10-K

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, 2003
OR
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-Smith Operating Trust

(Exact Name of Registrant as Specified in Its Charter)

MARYLAND	74-6056896
(State or other jurisdiction of incorporation or organization)	(IRS employer identification no.)

9200 E. Panorama Circle, Suite 400

Englewood, Colorado 80112

(Address of principal executive offices and zip code)

(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:

Class A-1 Common Units

(Title of Class)

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      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 Archstone-Smith is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes þ          No o

      Based on the closing price of Archstone-Smith Trust’s Common Shares on June 30, 2003, which are issuable upon redemption of the A-1 Common Units, the aggregate market value of the Class A-1 Common Units held by non-affiliates was approximately $598,369,680.

      At February 13, 2004, there were approximately 25,233,992 Class A-1 and Class B Common Units outstanding held by non-affiliates.

DOCUMENTS INCORPORATED BY REFERENCE

      None.

Table of Contents

Item	Description	Page
PART I
	Glossary		3
1.	Business		7
	The Company		8
	Officers of the Operating Trust		10
	Employees		12
	Insurance		13
	Risk Factors		13
2.	Properties		17
	Geographic Distribution		17
	Real Estate Portfolio		18
3.	Legal Proceedings		20
4.	Submission of Matters to a Vote of Security Holders		21
PART II
5.	Market for the Registrant’s Common Equity and Related Stockholder Matters		21
6.	Selected Financial Data		23
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
	Results of Operations		26
	Liquidity and Capital Resources		32
	Litigation and Contingencies		36
	Critical Accounting Policies		37
	Off Balance Sheet Arrangements		40
	Contractual Commitments		41
	Related Party Transactions		41
	New Accounting Pronouncements		42
7A.	Quantitative and Qualitative Disclosures About Market Risk		43
8.	Financial Statements and Supplementary Data		45
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		45
9A.	Controls and Procedures		45
PART III
10.	Trustees and Executive Officers of the Registrant		45
11.	Executive Compensation		46
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		46
13.	Certain Relationships and Related Transactions		47
14.	Principal Accountants Fees and Services		47
PART IV
15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K		49
EX-4.4 Rights Agreement dated as of 12/1/03
EX-10.12 Amended and Restated Credit Agreement
EX-12.1 Computation of Ratio of Earnings
EX-12.2 Computation of Ratio of Earnings
EX-21 Subsidiaries of Archstone-Smith
EX-23.1 Consent of KPMG LLP
EX-31.1 Certification of CEO pursuant to Sec. 302
EX-31.2 Certification of CFO pursuant to Sec. 302
EX-32.1 Certification of CEO pursuant to Sec. 906
EX-32.2 Certification of CFO pursuant to Sec. 906

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GLOSSARY

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

Abbreviation, Acronym or Defined Term	Definition/Description
A-1 Common Unitholders	Holders of A-1 Common Units.
A-1 Common Units	Class A-1 common units of beneficial interest, which are redeemable for cash, or at the option of Archstone-Smith, A-2 Common Units. A-1 Common Units are the only common units of the Operating Trust not held by Archstone-Smith and represent approximately 11.5% of the Operating Trust at December 31, 2003.
A-2 Common Units	Class A-2 common units of beneficial interest. Archstone-Smith is the sole holder of A-2 Common Units, which represent approximately an 88.5% interest of the Operating Trust at December 31, 2003.
Ameriton	AMERITON Properties Incorporated, which is a taxable REIT subsidiary that engages in the opportunistic acquisition, development and eventual disposition of real estate with a shorter-term investment horizon.
Ameriton Holdings	Ameriton Holdings LLC, owned 100% of the voting stock of Ameriton. During September 2003, the Operating Trust purchased the voting membership interest in Ameriton Holdings.
Annual Report	This Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2003.
Archstone	Archstone Communities Trust, the predecessor registrant to Archstone-Smith.
Archstone-Smith	Archstone-Smith Trust, sole holder of the A-2 Common Units and sole trustee.
Board	Collectively, refers to Archstone-Smith’s Board of Trustees or to Archstone-Smith, our sole trustee, unless the context otherwise requires.
Class B Common Units	Common Units of beneficial interest issued in connection with contributions of property between dividend distribution dates; they are entitled to receive a pro-rata distribution with respect to the quarter in which the property is contributed and, after that distribution date, they automatically convert into A-1 Common Units.
Common Share(s)	Archstone-Smith common shares of beneficial interest, par value $0.01 per share.
Common Unit(s)	For periods prior to the Smith Merger and reorganization into an UPREIT, Archstone’s common shares of beneficial interest are referred to as Common Units.
Consolidated Engineering Services or CES	Consolidated Engineering Services, Inc. was a taxable REIT subsidiary in the business of delivering mission critical facilities management services for corporate, government and institutional customers. CES was sold to a third party in December 2002 for $178 million.

