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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark One)


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 1-10272

Archstone

(Exact name of Registrant as Specified in Its Charter)


MARYLAND		90-0042860
(State or other jurisdiction of		(IRS employer
incorporation or organization)		identification no.)

9200 E. Panorama Circle, Suite 400
Englewood, Colorado 80112
(Address of principal executive office)
(303) 708-5959
(Registrant’s telephone number, including area code)

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o (Note: The registrant filed a Form 15 on December 14, 2007 to terminate the registration of our Series O Preferred Units, and a Form 15 on January 2, 2008 immediately suspending our reporting obligations under Section 15(d) of the Securities Exchange Act of 1934.)

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. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ (Do not check if a smaller reporting company)		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

At June 30, 2007, there were approximately 26.2 million Class A-1 Common Units outstanding held by non-affiliates. At March 30, 2008, none of the Common Units were held by non-affiliates. There was no established trading market for such Common Units at June 30, 2007 or subsequent to that date.

DOCUMENTS INCORPORATED BY REFERENCE

None

GLOSSARY

The following abbreviations, acronyms or defined terms used in this document are defined below:


Abbreviation, Acronym or Defined Term		Definition/Description
401(k) Plan		Archstone’s 401(k) Plan.

A-1 Common Unitholders		Holders of A-1 Common Units.

A-1 Common Units		Archstone class A-1 common units of beneficial interest, par value $0.01 per unit, which prior to the Merger were redeemable for cash or, at the option of Archstone-Smith, Common Shares. A-1 Common Units are the common units of Archstone not held by Archstone-Smith or, after the Merger, Series I Trust.

A-2 Common Units		Archstone class A-2 common units of beneficial interest, par value $0.01 per unit. Series I Trust is the sole holder of A-2 Common Units.

ADA		Americans with Disabilities Act, as amended.

Ameriton		AMERITON Properties Incorporated, which was a taxable REIT subsidiary of Archstone prior to the Merger that engaged in the opportunistic acquisition, development and eventual disposition of real estate with a shorter-term investment horizon. Ameriton merged into Archstone-Smith on October 5, 2007.

Annual Report		This Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2007.

Archstone or Operating Trust		Archstone, an entity organized as a real estate investment trust under Maryland law (formerly Archstone-Smith Operating Trust).

Archstone-Smith		Archstone-Smith Trust, an entity organized as a real estate investment trust under Maryland law, which was a publicly traded entity and our sole trustee and owned 89.5% of our Common Units immediately prior to the Merger.

Archstone-Smith Board		The Board of Trustees of Archstone-Smith.

Board		Refers to the Archstone-Smith Board for periods prior to the Merger or to the Series I Trust Board for periods after the Merger.

Buyer Parties		Subsidiaries of an entity jointly controlled by Tishman Speyer Real Estate Venture VII, L.P., and Lehman Brothers Holdings, Inc.

Common Share(s)		Archstone-Smith common shares of beneficial interest, par value $0.01 per share.

Common Units		The A-1 Common Units and the A-2 Common Units.

Common Unitholders		Holders of Common Units.

Compensation Committee		The Management Development and Executive Compensation Committee of the Archstone-Smith Board in office prior to completion of the Merger.

Convertible Debt		$575 million exchangeable senior unsecured notes that were exchangeable into Common Shares prior to completion of the Merger.

Declaration of Trust		Archstone’s Amended and Restated Declaration of Trust, as filed with the State of Maryland on October 4, 2007, as amended and supplemented.


Abbreviation, Acronym or Defined Term		Definition/Description
Deferred Compensation Plan		Archstone-Smith’s Deferred Compensation Plan, which was terminated upon completion of the Merger.

DEU		Dividend Equivalent Unit; an amount credited to the account of holders of certain options and RSU’s under Archstone-Smith’s long-term incentive plan.

Distributions		Distributions paid on Archstone Common Units or Preferred Units.

DeWAG		DeWAG Deutsche WohnAnlage GmbH.

DRIP		Archstone-Smith’s Dividend Reinvestment and Share Purchase Plan.

Fannie Mae Mezzanine Lenders		Lehman Brothers Holdings Inc., Bank of America, N.A. and Barclays Capital Real Estate Finance Inc.

Freddie Mac Mezzanine Lenders		Lehman Brothers Holdings Inc., Bank of America, N.A. and Barclays Capital Real Estate Finance Inc.

FASB		Financial Accounting Standards Board.

FHA		Fair Housing Act, as amended.

Fund GP		Tishman Speyer Archstone-Smith Multifamily (GP), L.P., a Delaware limited partnership and the sole general partner of Tishman Speyer Archstone-Smith Multifamily JV, L.P.

Fund II GP		Tishman Speyer Archstone-Smith Multifamily Parallel (GP), L.P., a Delaware limited partnership and the sole general partner of Tishman Speyer Archstone-Smith Multifamily Parallel JV, L.P.

GAAP		Generally accepted accounting principles in the United States.

Governance GP		Collectively, Tishman Speyer Real Estate Venture VII (Governance), L.P., a Delaware limited partnership, which is the sole general partner of the Fund GP, and Tishman Speyer Real Estate Venture VII Parallel (Governance), L.P., a Delaware limited partnership, which is the sole general partner of the Fund II GP

High-Rise		Those communities with five or more above-ground floors.

Independent Trustees		Members of the Archstone-Smith Board meeting the New York Stock Exchange definition of “Independent Director.”

In Planning		Represents parcels of land owned or Under Control, which are in the development planning process, upon which construction of apartments is expected to commence subsequent to the completion of the entitlement and building permit processes.

International		Refers to our operational and investment activities in Europe. Our real estate investments to date have been limited to Germany.

International Fund		Combined group of Luxembourg, Dutch and German entities in which we have a minority ownership interest.

Junior Mezz Borrower		Tishman Speyer Archstone-Smith Multifamily Junior Mezz Borrower, L.P., an affiliate of the Venture.

Lease-Up		The phase during which newly constructed apartment units are being leased for the first time, but prior to the community becoming Stabilized.

Lehman Sponsor		REPE Archstone GP Holdings LLC, a Delaware limited partnership.


Abbreviation, Acronym or Defined Term		Definition/Description
LIBOR		London Interbank Offered Rate.

Long-Term Unsecured Debt		Collectively, Archstone’s long-term unsecured senior notes payable and unsecured tax-exempt bonds.

LTIP		Archstone-Smith’s Long Term Incentive Plan.

Master Credit Facility		Credit agreement with Lehman Brothers Inc., Banc of America Securities LLC, Bank of America, N.A., Barclays Capital Real Estate, Inc., and Lehman Commercial Paper Inc. and other lenders from time to time parties thereto which was entered into on October 5, 2007 and amended and restated on November 27, 2007.

Merger(s)		A series of transactions which included (a) the merger on October 4, 2007 of River Trust Acquisition (MD), LLC with and into Archstone, with Archstone surviving (the “Operating Trust Merger”), and (b) the merger on October 5, 2007 of Archstone-Smith with and into Series I Trust, with Series I Trust surviving (the “Archstone-Smith Merger”).

Merger Agreement		The Agreement and Plan of Merger, dated as of May 28, 2007, among Archstone-Smith, Archstone, River Holding, LP, River Acquisition (MD), LP and River Trust Acquisition (MD), LLC, as amended by Amendment No. 1 thereto.

Net Operating Income or NOI		Represents rental revenues less rental expenses and real estate taxes. We rely on NOI for purposes of making decisions about resource allocations and assessing segment performance. We also believe NOI is a valuable means of comparing period-to-period property performance. NOI is a non-GAAP financial measure. See a reconciliation of NOI to Earnings from Operations in this Annual Report in Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Quantitative Summary.

Oakwood or Oakwood Worldwide		The terms used in reference to a group of partnerships coordinated by a common sponsor who contributed a group of apartment communities to Archstone in 2005.

Oakwood Master Leases		Refers to thirteen communities acquired from Oakwood and one community we previously owned and operated that were leased in their entirety to affiliates of Oakwood Worldwide under master lease agreements with seven year terms, subject to Oakwood’s right to terminate individual leases under certain circumstances after the one year anniversary of the acquisition.

Outside Trustees		Trustees of Archstone-Smith who were not employees of Archstone-Smith or Archstone.

Outside Trustee Plan		Archstone-Smith’s Equity Plan for Outside Trustees

Predecessor		Archstone before the Operating Trust Merger.

Preferred Units or Perpetual Preferred Units		The Series I, O, P, Q-1 and Q-2 Preferred Units.

REIT		Real estate investment trust. This term is also used to refer to consolidated subsidiaries of Archstone, but excluding taxable and International subsidiaries unless the context indicates otherwise.

Restricted Share Unit or RSU		A unit representing an interest in one Common Share, subject to certain vesting provisions, granted to an associate through Archstone-Smith’s long-term incentive plan.

Same-Store		Term used to refer to a group of operating communities in the United States that had attained Stabilization and were fully operating


Abbreviation, Acronym or Defined Term		Definition/Description
		during the entire time two periods are being compared. Excludes communities which were not eligible for inclusion due to (i) recent acquisition or development, (ii) major redevelopment, or (iii) a significant number of non-operational units (fires, floods, etc.). Also excludes Ameriton properties, due to their short-term holding periods, and International properties.

Series A Preferred Units		Archstone Series A Cumulative Preferred Units of Beneficial Interest, par value $0.01 per unit, which were redeemed in full in November 2003.

Series D Preferred Units		Archstone Series D Cumulative Perpetual Preferred Units of Beneficial Interest, par value $0.01 per unit, which were redeemed in full in August 2004.

Series E Perpetual Preferred Units		Archstone Series E 8.375% Cumulative Perpetual Preferred Units, par value $0.01, which were redeemed in full in February 2005.

Series F Perpetual Preferred Units		Archstone Series F 8.125% Cumulative Perpetual Preferred Units, par value $0.01, which were redeemed in full in September 2004.

Series G Perpetual Preferred Units		Archstone Series G 8.625% Cumulative Perpetual Preferred Units, par value $0.01, which were redeemed in full in March 2005.

Series H Preferred Units		Archstone Series H Cumulative Convertible Perpetual Preferred Units of Beneficial Interest, par value $0.01 per unit, which were converted into Common Units in full in May 2003.

Series I Preferred Units		Archstone Series I Cumulative Redeemable Preferred Units of Beneficial Interest, par value $0.01 per unit, redeemable in February 2028.

Series K Preferred Units		Archstone Series K Cumulative Convertible Perpetual Preferred Units of Beneficial Interest, par value $0.01 per unit, which were converted into Common Units in September 2004.

Series L Preferred Units		Archstone Series L Cumulative Convertible Perpetual Preferred Units of Beneficial Interest, par value $0.01 per unit, which were converted into Common Units in December 2004.

Series M Preferred Unit		Archstone Series M Preferred Unit of Beneficial Interest, par value $0.01 per unit. The Series M Preferred Unit was converted into a Series P Preferred Unit as of the Merger, on materially the same terms and conditions.

Series N-1 Preferred Units		Archstone Series N-1 Convertible Redeemable Preferred Units of Beneficial Interest, par value $0.01 per unit. Each Series N-1 Preferred Unit was converted into a Series Q-1 Preferred Unit as of the Merger, on materially the same terms and conditions.

Series N-2 Preferred Units		Archstone Series N-2 Convertible Redeemable Preferred Units of Beneficial Interest, par value $0.01 per unit. Each Series N-2 Preferred Unit was converted into a Series Q-2 Preferred Unit as of the Merger, on materially the same terms and conditions.

Series O Preferred Units		Archstone Series O Preferred Units of Beneficial Interest, par value $0.01 per unit.


Abbreviation, Acronym or Defined Term		Definition/Description
Series P Preferred Units		Archstone Series P Preferred Units of Beneficial Interest, par value $0.01 per unit.

Series Q-1 Preferred Units		Archstone Series Q-1 Preferred Units of Beneficial Interest, par value $0.01 per unit.

Series Q-2 Preferred Units		Archstone Series Q-2 Preferred Units of Beneficial Interest, par value $0.01 per unit.

Series I Trust		Tishman Speyer Archstone-Smith Multifamily Series I Trust, a Maryland real estate investment trust, which is the sole holder of the A-2 Common Units and sole trustee of Archstone after the Merger.

Series I Trust Board		The Board of Trustees of Series I Trust.

Series II LLC		Tishman Speyer Archstone-Smith Multifamily Series II, L.L.C.

Series III LLC		Tishman Speyer Archstone-Smith Multifamily Series III, L.L.C.

Smith Merger		The series of transactions in October 2001 whereby Archstone-Smith merged with Smith Residential, and Archstone Communities Trust (now, Archstone) merged with Smith Partnership.

Smith Partnership		Charles E. Smith Residential Realty L.P.

Smith Residential		Charles E. Smith Residential Realty, Inc.

SFAS		Statement of Financial Accounting Standards.

Stabilized or Stabilization		The classification assigned to an apartment community that has achieved 93% occupancy, and for which development, new management and new marketing programs (or development and marketing in the case of a newly developed community) have been completed.

Successor		Archstone after the Merger

Tishman Speyer Sponsor		Tishman Speyer Real Estate Venture VII, L.P., a Delaware limited partnership.

Trustees		Members of the Archstone-Smith Board prior to the Merger and the members of the Series I Trust Board after the Merger.

Forward-Looking Statements

Certain statements in this Annual Report that are not historical facts are “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations, beliefs, assumptions, estimates and projections about the industry and markets in which we operate. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and variations of such words and similar expressions are intended to identify such forward-looking statements. Information concerning expected investment balances, expected funding sources, planned investments, forecasted dates and revenue and expense growth assumptions are examples of forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. Therefore, actual outcomes and results may differ materially from what is expressed, forecasted or implied in such forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Our operating results depend primarily on income from apartment communities, which is substantially influenced by supply and demand for apartment units, operating expense levels, property level operations and the pace and price at which we develop, acquire or dispose of apartment communities. Capital and credit market conditions, which affect our cost of capital, also influence operating results. See “Risk Factors” in Item 1A of this Annual Report for a more complete discussion of the various risk factors that could affect our future performance.

EXPLANATORY NOTE: On December 14, 2007, we filed a Form 15 with the Securities and Exchange Commission to terminate the registration of our Series O Preferred Units, which termination became effective 90 days after the filing of such Form 15. On January 2, 2008, we filed a Form 15 with the Securities and Exchange Commission to immediately suspend our reporting obligations under Section 15(d) of the Securities Exchange Act of 1934, as amended. As a result of these filings, our obligations to file annual, quarterly and periodic reports, other than our obligation to file this Annual Report, and our obligations with respect to certain Unitholder communications and the obligations of certain Unitholders to report their ownership of and transactions in our Units, have terminated. The statements and information set forth in this Annual Report are qualified by reference to the foregoing.

PART I

Item 1. Business

References in this Annual Report to “Archstone,” the “Operating Trust”, “Company,” “company, “we” or “us” refer to Archstone (formerly Archstone-Smith Operating Trust), a Maryland real estate investment trust, organized in 1963.

Unless indicated otherwise, the financial information presented in this Annual Report relates to the Successor after October 4, 2007 and to the Predecessor prior to October 5, 2007. See “Item 1. Business — Consummation of Merger” for further information regarding our recent Merger.

Overview

As of December 31, 2007, we owned or had an ownership position in 56,896 units, including 1,053 units under construction. At year-end, our operating portfolio was concentrated in protected locations in the following core markets,

based on NOI for the three months ended December 31, 2007, excluding International investments and joint ventures:


Washington, D.C. metropolitan area	40.7	%
Southern California	21.6
San Francisco Bay Area, California	14.4
New York City metropolitan area	8.6
Boston, Massachusetts	7.4
Seattle, Washington	4.7

Total	97.4	%

We define our garden communities and High-Rise properties each as an operating segment. In addition, prior to the Merger, we defined the activities from Ameriton as an individual operating segment as its focus was the opportunistic acquisition, development and eventual disposition of assets with a shorter investment horizon. For information regarding our business segments and our international operations, see “Item 15. Exhibits and Financial Statement Schedules.”

Consummation of Merger

As of October 4, 2007 approximately 89.5% of our outstanding Common Units were owned by Archstone-Smith and the remaining 10.5% of the outstanding Common Units were owned by minority interest holders. Archstone-Smith was a publicly traded equity REIT organized under the laws of the State of Maryland.

On May 29, 2007, Archstone-Smith announced it had signed the Merger Agreement, whereby both Archstone-Smith and Archstone would be acquired by the Buyer Parties. The transactions contemplated by the Merger Agreement were consummated on October 4 and 5, 2007. As a result of the transactions contemplated by the Merger Agreement, the sole trustee of Archstone, effective as of October 5, 2007, is Series I Trust, which along with Series II LLC and Series III LLC owns 100% of Archstone’s outstanding Common Units.

Under the terms of the Merger Agreement, all outstanding Common Shares of Archstone-Smith were acquired by Series I Trust, Series II LLC and Series III LLC for $60.75 in cash, without interest and less applicable withholding taxes, for each Common Share issued and outstanding immediately prior to the effective time of the Merger. With respect to the outstanding Series I Preferred Shares, the Buyer Parties elected to replace them with substantially identical Series I Preferred Shares of Series I Trust.

As part of the transaction, Archstone merged on October 4, 2007 with River Trust Acquisition (MD), LLC, a subsidiary of the Buyer Parties. A total of 39.6 million Common Units remain outstanding. Approximately 3.9 million A-1 Common Units, held by less than 300 holders, were converted into newly issued Series O Preferred Units, whereas holders of approximately 22.2 million A-1 Common Units elected to exchange their A-1 Common Units for cash consideration of $60.75 without interest and less applicable withholding taxes. Each Series O Preferred Unit has a redemption price of $60.75 and bears cumulative preferential distributions payable quarterly at an annual rate of 6%. During any period of time after we incur indebtedness in excess of $10 million in principal amount (excluding draws on our line of credit or refinancings of existing indebtedness) and as a result of which our loan to value ratio exceeds 85%, until such time as our loan to value ratio no longer exceeds 85%, the distribution rate on our Series O Preferred Units shall increase from 6% per annum to 8% per annum. The Series O Preferred Units, which have only limited voting rights, are redeemable by the holder or Archstone under certain circumstances. The Series I Preferred Units remain outstanding and unchanged. The Series M Preferred Unit and each Series N-1 and N-2 Preferred Unit was converted into the right to receive one newly issued Series P Preferred Unit, Series Q-1 Preferred Unit and Series Q-2 Preferred Unit, respectively, of Archstone.

In summary, the total purchase consideration paid by the Buyer Parties for the assets owned by Predecessor immediately prior to the Mergers was $22.1 billion which consisted of cash equity of $4.9 billion (net of capital raising costs), replacement or issuance of Preferred Units of $0.3 billion, borrowings of $15.2 billion in new debt, assumption of $0.9 billion of existing debt and the assumption of trade payables and other accrued liabilities of $0.8 billion. The accrued liabilities included a payment of $0.1 billion related to Predecessor employee stock awards under the LTIP. We incurred $1.0 billion of transaction-related costs that were financed through our borrowings. Although Archstone is the surviving entity, River Trust Acquisition (MD), LLC was viewed as the acquirer for accounting purposes due to the resulting change in control. As such, the total purchase consideration was allocated to the fair value of the net assets acquired through the application of purchase accounting in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations.” The majority of our fair value adjustments pertained to real estate and lease-related intangibles. The financial statements in this Annual Report include the operations of the Predecessor for periods prior to the Merger on October 4, 2007 and the Successor for periods after the Merger. In connection with the Merger, through a series of legal transactions, the Buyer Parties caused Predecessor to make certain material distributions to affiliated entities. These assets consisted primarily of communities that are not subject to unitholder tax protection agreements, domestic joint ventures, communities under development and communities formerly owned by Ameriton.

Following is a summary of the fair values of assets and liabilities owned by Successor as compared to the fair value attributable to the assets and liabilities distributed to and owned by affiliated entities at October 5, 2007 (in thousands):


			Fair Value Attributable to
	Aggregate Fair Value		Affiliates			Successor
Real estate	$	18,662,371	$	3,641,083		$	15,021,288
Investment in unconsolidated entities		1,018,725		550,399			468,326
Lease and other intangibles		594,306		91,439			502,867
Other assets		1,840,255		116,021			1,724,234
Intercompany assets (liabilities)		—		(12,873	)		12,873

Total assets	$	22,115,657	$	4,386,069		$	17,729,588


Debt	$	16,108,709	$	2,013,815		$	14,094,894
Other liabilities		834,452		120,757			713,695
Other Preferred Units		285,944		—			285,944


Net assets at fair value	$	4,886,552	$	2,251,497		$	2,635,055

The purchase price allocation reflected above was based on preliminary estimates and is subject to change as we obtain more complete information regarding land, building and lease intangible values.

Officers of Archstone

Executive officers of Archstone are:


Name		Title
R. Scot Sellers		Chief Executive Officer
J. Lindsay Freeman*		Chief Operating Officer
Charles E. Mueller, Jr.		Chief Financial Officer (Chief Operating Officer effective January 1, 2008)
Caroline Brower*		General Counsel and Secretary
Alfred G. Neely		Chief Development Officer


*		Retired as of December 31, 2007.

Please refer to “Item 10. Directors, Executive Officers, and Corporate Governance” for further information.

Employees

We currently employ approximately 2,659 individuals, of whom approximately 2,038 are focused on the site-level operation of our garden communities and High-Rise properties. Of the site-level associates, approximately 130 are subject to collective bargaining agreements with two unions in New York. The balance are professionals who manage corporate and regional operations, including our investment program, property operations, financial activities and other support functions. We consider our relationship with our employees to be very good.

Insurance

We carry comprehensive general liability coverage on our owned communities, with limits of liability customary within the industry to insure against liability claims and related defense costs. Similarly, we are insured against the risk of direct physical damage in amounts necessary to reimburse the company on a replacement cost basis for costs incurred to repair or rebuild each property, including loss of rental income during the reconstruction period. Our property policies for all United States operating and development communities and certain International communities include coverage for the perils of flood and earthquake shock with limits and deductibles customary in the industry. We also obtain title insurance policies when acquiring new properties, which insure fee title to our real properties. We currently have coverage for losses incurred in connection with both domestic and foreign terrorist-related activities. The terms of our property and general liability policies may exclude certain mold-related claims or other types of claims based on the specific circumstances and allegations. Should an uninsured loss arise against the company, we would be required to use our own funds to resolve the issue, including litigation costs. In addition, for our United States communities we self-insure certain portions of our insurance program

through a wholly-owned captive insurance company, and therefore use our own funds to satisfy those limits, when applicable.

Competition

There are numerous commercial developers, real estate companies and other owners of real estate that we compete with in seeking land for development, apartment communities for acquisition and disposition and residents for apartment communities. All of our apartment communities are located in developed areas that include other apartment communities. The number of competitive apartment communities in a particular area could have a material adverse effect on our ability to lease units and on the rents charged. In addition, single-family homes and other residential properties provide housing alternatives to residents and potential residents of our apartment communities.

Available Information and Code of Ethics

Our website is http://www.archstonesmith.com. We make available free of charge, on or through our website, this Annual Report, our prior annual, quarterly and current reports, as well as any amendments to these reports, as soon as reasonably practicable after electronically filing these reports with the Securities and Exchange Commission. To the extent we are required to file reports in the future, we will also make available free of charge on or through our website, any future annual, quarterly and current reports and any amendments to such reports. The Archstone-Smith Board adopted, and we continue to operate under, a Code of Ethics and Business Conduct applicable to our officers and employees, including our principal executive officer, principal financial officer and principal accounting officer or controller. A copy of our Code of Ethics and Business Conduct is available through our website or at no charge upon written request to Investor Relations, 9200 East Panorama Circle, Suite 400, Englewood, Colorado 80112. Any amendments to or waivers of our Code of Ethics and Business Conduct that apply to the principal executive officer, principal financial officer and principal accounting officer or controller and that relate to any matter enumerated in Item 406(b) of Regulation S-K, will be disclosed on our website to the extent we are subject to the requirements of Regulation S-K. Any reference to our website in this Annual Report does not incorporate by reference the information contained in the website and such information should not be considered a part of this Annual Report.

Item 1A. Risk Factors

The following factors could affect our future financial performance:

Risks Associated with our Operations

We have restrictions on the sale of certain properties which could limit our operating flexibility.

A taxable sale of any of the properties contributed to us could result in increased costs to us in light of the tax-related obligations made to the contributors, including the Smith Partnership Unitholders and the Oakwood Unitholders. The restrictions applicable to the Smith Partnership Unitholders last until January 1, 2022. We have similar restrictions with respect to the properties acquired from Oakwood Worldwide in 2005. The Oakwood restrictions last until the earlier of (a) such time as 99% of the contributing partners have sold, redeemed or otherwise disposed of their Series O Preferred Units in a taxable event and (b) the later to occur of (x) 10 years from the closing of the contribution of such properties and (y) the last to die of Howard Ruby and Ed Broida. Mr. Broida died in 2006. During the period of time that these restrictions apply, it may be cost-prohibitive for us to sell one or more of these properties even though such sale may be in our Unitholders’ best interests. The built in gain on communities subject to tax protection is estimated to be approximately $350 million at December 31, 2007.

We depend on our key personnel.

Our success depends on our ability to attract and retain the services of executive officers, senior officers and company managers. There is substantial competition for qualified personnel in the real estate industry and the loss of several of our key personnel could have an adverse effect on us.

We do not have access to public equity capital which could adversely affect our cash flows.

Our Trustee is no longer a publicly traded entity and does not have securities listed on a national stock exchange. Because we no longer have access to the public equity markets, we will have to rely on alternative financing sources to undertake new investment activities, including debt and private equity. These alternative sources of financing may be more costly than raising funds in the public equity markets. Further, if we cannot access sufficient funds through debt, the private

equity markets or other sources, we may need to rely upon the Venture participants for capital contributions. However, the Venture participants are not obligated to provide additional capital and there is no assurance that the Venture participants would contribute adequate funds to capitalize us and our operations.

We have a limited operating history under our current ownership.

The Merger was completed in October 2007. We have only a limited operating history under our current ownership. Although our current chief executive officer and several key officers remain with Archstone after the Merger, until recently, the Venture was not involved in our operation or performance of our business. We cannot guarantee that changes associated with the Merger will yield favorable results or that we will realize the benefits anticipated in connection with the Merger. As a result, we cannot be sure how we will be operated or will perform financially. Furthermore, the new ownership has retained flexibility to change our investment strategy, for any reason, including changing conditions in the real estate investment and capital markets and changes in general economic conditions. Any such strategy changes could adversely affect our financial condition and results of operations and our ability to pay distributions to our Unitholders.

There is no public market for our units.

There is currently no public market for our units. On December 14, 2007, we filed a Form 15 with the Securities and Exchange Commission to terminate the registration of our Series O Preferred Units, which termination became effective 90 days after the filing of such Form 15. Our declaration of trust contains limited rights of our Unitholders to request our redemption of their Units, but we have no current obligation to repurchase Units from or make distributions to our Unitholders other than upon a Unitholder’s death. There can be no assurances that we will be able to liquidate our investments in the event of an emergency.

There may be limited or no public information available about us or our Unitholders in the future.

On December 14, 2007, we filed a Form 15 with the Securities and Exchange Commission to terminate the registration of our Series O Preferred Units, which termination became effective 90 days after the filing of such Form 15. On January 2, 2008, we filed a Form 15 with the Securities and Exchange Commission to immediately suspend our reporting obligations under Section 15(d) of the Securities Exchange Act of 1934, as amended. As a result of these filings, our obligations to file annual, quarterly and periodic reports, other than our obligation to file this Annual Report on Form 10-K, and our obligations with respect to certain Unitholder communications and the obligations of certain Unitholders to report their ownership of and transactions in our Units, have terminated. As a result, we anticipate that there will be limited, if any, publicly available information about us and our Unitholders in the future. The limited availability or lack of such publicly available information may have an adverse impact on your ability to assess the value of your investment in the Company and make determinations regarding your ownership of our Units.

Risks Associated with our Indebtedness and Financing

Continued volatility in the debt market could make it more difficult or costly for us to borrow money to finance our business.

Recently, the residential mortgage market in the United States has experienced a number of difficulties and changed economic conditions that may adversely affect the credit markets generally, including the commercial lending market. We rely on national and regional institutions including Fannie Mae and Freddie Mac to provide financing for our acquisitions and development projects. These institutions may originate mortgage loans and may have suffered financial difficulties as a result of these changing market conditions. As a result, these institutions may become insolvent or may tighten their lending standards, which could make it more difficult for us to obtain financing on favorable terms or at all. If we are unable to obtain financing on favorable terms or at all from these institutions, our financial condition and results of operations would be adversely affected.

Debt financing could adversely affect our performance and our ability to make distributions to our Unitholders.

We are subject to risks associated with debt financing and preferred equity. These risks include the following:

	•		We may not have sufficient cash flow from operations to meet required payments of principal and interest or to pay distributions on our securities at expected rates.

	•		We may be unable to refinance current or future indebtedness.

	•		The terms of any refinancing may not be as favorable as the terms of existing indebtedness.

	•		We may be unable to make necessary investments in new business initiatives due to lack of available funds.

•

If we are unable to make required payments on indebtedness that is secured by a mortgage on our property, the asset may be transferred to the lender with a consequent loss of income and value to us.

We do not plan on making distributions in the near term, and it is uncertain when any distributions will be made.

We have significant debt, which could have important adverse consequences.

We had $13.9 billion in total debt outstanding as of December 31, 2007, all of which was directly or indirectly secured by real estate assets and $8.1 billion ($1.0 billion when including the effect of interest rate hedges) was subject to variable interest rates, including $60.0 million outstanding on our revolving credit facilities. On March 20, 2008, the revolver portion of our credit facilities had a drawn balance of $445.0 million and we had $163.7 million outstanding under letters of credit, leaving available borrowing capacity on the revolving portion of our Master Credit Facility of $141.3 million. In addition, as of March 20, 2008, we had unfunded term loan commitments of $242.5 million. This debt level could limit our flexibility in planning for, or reacting to, changes in our business and our industry in general. The substantial amount of debt and the amount needed to service our debt obligations could place us at a disadvantage compared to our competitors which are less highly-leveraged. This high degree of leverage could adversely affect our ability to obtain additional financing in the future on favorable terms or at all for working capital, capital expenditures, acquisitions, development or other general corporate purposes, making us more vulnerable to a downturn in business or the economy in general. We may not have sufficient cash flow from operations or capital transactions to service our indebtedness and we may be unable to incur additional indebtedness without violating various financial ratios contained in our debt agreements. If we cannot meet required payments under our debt agreements or cannot comply with the covenants contained in these agreement, the lenders may declare us in default and may seek available remedies under the agreements, which may include transferring properties to the lender under indebtedness which is secured by real property.

Our debt agreements include restrictive covenants relating to our operations, which could limit our ability to respond to changing market conditions and our ability to make distributions.

Our debt agreements contain customary covenants which, among other things, restrict our ability to incur additional indebtedness and, in certain instances, restrict our ability to engage in material asset sales, mergers, consolidations and acquisitions, and restrict our ability to make capital expenditures. These debt agreements also require us to maintain various financial ratios. Our Master Credit Facility required the establishment of a funded interest reserve of $500 million to facilitate compliance with debt service coverage ratios under the facility. We expect that we will need to draw on these reserves in 2008 to maintain compliance with these ratios. Some loans under our major credit facilities are cross-collateralized and contain cross default provisions with other material loans. Due to this cross-collateralization, a failure or default with respect to certain properties could have an adverse impact on us or our properties that are subject to the cross-collateralization under the applicable debt instrument. Failure to comply with these covenants could cause a default under the agreements and result in a requirement to repay the indebtedness prior to its maturity, which could have an adverse effect on our cash flow and ability to make distributions to our Unitholders.

Variable rate debt is subject to interest rate risk which could adversely affect our ability to pay distributions to our Unitholders.

As of December 31, 2007, we had $8.1 billion ($1.0 billion when including the effect of interest rate hedges) of debt outstanding under instruments which bear interest at variable rates. Increases in interest rates would increase our interest expense under these instruments and would increase the cost of refinancing these instruments and issuing new debt. As a result, higher interest rates would adversely affect cash flow and our ability to service our indebtedness and to make distributions to our Unitholders.

Possible increases in interest and other costs in connection with the syndication of some of our debt could adversely affect our results of operation, our ability to satisfy our debt obligations and our ability to pay distributions to our Unitholders.

A significant portion of our debt is subject to increases in interest and borrowing costs and payment of fees to lenders in connection with the potential syndication of such debt. Specifically, the lenders under our Master Credit Facility and our mezzanine loans provided by the Fannie Mae Mezzanine Lenders and the Freddie Mac Mezzanine Lenders have the option to syndicate or sell the outstanding principal amount under such agreements to other investors at a discount and may revise the interest rate spread or discount or increase fees to a level necessary to facilitate syndication based on current market conditions at the syndication date. As of December 31, 2007, $5.6 billion in outstanding principal indebtedness under these loans was subject to syndication and the increased borrowing costs described above. The cost associated with any incremental interest or additional fees, as well as any original issue discount realized, is required to be born by the Company.

These same lenders have committed to lend us up to $148.8 million to fund such costs, although we can make no assurance that we will be able to incur these additional borrowings without violating the financial covenants under our debt agreements or obtaining covenant waivers. As of March 20, 2008, we had approximately $73.0 million set aside in restricted cash to fund syndication discounts. As of March 20, 2008, $43.0 million of principal had been syndicated at a discount of 3%. The deterioration of the residential mortgage market has caused a widening of the credit spreads on both commercial mortgage-backed securities and commercial real estate collateralized debt obligations recently. If these conditions continue or worsen, the lenders may be required to increase the pricing or fees. Such increases in interest and payments would adversely affect our cash flow, our ability to satisfy our debt obligations and our ability to make distributions to our Unitholders.

A reduction in the value of our assets or an increase in indebtedness could trigger an increased distribution rate and a redemption right of our Series O preferred unitholders, which could adversely effect our cash flows.

During any period of time after we incur indebtedness in excess of $10 million in principal amount (excluding draws on our line of credit or refinancings of existing indebtedness) and as a result of which our loan to value ratio exceeds 85%, until such time as our loan to value ratio no longer exceeds 85%, the distribution rate on our Series O Preferred Units shall increase from 6% per annum to 8% per annum. Further, if at any time prior to January 1, 2022, either (1) our loan to value ratio is higher than 85% and we make a distribution to the holders of Common Units; or (2) we incur indebtedness in excess of $10 million in principal amount (excluding draws on our line of credit or refinancings of existing indebtedness) and after such borrowing our loan to value ratio is higher than 85% and we have made a distribution to our Common Units in contemplation of the incurrence of that indebtedness, then each holder of a Series O Preferred Unit will have the right to exercise an immediate redemption right, including payment of any tax protection amount (as defined in our Declaration of Trust) with respect to the Series O Preferred Units being redeemed. If we were required to pay this higher distribution or to redeem a material portion of the outstanding Series O Preferred Units, our cash flows and our ability to satisfy our debt obligations would be materially adversely affected. As of December 31, 2007, we have Series O Preferred Units outstanding with an aggregate redemption value of $235.7 million.

A default by our affiliated entities on intercompany loans could adversely affect our cash flows, ability to satisfy our debt obligations and our ability to make distributions to our Unitholders.

We have intercompany transactions with affiliated entities and record a receivable from affiliated entities when they borrow from Archstone or we pay billings on their behalf. We charge interest on balances owed by affiliates to Archstone under the intercompany loans at the same rate that we are paying and therefore do not recognize any profit from our affiliated entities. As of December 31, 2007, there was an aggregate of $393.8 million outstanding under all such transactions. Furthermore, Archstone’s employees render services for affiliated entities where Archstone is reimbursed based on an estimate of the allocable cost. We also record a payable to our affiliates when we receive funds on the affiliated entity’s behalf or the affiliate pays bills on our behalf. A default by one or more of the affiliated entities on payments to us under our intercompany balances would adversely affect our ability to satisfy our debt obligations and our ability to make distributions to our Unitholders. Further, because of the way the Venture’s credit facilities and intracompany loans are structured, a failure or default with respect to one or more affiliate entities’ properties could have an adverse impact on us or our other properties.

Risks Associated with Real Estate

Unfavorable changes in economic conditions could adversely affect our results of operation.

Changes in the general economic climate, local, regional or national conditions (such as an oversupply of communities or a reduction in rental demand in a specific area) could adversely affect real estate values and the cash flow of the properties, which would in turn have an adverse impact on our results of operations and ability to make distributions to our Unitholders. Specifically, several of the markets in which we operate have recently experienced a decrease in job growth. If job growth continues to slow in these markets, our market rental rates could be adversely affected.

We are subject to additional risks inherent in ownership of real estate.

Real estate, cash flows and values are affected by a number of additional factors, including the quality and philosophy of management, competition from other available properties and the ability to provide adequate property maintenance and insurance and to control operating costs. Real estate cash flows and values are also affected by such factors as government regulations, including zoning, usage and tax laws, caps on rent and rent increases, interest rate levels, the availability of financing, property tax rates, utility expenses, potential liability under environmental and other laws and changes in environmental and other laws. Although we seek to minimize these risks through our market research and property management capabilities, they cannot be totally eliminated.

We have a concentration of investments in certain markets.

As shown in the United States Geographic Distribution table below in “Item 2. Properties,” our most significant investment concentrations are in the Washington, D.C. metropolitan area, Southern California, the New York City metropolitan area and the San Francisco Bay Area. Southern California is the geographic area comprising the Los Angeles County, San Diego, Orange County, Ventura County and the Inland Empire markets. We are, therefore, subject to increased exposure (positive or negative) from economic and other competitive factors specific to markets within these geographic areas. Some of these areas have recently experienced a decrease in job growth and depressed conditions in the local real estate market. To the extent general economic conditions worsen in one or more of these markets, or if any of these areas experience a natural disaster, the value of our portfolio and our market rental rates could be adversely affected. As a result, our results of operations, cash flow, cash available for distribution, including cash available to pay distributions to our Unitholders and our ability to satisfy our debt obligations could be materially adversely affected.

We are subject to risks inherent in real estate development.

We have developed or commenced development on a substantial number of apartment communities and expect to develop additional apartment communities in the future. Real estate development involves risks in addition to those involved in the ownership and operation of established communities, including the risks that financing, if needed, may not be available on favorable terms, construction may not be completed on schedule, contractors may default, estimates of the costs of developing apartment communities may prove to be inaccurate, the costs and availability of materials may be adversely affected by global supply and demand, and communities may not be leased or rented on profitable terms or in the time frame anticipated. Timely construction may be affected by local weather conditions, local moratoria on construction, local or national strikes and local or national shortages in materials, building supplies or energy and fuel for equipment. These risks may cause the development project to fail to perform as expected.

Our business is subject to extensive competition.

Real estate investments are relatively illiquid and we may not be able to recover our investments.

Equity real estate investments are relatively illiquid, which may tend to limit our ability to react promptly to changes in economic or other market conditions. Our ability to dispose of assets in the future will depend on prevailing economic and market conditions. We intend to repay a portion of our debt obligations with proceeds from sales of our assets. Our inability to sell our properties on favorable terms or at all could have a material adverse effect on our results of operations and our ability to satisfy our debt obligations. Furthermore, our mezzanine loans to real estate investors may not be recoverable if those investors are unable to monetize the underlying asset at underwritten amounts.

We could be subject to acts of terrorism.

Periodically, we receive alerts from government agencies that apartment communities could be the target of both domestic and foreign terrorism. Although we currently have insurance coverage for losses incurred in connection with terrorist-related activities, losses could exceed our coverage limits and have a material adverse affect on our operating results.

Compliance with laws and regulatory requirements may be costly.

We must comply with certain accessibility, environmental, building, and health and safety laws and regulations related to the ownership, operation, development and acquisition of apartments. Under those laws and regulations, we may be liable for, among other things, the costs of bringing our properties into compliance with the statutory and regulatory requirements. Non-compliance with certain of these laws and regulations may impose liability without regard to fault, and could give rise to actions brought against us by governmental entities and/or third parties who claim to be or have been damaged as a consequence of an apartment not being in compliance with the subject laws and regulations. As part of our due diligence procedures in connection with the acquisition of a property, whether it is an apartment community or land to be developed, we conduct an investigation of the property’s compliance with known laws and regulatory requirements with which we must comply once we acquire a property, which investigation includes performing a Phase I environmental

assessment of the property and a Phase II assessment if recommended in the Phase I report. We hire architects and general contractors to design and build our development projects, and we rely on them to design and build in accordance with all legal requirements. We cannot, however, give any assurance that our investigations and these assessments have revealed all potential non-compliance issues or related liabilities, or that our development properties have been designed and built in accordance with all applicable legal requirements.

Costs associated with moisture infiltration and resulting mold remediation may be costly.

As a general matter, concern about indoor exposure to mold continues as such exposure has been alleged to have a variety of adverse effects on health. As a result, there have been a number of lawsuits in our industry against owners and managers of apartment communities relating to moisture infiltration and resulting mold. We have implemented guidelines and procedures to address moisture infiltration and resulting mold issues if and when they arise. We believe that these measures will minimize the potential for any adverse effect on our residents, but such adverse effects cannot be completely eliminated. Specifically, several tenants have filed complaints against entities related to us in connection with moisture infiltration at Archstone Westbury, an apartment community in Westbury, NY. We estimate that remediation of moisture infiltration at Archstone Westbury described in this report, will require that the apartments be vacated during the remediation, which is expected to take approximately twelve to eighteen months, with a resulting loss of rental revenue during this period. The terms of our property and general liability policies after June 30, 2002, may exclude certain mold-related claims. Should an uninsured loss arise against the company, we would be required to use our own funds to resolve the issue, including litigation costs. We can make no assurance that liabilities resulting from moisture infiltration and the presence of or exposure to mold will not have a future material impact on our financial results.

Changes in laws may result in increased cost.

We may not be able to pass on increased costs resulting from increases in real estate taxes, income taxes or other governmental requirements directly to our residents. Substantial increases in rents, as a result of those increased costs, may affect the ability of a resident to pay rent, causing increased vacancy.

We are subject to losses that may not be covered by insurance.

There are certain types of losses (such as from war) that may be uninsurable or not economically insurable. Additionally, many of our communities in California are located in the general vicinity of active earthquake fault lines. Although we maintain insurance to cover most reasonably likely risks, including earthquakes and hurricanes, if an uninsured loss or a loss in excess of insured limits occurs, we could lose both our invested capital in, and anticipated profits from, one or more communities. We may also be required to continue to repay mortgage indebtedness or other obligations related to such communities. The terms of our property and general liability policies after June 30, 2002, may exclude certain mold-related claims. We can make no assurance that liabilities resulting from moisture infiltration and the presence of or exposure to mold will not have a future material impact on our financial results. Should an uninsured loss arise against the company, we would be required to use our own funds to resolve the issue, including litigation costs. Any such loss could materially adversely affect our business, financial condition and results of operations.

Ownership of properties located outside of the United States subjects us to foreign currency risks which may adversely impact our ability to make distributions.

We currently own or have a minority ownership interest in properties located outside of the United States, which subjects us to risk from fluctuations in exchange rates between foreign currencies and the U.S. dollar. We expect that our principal foreign currency exposure will be to the Euro. Changes in the relation of these currencies to U.S. dollars may affect the fair values and earnings streams of our international holdings, and therefore our revenues and operating margins on our non-dollar denominated foreign holdings. These fluctuations in foreign currency exchange rates may materially adversely impact our financial condition, results of operations, cash flow, cash available for distribution, including cash available to pay distributions, and ability to satisfy our debt obligations.

We intend to attempt to mitigate the risk of currency fluctuation by financing our properties in the local currency denominations, although we cannot assure you that we will be able to do so or that this will be effective. We have engaged, and may continue to engage, in direct hedging activities to mitigate the risks of exchange rate fluctuations. We do not currently have any foreign currency hedges in place.

Acquisition and ownership of foreign properties may involve risks greater than those faced by us in the United States.