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Abbreviation, Acronym or Defined Term	Definition/Description
Convertible Preferred Units	Collectively, the Series A, H, J, K and L Preferred Units.
Declaration of Trust	The Operating Trust’s Amended and Restated Declaration of Trust as filed with the State of Maryland on October 30, 2001, as amended and supplemented.
DEU	Dividend Equivalent Unit; an amount credited to certain options and RSU’s under Archstone-Smith’s long-term incentive plan.
Distributions	Refers to dividends paid by Archstone on either Archstone common or preferred shares of beneficial interest paid prior to the UPREIT reorganization and Smith Merger. Subsequent to the Smith Merger, refers to distributions paid on Operating Trust Common Units or Preferred Units.
DownREIT OP Units	Operating Partnership Units issued by Atlantic Multifamily Limited Partnership — I, Archstone Communities Limited Partnership and Archstone Communities Limited Partnership II, which are convertible into Common Units. The DownREIT OP Units were converted into A-1 Common Units in August 2002.
DownREIT Perpetual Preferred Units	Collectively, the Series E, F, and G Preferred Units issued by Archstone Communities Limited Partnership and Archstone Communities Limited Partnership II. These Units were convertible into a corresponding series of Preferred Shares. The DownREIT Perpetual Preferred Units were converted into Operating Trust Perpetual Preferred Units in August 2002.
FASB	Financial Accounting Standards Board.
Fannie Mae	Federal National Mortgage Association.
Freddie Mac	Federal Home Loan Mortgage Corporation.
GAAP	Generally accepted accounting principles in the United States.
In Planning	Parcels of land owned or Under Control, which are in the development planning process, upon which construction of apartments is expected to commence within 36 months.
Lease-Up	The phase during which newly constructed apartment units are being leased for the first time, but prior to the community becoming Stabilized.
LIBOR	London Interbank Offered Rate.
Long-Term Unsecured Debt	Collectively, the Operating Trust’s long-term unsecured senior notes payable and tax-exempt unsecured bonds.
NAREIT	National Association of Real Estate Investment Trusts.
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. See a reconciliation of NOI to Earnings from Operations in this Annual Report under caption “Apartment Community Operations”.
NYSE	New York Stock Exchange.
Operating Trust	Archstone-Smith Operating Trust.

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Abbreviation, Acronym or Defined Term	Definition/Description
Perpetual Preferred Units	Collectively, the Series B, C, D, E, F, G and I Preferred Units. These units are not convertible, but are redeemable at the option of Archstone-Smith at certain future dates.
Preferred Units	Collectively, the Series A, B, C, D, H, I, J, K, and L Preferred Units.
REIT	Real estate investment trust.
Restricted Share Unit or RSU	A unit representing an interest in one Common Unit, subject to certain vesting provisions, through our long-term incentive plan.
Same-Store	Term used to refer to a group of operating communities that had attained stabilization and were fully operating 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 the Ameriton properties due to their short-term holding periods.
Series A Preferred Units	Operating Trust Series A Cumulative Preferred Units of Beneficial Interest, par value $0.01 per unit, which were redeemed in full in November 2003.
Series B Preferred Units	Operating Trust Series B Cumulative Perpetual Preferred Units of Beneficial Interest, par value $0.01 per unit, which were redeemed in full in May 2001.
Series C Preferred Units	Operating Trust Series C Cumulative Perpetual Preferred Units of Beneficial Interest, par value $0.01 per unit, which were redeemed in full in August 2002.
Series D Preferred Units	Operating Trust Series D Cumulative Perpetual Preferred Units of Beneficial Interest, par value $0.01 per unit.
Series E Perpetual Preferred Units	Operating Trust 8.375% Cumulative Perpetual Preferred Units, par value $0.01 per unit.
Series F Perpetual Preferred Units	Operating Trust 8.125% Cumulative Perpetual Preferred Units, par value $0.01 per unit.
Series G Perpetual Preferred Units	Operating Trust 8.625% Cumulative Perpetual Preferred Units, par value $0.01 per unit.
Series H Preferred Units	Operating Trust 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	Operating Trust Series I Cumulative Perpetual Preferred Units of Beneficial Interest, par value $0.01 per unit.
Series J Preferred Units	Operating Trust Series J Cumulative Convertible Perpetual Preferred Units of Beneficial Interest, par value $0.01 per unit, which were converted into Common Units in full in July 2002.
Series K Preferred Units	Operating Trust Series K Cumulative Convertible Perpetual Preferred Units of Beneficial Interest, par value $0.01 per unit.
Series L Preferred Units	Operating Trust Series L Cumulative Convertible Perpetual Preferred Units of Beneficial Interest, par value $0.01 per unit.

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Abbreviation, Acronym or Defined Term	Definition/Description
Service Businesses	Collectively, Consolidated Engineering Services and Smith Management Construction. Both of these entities were taxable REIT subsidiaries and were acquired in the Smith Merger.
Smith Management Construction or SMC	Smith Management Construction Incorporated was a taxable REIT subsidiary in the business of providing construction management and building maintenance services. SMC was sold to members of its senior management in February 2003.
Smith Merger	The series of merger transactions in October 2001 whereby Archstone-Smith merged with Smith Residential and 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 the redevelopment, new management and new marketing programs (or development and marketing in the case of a newly developed community) have been completed.
Total Expected Investment	For development communities, represents the total expected investment at completion; for operating communities, represents the total expected investment plus planned capital expenditures.
Under Control	Land parcels we do not own, yet have an exclusive right (through contingent contract or letter of intent) during a contractually agreed upon time period to acquire for the future development of apartment communities, subject to approval of contingencies during the due diligence process.
UPREIT	Umbrella Partnership Real Estate Investment Trust.

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PART I

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 1 of this Annual Report for a complete discussion of the various risk factors that could affect our future performance.

Item 1.      Business

      Archstone-Smith Operating Trust is a recognized leader in apartment investment and operations. The company owns and operates an irreplaceable portfolio of high-rise and garden apartment communities concentrated in many of the most desirable neighborhoods in the greater Washington, D.C. metropolitan area, Southern California, the San Francisco Bay area, Chicago, Boston, Seattle, the greater New York City metropolitan area and Southeast Florida. The company continually upgrades the quality of its portfolio through the selective sale of assets, using proceeds to fund investments with higher anticipated growth prospects. Through its two customer-facing brands, Archstone and Charles E. Smith, we define the standard for apartment operations. As of December 31, 2003, we owned or had an ownership position in 249 communities, representing 88,183 units, including units under construction.