Foreign real estate investments generally involve certain risks not associated with investments in the United States. Our international acquisitions and operations are subject to a number of risks, including acquisition risk resulting from less knowledge of local real estate markets, economies, and business practices and customs; our limited knowledge of and relationships with sellers in these markets; higher due diligence, transaction and structuring costs than those we may face in the United States; additional accounting and control expenses; complexity and costs associated with managing international operations; difficulty in hiring qualified management, leasing personnel and service providers in a timely fashion; multiple, conflicting and changing legal, regulatory, tax and treaty environments, including land use, zoning and environmental laws, as well as the enactment of laws prohibiting or restricting the foreign ownership of property; exposure to increased taxation, confiscation or expropriation; currency transfer restrictions and limitations on our ability to distribute cash earned in foreign jurisdictions to the United States; difficulty in enforcing agreements in non-United States jurisdictions, including those entered into in connection with our acquisitions; and change in the availability, cost and terms of property financing resulting from varying national economic policies or changes in interest rates. Our inability to overcome these risks could adversely affect our foreign operations and could harm our business and results of operations.

Risks Associated with Tax Laws

We intend to qualify as a partnership, but we cannot guarantee that we will qualify.

We intend to qualify as a partnership for federal income tax purposes. However, we will be treated as an association taxable as a corporation for federal income tax purposes if we are deemed to be a publicly traded partnership, unless at least 90% of our income is qualifying income as defined in the tax code. Qualifying income for our 90% test generally includes passive income, such as real property rents, distributions and interest. We believe that we will meet this qualifying income test, but cannot guarantee that we will. If we were to be taxed as a corporation, we would incur substantial tax liabilities and our ability to raise additional capital would be impaired.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

United States Geographic Distribution

At December 31, 2007, the geographic distribution for our six core markets based on NOI for the three months ended December 31, 2007 was as follows:


Washington, D.C. metropolitan area	40.7	%
Southern California	21.6
San Francisco Bay Area, California	14.4
New York City metropolitan area	8.6
Boston, Massachusetts	7.4
Seattle, Washington	4.7

Total	97.4	%

The following table summarizes the geographic distribution for 2007, 2006 and 2005 based on NOI:


	Successor			Predecessor
	Total Portfolio⁽¹⁾
	December 31,
	2007			2006			2005
Core Markets
Washington, D.C. metropolitan area		40.7	%		34.6	%		36.6	%
Southern California		21.6			25.8			24.9
San Francisco Bay Area, California		14.4			11.5			8.2
New York City metropolitan area		8.6			12.5			6.8
Boston, Massachusetts		7.4			5.0			4.7
Seattle, Washington		4.7			4.2			3.9

Total Core Markets		97.4	%		93.6	%		85.1	%
Non-Core Markets ⁽²⁾
Chicago, Illinois		2.4	%		2.0	%		4.3	%
Southeast Florida		—			2.2			4.0
Houston, Texas		—			—			1.3
Denver, Colorado		—			—			1.1
Other		0.2			2.2			4.2

Total Non-Core Markets		2.6	%		6.4	%		14.9	%

Total All Markets		100	%		100	%		100	%


(1)		Based on NOI for the fourth quarter of each calendar year, excluding NOI from communities disposed of during the period. See Item 7 under the caption “Property-level operating results – 2007 compared to 2006” for a discussion on why we believe NOI is a meaningful measure and the caption for “Quantitative Summary” for a reconciliation of NOI to Earnings from Operations.

(2)		Markets that represent 1.0% or less of NOI in any year are included in Other for that year.

Real Estate Portfolio

We are a leading multifamily company focused primarily on the operation, development, redevelopment, acquisition, and management of apartment communities in protected markets throughout the United States. The following information summarizes Successor’s wholly owned real estate portfolio as of December 31, 2007 and includes information about our operating segments – garden communities and High Rise properties (dollar amounts in thousands). Additional information on our real estate portfolio is contained in “Schedule III, Real Estate and Accumulated Depreciation” and in our audited financial statements contained in this Annual Report:


	Number of		Number of				Percentage
	Communities		Units		Investment		Leased⁽¹⁾
OPERATING APARTMENT COMMUNITIES:
Garden Communities:
Boston, Massachusetts		5		1,164	$	425,883		97.7	%
Inland Empire, California		1		300		66,888		92.7	%
Los Angeles County, California⁽²⁾		21		7,518		2,548,929		90.6	%
San Diego, California		3		468		120,474		95.9	%
San Francisco Bay Area, California		20		6,855		1,920,372		93.0	%
Seattle, Washington		8		2,327		465,617		95.2	%
Ventura County, California⁽²⁾		7		1,773		537,582		91.3	%
Washington, D.C. metropolitan area		15		5,867		1,486,902		95.4	%

Garden Community Subtotal/Average		80		26,272	$	7,572,647		93.6	%

High-Rise Properties:
Boston, Massachusetts⁽²⁾		6		1,519	$	677,873		89.0	%
Chicago, Illinois		2		304		134,277		N/A
Los Angeles County, California		3		1,073		392,427		93.9	%
New York City metropolitan area		7		1,974		1,595,411		95.7	%
Philadelphia, Pennsylvania		1		80		15,967		N/A
San Francisco Bay Area, California		2		853		313,495		94.4	%
Seattle, Washington		3		694		180,224		94.7	%
Washington, D.C. metropolitan area		34		11,239		3,779,097		95.8	%

High-Rise Subtotal/Average		58		17,736	$	7,088,771		95.0	%

Operating Apartment Communities Subtotal /Average		138		44,008	$	14,661,418		94.2	%

APARTMENT COMMUNITIES UNDER CONSTRUCTION:
High-Rise Properties:
Boston, Massachusetts		1		426	$	206,070		N/A
APARTMENT COMMUNITIES IN PLANNING:⁽³⁾
Garden Communities:
Los Angeles County, California		2		568		37,740
San Francisco Bay Area, California		2		416		—

High-Rise Communities:
Boston, Massachusetts		1		341	$	19,595

Total Apartment Communities In Planning⁽³⁾ Subtotal/Average		5		1,325	$	57,335

Total Communities		144		45,759	$	14,924,823

INTERNATIONAL PORTFOLIO:
German Operating Apartment Communities		10		807		53,458

OTHER REAL ESTATE ASSETS⁽⁴⁾		—		—	$	90,791

Total Real Estate Owned at December 31, 2007		154		46,566	$	15,069,072

See notes on following page.


(1)		Represents the percentage leased as of December 31, 2007. For communities in Lease-Up, the percentage leased is based on leased units divided by total number of units in the community (completed and under


		construction) as of December 31, 2007. The “N/A” for the Philadelphia and Chicago markets in the High-Rise operating community section indicates that the market is entirely comprised of Oakwood Master Lease communities or ground lease properties. Oakwood Master Leased communities and ground lease properties have been excluded from the Percentage Leased calculation for other markets that have both Oakwood Master Leased communities and communities with traditional resident leases. A “N/A” related to Boston indicates the community is under construction where Lease-Up has not yet commenced.

(2)		Lower average occupancy is due to the inclusion of certain recently completed development communities which are in Lease-Up and therefore not yet Stabilized.

(3)		As of December 31, 2007, we had three investments representing $0.5 million or 780 units classified as In Planning and Under Control. Our investment in these communities is reflected in the “Other assets” caption of our Balance Sheet.

(4)		Includes land that is not In Planning and other real estate assets.

Item 3. Legal Proceedings

Shareholder Litigation

On May 30, 2007, two separate purported shareholder class-action lawsuits related to the Merger Agreement and the transactions contemplated thereby were filed naming Archstone-Smith and each of Archstone-Smith’s trustees as defendants. One of these lawsuits, Seymour Schiff v. James A. Cardwell, et al. (Case No. 2007cv1135), was filed in the United States District Court for the District of Colorado. The other, Mortimer J. Cohen v. Archstone-Smith Trust, et al. (Case No. 2007cv1060), was filed in the District Court, County of Arapahoe, Colorado. On May 31, 2007, two additional purported shareholder class-action lawsuits related to the Merger Agreement and the transactions contemplated thereby were filed in the District Court, County of Arapahoe, Colorado. The first, Howard Lasker v. R. Scot Sellers, et al. (Case No. 2007cv1073), names Archstone-Smith, each of Archstone-Smith’s trustees and one of Archstone-Smith’s senior officers as defendants. The second, Steamship Trade Association/International Longshoremen’s Association Pension Fund v. Archstone-Smith Trust, et al. (Case No. 2007cv1070), names Archstone-Smith, each of Archstone-Smith’s trustees, Tishman Speyer and Lehman Brothers as defendants. On June 11, 2007, an additional purported shareholder class-action lawsuit related to the Merger Agreement, Doris Staehr v. Archstone-Smith Trust, et al. (Case No. 2007cv1081), was filed in the District Court, County of Arapahoe, Colorado, naming Archstone-Smith and each of Archstone-Smith’s trustees as defendants. All five lawsuits allege, among other things, that Archstone-Smith’s trustees violated their fiduciary duties to Archstone-Smith’s shareholders in approving the Mergers.

On June 21, 2007, the District Court, County of Arapahoe, Colorado entered an order consolidating the Lasker, Steamship Trade Association/International Longshoremen’s Association Pension Fund and Staehr actions into the Cohen action, under the caption In re Archstone-Smith Trust Shareholder Litigation.

On August 17, 2007, Archstone-Smith and the other defendants entered into a memorandum of understanding with the plaintiffs regarding the settlement of both the Schiff and the consolidated action captioned In re Archstone-Smith Trust Shareholder Litigation. In connection with the settlement, Archstone-Smith agreed to make certain additional disclosures to its shareholders. Subject to the completion of certain confirmatory discovery by counsel to the plaintiffs, the memorandum of understanding contemplates that the parties will enter into a stipulation of settlement. The stipulation of settlement will be subject to customary conditions, including court approval following notice to Archstone-Smith’s shareholders and consummation of the Merger. In the event that the parties enter into a stipulation of settlement, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement, which, if finally approved by the court, will resolve all of the claims that were or could have been brought in the actions being settled, including all claims relating to the Merger, the Merger Agreement and any disclosure made in connection therewith. In addition, in connection with the settlement, the parties contemplate that plaintiffs’ counsel will petition the court for an award of attorneys’ fees and expenses to be paid by us, up to $1.0 million. There can be no assurance that the parties will ultimately enter into a stipulation of settlement or that the court will approve the settlement even if the parties were to enter into such stipulation. In such event, the proposed settlement as contemplated by the memorandum of understanding may be terminated. The settlement will not affect the amount of the Merger consideration that the plaintiffs are entitled to receive in the Merger. Archstone-Smith and the other defendants vigorously deny all liability with respect to the facts and claims

alleged in the lawsuits, and specifically deny that any modifications to the Merger Agreement or any further supplemental disclosure was required under any applicable rule, statute, regulation or law. However, to avoid the risk of delaying or adversely affecting the Merger and the related transactions, to minimize the expense of defending the lawsuits, and to provide additional information to Archstone-Smith shareholders at a time and in a manner that would not cause any delay of the Merger, Archstone-Smith and the Archstone-Smith Trustees agreed to the settlement described above. Archstone-Smith and the other defendants further considered it desirable that the actions be settled to avoid the substantial burden, expense, risk, inconvenience and distraction of continued litigation and to fully and finally resolve the settled claims.

Clinton Green

The Clinton Green project is a mixed-use apartment, condominium, and retail complex in New York City on 10th Avenue between 51st and 53rd Streets. The Clinton Green Project is owned by Clinton Green Holdings, LLC (“CG Holdings”), a joint venture consisting of our wholly-owned indirect subsidiary (“ASN-CG Member”) and an affiliate of The Dermot Company (“Dermot Member”). The Clinton Green Project also includes a small condominium component that is separately owned by Clinton Green Condo, LLC (“CG Condo”), a joint venture of the ASN-CG Member and the Dermot Member. In addition to other investments in CG Holdings and CG Condo, we provided a letter of credit under our pre-Merger Credit Facility to support tax-exempt bonds issued to finance the CG Project.

On September 21, 2007, the Dermot Member filed a lawsuit captioned Clinton Green Holdings, LLC and DPIC Clinton Green, LLC v. Archstone-Smith Operating Trust, ASN Clinton Green Member, LLC, and Ameriton Properties Incorporated, Index No. 07/603154, Supreme Court of the State of New York, County of New York. The Dermot Member alleges (a) that the Merger caused a breach of the CG Holdings Operating Agreement because the transfer violated certain covenants in the Pre-Merger Credit Facility and also breached a provision of the CG Holdings Operating Agreement prohibiting a change of control of ASN-CG Member, (b) that the Merger caused a breach of a Put-Call Agreement under which the Dermot Member is entitled to be bought out of CG Holdings by ASN-CG Member through a tax-free contribution to us for an interest that could be converted into Archstone-Smith’s publicly traded stock and (c) that the Merger caused a breach of the CG Condo Operating Agreement as a result of a change in control of Ameriton. The Dermot Member is seeking unspecified damages as well as the ability to have CG Holdings dissolved.

Prior to the Merger, the ASN-CG Member reached agreement with the Dermot Member and the lenders under the Pre-Merger Credit Facility to waive any breach of covenants for a period of six months. The agreement involved certain immaterial payments and concessions to the Dermot Member. The Dermot Member has also agreed to an extension of the date by which the Archstone defendants must respond to the Complaint until April 30, 2008.

Tax Protection Agreements and Unitholder Claims

Prior to the Mergers, Archstone and several related parties had entered into tax protection agreements and other contracts with various holders of the A-1 Common Units. Those tax protection and related agreements provided such Unitholders, among other things, with the right to tax protection payments under specified circumstances detailed in such agreements. Archstone has received various tax claim notices and other communications from various former Unitholders asserting that those former Unitholders are owed tax protection payments and alleging a variety of other claims. Other former Unitholders may assert similar or additional claims in the future. The tax protection agreements generally provide that, after a Unitholder sends a tax claim notice to Archstone, Archstone may reject such claims (as it has with respect to tax claim notices sent to date). Following such rejection, unless the parties are able to negotiate an amicable resolution, the parties are generally required to submit to arbitration with respect to claims for tax protection payments. It is expected that arbitrations will be commenced in the future.

In addition, on November 30, 2007, a purported class action lawsuit related to the Mergers, captioned Steven A. Stender and Infinity Clark Street Operating v. James A. Cardwell, et al. (Case no. 2007cv2503), was filed in the United States District Court for the District of Colorado. The lawsuit names, among others, Archstone, Archstone-Smith, certain of their former trustees and officers, Lehman Brothers Holdings Inc. and Tishman Speyer Development Corporation as defendants. This action was brought by certain former Unitholders, individually and

purportedly on behalf of all former holders of A-1 Common Units as of the Mergers, and alleges, among other things: (i) that Archstone and Archstone-Smith entered into enforceable property contribution agreements and partnership agreements with such Unitholders; (ii) that Archstone and Archstone-Smith agreed not to enter into any transactions or dispose of any interest in the property contributed by such Unitholders that would result in such Unitholders realizing a taxable gain, and agreed to provide such Unitholders with the ability to receive dividends and also to liquidate their units by receiving cash or converting them to common shares in the publicly traded Archstone-Smith; (iii) that Archstone and Archstone-Smith failed to perform their duties under the Declaration of Trust, contribution and partnership agreements, and statutory and common law partnership principles in connection with the Mergers; (iv) that such failures discharge such Unitholders’ obligations to defendants (as noted above, the former Unitholders undertook certain obligations to arbitrate with respect to claimed rights to tax protection payments); and (v) that Archstone-Smith and former trustees and officers, aided and abetted by Lehman Brothers and Tishman Speyer, violated their fiduciary duties owed to such Unitholders in connection with the Mergers. The purported class action seeks an unspecified amount of damages. Although Archstone and the Venture believe that the claims that have been asserted are without merit, there can be no assurance that the disposition of such claims will not result in material liability to Archstone.

FHA/ADA

During the second quarter of 2005, we entered into a full and final settlement in the United States District Court for the District of Maryland with three national disability organizations and agreed to make capital improvements in a number of our communities in order to make them fully compliant with the FHA and ADA. The litigation, settled by this agreement, alleged lack of full compliance with certain design and construction requirements under the two federal statutes at 71 of our wholly-owned and joint venture communities, of which we or our affiliates still own or have an interest in 18. As part of the settlement, the three disability organizations all recognized that Archstone had no intention to build any of its communities in a manner inconsistent with the FHA or ADA.

The amount of the capital expenditures required to remediate the communities named in the settlement was estimated at $47.2 million and was accrued as an addition to real estate during the fourth quarter of 2005. The settlement agreement approved by the court allows us to remediate each of the designated communities over a three-year period, and also provides that we are not restricted from selling any of our communities during the remediation period. We agreed to pay damages totaling $1.4 million, which included legal fees and costs incurred by the plaintiffs. We had $10.9 million of the original accrual remaining on December 31, 2007.

Water Intrusion-Florida

We are subject to various claims filed in 2002 and 2003 in connection with moisture infiltration and resulting mold issues at certain High-Rise properties we once owned in Southeast Florida. These claims generally allege that water infiltration and resulting mold contamination resulted in the claimants having personal injuries and/or property damage. Although certain of these claims continue to be in various stages of litigation, with respect to the majority of these claims, we have either settled the claims and/or we have been dismissed from the lawsuits that had been filed. With respect to the lawsuits that have not been resolved, we continue to defend these claims in the normal course of litigation.

Water Intrusion — Westbury

In November, 2007, we began notifying residents of Archstone Westbury that, due to water intrusion and some related mold growth, we had concluded that the appropriate course of action was to perform necessary remediation and reconstruction at the community. Further, we determined it would be necessary to terminate every tenant’s lease, effective March 31, 2008, to ensure the safety of tenants during the potentially year-long construction project. As a consequence, four complaints were filed by tenants at Westbury against entities related to us and various other entities allegedly involved in the design, construction and ownership of the Project. These cases are Andrea Sorrentino, et al. v. ASN Roosevelt Center LLC d/b/a Archstone Westbury, et al., filed on November 28, 2007, in the Supreme Court of the State of New York, County of Nassau, Case No. 07-021135, removed on February 8, 2008 to U.S. Federal District Court for the Eastern District of New York; Richardo Francois v. ASN Roosevelt Center LLC D/B/A Archstone Westbury, filed on December 7, 2007, in the Supreme Court of the State of

New York, County of Nassau, Case No. 07-021967; Pasquale Marchese, et al. v. ASN Roosevelt Center LLC, et al., filed on December 7, 2007, but not yet served on us; and John DiGiovanna and Farideh DiGiovanna vs. ASN Roosevelt Center LLC d/b/a Archstone Westbury, filed on January 7, 2008, in the Supreme Court of the State of New York, County of Nassau, Case No. 08-000347. In addition to the foregoing cases, there are a number of threatened lawsuits. Plaintiffs in the filed cases seek monetary damages and equitable relief alleging, among other things, that water damage and mold has caused the tenants at Westbury personal harm and property damage. Although no assurances can be given with respect to the outcome of these lawsuits, we intend to vigorously defend against the claims alleged in these lawsuits.

Other

We are a party to various other claims and routine litigation arising in the ordinary course of business. We do not believe that the results of any such claims or litigation, individually or in the aggregate, will have a material adverse effect on our business, financial position or results of operations.

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

No matters were submitted to a vote of our security holders during the quarter ended December 31, 2007.

PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our Common Units are not traded in any public market. At the effective time of the Operating Trust Merger, under the Merger Agreement, holders of our A-1 Common Units were entitled to receive at their election one newly-issued Series O Preferred Unit or $60.75 for each of their Class A-1 Common Units. Each of the A-1 Common Units that were not converted to Series O Preferred Units, and all of the A-2 Common Units outstanding (other than A-1 Common Units and A-2 Common Units held by Archstone-Smith, its subsidiaries and certain affiliates of the Buyer Parties) immediately prior to the Operating Trust Merger, were converted into, and canceled in exchange for the right to receive $60.75 in cash, without interest and less applicable withholding tax. There have been no transfers of any Common Units since October 4, 2007. Following the Mergers, Series I Trust, Series II LLC and Series III LLC are the only holders of our common equity.

In 2006, distributions were declared and paid quarterly on our common units. The annual distribution for 2006 was $1.74 per common unit. In 2007, distributions were declared and paid during the first and second quarter at a rate of $0.4525 per common unit. No distributions have been declared or paid since the second quarter. We do not plan on making distributions in the near term, and it is uncertain when any distributions will be made.

As of December 31, 2007, no securities were authorized for issuance under any equity compensation plans.

During 2007, we redeemed 1,108,323 A-1 Common Units at an average price of $59.16 per Common Unit. In connection with the Mergers, holders of 22.2 million A-1 Common Units elected to receive the merger consideration of $60.75 per Common Unit.

Item 6. Selected Financial Data

The following table provides selected financial data relating to our historical financial condition and results of operations as of and for each of the years ending December 31, 2003 to 2006, and the periods January 1, 2007 through October 4, 2007 (Predecessor) and October 5, 2007 through December 31, 2007 (Successor). This data is qualified in its entirety by, and should be read in conjunction with, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes that have been included or incorporated by reference in this Annual Report. Prior year’s amounts have been restated for amounts classified within discontinued operations (in thousands, except per unit data):


	Combined
	Successor and
	Predecessor			Successor			Predecessor
				Period from			Period from
				October 5, 2007			January 1, 2007
	Year Ended			Through			Through					Year Ended
	December 31,			December 31,			October 4,					December 31,
	2007			2007			2007			2006		2005		2004		2003
Operations Summary⁽¹⁾:
Total revenues⁽²⁾	$	945,432		$	255,271		$	690,161		$	759,825	$	513,855	$	405,681	$	333,063
Property operating expenses (rental expenses and real estate taxes)		296,063			76,348			219,715			225,822		148,640		130,725		100,242
Net Operating Income⁽³⁾		562,044			137,429			424,615			456,593		309,185		255,748		213,487
Depreciation on real estate investments		329,323			162,427			166,896			177,264		115,997		97,396		67,745
Interest expense		422,237			255,709			166,528			161,231		75,968		56,240		53,183
General and administrative expense		84,765			24,160			60,605			68,188		58,604		55,479		49,838
Earnings (loss) from operations		(232,413	)		(268,062	)		35,649			109,615		61,370		47,907		26,795
Income from unconsolidated entities		(12,974	)		(7,680	)		(5,294	)		36,316		22,432		17,902		5,745
Net earnings (loss) from discontinued operations⁽⁴⁾⁽⁵⁾		707,015			(7,816	)		714,831			686,806		588,895		518,192		461,651
Preferred Unit distributions		2,917			—			2,917			3,829		4,572		16,254		26,153
Net earnings (loss) attributable to Common Units⁽⁶⁾:
— Basic		354,325			(413,475	)		767,800			831,246		696,932		596,369		468,038
— Diluted		374,541			(413,475	)		788,016			842,385		696,932		600,124		480,910
Common Unit distributions		—			—			227,868			432,592		397,466		603,553		277,035
Per Unit Data:⁽¹⁵⁾
Net earnings (loss) attributable to Common Units:
— Basic		—			—		$	3.07		$	3.35	$	3.01	$	2.71	$	2.20
— Diluted		—			—			3.03			3.33		3.00		2.69		2.18
Common Unit cash distributions paid⁽⁷⁾		—			—			0.9050			1.74		1.73		2.72		1.71
Cash distributions paid per unit:
Series A Preferred Unit⁽⁸⁾		—			—			—			—		—		—		2.11
Series D Preferred Unit⁽⁹⁾		—			—			—			—		—		1.31		2.19
Series E Preferred Unit⁽⁹⁾		—			—			—			—		2.09		2.09		2.09
Series F Preferred Unit⁽⁹⁾		—			—			—			—		—		1.50		2.03
Series G Preferred Unit⁽⁹⁾		—			—			—			—		2.16		2.16		2.16
Series H, J, K, and L Preferred Unit^(9)(10)		—			—			—			—		—		—		3.38
Series I Preferred Unit⁽¹¹⁾		—			—			5,745			7,660.00		7,660.00		7,660.00		7,660.00
Series P Preferred Unit⁽¹²⁾		—			—			228.81			457.62		364.74		—		—
Series Q-1 Preferred Unit⁽¹³⁾		—			—			10.08			20.16		3.54		—		—
Series Q-2 Preferred Unit⁽¹⁴⁾		—			—			4.32			8.64		1.52		—		—
Weighted average Common Units outstanding:
— Basic		—			—			250,223			248,314		231,642		220,053		212,288
— Diluted		—			—			260,026			253,308		232,608		223,187		220,758


(1)		Net earnings from discontinued operations have been reclassified to reflect communities classified as discontinued operations as of December 31, 2007 for all years presented.

(2)		Annual revenues and other income, inclusive of discontinued operations, for 2007 (combined Successor and Predecessor), 2006, 2005, 2004 and 2003 were $1.2 billion, $1.3 billion, $1.1 billion, $1.0 billion and $1.0 billion, respectively.

(3)		Defined as rental revenues less rental expenses and real estate taxes. We believe that net earnings (loss) attributable to Common Units and NOI are the most relevant measures of our operating performance and allow investors to evaluate our business against our industry peers and against all publicly traded companies as a whole. We rely on NOI for purposes of making decisions about resource allocations and assessing segment performance. We also believe NOI is a valuable means of comparing period-to-period property performance. See Item 7 of this Annual Report under Results of Operations for a reconciliation of NOI to Earnings from Operations, and to obtain the required information to recalculate NOI from continuing operations.

(4)		Gains on the disposition of real estate investments classified as held for sale after January 1, 2003 are included in discontinued operations.

(5)		Represents property-specific components of net earnings and gains/(losses) related to real estate sold or classified as held for sale at December 31, 2007.

(6)		Includes $131.0 million of unrealized derivative losses from interest rate hedges for the period of October 5, 2007 through December 31, 2007 recorded in Other non-operating income (loss).

(7)		Includes a $1.00 per unit special distribution issued to our Common Unitholders in December 2004.

(8)		The Series A Preferred Units were called for redemption during October 2003; of the 2.9 million Series A Preferred Units then outstanding, 2.8 million were converted to Common Units and the remaining were redeemed.

(9)		All of the outstanding Series D, Series E, Series F, Series G and Series J Preferred Units were redeemed at liquidation value plus accrued distributions.

(10)		The Series L Preferred Units were converted into Common Units during December 2004 and the distribution paid during 2004 prior to conversion was $3.40 per unit. In September 2004, the Series K Preferred Units were converted into Common Units and the distribution paid during 2004 prior to conversion was $2.55 per unit. The Series H Preferred Units were converted into Common Units during May 2003 and the distribution paid during 2003 prior to conversion was $1.27 per unit.

(11)		Series I Preferred Units have a par value of $0.01 per unit.

(12)		The Series P Preferred Unit replaced the Series M Preferred Unit in connection with the Merger.

(13)		The Series Q-1 Preferred Unit replaced the Series N-1 Preferred Unit in connection with the Merger.

(14)		The Series Q-2 Preferred Unit replaced the Series N-2 Preferred Unit in connection with the Merger.
(15)		Per unit data is not presented for the Successor as a result of the Merger.


	Successor			Predecessor
	December 31,			December 31,			December 31,			December 31,			December 31,
	2007			2006			2005			2004			2003
Financial Position:
Real estate owned, at cost	$	14,680,183		$	12,967,709		$	11,142,311		$	9,006,114		$	8,785,004

Real estate held for sale⁽¹⁾		388,890			219,931			216,953			215,924			214,176
Investments in and advances to unconsolidated entities		297,113			235,323			132,728			111,481			86,367
Total assets		17,154,659			13,259,127			11,462,095			9,061,280			8,916,591
Revolving credit facilities		60,000			84,723			394,578			19,000			103,790
Long-Term Unsecured Debt		—			3,355,699			2,540,036			2,094,358			1,866,861
Term Loans		4,591,822			—			—			—			—
Property Mortgages Payable		9,212,648			2,776,234			2,393,652			2,031,505			1,960,827
Total Liabilities		14,635,771			6,956,789			5,693,305			4,469,994			4,179,488
Other Common Unitholders’ interest (at redemption value)		—			1,718,017			1,420,491			885,400			707,924
Series O Preferred Units		235,944			—			—			—			—
Perpetual Preferred Units		50,000			50,000			50,000			69,522			210,120
Total unitholders’ equity		2,282,944			4,584,321			4,348,299			3,703,826			4,017,669
Number of Common Units outstanding		39,565			249,661			246,324			222,694			220,063

	Combined Successor and Predecessor			Predecessor
	December 31,			December 31,			December 31,			December 31,			December 31,
	2007			2006			2005			2004			2003
Other Data:
Net cash flows provided by (used in):
Operating activities	$	411,355		$	537,428		$	414,019		$	399,897		$	343,696
Investing activities		14,657			(506,264	)		(964,621	)		528,253			428,166
Financing activities		(452,245	)		3,853			360,985			(730,125	)		(779,478	)


(1)		Previous years have been restated to include assets that were classified as held for sale as of December 31, 2007.

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

Please refer to “Item 1. Business — Consummation of Mergers” for important information regarding the recent Mergers. Unless indicated otherwise, the following discussion of our “Results of Operations” is based on the combined operating results of the Successor and Predecessor for 2007 and the Predecessor’s operating results for 2006 and 2005. Unless indicated otherwise, the “Liquidity and Capital Resources” discussion is based on the liquidity and capital resources of the Successor entity. Our analysis includes discussion of areas where comparability was significantly impacted by the Merger.

Results of Operations

Reconciliation of Quantitative Summary to Consolidated Statements of Earnings

The following schedule is provided to reconcile our consolidated statements of earnings to the information presented in the “Quantitative Summary” provided in the next section:


	Combined Successor and Predecessor									Predecessor
	2007									2006									2005
	Continuing			Discontinued						Continuing			Discontinued						Continuing			Discontinued
	Operations			Operations			Total			Operations			Operations			Total			Operations			Operations			Total
Rental revenue	$	858,107		$	286,768		$	1,144,875		$	682,415		$	513,218		$	1,195,633		$	457,825		$	559,584		$	1,017,409

Other income		87,325			—			87,325			77,410			—			77,410			56,030			—			56,030

Property operating expenses (rental expenses and real estate taxes)		(296,063	)		(92,165	)		(388,228	)		(225,822	)		(178,542	)		(404,364	)		(148,640	)		(209,329	)		(357,969	)

Depreciation on real estate investments		(329,323	)		(53,033	)		(382,356	)		(177,264	)		(111,032	)		(288,296	)		(115,997	)		(122,791	)		(238,788	)

Interest expense		(422,237	)		(73,067	)		(495,304	)		(161,231	)		(114,595	)		(275,826	)		(75,968	)		(141,600	)		(217,568	)

General and administrative expenses		(84,765	)		—			(84,765	)		(68,188	)		—			(68,188	)		(58,604	)		—			(58,604	)

Other expense		(45,457	)		(6,356	)		(51,813	)		(17,705	)		(19,815	)		(37,520	)		(53,276	)		(18,903	)		(72,179	)

Income from unconsolidated entities		(12,974	)		—			(12,974	)		36,316			—			36,316			22,432			—			22,432

Other non-operating income (loss)		(98,929	)		—			(98,929	)		2,338			—			2,338			28,807			—			28,807

Gains, net of disposition costs		—			644,868			644,868			—			597,572			597,572			—			521,934			521,934

Net earnings	$	(344,316	)	$	707,015		$	362,699		$	148,269		$	686,806		$	835,075		$	112,609		$	588,895		$	701,504

Quantitative Summary

This summary is provided for reference purposes and is intended to support and be read in conjunction with the narrative discussion of our results of operations. This quantitative summary includes all operating activities, including those classified as discontinued operations for GAAP reporting purposes. This information is presented to correspond with the manner in which we analyze the business. We have historically reinvested disposition proceeds into new developments and operating communities and therefore believe it is most useful to analyze continuing and discontinued operations on a combined basis. The impact of communities classified as “discontinued operations” for GAAP reporting purposes is discussed separately in a later section under the caption “Discontinued Operations Analysis.”


	Combined
	Successor and									2007 vs. 2006			2006 vs. 2005
	Predecessor			Predecessor						Increase /			Increase /
	2007			2006			2005			(Decrease)			(Decrease)
Rental revenues:
Same-Store ⁽¹⁾	$	435,286		$	413,989		$	387,213		$	21,297		$	26,776
Non Same-Store		647,952			714,758			588,857			(66,806	)		125,901
Ameriton		9,921			20,869			33,986			(10,948	)		(13,117	)
International		43,660			34,920			—			8,740			34,920
Non-multifamily		8,056			11,097			7,353			(3,041	)		3,744

Total revenues		1,144,875			1,195,633			1,017,409			(50,758	)		178,224


Property operating expenses (rental expenses and real estate taxes):
Same-Store ⁽¹⁾		139,713			130,545			124,545			9,168			6,000
Non Same-Store		216,165			243,721			214,394			(27,556	)		29,327
Incremental operating expenses related to the Merger ⁽²⁾		4,975			—			—			4,975			—
Ameriton		4,963			10,619			17,038			(5,656	)		(6,419	)
International		21,625			16,225			—			5,400			16,225
Non-multifamily		787			3,254			1,992			(2,467	)		1,262


Total operating expenses		388,228			404,364			357,969			(16,136	)		46,395


Net Operating Income (rental revenues less property operating expenses)		756,647			791,269			659,440			(34,622	)		131,829

Margin (NOI/rental revenues):		66.1	%		66.2	%		64.8	%		(0.1	%)		1.4	%
Average occupancy during period: ⁽³⁾		92.4	%		93.9	%		94.6	%		(1.5	%)		(0.7	%)

Other income		87,325			77,410			56,030			9,915			21,380
Depreciation of real estate investments		382,356			288,296			238,788			94,060			49,508
Interest expense		533,679			327,634			256,679			206,045			70,955
Capitalized interest		38,375			51,808			39,111			(13,433	)		12,697

Net interest expense		495,304			275,826			217,568			219,478			58,258
General and administrative expenses		84,765			68,188			58,604			16,577			9,584
Other expense		51,813			37,520			72,179			14,293			(34,659	)

Earnings from continuing and discontinued operations		(170,266	)		198,849			128,331			(369,115	)		70,518


Equity in earnings from unconsolidated entities		(12,974	)		36,316			22,432			(49,290	)		13,884
Other non-operating income (loss)		(98,929	)		2,338			28,807			(101,267	)		(26,469	)
Gains on disposition of real estate investments, net of disposition costs:
Taxable subsidiaries		16,891			51,245			75,248			(34,354	)		(24,003	)
Non-taxable transactions		627,977			546,327			446,686			81,650			99,641


Net earnings	$	362,699		$	835,075		$	701,504		$	(472,376	)	$	133,571


(1)		Reflects revenues and operating expenses for Same-Store communities that were owned on December 31, 2007 and fully operating during all three years in the comparison period.

(2)		Reflects incremental real estate taxes triggered by revaluations stemming from the Merger and the amortization of an intangible related to below market ground leases.

(3)		Does not include occupancy associated with properties owned by Ameriton, operated under the Oakwood Master Leases or International.

Property-level operating results — 2007 compared to 2006

We utilize NOI as the primary measure to evaluate the performance of our operating communities and for purposes of making decisions about resource allocations and assessing segment performance. We also believe NOI is a valuable means of comparing period-to-period property performance. In analyzing the performance of our operating portfolio, we evaluate Same-Store communities separately from Non Same-Store communities and other properties.

Same-Store Analysis

The following table reflects revenue, expense and NOI growth in 2007 as compared to 2006 for Same-Store communities that were owned on December 31, 2007 and fully operating during all three years.


	Same-Store			Same-Store
	Revenue			Expense			Same-Store
	Growth			Growth			NOI Growth
Garden		5.6	%		6.6	%		5.1	%
High-Rise		4.8	%		7.3	%		3.5	%

Total		5.1	%		7.0.	%		4.3	%

Same-Store revenues were up 5.1% in 2007 as compared to 2006 due primarily to an increase in average rental revenue per unit partially offset by a reduction in the occupancy rate. Same-Store expenses were up 7.0% for the comparison period, primarily due to higher real estate taxes and increased personnel costs. These changes in revenues and expenses resulted in an increase in Same-Store NOI of 4.3% driven principally by strong revenue growth in Seattle, Southern California, the New York City Metropolitan Area and the San Francisco Bay Area, which collectively represented 49.3% of the company’s portfolio at December 31, 2007.

Non Same-Store and Other Analysis

The $39.3 million decrease in NOI in the Non Same-Store portfolio for the 2007 as compared to 2006 is primarily attributable to a $98.2 million decrease related to community dispositions and a $29.5 million decrease due to assets sold to affiliated entities at the date of the Merger. These decreases were offset by a $48.6 million increase related to acquisitions, a $23.7 million increase related to recently stabilized development communities and communities in lease-up, a $16.2 million increase due to the Oakwood Master Leases and ground lease revenue on three new ground leases and other non same-store assets. The $5.0 million in incremental operating expenses related to the Merger reflects real estate taxes triggered by revaluations stemming from the Merger and the amortization of an intangible related to below-market ground leases.

Ameriton

The decrease in NOI from Ameriton apartment communities in 2007 as compared to 2006 is primarily attributable to dispositions. Ameriton was liquidated in connection with the Mergers which also contributed to the decrease.

International

NOI from International operations for 2007 increased $3.3 million as compared to 2006 due primarily to the DeWAG acquisition that occurred in July 2006. The increase was partially offset by a decrease related to the contribution of the majority of our international operations to the International Fund on June 29, 2007 at which date the results of operations from the International Fund are included in income from unconsolidated entities rather than NOI since we do not control this entity.

Property-level operating results — 2006 compared to 2005

Same-Store Analysis

The following table reflects revenue, expense and NOI growth in 2006 as compared to 2005 for Same-Store communities that were owned on December 31, 2007 and fully operating during all three years.


	Same-Store			Same-Store
	Revenue			Expense			Same-Store
	Growth			Growth			NOI Growth
Garden		7.6	%		6.8	%		8.0	%
High-Rise		6.3	%		3.3	%		7.8	%

Total		6.9	%		4.8	%		7.9	%

Same-Store revenues were up 6.9% in 2006 as compared to 2005 due primarily to an increase in average rental revenue per unit. Same-Store expenses were up 4.8% for the comparison period, primarily due to higher insurance costs, real estate taxes and personnel costs. These changes in revenues and expenses resulted in an increase in Same-Store NOI of 7.9% driven principally by strong growth in the Washington, D.C. metropolitan area, Southern California and the New York City metropolitan area which represented approximately 72% of the Company’s portfolio at December 31, 2006.

Non Same-Store and Other Analysis

The $96.6 million NOI increase in the non Same-Store portfolio for 2006 as compared to 2005 is primarily attributable to (i) $86.6 million related to acquisitions; (ii) $15.6 million related to newly developed apartment communities, including Lease-Ups; (iii) $33.3 million related to the Oakwood Master Leases; and offset by (iv) $39.2 million related to community dispositions.

Ameriton

The $6.7 million NOI decrease from Ameriton apartment communities for 2006 as compared to 2005 is primarily attributable to a $10.3 million decline related to community dispositions, including the sale of new developments, partially offset by $3.5 million increase from community acquisitions.

International

The increase in NOI from International operations of $18.7 million for 2006 as compared to 2005 is primarily attributable to the DeWAG acquisition that occurred in July 2006.

Non Multi-family

The $2.5 million NOI increase from non-multifamily assets for 2006 as compared to 2005 is primarily attributable to commercial/retail income associated with an asset purchased by Ameriton in July 2005.

Other Income

Other income was higher in 2007 as compared to 2006 due to a $32.4 million increase in interest income due to increased restricted cash balances resulting from our recent Merger and a $9.6 million management fee

increase from the German management company. This increase is offset by $22.4 million decrease related to higher 2006 gains on land sales and a $10.9 million decrease in insurance recoveries.

The increase in other income during 2006 as compared to 2005 resulted primarily from a $19.0 million increase in interest income on mortgage loans to third parties and other interest bearing instruments and a $19.6 million increase in gains on land sales, primarily in Ameriton. These increases were offset by a $21.9 million decrease in 2006 related to insurance recoveries.

Depreciation Expense

In 2007, the increase in depreciation expense is primarily attributable to the fair market value adjustment which increased the basis of our real estate and the amortization of in place lease intangible values established in connection with the Merger.

In 2006, the depreciation increase was primarily related to the increase in the size of the real estate portfolio. A few of the major drivers are amortization of the value associated with in-place leases over the lease term on our new acquisitions; disposition of assets with a lower depreciable basis at significant gains, and reinvestment of the proceeds into assets with a higher depreciable basis partially offset by cessation of depreciation on assets sold or classified as held for sale.

Interest Expense

Gross interest expense increased in 2007 as compared to 2006 due to a substantial increase in borrowings related to our recent Merger, interest charges related to our international operations that began material operations in July 2006 and higher borrowings on our lines of credit which carry a higher effective interest rate as compared to our long-term debt and mortgages. These increases were partially offset by the impact of the deconsolidation of the majority of our international operations as of July 1, 2007. Capitalized interest decreased in 2007 primarily as a result of the distribution of most of our communities under development to affiliated entities in connection with the Merger transactions.

The increase in gross interest expense during 2006 as compared to 2005 is due to higher average debt levels associated with the increased size of the real estate portfolio combined with higher average interest rates on our unsecured credit facilities and other debt instruments. The International transactions were the most significant drivers of the portfolio increase in 2006. Capitalized interest also increased significantly as a result of the increase in the size and number of communities under construction and, to a lesser extent, higher average interest rates in 2006.

General and Administrative Expenses

General and administrative expenses were higher in 2007 as compared to 2006 due primarily to higher personnel-related costs associated with our international expansion that began material operations in July 2006 and higher payroll-related costs and professional fees. Our post-Merger expenses were also higher due to certain bonuses paid in lieu of equity awards which would have otherwise been issued under Archstone-Smith’s long-term incentive plan and amortized over three years.

The increase in the general and administrative expenses during 2006 as compared to 2005 is principally due to higher personnel-related costs related to our International expansion.

Other Expenses

Other expense in 2007 was higher as compared to 2006 due principally a $17.6 million charge for transaction costs related to the Merger and a $17.1 million increase in impairment charges. The 2007 impairment charge related primarily to a community in New York which will require significant renovation due to a water intrusion issue. These costs were offset by $20.7 million in lower income tax expense related to Ameriton dispositions.

The decrease in other expenses during 2006 as compared to 2005 is primarily attributable to a $14.3 million decrease in early debt extinguishment costs; an $8.5 million decrease in legal expenses; a $1.5 million decrease in taxes in our taxable REIT subsidiaries; a $7.8 million decrease in hurricane related charges; a $2.8 million writeoff of a loan to a prior affiliate in 2005; and a $1.5 million impairment related to a non-core asset in 2005 offset by a $4.3 million impairment charge on that asset in 2006.

Equity in Income from Unconsolidated Entities

Earnings from unconsolidated entities were lower in 2007 as compared to 2006 primarily due to a $29.2 million decrease in gains on the sale of joint venture assets and losses on the International Fund due primarily to the initial formation costs. In addition, the majority of our domestic joint ventures were sold or distributed to affiliated entities in connection with the Merger.

The increase in income from unconsolidated entities during 2006 as compared to 2005 is due primarily to more income from community dispositions and related venture liquidations.

Other Non-Operating Income (Loss)

In 2007, we had a non-operating loss compared to non-operating income in 2006, due to a $131.0 million unrealized loss on our interest rate swaps which were not designated as hedges for accounting purposes by the Successor entity. These derivative losses were partially offset by foreign currency gains on our international investments and gains recognized on the sale of International Fund shares.

Other non-operating income during 2006 consists primarily of a $1.7 million of gain from the sale of our Rent.com investment which was recorded upon the resolution of certain contingencies.

Gains on real estate dispositions

See “Discontinued Operations Analysis” below for discussion of gains.

Discontinued Operations Analysis

Included in the overall results discussed above are the following amounts associated with properties which have been sold or were classified as held for sale as of December 31, 2007 (dollars in thousands).