      As of December 31, 2003, our operating portfolio was concentrated in protected locations in the following core markets, based on net operating income, excluding amounts associated with communities that are owned by Ameriton was as follows:

Greater Washington, D.C. metropolitan area		40.0	%
Southern California		15.2
San Francisco Bay Area, California		9.8
Chicago, Illinois		7.6
Boston, Massachusetts		5.0
Southeast Florida		4.2
Seattle, Washington		3.3
Greater New York City metropolitan area		2.5
Other		12.4
	Total:	100.0	%

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The Company

      We are a REIT engaged primarily in the operation, development, redevelopment, acquisition, management and long-term ownership of apartment communities throughout the United States. Archstone-Smith is structured as an UPREIT, under which all property ownership and business operations are conducted through the Operating Trust. Archstone-Smith is our sole trustee and owned 88.5% of our Common Units at December 31, 2003. Archstone-Smith Common Shares trade on the New York Stock Exchange (NYSE:ASN).

      We focus on creating value for our unitholders by:

•  Maximizing the performance of our apartment communities by (i) generating long-term sustainable growth in operating cash flow, (ii) strengthening our operating platform, (iii) leveraging the equity of our brands, (iv) investing in technology that improves our core business, (v) and solidifying our reputation for operational leadership;

•  Acquiring, developing and operating apartments in markets characterized by: (i) protected locations with limited land on which to build new housing; (ii) expensive single-family home prices; and (iii) a strong, diversified economic base and job growth potential; and

•  The selective sale of assets, which allows us to continually upgrade our portfolio by using proceeds to fund investments with higher anticipated growth prospects.

Customer-focused Operations

      We believe that our long-term cash flow growth is enhanced by the Archstone and Charles E. Smith brands, our efficient operating platform, robust and scalable technology, and the continued investment in our associates:

      Powerful brands. An essential component of our strategy is to consistently offer a higher level of service at all our apartment communities. Through Archstone’s Seal of Service^TM and Charles E. Smith’s Smith Advantage, we offer our residents convenience and flexibility all backed by written guarantees. These programs help to create customer loyalty and trust, and increase the likelihood of renewals and referrals.

      Strengthening our operations. We believe that we can create a distinct competitive advantage by identifying and implementing the best practices for our most critical processes and standardizing them at each of our communities. To do this, we assembled a core process project (CPP) team to focus on three important customer touch-points: (i) customer inquiries and leasing, (ii) the move-in experience, and (iii) renewal, transfer or move-out. To capture best practices, the CPP team conducts extensive field research with front-line associates to translate proven tactics into scalable tools that ensure consistency in our day-to-day customer interactions. We believe that by enhancing our customers’ experiences with us, we will ultimately increase customer acquisition, retention and referrals.

      Investing in technology. We invest in technology to improve our core operations and make it easier for our customers to do business with us. In 2003, we completed the implementation of a revenue and pricing management system and launched a new web-based property management system that we believe will redefine the way customers lease an apartment and how we manage our apartment communities.

      We pioneered the use of Lease Rent Options^TM (LRO), the first pricing and revenue management software system in the apartment industry. LRO enables us to more precisely forecast and analyze market demand and unit availability by taking into account multiple variables that are difficult to compile manually to optimize pricing for our apartments, thereby enhancing total revenues for the company. In addition, LRO allows us to offer flexible lease terms to new and renewing customers, creating a level of flexibility that has never been available in the apartment industry.

      We are also upgrading our existing property management system to MRI Residential Management (RM) software. Developed in conjunction with MRI, an Intuit company (NASDAQ: INTU), RM is a customer-centric, web-based property management software system that allows us to fully integrate LRO, our

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pricing and revenue management software, into our operating platform and automate virtually all of our daily on-site leasing and reporting tasks. This allows us to execute leases more smoothly and quickly — and improve our customer’s experience.

      In addition, RM provides a seamless online interface with our customers via resident-only web sites, allowing customers 24/7 access to us to complete new and renewed leases, pay rent online, submit service requests and more. The system’s automated work order solution allows us to directly enhance our customer service offering by improving our ability to manage and execute service requests, one of our most important customer functions. Equally important, the system gives us the ability to accurately track resident histories to better understand and serve our customers. We expect to complete the rollout of RM across our entire portfolio in 2005.

      Investing in our associates. A critical component to ensuring the integrity of our brand offering is attracting, training and retaining the best professionals in our industry — and giving them the support and tools to provide an exceptional customer experience.

      Each of our on-site associates receives extensive training in their first year through our Customer-centered Sales Excellence (CCSE) training program. CCSE’s seven training modules cover the various aspects of our sales process and are offered to associates in manageable half-day classes.

      In 2003, we introduced The Practice of Leadership training program to on-site, corporate and regional managers to give them the tools to become better leaders. This three-day program focuses on six leadership practices consistent with our company culture and values that we believe drive our success. This program is complemented by a 360-Degree Feedback Program, through which direct reports, supervisors and peers evaluate corporate managers to identify strengths and opportunities for improvement.