	Successor			Predecessor
	Period from			Period from
	October 5, 2007			January 1, 2007
	through			through			Year Ended
	December 31,			October 4,			December 31,
	2007			2007			2006			2005
Rental revenue	$	10,795		$	275,973		$	513,218		$	559,584
Rental expenses		(1,719	)		(66,326	)		(129,685	)		(150,604	)
Real estate taxes		(904	)		(23,216	)		(48,857	)		(58,725	)
Depreciation on real estate investments		(3,171	)		(49,862	)		(111,032	)		(122,791	)
Interest expense⁽¹⁾		(10,118	)		(62,949	)		(114,595	)		(141,600	)
Income taxes from taxable REIT subsidiaries		—			(1,126	)		(5,982	)		(11,556	)

Provision for possible loss on real estate investment		—			—			(4,328	)		(1,500	)
Debt extinguishment costs related to dispositions		(2,694	)		(2,536	)		(9,505	)		(5,847	)
Gain from the disposition of REIT real estate investments, net		—			629,444			548,187			448,358
Internal Disposition Costs — REIT transactions		—			(1,462	)		(1,860	)		(1,672	)
Gain from the dispositions of taxable REIT subsidiary real estate investments, net		(5	)		17,769			54,728			76,326

Internal Disposition Costs — Taxable REIT subsidiary transactions		—			(878	)		(3,483	)		(1,078	)

Total discontinued operations	$	(7,816	)	$	714,831		$	686,806		$	588,895


(1)		Interest expense included in discontinued operations is allocated to properties based on each asset’s cost in relation to the company’s leverage ratio and the average effective interest rate for each respective period.

As a result of the execution of our strategy of managing our invested capital through the selective sale of apartment communities in non-core locations and redeploying the proceeds to fund investments with higher anticipated growth prospects in our core markets, we had significant disposition activity in all three years. The resulting gains, net of disposition costs, were the biggest driver of overall earnings from discontinued operations. The relative level of gains in each year were primarily attributable to the volume of disposition activity. Revenues and expense levels related to communities sold or classified as held-for-sale are primarily dependent on the number of communities meeting the held-for-sale criteria and the period of time they were owned. Prior to the Merger, income taxes fluctuated in relation to the taxable gains associated with communities sold by our taxable REIT subsidiaries.

Preferred Unit Distribution Analysis

Preferred Unit distributions were lower in 2007 as compared to 2006 as no distributions have been declared or paid since the second quarter of 2007. Preferred Unit distributions were lower in 2006 as compared to 2005 due to redemptions during 2005.

Liquidity and Capital Resources

We generally finance a portion of our long-term investing and operating activities with long-term debt. In connection with the recent Merger, we paid off most of our pre-Merger debt and entered into several new loans and credit agreements to finance a significant portion of the transaction. Our leverage ratio after the Merger is significantly higher and interest rates on the new credit facilities are generally higher than those of the Predecessor entity. As a result of the cash flow generated by our operations, the available capacity under our credit facilities and term loans, available cash balances, draws on our interest reserve, expected proceeds from the planned disposition of real estate or from joint venture formations and our anticipated ability to secure additional financing, we believe our liquidity and financial condition are sufficient to meet all of our reasonably anticipated cash flow needs during the next 12 months. Please refer to the Consolidated Statement of Cash Flows for detailed information of our sources and uses of cash for 2007, 2006 and 2005. The 2007 cash flow statement combines pre and post Merger information.

Scheduled Debt Maturities and Interest Payment Requirements

On October 5, 2007 we borrowed approximately $13.8 billion under various credit facilities with third party lenders to, among other things, finance a portion of the cost of the Merger and refinance a portion of our existing indebtedness. As of December 31, 2007 we had total outstanding debt of $13.9 billion with a weighted average nominal interest rate of 6.94%. As of March 20, 2008 we had $14.0 billion of total outstanding debt with a weighted average nominal interest rate of 6.12 %.

Master Credit Facility

Our Master Credit Facility was entered into on October 5, 2007 as subsequently amended or restated from time to time thereafter. The amendments, among other things, increased the amount of Tranche B Term Loans (see further detail below) available under the Master Credit Facility. The Master Credit Facility provides a $750 million revolving credit facility, which includes a $75 million swing line and a letter of credit commitment with a maximum of $425 million for the first year, which decreases thereafter. The revolving credit facility bears interest at (a) 2.0% plus the greater of (i) the prime rate or (ii) the federal funds rate plus 0.50% or, at our option, (b) LIBOR plus 3.00%, and has a maturity date of October 5, 2011. The swing line bears interest at the same rate as the revolving credit facility. The Master Credit Facility also includes a $1.75 billion term loan (“Tranche A Term Loan”) maturing on October 5, 2011, bearing interest at (a) 2.0% plus the greater of (i) the prime rate or (ii) the federal funds rate plus 0.50% or, at our option, (b) LIBOR plus 3.00%, and a $3.0 billion term loan (“Tranche B Term Loan”) maturing on October 5, 2012, bearing interest at (a) 2.25% plus the greater of (i) the prime rate or (ii) the federal funds rate plus 0.50% or, at our option, (b) LIBOR plus 3.25%. All interest rates are subject to a 1.0% increase if the combined leverage ratio,

tangible net worth test and, on or prior to December 31, 2008, the consolidated debt service coverage ratio covenants are not satisfied as provided in the agreement. The Tranche A Term Loan is payable in four annual installments, beginning on October 5, 2008. The lenders under our Master Credit Facility and our mezzanine loans provided by the Fannie Mae Mezzanine Lenders and the Freddie Mac Mezzanine Lenders have the option to syndicate or sell the outstanding principal amount under such agreements to other investors at a discount and may revise the interest rate spread or discount or increase fees to a level necessary to facilitate syndication based on current market conditions at the syndication date. As of December 31, 2007, $5.6 billion in outstanding principal indebtedness under these loans was subject to syndication and the increased borrowing costs described above. The cost associated with any incremental interest or additional fees, as well as any original issue discount realized, is required to be born by the Company. These same lenders have committed to lend us up to $148.8 million to fund such costs, at any time prior to December 31, 2008. As of March 20, 2008, we had approximately $73.0 million set aside in restricted cash to fund syndication discounts. As of March 20, 2008, $43.0 million of principal had been syndicated at a discount of 3%.

The Master Credit Facility also provides that, if certain conditions are satisfied, the Company may request up to an aggregate principal amount of $242.5 million of new term loans, which may be used for syndication costs, working capital, including refinancing revolving loans, and which otherwise have substantially the same terms as the Tranche B Term Loan. The lenders under the Master Credit Facility have committed to lend us up to $242.5 million of such new term loans, $148.8 million of which may be used for syndication costs as described above and the remaining $93.7 million of which may be used to pay additional transaction costs and other miscellaneous costs and expenses. Nothing was drawn on the incremental facility at December 31, 2007. Further, if certain conditions are satisfied, the Company may request up to an aggregate principal amount of $250 million increase in the revolving credit facility, provided that the total revolving credit commitments may not exceed $1.0 billion at any time.

The Master Credit Facility loans are prepayable by us in whole or in part without penalty. The following amounts are required to be applied to prepay the Master Credit Facility loans, subject to certain carve-outs: (i) 100% of net cash proceeds from the sale or issuance of certain equity or incurrence of certain indebtedness, (ii) 100% of net cash proceeds from any sale or other disposition of any assets yielding gross proceeds in excess of $500,000 in any fiscal year, subject to certain exceptions after $500,000,000 of net cash proceeds have been applied to prepay the Tranche A Term Loan, including capacity for reinvestment of an amount not exceeding 50% of such net cash proceeds and (iii) 100% of excess cash flow for each fiscal year. After the Tranche A Term Loan has been repaid in full, if the combined leverage ratio is less than or equal to 60% and the consolidated debt service coverage ratio is greater than or equal to 1.25 to 1.00, then the foregoing percentages shall be reduced from 100% to 25%. Subject to certain exceptions, all such amounts shall be applied first, to the Tranche A Term Loan, second, to the Tranche B Term Loan and third, to the Revolving Loans and, the replacement or cash collateralization of outstanding letters of credit.

In addition to the mandatory prepayments described above, if at the end of any fiscal quarter, the leverage ratio is greater than the ratio required by the Master Credit Facility, the tangible net worth test is less than the amount required by the Master Credit Facility or, on or prior to December 31, 2008, the consolidated debt service coverage ratio is less than the ratio required by the Master Credit Facility, then the Company is generally required to cause the Master Credit Facility loans to be prepaid by an amount necessary to cause the combined leverage ratio, tangible net worth test and consolidated debt service coverage ratio to be in compliance on or prior to the later of January 1, 2009 and the last day of the fiscal quarter ending immediately after the initial fiscal quarter. All such mandatory prepayments may be made with the net cash proceeds of any sale or other disposition of assets or the sale or issuance of certain equity. Although failure to comply with the leverage ratio, tangible net worth test or, on or prior to December 31, 2008, consolidated debt service coverage ratio generally is not an event of default until the later of January 1, 2009 and the last day of the fiscal quarter ending immediately after the initial fiscal quarter as described above, until such time as the Company is in compliance with the combined leverage ratio, tangible net worth test, and consolidated debt service coverage ratio (i) the Company would not be permitted to incur certain types of indebtedness, make certain investments (other than those investments committed to be made prior to such failure) or pay certain dividends and (ii) the applicable margin with respect to the Master Credit Facility loans will increase by 1.00%.

Loans under the Master Credit Facility are secured, subject to permitted liens and other agreed upon exceptions, by substantially all of our owned assets, including (i) all of our properties other than those properties which are prohibited from being pledged as collateral pursuant to our and our subsidiaries existing contractual obligations, as well as any real property acquired by us or our subsidiaries in the future that is valued at $5.0 million or more and (ii) all the ownership interests in our subsidiaries held by us. Further, we and various parent and subsidiary guarantors, including our trustee, entered into a guarantee and collateral agreement, whereby the guarantors guarantee our obligations under the Master Credit Facility and we guarantee the guarantors’ obligations under certain pledge agreements with the lenders and their affiliates contemplated by the Master Credit Facility. The guarantees are secured by pledges of each such entity’s personal property, including all ownership interests held by such entity.

The Master Credit Facility required the establishment of a funded interest reserve of $500 million to facilitate compliance with certain debt service coverage ratios. We anticipate that we will need to draw on such reserves during 2008 to maintain compliance with such ratios. As of December 31, 2007 the balance in this restricted cash account was $427.9 million.

A summary of our Master Credit Facility Debt outstanding at December 31, 2007 is as follows (dollar amounts in thousands):


				Successor
				Balance at		Average
	Nominal			December 31,		Remaining
Type of Debt	Interest Rate⁽³⁾			2007		Life (Years)
Term loans⁽¹⁾⁽²⁾		8.18	%	$	4,591,822		4.42
Revolving credit facility⁽²⁾		7.95	%		60,000		3.76

Total/average		8.18	%	$	4,651,822		4.41


(1)		Includes Tranche A and Tranche B of the Master Credit Facility. The interest rates for both instruments are described above.

(2)		The interest rates for these instruments are described above.

(3)		The effective interest rates for the term loans and revolving credit facility are 8.42% and 28.31%, respectively, which includes the effect of loan cost amortization and other ongoing fees and expenses, where applicable. The effective interest rate on the revolving credit facility is high due primarily to the fees on the unfunded commitment. The higher the average outstanding drawn balance, the lower the effective interest.

Property Mortgages

In connection with the Merger, we entered into a $7.1 billion credit facility (“Fannie Facility”) provided by Fannie Mae, which is secured by 105 of our properties. This facility is divided into 9 loan pools. Pools 1 through 3, totaling $2.5 billion at issuance, mature on November 1, 2017 and bear interest at 6.256%. Pool 4, totaling $963.5 million at issuance, matures on November 1, 2014, and bears interest at 5.883%. Pools 5 through 7, totaling $2.3 billion at issuance, matures on November 1, 2012 and bears interest at 6.193%. Pools 8 and 9, totaling $1.3 billion at issuance, matures on November 1, 2009 and bears interest at LIBOR plus 1.265%. The variable rate loans are prepayable without penalty after October 31, 2008. Fixed rate loans are subject to a prepayment premium equal to the greater of 1% of the principal being repaid or a market rate present value determined in accordance with the loan’s terms. In addition to the Fannie Facility, the Fannie Mae Mezzanine Lenders have provided $768.9 million of mezzanine loans subordinate to each of the nine Fannie Facility pools. The interest rates on these mezzanine loans range from LIBOR plus 2.65% to LIBOR plus 2.85%. The Fannie Mae Mezzanine Lenders have the option to syndicate or sell the debt to other investors at a discount and may revise the interest rate spread or discount or fees to a level necessary to facilitate syndication based on current market as further described above.

Also in connection with the Merger, we entered in to an $847 million facility (“Freddie Facility”) provided by the Federal Home Loan Mortgage Corporation (“Freddie Mac”), which is secured by 13 of our properties. This facility matures on November 1, 2012 and bears interest at LIBOR plus 1.025%. The Freddie Facility is subject to a prepayment premium of 1% of the principal amount being repaid. In addition to the Freddie Facility, Freddie Mac Mezzanine Lenders, have provided $135.4 million of mezzanine loans subordinate to the Freddie Facility. The interest rate on the mezzanine loans is LIBOR plus 3.00%. The Freddie Mac Mezzanine Lenders have the option to syndicate or sell the debt to other investors at a discount and may revise the interest rate spread or discount or fees to a level necessary to facilitate syndication based on current market as further described above.

In addition to the property mortgages originated in connection with the Merger, the Successor entity assumed $479.3 million in existing pre-Merger tax-exempt bonds and mortgages.

Covenants

Our debt instruments are generally secured by real estate and other tangible assets and contain covenants common to the type of facility or borrowing, including financial covenants establishing minimum debt service coverage and tangible net worth ratios and maximum leverage ratios. The covenant limits under certain of our credit facilities become more restrictive beginning in 2009. We were in compliance with all required financial ratios pertaining to our debt instruments as of December 31, 2007. In addition to financial and other negative covenants certain of our debt facilities contain restrictions on our operations, including our ability to make capital expenditures over certain amounts and our ability to make distributions or voluntarily redeem or prepay any of our outstanding Preferred Units. While we will endeavor to maintain compliance with all required financial ratios during 2008 and beyond, we face risks that could impact our ability to do so and some of these risks are beyond our direct control. See “Item 1A. Risk Factors” for further discussion of risks associated with our indebtedness and financing. In the event of non-compliance, we can not provide any assurance as to whether such violations would be waived or the effect non-compliance would have on us.

Unitholder Distribution Requirements

From January 1, 2007 to September 30, 2007, we paid distributions of $230.8 million related to our Common and Preferred Units. There have been no distributions declared or paid on Common Units or Preferred Units subsequent to the October 5, 2007 Merger date. As of December 31, 2007, we had Preferred Units with a redemption value of approximately $285.9 million. These securities generally provide for a cumulative distribution. The undeclared and unaccrued distribution as of December 31, 2007 aggregated approximately $5.5 million.

Each holder of a Series O Preferred Unit will have the right to exercise an immediate put right, including payment of any tax protection amount (as defined in our Declaration of Trust) with respect to the Series O Preferred Units being redeemed, if at any time prior to January 1, 2022, (1) our loan to value ratio is higher than 85% and we make a distribution to the holders of Common Units; or (2) we incur indebtedness in excess of $10 million in principal amount (excluding draws on our line of credit or refinancings of existing indebtedness) and after such borrowing our loan to value ratio is higher than 85% and we have made a distribution to our Common Units in contemplation of the incurrence of that indebtedness. During any period of time after we incur indebtedness in excess of $10 million in principal amount (excluding draws on our line of credit or refinancings of existing indebtedness) and as a result of which our loan to value ratio exceeds 85%, until such time as our loan to value ratio no longer exceed 85%, the distribution rate on our Series O Preferred Units shall increase from 6% per annum to 8% per annum.

Planned Investments

Following is a summary of planned investments as of December 31, 2007, excluding joint ventures. The amounts labeled “Discretionary” represent future investments that we plan to make, although there is not a contractual commitment to do so. The amounts labeled “Committed” represent the approximate amount that we are contractually committed to fund in accordance with contracts with general contractors.


	Planned Investments
	(in thousands)
	Discretionary		Committed
Communities under redevelopment	$	103,566	$	—
Communities under construction		—		24,975
Communities In Planning and owned		359,897		—
Communities In Planning and Under Control		117,452		—
FHA/ADA settlement capital accrual		—		10,883

Total	$	580,915	$	35,858

In addition to the planned investments noted above, we expect to make additional investments relating to planned expenditures on recently acquired communities as well as recurring expenditures to improve and maintain our established operating communities.

We anticipate completion of most of the communities that are currently under construction and the planned operating community improvements by the end of 2008. No assurances can be given that planned developments will actually occur. In addition, actual costs incurred could be greater or less than our current estimates.

Funding Sources

We anticipate financing our planned investment and operating needs primarily with cash flow from operating activities, disposition proceeds, draws on interest reserves, joint venture or fund formations and borrowings under our credit facilities and term loans. On March 20, 2008, the revolver portion of our credit facilities had a drawn balance of $445.0 million and we had $163.7 million outstanding under letters of credit, leaving available borrowing capacity on the revolving portion of our Master Credit Facility of $141.3 million. In addition, as of March 20, 2008, we had unfunded term loan commitments of $242.5 million. In addition, we expect the proceeds from dispositions to exceed our investment in new operating community acquisitions in 2008 because net proceeds from dispositions are expected to be utilized to repay debt and fund other cash needs. We therefore believe that the dispositions proceeds related to discontinued operations will have a favorable impact on our liquidity in the foreseeable future.

Litigation and Contingencies

Shareholder Litigation

risk of delaying or adversely affecting the Merger and the related transactions, to minimize the expense of defending the lawsuits, and to provide additional information to Archstone-Smith shareholders at a time and in a manner that would not cause any delay of the Merger, Archstone-Smith and the Archstone-Smith Trustees agreed to the settlement described above. Archstone-Smith and the other defendants further considered it desirable that the actions be settled to avoid the substantial burden, expense, risk, inconvenience and distraction of continued litigation and to fully and finally resolve the settled claims.

Clinton Green

Tax Protection Agreements and Unitholder Claims

partnership agreements with such Unitholders; (ii) that Archstone and Archstone-Smith agreed not to enter into any transactions or dispose of any interest in the property contributed by such Unitholders that would result in such Unitholders realizing a taxable gain, and agreed to provide such Unitholders with the ability to receive dividends and also to liquidate their units by receiving cash or converting them to common shares in the publicly traded Archstone-Smith; (iii) that Archstone and Archstone-Smith failed to perform their duties under the Declaration of Trust, contribution and partnership agreements, and statutory and common law partnership principles in connection with the Mergers; (iv) that such failures discharge such Unitholders’ obligations to defendants (as noted above, the former Unitholders undertook certain obligations to arbitrate with respect to claimed rights to tax protection payments); and (v) that Archstone-Smith and former trustees and officers, aided and abetted by Lehman Brothers and Tishman Speyer, violated their fiduciary duties owed to such Unitholders in connection with the Mergers. The purported class action seeks an unspecified amount of damages. Although Archstone and the Venture believe that the claims that have been asserted are without merit, there can be no assurance that the disposition of such claims will not result in material liability to Archstone.

FHA/ADA

Water Intrusion-Florida

Water Intrusion — Westbury

Roosevelt Center LLC d/b/a Archstone Westbury, filed on January 7, 2008, in the Supreme Court of the State of New York, County of Nassau, Case No. 08-000347. In addition to the foregoing cases, there are a number of threatened lawsuits. Plaintiffs in the filed cases seek monetary damages and equitable relief alleging, among other things, that water damage and mold has caused the tenants at Westbury personal harm and property damage. Although no assurances can be given with respect to the outcome of these lawsuits, we intend to vigorously defend against the claims alleged in these lawsuits.

Other

Critical Accounting Policies

We define critical accounting policies as those accounting policies that require our management to exercise their most difficult, subjective and complex judgments. Our management has discussed the development and selection of all of these critical accounting policies with our audit committee, and the audit committee has reviewed the disclosure relating to these policies. Our critical accounting policies relate principally to the following key areas:

Business Combinations

From time to time, we are involved in transactions that are deemed to be business combinations. The purchase price for such allocations is allocated to the various components of the combination based on their respective fair value. The components typically include land, building, debt and other assumed liabilities and intangibles related to in-place leases, above and below market leases, technology, management agreements and non-compete agreements as well as other assets and liabilities. If the acquisition relates to multiple properties or entities, we must also allocate the purchase price among the acquired group. In the allocation of purchase price, management makes significant assumptions as it relates to expected future cash flows or replacement cost from which the fair value is derived. Subsequent adjustments made to the initial purchase price allocation are made within the allocation period, which typically does not exceed one year.

Valuation of Real Estate

Long-lived assets to be held and used are carried at cost and evaluated for impairment when events or changes in circumstances indicate such an evaluation is warranted. We also evaluate assets for potential impairment when we deem them to be held-for-sale. Valuation of real estate is considered a “critical accounting estimate” because the evaluation of impairment and the determination of fair values involve a number of management assumptions relating to future economic events that could materially affect the determination of the ultimate value, and therefore, the carrying amounts of our real estate. Furthermore, decisions regarding when a property should be classified as held-for-sale under SFAS No. 144 requires significant management judgment. There are many phases to the disposition process ranging from the initial market research to being under contract with non-refundable earnest money to closing. Deciding when management is committed to selling an asset is therefore highly subjective.

When determining if there is an indication of impairment for assets intended to be held and used, we estimate the asset’s NOI over the anticipated holding period on an undiscounted cash flow basis and compare this amount to its carrying value. Estimating the expected NOI and holding period requires significant management judgment. If it is determined that there is an indication of impairment for assets to be held and used, or if an asset is deemed to be held-for-sale, we then determine the estimated fair value of the asset.

The apartment industry uses capitalization rates and NOI as the primary components to measure fair value. Specifically, annual NOI for a community is divided by an estimated capitalization rate to determine the fair value of the community. Determining the appropriate capitalization rate requires significant judgment and is typically based on many factors including the prevailing rate for the market or submarket, as well as the quality and location of the properties. Further, capitalization rates can fluctuate up or down due to a variety of factors in the overall economy or within local markets. If the actual capitalization rate for a community is significantly different from our estimated rate, the impairment evaluation for an individual asset could be materially affected.

Capital Expenditures and Depreciable Lives

We incur costs relating to redevelopment initiatives, revenue-enhancing and expense-reducing capital expenditures, and recurring capital expenditures that are capitalized as part of our real estate. These amounts are capitalized and depreciated over estimated useful lives determined by management. We allocate the cost of newly acquired properties between net tangible and identifiable intangible assets. The primary intangible asset associated with an apartment community acquisition is the value of the existing lease agreements. When allocating cost to an acquired property, we first allocate costs to the estimated intangible value of the existing lease agreements and then to the estimated value of the land, building and fixtures assuming the property is vacant. We estimate the intangible

value of the lease agreements by determining the lost revenue associated with a hypothetical lease-up. We depreciate the building and fixtures based on the expected useful life of the asset and amortize the intangible value of the lease agreements over the average remaining life of the existing leases.

Determining whether expenditures meet the criteria for capitalization, the assignment of depreciable lives and determining the appropriate amounts to allocate between tangible and intangible assets for property acquisitions requires our management to exercise significant judgment and is therefore considered a “critical accounting estimate.”

Consolidation vs. Equity Method of Accounting for Ventures

From time to time, we make co-investments in real estate ventures with third parties and are required to determine whether to consolidate or use the equity method of accounting for the venture. FASB Interpretation No. 46R, “ Consolidation of Variable Interest Entities,” (as revised) and Emerging Issues Task Force issued EITF No. 04-5, “ Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights,” are the two primary sources of accounting guidance in this area. Appropriate application of these relatively complex rules requires substantial management judgment, which we believe, makes the choice of the appropriate accounting method for these ventures a “critical accounting estimate.”

Off Balance Sheet Arrangements

Our real estate investments in entities that do not qualify as variable interest entities, variable interest entities where we are not the primary beneficiary and entities we do not control through majority economic interest are not consolidated and are reported as investments in unconsolidated entities. Our investments in and advances to unconsolidated entities at December 31, 2007 aggregated $297.1 million. Please refer to Note 6 to the financial statements included in this report, Investments in and Advances to Unconsolidated Entities, for additional information.

As part of the Smith Merger, the Oakwood transaction and other unit-related contributions of property to us, we are required to indemnify certain Unitholders for any personal income tax expense resulting from the sale of properties identified in tax protection agreements. We intend to minimize or eliminate exposure to tax protection payments under the terms of the indemnification agreements by holding and using these properties through the term of the indemnification period or disposing of assets through tax-deferred exchanges. The built in gain subject to tax protection is estimated to be approximately $350 million as of December 31, 2007.

Contractual Commitments

The following table summarizes information contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in our audited financial statements in this Annual Report regarding contractual commitments as of December 31, 2007 (amounts in millions).


	Amount of Commitment Expiration Per Period
			2009		2011		2013
	2008		and 2010		and 2012		thru 2096		Total
Scheduled debt maturities	$	331	$	2,310	$	6,948	$	4,215	$	13,804
Revolving credit facilities		—		—		60		—		60
Interest on indebtedness		978		1,768		1,521		268		4,535
Development expenditures		25		—		—		—		25
Performance bonds		67		1		—		1		69
FHA/ADA Settlement⁽¹⁾		11		—		—		—		11
Lease commitments and other⁽²⁾		227		17		11		184		439

Total	$	1,639	$	4,096	$	8,540	$	4,668	$	18,943


(1)		Represents the estimated capital spending associated with the FHA and ADA settlement assuming the remainder will be spent evenly over the next year. Certain communities impacted by the settlement may be


		sold, which could impact the ultimate timing and amounts spent.

(2)		Includes letters of credit and lease commitments relating principally to ground lease payments as of December 31, 2007.

New Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. The statement does not require new fair value measurements, but is applied to the extent other accounting pronouncements require or permit fair value measurements. The statement emphasizes fair value as a market-based measurement which should be determined based on assumptions market participants would use in pricing an asset or liability. We will be required to disclose the extent to which fair value is used to measure assets and liabilities, the inputs used to develop the measurements, and the effect of certain of the measurements on earnings (or changes in net assets) for the period. SFAS No. 157 is effective for our fiscal year beginning January 1, 2008. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157” (“FSP FAS 157-2”), that delays the effective date of SFAS 157’s fair value measurement requirements for nonfinancial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis. Fair value measurements identified in FSP FAS 157-2 will be effective for our fiscal year beginning January 1, 2009. The adoption of SFAS 157 will primarily impact the valuation of our financial instruments, and is not expected to materially impact our financial position and results of operations.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” which gives entities the option to measure eligible financial assets, financial liabilities and firm commitments at fair value on an instrument-by-instrument basis (i.e., the fair value option), which are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability or upon entering into a firm commitment. Subsequent changes in fair value must be recorded in earnings. Additionally, SFAS No. 159 allows for a one-time election for existing positions upon adoption, with the transition adjustment recorded to beginning retained earnings. This statement is effective for fiscal years beginning after November 15, 2007. We do not anticipate the adoption of this statement will have a material impact on our financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 141R, “ Business Combinations” (“SFAS 141R”) and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51” (“SFAS 160”). SFAS 141R and 160 require most identifiable assets, liabilities, noncontrolling interests, and goodwill acquired in a business combination to be recorded at “full fair value” and require noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity, which changes the accounting for transactions with noncontrolling interest holders. The provisions of SFAS 141R and 160 are effective for our fiscal year beginning January 1, 2009. SFAS 141R will be applied to business combinations occurring after the effective date and SFAS 160 will be applied prospectively to all noncontrolling interests, including any that arose before the effective date. We are currently assessing what impact the adoption of SFAS 141R and 160 will have on our financial position and results of operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Stock Investments

From time to time we make public and private investments in equity securities. The publicly traded equity securities are classified as “available for sale securities” and carried at fair value, with unrealized gains and losses reported as a separate component of Unitholders’ equity. The private investments, for which we lack the ability to exercise significant influence, are accounted for at cost. Declines in the value of public and private investments that our management determines are other than temporary, are recorded as a provision for possible loss on investments. Our evaluation of the carrying value of these investments is primarily based upon a regular review of market valuations (if available), each company’s operating performance and assumptions underlying cash flow forecasts. In addition, our management considers events and circumstances that may signal the impairment of an investment.

Interest Rate Hedging Activities

We are exposed to the impact of interest rate changes and will occasionally utilize interest rate swaps and interest rate caps as hedges with the objective of lowering our overall borrowing costs. Prior to the Merger, these derivatives were designated as either cash flow or fair value hedges. Subsequent to the Merger we have entered into interest rate swaps and caps to fix the rates associated with various debt instruments. These derivatives were not designated as hedges for accounting purposes and the resulting gains and losses are recorded as other non-operating income or expense. We do not use these derivatives for trading or other speculative purposes. Further, as a matter of policy, we only enter into contracts with major financial institutions based upon their credit ratings and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, we have not, nor do we expect to sustain a material realized loss from the use of these hedging instruments. In 2007, we recorded an unrealized loss of $131.0 million on interest rate swaps established in connection with the Merger that were not designated as hedges for accounting purposes. This loss is included in other non-operating income (loss) in our Consolidated Statement of Operations.

During the period January 1, 2007 through October 4, 2007 and years ended December 31, 2006 and 2005 the Predecessor recorded an increase/(decrease) to interest expense of $168,000, $372,000 and $(174,000), respectively, for hedge ineffectiveness caused by a difference between the interest rate index on a portion of our outstanding variable rate debt and the underlying index of the associated interest rate swap. We pursue hedging strategies that we expect will result in the lowest overall borrowing costs.

To determine the fair values of derivative and other financial instruments, we use a variety of methods and assumptions that are based on market value conditions and risks existing at each balance sheet date. These methods and assumptions include standard market conventions and techniques such as discounted cash flow analysis, option pricing models, replacement cost and termination cost. All methods of assessing fair value result in a general approximation of value, and therefore, are not necessarily indicative of the actual amounts that we could realize upon disposition.

The following table summarizes the notional amount, carrying value and estimated fair value of our derivative financial instruments used to hedge interest rates, as of December 31, 2007 (dollar amounts in thousands). The notional amount represents the aggregate amount of a particular security that is currently hedged at one time, but does not represent exposure to credit, interest rate or market risks.


					Carrying and
	Notional		Maturity		Estimated
	Amount		Date Range		Fair Value
Cash flow hedges:
Interest rate caps	$	3,033,498		2008 - 2011	$	3,326
Interest rate swaps		4,001,155		2010 - 2017		(155,262	)

Total cash flow hedges	$	7,034,653		2008 - 2017	$	(151,936	)

Fair value hedges:
Total rate of return swaps		49,600		2011		166

Total hedges	$	7,084,253			$	(151,770	)

Foreign Currency Hedging Activities

We are exposed to foreign-exchange related variability and earnings volatility on our foreign investments. There are no forward contracts outstanding at December 31, 2007.

Energy Contract Hedging Activities

We are exposed to price risk associated with the volatility of natural gas, fuel oil and electricity rates. During 2007 and 2006, we entered into contracts with several of our suppliers to fix our payments on set quantities of natural gas, fuel oil and electricity. If the contract meets the criteria of a derivative, we designate these contracts as cash flow hedges of the overall changes in floating-rate payments made on our energy purchases. As of December 31, 2007, none of the contracts met the definition of a derivative as they are considered normal purchases and sales.

Equity Securities Hedging Activities

We were exposed to price risk associated with changes in the fair value of certain equity securities. During 2006, we entered into forward sale agreements with an aggregate notional amount, which represents the fair value of the underlying marketable securities, of approximately $6.6 million and an aggregate fair value of the forward sale agreements of approximately ($0.3) million, to protect against a reduction in the fair value of these securities. We designated this forward sale as a fair value hedge. There were no forward sale agreements outstanding as of December 31, 2007.

Interest Rate Sensitive Liabilities

The table below provides information about our liabilities that are sensitive to changes in interest rates as of December 31, 2007. As the table incorporates only those exposures that existed as of December 31, 2007, it does not consider those exposures or positions that could arise after that date.

Moreover, because there were no firm commitments to actually sell these instruments at fair value as of December 31, 2007, the information presented herein is an estimate and has limited predictive value. As a result, our ultimate realized gain or loss, if any, will depend on the exposures that arise during future periods, hedging strategies, prevailing interest rates and other market factors existing at the time. The debt classification and interest rates shown below give effect to other fees or expenses, where applicable (in thousands):


																			Total			Estimated
	2008			2009			2010			2011			2012			Thereafter			Balance			Fair Value⁽¹⁾

Interest rate sensitive liabilities:

Revolving credit facilities	$	—		$	—		$	—		$	60,000		$	—		$	—		$	60,000		$	58,292

Average nominal interest rate⁽²⁾		—			—			—			8.1	%		—			—			8.1	%
Term Loans:

Fixed rate	$	—		$	—		$	—		$	230		$	—		$	—		$	230			230

Average nominal interest rate⁽²⁾		—			—			—			4.0	%		—			—			4.0	%
Variable rate	$	327,592		$	350,000		$	300,000		$	600,000		$	3,014,000		$	—		$	4,591,592		$	4,460,880

Average nominal interest rate⁽²⁾		8.3	%		8.3	%		8.3	%		8.3	%		8.5	%		—			8.4	%
Property Mortgages payable:

Fixed rate debt	$	—		$	—		$	—		$	—		$	2,302,961		$	3,482,335		$	5,785,296		$	5,785,840

Average nominal interest rate⁽²⁾		—			—			—			—			6.2	%		6.1	%		6.2	%
Variable rate debt	$	3,608		$	1,520,558		$	139,672		$	4,577		$	1,026,118		$	732,819		$	3,427,352		$	3,427,352

Average nominal interest rate⁽²⁾		3.5	%		6.8	%		8.1	%		3.5	%		6.3	%		5.9	%		6.5	%


(1)		The estimated fair value for each of the liabilities listed was calculated by discounting the actual principal payment stream at prevailing interest rates (obtained from third party financial institutions) currently available on debt instruments with similar terms and features.

(2)		Reflects the weighted average nominal interest rate on the liabilities outstanding during each period, giving effect to principal payments and final maturities during each period, if any. The nominal rates for variable rate mortgages payable have been held constant during each period presented based on the actual variable rates as of December 31, 2007. The weighted average effective interest rate on the revolving credit facilities, term loans and property mortgages payable was 28.3%, 8.4% and 6.8%, respectively, as of December 31, 2007. The effective interest rate on the revolving credit facility is high due primarily to the fees on the unfunded commitment. The higher the average outstanding drawn balance, the lower the effective interest. The amount drawn as of December 31, 2007 was $60 million.

The lenders under our Master Credit Facility and our mezzanine loans provided by the Fannie Mae Mezzanine Lenders and the Freddie Mac Mezzanine Lenders have the option to syndicate or sell the outstanding principal amount under such agreements to other investors at a discount and may revise the interest rate spread or discount or increase fees to a level necessary to facilitate syndication based on current market conditions at the syndication date. As of December 31, 2007, $5.6 billion in outstanding principal indebtedness under these loans was subject to syndication and the increased borrowing costs described above. The cost associated with any incremental interest or additional fees, as well as any original issue discount realized, is required to be born by the Company. These same lenders have committed to lend us up to $148.8 million to fund such costs. As of March 20, 2008, we had approximately $73.0 million set aside in restricted cash to fund syndication discounts. As of March 20, 2008, $43.0 million of principal had been syndicated at a discount of 3%.

Item 8. Financial Statements and Supplementary Data

Our Balance Sheets as of December 31, 2007 and 2006, and our Statements of Operations, Unitholders’ Equity, other Common Unitholders’ Interest and Comprehensive Income (Loss) and Cash Flows for each of the years in the three-year period ended December 31, 2007, Schedule III — Real Estate and Accumulated Depreciation and Schedule IV – Mortgage Loans on Real Estate, together with the reports of KPMG LLP, Independent Registered Public Accounting Firm, are included under Item 15 of this Annual Report and are incorporated herein by reference. Unaudited selected quarterly financial data is presented in Note 13 of our audited financial statements in this Annual Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

An evaluation was carried out under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d — 15(e) under the Securities Exchange Act of 1934, as amended). Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were, to the best of their knowledge, effective as of December 31, 2007, to ensure that information required to be disclosed in reports that are filed or submitted under the Securities Exchange Act of 1934, as amended, are recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) or 15d – 15(f) under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2007. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Our management has concluded that, as of December 31, 2007, our internal control over financial reporting was effective based on these criteria.

There was no change to our internal control over financial reporting during the fourth quarter ended December 31, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of their inherent

Part III

Item 10. Directors, Executive Officers and Corporate Governance

Trustees and Executive Officers

Set forth below are the Trustees of Series I Trust, which is our sole Trustee, as of December 31, 2007. As of the date hereof Mr. David Augarten is the sole Trustee of Series I Trust. Mr. Augarten shall remain in office until the first annual meeting of the shareholders of the Series I Trust and until pursuant to the Declaration of Trust, as amended, of Series I Trust, his successor is duly elected and qualifies.


				Trustee
Trustee	Age		Business Experience	Since

David Augarten		52	Mr. Augarten has served as a trustee of Series I Trust since October 2007 and serves as the sole member of the Series I Trust Audit Committee. Mr. Augarten also directs Tishman Speyer’s global portfolio management and investor relations activities. Mr. Augarten is a member of the Management, Investment, and Compensation committees of Tishman Speyer. In 1984, Mr. Augarten joined Tishman Speyer as the director of taxes. While at Tishman Speyer, he has also worked in the acquisitions and development areas prior to serving as treasurer from 1993 to 1996 and chief financial officer from 1996 to 2000.		2007

Jerry I. Speyer		67	Jerry I. Speyer served as a trustee of Series I Trust from October 2007 until March of 2008. Mr. Speyer is one of the two founding partners of Tishman Speyer and served as president and CEO since its formation in 1978, prior to assuming the role of CEO and Chairman in September 2007. Mr. Speyer also serves as chairman of the Board of Directors of the Federal Reserve Bank of New York; chairman of the Museum of Modern Art; vice chairman of New York Presbyterian Hospital; chairman emeritus of Columbia University; chairman emeritus of the Real Estate Board of New York; and chair emeritus of the Venture for New York City. Mr. Speyer also serves on the Boards of Siemens AG, Yankee Global Enterprises and Carnegie Hall.

Robert J. Speyer		38	Robert J. Speyer served as a trustee of Series I Trust from October 2007 until March of 2008. Mr. Speyer was named president of Tishman Speyer in September 2007. Since he joined Tishman Speyer in 1996, he has worked in senior positions in each of its major spheres of activity, including acquisitions, development and leasing. He is a member of the Board of Visitors of Columbia College (emeritus), the Board of Trustees of the New York City Police Foundation, and the Executive Committee of the Board of Governors of the Real Estate Board of New York.

Executive Officers:


Executive
Officer	Age		Business Experience

R. Scot Sellers, Chief Executive Officer		51	Chairman and Chief Executive Officer of Archstone from June 1997 to July 1998 and since December 1998, with overall responsibility for Archstone’s strategic direction, investments and operations; Co-Chairman and Chief Investment Officer of Archstone from July 1998 to December 1998; other executive management positions within Archstone and its predecessors and affiliates since 1993; Member, Executive Committee of the Board of Governors and, during 2006, Chairman, National Association of Real Estate Investment Trusts; Member, Executive Committee of the Board of Directors of the National Multi Housing Council; Director, Christian International Scholarship Foundation; Director of CEO Forum; and Director, Alliance for Choice in Education.

J. Lindsay Freeman, Chief Operating Officer		62	Chief Operating Officer of Archstone since September 2002, with responsibility for managing all investment and operating activities for Archstone; President – East Division of Archstone, from October 2001 to September 2002, with responsibility for all investments and operations of the East Division; other executive management positions with Archstone and its predecessors and affiliates since May 1994. Mr. Freeman retired on December 31, 2007.

Charles E. Mueller, Jr., Chief Financial Officer		44	Chief Financial Officer of Archstone since December 1998, with responsibility for the planning and execution of Archstone’s financial strategy, balance sheet management and corporate operations, and oversight of the company’s accounting/financial reporting, corporate finance, investor relations, corporate and property tax, due diligence, risk management, human resources, national marketing and ancillary services functions; various other management positions with Archstone and its predecessors and affiliates since April 1994; Member, Executive Committee of the Board of Directors of the National Multi Housing Council Executive Committee; Director, Colorado UpLIFT; Director, Denver K-Life. Mr. Mueller assumed the position of Chief Operating Officer of Archstone as of January 1, 2008.

Alfred G. Neely, Chief Development Officer		62	President, Charles E. Smith Residential Division of Archstone, since February 2005; Chief Development Officer of Archstone since April 2003, with responsibility for the oversight and direction of all Archstone residential development projects; Executive Vice President of Archstone, and, prior to November 2001, Charles E. Smith Residential Realty, Inc. (a predecessor of Archstone-Smith) from April 1989 to April 2003 with responsibility for oversight and direction of High-Rise and garden residential development projects.

Caroline Brower, General Counsel and Secretary		59	General Counsel and Secretary of Archstone since September 1999, with responsibility for legal and corporate governance; from September 1998 to September 1999, President of Ameriton; prior thereto, Ms. Brower was a partner of Mayer, Brown & Platt (now Mayer, Brown, Rowe & Maw, LLP) where she practiced transaction and real estate law. Ms. Brower retired on December 31, 2007.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our Trustees, executive officers and prior to the Merger, beneficial owners of more than ten percent of the outstanding A-1 Common Units and, following the Merger, beneficial owners of more than ten percent of the outstanding Series O Preferred Units, to file reports of ownership

and changes in ownership of the Common Units or Series O Preferred Units, as applicable, with the SEC and to send copies of those reports to us. Based solely on a review of those reports and amendments thereto furnished to us and on representations made to us by our trustee and executive officers, we believe that no such person failed to file any such report or report any transaction on a timely basis during 2007, except that, after the consummation of the Merger, each of Messrs. Sellers, Mueller, Freeman, and Neely and Ms. Brower, as the executive officers of the Company, and Series I Trust as our sole trustee, failed to timely file an initial statement of beneficial ownership of securities on Form 3. These forms have now been filed.

Code of Ethics

Archstone-Smith adopted a Code of Business Conduct and Ethics which remains applicable to our officers and employees, including our principal executive officer, principal financial officer and principal accounting officer or controller. To the extent we are subject to the requirements of Item 406 of Regulation S-K, a copy of our Code of Business Conduct and Ethics is posted on our website, www.archstonesmith.com. Any amendments to or waivers of our Code of Business Conduct and Ethics that apply to the principal executive officer, principal financial officer and principal accounting officer or controller and that relate to any matter enumerated in Item 406(b) of Regulation S-K, will be disclosed on our website.

Nomination Procedures

Series I Trust, as the holder of 100% of our A–2 Common Units, has the sole authority to elect our trustee.

Audit Committee

The Board of Trustees of Series I Trust has an Audit Committee, which as of December 31, 2007 is comprised of its sole member, David Augarten. Mr. Augarten is not an “audit committee financial expert.” Because, Series I Trust is not a listed company, the Common Units are privately held by affiliates of Series I Trust, and, as of January 1, 2008, our reporting obligations were automatically suspended, the Board determined that it was not necessary for the Audit Committee to include an “audit committee financial expert”.

Item 11. Executive Compensation

Compensation of Trustees

Trustees Fees

Prior to the consummation of the Archstone-Smith Merger on October 5, 2007, our Trustee was Archstone-Smith, which received no compensation for acting as our Trustee. The Outside Trustees received an annual retainer of $25,000, prorated for service of less than one year, plus meeting fees as follows: Outside Trustees received $1,500 for each Archstone-Smith Board meeting attended and $1,000 for each committee meeting attended. In addition, each Outside Trustee was awarded 2,000 RSUs on May16, 2007. The Chairman of any committee of the Archstone-Smith Board also received $7,500 per year per committee chaired. The Lead Independent Trustee of Archstone-Smith was paid an annual fee of $7,500. Retainers and meeting fees were paid quarterly. The Archstone-Smith Trustees were reimbursed for commercial airfare (or, if private air transportation is used, the cost such Trustee would have incurred for a commercial flight) and other travel expenses incurred in connection with attendance at Board meetings. In connection with the Archstone-Smith Merger, each outstanding share option held by the Trustees became fully vested and exercisable and was exchanged for a cash payment equal to the product of the number of shares subject to the option and the excess, if any, of $60.75 cash consideration per share, referred to as the “common share merger consideration,” over the exercise price of the option. Further, each RSU, DEU and phantom common share held by the Trustees became fully vested and was exchanged for the common share merger consideration.

On October 5, 2007, our Trustee, Archstone-Smith, merged with and into Series I Trust. Series I Trust does not receive any compensation for acting as our Trustee. The Trustee of Series I Trust, Mr. David Augarten, does not receive any compensation for his service as a Trustee.

Outside Trustees Plan

The purpose of the Outside Trustees Plan was to enable the Outside Trustees to increase their ownership in Archstone-Smith and thereby increase the alignment of their interests with those of the other shareholders. The Outside Trustees Plan provided for grants of RSUs, which converted into Common Shares on a one-to-one basis when they vested, provided the Outside Trustee had not opted to defer settlement of such units. RSUs awarded prior to 2006 were entitled to accrue DEUs, which in turn accrued further DEUs. RSUs granted in 2006 and later no longer were entitled to earn DEUs but instead received a quarterly cash payment equal in amount to the dividend paid on the Common Shares. Such payments were payable on RSUs granted in 2006 or later which were held as of each dividend record date for the Common Shares. Additionally, the Outside Trustees continued to earn DEUs on any outstanding option grants which were made between 1999 and 2001, and DEUs continued to be credited on these DEUs. Our Secretary administered the Outside Trustees Plan.

On the date of each annual meeting of the Archstone-Smith shareholders, each Outside Trustee was granted 2,000 RSUs. A Trustee elected other than at an annual meeting was granted a pro rata award for the period of time between the date of election and the anticipated date of the next annual meeting. The RSUs vested at the rate of 25% per year for grants made prior to July 2002 and at 33.33% per year for grants made after June 2002, with vesting beginning on the first anniversary date of the grant.

DEUs were earned on options granted between 1999 and 2001, RSUs and DEUs, and were determined as soon as practicable after each January 1. For options, the number of new DEUs earned was determined by multiplying the average of the number of options held as of each dividend record date in the prior year by the difference between the average annual dividend yield on Common Shares for the prior year and the average annual dividend yield for the Standard & Poor’s 500 Stock Index for the prior year. For RSUs, the number of new DEUs earned was determined by multiplying the average of the number of RSUs held as of each dividend record date in the prior year by the average annual dividend yield on Common Shares for the prior year. The number of DEUs earned on previously earned DEUs was determined by multiplying the number of DEUs held as of December 31 of the prior year by the annual dividend yield on Common Shares for the prior year. The DEUs associated with any given award vested in accordance with the vesting schedule applicable to that award.

Settlement of DEUs earned by Outside Trustees could be triggered by exercise of the associated options, settlement of the associated RSUs, or cessation of service as a Trustee. Upon settlement, DEUs converted to

Common Shares on a one-to-one basis. The settlement of RSU awards and DEU awards under the Outside Trustees Plan could be deferred pursuant to the Deferred Compensation Plan, which is described below. The Outside Trustees Plan was terminated as of the effective date of the Merger. As discussed above under “Trustees Fees,” all outstanding share options, RSUs, and DEUs awarded pursuant to the Outside Trustees Plan became fully vested in connection with the Merger and were exchanged for cash pursuant to the merger agreement, as set forth in the “Trustee Compensation Summary” below.

Deferred Compensation Plan

Under the Deferred Compensation Plan, described in more detail later in this section, Outside Trustees could elect to defer payment of their eligible cash fees and settlement of their RSUs and DEUs. Prior to 2006, an Outside Trustee could elect to defer eligible cash fees into phantom Common Shares. If fees were deferred into phantom Common Shares they were entitled to earn additional phantom Common Shares following each dividend payable date for Common Shares. Such additional phantom Common Shares were determined by multiplying the number of phantom Common Shares held as of the dividend record date by the amount of the dividend paid on a Common Share, and dividing by the fair market value of a share on the dividend payable date. Beginning in 2006, Outside Trustees could no longer defer fees earned in 2006 or later in the form of phantom Common Shares, but could defer such fees into another investment under the Deferred Compensation Plan, including our stock. Any phantom Common Shares remaining on account continued to earn additional phantom Common Shares, as described above, until they were settled. Phantom Common Shares were settled based upon the date elected by the Outside Trustee in accordance with the Deferred Compensation Plan. Upon settlement, phantom Common Shares converted to Common Shares on a one-to-one basis. Shares available under the Outside Trustees Plan were used to satisfy this obligation. The Deferred Compensation Plan was terminated in connection with the Merger, and all outstanding RSUs, DEUs and phantom Common Shares deferred pursuant to the Deferred Compensation Plan were exchanged for cash pursuant to the merger agreement, as set forth in the “Trustee Compensation Summary” below.

Trustee Compensation Summary

Total compensation received by the Archstone-Smith Outside Trustees for the period January 1, 2007 through consummation of the Merger on October 5, 2007 is set forth below:


							All Other
	Fees Earned or		Stock Awards		Option		Compensation
Trustee⁽¹⁾	Paid in Cash		($)⁽²⁾		Awards ($)		($)⁽³⁾		Total ($)

Mr. Cardwell⁽⁴⁾	$	30,840	$	41,840	$	—	$	—	$	72,680
Mr. Demeritt	$	71,090	$	32,660	$	—	$	201,386	$	305,136
Mr. Gerardi	$	63,590	$	56,576	$	—	$	255,472	$	375,638
Ms. Gillis	$	75,317	$	56,576	$	—	$	685,660	$	817,553
Mr. Holmes	$	70,067	$	56,576	$	—	$	794,796	$	921,439
Mr. Kogod⁽⁵⁾	$	—	$	—	$	—	$	—	$	—
Mr. Polk	$	79,590	$	56,576	$	—	$	892,110	$	1,028,276
Mr. Richman⁽⁴⁾	$	34,590	$	41,840	$	—	$	1,478,482	$	1,554,912
Mr. Schweitzer	$	89,549	$	56,576	$	—	$	1,132,608	$	1,278,733
Mr. Smith⁽⁶⁾	$	—	$	—	$	189,900	$	2,382,658	$	2,572,558


(1)		Mr. Sellers did not receive additional compensation for his service as a Trustee. For information on Mr. Sellers’ compensation, see the “*Summary Compensation Table*” below.

(2)		Each Outside Trustee was awarded 2,000 RSUs on May 16, 2007, the date of the Archstone-Smith annual shareholder meeting. The value shown above reflects the amount expensed during fiscal year 2007 for grants made to Outside Trustees in 2007 and prior years. The grant date fair value of the May 16, 2007 grant of 2,000 RSUs to each Outside Trustee, computed in accordance with FAS 123R, was $106,100 for each RSU award. All outstanding RSUs were redeemed at $60.75 per RSU in connection with the Merger, and the value of the redemptions is included in the column for “All Other Compensation”.

(3)		Includes a payment of $12,000 to Messrs. Schweitzer and Polk for their service on the Board of Directors of Ameriton. Includes amounts paid in connection with the Merger upon redemption of outstanding RSUs, DEUs, options and phantom shares as follows: Mr. Demeritt $201,386; Mr. Gerardi $255,472; Ms. Gillis $685,660; Mr. Holmes $794,796; Mr. Polk $880,110; Mr. Richman $1,478,482; Mr. Schweitzer $1,120,608;


		and Mr. Smith $2,382,658. Such phantom shares were earned on existing phantom shares on each dividend payable date in 2007, and originally stemmed from the deferral of trustee fees. Because each of these phantom shares was redeemed at $60.75 per phantom share in connection with the Merger, the amounts under this column include the actual amounts paid to the Outside Trustees in connection with the Merger rather than the expensed amounts.

(4)		Retired on May 16, 2007.

(5)		Mr. Kogod was an employee of ours prior to October 5, 2007. Pursuant to the Shareholders’ Agreement (see “**Certain Relationships and Transactions — Shareholders’ Agreement”),** Mr. Kogod received a salary of $80,769 for his services in 2007.

(6)		Mr. Smith was an employee of Archstone-Smith prior to October 5, 2007. Pursuant to the Shareholders’ Agreement (see “**Certain Relationships and Transactions — Shareholders’ Agreement”),** Mr. Smith received a salary of $250,068 for his services in 2007. In addition, pursuant to the terms of the Shareholders’ Agreement, Mr. Smith was awarded 100,000 options on February 23, 2007. All of Mr. Smith’s outstanding options vested and were redeemed in connection with the Merger, which cash payment is included under “All Other Compensation.” The value shown above under “Option Awards” reflects the amount expensed during fiscal year 2007 for options. The grant date fair value of each of the 2007 option awards, calculated under the Black-Scholes-Merton model, included in the “Options Awards” column is set forth below:


Grant Date	Options Granted		Fair Value
February 23, 2007		100,000	$	759,600

Compensation Discussion and Analysis

Introduction

As discussed earlier in this report, we and Archstone-Smith completed the Mergers on October 4 and 5, 2007. The following discussion is set forth in three sections. The first section will provide information relating to the historical practices of Archstone-Smith prior to October 5, 2007. The second section will outline what compensation arrangements were made in connection with the Merger. Finally, the third section will discuss compensation arrangements in effect after October 5, 2007.

When we refer in this discussion to the “Compensation Committee”, we are referring to the Management Development and Executive Compensation Committee of the Archstone-Smith Board in office prior to completion of the Mergers. After October 5, 2007, “Series I Trust Compensation Committee” refers to the Compensation Committe of Series I Trust. The following table lists the members of the Compensation Committee before the 2007 annual meeting, after the 2007 annual meeting and after the Merger:


Before May 16, 2007 Annual Meeting	After May 16, 2007 Annual Meeting	After October 5, 2007 Merger, members of Series I Trust Compensation Committee

John C. Schweitzer, Chairman	John C. Schweitzer, Chairman	David Augarten

James H. Polk, III	Stephen R. Demeritt

John M. Richman	Ned S. Holmes

	James H. Polk, III

Compensation Discussion and Analysis Prior to October 5, 2007 Merger

Compensation Policy Objectives and Process

Philosophy

Prior to the Merger, the Compensation Committee was committed to a compensation philosophy that placed significant emphasis on rewarding our Named Executive Officers on the basis of our success in attaining corporate objectives and/or those officers’ success in attaining individual financial and qualitative performance objectives that advance the overall success of the company. The committee’s compensation philosophy was intended to encourage the Named Executive Officers to aggressively pursue company goals in order to generate better long term returns for Archstone-Smith’s shareholders relative to our peer group of multifamily real estate investment trusts and to reward, and therefore encourage, decisions that caused the company to achieve better overall levels of shareholder returns relative to our peer group. Individual performance goals were different for each of our executive officers, based on their varying job responsibilities. Some of the goals involved standard business objectives that were in place year over year, while others were non-routine-items specific to the company’s business plan for that year. The goals were determined at the beginning of each calendar year by the executive and the Compensation Committee.

The pre-Merger Archstone-Smith compensation program was designed to:

	•		attract, reward and retain highly qualified employees.

	•		align shareholder and employee interests.

	•		reward long term career contributions to Archstone-Smith.

	•		emphasize the variable portion of total compensation (cash and equity) as an individual’s level of responsibility increases.

	•		provide fully competitive compensation opportunities consistent with performance.

	•		encourage teamwork.

The Compensation Committee last conducted a review of its compensation objectives and the levels of compensation for Messrs. Sellers, Freeman and Mueller and Ms. Brower in October 2005, and based on that review, established base salary levels and performance metrics and levels of achievement for incentive awards for Messrs. Sellers, Freeman and Ms. Brower for 2006 through 2008 and Mr. Mueller for 2006, with Mr. Mueller’s 2007 and 2008 levels established in mid-2006. While the performance metrics and levels of achievement for incentive awards were established by the Compensation Committee at such time, the actual grants of RSUs and cash bonus awards based on such metrics were not made by the Compensation Committee until the beginning of each year based on such employee’s and Archstone-Smith’s performance for the prior year. The Compensation Committee chose a three year period in order to focus senior management on building long term value rather than achieving short term results, such as quarterly results, and secondarily, to minimize the frequency with which the Compensation Committee would need to conduct a thorough evaluation and benchmarking analysis. The Compensation Committee believed that three years was a reasonably long period of time to allow measurement of progress without focusing on short term metrics. The Compensation Committee retained FPL Associates to assist it in the review of this three year compensation program. Although Mr. Sellers participated in a majority of the meetings of the Compensation Committee and provided the committee with his thoughts on compensation matters, the final design for the three year compensation program and annual compensation decisions were made solely by the Compensation Committee.

Benchmarking

As part of its review of the compensation package for Messrs. Sellers, Freeman and Mueller and Ms. Brower, the Compensation Committee examined salaries and incentive compensation paid to equivalent officers at two peer groups. The first peer group consisted of the following eight largest publicly-traded multifamily real estate investment trusts, based on total market capitalization as of June 30, 2005: Apartment Investment and Management Company, Avalon Bay Communities, Inc., BRE Properties, Inc., Camden Property Trust, Equity Residential, Essex Property Trust, Inc., Home Properties, Inc. and United Dominion Realty Trust, Inc. The second peer group consisted of ten real estate companies with total market capitalization as of June 30, 2005 similar to us, and included real estate investment companies that invested in both multifamily and non-multifamily assets. The size-based peer

group companies were: Apartment Investment and Management Company, Boston Properties, Inc., Developers Diversified Realty Corporation, Equity Residential, Hilton Hotels Corporation, Marriott International, Inc., Kimco Realty Corporation, The Mills Corporation, ProLogis, and Public Storage, Inc. Since most of the companies in the asset-based peer group had a significantly smaller total capitalization than we had prior to the Merger, the Compensation Committee placed a larger emphasis on the compensation paid to equivalent officers at companies in the size-based peer group, where we were in the 66^th percentile.

The combination of base salary and annual cash bonus, and the combination of base salary, annual target level cash bonus and annual target level incentive stock award, were each designed to deliver a base level of total annual cash compensation slightly higher than the median for companies in the size-based peer group, consistent with our size being slightly larger than the median. To the extent that we outperformed the NAREIT Apartment Index, the cash bonus and incentive stock award portions of compensation for certain of the Named Executive Officers increased as described in more detail below and could result in overall compensation being higher than the median for the size-based peer group. If we underperformed the NAREIT Apartment Index, then the annual incentive stock award would be at less than the target amount. The Compensation Committee believed that this approach to compensation fostered achievement by the executives of the company’s objectives.

Based upon this benchmarking analysis, Mr. Sellers’ base salary and incentive awards at each level of achievement are considerably higher than the amounts for the other Named Executive Officers. As with all other Named Executive Officers included in the benchmarking analysis, the base salary and annual cash bonus amounts set by the Compensation Committee for Mr. Sellers were designed to deliver a base level of total annual compensation slightly higher than the median for companies in the size-based peer group. The Compensation Committee determined that Mr. Sellers’ total compensation was appropriate in light of his central role within the company, including his overall responsibility for developing the company’s strategy, implementation of that strategy and the ultimate performance of the company under his leadership.

Compensation Committee Discretion

Awards earned under the program could be further adjusted up or down at the discretion of the Compensation Committee based on the quality of the results, extraordinary circumstances, and other subjective factors that the Compensation Committee deemed relevant.

As discussed below, Mr. Sellers’ cash bonus could be reduced by the Compensation Committee if it determined that he had not fully met his performance goals. A portion of the performance units that Mr. Sellers could earn under the special long term incentive program discussed below were discretionary. Because a portion of the cash bonus for Messrs. Freeman and Mueller and Ms. Brower, and a portion of the annual stock award for Messrs. Sellers, Freeman and Mueller and Ms. Brower were based on achievement of individually-established goals, the Compensation Committee also exercised some discretion in determining the extent to which the specific goals for an officer had been attained or exceeded and, consequently, the determination of the portion of the cash bonus and annual stock award to be made.

Mr. Neely’s Compensation

Mr. Neely is principally responsible for overseeing the company’s nationwide development activities. His compensation was based upon the extent to which we have the opportunity to evaluate appropriate development opportunities available in our markets, we obtain approvals on those land parcels the company was working to entitle, and we were successful in building high quality properties on time and on budget given variations in the market. Consequently, his compensation program was designed to foster and reward achievement in these areas, although the same objectives regarding compensation and the compensation policies described above are applied by management and the Compensation Committee to Mr. Neely’s compensation.

Mr. Neely’s base salary and his target cash bonus and target annual RSU award were established annually. No benchmarking was performed with respect to Mr. Neely’s compensation during the past five years. The Compensation Committee believed that an annual evaluation was appropriate because the development goals for the company, and all of the employees reporting to Mr. Neely on those projects, were determined and reviewed on an annual basis. Each year Messrs. Sellers and Freeman reviewed Mr. Neely’s performance of the goals and objectives established for him for the year by Messrs. Sellers and Freeman with respect to the company’s development activities, as well as with respect to personnel development within these areas of the company. Also taken into consideration were events and circumstances that arose during the year, but which had not been anticipated in determining the goals and objectives for the year. Based on this evaluation, Messrs. Sellers and Freeman made a

recommendation to the Compensation Committee with respect to the base salary to be paid Mr. Neely for the following year and the target bonus and target RSU award for the following year, as well as the actual cash bonus and RSU award to be made for the previous year. The actual cash bonus and RSU award granted to Mr. Neely are included in the Summary Compensation Table or the notes to the Summary Compensation Table, as appropriate.

Elements of Compensation

Prior to the Merger, the key elements of our executive compensation program consisted of base salary, annual cash and stock incentives and long term incentives. Other forms of potential compensation existing prior to the Merger, including potential change in control/post-employment payments, are discussed in the compensation tables.

Base Salary

Pre-Merger base salaries were based on an overall assessment of the executive’s responsibilities and contribution to our success. Base salaries were set at a level which, together with the target level annual cash bonus, was sufficient to provide the officer with a competitive level of basic income. As discussed above, the base salary and annual cash bonus were designed to deliver a base level of total annual compensation slightly higher than the median for companies in the size-based peer group. The base salaries established by the Compensation Committee through 2008 were set in 2005 and were based on a number of factors, including: (i) Archstone-Smith’s overall performance and the executive’s responsibilities and contribution to the company’s success, (ii) a comparison of base salaries and cash bonuses of executives who perform similar functions at REITs in the size-based peer group, and (iii) a determination that a base salary and cash bonus at a level slightly higher than the median for the size-based peer group was appropriate for each such executive given our slightly larger size compared to the peer group or a determination that a different level was appropriate based on other factors unique to Archstone-Smith.

Cash Bonus

Prior to the Merger, our Named Executive Officers were eligible for an annual cash bonus based on their individual and/or our performance. The combination of base salary and cash bonus was paid to provide rewards to these officers for achievement of specific personal and corporate goals during the relevant period of measurement and were not tied to future retention of a given officer, beyond a given calendar year. The description of the factors considered in connection with a determination of base salary also applied to the determination of the cash bonus level.

Long Term Incentive Awards

Prior to the Merger, our Named Executive Officers were eligible for an annual stock award under Archstone-Smith’s LTIP. These types of awards provide the Named Executive Officers with incentives for achievement by linking these officers to shareholders’ goals through stock ownership and encouraging officer retention through the three year vesting. The incentive stock awards included options coupled with an annual award of DEUs, options without a DEU component, RSUs with a DEU component, and RSUs with a quarterly cash payment instead of a DEU component. From January 1, 2002 through October 5, 2007, Messrs. Sellers, Freeman and Mueller and, from January 1, 2005 through October 5, 2007, Ms. Brower, were also eligible for special long term incentive awards in the form of performance units, which, if earned, were convertible on a one-for-one basis in Archstone-Smith common shares.

Historical Criteria for Awards

A significant portion of the total compensation for Messrs. Sellers, Freeman and Mueller and Ms. Brower through October 5, 2007 was based on annual and long term performance-based incentive compensation and less on salary and employee benefits, creating the potential for greater variability in the individual’s compensation level from year to year. The mix, level and structure of performance-based incentive elements reflected market industry practices as well as the executive’s role and relative impact on business results consistent with our variable pay-for-performance philosophy. The base salary and target annual cash bonus levels for each named executive officer were set at levels consistent with their executive counterparts at companies within our peer group. The target cash bonus levels were intended to encourage the retention of key executives by providing competitive compensation in immediately available funds, with higher cash bonus levels available to reward superior performance.

Base Salary

As noted above, base salaries through 2008 for Messrs. Sellers, Freeman and Mueller and Ms. Brower were established as part of a three year program described above, with an adjustment to Mr. Mueller’s base salary made in mid-2006. Also as noted above, Mr. Neely’s base salary is adjusted annually in line with adjustments for our other senior officers.

Annual and Long Term Incentives

Incentive levels for the annual cash bonuses for Messrs. Freeman, Mueller and Ms. Brower for 2006 and for the annual stock awards for Messrs. Sellers, Freeman and Mueller and Ms. Brower for 2006, were established as part of the three year program described above. The determination of the 2006 annual cash bonus for Mr. Sellers, and Mr. Neely’s 2006 annual cash bonus and annual incentive stock awards, are discussed below.

Cash Bonus and RSU Grants for 2006

The actual annual cash bonus paid to Messrs. Freeman and Mueller and Ms. Brower for 2006, and the annual RSU awards granted to Messrs. Sellers, Freeman and Mueller and Ms. Brower for 2006, were each based on four criteria: (1) achievement of specific corporate goals articulated in writing at the beginning of each year, (2) Archstone-Smith’s compounded annualized total shareholder return (“TSR”) for the three preceding calendar years, compared to the TSR for companies in the NAREIT Apartment Index for the same period, (3) Archstone-Smith’s funds from operation (“FFO”) growth for the calendar year, compared to the weighted average FFO growth for the companies included in the NAREIT Apartment Index for the same period, and (4) Archstone-Smith’s absolute FFO growth for the year compared to the long term growth targets established by the Compensation Committee and the Board. The Compensation Committee selected the NAREIT Apartment Index as the appropriate peer group index because all of the multifamily real estate investment trusts used by the Compensation Committee for benchmarking were included in this index, it measures performance of real estate investment trusts that invest in multifamily residential apartment projects, and it is weighted based on size of the companies included.

The Compensation Committee believed that total shareholder return was the most important factor in determining incentive compensation for officers with overall corporate responsibilities since it most effectively aligned the interests of these officers with the interests of the Archstone-Smith shareholders. TSR was determined by comparing our daily TSR on the last trading day of December of the second prior calendar year to our daily TSR on the last trading day of December of the current compensation calendar year (e.g., to determine TSR for 2006, the comparison was December 31, 2003 to December 29, 2006). The Compensation Committee looked at a three year average in order to reduce the impact of one-time events. To the extent that these officers provided a better overall return for our shareholders, compared to the shareholder return of comparable companies in the real estate industry, as measured by the NAREIT Apartment Index, they should be rewarded for those accomplishments. The committee’s use of TSR measured over three years as a metric also focused these officers on long term value creation rather than short term earnings. Because of its importance, 50% of the cash bonus for Messrs. Freeman and Mueller and Ms. Brower and 50% of the RSU grants for Messrs. Sellers, Freeman and Mueller and Ms. Brower for the year was based on this TSR calculation.

For the cash bonus allocable to this metric for Messrs. Freeman and Mueller and Ms. Brower, three levels of achievement were defined:


•	Target:	Performance up to the 50^th percentile

•	Target Plus:	At or above the 65^th percentile

•	High:	At or above the 80^th percentile

If our performance was between specified levels, the amount of the cash bonus for the TSR component would equal the interpolated amount based on the actual percentile achieved as compared to the bonus amount for the specified target levels directly above and below the actual percentile achieved (e.g., assuming the bonus based on TSR for the Target level is $100,000 and the bonus for the Target Plus level is $150,000, the actual bonus payout for the TSR component would equal $126,667, if the actual percentile achieved were 58%).

The committee believed that Messrs. Sellers, Freeman and Mueller and Ms. Brower should receive an RSU award each year — since these awards aligned the officers’ interests to shareholders’ goals through stock ownership and they encouraged officer retention through the three year vesting — but the amounts should be lower if target performance relative to the NAREIT Apartment Index and the other corporate and individual performance metrics were not achieved. However, since the Compensation Committee did not consider the RSU award to be part of base compensation, it incorporated two lower levels of performance — Threshold and Threshold Plus — so that performance at lower than the target level would result in a lower RSU award.

For the RSU award allocable to this metric for Messrs. Sellers, Freeman and Mueller and Ms. Brower, the criteria for TSR relative to the NAREIT Apartment Index were as follows:


•	Threshold:	Up to the 20^th percentile

•	Threshold Plus:	At or above the 35^th percentile

•	Target:	At or above the 50^th percentile

•	Target Plus:	At or above the 65^th percentile

•	High:	At or above the 80^th percentile

If our performance was between specified levels, the amount of the RSU award for the TSR component would equal the interpolated amount based on the actual percentile achieved as compared to the amount of the RSU award for the specified levels directly above and below the actual percentile achieved (e.g., assuming the RSU award based on TSR for the Target level is $100,000 and the RSU award for the Target Plus level is $150,000, the actual RSU award for the TSR component would equal $126,667, if the actual percentile achieved were 58%). The actual TSR percentile achieved for 2006 awards was the 81st percentile.

A second measure commonly used in the real estate industry to measure performance is FFO growth. FFO is a non-GAAP measure that is commonly used in the real estate industry to assist investors and analysts in comparing results of real estate companies. FFO adjusts GAAP net earnings to exclude depreciation and gains and losses from the sales of previously depreciated properties. Our calculation of FFO included (i) gains and losses from dispositions of properties acquired or developed by our taxable REIT subsidiaries such as Ameriton, as the fundamental purpose of these entities is to take advantage of short-term investment opportunities, (ii) gains and losses from our international subsidiaries, and (iii) promote incentive fee income resulting from the liquidation of unconsolidated joint ventures, if any. If they related to a disposition, we excluded prepayment penalties and included the cost or benefit of unamortized purchase accounting-related debt adjustments. Our share of the FFO relating to our unconsolidated entities was calculated on the same basis. The Compensation Committee used two measures of FFO growth, each applicable to 15% of the cash bonus for Messrs. Freeman and Mueller and Ms. Brower, and 15% of the RSU award for Messrs. Sellers, Freeman and Mueller and Ms. Brower. First, the Compensation Committee looked at Archstone-Smith’s FFO growth compared to the FFO growth of our peers, using the NAREIT Apartment Index. As with TSR, the Compensation Committee believed that these officers should be rewarded for outperforming our peers in this area. The second FFO measurement looked at Archstone-Smith’s absolute FFO growth for the year compared to the long term growth targets established by the Compensation Committee and the Archstone-Smith Board. To the extent that these officers exceeded the long term FFO growth targets, they were rewarded for that achievement. Like the TSR calculation described above, the FFO growth measurements included Target, Target Plus, and High thresholds for the cash bonus, and Threshold, Threshold Plus, Target, Target Plus and High thresholds for the RSU awards.

Achievement of the FFO-based performance criteria in any given year depended on a number of factors. However, since the same metrics were used over a three year period, we believe that an analysis of how often the various target levels were achieved during the past three years will provide guidance as to the likelihood that a particular target level would have been met in future years. The charts below set forth in which years each level of achievement was paid for the FFO-based performance metrics for the cash bonus for Messrs. Freeman and Mueller

and Ms. Brower and the RSU awards for Messrs. Sellers, Freeman and Mueller and Ms. Brower, respectively, during 2004 through 2006:


	Years in which each Achievement Level was Paid
Cash Bonus Metric	Target		Target Plus		High
Comparative FFO Growth		2005, 2006				2004
Absolute FFO Growth		2005		2006		2004

Years in which each Achievement Level was Paid

Threshold

RSU Award Metric

Threshold

Plus

Target

Target Plus

High

Comparative FFO Growth

2005

2006

2004

Absolute FFO Growth

2005

2006

2004

The final 20% of the cash bonus for Messrs. Freeman and Mueller and Ms. Brower, and the final 20% of the RSU award for Messrs. Sellers, Freeman and Mueller, and Ms. Brower, was determined based on the individual officer’s accomplishment of specific written goals established in cooperation with the Compensation Committee for that officer at the beginning of each calendar year. This portion of each award was designed to award each individual officer to the extent the officer achieves those specific goals. Because many of these goals were not defined by meeting specific financial goals, the committee exercised some discretion in determining the extent to which the specific goals for an officer had been attained and, consequently, the portion of the bonus and RSU award allocated to this metric that was awarded. The Compensation Committee awarded the target amount allocated to this metric provided that the officer had performed at the appropriate level and to the satisfaction of the Committee, including achievement in all material respects of the goals established for that officer. To the extent that an officer’s performance during the year exceeded the goals established for a specific officer, then the committee considered an award at a higher level. The goals for 2006 included, among others, meeting budgeted revenue and growth in net operating income, adding a specific volume of new development transactions to the pipeline, meeting the budget for Ameriton performance, completing the disposition of the majority of our non-core assets during 2006, maintaining a high level of corporate morale, and maintaining an industry-leading position in innovation and continuous improvements in our operating platform - which resulted in the portion of the RSU awards tied to the achievement of each officer’s individual corporate goals at slightly above the target plus level for each of these officers.

The Compensation Committee believed that the allocation described above created the proper incentives for Messrs. Sellers, Freeman and Mueller and Ms. Brower. A significant portion of the cash bonus and/or RSU award of Messrs. Sellers, Freeman and Mueller and Ms. Brower was based on achievement of individual goals and the ability of the company, under the leadership of these officers, to meet the TSR and FFO growth goals established by the Compensation Committee. Sixty-five percent of the cash bonus for Messrs. Freeman and Mueller and Ms. Brower, and 65% of the RSU award for these officers and for Mr. Sellers, was based on how well our company performed with respect to these metrics compared to other companies in the multifamily real estate industry, as measured by the NAREIT Apartment Index, and, therefore, rewarded these officers based on performance relative to those peer companies.

Based on the foregoing criteria, the maximum cash bonus that Messrs. Freeman and Mueller and Ms. Brower could earn, subject to the discretion of the Compensation Committee to modify an award for unusual circumstances or extraordinary performance, for each of 2006, 2007 and 2008, prior to any changes made in connection with the Merger, was as follows:


Executive	Target		Target Plus		High
Mr. Freeman	$	360,000	$	480,000	$	640,000
Mr. Mueller (2006)	$	280,000	$	420,000	$	560,000
Mr. Mueller (2007-2008)	$	315,000	$	475,000	$	635,000
Ms. Brower	$	180,000	$	245,000	$	310,000

The target level was intended to be the minimum amount Messrs. Freeman and Mueller and Ms. Brower would receive as long as he or she was doing a good job in his or her role consistent with the goals agreed to by the Compensation Committee. Messrs. Freeman and Mueller and Ms. Brower could earn above the target level based on the company’s performance under their leadership. The Compensation Committee set the amount for each level of achievement of cash bonus and RSU awards based on the analysis of the compensation levels of similarly situated executive officers in our peer groups provided by FPL Associates in October 2005.

Based on the foregoing criteria, the RSU award that Messrs. Sellers, Freeman and Mueller and Ms. Brower could earn, subject to the discretion of the Compensation Committee to modify an award for unusual circumstances or extraordinary performance, for each of 2006, 2007 and 2008, prior to any changes made in connection with the Merger, was as follows:


			Threshold
Executive	Threshold		Plus		Target		Target Plus		High
Mr. Sellers	$	1,207,500	$	1,811,250	$	2,415,000	$	3,018,750	$	3,622,500
Mr. Freeman	$	525,000	$	682,500	$	840,000	$	997,500	$	1,155,000
Mr. Mueller (2006)	$	315,000	$	472,500	$	630,000	$	787,500	$	945,000
Mr. Mueller (2007-2008)	$	355,000	$	534,000	$	710,000	$	890,000	$	1,070,000
Ms. Brower	$	157,500	$	210,000	$	262,500	$	315,000	$	367,500

Prior to the Merger, the annual cash bonus paid to Mr. Sellers was set at $1,750,000 per year provided he executed in an appropriate and exemplary manner, and to the satisfaction of the Compensation Committee, his managerial responsibilities as the company’s chief executive officer, including developing and executing the company’s strategic plans, overseeing personnel and fostering good morale and retention, succession planning for key positions within the company, providing technology leadership, creating an atmosphere that encourages innovation, maintaining the company’s outstanding development capability, creating value through development activity in our core markets, overseeing our acquisition activity and the repositioning of our portfolio, and creating long term value. The Compensation Committee recognized that the appropriate and exemplary execution of these goals would not necessarily be immediately reflected in the company’s comparative performance metrics, but believed that they were essential to the long term success of the company. Because we expect our chief executive officer to focus on all aspects of the company’s performance, including the cultural and subjective elements of success as well as objective financial performance, the Compensation Committee believed it was appropriate and in the best interests of our company and the Archstone-Smith shareholders to consider all of these elements in determining Mr. Sellers’ total compensation. If the Compensation Committee determined that Mr. Sellers had not fully met these goals, then the committee could reduce the bonus by up to $400,000, for a minimum annual cash bonus of $1,350,000.

Mr. Neely’s target cash bonus and target annual RSU award was set annually in line with those awarded to our other senior officers. As noted above, the amount actually awarded to him by the Compensation Committee was based on the review of his performance undertaken by Messrs. Sellers and Freeman and their recommendation to the Compensation Committee. Mr. Neely’s target cash bonus for 2006 was $275,000, and his target cash bonus for 2007 was $286,000. The target RSU award for Mr. Neely for 2006 was $500,000 and his target RSU award for 2007 was $650,000. As discussed above, the actual amount of each award was based on Mr. Neely’s performance in overseeing and directing the development activities of the company.

Performance Units — Special Long Term Incentive Program for 2006

The table set forth below identifies the number of performance units awarded under our Special Long Term Incentive Program to Messrs. Sellers, Freeman and Mueller and Ms. Brower for the 2006-2008 performance period. As noted above, Mr. Neely was not a participant in this program. Under the terms of the Special Long Term Incentive Program, the actual number of performance units awarded to each executive that would vest would have been determined by the Compensation Committee in January or February 2009, based upon certain performance measures tied to Total Shareholder Return and, in the case of Mr. Sellers, individual performance criteria, as described in the Proxy Statement of Archstone-Smith filed with the SEC on April 11, 2007. However, as discussed below under “Compensation Related to the October 5, 2007 Merger,” the Compensation Committee determined that all of these units should vest at the Merger.


	Performance Units
	Awarded for
Name	2006-2008 (#)
Mr. Sellers		170,908
Mr. Freeman		50,633
Mr. Mueller		39,878
Ms. Brower		15,000

Other Compensation Features

Change in Control Arrangements

On August 12, 2002, we entered into change in control agreements with each of the Named Executive Officers other than Mr. Neely, with whom we entered into such an agreement on December 8, 2003. Each change in control agreement had a term of one year, which is automatically renewed unless the Board elected to terminate it. To avoid an unintended windfall to management upon a friendly change in control, the Named Executive Officers would each be entitled to a payment only if there was a change in control and thereafter the Named Executive Officer’s employment was terminated without cause or for good reason during a protected period. All of the change in control agreements were amended on August 3, 2007 to clarify how the cash bonus calculation was to be made in the event of a change in control. In addition, the change in control agreements for Messrs. Sellers and Mueller and Ms. Brower were amended to provide that a material adverse change in their title or the nature or scope of their authority, duties or responsibilities by virtue of the fact that Archstone-Smith was not a public company would be deemed a termination without cause. The protections of all of the change in control agreements came into force as a result of the Merger. Mr. Freeman’s change in control agreement terminated upon his retirement on December 31, 2007. In lieu of the amounts due to Mr. Freeman under his change in control agreement, he was entitled to the amounts set forth in his separation and general release agreement, as amended. See “Post-Employment Payments.” Ms. Brower’s retirement on December 31, 2007 resulted in a full payment under her change in control agreement. Mr. Sellers’ change in control agreement was superseded by his employment agreement (see discussion immediately below). For more detailed information on the conditions to payments and regarding the payments that could be made under each change in control agreement, see “Post-Employment Payments” below.

Employment Agreements

Prior to the Mergers, we did not have employment agreements with any of our employees. In connection with the Mergers, we entered into an employment agreement with Mr. Sellers, which is described below in “Compensation Discussion and Analysis after October 5, 2007; Other Compensation Features; Employment Agreement with R. Scot Sellers”.

Deferred Compensation

Each of our Named Executive Officers is eligible to participate in our 401(k) Plan.

Under the 401(k) Plan, each employee, including the Named Executive Officers, could contribute up to $15,000 of his or her salary in 2006 and up to $15,500 of his or her salary in 2007. Contributions equal to 6% of a contributing employee’s salary (not to exceed $15,000), including contributions by the Named Executive Officers, receive a matching contribution by Archstone-Smith in Common Shares prior to October 5, 2007 and in cash

thereafter. Each year, we test the 401(k) Plan to ensure that our highly compensated employees, which include all of the Named Executive Officers, do not receive more benefits than our non-highly compensated employees. If the benefits to the highly compensated employees exceed the benefits to the non-highly compensated employees by more than 2%, then a portion of the contributions made by the highly compensated employees is returned to those highly compensated employees until the benefits meet the test. These excess contributions are returned to the employee.

Under the Deferred Compensation Plan, which terminated at the time of the Merger, the Named Executive Officers could elect to defer payment of up to 75 percent of their base salary, 90 percent of their cash bonuses and certain amounts which could not be contributed to our 401(k) Plan due to limitations of the Internal Revenue Code. The minimum deferral for any calendar year was generally $5,000. The Deferred Compensation Plan was funded into a “rabbi trust” and participants in the Deferred Compensation Plan were treated as our unsecured general creditors. Each of our Named Executive Officers participated in the Deferred Compensation Plan.

Amounts deferred under the Deferred Compensation Plan earned a rate of return based on a hypothetical investment in investment choices selected by the Named Executive Officer from alternatives we provided. Although we were not required to do so, our Deferred Compensation Plan did actually invest in the selected investments. Any actual investment we made, in our discretion, was treated as part of our general assets.

Participants in the Deferred Compensation Plan received payment of deferred amounts as of the date selected by the participant, which generally had to be at least three years after the date on which the amount would otherwise have been payable to the individual. (This did not apply to settlements of RSUs or DEUs deferred into the Deferred Compensation Plan, which are described below.) All amounts were paid upon a participant’s termination of employment (although delayed payment could be provided in certain cases). Payments were made in the form of a lump sum or installments over a period not exceeding 5 years (15 years in the case of a participant whose employment terminates after the sum of his or her age and years of service equals at least 55). If the value of a participant’s account balance was less than $10,000, it was paid in a lump sum. Payment prior to the deferred date elected by a participant (or prior to termination of employment) was permitted only in limited circumstances. Except as described below (or as discussed above with respect to Outside Trustees), all payments from the Deferred Compensation Plan were made in cash.

Certain benefits under the Deferred Compensation Plan were potentially subject to Section 409A of the Internal Revenue Code. We intended to administer the plan in a manner that complied with section 409A and to amend the plan as and when needed in order to conform to the requirements of Section 409A, all as set forth in applicable IRS guidance when issued.

Prior to 2002, a Named Executive Officer receiving an award of RSUs under the LTIP could elect to defer settlement of such RSUs to a future date so that upon vesting, the RSUs would remain deferred under the Deferred Compensation Plan rather than being settled in the form of Common Shares. Such deferred RSUs would continue to earn DEUs in accordance with a formula applicable to the award under the LTIP. Options granted to Senior Executive Officers prior to 2000 also earned DEUs. DEUs thus earned also earned DEUs in accordance with the LTIP. Upon the settlement date selected by the Named Executive Officer in accordance with the Deferred Compensation Plan, the RSUs and/or DEUs would convert to Common Shares on a one-to-one basis. Common Shares available under the LTIP Plan were used to satisfy this obligation. With respect to awards granted after January 1, 2002, an individual receiving an award of RSUs could either elect to defer the vesting of such units as described above, or upon vesting elect to have the cash value of the RSUs deferred into the Deferred Compensation Plan.

Compensation Related to the October 5, 2007 Merger

The Merger Agreement included several provisions, all approved and/or ratified by the Compensation Committee, relating to payments that would be made to certain of our officers and employees, including the Named Executive Officers, in connection with the Merger.

Vesting of all Outstanding Options, RSUs and DEUs

In connection with the Mergers each outstanding share option held by all officers and employees, including the Named Executive Officers, became fully vested and exercisable and was exchanged for a cash payment equal to

the product of the number of shares subject to the option and the excess, if any, of the common share merger consideration over the exercise price of the option. Further, each RSU and DEU held by the Named Executive Officers became fully vested and was exchanged for the common share merger consideration.

Grant of Cash Awards in Lieu of RSU Awards

Pursuant to the terms of the three-year compensation plan, the same criteria described under "Historical Criteria for Awards” were to apply to cash and annual RSU awards for 2007 and 2008. The Compensation Committee typically made annual awards of RSUs to the Named Executive Officers at the beginning of each fiscal year in consideration of an employee’s and our performance for the prior fiscal year. As a result of the Merger, which closed in the third quarter of 2007, the full year’s performance of Archstone-Smith would not have been available to calculate the awards, and Archstone-Smith would no longer be a public company after the Merger. Because of these considerations, the Merger Agreement provided that the Named Executive Officers, other than Mr. Freeman who was to be compensated in accordance with the terms of his separation and general release agreement, would receive the cash equivalent of the RSU awards for 2007, based on 75% of such officer’s award of RSUs for the 2006 fiscal year. Since Archstone-Smith would not be a public company at December 31, 2007, there was no basis for determining the award that these officers would have been entitled to under the then-existing compensation program. Therefore, the Compensation Committee determined that the best way to approximate the value created during 2007 was to make the same award as was made in 2006. This award was intended to compensate these officers on a pro rated basis for 2007 performance prior to the Merger and was paid as of the Merger date.

The cash awards our executive officers received upon the consummation of the Merger, in lieu of an RSU grant for 2007, are as follows:


Executive Officers	Amount of Cash Award
R. Scot Sellers	$	2,454,962
Charles E. Mueller, Jr.		637,273
Caroline Brower		256,931
Alfred G. Neely		487,484

Pursuant to his separation and general release agreement, Mr. Freeman was entitled to receive a cash award in lieu of a 2007 RSU award for the same reasons described above for the other Named Executive Officers.

Cash Payment to Holders of certain RSUs, Share Options and DEUs

Archstone-Smith employees who were granted RSUs, share options with a DEU feature and DEUs prior to 2006 earned and were entitled to receive DEUs on such awards based on amounts equal to, and to correspond with, the dividends that Archstone-Smith paid to its common shareholders. The DEUs earned for each year had typically been credited in January of the year following the year in which dividends have been paid. As the Mergers were scheduled to close prior to the end of 2007, the Merger Agreement provided that each of our employees holding restricted share units, share options and dividend equivalent units that would otherwise have been entitled to a DEU award on January 1, 2008 would receive a cash payment on the Archstone-Smith Merger date equal to the value of the dividend equivalent units that such individual would have earned based on the dividends that we paid in the first and second quarters of 2007. Such cash payments to our Named Executive Officers were as follows:


Executive Officers	Amount of Cash Payment
R. Scot Sellers	$	85,205
J. Lindsay Freeman		139,906
Charles E. Mueller, Jr.		57,733
Caroline Brower		15,379
Alfred G. Neely		22,397

Performance Units

The Merger Agreement provided that each of the performance units granted to each Named Executive Officer would vest immediately prior to the closing of the Archstone-Smith Merger and was to be considered a Common Share of Archstone-Smith. As a result, each Named Executive Officer received the cash merger consideration for each such Common Share. The table below sets forth the number of performance units previously awarded to each Named Executive Officer that vested in connection with the Archstone-Smith Merger and the compensation received for those performance units.