Investment Strategy

      Protected markets. We invest our capital in protected markets in locations where there is a very limited amount of land on which new housing can be developed, which minimizes competition. In addition to supply constraints, our core markets — the greater Washington, D.C. metropolitan area, Southern California, the San Francisco Bay area, Chicago, Boston, Seattle, the greater New York City metropolitan area and Southeast Florida — are characterized by (i) relatively stable demand, (ii) a diverse economic base and (iii) expensive single-family home prices, which we believe maximize our ability to maintain occupancy and produce sustainable long-term cash flow growth.

      Capital recycling program. We utilize a sophisticated capital allocation strategy, using the selective sale of assets to redeploy disposition proceeds into investments with higher anticipated long-term growth prospects. We believe that concentrating our portfolio in protected markets improves our growth rate, value creation and long-term business fundamentals.

      In 2003, we sold $1.4 billion of apartment communities (excluding Ameriton) representing 15,599 units, generating GAAP gains of $310.9 million and an average unleveraged internal rate of return of 13.0%. Additionally, we acquired $508.9 million of operating communities, representing 2,893 units, essentially all of which were funded by disposition proceeds. We believe the quality of our portfolio is continually upgraded by redeploying disposition proceeds into new investments.

      Development and redevelopment. We believe we create significant value through the development of new apartment communities and the redevelopment of existing operating communities. At December 31, 2003, we had 2,607 units, representing a Total Expected Investment of $636.9 million, of development communities under construction in markets that include Southern California, downtown Boston and the greater Washington, D.C. metropolitan area. Of the total amount, $301.6 million is already funded. In 2003, we completed $171.5 million of new development communities, representing 861 units.

      We also dramatically reposition assets by upgrading interiors, exteriors, leasing offices, parking facilities, landscaping, and amenities that we believe can produce attractive returns on invested capital. In addition, we

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invest in revenue-enhancing and expense-reducing capital expenditures such as building garages/carports, additional storage facilities, and adding utility sub-metering systems.

Conservative Balance Sheet Management

      One of our primary financial objectives is to structure our balance sheet to enhance our financial flexibility in order to have access to capital when others in the industry do not. We have a significant equity base, with a total equity market capitalization of $6.4 billion as of December 31, 2003. Our investment-grade debt ratings from Standard & Poor’s (BBB+), Moody’s Investors Service (Baa1) and Fitch, Inc. (BBB+) are indicative of our solid financial position.

      During 2003, we financed our investment activity primarily through internally generated cash flow from operations and asset dispositions. Our dispositions for the year ended December 31, 2003, totaled $1.4 billion. We used a portion of the proceeds to repay $400 million of debt, which reduced our ratio of debt-to-undepreciated-book-capitalization from 47% at December 31, 2002 to 42% at the end of 2003. We also reduced our secured debt levels by $250 million and increased our unencumbered asset base to $5.8 billion as of December 31, 2003. As of February 13, 2004, we had approximately $1.2 billion of liquidity, including cash on hand, liquid assets, restricted cash in escrows and capacity on unsecured credit facilities.

      Our long-term debt is structured to create a relatively level principal maturity schedule, without significant repayment obligations in any year. We have only $113.5 million of long-term debt maturing in 2004, representing 1.1% of our total market capitalization. The following summarizes our long-term debt maturity profile for 2004 through 2008, and thereafter, as of December 31, 2003 (dollar amounts in thousands):

				% of Total Market
Year		Total		Capitalization(1)
2004		$	113,522		1.1	%
2005			319,944		3.1	%
2006			355,642		3.5	%
2007			515,312		5.0	%
2008			461,393		4.5	%
Thereafter			2,033,777		19.7	%
	Total	$	3,799,590		36.9	%

(1)  Total market capitalization as of December 31, 2003, represents the market capitalization based on the closing share price on the last trading day of the period for publicly traded securities and liquidation value for private securities as well as the book value of total debt.

      Consistent dividend growth. We paid distributions of $1.71 per Common Unit in 2003 and announced our anticipated 2004 distribution level of $1.72 per unit, a 169% increase since 1991, the year we began to focus exclusively on multifamily communities. With the 2004 increase, we have raised our annual distribution for 12 consecutive years. We have paid 114 consecutive quarterly distributions.

Management

      We have several senior executives who possess the leadership, operational, investment and financial skills and experience to oversee the overall operation of our company. Several of our senior officers could serve as the principal executive officer and continue our strong performance. Our management team emphasizes active training and organizational development initiatives for associates at all levels of our company in order to build long-term management depth and facilitate succession planning.

Officers of the Operating Trust

      Archstone-Smith is the majority owner of the Operating Trust and owns approximately 88.5% of our total outstanding Common Units. Archstone-Smith is the Operating Trust’s sole Trustee. References throughout

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this section are labeled “Operating Trust” for the post-merger period as a result of this name change. Pre-merger periods will be referenced as follows: (i) as “Operating Trust” for individuals who were associated with Archstone and/or its affiliates; and (ii) as “Smith Residential” for individuals who were associated with Smith Residential and/or its affiliates. See Note 2 of the Operating Trust’s audited financial statements in this Annual Report or in Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report for additional information on the Smith Merger.

Senior Officers of Archstone-Smith Operating Trust

      The senior officers of Archstone-Smith Operating Trust are:

Name	Title
R. Scot Sellers	Chairman and Chief Executive Officer
J. Lindsay Freeman	Chief Operating Officer
Charles E. Mueller, Jr.	Chief Financial Officer
Al Neely	Chief Development Officer
James D. Rosenberg	President — High Rise Division
Dana K. Hamilton	Executive Vice President — National Operations
Caroline Brower	General Counsel and Secretary
Daniel E. Amedro	Senior Vice President and Chief Information Officer
Mark A. Schumacher	Senior Vice President and Controller

Biographies of Senior Officers

      R. Scot Sellers – 47 — Trustee, Chairman and Chief Executive Officer of Archstone-Smith Operating Trust since June 1997, with overall responsibility for the Operating Trust’s strategic direction, investments and operations; Co-Chairman and Chief Investment Officer of the Operating Trust from July 1998 to December 1998. From September 1994 to June 1997, Managing Director of the Operating Trust, where he had overall responsibility for Operating Trust’s investment strategy and implementation; Senior Vice President of the Operating Trust from May 1994 to September 1994. Mr. Sellers is a member of the Executive Committee and Second Vice Chairman of the Board Governors of NAREIT; a member of the Executive Committee of the Board of Directors of the National Multi Housing Council; Director of Christian International Scholarship Foundation; Director of Alliance for Choice in Education.

      J. Lindsay Freeman – 58 — Chief Operating Officer since September 2002, with responsibility for managing all investment and operating activities for the Operating Trust; President-East Division of the Operating Trust from October 2001 to September 2002, with responsibility for all investments and operations of the East Division; from July 1998 to October 2001, Managing Director of the Operating Trust, with responsibility for investments and operations in the East and Central Regions; Managing Director of Security Capital Atlantic Incorporated from December 1997 to July 1998; Senior Vice President of Security Capital Atlantic Incorporated from May 1994 to November 1997; previously, Senior Vice President and Operating Partner of Lincoln Property Company in Atlanta, Georgia, where he was responsible for acquisitions, financing, construction and management of apartment communities within the Atlantic region and oversaw operations of 16,000 apartment units.

      Charles E. Mueller, Jr. – 40 — Chief Financial Officer of the Operating Trust since December 1998, with responsibility for the planning and execution of the company’s financial strategy and balance sheet management; Mr. Mueller oversees the company’s accounting/financial reporting, corporate finance, investor relations, corporate and property tax, due diligence and risk management functions. Vice President of the Operating Trust from September 1996 to December 1998; prior thereto, he held various financial positions with Security Capital, where he provided financial services to Security Capital and its affiliates.

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      Al Neely – 58 — Chief Development Officer of the Operating Trust since April 2003, with responsibility for the oversight and direction of all Operating Trust residential development projects; Executive Vice President of the Operating Trust and Charles E. Smith Residential Realty, Inc. from April 1989 to April 2003 with responsibility for oversight and direction of High-Rise residential development projects; Executive Vice President and Managing General Partner of the New Height Group from August 1981 to April 1989 with responsibility for the development and management of 2.5 million square feet of mixed-use property; General Manager of a 1,100-acre mixed-use business park from October 1973 to April 1989 where he managed the development of 3.5 million square feet of corporate user buildings.

      James D. Rosenberg – 46 — President-Charles E. Smith Residential Division of the Operating Trust since November 2002, with responsibility for all investments and operations of the Division; President and Chief Operating Officer of Winston Hotels from January 1998 to November 2002; Senior Vice President for Holiday Inn Worldwide from January 1994 to January 1998, where he was responsible for the operations of 85 hotel properties, including nearly 50 high-rise properties in urban areas; Mr. Rosenberg started his career with the public accounting firm of Price Waterhouse.

      Dana K. Hamilton – 35 — Executive Vice President-National Operations for the Operating Trust since May 2001, with responsibility for corporate services, including human resources, training and development, marketing and corporate communications, and new business development; Senior Vice President of the Operating Trust from December 1998 to May 2001; Vice President from December 1996 to December 1998, with responsibility for new product development and revenue enhancement through portfolio-wide initiatives.

      Caroline Brower – 55 — General Counsel and Secretary of the Operating Trust since September, 1999, with responsibility for legal and corporate governance; from September 1998 to September 1999, President of Ameriton Properties Incorporated; 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.

      Daniel E. Amedro – 47 — Chief Information Officer and Senior Vice President of the Operating Trust since January 1999, with primary responsibility for the company’s information technology functions and initiatives; Chief Information Officer and Vice President from May 1998 to January 1999; from September 1996 to March 1998, Vice President of Information Services for American Medical Response, the largest private ambulance operation in the United States; prior thereto, Vice President of Information Services for Hyatt Hotels and Resorts, where he was responsible for all strategic information systems including Spirit, Hyatt’s worldwide reservation system, which supported over 50,000 users and was recognized as the leading reservations system in the hospitality industry.

      Mark A. Schumacher – 45 — Senior Vice President and Corporate Controller of the Operating Trust since January 2002, with principal responsibility for accounting and financial reporting; prior thereto, Vice President and Corporate Controller of Qwest Communications International from December 2000 to December 2001 where he had principal responsibility for accounting and financial reporting; from April 1991 to December 2000, held various senior and executive level positions in the accounting and financial reporting departments of US West; from April 1984 to April 1991 he held various managerial level positions in the accounting and financial reporting department of US West.

Employees

      We currently employ approximately 2,730 individuals, of whom approximately 2,160 are focused on the site-level operation of our garden communities and high-rise properties. Of the site-level associates, approximately 85 are subject to collective bargaining agreements with four unions in Illinois and New York. The balance are professionals who manage corporate and regional operations, including our investment program, property operations, financial reporting and other support functions. We consider our relationship with our employees to be very good.

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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 operating and development communities include coverages 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 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.