	Performance Units
	Awarded for		Compensation Received
Name	2006-2008 (#)		at Merger
Mr. Sellers		170,908	$	10,382,661
Mr. Freeman		50,633	$	3,075,955
Mr. Mueller		39,878	$	2,422,589
Ms. Brower		15,000	$	1,730,464

Compensation Discussion and Analysis After October 5, 2007

Compensation Objectives, Elements Of Compensation, Criteria For Award

As a newly-formed private company, the Series I Trust Compensation Committee intends to continue the existing compensation philosophy of rewarding contributions to our success, but measuring our success in terms of a privately owned enterprise. For the period following the Merger through December 31, 2007, the Series I Trust Compensation Committee, other than with respect to Mr. Sellers, generally continued the compensation for our Named Executive Officers at the same levels as were in place prior to the Merger. Where compensation would historically have been based on our 2007 performance, the Series I Trust Compensation Committee either used 2006 awards as a basis for making a 2007 award or approved awards based on the discretionary review of a particular officer’s performance during 2007. The Series I Trust Compensation Committee decisions with respect to base salary, cash bonuses, and incentive compensation with respect to our Named Executive Officers for the period following the Merger through December 31, 2007 are set forth below.

Base Salary

With the exception of Mr. Mueller, the base salaries of each Named Executive Officer was continued at the same level as before the Merger. Effective October 5, 2007, the salary for Mr. Mueller was increased to $500,000 per year. This raise was in recognition of the fact that Mr. Mueller was increasingly taking on additional responsibilities as he prepared to take on the role of Chief Operating Officer on January 1, 2008.

Cash Bonuses

Mr. Sellers was not awarded a cash bonus for 2007 in accordance with the terms of his employment agreement. Since Archstone-Smith would not be a public company at December 31, 2007, there was no basis for determining the cash bonus that Mr. Freeman would have been entitled to under the then-existing compensation program. Therefore, the Series I Trust Compensation Committee determined that the best way to approximate the value created during 2007 was to award the same cash bonus as was made in 2006. With respect to Mr. Mueller, his cash bonus of $606,475 was determined following a review of his performance by Mr. Augarten and Mr. Sellers. Mr. Mueller’s bonus was based on the significant role he played in negotiating the Merger Agreement and overseeing the overall transaction, as well as his oversight of the integration process after completion of the Mergers. A cash bonus equal to the High amount was awarded to Ms. Brower in accordance with the terms of her change in control agreement. A cash bonus of $436,000, which was $150,000 over the target bonus amount for 2007 of $286,000, was awarded to Mr. Neely based on a review of his 2007 performance undertaken by Messrs. Augarten, Sellers and Freeman. Mr. Neely’s bonus was based on his excellent accomplishments with respect to our development projects during 2007.

Incentive Grants

No incentive stock awards were made to any of the Named Executive Officers as part of their 2007 compensation. They did receive cash compensation in connection with the Merger with respect to a portion of the RSU award that they could have earned for 2007 as discussed above. In addition, each Named Executive Officer, other than Mr. Freeman who was to be compensated in accordance with the terms of his separation and general release agreement, as amended, was paid in January, 2008, an amount equal to 25% of such officer’s award of RSUs for the 2006 fiscal year. As with the cash payments in lieu of RSU awards made in connection with the Merger, this payment was intended to approximate the value created during 2007 by making the same award as was made in 2006. Mr. Freeman received $1,071,788 in lieu of an RSU award for 2007 pursuant to his separation and general release agreement, as amended. These amounts are included in the Summary Compensation Table below.

Performance Units

As part of his employment agreement, the Series I Trust Compensation Committee awarded Mr. Sellers (a) 4,800 Class C Units in Tishman Speyer Archstone-Smith Multifamily Participants, L.L.C, an affiliate of the Venture, and (b) 100 non-voting units in each of three affiliates of the Venture with an aggregate value of approximately $11.25 million as of October 5, 2007 (see “Other Compensation Features; Employment Agreement with R. Scot Sellers” and “Grant of Plan Based Awards”).

Other Compensation Features

Change in Control Agreements

Mr. Mueller amended his change in control agreement on January 4, 2008 to clarify the circumstances under which Mr. Mueller may terminate employment and receive the severance payments provided for in the agreement, revise the severance payments that Mr. Mueller would be entitled to pursuant to the terms of the agreement, and confirm Mr. Mueller’s post-Merger compensation as described below. Mr. Sellers’ employment agreement described immediately below superseded his change in control agreement, other than the provision regarding the calculation of any gross-up payment due.

Employment Agreement with R. Scot Sellers

With the exception of Mr. Sellers, we do not have employment agreements with any of our Named Executive Officers or with any of our other employees. We entered into an employment agreement with Mr. Sellers on October 5, 2007. The Series I Trust Compensation Committee determined that an employment agreement would assist in retaining Mr. Sellers, whose continued service as chief executive officer was deemed crucial to the successful implementation of its post-merger strategy and goals. The employment agreement supersedes Mr. Sellers’ change in control employment agreement, other than the provision regarding the calculation of any gross-up payment due.

Pursuant to the employment agreement, Mr. Sellers agreed to continue to serve as our Chief Executive Officer following the Merger. The initial term of Mr. Sellers’ employment agreement will end on December 31, 2010, but will automatically be extended for consecutive one year periods upon the expiration of the initial term (or any extension thereof) unless either party provides no less than 90 days notice of its intention not to renew. Mr. Sellers is entitled to an initial annual base salary of $750,000. Assuming he is employed on the last day of the fiscal year to which the guaranteed bonus relates, Mr. Sellers is guaranteed a bonus of $4.0 million for the fiscal year ending December 31, 2008 and $2.0 million for each subsequent fiscal year, and will be entitled to an additional incremental bonus of up to $3.125 million per year based on the achievement of certain equity raising milestones. Mr. Sellers will have the right to reinvest up to 50% of his annual guaranteed bonus into phantom interests in affiliates/subsidiaries of the Venture including the Junior Mezz Borrower.

Mr. Sellers’ base salary remained unchanged after the Mergers. The Series I Trust Compensation Committee divided the annual cash bonus into two parts. The first part, a guaranteed minimum cash bonus, was set at a level slightly higher than was in effect prior to the Mergers to take into account the increased responsibilities

Mr. Sellers would have as the chief executive officer of Successor. The second part of the bonus, which is based on the achievement of certain equity raising milestones, and the equity awards discussed below, are designed to align Mr. Sellers’ interest with those of other investors in the Venture.

Termination payments to Mr. Sellers depend upon the timing and circumstances of any termination of his employment, and generally include the payment of (i) certain “accrued obligations,” (ii) any vested benefits, and (iii) amounts based upon Mr. Sellers’ base salary and bonuses he earned, or otherwise would in the future be entitled to receive, depending on the timing of such termination. Certain payments are contingent on Mr. Sellers’ execution and non-revocation of a release of claims against us and certain of our affiliates. In the event that any payments made in connection with the Mergers subject Mr. Sellers to a “golden parachute” excise tax, Mr. Sellers will be made whole for such excise tax. Mr. Sellers is subject to one-year or two-year (depending on the date of termination) post-termination non-solicit and non-hire covenants and a one-year post-termination non-competition covenant. These termination payments are described in greater detail in “Change in Control and Post-Termination Arrangements with Mr. Sellers.”

In connection with his entry into the employment agreement, and in addition to Mr. Sellers’ $4.1 million investment in Governance GP, Mr. Sellers purchased 21.75 non-voting Class A Units of Junior Mezz Borrower for an aggregate purchase price of $2,290,444. The Non-voting Class A Units are fully vested as of the date of purchase.

In connection with his entry into the employment agreement, Mr. Sellers was also granted non-voting equity interests in three affiliates of the Venture with an aggregate value of approximately $11.25 million as of October 5, 2007. Mr. Sellers’ equity interests in the three affiliates cliff vest in full on October 5, 2010, subject to earlier vesting in full upon a termination of his employment without “cause” or for “good reason” or certain liquidations or dissolutions of the granting entity.

Mr. Sellers was also granted 4,800 Class C Units in Tishman Speyer Archstone-Smith Multifamily Participants, L.L.C, an affiliate of the Venture. The value of these units depends on the return on investments generated by partners in the Venture (other than partners which are affiliates of the Venture’s sponsor), and they generally have no value unless such partners achieve an 8% gross IRR. The Class C Units granted to Mr. Sellers generally vest ratably on each of the first seven anniversaries of October 5, 2007, provided, that vesting accelerates upon a certain changes in control of Fund GP and Fund II GP upon the Lehman Sponsor or the Tishman Speyer Sponsor selling all or substantially all of their limited partner interests in the Venture and/or certain other affiliates thereof and certain liquidations or dissolutions of the granting entity. In the event of a termination of Mr. Sellers’ employment without “cause” or for “good reason” (each as defined, and in accordance with the procedures described, in Mr. Sellers’ employment agreement), the Class C Units that would have vested in the one-year period following the date of termination of his employment will immediately vest upon such termination. All Class C Units that are not vested upon termination of employment will be forfeited, subject to any prior vesting or acceleration. An additional 3,200 Class C Units are currently reserved for future grant to other of our employees.

POST-EMPLOYMENT PAYMENTS

The first table below discloses the potential payments that would be provided to each Named Executive Officer other than Mr. Sellers in the event of a termination of employment or a change in control of the Company on December 31, 2007. Payments are listed for Mr. Freeman only in the “Termination without change in control” section of the table since he was not entitled to any change in control protection after his retirement on December 31, 2007, and the amounts given are the actual amounts accrued or paid to him, which amounts are included in the “Summary Compensation Table” under “All Other Compensation”. Payments listed for Ms. Brower in the “Change in control and termination without cause within protected period” section of the table reflect actual amounts accrued or paid to her based on the change of control as a result of the Merger and her deemed termination “without cause” upon her retirement on December 31, 2007, which amounts are included in the “Summary Compensation Table” under “All Other Compensation”. The second table discloses the potential payments that would be provided to Mr. Sellers in the event of a termination of employment or a change in control of the Company on December 31, 2007, which payments are based on the terms of our employment agreement with Mr. Sellers.


Event	Consideration	Mr. Freeman		Mr. Mueller		Ms. Brower		Mr. Neely
Termination without change in control, with or without cause, or upon death or disability	Cash severance		—		—		—		—
	Accrued bonus and long term compensation		—		—		—		—
	Unvested equity awards		—		—		—		—
	401(k) account balance	$	291,146	$	281,046	$	234,784	$	572,953
	Health care benefits		—		—		—		—
	Excise tax gross-up		—		—		—		—
	Outplacement services		—		—		—		—
	Personal benefits		—		—		—		—
	Total:	$	291,146	$	281,046	$	234,784	$	572,953
Change in control and termination without cause within protected period	Cash severance		—	$	2,270,000	$	1,290,000	$	390,000
	Accrued bonus and long term compensation		—		606,475		310,000		436,000
	Unvested equity awards (1)		—		—		—		—
	401(k) account balance		—		281,046		234,784		572,953
	Health care benefits (2)		—		32,532		8,960		14,609
	Excise tax gross-up		—		—		—		—
	Outplacement services		—		15,000		—		10,000
	Personal benefits (3)		—		8,054		—		6,471
	Total:		—	$	3,213,107	$	1,843,744	$	1,430,033


(1)		All unvested options, RSUs and DEUs vested and were redeemed in connection with the Merger. As a result, none of these NEOs held unvested equity awards at December 31, 2007.

(2)		This amount includes medical insurance, disability income protection, life insurance coverage and death benefits during the applicable protected period for each Named Executive Officer, valued at the incremental cost to us of providing such benefits.

(3)		None of these Named Executive Officers received personal benefits in excess of $10,000 in 2007. For purposes of calculating the personal benefits, we used the approximate value of the personal benefits received in 2007 multiplied by the Multiple.


Event	Consideration	Mr. Sellers
Termination by Company without cause or by Mr. Sellers for good reason, without change in control	Accrued obligations (1)	$	0
	Severance amount	$	5,500,000
	Unvested equity awards	$	11,250,000
	401(k) account balance	$	287,626
	Excise tax gross-up	$	0

	Total:	$	17,037,626
Death or disability	Accrued obligations (1)	$	0
	401(k) account balance	$	287,626
	Excise tax gross-up	$	0

	Total:	$	287,626
Termination by Company without cause or by Mr. Sellers for good reason, with a change in control	Accrued obligations (1)	$	0
	Severance amount	$	5,500,000
	Unvested equity awards	$	11,250,000
	401(k) account balance	$	287,626
	Excise tax gross-up	$	0

	Total:	$	17,037,626
Termination by Company for cause or by Mr. Sellers without good reason	Accrued obligations, excluding prorated annual cash bonus (1)	$	0
	401(k) account balance	$	287,626

	Total:	$	287,626


(1)		Accrued obligations are defined as the sum of the following amounts: (a) annual base salary through the date of termination, (b) any unpaid guaranteed bonus and any unpaid incremental annual bonus earned for any fiscal year ended prior to the fiscal year in which the date of termination occurs, (c) prorated guaranteed annual cash bonus from January 1 through the date of termination, (d) reimbursed of expenses incurred, and (e) all other compensation and benefits under any compensation or benefit plan. The foregoing table assumes that Mr. Sellers’ last paycheck in 2007 covered the period ending on December 31, 2007.

We entered into a severance and release agreement with Mr. Freeman in 2007. We will pay Mr. Freeman a base salary of $450,000 for the period from January 1, 2008 through December 31, 2008, in consideration for which Mr. Freeman will be available as a consultant and advisor to us upon our request. There will be no written consulting agreement relating to these services. Mr. Freeman will not be eligible for any cash bonus for his services performed during 2008, but was paid $554,000 in January, 2008 as a cash bonus for 2007, $1,071,788 in lieu of an RSU award for 2007 and $1,000,000 in January, 2008 for remaining employed through December 31, 2007. We will provide Mr. Freeman with health insurance coverage, at a cost to us of $142 per month, in accordance with our policy for full-time employees.

Change in Control Arrangement with Messrs. Mueller and Neely and Ms. Brower

Except with respect to Mr. Sellers (see "Compensation Discussion and Analysis after October 5, 2007; Other Compensation Features; Employment Agreement with R. Scot Sellers"), we have not entered into an employment contract with any Named Executive Officer, nor are our Named Executive Officers subject to our Severance Plan. Upon a termination of employment, whether voluntary or involuntary (but excluding a termination following a change in control, which is discussed below) or the result of retirement, death or disability, we have no contractual obligation to give a Named Executive Officer anything over and above what he or she has contributed previously to accounts under the 401(k) Plan (including vested matching contributions) and earnings on the amounts contributed. As of December 31, 2007, the value of the currently vested accounts for each Named Executive Officer is included in the table above.

As noted above, we entered into change in control agreements with each of the Named Executive Officers. The Named Executive Officers would each be entitled to a payment only if there is both a change in control and thereafter the Named Executive Officer’s employment is terminated, or effectively terminated, without cause, as more fully described below. Mr. Sellers’ employment agreement (see "Compensation Discussion and Analysis after October 5, 2007; Other Compensation Features; Employment Agreement with R. Scot Sellers") superseded and replaced any benefit to which he would be entitled under his change in control agreement in connection with the Merger, other than the provisions regarding the calculation of any gross-up payment due. Mr. Freeman’s change in control agreement terminated upon his retirement on December 31, 2007. A severance payment was made to Ms. Brower following her deemed termination “without cause” upon her retirement on December 31, 2007.

Under these agreements, a “change in control” occurred if the Archstone-Smith shareholders approved (a) the merger of Archstone-Smith or of Archstone with or into another entity, (b) the sale by Archstone of substantially all of its assets, or (c) a plan of liquidation of either Archstone-Smith or Archstone and, following the consummation of the approved transaction, the original shareholders of Archstone-Smith did not constitute 75% of the shareholders of the resulting entity. A change of control also occurred if (i) a third party acquired over 25% of the outstanding Common Shares of Archstone-Smith, other than in a transaction where Archstone-Smith issued the shares to such third party, or (ii) there was a change in a majority of the trustees of Archstone-Smith during any period of two consecutive years, other than as a result of the election, or nomination for election by Archstone-Smith’s shareholders, of a person whose nomination was approved by a two-thirds majority of the Trustees who were in office at the beginning of such two year period. A “change in control” occurred as a result of the Merger.

A protective period has been established for each of our Named Executive Officers: twenty-four (24) months in the case of Mr. Mueller and Ms. Brower, and twelve (12) months in the case of Mr. Neely. The applicable protective period was set based on the officer’s level of responsibility. During the protective period, if the Named Executive Officer’s employment is terminated without cause, other than as a result of the officer’s death or disability, or if the officer resigns as a result of, among other matters, a material adverse change in the nature or scope of the officer’s duties or authority, then the officer will be entitled to receive a lump-sum payment. Mr. Mueller and Ms. Brower’s change in control agreements also provide that a change in their duties as a result of our not being a public company would constitute a termination without cause. In addition, the officer will be entitled to the continuation during the applicable protective period following the date of termination of medical insurance, disability income protection, life insurance and death benefits, and perquisites, or personal benefits, equivalent to those available to the officer on the date of termination. The terminated officer will also receive outplacement services of up to $15,000 in the case of Mr. Mueller and Ms. Brower, and $10,000 in the case of Mr. Neely.

The severance payment will be equal to a multiple — 2 in the case of Mr. Mueller and Ms. Brower, and 1 in the case of Mr. Neely (the "Multiple") — of base salary for the year in which termination occurs plus the Multiple times the greater of (i) the officer’s target cash bonus for the year in which termination occurs, based on the highest applicable performance targets having been met, or (ii) the actual cash bonus awarded to the officer for the year immediately preceding the year in which termination occurs. Each Named Executive Officer will also receive, if terminated within the protective period, an amount equal to the officer’s unpaid pro-rated salary through the date of termination, the pro-rated target bonus that would be paid to the officer if the highest applicable performance targets were met for the year of termination, and an additional payment required to compensate the officer for any excise taxes imposed upon the severance payments made under the officer’s agreement.

Change in Control and Post-Termination Arrangements with Mr. Sellers

Termination payments to Mr. Sellers are made pursuant to the terms and conditions of his employment agreement dated as of October 5, 2007. Depending upon the timing and circumstances of any termination of his employment, as explained in more detail below, he is generally entitled to (i) amounts earned but unpaid, (ii) any vested benefits, and (iii) amounts based upon Mr. Sellers’ base salary and bonuses he earned, or otherwise would in the future be entitled to receive, depending on the timing of such termination.

If Mr. Sellers is terminated without cause or resigns for good reason prior to December 31, 2010, Mr. Sellers would receive a lump sum cash payment, to the extent not previously paid, equal to (A) the “Accrued Obligations,” which consist of (i) his base salary through the date of termination, (ii) any unpaid guaranteed bonus and any unpaid incremental bonus for any prior fiscal year, (iii) a pro-rated guaranteed bonus for the year in which the termination occurs; (iv) any unpaid or unreimbursed expenses, and (v) benefits owed pursuant to any benefits plan; plus (B) the lesser of (i) the sum of (1) two times his base salary, (2) $4.0 million and (3) two times his incremental bonus, based on the achievement of certain equity raising milestones as of the termination date, and (ii) the sum of (1) one times his base salary, (2) $2.0 million, (3) his incremental bonus, based on the achievement of certain equity raising milestones as of the termination date, and (4) the remaining base salary, guaranteed bonus and incremental bonus, based on the achievement of certain equity raising milestones as of the termination date, to which Mr. Sellers would have been entitled through December 31, 2010, had he remained employed through such date.

If Mr. Sellers is terminated without cause or resigns for good reason on or after December 31, 2010, Mr. Sellers would receive a lump sum cash payment equal to (A) the Accrued Obligations; plus (B) the sum of (i) one times his base salary, (ii) $2.0 million, and (iii) his incremental bonus, based on the achievement of certain equity raising milestones through October 5, 2008.

Notwithstanding the above, if Mr. Sellers is terminated without cause or resigns for good reason after a change in control, Mr. Sellers would receive a lump sum cash payment equal to (A) the Accrued Obligations; plus (B) the sum of (i) two times his base salary, (ii) $4.0 million and (iii) two times his incremental bonus, based on the achievement of certain equity raising milestones as of the termination date. Under Mr. Sellers’ agreement, a “change in control” generally occurs if Tishman Speyer and/or Lehman execute one or more sales of their interests such that neither maintains a controlling interest in the Venture following the transactions.

Upon a change in control, Mr. Sellers is also entitled to acceleration of the vesting of all of his Class C Units in Tishman Speyer Archstone-Smith Multifamily Participants, L.L.C. or, if no change in control occurs and he is terminated by the Company without cause or he terminates his employment for good reason, acceleration of the vesting of the Class C Units that would have vested during the one year period following termination. Upon a termination of his employment without cause or for good reason, or upon certain liquidations or dissolutions of the granting entity, Mr. Sellers unvested non-voting equity interests in three affiliates of the Venture would immediately vest.

If Mr. Sellers terminates his employment without good reason or the Company terminates him for cause, Mr. Sellers would receive a lump sum cash payment, to the extent not previously paid, equal to (i) his base salary through the date of termination, and (ii) any unpaid guaranteed bonus and any unpaid incremental bonus for any prior fiscal year. Any unvested equity awards would be forfeited. Under Mr. Sellers’ agreement, “cause” generally includes (i) willful and continued failure by Mr. Sellers to substantially perform his duties, (ii) willful conduct that is injurious to the Company monetarily or otherwise, and (iii) conduct involving serious moral turpitude. Under Mr. Sellers’ agreement “good reason” generally includes (i) a material adverse change in Mr. Sellers’ title or position,

including the duties he performs, (ii) a reduction or the failure to pay Mr. Sellers’ base salary, guaranteed bonus or incremental bonus, (iii) the failure of the Company to grant or settle an equity award on previously determined terms, and (iv) the relocation of the Company’s offices to a location more than five miles from its current location.

If Mr. Sellers is disabled or upon his death, he or his estate, respectively, would receive a lump sum cash payment, to the extent not previously paid, equal to the Accrued Obligations.

Certain payments are contingent on Mr. Sellers’ execution and non-revocation of a release of claims against us and certain of our affiliates. Mr. Sellers is subject to one-year or two-year (depending on the date of termination) post-termination non-solicit and non-hire covenants and a one-year post-termination non-competition covenant.

TAX IMPLICATIONS OF COMPENSATION

In making compensation decisions, the Archstone-Smith Compensation Committee took into account the applicability of and the limitations imposed by Section 162(m) of the Internal Revenue Code on the deductibility of compensation paid to certain executives to the extent such compensation exceeds $1 million per executive. The law exempts compensation paid under plans that relate compensation to performance. Although our plans were designed to relate compensation to performance, certain elements of the plans may not meet the tax law’s requirements because they allowed the Archstone-Smith Compensation Committee to exercise discretion in setting compensation.

2006 AND 2007 EXECUTIVE COMPENSATION

The following table sets forth the information required by Item 402 of Regulation S-K, promulgated by the SEC. The amounts shown represent a summary of all compensation paid to our Named Executive Officers for the fiscal years ended December 31, 2007 and 2006. The cash bonuses awarded to the Named Executive Officer on February 23, 2007 (as part of 2006 compensation) and January 4, 2008 (as part of 2007 compensation), are included in the Summary Compensation Table below, under the “Bonus” or “Non-Equity Incentive Plan Compensation” column, as appropriate. The basis for making both the RSU awards and the cash bonus awards to these officers is detailed in Notes (1), (2) and (3) to this table.

SUMMARY COMPENSATION TABLE


									Non-Equity
							Stock		Incentive Plan		All Other
Name and Principal			Salary		Bonus		Awards		Compensation		Compensation		Total
Position	Year		($)		($)⁽¹⁾		($)⁽²⁾		($)⁽³⁾		($)⁽⁴⁾		($)
R. Scot Sellers, Chief Executive Officer		2007	$	750,000		—	$	2,358,945		—	$	35,636,045	$	36,386,045
		2006	$	750,000	$	1,750,000	$	2,937,500		—	$	602,034	$	6,039,534

J. Lindsay Freeman, Chief Operating Officer		2007	$	450,000	$	1,554,000	$	772,257		—	$	16,977,924	$	18,981,924
		2006	$	450,000		—	$	969,572	$	554,000	$	409,738	$	2,383,310

Charles E. Mueller, Jr. Chief Financial Officer		2007	$	446,493	$	606,475	$	614,827		—	$	11,354,320	$	12,407,288
		2006	$	380,000		—	$	765,536	$	475,300	$	212,690	$	1,833,526

Caroline Brower, General Counsel		2007	$	335,000	$	310,000	$	244,967		—	$	5,885,582	$	6,530,582
		2006	$	335,000		—	$	304,933	$	276,075	$	90,721	$	1,006,729

Alfred G. Neely, President – Charles E. Smith Residential Division & Chief Development Officer		2007	$	390,000	$	436,000	$	475,005		—	$	3,455,939	$	4,281,939
		2006	$	375,000	$	412,500	$	550,012		—	$	102,185	$	1,439,697


(1)		Includes amounts earned in 2007 that were paid in 2008 and 2006 that were paid in 2007, as applicable. Under the terms of his employment agreement, Mr. Sellers was not paid a cash bonus for 2007. The 2006 bonus amount for Mr. Sellers was based on the Compensation Committee’s determination that he had executed his managerial responsibilities as the company’s chief executive officer in an appropriate and exemplary manner. The 2007 cash bonus for Mr. Freeman was awarded at the same level as his 2006 cash bonus. The bonus for Mr. Mueller was awarded based on the significant role he played in negotiating the Merger Agreement and overseeing the overall transaction, as well as his oversight of the integration process after completion of the Merger. Ms. Brower was awarded a bonus at the High amount under the pre-Merger compensation program in accordance with the terms of her change in control agreement. Mr. Neely was awarded a 2007 cash bonus of $436,000, which is $150,000 over the target amount, and he was awarded a 2006 cash bonus of $412,500, or $137,500 over the target amount, based in each year on his excellent accomplishments with respect to the Company’s development projects.

(2)		Consists of the compensation expense recognized by the company in the applicable year related to long-term equity incentive awards computed in accordance with FAS 123R. The amounts include the expense recorded in the applicable year relating to the amortization of awards made in earlier years as well as the expense relating to the amortization of awards granted in such year. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For more information on this calculation, see note 11. The expense amounts shown for 2007 cover the expense taken from January 1, 2007 through the Merger on October 5, 2007. The cash received by each Named Executive Officer upon the redemption of all outstanding stock awards is included in the “All Other Compensation” column and, for purposes of calculating Total Compensation, we have not included the amounts for 2007 in the Stock Awards column to avoid double counting those payments.

(3)		Includes amounts earned in 2006 that were paid in 2007. Bonus amounts for 2006 for Messrs. Freeman and Mueller and Ms. Brower were based on our achieving TSR placing us in the 81^st percentile, compared to the NAREIT Apartment Index, FFO growth relative to the NAREIT Apartment Index that resulted in an award at the target amount, and absolute FFO growth slightly above the target plus amount.


(4)		Personal benefits paid on behalf of Mr. Sellers during 2007 in the amount of $273,903, which included (a) $266,142 in legal fees for counsel to represent him in the negotiation of his employment agreement, (b) $540 for parking, (c) $3,915 for supplemental disability insurance, (d) $490 for personal use of a cellphone, and (e) $432 for personal use of a country club membership. In accordance with Mr. Freeman’s severance and release agreement, we paid him $1,071,788 in lieu of an RSU award for 2007; this amount is equal to the RSU award made to Mr. Freeman for 2006. For Ms. Brower, this amount includes $1,290,000, which was paid to her in 2008 as a severance amount due under her change in control agreement. In addition, this amount also includes the following amounts:

2006 Amounts


	401(k)				Quarterly Cash
	Company				Payments on		DEUs Earned
Officer	Match		Life Insurance		RSUs (a)		(b)		TOTAL
Mr. Sellers	$	4,537	$	810	$	119,307	$	477,380	$	602,034
Mr. Freeman	$	4,537	$	3,564	$	60,992	$	340,645	$	409,738
Mr. Mueller	$	4,537	$	540	$	31,120	$	176,493	$	212,690
Ms. Brower	$	4,537	$	2,322	$	12,380	$	71,482	$	90,721
Mr. Neely	$	4,537	$	3,564	$	24,814	$	69,270	$	102,185


(a)		Quarterly cash payments equal in amount to the dividend paid on Archstone-Smith Common Shares were earned on outstanding RSUs granted in 2006.

(b)		DEUs were earned on January 1, 2007 on outstanding RSUs granted prior to 2006, DEUs previously earned and options granted between 1997 and 1999 as follows:


			DEUs earned on		DEUs earned
	DEUs earned on Vested		Unvested RSUs		on Vested		Total DEUs
Officer	RSUs and DEUs (#)		and DEUs (#)		Options (#)		earned (#)
Mr. Sellers		6,650		1,020		531		8,201
Mr. Freeman		4,729		333		790		5,852
Mr. Mueller		2,765		267		—		3,032
Ms. Brower		372		105		751		1,228
Mr. Neely		988		202		—		1,190

2007 Amounts


							Cash
					Quarterly		Award in
	401(k)				Cash		Lieu of
	Company		Life		Payments		2007 RSU		Merger-Related
Officer	Match		Insurance		on RSUs (a)		Grant (b)		Compensation (c)		TOTAL
Mr. Sellers	$	6,750	$	1,242	$	112,587	$	818,321	$	34,423,242	$	35,362,142
Mr. Freeman		6,750		3,564		48,270		—		15,847,552		15,906,136
Mr. Mueller		6,750		540		29,304		212,424		11,105,302		11,354,320
Ms. Brower		6,750		2,322		9,581		85,644		4,491,318		4,595,615
Mr. Neely		6,750		3,564		18,638		162,516		3,264,471		3,455,939


(a)		Two quarterly cash payments, equal in amount to the dividend paid on Archstone-Smith Common Shares, were earned in February and May, 2007 on outstanding RSUs granted in 2007.

(b)		This amount equals 25% of the 2006 RSU award made to the Named Executive Officer.

(c)		Amounts include the following:


	Performance						Share		Cash in lieu		Cash in lieu
	Unit		RSU		DEU		Option		of 2007		of 2007
Officer	Cashout^(a)		Cashout^(a)		Cashout^(a)		Cashout^(a)		RSUs^(b)		DEUs^(a)(c)		TOTAL
Mr. Sellers	$	10,382,661	$	13,137,066	$	140,136	$	8,223,212	$	2,454,962	$	85,205	$	34,423,242
Mr. Freeman	$	3,075,955	$	10,910,457	$	1,721,234		—		—	$	139,906	$	15,847,552
Mr. Mueller	$	2,422,589	$	5,810,981	$	31,537	$	2,145,189	$	637,273	$	57,733	$	11,105,302
Ms. Brower	$	1,730,464	$	823,588	$	391,503	$	1,273,453	$	256,931	$	15,379	$	4,491,318
Mr. Neely		—	$	2,447,435	$	307,155		—	$	487,484	$	22,397	$	3,264,471


(a)		Payments were calculated as follows: (i) $60.75 for each vested and unvested RSU, DEU, and performance unit outstanding on October 4, 2007, and (ii) $60.75 less the strike price for each share option outstanding on October 4, 2007.

(b)		This amount equals 75% of the 2006 RSU award made to the Named Executive Officer.

(c)		This amount represents the value of DEUs that would have been earned on the deemed 2007 RSU award.

GRANTS OF PLAN BASED AWARDS

The following table sets forth information with respect to plan-based awards granted in or for 2007 to the Named Executive Officers. The “Estimated Possible Payouts under Non-Equity Incentive Plan Awards” column in the table reflects the target, target plus and high amounts that Messrs. Freeman and Mueller and Ms. Brower were eligible to earn as an annual cash bonus for 2007. The “Estimated Possible Payouts under Equity Incentive Plan Awards” column in the table reflects the threshold, target and high amounts that Messrs. Sellers, Freeman and Mueller and Ms. Brower were eligible to earn as an annual RSU award for 2007. See “Compensation Discussion and Analysis – Historical Criteria for Awards – Annual and Long Term Incentives – Cash Bonus and RSU Grants for 2006.” The “All Other Stock Awards” column reflects the RSUs awarded on February 23, 2007 as part of each officer’s compensation for 2006. Information regarding the performance units awarded under our special long-term incentive program on October 4, 2005 is included in “Compensation Discussion and Analysis – Historical Criteria for Awards – Annual and Long Term Incentives – Performance Units–Special Long Term Incentive Program.”


															All Other
			Estimated Possible Payouts Under Non-						Estimated Possible Payouts Under						Stock Awards:
			Equity Incentive Plan Awards⁽¹⁾						Equity Incentive Plan Awards⁽¹⁾						Number of		Grant Date
			Threshold		Target		Maximum		Threshold		Target		Maximum		Shares of Stock		Fair Value of
Name	Grant Date		($)		($)		($)		($)		($)		($)		or Units (#)⁽²⁾		Award ($)⁽³⁾
Mr. Sellers		—								1,207,500		2,415,000		3,622,500
		2/23/07														68,567		3,125,284
		10/5/07														4,800			(4)
		10/5/07														100			(4)
		10/5/07														100			(4)
		10/5/07														100			(4)

Mr. Freeman		—		360,000		480,000		640,000		525,000		840,000		1,155,000
		2/23/07														22,492		1,025,185

Mr. Mueller		—		315,000		475,000		635,000		355,000		710,000		1,070,000
		2/23/07														17,885		815,198

Ms. Brower		—		180,000		245,000		310,000		157,500		262,500		367,500
		2/23/07														7,115		324,302

Mr. Neely		2/23/07														14,261		650,016


(1)		These columns consist of the potential annual cash bonus awards and annual stock awards under our Long Term Incentive Plan for fiscal 2007 pursuant to the performance levels established by the Compensation Committee in October 2005 and, for Mr. Mueller, in mid-2006. For cash awards, the “Threshold,” “Target,” and “Maximum” columns represent the amounts payable when the “Target,” “Target Plus,” and “High” performance, respectively, is met, as described in “*Compensation Discussion & Analysis — Historical Criteria for Awards – Annual and Long Term Incentives – Cash Bonus and RSU Grants for 2006.” For stock awards, the “Threshold,” “Target,” and “Maximum” columns represent the amounts payable when the “Threshold,” “Target,” and “High” performance, respectively, is met, as described in “Compensation Discussion & Analysis — Historical Criteria for Awards – Annual and Long Term Incentives – Cash Bonus and RSU Grants for 2006.” Two additional performance levels, Threshold Plus, and Target Plus, for the stock awards are not reflected in this table, but are described in “Compensation Discussion & Analysis — Historical Criteria for Awards – Annual and Long Term Incentives – Cash Bonus and RSU Grants for 2006.” Actual cash bonus amounts received for fiscal 2007 are discussed in “Compensation Discussion & Analysis After October 5, 2007 – Compensation Objectives, Elements of Compensation, Criteria for Award.”* The Named Executives Officers received cash payments in lieu of 2007 RSU awards, which are discussed in “*Compensation Related to the October 5, 2007 Merger”* and *“Compensation Discussion & Analysis After October 5, 2007 – Compensation Objectives, Elements of Compensation, Criteria for Award.*”

(2)		Reflects the RSU awards made on February 3, 2007 pursuant to the Company’s Long Term Incentive Plan for performance in 2006. The Compensation Committee approved the performance levels for these awards on October 4, 2005. These RSU awards were to vest ratably on December 4, 2007, December 4, 2008 and December 4, 2009. All RSUs vested in connection with the Merger and the holders received $60.75 per RSU.

(3)		Through 2006, the grant date fair value on grants made under the Long-Term Incentive Plan was defined as the closing price of Archstone-Smith Common Shares on the New York Stock Exchange on the business day immediately preceding the grant date. Beginning January 1, 2007, the grant date fair value was defined as the closing price of Archstone-Smith Common Shares on the New York Stock Exchange on the date of grant. The relevant closing price for grants made on February 23, 2007 was $53.05.

(4)		Pursuant to his employment agreement, Mr. Sellers was awarded 4,800 Class C Units in Tishman Speyer Archstone-Smith Multifamily Participants, L.L.C, an affiliate of the Venture, and 100 Class B Units in each of Tishman Speyer Archstone-Smith Junior Mezz Borrower, L.P., Tishman Speyer Archstone-Smith Parallel Guarantor, L.P., Tishman Speyer Archstone-Smith Parallel Guarantor, I L.P., and Tishman Speyer Archstone-Smith Parallel Guarantor II, L.P. The Class B Units and Class C Units were issued on October 5, 2007. There is no public market for these units, which has made it difficult for the company to complete as of the filing date the calculations required to establish a grant date fair value. Furthermore, such units were issued by the Venture or affiliates rather than Archstone.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table sets forth information with respect to outstanding equity awards held by the Named Executive Officers as of December 31, 2007:

Option Awards

Stock Awards

Number

Equity Incentive

of Shares

Equity Incentive

Plan Awards:

Number of

or Units

Plan Awards:

Market or Payout

Securities

of Stock

Market value

Number of

value of

Underlying

that have

of Shares or

Unearned Shares,

Unexercised

Option

Not

Units of Stock

Units or Other

Options (#)

Exercise

Expiration

Vested

that have not

Rights that have

Officer

Exercisable

Price ($)

Date

(#)

Vested ($)

not Vested (#)

not Vested ($)

Mr. Sellers

4,800

(1)

Mr. Sellers

100

(1)

Mr. Sellers

100

(1)

Mr. Sellers

100

(1)


(1)		Pursuant to his employment agreement, Mr. Sellers was awarded 4,800 Class C Units in Tishman Speyer Archstone-Smith Multifamily Participants, L.L.C, an affiliate of the Venture, and 100 Class B Units in each of Tishman Speyer Archstone-Smith Junior Mezz Borrower, L.P., Tishman Speyer Archstone-Smith Parallel Guarantor, L.P., Tishman Speyer Archstone-Smith Parallel Guarantor, I L.P., and Tishman Speyer Archstone-Smith Parallel Guarantor II, L.P. The Class B Units and Class C Units were issued on October 5, 2007. There is no public market for these units, which has made it difficult for the company to complete as of the filing date the calculations required to establish a grant date fair value. Furthermore, such units were issued by the Venture or affiliates rather than Archstone.

OPTION EXERCISES AND STOCK VESTED

The following table sets forth information with respect to the exercise of stock options during 2007, and the vesting of restricted stock as of December 31, 2007 by the Named Executive Officers.


	Option Awards				Stock Awards
	Number of Shares		Value Realized on		Number of Shares
	Acquired on		Exercise		Acquired on Vesting		Value Realized on
Officer	Exercise (#)⁽¹⁾		($)⁽¹⁾		(#)⁽²⁾		Vesting ($)⁽²⁾
Mr. Sellers		218,354	$	8,223,212		302,380	$	18,369,585
Mr. Freeman		—		—		94,421	$	5,736,076
Mr. Mueller		56,962	$	2,145,189		74,355	$	4,517,066
Ms. Brower		32,761	$	1,273,453		28,762	$	1,747,292
Mr. Neely		—		—		40,679	$	2,471,256


(1)		The share options included in this column became fully vested in connection with the Merger; valuation is based on the product of the number of shares subject to the option and the excess, if any, of $60.75 per share, over the exercise price per share of the option.

(2)		This column includes the value of all performance units, RSUs and DEUs that were vested, or became fully vested, in connection with the Merger. The amounts paid for performance units is described above in “*Compensation Related to October 5, 2007 Merger*.” The valuation included in the table below for RSUs and DEUs is based on a redemption price of $60.75 per RSU or DEU.


Officer	RSUs		DEUs		Total RSU/DEUs		Value Realized
Mr. Sellers		130,377		995		131,372	$	7,980,872
Mr. Freeman		42,693		1,095		43,788	$	2,660,109
Mr. Mueller		33,958		519		34,477	$	2,094,486
Ms. Brower		13,557		205		13,762	$	836,013
Mr. Neely		40,287		392		40,679	$	2,471,256

The foregoing table also includes the following DEUs that became vested on January 1, 2007, with the values indicated based on the December 29, 2006 closing price of Archstone-Smith Common Shares of $58.21: Mr. Mueller, 701 units, valued at $40,781; Ms. Brower, 10,190 units valued at $593,160; and Mr. Neely, 901 units valued at $52,437.

NON-QUALIFIED DEFERRED COMPENSATION

As described in more detail in “Compensation Discussion and Analysis Prior to October 5, 2007 Merger — Other Compensation Features – Deferred Compensation”, our Named Executive Officers could elect to participate in our Deferred Compensation Plan until the Merger, at which time the Deferred Compensation Plan was terminated. The Named Executive Officers could elect to defer payment of up to 75 percent of base salary, 90 percent of cash bonuses and certain amounts which could not be contributed to our 401(k) Plan due to Internal Revenue Code limitations. We did not match contributions made by any employee, including the Named Executive Officers, to the Deferred Compensation Plan. Deferrals could be made to the Deferred Compensation Plan from cash compensation paid in the form of current base salary, annual cash bonuses, and excess 401(k) Plan contributions. In addition, RSUs and DEUs that had been awarded to a Named Executive Officer could, upon vesting, be deferred to the Deferred Compensation Plan either in the form of RSUs and DEUs or the cash equivalent. Cash equivalents are subject to FICA taxation prior to transfer into the Deferred Compensation Plan. All amounts deferred represent cash compensation earned in 2007 and DEUs which vested in 2007. The following table sets forth information with respect to non-qualified deferred compensation of the Named Executive Officers as of December 31, 2007.


	Executive Contributions in						Aggregate Earnings in						Aggregate Balance at Last FYE ($)
	Last FY ($)						Last FY ($)				Aggregate		Aggregate		Aggregate
	Deferred		Deferred		Registrant		Deferred		Deferred		Withdrawals/		Deferred		Deferred		Aggregate
	Stock		Cash		Contributions in		Stock		Cash		Distributions		Stock		Cash		Balance of
Name	Awards⁽¹⁾		Amounts⁽²⁾		Last FY ($)		Awards⁽¹⁾		Amounts⁽³⁾		($)⁽⁴⁾		Awards		Amounts		all Deferrals
Mr. Sellers		—	$	5,328	$	0		—	$	1,036,980	$	12,717,612	$	0	$	0	$	0
Mr. Freeman		—		—	$	0		—	$	145,075		2,632,060	$	0	$	0	$	0
Mr. Mueller		—		—	$	0		—	$	123,629		1,221,215	$	0	$	0	$	0
Ms. Brower		—	$	105,017	$	0		—	$	115,101		1,827,023	$	0	$	0	$	0
Mr. Neely		—	$	38,623	$	0		—	$	59,353		646,056	$	0	$	0	$	0


(1)		None of the Named Executive Officers deferred any RSUs or DEUs into the Deferred Compensation Plan during 2007.

(2)		This column includes amounts deferred by Mr. Sellers from the refund of excess 401(k) contributions; by Ms. Brower from her salary, cash bonus, the quarterly cash settlement of RSUs, and the refund of excess 401(k) contributions; and Mr. Neely from his salary, quarterly cash payments on RSUs, and the refund of excess 401(k) contributions. All of the foregoing amounts are included in the Summary Compensation Table under “All Other Compensation”.

(3)		Includes earnings or losses on mutual fund investments.

(4)		Withdrawals for 2007 represent the amounts paid to each Named Executive Officer in connection with the termination of the Deferred Compensation Plan as of the Merger on October 5, 2007.

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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee and the Series I Trust Compensation Committee are set forth under “Compensation Discussion and Analysis – Introduction.” The Series I Trust Compensation Committee consists of Mr. Augarten. Mr. Augarten has not served as an officer of the Company or any of its subsidiaries. Except as described under “Certain Relationships and Related Transactions,” no member of the Series I Trust Compensation Committee or the Compensation Committee prior to the Merger, has or had any other business relationship or affiliation with the Company or any of its subsidiaries (other than his or her service as a Trustee).

COMPENSATION COMMITTEE REPORT

Series I Trust Compensation Committee, has reviewed and discussed with management the Compensation Discussion and Analysis. Based on that review and discussion, the Series I Trust Board approved the inclusion of the Compensation and Discussion Analysis in the Company’s Annual Report for 2007.

David Augarten

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

None of our securities are authorized for issuance in connection with any equity compensation plan.