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 web site is http://www.archstonesmith.com. We make available free of charge, on or through our web site, our 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. The reference to our web site does not incorporate by reference the information contained in the web site and such information should not be considered a part of this report. We have adopted a code of ethics and business conduct applicable to our Board and 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 included as an exhibit to this report and is available through our web site. In addition, copies of the code of ethics and business conduct can be obtained, free of 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 web site.

Risk Factors

      The following factors could affect our future financial performance:

      We are restricted in our ability to sell the properties located in the Crystal City area of Arlington, Virginia, unless they are all sold as a single transaction, without the consent of Messrs. Smith and Kogod, which could result in our inability to sell these properties at an opportune time without incurring additional costs.

      A sale of any of the properties acquired in the Smith Merger prior to January 1, 2022, could result in increased costs to us in light of the tax-related obligations made to the former Smith Partnership unitholders. Under the shareholders’ agreement between Archstone-Smith, the Operating Trust, Robert H. Smith and Robert P. Kogod, we are restricted from transferring specified high-rise properties located in the Crystal City area of Arlington, Virginia until October 31, 2016, without the consent of Messrs. Smith and Kogod, which could result in our inability to sell these properties at an opportune time and at increased costs to us. However, we are permitted to transfer these properties in connection with a sale of all of the properties in a single

13

transaction or pursuant to a bona fide mortgage of any or all of such properties in order to secure a loan or other financing.

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.

Debt financing could adversely affect our performance.

      We are subject to risks associated with debt financing and preferred equity. These risks include the risks that we will 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, that we will be unable to refinance current or future indebtedness, that the terms of any refinancing will not be as favorable as the terms of existing indebtedness, and that we will be unable to make necessary investments in new business initiatives due to lack of available funds. Increases in interest rates could increase interest expense, which would adversely affect net earnings and cash available for payment of obligations. 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.

      Additionally, 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. These debt agreements also require us to maintain various financial ratios. Failure to comply with these covenants could result in a requirement to repay the indebtedness prior to its maturity, which could have an adverse effect on our operations and ability to make distributions to unitholders.

      Some of our debt instruments 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.

      We had $3.9 billion in total debt outstanding as of December 31, 2003, of which $1.9 billion was secured by real estate assets and $599.8 million was subject to variable interest rates, including $103.8 million outstanding on our short-term credit facilities.

Archstone-Smith may not have access to equity capital.

      A prolonged period in which real estate operating companies cannot effectively access the public equity markets may result in heavier reliance on alternative financing sources to undertake new investment activities. These alternative sources of financing may be more costly than raising funds in the public equity markets.

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.

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

      Real estate cash flows and values are affected by a number of factors, including 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), 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,

14

including zoning, usage and tax laws, 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 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 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.

Real estate investments are relatively illiquid and we may not be able to sell properties when appropriate.

      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.

Compliance with environmental regulations may be costly.

      We must comply with certain environmental 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 removal or remediation of certain hazardous substances, including asbestos-related liability. Those laws and regulations often impose liability without regard to fault. As part of our due diligence procedures, we have conducted Phase I environmental assessments on each of our communities prior to acquisition; however, we cannot give any assurance that those assessments have revealed all potential liabilities.

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

      As a general matter, concern about indoor exposure to mold has been increasing as such exposure has been alleged to have a variety of adverse effects on health. As a result, there has been an increasing 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. 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, such as the enactment of regulations relating to internal air quality, 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. Changes in laws increasing potential liability for environmental conditions or increasing the restrictions on discharges or other environmental conditions may result in significant unanticipated expenditures.

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Archstone-Smith’s failure to qualify as a REIT would have adverse consequences.

      We believe that Archstone-Smith has qualified for taxation as a REIT under the Internal Revenue Code and they plan to continue to meet the requirements for taxation as a REIT. They cannot, however, guarantee that they will continue to qualify in the future as a REIT. They cannot give any assurance that new legislation, regulations, administrative interpretations or court decisions will not significantly change the requirements relating to Archstone-Smith’s qualification. If they fail to qualify as a REIT, they would be subject to federal income tax at regular corporate rates. Also, unless the Internal Revenue Service granted them relief, they would remain disqualified as a REIT for four years following the year in which it failed to qualify. In the event that they failed to qualify as a REIT, they would be required to pay significant income taxes and would have less money available for operations and distributions to unitholders. This would likely have a significant adverse effect on the value of our securities and our ability to raise additional capital. In order to maintain its qualification as a REIT under the Internal Revenue Code, Archstone-Smith’s declaration of trust limits the ownership of its shares by any person or group of related persons to 9.8%, unless special approval is granted by our Board.

We intend to qualify as a partnership, but we cannot guarantee 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 the 90% test generally includes passive income, such as real property rents, dividends and interest. The income requirements applicable to REITs and the definition of qualifying income for purposes of this 90% test are similar in most respects. 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 will incur substantial tax liabilities, Archstone-Smith would fail to qualify as a REIT for tax purposes and our ability to raise additional capital would be impaired.

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, 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.

We have a concentration of investments in certain markets.

      At December 31, 2003, approximately 40.0% of our apartment communities are located in the Greater Washington, D.C. Metropolitan Area, based on NOI. Approximately 15.2% of our apartment communities are located in Southern California at December 31, 2003, based on NOI. Southern California is the geographic area comprised of the Los Angeles, Inland Empire, Orange County, San Diego and Ventura County markets. Additionally, approximately 9.8% of our apartment communities are located in the San Francisco Bay Area of California at December 31, 2003, based on NOI. We are, therefore, subject to increased exposure (positive or negative) to economic and other competitive factors specific to protected markets within these geographic areas.

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Our business is subject to extensive 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.

Item 2. Properties

Geographic Distribution

      At December 31, 2003, the geographic distribution for our eight core markets based on NOI, excluding properties owned by Ameriton, was as follows:

Greater Washington, D.C. Metropolitan Area		40.0	%
Southern California		15.2
San Francisco Bay Area, California		9.8
Chicago, Illinois		7.6
Boston, Massachusetts		5.0
Southeast Florida		4.2
Seattle, Washington		3.3
Greater New York City Metropolitan Area		2.5
	Total	87.6	%

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      The following table summarizes the geographic distribution at December 31, 2003 based on NOI:

				Total Portfolio(1)(2)
				2003			2002			2001
Core Markets
	Greater Washington, D.C. Metropolitan Area				40.0	%		35.1	%		33.2	%
	Southern California				15.2			13.2			11.8
	San Francisco Bay Area, California				9.8			9.0			9.8
	Chicago, Illinois				7.6			8.5			9.0
	Boston, Massachusetts				5.0			5.2			5.1
	Southeast Florida				4.2			6.6			7.2
	Seattle, Washington				3.3			3.4			4.0
	Greater New York City Metropolitan Area				2.5			2.2			—
		Total Core Markets			87.6	%		83.2	%		80.1	%
Non-Core Markets
	Atlanta, Georgia				2.5	%		3.1	%		3.3	%
	Denver, Colorado				2.2			2.4			2.7
	Houston, Texas				1.4			1.0			1.4
	Phoenix, Arizona				1.4			2.1			2.3
	Raleigh, North Carolina				1.1			1.4			1.8
	Other				3.8			6.8			8.4
		Total Non-Core Markets			12.4	%		16.8	%		19.9	%
			Total All Markets		100.0	%		100.0	%		100.0	%

(1)

Based on NOI for the fourth quarter of each calendar year, excluding NOI from communities disposed of during the period. For 2001, includes an entire quarter of NOI for the assets acquired in the Smith Merger, which closed October 31, 2001. See Item 7 under the caption “Apartment Community Operations” for a discussion on why we believe NOI is a meaningful measure and a reconciliation of NOI to Earnings for Operations.

(2)

Excludes all Ameriton properties.

Real Estate Portfolio

      We are a leading real estate operating company focused on the operation, development, redevelopment, acquisition, management and long-term ownership of apartment communities in protected markets throughout the United States. The following information summarizes our real estate portfolio as of December 31, 2003 (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:

						Operating
		Number of		Number of		Trust		Percentage
		Communities		Units		Investment		Leased(1)
OPERATING APARTMENT COMMUNITIES:
Garden Communities:
	Albuquerque, New Mexico		2		664	$	42,374		95.8	%
	Atlanta, Georgia		9		2,659		215,689		97.0	%
	Austin, Texas		2		714		34,187		93.8	%
	Boston, Massachusetts		6		1,308		220,713		98.2	%

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								Operating
				Number of		Number of		Trust		Percentage
				Communities		Units		Investment		Leased(1)
	Chicago, Illinois				4		1,313		143,681		93.6	%
	Dallas, Texas				5		1,282		67,162		96.3	%
	Denver, Colorado				6		1,949		166,094		96.0	%
	Greater Washington, D.C. Metropolitan Area				22		8,735		1,120,293		97.0	%
	Houston, Texas				2		1,408		73,945		96.2	%
	Inland Empire, California				4		1,594		96,901		96.3	%
	Los Angeles County, California				8		2,304		393,355		96.1	%
	Orange County, California				7		1,647		179,768		98.0	%
	Orlando, Florida				1		312		21,622		96.8	%
	Phoenix, Arizona				3		1,212		74,454		95.7	%
	Portland, Oregon				2		576		37,695		97.6	%
	Raleigh, North Carolina				5		1,324		96,730		97.3	%
	San Antonio, Texas				1		224		12,826		96.0	%
	San Diego, California				7		2,559		290,329		98.0	%
	San Francisco Bay Area, California				14		5,454		708,897		95.4	%
	Seattle, Washington				7		2,808		234,773		95.4	%
	Southeast Florida				6		1,566		163,239		96.5	%
	Stamford, Connecticut				1		160		36,390		97.5	%
	West Coast Florida				3		746		44,021		98.3	%
	Ventura County, California				2		770		69,803		97.5	%
		Garden Community Subtotal/ Average			129		43,288	$	4,544,941		96.5	%
High-Rise Properties:
	Boston, Massachusetts				3		693	$	177,681		98.7	%
	Chicago, Illinois				6		3,516		625,274		94.6	%
	Greater New York City Metropolitan Area				1		506		211,823		96.2	%
	Greater Washington, D.C. Metropolitan Area				31		11,325		1,959,200		96.5	%
	Southeast Florida				5		4,520		548,156		97.1	%
		High-Rise Subtotal/ Average			46		20,560	$	3,522,134		96.4	%
			Operating Apartment Communities Subtotal/ Average		175		63,848	$	8,067,075		96.4	%

							Archstone-
			Number of		Number of		Smith		Percentage
			Communities		Units		Investment		Leased(1)
APARTMENT COMMUNITIES UNDER CONSTRUCTION:
Garden Communities:
	Boston, Massachusetts			1		134	$	17,933		N/A
	Long Island, New York			1		396		32,828		N/A
	Los Angeles County, California			4		1,129		200,666		66.1	%
	Ventura County, California			1		316		14,208		N/A
		Garden Community Subtotal/ Average		7		1,975	$	265,635		N/A