None of the Trustees of Series I Trust and none of our executive officers hold any of our securities. The following table sets forth, as of March 20, 2008, the beneficial ownership of Common Units for each person known to us to have been the beneficial owner of more than five percent of the outstanding Common Units. The address for each of the listed beneficial owners is 9200 E. Panorama Circle, Englewood, Colorado. All of the Common Units are pledged as collateral for the Tranche A Term Loan and the Tranche B Term Loan.


	Number of Common Units		Percentage of all
Name of Beneficial Owner	Beneficially Owned		Common Units
Series I Trust		7,444,435		18.81	%
Series II LLC		25,202,745		63.70	%
Series III LLC		6,917,971		17.49	%

TOTAL		39,565,151		100	%

See “Item 11. Executive Compensation” for information regarding change of control provisions.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Shareholders’ Agreement

In connection with our merger with the Smith Partnership in 2001, we entered into a Shareholders’ Agreement with Robert H. Smith and Robert P. Kogod, pursuant to which Robert H. Smith, Robert P. Kogod and Ernest A. Gerardi, Jr. became members of the Archstone-Smith Board. In accordance with the Shareholders’ Agreement, throughout Mr. Smith’s employment with us he was entitled to receive an annual minimum salary of $300,000 and an annual minimum bonus of $150,000. Throughout Mr. Kogod’s employment with us he was entitled to receive an annual minimum salary of $100,000. In addition, during each year of his employment with us, Mr. Smith was entitled to receive options to purchase not less than 100,000 of our Common Shares. The Shareholders’ Agreement terminated on October 5, 2007.

Related Party Transaction Policy

The Archstone-Smith Board adopted a written policy for the approval of all “related person” transactions that remain applicable to us. Under this policy, “related persons” include trustees, executive officers, immediate family members of trustees and executive officers, certain entities in which a trustee, executive officer, or one of the immediate family members is employed, is a principal or owns a controlling interest, charities in which a trustee, executive officer or one of the immediate family members is employed or is on the managing board, and

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shareholders who held more than 5% of Archstone-Smith’s Common Shares upon conversion of their Units. Other than certain pre-approved transactions described in the policy, any transaction in which we are a participant and in which any related person (other than a shareholder) has a material interest having a value in excess of $120,000 must be reviewed and approved by the Archstone-Smith Board’s Audit Committee (now the Series I Trust Board’s Audit Committee).

Related Party Transactions

On April 8, 2002, we entered into an Office Space Easement and Cost Sharing Arrangement with CESM, Inc. and others. CESM, Inc. is controlled by, Mr. Smith and Mr. Kogod, who were trustees of Archstone-Smith until October 5, 2007. During 2007, CESM, Inc. paid to us a total of $23,325 for office services provided by us to CESM, Inc. and $26,607 for certain employee expenses. For that same period, we paid to CESM, Inc. $200,720 for a portion of the rent due for the executive suites that CESM, Inc. leases and that was utilized by Mr. Smith and Mr. Kogod while working for us and $35,771 for certain employee expenses to support Mr. Smith and Mr. Kogod. Messrs. Smith and Kogod ceased to be related persons on October 5, 2007.

Affiliates of the lenders under the Master Credit Facility, the Fannie Mae Mezzanine Lenders and the Freddie Mac Mezzanine Lenders hold limited partnership interests in the Venture and an affiliate of Lehman Brothers Inc. holds a limited partnership interest in the general partner of the Venture. We have paid fees of approximately $216 million to the Buyer Parties and the lenders under the Master Credit Facility in connection with the Merger. As of December 31, 2007 and March 20, 2008, respectively, there was a total of $5.6 billion and $5.6 billion, respectively, outstanding under the Master Credit Facility, the Fannie Mae Mezzanine loans and the Freddie Mac Mezzanine loans. Through December 31, 2007, we paid $76.8 million in interest and $237.7 million in principal under these facilities. Please refer to “Item 15. Financial Statements – Note 8 – Borrowings” for a description of the terms.

The lease for our corporate office, which was negotiated prior to the Merger, is with an affiliate of Tishman Speyer. For the period from October 5, 2007 through December 31, 2007 we paid $463,918 in rent to that affiliate.

Our Chief Executive Officer has entered into an employment agreement which includes equity awards granted by the Venture or affiliated entities. Please refer to “Item 11. Executive Compensation – Employment Agreement with R. Scot Sellers.”

Pre-Merger Trustee Independence

The Archstone-Smith Board undertook its annual review of trustee independence in March 2007. In determining independence, the Archstone-Smith Board affirmatively determined whether Trustees had any “material relationship” with Archstone-Smith. When assessing the “materiality” of a Trustee’s relationship with Archstone-Smith, the Board considered, among other things, the independence standards set forth in the New York Stock Exchange corporate governance listing standards (including the special requirements for members of the Audit Committee) and all other relevant facts and circumstances, not merely from the Trustee’s standpoint, but from that of the persons or organizations with which the Trustee had an affiliation, including transactions and relationships between each Trustee or any member of his or her immediate family and Archstone-Smith and its subsidiaries and affiliates, between Trustees or their affiliates and members of Archstone-Smith’s senior management or their affiliates and those items reported under “Certain Relationships and Transactions”. The Board also examined the frequency or regularity of the services underlying any such transactions, whether the services were being carried out at arm’s length in the ordinary course of business and whether the services were being provided substantially on the same terms to Archstone-Smith as those prevailing at the time from unrelated parties for comparable transactions. Material relationships can include certain commercial, banking, industrial, consulting, legal, accounting, charitable and familial relationships. During the Archstone-Smith Board’s review of independence of Trustees, the Board

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examined the relationships each of the Trustees had with Archstone-Smith and any of its affiliates and affirmatively determined, based on that examination and the criteria described above, that each of Ms. Gillis and Messrs. Cardwell, Demeritt, Gerardi, Holmes, Polk, Richman and Schweitzer had no material relationship with Archstone-Smith and each was “independent” in accordance with the applicable corporate governance listing standards of the New York Stock Exchange. The Board also determined that Messrs. Sellers, Smith and Kogod were not “independent”, because of their employment with Archstone-Smith.

Post-Merger Trustee Independence

Effective as of October 5, 2007, Series I Trust and the Trustee of Series I Trust are not independent.

Item 14. Principal Accounting Fees and Services

The Audit Committee has selected KPMG LLP, certified public accountants, to serve as the auditors of our books and records for the coming year. KPMG LLP has served as our auditors since 1980.

The fees billed by KPMG LLP in 2007 and 2006 for services provided to Archstone-Smith were as follows:


	2007		2006
Audit Fees⁽¹⁾	$	1,735,450	$	1,459,722
Audit-Related Fees⁽²⁾		185,000		202,421
Tax Fees⁽³⁾		341,861		93,508
All Other Fees⁽⁴⁾		—		—

TOTAL	$	2,262,311	$	1,755,651


(1)		“Audit Fees” are the aggregate fees billed by KPMG LLP for professional services rendered for the audit of Archstone-Smith’s annual financial statements for the years ended December 31, 2007 and December 31, 2006 and the reviews of the financial statements included in Archstone-Smith’s quarterly reports on Form 10-Q during 2007 and 2006. These fees include fees billed in connection with KPMG LLP’s analysis of the effectiveness of our internal controls. “Audit Fees” for 2006 also includes amounts billed relating to our international operations, which totaled $96,622. In addition, “Audit Fees” includes amounts billed for registration statements filed and related comfort letters and consents amounting to $45,490 and $96,300 in 2007 and 2006, respectively.

(2)		“Audit-related fees” include fees billed for assurance and related services that are reasonably related to the performance of the audit and not included in the “audit fees” described above, including audits of joint ventures and unconsolidated and consolidated subsidiaries.

(3)		“Tax Fees” are fees billed by KPMG LLP in either 2007 or 2006 for tax services, including tax compliance, tax advice or tax planning.

(4)		“All Other Fees” are fees billed by KPMG LLP in 2007 or 2006 that are not included in the above classifications.

All services provided by KPMG LLP in 2007 and 2006 were permissible under applicable laws and regulations and have been, pre-approved by the Archstone-Smith Audit Committee. All audit and permissible non-audit services are pre-approved by the Archstone-Smith Audit Committee or fall within guidelines that have been pre-approved by the Archstone-Smith Audit Committee. In particular, the Archstone-Smith Audit Committee approved the engagement of KPMG LLP for non-audit services, consisting of certain specified tax-related services during 2005, 2006 and 2007, provided that the fees for these services did not exceed $400,000 in the aggregate or $100,000 for any one service.

Report of Independent Registered Public Accounting Firm

The Trustee of Archstone and the Board of Trustees of the Trustee

We have audited the consolidated balance sheet of Archstone and subsidiaries (Successor) as of December 31, 2007 and the consolidated balance sheet of Archstone-Smith Operating Trust and subsidiaries (Predecessor) as of December 31, 2006, and the related consolidated statements of operations, unitholders’ equity, other common unitholders’ interest, preferred units and comprehensive income (loss) of the Successor for the period October 5, 2007 through December 31, 2007 and of the Predecessor for the period January 1, 2007 through October 4, 2007 and for the years ended December 31, 2006 and 2005, and the related consolidated and combined statement of cash flows of the Successor and the Predecessor for the year ended December 31, 2007 and the related consolidated statements of cash flows of the Predecessor for the years ended December 31, 2006 and 2005. These consolidated and combined financial statements are the responsibility of Archstone and subsidiaries management. Our responsibility is to express an opinion on these consolidated and combined financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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 and combined financial statements referred to above present fairly, in all material respects, the financial positions of the Successor as of December 31, 2007 and of the Predecessor as of December 31, 2006, and the results of the Successor’s operations for the period October 5, 2007 through December 31, 2007 and the results of the Predecessor’s operations for the period January 1, 2007 through October 4, 2007 and for the years ended December 31, 2006 and 2005, and the cash flows of the Successor and Predecessor for the year ended December 31, 2007 and of the Predecessor for the years ended December 31, 2006 and 2005, in conformity with U.S. Generally Accepted Accounting Principles.

/s/ KPMG LLP

Denver, Colorado
March 31, 2008

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CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data)


	Successor			Predecessor
	December 31,			December 31,
	2007			2006
ASSETS
Real estate	$	14,680,182		$	12,967,709
Real estate — held for sale		388,890			219,931
Less accumulated depreciation		77,384			957,146

		14,991,688			12,230,494
Investments in and advances to unconsolidated entities		297,113			235,323

Net real estate investments		15,288,801			12,465,817
Cash and cash equivalents		22,422			48,655
Restricted cash		579,097			319,312
Due from affiliated entities		393,841			—
Other assets		870,498			425,343

Total assets	$	17,154,659		$	13,259,127


LIABILITIES AND UNITHOLDERS’ EQUITY

Liabilities:

Revolving credit facilities	$	60,000		$	84,723
Long-term Unsecured Debt		—			3,339,462
Long-term Unsecured Debt – held for sale		—			16,237
Term Loan – International		—			235,771
Term loan – domestic		4,591,822			—
Property mortgages payable		9,194,835			2,743,081
Property mortgages payable — held for sale		17,813			33,153
Due to affiliated entities		256,666			—
Accounts payable		25,690			71,967
Accrued expenses and other liabilities		488,945			432,395

Total liabilities		14,635,771			6,956,789

Series O and other Preferred Units (3,878,131 units, Liquidation value of $61.75 per unit)		235,944			—
Other common unitholders’ interest, at redemption value (A-1 Common Units: 29,514,128 in 2006)		—			1,718,017


Unitholders’ equity (450,000,000 units authorized):
Perpetual Preferred Units (Liquidation value of $103,830 per unit)		50,000			50,000
Common unitholders’ equity (39,565,151 units in 2007 and 220,147,167 units in 2006)		2,635,056			4,530,801
Accumulated other comprehensive income		5,906			3,520
Retained deficit		(408,018	)		—

Total unitholders’ equity		2,282,944			4,584,321

Total liabilities and unitholders’ equity	$	17,154,659		$	13,259,127

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

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CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit amounts)


	Successor			Predecessor
	Period from			Period from
	October 5, 2007			January 1, 2007
	through			through			Year Ended
	December 31,			October 4,			December 31,			December 31,
	2007			2007			2006			2005
Revenues:
Rental revenues	$	213,777		$	644,330		$	682,415		$	457,825
Other income		41,494			45,831			77,410			56,030

		255,271			690,161			759,825			513,855


Expenses:
Rental expenses		49,024			157,452			163,195			106,657
Real estate taxes		27,324			62,263			62,627			41,983
Depreciation on real estate investments		162,427			166,896			177,264			115,997
Interest expense		255,709			166,528			161,231			75,968
General and administrative expenses		24,160			60,605			68,188			58,604
Other expenses		4,689			40,768			17,705			53,276

		523,333			654,512			650,210			452,485


Earnings (loss) from operations		(268,062	)		35,649			109,615			61,370
Income (loss) from unconsolidated entities		(7,680	)		(5,294	)		36,316			22,432
Other non-operating income (loss)		(124,460	)		25,531			2,338			28,807

Net earnings (loss) before discontinued operations		(400,202	)		55,886			148,269			112,609
Net earnings (loss) from discontinued operations		(7,816	)		714,831			686,806			588,895

Net earnings (loss)		(408,018	)		770,717			835,075			701,504

Preferred Unit Distributions		-0-			(2,917	)		(3,829	)		(4,572	)
Undeclared and unaccrued Preferred Unit Distributions		(5,457	)		-0-			-0-			-0-

Net earnings attributable to Common Units — Basic	$	(413,475	)		767,800			831,246			696,932

Interest on Convertible Debt					20,216			11,139			—

Net earnings attributable to Common Units — Diluted				$	788,016		$	842,385		$	696,932

Weighted average Common Units outstanding:
Basic					250,223			248,314			231,642

Diluted					260,026			253,308			232,608


Net earnings per Common Units — Basic:
Net earnings before discontinued operations				$	0.21		$	0.58		$	0.47
Discontinued operations, net					2.86			2.77			2.54

Net earnings				$	3.07		$	3.35		$	3.01


Net earnings per Common Unit — Diluted:
Net earnings before discontinued operations				$	0.21		$	0.58		$	0.47

Discontinued operations, net					2.82			2.75			2.53

Net earnings				$	3.03		$	3.33		$	3.00


Distributions paid per Common Unit				$	0.9050		$	1.74		$	1.73

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

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CONSOLIDATED STATEMENTS OF UNITHOLDERS’ EQUITY, OTHER COMMON
UNITHOLDERS’ INTEREST, PREFERRED UNITS AND COMPREHENSIVE INCOME (LOSS)
Years Ended December 31, 2007, 2006 and 2005
(In thousands)


	Perpetual
	Preferred
	Units at									Accumulated						Other
	Aggregate			Common						Other			Total			Common			Series O
	Liquidation			Unitholders’			Retained			Comprehensive			Unitholders’			Unitholders’			Preferred
	Preference			Equity			Deficit			Earnings (Loss)			Equity			Interest			Units		Total
Balances at December 31, 2004	$	69,522		$	3,638,729			—		$	(4,425	)	$	3,703,826		$	885,400			—	$	4,589,226
Comprehensive income:
Net earnings		—			616,172			—			—			616,172			85,332			—		701,504
Change in fair value of cash flow hedges		—			—			—			4,211			4,211			—			—		4,211
Change in fair value of marketable securities		—			—			—			(1,214	)		(1,214	)		—			—		(1,214	)
Foreign currency exchange translation		—			—			—			(292	)		(292	)		—					(292	)

Comprehensive income attributable to Common Units																						704,209

Preferred Unit distribution					(4,572	)		—			—			(4,572	)		—			—		(4,572	)
Common Unit distributions		—			(353,623	)		—			—			(353,623	)		(43,843	)		—		(397,466	)
A-1 Common Units converted into A-2 Common Units		—			8,415			—			—			8,415			(8,415	)		—		—
A-2 Common Unit repurchases					(56,495	)		—			—			(56,495	)		—			—		(56,495	)
Preferred Unit repurchases		(19,522	)		—			—			—			(19,522	)		—			—		(19,522	)
Exercise of Options		—			41,566			—			—			41,566			—			—		41,566
Issuance of A-1 Common Units under Compensation Plans		—			14,670			—			—			14,670			—			—		14,670
Issuance of A-1 Common Units in exchange for real estate		—			—			—			—			—			408,292			—		408,292
Issuance of A-2 Common Units					491,398			—			—			491,398			—			—		491,398
Adjustment to redemption value		—			(93,725	)		—			—			(93,725	)		93,725			—		—
Other, net		—			(2,516	)		—			—			(2,516	)		—			—		(2,516	)

Balances at December 31, 2005	$	50,000		$	4,300,019			—		$	(1,720	)	$	4,348,299		$	1,420,491			—	$	5,768,790
Comprehensive income:
Net earnings		—			727,434			—			—			727,434			107,641			—		835,075
Change in fair value of cash flow hedges		—			—			—			1,058			1,058			—			—		1,058
Change in fair value of marketable securities		—			—			—			1,638			1,638			—			—		1,638
Foreign currency exchange translation		—			—			—			2,544			2,544			—			—		2,544

Comprehensive income attributable to Common Units																						840,315

Preferred Unit distribution					(3,829	)		—			—			(3,829	)		—			—		(3,829	)
Common Unit distributions		—			(377,513	)		—			—			(377,513	)		(55,079	)		—		(432,592	)
A-1 Common Units converted into A-2 Common Units		—			143,404			—			—			143,404			(143,404	)		—		—
Issuance of Common Units under Dividend Reinvestment Plan		—			27,100			—			—			27,100			—			—		27,100
Exercise of Options		—			27,716			—			—			27,716			—			—		27,716
Issuance of A-1 Common Units in exchange for real estate		—			—			—			—			—			81,401			—		81,401
Accrual of equity-classified awards under Compensation Plans		—			10,681			—			—			10,681			—			—		10,681
Adjustment to redemption value		—			(306,967	)		—			—			(306,967	)		306,967			—		—
Other, net		—			(17,244	)		—			—			(17,244	)		—			—		(17,244	)

Balances at December 31, 2006	$	50,000		$	4,530,801			—		$	3,520		$	4,584,321		$	1,718,017			—	$	6,302,338
Comprehensive income:
Net earnings		—			686,371			—			—			686,371			84,346					770,717
Change in fair value of cash flow hedges		—			—			—			(60	)		(60	)		—			—		(60	)
Reclassification adjustment for realized net gains on marketable securities		—			—			—			(1,794	)		(1,794	)		—			—		(1,794	)
Change in fair value of marketable securities					—			—			(14	)		(14	)		—			—		(14	)
Foreign currency exchange translation		—			—			—			8,263			8,263			—			—		8,263

Comprehensive income attributable to Common Units																						777,112

Preferred Unit distribution		—			(2,917	)		—			—			(2,917	)		—			—		(2,917	)
Common Unit distributions		—			(202,471	)		—			—			(202,471	)		(25,397	)		—		(227,868	)
A-1 Common Units converted into A-2 Common Units		—			55,378			—			—			55,378			(55,378	)		—		—
Issuance of Common Units under Dividend Reinvestment Plan		—			20,493			—			—			20,493			—			—		20,493
Exercise of Options					11,489			—			—			11,489								11,489
Issuance of A-1 Common Units in exchange for real estate		—			—			—			—			—			1,067			—		1,067
Accrual of equity-classified awards under Compensation Plans		—			7,882			—			—			7,882								7,882
Adjustment to redemption value		—			69,810			—			—			69,810			(69,810	)		—		—
Common Unit Redemptions		—			—			—			—			—			(1,416,901	)		—		(1,416,901	)
Other, net		—			9,612			—			—			9,612			—			—		9,612

Balances at October 4, 2007	$	50,000		$	5,186,448			—		$	9,915		$	5,246,363		$	235,944			—	$	5,482,307
Reclassification in connection with the Merger		—			(2,551,392	)		—			(9,915	)		(2,561,307	)		(235,944	)		235,944		(2,561,307	)
Comprehensive income:
Net loss		—			—			(408,018	)		—			(408,018	)		—			—		(408,018	)
Foreign currency exchange translation		—			—			—			5,906			5,906			—			—		5,906

Comprehensive (loss) attributable to Common Units																						(402,112	)

Balances at December 31, 2007	$	50,000		$	2,635,056		$	(408,018	)	$	5,906		$	2,282,944		$	—		$	235,944	$	2,518,888

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

ARCHSTONE

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(In thousands)


	Combined
	Successor and
	Predecessor			Predecessor
	Year Ended			Year Ended			Year Ended
	December			December			December
	31, 2007			31, 2006			31, 2005
Operating activities:
Net earnings	$	362,699		$	835,075		$	701,504
Adjustments to reconcile net earnings to net cash flow provided by operating activities:
Depreciation and amortization		389,759			302,495			252,174
Gains on dispositions of depreciated real estate		(647,208	)		(602,915	)		(524,684	)
Gains on sale of marketable equity securities		(1,867	)		(1,673	)		(27,948	)
Provisions for possible loss on investments		7,490			4,328			9,803
Gains on sale of International Fund shares		(13,145	)		—			—
Foreign currency gains on International investments		(15,221	)		—			—
Unrealized losses on derivatives		130,176			—			—
Equity in earnings from unconsolidated entities		16,168			(6,118	)		6,605
Interest accrued on Mezzanine loans		(4,587	)		(9,781	)		(5,224	)
Change in other assets		(199,624	)		(14,786	)		7,132
Change in accounts payable, accrued expenses and other liabilities		368,652			49,067			7,663
Other, net		18,063			(18,264	)		(13,006	)

Net cash flow provided by operating activities		411,355			537,428			414,019

Investing activities:
Real estate investments, net		(2,318,291	)		(2,216,598	)		(2,016,573	)
Purchase of DeWAG net of cash acquired of $20,364		—			(252,428	)		—
Change in investments in unconsolidated entities, net		(43,464	)		(76,366	)		(10,991	)
Proceeds from disposal of International Fund shares		98,857			—			—
Change in investment in International Fund		72,124			—			—
Proceeds from dispositions		1,995,941			1,888,341			1,538,839
Change in restricted cash		198,236			175,962			(375,179	)
Change in notes receivable, net		(44,051	)		(82,414	)		(98,909	)
Proceeds from notes receivable		89,300			46,081			36,654
Other, net		(33,995	)		11,158			(38,462	)

Net cash flow provided by (used in) investing activities		14,657			(506,264	)		(964,621	)

Financing activities:
Proceeds from Long-Term Unsecured Debt		5,204,448			859,385			695,724
Payments on Long-Term Unsecured Debt		(3,552,067	)		(51,250	)		(251,250	)
Principal repayment of mortgages payable, including prepayment penalties		(1,380,231	)		(324,700	)		(500,963	)
Regularly scheduled principal payments on mortgages payable		(11,058	)		(12,949	)		(15,067	)
Proceeds from Unsecured Loans – International		142,657			272,792			—
Principal repayments on Unsecured Loans – International		(378,428	)		(37,021	)		—
Proceeds from mortgage notes payable		9,832,621			—			33,807
Proceeds from (payments on) unsecured credit facilities, net		80,914			(309,855	)		375,578
Change in amounts due from affiliated entities		1,191,706			—			—
Change in interest receivable from funds in escrow		(9,467	)		—			—
Change in restricted cash		(486,949	)		—			—
Proceeds from issuance of A-2 Common Units, net		—			—			491,398
Proceeds from Common Units issued under DRIP and employee stock options		29,933			57,773			41,566
Repurchase of Common Units and Preferred Units		(14,949,328	)		—			(56,495	)
Repurchase of Series E and F Perpetual Preferred Units		—			—			(19,522	)
Cash distributions paid on Common Units		(227,868	)		(432,592	)		(417,267	)
Cash distributions paid on Preferred Units		(2,916	)		(3,829	)		(4,572	)
Equity Contribution		4,886,552			—			—
Transaction costs related to the Merger		(697,040	)		—			—

Termination of the Long Term Incentive Plan in connection with the Merger		(134,626	)		—			—
Other, net		8,902			(13,901	)		(11,952	)

Net cash flow provided by (used in) financing activities		(452,245	)		3,853			360,985

Net change in cash and cash equivalents		(26,233	)		35,017			(189,617	)
Cash and cash equivalents at beginning of period		48,655			13,638			203,255

Cash and cash equivalents at end of period	$	22,422		$	48,655		$	13,638

These consolidated statements of cash flows combine cash flows from discontinued operations with cash flows from continuing operations. See Note 17 for supplemental information on non-cash investing and financing activities.

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

ARCHSTONE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007, 2006 and 2005
(The glossary included in this Annual Report is hereby incorporated by reference)

(1) Description of Business and Summary of Significant Accounting Policies

Business

Archstone’s business is focused primarily on creating value for our unitholders by acquiring, developing, redeveloping and operating apartments in markets characterized by protected locations with limited land for new housing construction, expensive single-family home prices, and a strong, diversified economic base with significant employment growth potential. As used herein, references to “Archstone,” the “Operating Trust”, “Company,” “company, “we” or “us” refer to Archstone (formerly Archstone-Smith Operating Trust), a Maryland real estate investment trust, organized in 2001.

Consummation of Merger

prior to the Merger on October 4, 2007 and the Successor for periods after the Merger. In connection with the Merger, through a series of legal transactions, the Buyer Parties caused Predecessor to make certain material distributions to affiliated entities. These assets consisted primarily of communities that are not subject to unitholder tax protection agreements, domestic joint ventures, communities under development and communities formerly owned by Ameriton. Following is a summary of the fair values of assets and liabilities owned by Successor as compared to the fair value attributable to the assets and liabilities distributed to and owned by affiliated entities at October 5, 2007 (in thousands):


			Fair Value Attributable to
	Aggregate Fair Value		Affiliates			Successor
Real estate	$	18,662,371	$	3,641,083		$	15,021,288
Investment in unconsolidated entities		1,018,725		550,399			468,326
Lease and other intangibles		594,306		91,439			502,867
Other assets		1,840,255		116,021			1,724,234
Intercompany assets (liabilities)		—		(12,873	)		12,873

Total assets	$	22,115,657	$	4,386,069		$	17,729,588


Debt	$	16,108,709	$	2,013,815		$	14,094,894
Other liabilities		834,452		120,757			713,695
Other Preferred Units		285,944		—			285,944


Net assets at fair value	$	4,886,552	$	2,251,497		$	2,635,055

The purchase price allocation reflected above was based on preliminary estimates and is subject to change as we obtain more complete information regarding land, building and lease intangible values.

Principles of Consolidation

The accounts of Archstone and its controlled subsidiaries are consolidated in the accompanying financial statements. All significant inter-company accounts and transactions have been eliminated. We use the equity method to account for investments that do not qualify as variable interest entities, variable interest entities where we are not the primary beneficiary and entities that we do not control, or where we do not own a majority of the economic interest, but have the ability to exercise significant influence over the operating and financial policies of the investee. We also use the equity method when we function as the managing member and our partner does not have substantive participating rights or we can be replaced by a partner if we are the managing member. For an investee accounted for under the equity method, our share of net earnings or losses of the investee is reflected in income as earned and distributions are credited against the investment as received.

Business Combinations

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the financial statements and the related notes. Actual results could differ from management’s estimates. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period they are determined to be necessary.

Discontinued Operations

For properties accounted for under SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets,” the results of operations for properties sold during the period or classified as held for sale at the end of the current period are required to be classified as discontinued operations in the current and prior periods. The property-specific components of net earnings that are classified as discontinued operations include rental revenue, rental expense, real estate tax, depreciation expense and a pro-rata allocation of interest expense. The net gain or loss and the related internal disposition costs on the eventual disposal of the held for sale properties are also classified as

discontinued operations. Land sales and properties sold by our unconsolidated entities are not included in discontinued operations and related gains or losses are reported as a component of other income and income from unconsolidated entities, respectively. Operating communities transferred through sale or distribution to affiliated entities in connection with the Merger are treated as discontinued operations in the accompanying Statements of Operations.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, demand deposits with financial institutions and short-term, highly liquid investments. We consider all highly liquid instruments with maturities when purchased of three months or less to be cash equivalents.

Restricted Cash

In most cases, disposition proceeds are set aside and designated to fund future tax-deferred exchanges of qualifying real estate investments. If these proceeds are not redeployed to qualifying real estate investments within 180 days, these funds are redesignated as cash and cash equivalents. We generally decide if we are not going to do an exchange within 45 days and it is therefore rare for cash to remain in escrow for the full 180 days. Cash proceeds from bond financings held in escrow to fund future development costs and cash held as security deposits are classified as restricted cash.

As of December 31, 2007 $428.0 million of our restricted cash balances related to an interest reserve required under the terms of certain borrowing agreements.

Marketable Securities and Other Investments

All publicly traded equity securities are classified as “available for sale” and carried at fair value, with unrealized gains and losses reported as a separate component of Unitholders’ equity. Private investments, for which we do not have the ability to exercise significant influence, are accounted for at cost. Declines in the value of public and private investments that management determines are other than temporary are recorded as a provision for loss on investments.

As of December 31, 2007, we had $0.0 million in public and private equity securities.

Real Estate and Depreciation

Real estate, other than properties held for sale, is carried at depreciated cost. In connection with the Merger our real estate was recorded at fair value which resulted in a real estate carrying value increase of $5.8 billion. Long-lived assets designated as being held for sale are reported at the lower of their carrying amount or estimated fair value less cost to sell, and thereafter are no longer depreciated. Costs associated with acquisition efforts are recorded in other assets and the unsuccessful acquisition efforts are expensed at the time the pursuit is abandoned.

We allocate the cost of newly acquired properties between net tangible and identifiable intangible assets. When allocating cost to an acquired property, we first allocate costs to the estimated intangible value of the existing lease agreements and then to the estimated value of the land, building and fixtures assuming the property is vacant. We estimate the intangible value of the lease agreements by determining the lost revenue associated with a hypothetical lease-up. We depreciate the building and fixtures based on the expected useful life of the asset and amortize the intangible value of the lease agreements over the average remaining life of the existing leases. This amortization expense is included in depreciation on real estate investments in our consolidated statements of operations

In accordance with SFAS No. 144, long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset, including the estimated proceeds upon ultimate disposition. If the carrying amount of

an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. When an operating asset is placed under contract, we reclassify it to held for sale as this is the point in time that we believe the requirements for held for sale classification are met. Held for sale assets are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities classified as held for sale are presented separately in the appropriate asset and liability sections of the balance sheet.

We have an investment organization that is responsible for development and redevelopment of apartment communities. Consistent with GAAP, all direct and certain indirect costs, including interest and real estate taxes, incurred during development and redevelopment activities are capitalized. Interest is capitalized on real estate assets that require a period of time to get them ready for their intended use. The amount of interest capitalized is based upon the average amount of accumulated development expenditures during the reporting period and the cost of related borrowings. Included in capitalized costs are management’s estimates of the direct and incremental personnel costs and indirect project costs associated with our development and redevelopment activities. Indirect project costs consist primarily of personnel costs associated with construction administration and development accounting, legal fees, and various office costs that clearly relate to projects under development.

Depreciation and amortization is computed over the expected useful lives or contractual term of the depreciable property or intangible on a straight-line basis as follows:


Building and related land improvements		15-40 years
Furniture, fixtures, equipment and other		3-10 years
Intangible value of retail and commercial lease agreements		1-20 years
Intangible value of residential lease agreements		6-48 months

Interest

During 2007, the total interest paid in cash on all outstanding debt was $296.5 million for the period of January 1, 2007 through October 4, 2007 and $211.8 million for October 5, 2007 through December 31, 2007. Interest paid in cash on all outstanding debt in 2006 and 2005 was $315.5 million and $263.5 million, respectively.

We capitalize interest during the construction period as part of the cost of apartment communities under development. Interest capitalized during 2007 aggregated $38.1 million for the period of January 1, 2007 through October 4, 2007 and $0.3 million for October 5, 2007 through December 31, 2007. Interest capitalized during 2006 and 2005 aggregated $51.8 million and $39.1 million, respectively.

Cost of Raising Capital

Costs incurred in connection with the issuance of equity securities are deducted from Unitholders’ equity. Costs incurred in connection with the issuance or renewal of debt is subject to the provisions of EITF 96-19, Debtors’ Accounting for a Modification or Exchange of Debt Instruments. Accordingly, if the terms of the renewed or modified debt instrument are deemed to be substantially different (i.e., a 10 percent or more difference in the present value of the remaining cash flows), all unamortized loan costs associated with the extinguished debt are charged against earnings during the current period; otherwise, costs are capitalized as other assets and amortized into interest expense over the term of the related loan or the renewal period. The balance of any unamortized loan costs associated with retired debt is expensed upon retirement. We utilize the straight-line method to amortize debt issuance costs as it approximates the effective interest method required under SFAS No. 91. Amortization of loan costs included in interest expense was $8.3 million for the period of January 1, 2007 through October 4, 2007 and $12.1 million for the period of October 5, 2007 through December 31, 2007. Amortization of loan costs included in interest expense for 2006 and 2005 was $6.1 million and $4.2 million, respectively.

Moisture Infiltration and Mold Remediation Costs

We estimate and accrue costs related to the correction of moisture infiltration and related mold remediation when we anticipate incurring such remediation costs because of the assertion of a legal claim or threatened litigation. When we incur remediation costs at our own discretion, the cost is recognized as incurred. Costs of addressing moisture infiltration and resulting mold remediation issues are only capitalized, subject to recoverability,

when it is determined by management that such costs also extend the life, increase the capacity, or improve the safety or efficiency of the property relative to when the community was originally constructed or acquired, if later. All other related costs are expensed.

Intangibles

Intangible assets consist primarily of lease-related intangibles and non-compete agreements and all of the intangibles were recorded in connection with our Merger. The market value of above and below market leases are based on our estimate of current market rents as compared to the rent that we are receiving and is recorded in either other assets or other liabilities. These assets are charged and liabilities are credited to rental income over the estimated term of the lease. We also recognize the value of our in-place residential lease agreements and amortize these assets into depreciation on real estate investments over the estimated term of the lease.

The following is a summary of the domestic intangibles and the corresponding amortization we expect to record (dollar amounts in thousands).


					Weighted
	Gross Carrying		Accumulated		Average Useful Life
	Amount		Amortization		(in years)

In-place leases	$	261,387	$	87,396		0.8
Above-market leases		2,269		169		5.0
Non-compete agreements		15,600		557		7.0
Ground lease intangibles		199,971		1,134		46.0

Total intangible assets	$	479,227	$	89,256


Below-market leases	$	30,771	$	735		14.0

Total intangible liabilities	$	30,771	$	735


Estimated net amortization for the year ending
2008	$	178,729
2009	$	4,739
2010	$	4,739
2011	$	4,739
2012	$	4,739

In connection with the Merger, we have recorded an indefinite-lived intangible asset related to the Archstone trademark of $10.7 million.

We will perform an impairment test annually, or more frequently, if events or changes in circumstances indicate impairment of our intangible assets, which are included in other assets.

Insurance Recoveries

We recognize insurance recovery proceeds as other income if the recovery is related to items that were originally expensed, such as, legal settlements, legal expenses and repairs that did not meet capitalization guidelines. For recoveries of property damages that were eligible for capitalization, we reduce the basis of the property or if the property has subsequently been sold, we recognize the proceeds as an additional gain on sale. We recognize insurance recoveries at such time that we believe the recovery is probable and we have sufficient information to make a reasonable estimate of proceeds, except in cases where we have to pursue recovery via litigation. In this circumstance, we recognize the recovery when we have a signed, legally binding agreement with the insurance carrier.

Derivative Financial Instruments

We utilize derivative financial instruments to manage our interest rate risk, foreign currency exchange risk, exposure to changes in the fair value of certain investments in equity securities and exposure to volatile energy prices. During 2003, we adopted SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” Under SFAS No. 149, the resulting assets and liabilities associated with derivative financial instruments are carried on our financial statements at estimated fair value at the end of each reporting period. When

our derivatives are designated as hedges under the provisions of SFAS 149, the changes in the fair value of a fair value hedge and the fair value of the items hedged are generally recorded in earnings for each reporting period. When designated, the change in the fair value of effective cash flow hedges and foreign currency hedges are carried on our financial statements as a component of accumulated other comprehensive income (loss). In connection with the Merger we did not re-designate derivative instruments accounted for as hedges, resulting in all fair value changes being recorded in earnings. All amounts in accumulated other comprehensive income (loss) related to derivative instruments accounted for as hedges by the Predecessor were reduced to zero as part of the Merger.

We review our debt and equity instruments for embedded derivatives that may require bifurcation under SFAS No. 149. The Master Credit Facility contains a feature giving the lenders the right to reprice the loans in certain instances. The lenders do not have the right to change the repayment terms or maturity date unless we agree, in our sole discretion, to such structural changes. For accounting purposes, the lender’s right to reprice the loan is considered an embedded derivative that is clearly and closely related to the debt host and has not been bifurcated and accounted for separately. See Note 8 Borrowings.

Revenue and Gain Recognition

We generally lease our apartment units under operating leases with terms of one year or less.

During 2007 we entered into three new ground leases for which we expect to receive an average of $6.0 million per year in lease payments over the next five years. As of December 31, 2007 we expect to record $17.4 million in lease revenue per year over the life of the lease using the straight-line method in accordance with SFAS No. 13, “Accounting for Leases” (“SFAS No. 13”). Communities subject to the Oakwood Master Leases entered into in 2005 have a seven year term, expiring between July 2012 and March 2013, subject to Oakwood’s right to terminate individual leases under certain circumstances. As of December 31, 2007, none of the Oakwood Master Lease Communities has been returned to the company. The aggregate annual contractual base rent due under these leases is $73.9 million and is subject to annual adjustments on January 1st of each year equal to the percentage change in the average Same-Store NOI growth for certain other specified properties. Rental income related to leases is recognized in the period earned over the lease term in accordance with Statement of Financial Accounting Standards SFAS No.13, Rent concessions are recognized as an offset to revenues collected over the term of the underlying lease.

We use the full accrual method of profit recognition in accordance with SFAS No. 66 to record gains on sales of real estate. If we sell improvements and retain a lease on the underlying land that covers substantially all of the economic life of the improvements, then we defer the profit associated with the land and record the profit ratably over the life of the lease. Accordingly, we evaluate the related GAAP requirements in determining the profit to be recognized at the date of each sale transaction (i.e., the profit is determinable and the earnings process is complete). We recognize deferred gains when a property is sold to a third party. Further, during periods when our ownership interests in an investee decrease, we will recognize gains related to previously deferred proceeds to coincide with our new ownership interest in the investee.

Rental Expenses

Rental expenses shown on the accompanying Statements of Operations include costs associated with on-site and property management personnel, utilities, repairs and maintenance, property insurance, marketing, landscaping and other on-site and related administrative costs. Utility reimbursements from residents, which are recorded as offsets to utility expenses, aggregated $18.1 million and $4.4 million for the periods January 1, 2007 through October 4, 2007 and October 5, 2007 through December 31, 2007, respectively. Utility reimbursements from residents, which are recorded as offsets to utility expenses, aggregated $25.4 million and $19.2 million for 2006 and 2005, respectively.

Legal Fees

We generally recognize legal expenses as incurred; however, if such fees are related to the accrual for an estimated legal settlement, we accrue for the related incurred and anticipated legal fees at the same time we accrue the estimated cost of settlement.

Foreign Currency Translation

Assets and liabilities of the company’s foreign operations are translated into U. S. dollars at the exchange rate in effect at the balance sheet date. Revenue and expenses are translated at average rates in effect during the period. The resulting translation adjustment is reflected as accumulated other comprehensive income (loss), a separate component of Unitholders’ equity on the Consolidated Balance Sheets. The functional currency utilized for these subsidiaries is the local foreign currency.

Stock-Based Compensation

Prior to the Merger we accounted for our stock based compensation using SFAS No. 123R, “Share-Based Payment” and expensed the grant date fair value of the stock options and other equity based compensation issued to employees. All stock-based compensation plans were terminated in connection with the Merger.

Income Taxes

We have made an election to be taxed as a partnership under the Internal Revenue Code of 1986, as amended, and we believe we qualify as a partnership. See Note 15 for more information on income taxes.

Prior to the Merger, income taxes for our taxable REIT subsidiaries were accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. A valuation allowance for deferred income tax expense is provided if we believe that we will not realize the tax benefit. Our taxable REIT subsidiaries were liquidated in the Merger and our partnerships no longer are required to provide for deferred taxes.

An Interpretation of FASB Statement No. 109 (“FIN 48”) was issued. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes”. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The new standard also provides guidance on various income tax accounting issues, including derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The provisions of FIN 48 were effective for our fiscal year beginning January 1, 2007 and were applied to all tax positions upon initial adoption. Under FIN 48, we may recognize the tax benefit from an uncertain tax position only if it is “more-likely-than-not” that the tax position will be sustained on examination by taxing authorities. We adopted the provisions of FIN 48 and, as a result, we did not recognize any additional increase in the liability for unrecognized tax benefits.

The unrecognized tax benefit liability, which is defined in FIN 48 as the difference between a tax position taken or expected to be taken in a tax return and the benefit measured and recognized in the financial statements, at December 31, 2007 and 2006, which includes accrued interest and penalties of zero and $2.0 million, respectively, principally consists of estimated state income tax liabilities associated with our former taxable REIT subsidiaries.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):


Unrecognized Tax Benefits:
Balance at January 1, 2007	$	2,021
Current period interest		111

Balance at October 4, 2007		2,132
October 5, 2007 Merger-related restructuring		(2,132	)

Balance at December 31, 2007	$	0

Comprehensive Income

Comprehensive income, which is defined as net earnings and all other non-owner changes in equity, is displayed in the accompanying consolidated Statements of Unitholders’ Equity, Other Common Unitholders’ Interest and Comprehensive Income (Loss). Other comprehensive income (loss) reflects unrealized holding gains and losses on the available-for-sale investments, changes in the fair value of effective cash flow hedges and gains and losses on long-term foreign currency transactions (see Derivative Financial Instruments).

Our accumulated other comprehensive income (loss) for the period of January 1, 2007 through October 4, 2007 and October 5, 2007 through December 31, 2007 and the years ended December 31, 2006 and 2005 is as follows (in thousands).


	Net
	Unrealized									Accumulated
	Gains on						Foreign			Other
	Marketable			Cash Flow			Currency			Comprehensive
	Securities			Hedges			Translation			Income/(Loss)
Balance at December 31, 2004	$	1,398		$	(5,823	)	$	—		$	(4,425	)
Change in fair value of hedges		—			4,211			—			4,211
Change in fair value of marketable securities		865			—			—			865
Reclassification adjustments for realized net gains		(2,079	)		—			—			(2,079	)
Foreign currency exchange translation		—			—			(292	)		(292	)

Balance at December 31, 2005	$	184		$	(1,612	)	$	(292	)	$	(1,720	)
Change in fair value of hedges		—			1,058			—			1,058
Change in fair value of marketable securities		1,638			—			—			1,638
Foreign currency exchange translation		—			—			2,544			2,544

Balance at December 31, 2006	$	1,822		$	(554	)	$	2,252		$	3,520
Change in fair value of hedges		—			(60	)		—			(60	)
Change in fair value of marketable securities		(14	)		—			—			(14	)
Reclassification adjustments for realized net gains		(1,794	)		—			—			(1,794	)
Foreign currency exchange translation		—			—			8,263			8,263

Balance at October 4, 2007		14			(614	)		10,515			9,915
Reclassification in connection with the Merger		(14	)		614			(10,515	)		(9,915	)
Foreign currency exchange translation		—			—			5,906			5,906

Balance at December 31, 2007	$	—		$	—		$	5,906		$	5,906

Per Unit Data

Following is a reconciliation of basic net earnings attributable to Common Units to diluted net earnings formerly attributable to Common Units for the periods indicated (in thousands):


	Predecessor
	Period from
	January 1, 2007
	through		Year Ended
	October 4,		December 31,
	2007		2006		2005
Reconciliation of numerator between basic and diluted net earnings per Common Unit⁽¹⁾:
Net earnings (loss) attributable to Common Units — Basic	$	767,800	$	831,246	$	696,932

Interest on Convertible Debt		20,216		11,139		—

Net earnings (loss) attributable to Common Units — Diluted	$	788,016	$	842,385	$	696,932


Reconciliation of denominator between basic and diluted net earnings per Common Unit⁽¹⁾:
Weighted average number of Common Units outstanding — Basic		250,223		248,314		231,642
Assumed conversion of Convertible Debt into Common Units		9,039		4,210		—
Incremental options		764		784		966

Weighted average number of Common Units outstanding — Diluted		260,026		253,308		232,608

(1)

Excludes the impact of potentially dilutive equity securities during periods in which they are anti-dilutive.

Market Concentration Risk

Approximately 40.7%, 21.6%, 8.6% and 14.4% of our apartment communities are located in the Washington, D.C. metropolitan area, Southern California, New York City metropolitan area and the San Francisco Bay Area of California, based on NOI for the three months ended December 31, 2007, exclusive of Ameriton and International properties. Southern California is the geographic area comprising Los Angeles County, San Diego, Orange County, Ventura County and the Inland Empire. We are, therefore, subject to increased exposure (positive or negative) from economic and other competitive factors specific to markets within these geographic areas.

Preferred Unit Redemptions

When redeeming preferred units, we recognize share issuance costs as a charge to preferred unit distributions in accordance with Financial Accounting Standards Board (“FASB”) — Emerging Issues Task Force (“EITF”) Topic D-42, “The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock.” In July 2003, the Securities and Exchange Commission (“SEC”) staff issued a clarification of the SEC’s position on the application of FASB-EITF Topic D-42. The SEC staff’s position, as clarified, is that in applying Topic D-42, the carrying value of preferred units that are redeemed should be reduced by the amount of original issuance costs, regardless of where in Unitholders’ equity those costs are reflected.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current presentation.

New Accounting Pronouncements

2008. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157” (“FSP FAS 157-2”), that delays the effective date of SFAS 157’s fair value measurement requirements for nonfinancial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis. Fair value measurements identified in FSP FAS 157-2 will be effective for our fiscal year beginning January 1, 2009. The adoption of SFAS 157 will primarily impact the valuation of our financial instruments, and is not expected to materially impact our financial position and results of operations.

(2) Real Estate

Investments in Real Estate

Investments in real estate, at cost, were as follows (dollar amounts in thousands):


	Successor				Predecessor
	2007				2006
	Investment⁽¹⁾		Units⁽²⁾		Investment		Units⁽²⁾
Apartment Communities:
Operating communities	$	14,661,418		44,008	$	11,208,052		60,839
Communities under construction		206,070		426		406,881		2,150
Development communities In Planning⁽³⁾		57,335		1,325		75,538		1,841

Total apartment communities		14,924,823		45,759		11,690,471		64,830
Ameriton⁽³⁾		—		—		585,524		8,144

International		53,458		807		851,593		8,334
Other real estate assets⁽⁴⁾		90,791		—		60,052		—

Total real estate	$	15,069,072		46,566	$	13,187,640		81,308


(1)		Successor real estate cost was adjusted to fair value in connection with the Merger.

(2)		Unit information is based on management’s estimates and has not been audited by our Independent Registered Public Accounting Firm.

(3)		Includes development communities In Planning — Owned and In Planning — Under Control. Our investment as of December 31, 2007 and December 31, 2006 for development communities In Planning — Under Control was $0.5 million and $7.6 million, respectively, and is reflected in the “Other assets” caption of our Consolidated Balance Sheets. Ameriton was dissolved in connection with the Merger.

(4)		Includes land that is not In Planning and other real estate assets.

Capital Expenditures

In conjunction with the underwriting of each acquisition of an operating community, we prepare acquisition budgets that encompass the incremental capital needed to achieve our investment objectives. These expenditures, combined with the initial purchase price and related closing costs, are capitalized and classified as “acquisition-related” capital expenditures, as incurred.

As part of our operating strategy, we periodically evaluate each community’s physical condition relative to established business objectives and the community’s competitive position in its market. In conducting these evaluations, we consider our return on investment in relation to our long-term cost of capital as well as our research and analysis of competitive market factors. Based on these factors, we make decisions on incremental capital expenditures, which are classified as either “redevelopment” or “recurring.”

The redevelopment category includes: (i) redevelopment initiatives, which are intended to reposition the community in the marketplace and include items such as significant upgrades to the interiors, exteriors, landscaping and amenities; (ii) revenue-enhancing expenditures, which include investments that are expected to produce incremental community revenues, such as building garages, carports and storage facilities or gating a community; and (iii) expense-reducing expenditures, which include items such as water submetering systems and xeriscaping that reduce future operating costs.

Recurring capital expenditures consist of significant expenditures for items having a useful life in excess of one year, which are incurred to maintain a community’s long-term physical condition at a level commensurate with our operating standards. Examples of recurring capital expenditures include roof replacements, certain make-ready expenditures, parking lot resurfacing and exterior painting.

The change in investments in real estate, at cost, consisted of the following (in thousands):


	Successor			Predecessor
	Period from			Period from
	October 5, 2007			January 1, 2007
	through			through			Year Ended
	December 31,			October 4,			December 31,
	2007			2007			2006
Balance at beginning of period⁽¹⁾	$	15,021,288		$	13,187,640		$	11,359,264
Acquisition-related expenditures		226,133			1,419,633			2,530,459
Redevelopment expenditures		20,494			37,328			57,414
Recurring capital expenditures		9,765			30,340			46,354
Development expenditures, excluding initial acquisition costs		16,038			348,844			388,502
Acquisition and improvement of land for development					213,708			209,916
International Fund Formation		—			(1,034,524	)		—
Dispositions		(226,903	)		(1,195,068	)		(1,403,858	)
Provision for possible loss on investment		—			(7,490	)		(4,328	)
Change in estimated hurricane retirements		—			—			4,496
Other		2,257			820			7,987

Net apartment community activity		47,784			(186,409	)		1,836,942
Change in other real estate assets		—			(42,733	)		(8,566	)

Balance at end of period	$	15,069,072		$	12,958,498		$	13,187,640


(1)		The beginning balance of the period October 5, 2007 through December 31, 2007 includes a fair value adjustment of $5.8 billion in connection with the Merger, net of distributions to affiliates of $3.6 billion.

At December 31, 2007, we had unfunded contractual commitments of $25.0 million related to communities under construction.

(3) DeWAG Acquisition and International Fund Formation

On July 27, 2006, we acquired 94% of the shares and 94% of an outstanding shareholder loan of DeWAG Deutsche WohnAnlage GmbH (“DeWAG”), a company that specializes in the acquisition, ownership, operation and re-sale of quality residential properties in the major metropolitan areas of Southern and Western Germany, as well as West Berlin. Our purchase price consisted of approximately $271 million plus the assumption of approximately $509 million in DeWAG liabilities, based on the exchange rate on the transaction date. We finalized our purchase price allocation related to the acquisition and there were no significant adjustments to the original allocation.

Effective June 29, 2007, we contributed our ownership in certain German real estate entities, including those in DeWAG, into a German real estate fund. In this report we refer to the combined group of entities in which we have ownership interests as the “International Fund.” The combined total assets and third-party liabilities associated with the contribution were $1.1 billion and $0.8 billion, respectively. We recognized a gain of $13.1 million on the shares that were sold, which is included in other non-operating income. As of December 31, 2007, approximately 74% of the International Fund’s common equity was owned by third-party investors with the remainder owned by Archstone. We do not control the International Fund and therefore recognize our proportionate share of the earnings or losses using the equity method of accounting. The accompanying Consolidated Balance Sheet as of December 31, 2007 reflects the International Fund on the equity method as a result of deconsolidation, whereas the Consolidated Balance Sheet as of December 31, 2006 reflects our German real estate entities contributed to the International Fund on a consolidated basis. The accompanying Consolidated Statements of Operations reflect operations associated with entities contributed to the International Fund on a consolidated basis through June 30, 2007 and on an equity method basis subsequent to June 30, 2007.

As part of our DeWAG acquisition in 2006, we acquired a management company which is now known as DeWAG Management GmbH (“DMG”). Prior to the Merger, the assets of DMG consisted principally of the

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goodwill created in the DeWAG transaction and non-compete agreements entered into with certain key officers of DeWAG. We concluded that the goodwill was primarily attributable to the people and processes which comprise the investing and the operating platform we acquired in the DeWAG transaction, none of which were contributed to the International Fund. The goodwill was eliminated in connection with the application of purchase accounting for the Merger. DMG earns fees for acting as the manager of the International Fund, including fees for asset management, acquisition, disposition, financing, accounting and administrative activities. We may also earn incentive performance fees if certain investor returns are achieved over a specified period.

The changes in the carrying amount of goodwill are as follows (in thousands):


Balance at December 31, 2006	$	35,450
Purchase accounting and fund formation adjustments		6,131
Change in foreign currency translation		3,661

Balance at October 4, 2007		45,242
Merger adjustment		(45,242	)

Balance at December 31, 2007	$	0

(4) Oakwood Asset Acquisition

During 2005 we acquired 35 communities, comprising 12,696 units, for a total purchase price of $1.5 billion from Oakwood Worldwide. We funded the acquisitions with a combination of $362.8 million or 10.1 million A-1 Common Units, $250,000 or 1,000 N-1 and N-2 Preferred Units, $581.2 million of assumed mortgage debt and the remainder through cash. We acquired two additional communities, comprising 533 units, for a total purchase price of $69.3 million from Oakwood during 2006. We funded the acquisitions with a combination of $15.8 million or 0.4 million A-1 Common Units, $28.1 million of assumed mortgage debt and the remainder through cash.

Fourteen of the communities acquired and one community we previously owned and operated were leased back to an affiliate of Oakwood Worldwide under the Oakwood Master Leases, which have seven-year terms, expiring between July 2012 and March 2013, subject to Oakwood’s right to terminate individual leases under certain circumstances after the one-year anniversary of the acquisition, with one exception for which the right to terminate exists throughout the term. As of December 31, 2007, none of the Oakwood Master Lease Communities have been returned to the Company. The aggregate contractual base rent due under these leases is $73.9 million and is subject to annual adjustments on January 1st of each year equal to the percentage change in the average same-store NOI growth for certain other specified properties. We are responsible for payment of real estate taxes, insurance and certain capital expenditures. We have engaged an affiliate of Oakwood to manage the retail portion of each community, if applicable. The real estate cost and net book value associated with the communities subject to the Oakwood Master Leases aggregated $1.53 billion and $1.52 billion, respectively, as of December 31, 2007. Approximately 6.6% of our total 2007 rental revenue was earned from the Oakwood Master Leases.

(5) Discontinued Operations

The results of operations for properties sold during the period or designated as held-for-sale at the end of the period are required to be classified as discontinued operations. The property specific components of net earnings that are classified as discontinued operations include rental revenues, rental expenses, real estate taxes, depreciation expense, income taxes, the net gain or loss on the disposition of properties and a pro-rata allocation of interest expense.

We had six operating apartment communities, representing 1,571 units (unaudited), classified as held for sale under the provisions of SFAS No. 144, at December 31, 2007. Accordingly, we have classified the operating earnings from these six properties within discontinued operations for the periods January 1, 2007 through October 4, 2007 and October 5, 2007 through December 31, 2007 and the years ended December 31, 2006 and 2005. During the periods January 1, 2007 through October 4, 2007 and October 5, 2007 through December 31, 2007 we sold 27 and 3 operating communities, respectively. In connection with the Merger we transferred 43 properties to affiliated

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entities. The operating results of the transferred communities have been included in discontinued operations. During the years ended December 31, 2006 and 2005 we sold 42 and 35 operating communities, respectively. The operating results of the sold communities and the related gain/loss on sale are also included in discontinued operations for 2007, 2006 and 2005.

The following is a summary of net earnings from discontinued operations (in thousands):


	Successor			Predecessor
	Period from			Period from
	October 5, 2007			January 1, 2007
	through			through			Year Ended
	December 31,			October 4,			December 31,
	2007			2007			2006			2005
Rental revenue	$	10,795		$	275,973		$	513,218		$	559,584
Rental expenses		(1,719	)		(66,326	)		(129,685	)		(150,604	)
Real estate taxes		(904	)		(23,216	)		(48,857	)		(58,725	)
Depreciation on real estate investments		(3,171	)		(49,862	)		(111,032	)		(122,791	)
Interest expense⁽¹⁾		(10,118	)		(62,949	)		(114,595	)		(141,600	)
Income taxes from taxable REIT subsidiaries⁽³⁾		—			(1,126	)		(5,982	)		(11,556	)

Provision for possible loss on real estate investment		—			—			(4,328	)		(1,500	)
Debt extinguishment costs related to dispositions		(2,694	)		(2,536	)		(9,505	)		(5,847	)
Gain from the disposition of REIT real estate investments, net		—			629,444			548,187			448,358

Internal Disposition Costs — REIT transactions⁽²⁾		—			(1,462	)		(1,860	)		(1,672	)
Gain from the dispositions of taxable REIT subsidiary real estate investments, net		(5	)		17,769			54,728			76,326

Internal Disposition Costs — Taxable REIT subsidiary transactions⁽²⁾⁽³⁾		—			(878	)		(3,483	)		(1,078	)

Total discontinued operations	$	(7,816	)	$	714,831		$	686,806		$	588,895


(1)		Interest expense included in discontinued operations is allocated to properties based on each asset’s cost in relation to the company’s leverage ratio and the average effective interest rate for each respective period.

(2)		Represents the direct and incremental compensation and related costs associated with the employees dedicated to our significant disposition activity.

(3)		Taxable REIT subsidiaries were liquidated in connection with the Merger.

The balances associated with operating communities classified as held for sale as of December 31, 2007 are designated “held for sale” in the accompanying Consolidated Balance Sheets.

The disposition proceeds associated with the sales of individual rental units by our International subsidiaries prior to formation of the International Fund in July 2007, were included in continuing operations as other income as such sales did not meet the requirements under SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” to be reflected as discontinued operations.

We may dispose of properties in the future, but as of December 31, 2007 we have not committed to sell specific assets. The ultimate gain or loss realized will depend on market conditions at the date of disposition.

(6) Investments in and Advances to Unconsolidated Entities

Real Estate Joint Ventures

At December 31, 2007, we had investments in three real estate joint ventures. Our ownership percentage of economic interests ranges from 24.9% to 66.7%. Major decisions are generally subject to the approval of all members, and we generally handle day-to-day decisions. Economic interest in the ventures varies depending upon the ultimate return of the venture. The joint ventures do not qualify as variable interest entities as neither partner is deemed to individually receive substantially all the benefits from the joint venture. Accordingly, we utilize the guidance provided by SOP 78-9, “Accounting for Investments in Real Estate Ventures,” when determining the basis of accounting for these ventures. Because we do not control the voting interest of these joint ventures, we account for these entities using the equity method. At December 31, 2007, the investment balance was $297.1 million, which includes $108.8 million related to the International Fund. At

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December 31, 2006, the investment balance was $199.7 million in Archstone joint ventures and $35.6 million in Ameriton joint ventures. Our combined weighted average percentage of ownership in joint ventures based on total assets at December 31, 2007 was 34.5%. Ameriton was dissolved in connection with the Merger. The purchase price allocated to certain development joint ventures and the International Fund was based on preliminary estimates and is subject to change as more complete information is obtained.

Summary Financial Information

Combined summary balance sheet data for our investments in unconsolidated entities presented on a stand-alone basis follows as of December 31, 2007 and 2006 (in thousands):


	Successor		Predecessor
	2007		2006
Assets:
Real estate	$	1,441,721	$	1,530,659
Other assets		244,018		213,569

Total assets	$	1,685,739	$	1,744,228

Liabilities and owners’ equity:
Inter-company debt payable to Archstone	$	—	$	1,519
Mortgages payable⁽¹⁾		1,124,603		1,063,451
Other liabilities		131,676		126,048

Total liabilities		1,256,279		1,191,018

Owners’ equity		429,460		553,210

Total liabilities and owners’ equity	$	1,685,739	$	1,744,228


(1)		Archstone guarantees $294.3 million of the outstanding debt balance as of December 31, 2007 and is committed to guarantee another $34.0 million upon funding of additional debt.

Selected summary results of operations for our unconsolidated investees presented on a stand-alone basis follows (in thousands):


	Successor			Predecessor
	Period from			Period from
	October 5, 2007			January 1, 2007
	through			through			Year Ended
	December 31,			October 4,			December 31,
	2007			2007			2006		2005
Archstone joint venture revenues	$	4,670		$	121,580		$	132,671	$	128,844
Net earnings (loss)⁽¹⁾		(4,247	)		1,951			69,341		57,141
Ameriton joint venture revenues	$	—		$	584		$	340	$	4,080
Net earnings⁽²⁾		—			3,626			17,790		12,507
International Fund revenues		20,462			20,640			—		—
Net loss⁽³⁾		(12,225	)		(10,373	)		—		—

Total revenues	$	25,132		$	142,804		$	133,011	$	132,924

Net earnings (loss)	$	(16,472	)	$	(4,796	)	$	87,131	$	69,648


(1)		Includes gains associated with dispositions aggregating $4.2 million, $4.0 million, $68.4 million and $31.6 million during the periods January 1, 2007 through October 4, 2007, October 5, 2007 through December 31, 2007, and years ended 2006 and 2005, respectively.

(2)		Includes pre-tax gains associated with the disposition of real estate joint venture assets. These gains totaled $4.0 million, $0.0 million, $19.8 million and $14.2 million during the periods January 1, 2007 through October 4, 2007, October 5, 2007 through December 31, 2007, and years ended 2006 and 2005, respectively.

(3)		The International Fund was formed at the end of June 2007 and the related earnings/(loss) for periods prior to formation are therefore incorporated into our consolidated results.

Our investment in and income from unconsolidated entities differs from the stand-alone amounts of the investees presented above due to various accounting adjustments made in accordance with GAAP. Examples of

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these differences include: (i) only recording our proportionate share of realizable net earnings in the unconsolidated investees; (ii) the impact of certain eliminating inter-company transactions; (iii) timing differences in income recognition due to deferral of gains on contribution of properties to joint ventures and (iv) fair value adjustments made to our investment as a result of the Merger. Additionally, we have incurred certain joint venture formation costs at the investor level which we account for as outside basis as these costs are not reflected on the stand-alone financial statements of the joint venture. These amounts are reflected on our consolidated financial statements and are amortized over the estimated life of the assets owned by the underlying ventures.

Except as disclosed, we generally do not guarantee third party debt incurred by our unconsolidated investees. Investee third-party debt consists principally of mortgage notes payable. Generally, mortgages on real estate assets owned by our unconsolidated investees are secured by the underlying properties. Occasionally, the investees and/or Archstone are required to guarantee the mortgages along with all other venture partners. As of December 31, 2007, we have not been required to perform under any guarantees provided to our joint ventures.

Prior to the Merger, we closed an operating apartment joint venture transaction in 2006 committing $150 million of capital for 80% of the equity and $37.5 million of capital for the remaining 20%. Through the date of the Merger we had invested $25.1 million. This joint venture was sold to an affiliated entity in connection with the Merger.

(7) Mortgage and Other Notes Receivable

The change in mortgage and other notes receivable, which are included in other assets, during the periods of January 1, 2007 through October 4, 2007 and October 5, 2007 through December 31, 2007 and the year ended December 31, 2006 consisted of the following (in thousands):


	Successor			Predecessor
	Period from			Period from
	October 5, 2007			January 1, 2007
	through			through			Year Ended
	December 31,			October 4,			December 31,
	2007			2007			2006
Balance at beginning of period	$	89,213		$	123,261		$	74,396
Funding of additional notes		32,862			13,097			85,165
Accrued interest		2,254			5,153			9,781
Repayments and sales of notes		(39,822	)		(52,298	)		(46,081	)

Balance at end of period	$	84,507		$	89,213		$	123,261

We have a commitment to fund an additional $56.2 million under existing agreements. Our rights to the underlying collateral on these notes in the event of default are generally subordinate to the primary mortgage lender. We evaluate the collectibility of our mezzanine and other notes receivable on a quarterly basis. We recognized interest income associated with notes receivable of $9.3 million, $3.7 million, $17.4 million, and $7.2 million for the periods of January 1, 2007 through October 4, 2007 and October 5, 2007 through December 31, 2007 and the years ended December 31, 2006 and 2005, respectively. The weighted average interest rate on these notes as of December 31, 2007 was 15.8%.

(8) Borrowings

Master Credit Facility

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under certain pledge agreements with the lenders and their affiliates contemplated by the Master Credit Facility. The guarantees are secured by pledges of each such entity’s personal property, including all ownership interests held by such entity.

A summary of our Master Credit Facility Debt outstanding at December 31, 2007 is as follows (dollar amounts in thousands):


				Successor		Average
	Nominal			Balance at		Remaining
Type of Debt	Interest Rate⁽³⁾			December 31, 2007		Life (Years)
Term loans⁽¹⁾⁽²⁾		8.18	%	$	4,591,822		4.42
Revolving credit facility⁽²⁾		7.95	%		60,000		3.76

Total/average		8.18	%	$	4,651,822		4.41


(1)		Includes Tranche A and Tranche B of the Master Credit Facility. The interest rates for both instruments are described above.

(2)		The interest rates for these instruments are described above.

(3)		The effective interest rates for the term loans and revolving credit facility are 8.42% and 28.31%, respectively, which includes the effect of loan cost amortization and other ongoing fees and expenses, where applicable. The effective interest rate on the revolving credit facility is high due primarily to the fees on the unfunded commitment. The higher the average outstanding drawn balance, the lower the effective interest.

Property Mortgages

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In addition to the property mortgages originated in connection with the Merger, the Successor entity assumed $479.3 million in existing pre-Merger tax-exempt bonds and mortgages.

Our property mortgages payable generally feature either monthly interest and principal payments or monthly interest-only payments with balloon payments due at maturity (see Scheduled Debt Maturities). Early repayment of mortgages is generally subject to prepayment penalties. A summary of property mortgages payable outstanding for the years ending December 31, 2007 and 2006 follows (dollar amounts in thousands):


	Successor					Predecessor
	Outstanding					Outstanding
	Balance at		Effective			Balance at		Effective
	December 31,		Interest			December 31,		Interest
	2007		Rate⁽¹⁾			2006⁽²⁾		Rate⁽³⁾
Secured floating rate debt:
Tax-exempt debt	$	363,042		4.8	%	$	935,536		4.9	%
Fannie Facility debt		1,210,542		7.8	%		—		N/A
Fannie Mae Mezzanine debt		742,490		8.5	%		—		N/A
Freddie Facility debt		846,908		6.4	%		—		N/A
Freddie Mac Mezzanine debt		135,441		8.6	%		—		N/A
Conventional mortgages		52,929		4.4	%		167,020		4.6	%
Other secured debt		76,000		8.0	%		—		N/A

Total Floating		3,427,352		7.3	%		1,102,556		4.9	%
Secured fixed rate debt:
Tax-exempt debt		49,600		5.6	%		3,086		6.4	%
Fannie Facility debt		5,733,242		6.5	%		—		N/A
Conventional mortgages		—		N/A			1,651,650		5.8	%
Other secured debt		2,454		3.6	%		18,942		3.2	%

Total Fixed		5,785,296		6.5	%		1,673,678		5.8	%

Total debt outstanding at end of period	$	9,212,648		6.8	%	$	2,776,234		5.4	%


(1)		Includes the effect of credit enhancement fees, debt issuance costs, and other related costs, where applicable.

(2)		Includes the unamortized fair market value adjustment associated with assumption of fixed rate mortgages in connection with real estate acquisitions. The unamortized balance aggregated $43.9 million at December 31, 2006, and was eliminated in connection with the application of purchase accounting for the Merger.

(3)		Includes the effect of cash flow and fair value hedges, credit enhancement fees, the amortization of fair market value purchase adjustment, and other related costs, where applicable.

The change in property mortgages payable during 2007 and 2006 consisted of the following (in thousands):


	Successor			Predecessor
	Period from			Period from
	October 5, 2007			January 1, 2007
	through			through
	December 31,			October 4,
	2007			2007			2006
Balance at beginning of period ⁽¹⁾	$	1,931,858		$	2,776,234		$	2,393,652
Proceeds from mortgage notes payable		8,896,534			—			—
Mortgage assumptions related to property acquisitions		—			15,000			728,484
Regularly scheduled principal amortization		(1,069	)		(10,760	)		(12,949	)
Prepayments, final maturities and other ⁽¹⁾		(1,614,675	)		(224,286	)		(332,953	)
International Fund formation (See Note 3)		—			(624,330	)		—

Balance at end of period	$	9,212,648		$	1,931,858		$	2,776,234


(1)		The beginning balance for Successor includes approximately $1.0 billion that was prepaid in connection with the Merger.

Pre-Merger Debt

In connection with the Merger, we repaid outstanding balances of $500 million on an unsecured credit facility led by JPMorgan Chase Bank, N.A., $75 million on our short-term unsecured borrowing agreement with

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JPMorgan Chase Bank, N.A., $500 million on an unsecured revolving line of credit agreement with Morgan Stanley Senior Funding, Inc., $2.37 billion in long-term unsecured senior notes, and the majority of our exchangeable senior unsecured notes.

We assumed $479.3 million in existing pre-Merger tax-exempt bonds and mortgages. As of December 31, 2007 the only additional pre-Merger debt facilities outstanding were $230,000 of exchangeable senior unsecured notes. As part of the Merger we have set aside funds in an escrow account to redeem these senior unsecured notes at the option of the holder.

Scheduled Debt Maturities

Approximate principal payments due during each of the next five calendar years and thereafter, are as follows (in thousands):


	Term Loans & Revolver				Property Mortgages Payable
	Regularly				Regularly
	Scheduled		Final		Scheduled		Final
	Principal		Maturities		Principal		Maturities
	Amortization		and Other		Amortization		And Other		Total
2008	$	327,592	$	—	$	3,608	$	—	$	331,200
2009		350,000		—		3,911		1,516,647		1,870,558
2010		300,000		—		4,231		135,441		439,672
2011		—		660,230		4,577		—		664,807
2012		—		3,014,000		4,953		3,324,126		6,343,079
Thereafter(1)		—		—		182,315		4,032,839		4,215,154

Total	$	977,592	$	3,674,230	$	203,595	$	9,009,053	$	13,864,470


(1)		The average annual principal payments due from 2013 to 2040 are $150.5 million per year.

Covenants

Our debt instruments are generally secured by real estate and other tangible assets and contain covenants common to the type of facility or borrowing, including financial covenants establishing minimum debt service coverage and tangible net worth ratios and maximum leverage ratios. The covenant limits under certain of our credit facilities become more restrictive beginning in 2009. We were in compliance with all required financial ratios pertaining to our debt instruments as of December 31, 2007. In addition to financial and other negative covenants certain of our debt facilities contain restrictions on our operations, including our ability to make capital expenditures over certain amounts and our ability to make distributions or voluntarily redeem or prepay any of our outstanding Preferred Units. While we will endeavor to maintain compliance with all required financial ratios during 2008 and beyond, we face risks that could impact our ability to do so and some of these risks are beyond our direct control. We may not have sufficient cash flow from operations or capital transactions to service our indebtedness and we may be unable to incur additional indebtedness without violating various financial ratios contained in our debt agreements. If we cannot meet required payments under our debt agreements or cannot comply with the covenants contained in these agreement, the lenders may declare us in default and may seek available remedies under the agreements, which may include transferring properties to the lender under indebtedness which is secured by real property. In the event of non-compliance, we can not provide any assurance as to whether such violations would be waived or the effect non-compliance would have on us.

(9) Distributions to Unitholders

The payment of distributions is subject to the discretion of the Board and is dependent upon our strategy, financial condition and operating results. We have not declared or paid any distributions on Common Units and Preferred Units since the Merger date.

108

The following table summarizes the cash distributions paid per unit on Common Units and Preferred Units during 2007, 2006 and 2005:


	Successor		Predecessor
	Period from		Period from
	October 5, 2007		January 1, 2007
	through		through
	December 31,		October 4,
	2007		2007		2006		2005
Common Units and A-1 Units	$	—	$	0.9050	$	1.74	$	1.73
Series I Preferred Units⁽¹⁾		—		5,745.00		7,660.00		7,660.00
Series O Preferred Units		—		N/A		N/A		N/A
Series P Preferred Units⁽²⁾		—		228.81		457.62		364.74
Series Q-1 Preferred Units⁽³⁾		—		10.08		20.16		3.54
Series Q-2 Preferred Units⁽⁴⁾		—		4.32		8.64		1.52


(1)		The Series I Preferred Units have a par value of $0.01.

(2)		The Series P Preferred Units replaced the Series M Preferred Units in connection with the Merger.

(3)		The Series Q-1 Preferred Units replaced the Series N-1 Preferred Units in connection with the Merger.

(4)		The Series Q-2 Preferred Units replaced the Series N-2 Preferred Units in connection with the Merger.

(10) Unitholders’ Equity

Common Units

Units of Beneficial Interest

Our Declaration of Trust authorizes us to issue 450,000,000 units with a par value of $0.01 per unit. Our Declaration of Trust allows us to issue Common Units, Preferred Units and such other units of beneficial interest as our Trustee, the Board, may create and authorize from time to time. The Board may classify or reclassify any unissued units from time to time by setting or changing the preferences, conversion rights, voting powers, restrictions, limitations as to distributions, qualifications of terms or conditions of redemption.

As of December 31, 2007 the Successor has 39.6 million Common Units outstanding, beneficially owned as follows:


	Number of Common Units		Percentage of all
Name of Beneficial Owner	Beneficially Owned		Common Units
Series I Trust		7,444,435		18.81	%
Series II LLC		25,202,745		63.70	%
Series III LLC		6,917,971		17.49	%

TOTAL		39,565,151		100	%

Common Unit Repurchase and Issuances

In 2007 and 2006, we repurchased 1,108,323 and 204,877 Common Units for an average price of $59.16 and $58.90 per unit, including commissions, respectively.

109

Preferred Units

A summary of our Preferred Units outstanding at December 31, 2007 and 2006, including their significant rights, preferences, and privileges follows (dollars in thousands, except per unit amounts):


									Successor		Predecessor
					Cumulative
					Dividends in		Annual		Notional at		Notional at
	Redemption		Liquidation		Arrears but		Distribution		December 31,		December 31,
Description	Date⁽¹⁾		Value⁽²⁾		not declared		Rate Per Unit		2007		2006
Series I Preferred Units; 500 units issued and outstanding at December 31, 2007 and 2006, respectively⁽¹⁾		02/01/28		51,915		1,915		7,660	$	50,000	$	50,000
Series O Preferred Units: 3,877,130 units issued and outstanding at December 31, 2007		10/05/12		239,229		3,535		3.65		235,694		0
Series P Preferred Unit; 1 unit issued and outstanding at December 31, 2007 and 2006, respectively⁽³⁾		N/A		10.20		0.2		960.05	$	10	$	10
Series Q-1 Preferred Unit; 300 units issued and outstanding at December 31, 2007 and 2006, respectively⁽⁴⁾		N/A		123.2		3.2		42.27	$	120	$	120
Series Q-2 Preferred Unit; 700 units issued and outstanding at December 31, 2007 and 2006, respectively⁽⁵⁾		N/A		123.2		3.2		18.11	$	120	$	120


(1)		Series I Preferred Units may be redeemed for cash at our option, in whole or in part, at a redemption price equal to the liquidation price per unit, plus accrued and unpaid distributions, if any, on or after the redemption date indicated.

(2)		Liquidation value includes cumulative dividends in arrears but not declared.

(3)		Series P Preferred Units replaced the Series M Preferred Units in connection with the Merger.

(4)		Series Q-1 Preferred Units replaced the Series N-1 Preferred Units in connection with the Merger.

(5)		Series Q-2 Preferred Units replaced the Series N-2 Preferred Units in connection with the Merger.

The holders of our Preferred Units do not have preemptive rights over the holders of Common Units, but do have limited voting rights under certain circumstances. The Preferred Units have no stated maturity are not subject to any sinking fund requirements. Holders of the Preferred Units are entitled to receive cumulative preferential cash distributions, when and as declared and authorized by the Board, out of funds legally available for the payment of distributions. All Preferred Unit distributions are cumulative from date of original issue, and due and unpaid distributions accumulate and compound quarterly at the applicable distribution rate in effect from time to time. No distributions have been declared or paid on Preferred Units since the second quarter of 2007. We do not plan on making distributions in the near term and it is uncertain when any distributions will be made.

Series I Preferred Units

Series I Preferred Units are entitled to receive cash distributions equal to $7,660 per unit per annum. The Series I Preferred Units are entitled to $100,000 per unit liquidation preference over junior units. If the Series I Trust is required to redeem or repurchase any Series I Preferred Shares under the terms of Series I Trust’s declaration of trust, an equivalent number of Series I Preferred Units will be redeemed for consideration equal to that payable upon redemption of the Series I Preferred Shares. The holders of Series I Preferred Units do not have any voting rights except as required by law.

Series O Preferred Units

110

(excluding draws on our line of credit or refinancings of existing indebtedness) and after such borrowing our loan to value ratio is higher than 85% and we have made a distribution to our Common Units in contemplation of the incurrence of that indebtedness. During any period of time after we incur indebtedness in excess of $10 million in principal amount (excluding draws on our line of credit or refinancings of existing indebtedness) and as a result of which our loan to value ratio exceeds 85%, until such time as our loan to value ratio no longer exceeds 85%, the distribution rate on our Series O Preferred Units shall increase from 6% per annum to 8% per annum. The Units are redeemable by the holders under certain circumstances.

Series P Preferred Unit

In December 2004, Archstone issued one Series M Preferred Unit in exchange for cash. The Series M Preferred Unit was converted into a Series P Preferred Unit in connection with the Merger on materially the same terms. This unit is redeemable at the option of the holder of such unit and/or Archstone under certain circumstances. If the holder of the Series P Preferred Unit requests redemption or Archstone is required to redeem the Series P Preferred Unit, the redemption price will be paid in cash. The redemption value under such circumstances is based on the performance of the related real estate asset, as outlined in the contribution agreement. The Series P Preferred Unit is entitled to a distribution equivalent to the same distribution paid on 263 Series O Preferred Units. The holder of the Series P Preferred Unit does not have preemptive rights over the holders of Common Units and does not have any voting right except as required by law. The Series P Preferred Unit has no stated maturity and is not subject to any sinking fund requirements.

Series Q-1 and Q-2 Preferred Units

Three-hundred N-1 and 700 N-2 Preferred Units were issued as partial consideration for land acquired in one of the Oakwood acquisitions. These units were converted in connection with the Merger to 300 Q-1 and 700 Q-2 Preferred Units on materially the same terms. If certain entitlements related to the land are obtained, the Q-1 and Q-2 units have the potential to convert to Series O Preferred Units at a rate of $70,000 and $30,000, respectively, per entitled apartment unit. As of December 31, 2007, no entitlements have been obtained. The Series Q-1 Preferred Units are entitled to a distribution equivalent to the same distribution paid on 11.58 Series O Preferred Units. The Series Q-2 Preferred Units are entitled to a distribution equivalent to the same distribution paid on 4.96 Series O Preferred Units. The holders of the Series Q-1 and Q-2 Preferred Units do not have preemptive rights over the holders of Common Units and do not have any voting rights except as required by law. The Series Q-1 and Q-2 Preferred Units have no stated maturity and are not subject to any sinking fund requirements.

(11) Benefit Plans and Implementation of SFAS 123R

Our long-term incentive plan was approved in 1997, modified in connection with the Smith Merger and terminated in connection with the Merger. There have been seven types of awards under the plan: (i) options with a DEU feature (only awarded prior to 2000); (ii) options without the DEU feature (generally awarded after 1999); (iii) RSU awards with a DEU feature (awarded prior to 2006); (iv) RSU awards with a cash dividend payment feature (awarded after 2005); (v) employee share purchase program with matching options without the DEU feature, granted only in 1997 and 1998; (vi) performance units, which are convertible into Common Shares upon vesting, issued to certain named executives under a Special Long-Term Incentive Program; and (vii) stock appreciation rights.

No more than 20.0 million share or option awards in the aggregate could be granted under the plan, and no individual could be awarded more than 1.0 million share or option awards in any one-year period.

111

A summary of share option activity for the options and RSUs is presented below:


	Option Awards				RSU Awards
			Weighted				Weighted
			Average				Average Grant
	Options		Exercise Price		Units		Price
Balance, December 31, 2005		2,702,026	$	24.94		948,735	$	27.77
Granted		426,977		45.61		310,855		45.85
Exercised/Settled		1,249,089		23.96		296,215		33.23
Forfeited		48,559		35.86		16,760		34.31
Expired		—		—		—		—

Balance, December 31, 2006		1,831,355	$	30.14		946,615	$	31.82
Granted		392,119		58.56		187,176		58.26
Exercised/Settled		329,222		30.04		138,780		28.55
Forfeited		50,811		46.75		23,633		48.61
Expired		—		—		—		—

Balance, October 4, 2007		1,843,441	$	34.92		971,378	$	36.99
Granted		—		—		—		—
Exercised/Settled		1,843,441		34.92		971,378		36.99
Forfeited		—		—		—		—
Expired		—		—		—		—

Balance, December 31, 2007		—	$	—		—	$	—

Options

During the period January 1, 2007 through October 4, 2007 and years ended December 31, 2006 and 2005 the share options granted to associates had a calculated fair value of $8.44, $5.52 and $4.19 per option, respectively. The historical exercise patterns of the associate groups receiving option awards are similar, and therefore we used only one set of assumptions in calculating fair value for each period. For the period January 1, 2007 through October 4, 2007 the calculated fair value was determined using the Black-Scholes-Merton valuation model, using a weighted average risk-free interest rate of 4.44%, a weighted average dividend yield of 3.39%, a volatility factor of 18.62% and a weighted average expected life of four years. For the year ended December 31, 2006, the calculated fair value was determined using the Black-Scholes-Merton valuation model, using a weighted average risk-free rate interest rate of 4.66%, a weighted average dividend yield of 4.57%, a volatility factor of 18.3% and a weighted average expected life of four years. For the year ended December 31, 2005, the calculated fair value was determined using the Black-Scholes-Merton valuation model, using a weighted average risk-free interest rate of 3.77%, a weighted average dividend yield of 5.63%, a volatility factor of 21.97% and a weighted average expected life of five years. The options vested in connection with the Merger and we have no unamortized compensation costs.

The total intrinsic value of the share options exercised during the period from January 1, 2007 through October 4, 2007 and the years ended December 31, 2006 and 2005 were $9.9 million, $30.7 million and $22.9 million, respectively. The intrinsic value is defined as the difference between the realized fair value of the share or the quoted fair value at the end of the period, less the exercise price of the option.

Restricted Share Units

Also during the period January 1, 2007 through October 4, 2007 we issued RSUs to senior officers and trustees of the Company with a weighted average grant date fair value of $58.26 per unit. The units vested in connection with the Merger and we have no unamortized compensation costs.

Special Long Term Incentive Plan

Effective January 1, 2006, a special long-term incentive program related to the achievement of total unitholder return performance targets was established for certain of our executive officers. We issued approximately 300,000 performance units which vested in connection with the Merger and we have no unamortized compensation costs.

112

Summary

The compensation cost associated with all awards for the period January 1, 2007 through October 4, 2007 was approximately $10.0 million, of which approximately $7.9 million was charged to operating expenses, and approximately $2.1 million related to dedicated investment personnel was capitalized with respect to development and other qualifying investment activities. The compensation cost associated with all awards for the year ended December 31, 2006 was approximately $11.3 million, of which approximately $8.5 million was charged to operating expenses, and approximately $2.8 million related to dedicated investment personnel and was capitalized to development and other qualifying investment activities. The compensation cost associated with all awards for the year ended December 31, 2005 was approximately $8.5 million, of which approximately $6.5 million was charged to operating expenses, and approximately $2.0 million related to dedicated investment personnel and was capitalized to development and other qualifying investment activities.

Dividend Equivalent Units

Under the modified long-term incentive plan, participants who were awarded options prior to 2000 and RSUs prior to 2006 were credited with DEUs equal to the amount of distributions paid on Common Units with respect to such awards. The DEUs vested under substantially the same terms as the underlying share options or RSUs.

DEUs earned on options were calculated by taking the average number of options held at each record date and multiplying by the difference between the average annual distribution yield on Common Units and the average dividend yield for the Standard & Poor’s 500 Stock Index. DEUs earned on RSUs were calculated by taking the average number of RSUs held at each record date and multiplying by the average annual distribution yield on Common Units. DEUs earned on existing DEUs were calculated by taking the number of DEUs at December 31 and multiplying by the average annual distribution yield on Common Units.

Certain of the options and all RSUs included in the table above have a DEU feature. All of these options were settled in connection with the Merger. During the period from January 1, 2007 through October 4, 2007 and the year ended December 31, 2006, we recorded $185,000 and $486,800, respectively, as a charge to operating expense related to unvested DEUs and $1.6 million and $1.7 million, respectively, of common unit distributions related to vested DEUs.

401(k) Plan

In December 1997, the Archstone-Smith Board established a 401(k) plan and a nonqualified savings plan, which both became effective on January 1, 1998. The 401(k) plan provides for matching employer contributions of fifty cents for every dollar contributed by the employee, up to 6% of the employee’s annual contribution. Contributions by employees to the 401(k) plan were subject to federal limitations of $15,500 during 2007. Subsequent to June 2007 the matching employer contributions are made in cash, which vest based on years of service at 20% per year. We terminated our nonqualified deferred compensation plan in connection with the Merger.

113

(12) Financial Instruments and Hedging Activities

Fair Value of Financial Instruments

At December 31, 2007 and 2006, the fair values of cash and cash equivalents, restricted cash held in a tax-deferred exchange escrow accounts, receivables (including related party receivables) and accounts payable (including related party payables) approximated their carrying values because of the short-term nature of these instruments. The estimated fair values of other financial instruments subject to fair value disclosures were determined based on available market information and valuation methodologies believed to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, therefore, are not necessarily indicative of the actual amounts that we could realize upon disposition. The following table summarizes these financial instruments (in thousands):


	Successor						Predecessor
	Balance at December 31, 2007						Balance at December 31, 2006
	Carrying			Estimated			Carrying			Estimated
	Amounts			Fair Value			Amounts			Fair Value
Marketable equity securities	$	—		$	—		$	6,600		$	6,600
Borrowings:
Revolving credit facilities	$	60,000		$	58,292		$	84,723		$	84,723
Term Loan — International		—			—			235,771			235,771
Term Loan — Domestic		4,591,822			4,460,880			—			—
Long-Term Unsecured Debt		—			—			3,355,699			3,436,902
Property mortgages payable		9,212,648			9,213,192			2,776,234			2,801,342
Interest rate contracts:
Interest rate swaps	$	(155,096	)	$	(155,096	)	$	6,818		$	6,818
Interest rate caps		3,326			3,326			809			809
Forward contracts:
Forward sale agreement	$	—		$	—		$	(313	)	$	(313	)
Foreign currency forward		—			—			(1,172	)		(1,172	)
Energy contracts:
Electricity contracts	$	—		$	—		$	(8	)	$	(8	)
Natural gas contracts		—			—			(1,047	)		(1,047	)

Interest Rate Hedging Activities

114

During the period January 1, 2007 through October 4, 2007 and years ended December 31, 2006 and 2005 the Predecessor recorded an increase/(decrease) to interest expense of $168,000, $372,000 and $(174,000), for hedge ineffectiveness caused by a difference between the interest rate index on a portion of our outstanding variable rate debt and the underlying index of the associated interest rate swap. We pursue hedging strategies that we expect will result in the lowest overall borrowing costs.


					Carrying and
	Notional		Maturity		Estimated
	Amount		Date Range		Fair Value
Cash flow hedges:
Interest rate caps	$	3,033,498		2008-2011	$	3,326
Interest rate swaps		4,001,155		2010-2017		(155,262	)

Total cash flow hedges	$	7,034,653		2008-2017	$	(151,936	)

Fair value hedges:
Total rate of return swaps		49,600		2011		166

Total hedges	$	7,084,253			$	(151,770	)

115

Foreign Currency Hedging Activities

We are exposed to foreign-exchange related variability and earnings volatility on our foreign investments. There are no foreign currency forward contracts outstanding at December 31, 2007.

Energy Contract Hedging Activities

Equity Securities Hedging Activities

(13) Selected Quarterly Financial Data (Unaudited)

Selected quarterly financial data (in thousands, except per share amounts) for 2007 and 2006 is summarized below. The sum of the quarterly earnings per Common Unit amounts may not equal the annual earnings per Common Unit amounts due primarily to changes in the number of Common Units outstanding from quarter to quarter.


	3/31⁽¹⁾		6/30⁽¹⁾			9/30⁽¹⁾			10/1 - 10/4⁽¹⁾			10/5 - 12/31⁽¹⁾
2007:
Total revenues	$	218,660	$	228,679		$	229,967		$	12,855		$	255,271


Earnings (loss) from operations		22,597		11,889			19,832			(18,669	)		(268,062	)
Income (loss) from unconsolidated entities		695		307			(4,542	)		(1,754	)		(7,680	)
Other non-operating income		2,026		(84	)		26,488			(2,899	)		(124,460	)
Plus net earnings (loss) from discontinued operations		299,609		56,910			357,261			1,051			(7,816	)
Less Preferred Unit distributions		958		958			958			43			—

Net earnings (loss) attributable to Common Units — Basic	$	323,969	$	68,064		$	398,081		$	(22,314	)	$	(408,018	)

Net earnings per Common Unit⁽²⁾: Basic	$	1.30	$	0.27		$	1.59		$	(0.09	)

Diluted (loss)	$	1.27	$	0.27		$	1.56		$	(0.09	)


	3/31⁽¹⁾		6/30⁽¹⁾		9/30⁽¹⁾		12/31⁽¹⁾
2006:
Total revenues	$	164,389	$	171,918	$	208,916	$	214,602


Earnings (loss) from operations		21,219		25,253		34,862		28,281
Income from unconsolidated entities		18,878		10,518		2,088		4,832
Other non-operating income		176		243		1,718		201
Plus net earnings (loss) from discontinued operations		103,619		156,740		111,443		315,004
Less Preferred Unit distributions		958		957		957		957

Net earnings (loss) attributable to Common Units — Basic	$	142,934	$	191,797	$	149,154	$	347,361

Net earnings (loss) per Common Unit⁽²⁾: Basic	$	0.58	$	0.77	$	0.60	$	1.39

Diluted	$	0.58	$	0.77	$	0.60	$	1.36


(1)		Net earnings from discontinued operations have been reclassified for all periods presented.

(2)		Due to the independent calculations of quarterly and annual earnings per unit and rounding, the sum of the quarterly per unit amounts may not equal the year-to-date totals.

116

(14) Segment Data

We define our garden communities and high-rise properties each as individual operating segments. We have determined that each of our garden communities and each of our High-Rise properties have similar economic characteristics and also meet the other GAAP criteria, which permit the garden communities and High-Rise properties to be aggregated into two reportable segments. Additionally, prior to the Merger we defined the activity from Ameriton as an individual operating segment as its primary focus was the opportunistic acquisition, development and eventual disposition of real estate with a short term investment horizon. Ameriton was dissolved in connection with the Merger. NOI is defined as rental revenues less rental expenses and real estate taxes. We rely on NOI for purposes of making decisions about resource allocations and assessing segment performance. We also believe NOI is a valuable means of comparing year-to-year property performance.

Following are reconciliations, which exclude the amounts classified as discontinued operations, of each reportable segment’s (i) revenues to consolidated revenues; (ii) NOI to consolidated earnings from operations; and (iii) assets to consolidated assets, for the periods indicated (in thousands).


	Successor		Predecessor
	Period from		Period from
	October 5, 2007		January 1, 2007
	through		through		Years Ended
	December 31,		October 4,		December 31,
	2007		2007		2006		2005
Reportable apartment communities segment rental revenues:
Same-Store:
Garden communities	$	43,928	$	135,661	$	169,331	$	157,178
High-Rise properties		55,745		174,218		219,455		206,406
Non Same-Store:
Garden communities		61,472		153,439		137,110		43,579
High-Rise properties		48,945		135,535		117,223		47,017
Ameriton		—		160		—		13
Other non-reportable operating segment revenues		3,687		45,317		39,296		3,632

Total segment and consolidated rental revenues	$	213,777	$	644,330	$	682,415	$	457,825


	Successor			Predecessor
	Period from			Period from
	October 5, 2007			January 1, 2007
	through			through			Years Ended
	December 31,			October 4,			December 31,
	2007			2007			2006			2005
Reportable apartment communities segment NOI:
Same-Store:
Garden communities	$	28,406		$	94,265		$	117,636		$	108,826

High-Rise properties		37,258			115,726			148,310			137,425
Non Same-Store:
Garden communities		37,443			99,611			92,739			29,185

High-Rise properties		31,805			90,540			76,229			30,690
Ameriton		—			57			(17	)		(91	)

Other non-reportable operating segment NOI		2,517			24,416			21,696			3,150


Total segment and consolidated NOI		137,429			424,615			456,593			309,185

Reconciling items:
Other income		41,494			45,831			77,410			56,030
Depreciation on real estate investments		(162,427	)		(166,896	)		(177,264	)		(115,997	)
Interest expense		(255,709	)		(166,528	)		(161,231	)		(75,968	)
General and administrative expenses		(24,160	)		(60,605	)		(68,188	)		(58,604	)

Other expenses		(4,689	)		(40,768	)		(17,705	)		(53,276	)

Consolidated earnings (loss) from operations	$	(268,062	)	$	35,649		$	109,615		$	61,370

117


	Successor		Predecessor
	As of		As of
	December 31,		December 31,
	2007		2006
Reportable operating communities segment assets:
Same-Store:
Garden communities	$	2,733,756	$	1,262,150
High-Rise properties		3,550,978		1,848,298
Non Same-Store:
Garden communities		4,466,925		5,134,042
High-Rise properties		3,609,604		3,028,840
Ameriton		—		477,056
FHA/ADA settlement capital accrual		—		29,185
International		53,189		48,438
Other non-reportable operating segment assets		188,346		217,960

Total segment assets		14,602,798		12,045,969
Real estate held for sale, net		388,890		184,525

Total segment assets		14,991,688		12,230,494
Reconciling items:
Investment in and advances to unconsolidated entities		297,113		235,323
Cash and cash equivalents		22,422		48,655
Restricted cash		579,097		319,312
Due from affiliated entities		393,841		—
Other assets		870,498		425,343

Consolidated total assets	$	17,154,659	$	13,259,127

Total capital expenditures for garden communities excluding communities sold or held for sale, were $59.3 million and $43.2 million for the years ended December 31, 2007 and 2006, respectively. Total capital expenditures for High-Rise properties excluding communities sold or held for sale were $63.5 million and $59.8 million for the years ended December 31, 2007 and 2006, respectively. Total capital expenditures for Ameriton properties excluding communities sold or held for sale, were $1.3 million and $0.8 million for the period of January 1, 2007 through October 4, 2007. Ameriton was dissolved in connection with the Merger.

118

(15) Income Taxes

Archstone is a Maryland real estate investment trust that has filed a federal tax election to be treated as a partnership. For income tax purposes, the company and subsequent partnerships were subject to regulations under the Internal Revenue Code pertaining to REITs from October 31, 2001 through October 5, 2007. In either case, as a REIT or a partnership, our income is not generally subject to federal income taxes.

As a partnership, we make distributions and allocate our taxable income to our partners. The following table reconciles net earnings (loss) to taxable income (loss) for the years ended December 31 (in thousands):


	Successor			Predecessor
	Period from			Period from
	October 5, 2007			January 1, 2007
	through			through			Years Ended
	December 31,			October 4,			December 31,
	2007			2007			2006			2005
	(Estimated)			(Estimated)
GAAP net earnings (loss)	$	(408,018	)	$	770,717		$	835,075		$	701,504
Book to tax differences:
Depreciation and amortization⁽¹⁾		37,122			8,470			(23,459	)		14,927
Gain or loss from capital transactions		293			(383,510	)		(412,493	)		(303,550	)
Deferred compensation and other reserves		(3,245	)		(2,251	)		6,440			8,682
Gain or loss from Foreign Exchange/Derivatives		127,093			142			230			164
Other, net		3,681			46,304			(4,919	)		(33,665	)

Taxable income, including capital gains	$	(243,074	)	$	439,872		$	400,874		$	388,062


(1)		We use accelerated depreciable lives for tax purposes. This results in higher depreciation expense on newly acquired assets for tax purposes relative to GAAP. This is offset by the Smith Merger in 2001 and the Oakwood transaction in 2005 as GAAP depreciation expense for the related assets is based on fair value and tax depreciation is based on a lower historical tax basis.

Distributions have been made as follows:


	Successor		Predecessor
	Period from		Period from
	October 5, 2007		January 1, 2007
	through		through		Years Ended
	December 31,		October 4,		December 31,
	2007		2007		2006		2005
Distributions to Partners	$	—	$	228,659	$	433,885	$	398,044

Total Distributions	$	—	$	228,659	$	433,885	$	398,044

The following table summarizes the taxability of our distributions for the period of January 1, 2007 through October 4, 2007 and the years ended 2006 and 2005:


	Predecessor
	Period from
	January 1, 2007
	through			Years Ended
	October 4,			December 31,
	2007			2006			2005
Ordinary Income		44	%		75	%		65	%
Capital gains⁽¹⁾		56	%		25	%		35	%

		100	%		100	%		100	%


(1)		Includes 0%, 11.4% and 34.3% of unrecaptured Section 1250 gains in 2007, 2006, and 2005, respectively.

119

With respect to Archstone-Smith Trust, for federal income tax purposes, distributions may consist of ordinary income, capital gains, non-taxable return of capital or a combination thereof. Distributions that exceed our current and accumulated earnings and profits constitute a return of capital rather than ordinary income and reduce the shareholder’s basis in the Common Shares. To the extent that a distribution exceeds both current and accumulated earnings and profits and the shareholder’s basis in the Common Shares, it will generally be treated as a gain from the sale or exchange of that shareholder’s Common Shares. We notify our shareholders annually of the taxability of distributions paid during the preceding year. The following table summarizes the taxability of cash distributions paid on the Common Shares in 2007, 2006 and 2005:

For tax purposes, the following summary reflects the taxability of distributions paid on our common units:

Predecessor

Period from

January 1, 2007

through

Years Ended

October 4,

December 31,

2007

2006

2005

Per Common Unit:

Ordinary Income

0.40

1.31

1.12

Capital gains

0.50

0.43

0.61

Total

0.90

1.74

1.73

In connection with the Merger, holders of approximately 22.2 million Common Units elected to exchange their Common Units for cash consideration of $60.75 without interest and less applicable taxes.

For tax purposes, the following summary reflects the taxability of distributions paid on our preferred units:

Predecessor

Period from

January 1, 2007

through

Years Ended

October 4,

December 31,

2007

2006

2005

Per Preferred Unit:

Ordinary Income

2,541

5,778

4,959

Capital gains

3,204

1,882

2,701

Total

5,745

7,660

During certain steps taken in the Merger, Ameriton was liquidated and deferred taxes are not provided for in the Successor period.

(16) Commitments and Contingencies

Commitments

At December 31, 2007 we were a lessee under seven non-cancelable ground leases for certain apartment communities and buildings that expire between 2042 and 2077. Each ground lease generally provides for a fixed annual rental payment plus additional rental payments based on the properties’ operating results. Additionally, we lease certain office space under non-cancelable operating leases with fixed annual rental payments.

The future minimum lease payments payable under non-cancelable leases are as follows at December 31, 2007 (in thousands):


2008		8,341
2009		7,861
2010		8,922
2011		6,422
2012		4,167
Thereafter (2013 - 2077)	$	184,403

Total	$	220,116

See Note 2 for real estate-related commitments.

120

Guarantees and Indemnifications

Investee third-party debt consists principally of mortgage notes payable. Generally, mortgages on real estate assets owned by our unconsolidated investees are secured by the underlying properties. We generally do not guarantee third party debt incurred by our unconsolidated investees; however, the investees and/or the Archstone are occasionally required to guarantee the mortgages along with all other venture partners. We guarantee $294.3 million of the outstanding debt balance related to an unconsolidated development joint venture and are committed to guarantee another $34.0 million upon funding of additional debt. As of December 31, 2007 we have not been required to perform under any guarantees provided to our joint ventures.

As part of the Smith Merger and the Oakwood transaction, we are required to indemnify certain Unitholders for any personal income tax expense resulting from the sale of properties identified in tax protection agreements. We do not believe that we will be required to perform under the terms of the indemnification agreements due to our ability and intent to hold and use these properties through the term of the indemnification period or our ability to dispose of assets through tax-deferred exchanges. The built in gain subject to tax protection is estimated to be approximately $350 million at December 31, 2007.

Litigation and Contingencies

Shareholder Litigation

121

event, the proposed settlement as contemplated by the memorandum of understanding may be terminated. The settlement will not affect the amount of the Merger consideration that the plaintiffs are entitled to receive in the Merger. Archstone-Smith and the other defendants vigorously deny all liability with respect to the facts and claims alleged in the lawsuits, and specifically deny that any modifications to the Merger Agreement or any further supplemental disclosure was required under any applicable rule, statute, regulation or law. However, to avoid the risk of delaying or adversely affecting the Merger and the related transactions, to minimize the expense of defending the lawsuits, and to provide additional information to Archstone-Smith shareholders at a time and in a manner that would not cause any delay of the Merger, Archstone-Smith and the Archstone-Smith Trustees agreed to the settlement described above. Archstone-Smith and the other defendants further considered it desirable that the actions be settled to avoid the substantial burden, expense, risk, inconvenience and distraction of continued litigation and to fully and finally resolve the settled claims.

Clinton Green

Tax Protection Agreements and Unitholder Claims

122

in the United States District Court for the District of Colorado. The lawsuit names, among others, Archstone, Archstone-Smith, certain of their former trustees and officers, Lehman Brothers Holdings Inc. and Tishman Speyer Development Corporation as defendants. This action was brought by certain former Unitholders, individually and purportedly on behalf of all former holders of A-1 Common Units as of the Mergers, and alleges, among other things: (i) that Archstone and Archstone-Smith entered into enforceable property contribution agreements and partnership agreements with such Unitholders; (ii) that Archstone and Archstone-Smith agreed not to enter into any transactions or dispose of any interest in the property contributed by such Unitholders that would result in such Unitholders realizing a taxable gain, and agreed to provide such Unitholders with the ability to receive dividends and also to liquidate their units by receiving cash or converting them to common shares in the publicly traded Archstone-Smith; (iii) that Archstone and Archstone-Smith failed to perform their duties under the Declaration of Trust, contribution and partnership agreements, and statutory and common law partnership principles in connection with the Mergers; (iv) that such failures discharge such Unitholders’ obligations to defendants (as noted above, the former Unitholders undertook certain obligations to arbitrate with respect to claimed rights to tax protection payments); and (v) that Archstone-Smith and former trustees and officers, aided and abetted by Lehman Brothers and Tishman Speyer, violated their fiduciary duties owed to such Unitholders in connection with the Mergers. The purported class action seeks an unspecified amount of damages. Although Archstone and the Venture believe that the claims that have been asserted are without merit, there can be no assurance that the disposition of such claims will not result in material liability to Archstone.

FHA/ADA

Water Intrusion-Florida

Water Intrusion — Westbury

123

2007, in the Supreme Court of the State of New York, County of Nassau, Case No. 07-021135, removed on February 8, 2008 to U.S. Federal District Court for the Eastern District of New York; Richardo Francois v. ASN Roosevelt Center LLC D/B/A Archstone Westbury, filed on December 7, 2007, in the Supreme Court of the State of New York, County of Nassau, Case No. 07-021967; Pasquale Marchese, et al. v. ASN Roosevelt Center LLC, et al., filed on December 7, 2007, but not yet served on us; and John DiGiovanna and Farideh DiGiovanna vs. ASN Roosevelt Center LLC d/b/a Archstone Westbury, filed on January 7, 2008, in the Supreme Court of the State of New York, County of Nassau, Case No. 08-000347. In addition to the foregoing cases, there are a number of threatened lawsuits. Plaintiffs in the filed cases seek monetary damages and equitable relief alleging, among other things, that water damage and mold has caused the tenants at Westbury personal harm and property damage. Although no assurances can be given with respect to the outcome of these lawsuits, we intend to vigorously defend against the claims alleged in these lawsuits. An affiliated entity has accrued $14.1 million for the estimated remediation costs associated with this community as of December 31, 2007.

Other

Unless indicated otherwise above, we have not accrued any cost for the legal contingencies referenced as we have concluded that they do not meet the accounting criteria for accrual. We are a party to various other claims and routine litigation arising in the ordinary course of business. We do not believe that the results of any such claims or litigation, individually or in the aggregate, will have a material adverse effect on our business, financial position or results of operations.

124

(17) Supplemental Cash Flow Information

Significant non-cash investing and financing activities for the years ended December 31, 2007, 2006 and 2005 consisted of the following:

•

Recorded the following purchase accounting-related adjustments and non-cash related party transactions in connection with the Merger (See Note 1):

	•		Real estate includes an increase related to a fair value adjustment of 5.8 billion;

	•		Net assets of $2.3 billion were distributed to Archstone’s affiliated entities;

	•		Assumption of Predecessor property mortgages of $0.9 billion and trade payables and other accrued liabilities of $0.8 billion;

	•		Preferred Units issued in connection with the Merger of $0.3 billion;

	•		Reclassification of Unitholders’ equity balance of $2.6 billion

	•		Issued $1.1 million, $81.4 million and $408.0 million of A-1 Common Units as partial consideration for properties acquired during 2007, 2006 and 2005, respectively;

	•		Issued $250,000 of Series N-1 and N-2 Preferred Units ($125,000 each) as partial consideration for real estate during 2005;

	•		Converted $55.4 million, $143.4 million and $8.4 million A-1 Common Units to A-2 Common Units during 2007, 2006 and 2005, respectively;

	•		Assumed mortgage debt of $15.0 million, $728.5 million and $864.2 million during 2007, 2006 and 2005, respectively, in connection with the acquisition of apartment communities;

	•		Recorded accruals of $3.0 million and $47.2 million for anticipated capital spending to bring properties named in the FHA and ADA settlement into compliance in 2007 and 2005, respectively;

	•		See Notes 3 and 4 for further discussion regarding the non-cash financing components of the International Fund Formation and the DeWAG and Oakwood acquisitions.

Report of Independent Registered Public Accounting Firm on Supplementary Information

The Trustee of Archstone and the Board of Trustees of the Trustee

Under date of March 31, 2008, we reported on the consolidated balance sheet of Archstone and subsidiaries (Successor) as of December 31, 2007 and the consolidated balance sheet of Archstone-Smith Operating Trust and subsidiaries (Predecessor) as of December 31, 2006, and the related consolidated statements of operations, unitholders’ equity, other common unitholders’ interest, preferred units and comprehensive income (loss) of the Successor for the period October 5, 2007 through December 31, 2007 and of the Predecessor for the period January 1, 2007 through October 4, 2007 and for the years ended December 31, 2006 and 2005, and the related consolidated and combined statement of cash flows of the Successor and the Predecessor for the year ended December 31, 2007 and the related consolidated statements of cash flows of the Predecessor for the years ended December 31, 2006 and 2005. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedules, Schedule III — Real Estate and Accumulated Depreciation (Schedule III) and Schedule IV — Mortgage Loans on Real Estate (Schedule IV). Schedule III and Schedule IV are the responsibility of Archstone’s management. Our responsibility is to express an opinion on Schedule III and Schedule IV based on our audits.

In our opinion, Schedule III and Schedule IV, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

Denver, Colorado
March 31, 2008

126

ARCHSTONE

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2007
(Dollar amounts in thousands)


									Cost
					Initial Cost to Archstone				Capitalized		Gross Amount at Which Carried at Year End
			Encum-				Buildings &		Subsequent to				Buildings &				Accumulated			Construction		Year
	Units		brances		Land		Improvements		Acquisition		Land		Improvements		Totals⁽⁴⁾		Depreciation			Year⁽¹⁾		Acquired⁽³⁾
Apartment Communities:
Garden Communities:
Boston, Massachusetts		1,164		296,771		50,312		375,066		505		50,312		375,571		425,883		(2,763	)		1898-2006		2007
Inland Empire, California		300		46,075		18,000		48,640		248		18,000		48,888		66,888		(352	)		1990		2007
Los Angeles, California		7,518		1,549,147		882,950		1,660,343		5,636		883,060		1,665,869		2,548,929		(12,381	)		1969-2007		2007
San Diego, California		468		57,945		38,400		81,180		894		38,432		82,042		120,474		(624	)		1987-2002		2007
San Francisco Bay Area, California		6,855		1,220,989		611,240		1,162,039		147,092		647,288		1,273,083		1,920,371		(9,529	)		1909-2007		2007
Seattle, Washington		2,327		316,944		101,245		362,155		2,218		101,359		364,259		465,618		(2,646	)		1976-2001		2007
Ventura County, California		1,773		368,828		182,900		352,670		2,012		183,042		354,540		537,582		(2,689	)		1971-2007		2007
Washington, D.C. metropolitan area		5,867		771,593		383,000		1,101,464		2,438		383,076		1,103,826		1,486,902		(6,691	)		1970-2007		2007

Garden Communities Total		26,272		4,628,292		2,268,047		5,143,557		161,043		2,304,569		5,268,078		7,572,647		(37,675	)

High-Rise Properties:
Boston, Massachusetts		1,945		466,782		108,432		760,649		14,861		108,451		775,491		883,942		(5,148	)		1901-2006		2007
Chicago, Illinois		304		77,467		74,000		59,785		492		74,004		60,273		134,277		(449	)		1988		2007
Los Angeles, California		1,073		281,214		64,000		328,123		304		64,005		328,422		392,427		(2,472	)		1934-2004		2007
New York City metropolitan area		1,974		824,560		718,100		870,747		6,564		718,102		877,309		1,595,411		(6,520	)		1974-2001		2007
Philadelphia, Pennsylvania		80		8,945		4,000		11,908		59		4,000		11,967		15,967		(93	)		1945		2007
San Francisco Bay Area, California		853		218,066		45,100		266,466		1,929		45,100		268,395		313,495		(2,000	)		1966-1986		2007
Seattle, Washington		694		114,445		33,000		146,644		580		33,015		147,209		180,224		(1,081	)		1949-1998		2007
Washington, D.C. metropolitan area		11,239		2,552,048		1,018,235		2,683,095		77,768		960,600		2,818,498		3,779,098		(21,423	)		1929-2005		2007

High-Rise Properties Total		18,162		4,543,527		2,064,867		5,127,417		102,557		2,007,277		5,287,564		7,294,841		(39,186	)

Germany⁽²⁾		807		40,829		7,636		43,564		2,258		7,972		45,486		53,458		(269	)		1967-1970		2007
FHA/ADA Settlement Capital Accrual
Total Apartment Communities — Operating and Under Construction		45,241		9,212,648		4,340,550		10,314,538		265,858		4,319,818		10,601,128		14,920,946		(77,130	)

Other:
Development communities In Planning and Owned		545		—												57,335		(10	)
Hotel, retail and other assets		—		—												90,791		(244	)

Total real estate assets		45,786		9,212,648												15,069,072		(77,384	)


(1)		Represents the date that the building structure was originally completed. For phased developments, it represents the date the earliest phase was constructed.

(2)		Our German portfolio is concentrated primarily in the Federal States of North-Rhine Westphalia, Hesse, Baden-Wurttemburg and Berlin.

(3)		In connection with the Merger we revalued all of the properties at October 5, 2007.

(4)		The tax basis at December 31, 2007 of our assets for federal income tax purposes was approximately $10.0 billion (unaudited).

127

SCHEDULE III

The following is a reconciliation of the carrying amount and related accumulated depreciation of Archstone’s investment in real estate, at cost (in thousands):


	Successor			Predecessor
	Period from			Period from
	October 5, 2007			January 1, 2007
	through			through			Years Ended
	December 31,			October 4,			December 31,
	2007			2007			2006			2005
Carrying Amounts
Balance at beginning of period⁽¹⁾	$	15,021,288		$	13,187,640		$	11,359,264		$	9,221,038

Apartment communities:
Acquisition-related expenditures		226,133			1,419,633			2,530,459			2,671,112
Redevelopment expenditures		20,494			37,328			57,414			106,264
Recurring capital expenditures		9,765			30,340			46,354			48,311
Development expenditures, excluding land acquisitions		16,038			348,844			388,502			324,740
Acquisition and improvement of land for development		—			213,708			209,916			81,340
International fund formation		—			(1,034,524	)		—			—
Dispositions		(226,903	)		(1,195,068	)		(1,403,858	)		(1,175,834	)
Provision for possible loss on investment		—			(7,490	)		(4,328	)		(1,500	)
Change in estimated hurricane retirements		—			—			4,496			—
Other		2,257			820			7,987			(8,303	)

Net apartment community activity	$	47,784		$	(186,409	)	$	1,836,942		$	2,046,130

Other:
Change in other real estate assets		—			(42,733	)		(8,566	)		92,096

Balance at end of period	$	15,069,072		$	12,958,498		$	13,187,640		$	11,359,264


(1)		The beginning balance of the period October 5, 2007 through December 31, 2007 includes a fair value adjustment of $5.8 billion in connection with the Merger, net of distributions to affiliates of $3.6 billion.


	Successor			Predecessor
	Period from			Period from
	October 5, 2007			January 1, 2007
	through			through			Years Ended
	December 31,			October 4,			December 31,
	2007			2007			2006			2005
Accumulated Depreciation
Balance at beginning of period	$	—		$	957,146		$	836,693		$	763,542
Depreciation for the period⁽¹⁾		78,146			203,147			266,589			220,770
Accumulated depreciation on real estate dispositions		(762	)		(153,243	)		(146,136	)		(147,619	)

Balance at end of period	$	77,384		$	1,007,050		$	957,146		$	836,693


(1)		Depreciation is net of $87.4 million and $21.7 million for intangible assets related to the value of leases in place for real estate acquired in 2007 and 2006, respectively.

128

SCHEDULE IV

ARCHSTONE

MORTGAGE LOANS ON REAL ESTATE

December 31, 2007
(Dollar amounts in thousands)

Face

Amount of

Carrying

Final

Mortgages

Amount

Maturity

Periodic Payment

Prior

(amount

Description

Interest Rate

Date

Term

Liens

committed)

Mortgages

Mortgage and Other

Notes Receivable:

Florida

LIBOR + 8.5%

2/21/10

⁽¹⁾

⁽³⁾

10,631

5,643

Georgia

LIBOR + 8%

7/6/10

⁽¹⁾

⁽³⁾

10,767

7,958

Massachusetts

LIBOR + 7%

2/07/11

⁽¹⁾

⁽³⁾

New York

LIBOR + 7%

6/22/09

⁽¹⁾

⁽³⁾

42,070

30,216

New York

⁽⁴⁾

11/10/12

⁽¹⁾

⁽³⁾

36,459

25,026

Texas

LIBOR + 9%

8/11/10

⁽¹⁾

⁽³⁾

25,937

1,947

Washington, D.C.

18%

7/17/07

⁽¹⁾

⁽³⁾

7,332

7,334

Washington, D.C.

14%

6/03/09

⁽¹⁾

⁽³⁾

7,524

6,349

140,754

84,507


	Successor			Predecessor
	Period from			Period from
	October 5, 2007			January 1, 2007
	through			through			Year Ended
	December 31,			October 4,			December 31,
	2007			2007			2006
Balance at Beginning of Period	$	89,213		$	123,261		$	74,396
New Mortgage Loans		32,862			13,097			85,165
Collections of Principal		(39,822	)		(52,298	)		(46,081	)
Other⁽²⁾		2,254			5,153			9,781

Balance at End of Period	$	84,507		$	89,213		$	123,261


(1)		Outstanding principal plus accrued and unpaid interest is generally due on the maturity date unless specified as payable monthly in the loan agreement. Partial prepayment is required to the extent the borrower receives proceeds from the sale of constructed units in accordance with contracted terms.

(2)		A portion of the accrued interest amount is added to the principal amount on a monthly basis on the majority of the loans.

(3)		Our rights to the underlying collateral in the event of default are subordinate to a primary mortgage lender.

(4)		The interest rate is divided into two tranches: Tranche A of LIBOR + 7.5% and Tranche B of LIBOR + 10%.

129

INDEX TO EXHIBITS

Certain of the following documents are filed herewith. Certain other of the following documents have been previously filed with the Securities and Exchange Commission and, pursuant to Rule 12b-32, are incorporated herein by reference:


Number		Description
2.1		Agreement and Plan of Merger, dated as of May 28, 2007, by and among Archstone-Smith Trust, Archstone-Smith Operating Trust, River Holding, LP, River Acquisition (MD), LP, and River Trust Acquisition (MD), LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Archstone-Smith Trust with the SEC on June 1, 2007)

2.2		Amendment No. 1, dated as of August 5, 2007, to Agreement and Plan of Merger dated as of May 28, 2007, by and among Archstone-Smith Trust, Archstone-Smith Operating Trust, River Holding, LP, River Acquisition (MD), LP, and River Trust Acquisition (MD), LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Archstone-Smith Trust with the SEC on August 6, 2007)

3.1		Amended and Restated Declaration of Trust of Archstone (formerly known as Archstone-Smith Operating Trust) (incorporated by reference to Exhibit 3.1 to Archstone-Smith Operating Trust’s Current Report on Form 8-K filed with the SEC on October 5, 2007)

3.2		Articles of Amendment of Amended and Restated Declaration of Trust of Archstone, as filed with the Maryland Department of Assessments and Taxation on January 4, 2008

3.3		Bylaws of Archstone (formerly known as Archstone-Smith Operating Trust) (incorporated by reference to Exhibit 4.2 to Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on June 2, 2006)

3.4		Amendment No. 1 to Bylaws of Archstone (formerly known as Archstone-Smith Operating Trust) (incorporated by reference to Exhibit 3.1 to Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on June 1, 2007)

4.1		Indenture, dated as of February 1, 1994, between Archstone (formerly known as Archstone-Smith Operating Trust and Property Trust of America) and Morgan Guaranty Trust Company of New York, as Trustee relating to Archstone’s unsecured senior debt securities (incorporated by reference to Exhibit 4.1 of Archstone-Smith Trust’s Annual Report on Form 10-K for the year ended December 31, 2006)

4.2		Fourth Supplemental Indenture, dated as of October 5, 2007, to the Indenture, dated as of February 1, 1994, by and between the Archstone (formerly known as Archstone-Smith Operating Trust) and the U.S. Bank National Association, as supplemented by the First Supplemental Indenture, dated as of February 2, 1994, the Second Supplemental Indenture, dated as of August 2, 2004, and the Third Supplemental Indenture, dated as of July 14, 2006 (incorporated by reference to Exhibit 4.1 to Archstone’s Current Report on Form 8-K, dated October 5, 2007)

10.1		Amended and Restated Credit Agreement, dated as of June 21, 2006, by and among Archstone-Smith Operating Trust, as borrower, and Archstone-Smith Trust as parent, and J.P. Morgan Chase Bank, as administrative agent,, J.P. Morgan Europe Limited, as administrative agent for foreign currencies, Bank of America, N.A., and Wells Fargo Bank, N.A., as syndication agents, and Suntrust Bank and Citicorp North America, Inc. as documentation agents and the various banks signatory thereto (incorporated by reference to Exhibit 10.2 to Archstone-Smith’s Current Report on Form 8-K filed with the SEC on June 27, 2006)


Number		Description
10.2		Guaranty, dated as of June 21, 2006, by Archstone-Smith Trust, as guarantor, for the benefit of J.P. Morgan Chase Bank, as administrative agent, J.P. Morgan Europe Limited, as administrative agent for foreign currencies, Bank of America, N.A., and Wells Fargo Bank, N.A., as syndication agents, and Suntrust Bank and Citicorp North America, Inc. as documentation agents and the various banks signatory thereto (incorporated by reference to Exhibit 10.1 to Archstone-Smith’s Current Report on Form 8-K filed with the SEC on June 27, 2006)

10.3		Amended and Restated Master Credit Facility Agreement, dated as of November 27, 2007, by and among certain subsidiaries of Archstone-Smith Operating Trust, as borrowers, and Lehman Brothers Holdings Inc., Bank of America, N.A., and Barclays Capital Real Estate Inc., as initial lender (collectively, the “Credit Facility Lenders”), and assigned to the Federal National Mortgage Association (incorporated by reference to Exhibit 10.1 of Archstone’s Current Report on Form 8-K filed with the SEC on December 3, 2008)

10.4		Form of Promissory Note for loan, dated as of October 5, 2007, to certain subsidiaries of Archstone-Smith Operating Trust from Lehman Brothers Holdings Inc., Bank of America, N.A., and Barclays Capital Real Estate Inc., as initial lender, and assigned to the Federal Home Loan Mortgage Corporation (incorporated by reference to Exhibit 10.4 of Archstone’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007)

10.5		Guarantee and Collateral Agreement made by Archstone-Smith Operating Trust and certain of its subsidiaries and parent guarantors in favor of Lehman Commercial Paper Inc. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by Archstone-Smith Operating Trust with the SEC on December 3, 2007).

10.6		Form of Cross-Collateralization Agreement for loan, dated as of October 5, 2007, to certain subsidiaries of Archstone-Smith Operating Trust from Lehman Brothers Holdings Inc., Bank of America, N.A., and Barclays Capital Real Estate Inc., as initial lender, and assigned to the Federal Home Loan Mortgage Corporation (incorporated by reference to Exhibit 10.5 of Archstone’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007)

10.7		Schedule of Cross-Collateralized Agreements and Promissory Notes (pursuant to Instruction 2 to Item 601 of Regulation S-K) (incorporated by reference to Exhibit 10.6 of Archstone’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007)

10.8		Mezzanine Loan A Agreement (Fannie Bucket 1), dated as of October 5, 2007, by and among certain subsidiaries of Archstone-Smith Operating Trust, as borrowers, and Lehman Brothers Holdings Inc., Bank of America, N.A., and Barclays Capital Real Estate Finance Inc., as lender (incorporated by reference to Exhibit 10.9 to Archstone-Smith Operating Trust’s Quarterly Report on Form 10-Q filed with the SEC on November 9, 2007).

10.9		Mezzanine Loan B Agreement (Fannie Bucket 1), dated as of October 5, 2007, by and among certain subsidiaries of Archstone-Smith Operating Trust, as borrowers, and Lehman Brothers Holdings Inc., Bank of America, N.A., and Barclays Capital Real Estate Finance Inc., as lender (incorporated by reference to Exhibit 10.10 to Archstone-Smith Operating Trust’s Quarterly Report on Form 10-Q filed with the SEC on November 9, 2007).

10.10		Schedule of Additional Mezzanine Loans for the Fannie Portfolio (pursuant to Instruction 2 to Item 601 of Regulation S-K) (incorporated by reference to Exhibit 10.11 to Archstone-Smith Operating Trust’s Quarterly Report on Form 10-Q filed with the SEC on November 9, 2007).

10.11		Mezzanine Loan A Agreement, dated as of October 5, 2007, by and among certain subsidiaries of Archstone-Smith Operating Trust, as borrowers, and Lehman Brothers Holdings Inc., Bank of America, N.A., and Barclays Capital Real Estate Finance Inc., as initial lender (collectively, the “Mezz Loan A Lenders”), and assigned to the Federal Home Loan Mortgage Corporation (incorporated by reference to Exhibit 10.7 of Archstone’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007)


Number		Description
10.12		Mezzanine Loan B Agreement, dated as of October 5, 2007, by and among certain subsidiaries of Archstone-Smith Operating Trust, as borrowers, and Lehman Brothers Holdings Inc., Bank of America, N.A., and Barclays Capital Real Estate Finance Inc., as initial lender (collectively, the “Mezz Loan B Lenders”), and assigned to the Federal Home Loan Mortgage Corporation (incorporated by reference to Exhibit 10.8 of Archstone’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007)

10.13		Letter agreement, dated October 5, 2007, from the Credit Facility Lenders, Mezz Loan A Lenders, Mezz Loan B Lenders and certain lenders under other loan agreements, to the borrowers thereunder. Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment.

10.14		Letter agreement, dated November 27, 2007, amending the letter agreement dated October 5, 2007, from the Credit Facility Lenders, Mezz Loan A Lenders, Mezz Loan B Lenders and certain lenders under other loan agreements, to the borrowers thereunder. Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment.

10.15		Credit Agreement (Affiliate Borrower I-A), dated October 5, 2007, between Tishman Speyer Archstone-Smith Multifamily Holdings I (Borrower-A), L.P., as borrower, and Archstone-Smith Operating Trust, as lender

10.16		Credit Agreement (Affiliate Borrower I-B), dated October 5, 2007, between Tishman Speyer Archstone-Smith Multifamily Holdings I (Parent Borrower-B), L.P., as borrower, and Archstone-Smith Operating Trust, as lender

10.17		Credit Agreement (Affiliate Borrower II — Revolving Credit Facility), dated October 5, 2007, between Tishman Speyer Archstone-Smith Multifamily Holdings II (Borrower), L.P., as borrower, and Archstone-Smith Operating Trust, as lender

10.18		Employment Agreement, dated October 5, 2007, between R. Scot Sellers, as Chief Executive Officer, Archstone-Smith Communities LLC, as employer, and Archstone (formerly known as Archstone-Smith Operating Trust), as guarantor

10.19		Award Agreement, dated October 5, 2007, between R. Scot Sellers and Tishman Speyer Archstone-Smith Multifamily Participants, L.L.C.

10.20		Unit Award Agreement, dated October 5, 2007, between R. Scot Sellers and Tishman Speyer Archstone-Smith Junior Mezz Borrower, L.P.

10.21		Unit Award Agreement, dated October 5, 2007, between R. Scot Sellers and Tishman Speyer Archstone-Smith Parallel Guarantor I, L.L.C.

10.22		Unit Award Agreement, dated October 5, 2007, between R. Scot Sellers and Tishman Speyer Archstone-Smith Parallel Guarantor II, L.L.C.

10.23		Separation and General Release Agreement, dated April 2, 2007, between J. Lindsay Freeman, Archstone-Smith Operating Trust and Archstone-Smith Trust

10.24		Amendment to Separation and General Release Agreement, dated June 1, 2007, between J. Lindsay Freeman, Archstone-Smith Operating Trust and Archstone-Smith Trust

10.25		Amended and Restated Archstone-Smith Trust Equity Plan for Outside Trustee and all amendments thereto (incorporated by reference to Exhibits 10.5, 10.6 and 10.7 to Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on December 12, 2006)

10.26		Archstone-Smith Trust 2001 Long-Term Incentive Plan and all amendments thereto (incorporated by reference to Exhibit 10.1, 10.2, 10.3 and 10.4 to Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on December 12, 2006)

10.27		Archstone-Smith Deferred Compensation Plan (incorporated by reference to Exhibit 10.5 to Archstone-Smith’s Annual Report on Form 10-K for the year ended December 31, 2001)


Number		Description
10.28		Form of Non-Qualified Share Option Agreement for Archstone-Smith Trust 2001 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 of Archstone-Smith Trust’s Annual Report on Form 10-Q for the Quarter Ended September 30, 2004)

10.29		Form of Restricted Share Unit Agreement for Archstone-Smith Trust 2001 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.2 of Archstone-Smith Trust’s Annual Report on Form 10-Q for the Quarter Ended September 30, 2004)

10.30		Form of Restricted Share Unit Agreement for Archstone-Smith Trust Equity Plan for Outside Trustees (incorporated by reference to Exhibit 10.3 of Archstone-Smith Trust’s Annual Report on Form 10-Q for the Quarter Ended September 30, 2004)

10.31		Form of Indemnification Agreement entered into between Archstone-Smith Trust and each of its officers and Trustees (incorporated by reference to Exhibit 10.6 to Archstone-Smith Trust’s Annual Report on From 10K for the year ended December 31, 2003)

10.32		Form of Change in Control Agreement between Archstone-Smith Trust and certain of its officers (incorporated by reference to Exhibit 10.7 to Archstone-Smith’s Annual Report on Form 10-K for the year ended December 31, 2002)

10.33		Form of Amendment No. 1 to Change in Control Agreement between Archstone-Smith Trust and certain of its officers (incorporated by reference to Exhibit 10.12 to Archstone-Smith Operating Trust’s registration statement on Form S-4 (File No. 333-144717))


21		Subsidiaries of Archstone

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


/s/ R. Scot Sellers
R. Scot Sellers
Chief Executive Officer (principal executive officer)

/s/ Charles E. Mueller, Jr.
Charles E. Mueller, Jr.
Chief Financial Officer (principal financial officer); Chief Operating Officer effective January 1, 2008


Item	Description	Page

	PART I
	Glossary	3
1.	Business	9
1A.	Risk Factors	12
1B.	Unresolved Staff Comments	18
2.	Properties	19
3.	Legal Proceedings	21
4.	Submission of Matters to a Vote of Security Holders	24

	PART II
5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	25
6.	Selected Financial Data	25
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
7A.	Quantitative and Qualitative Disclosures About Market Risk	44
8.	Financial Statements and Supplementary Data	47
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	47
9A.	Controls and Procedures	47
9B.	Other Information	48

	PART III
10.	Directors, Executive Officers and Corporate Governance	49
11.	Executive Compensation	51
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	79
13.	Certain Relationships and Related Transactions and Director Independence	79
14.	Principal Accounting Fees and Services	81

	PART IV
15.	Exhibits and Financial Statement Schedules	82
Articles of Amendment of Amended and Restated Declaration of Trust
Letter Agreement, dated October 5, 2007
Letter Agreement, dated November 27, 2007
Credit Agreement (Affiliate Borrower I-A)
Credit Agreement (Affiliate Borrower I-B)
Credit Agreement (Affiliate Borrower II - Revolving Credit Facility)
Employment Agreement - R. Scot Sellers
Award Agreement
Unit Award Agreement
Unit Award Agreement
Unit Award Agreement
Separation and General Release Agreement
Amendment to Separation and General Release Agreement
Subsidiaries
Certification of Chief Executive Officer Pursuant to Section 302
Certification of Chief Financial Officer Pursuant to Section 302
Certification of Chief Executive Officer Pursuant to Section 906
Certification of Chief Financial Officer Pursuant to Section 906


Abbreviation, Acronym or Defined Term		Definition/Description
Under Control		A term used to identify land parcels which Archstone does not own, yet has an exclusive right through contingent contract or letter of intent during a contractually agreed upon time period to acquire the land, subject to satisfaction of contingencies during the due diligence and entitlement processes.

Unitholders		The holders of Common Units and Preferred Units.

Venture		Collectively, Tishman Speyer Archstone-Smith Multifamily JV, L.P., a Delaware limited partnership, and Tishman Speyer Archstone-Smith Multifamily Parallel JV, L.P., a Delaware limited partnership, together with any other parallel entity organized to own an interest in the entire portfolio.


	Page
Report of Independent Registered Public Accounting Firm		84
Consolidated Balance Sheets as of December 31, 2007 and 2006		85
Consolidated Statements of Operations for the periods January 1, 2007 through October 4, 2007 and October 5, 2007 through December 31, 2007 and years ended December 31, 2006 and 2005		86
Consolidated Statements of Unitholders’ Equity, Other Common Unitholders’ Interest, Preferred Units and Comprehensive Income (Loss) for the years ended December 31, 2007, 2006 and 2005		87
Consolidated and Combined Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005		88
Notes to Consolidated Financial Statements		89
Report of Independent Registered Public Accounting Firm on Supplementary Information		126
Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2007		127
Schedule IV – Mortgage Loans on Real Estate as of December 31, 2007		129
Signatures		130
Index to Exhibits


	ARCHSTONE
	By:	/s/ R. Scot Sellers
		R. Scot Sellers
		Chief Executive Officer


Signature	Title	Date

/s/ R. Scot Sellers R. Scot Sellers	Chief Executive Officer (principal executive officer)	March 31, 2008

/s/ Charles E. Mueller, Jr. Charles E. Mueller, Jr.	Chief Financial Officer (principal financial officer); Chief Operating Officer effective January 1, 2008	March 31, 2008

/s/ Ash K. Atwood Ash K. Atwood	Controller and Group Vice President (principal accounting officer)	March 31, 2008

TISHMAN SPEYER ARCHSTONE-SMITH SERIES I TRUST
By: /s/ David Augarten Trustee	Trustee	March 31, 2008