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									Archstone-
					Number of		Number of		Smith		Percentage
					Communities		Units		Investment		Leased(1)
High Rise Properties:
	Boston, Massachusetts					1		420	$	26,768		N/A
	Greater Washington, D.C. Metropolitan Area					1		212		9,231		N/A
		High Rise Property Subtotal/ Average				2		632	$	35,999		N/A
			Apartment Communities Under Construction Subtotal/ Average			9		2,607	$	301,634		N/A
APARTMENT COMMUNITIES IN PLANNING AND OWNED(3):
Garden Communities:						6		2,633	$	95,911
		Total Apartment Communities In Planning and Owned Subtotal/ Average				6		2,633	$	95,911
				Total Apartment Communities Owned at December 31, 2003		190		69,088	$	8,464,620
OTHER REAL ESTATE ASSETS(2)								—		17,352
HOTEL ASSET								—		22,870
AMERITON PORTFOLIO:
		Operating Apartment Communities				10		2,526		283,319
		Apartment Communities Under Construction				7		2,385		171,125
		Apartment Communities In Planning and Owned and Other				3		735		39,894
				Subtotal/Average		20		5,646		494,338
				Total Real Estate Owned at December 31, 2003		210		74,734	$	8,999,180

(1)	Represents the percentage leased as of December 31, 2003. 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, 2003. A “N/A” indicates markets with communities under construction where Lease-Up has not yet commenced.
(2)	Includes land that is not In Planning.
(3)	As of December 31, 2003, we had one investment representing 112 units classified as In Planning and Under Control. Our actual investment in this community was $1.1 million, which is reflected in the “Other assets” caption of our Balance Sheet.

Item 3.      Legal Proceedings

      We are subject to the following claims in connection with moisture infiltration and resulting mold issues at high-rise properties in Southeast Florida.

      Henriques, et al. v. Archstone-Smith Operating Trust, et al., filed on August 27, 2002 (the “Henriques Claim”), in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida, on behalf of a class of residents at Harbour House. We have reached a court-approved settlement with the plaintiffs in this matter. The case alleged that water infiltration and resulting mold contamination at the property had been caused by faulty air-conditioning and had resulted in both personal injuries to the plaintiffs and damage to their property. Based on the settlement, we have recorded a liability for estimated legal fees associated with known and anticipated costs for our counsel and plaintiffs’ counsel, as well as estimated settlement costs. Not all plaintiffs have accepted the court-approved settlement, which could result in further court proceedings and potential legal fees and damages not contemplated in our current accrual. See

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Management’s Discussion and Analysis of Financial Conditions and Results of Operations in this Annual Report for further discussion regarding this accrual.

      Santos, et al. v. Archstone-Smith Operating Trust et al., filed on February 13, 2003, in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida, on behalf of a class of residents at Harbour House. The plaintiffs in this case make substantially the same allegations as those made in the Henriques claim and seek both injunctive relief and unspecified monetary and punitive damages. Although we believe this case to be without merit, we are currently in settlement discussions with the individuals who have retained counsel. Based on the status of these discussions, we have recorded a liability for estimated legal fees associated with known and anticipated costs for our counsel and plaintiffs’ counsel, as well as estimated settlement costs. See Management’s Discussion and Analysis of Financial Conditions and Results of Operations in this Annual Report for further discussion regarding this accrual.

      Michel, et al, v. Archstone-Smith Operating Trust, et al., was filed on May 9, 2003, in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida, on behalf of the class of residents at the property. The plaintiffs in this case make substantially the same allegations as those made in the Henriques claim and seek both injunctive relief and unspecified monetary and punitive damages. We believe this suit is without merit, and intend to vigorously contest the claims asserted in this litigation. No assurances can be given that this lawsuit, if adversely determined, will not have a material adverse effect on the company.

      Semidey, et al., v. Archstone-Smith Operating Trust et al., was filed on June 9, 2003, in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida, on behalf of the class of residents at the property. The plaintiffs in this case make substantially the same allegations as those made in the Henriques claim and seek both injunctive relief and unspecified monetary and punitive damages. We were never served with this complaint, but we have reached a settlement with a majority of the represented residents and are in discussions with the remaining plaintiffs. As a result, this complaint has been voluntarily dismissed without prejudice. Based on the status of these discussions, we have recorded a liability for estimated legal fees associated with known and anticipated costs for our counsel and plaintiffs’ counsel, as well as estimated settlement costs. No assurances can be given that the claims of the remaining represented residents will not result in additional lawsuits, or that if any such lawsuits were adversely determined, it would not have a material adverse effect on the company.

      We are 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 and 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

      None.

PART II

Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters

      There is no established market for the Common Units of the Operating Trust. Archstone-Smith’s Common Shares are listed on the New York Stock Exchange (NYSE: ASN). The following table sets forth the distributions on units made by Archstone-Smith Operating Trust during the past three years:

			2003		2002		2001
Per Common Unit:
	Ordinary income		$	0.77	$	1.33	$	0.89
	Capital gains			0.94		0.37		0.75
		Total	$	1.71	$	1.70	$	1.64

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			2003		2002		2001
Per Series A Convertible Preferred Unit(1):
	Ordinary income		$	0.95	$	1.79	$	1.19
	Capital gains			1.16		0.50		1.02
		Total	$	2.11	$	2.29	$	2.21

			2003		2002		2001
Per Series B Preferred Unit(2):
	Ordinary income		$	—	$	—	$	0.42
	Capital gains			—		—		0.37
		Total	$	—	$	—	$	0.79

			2003		2002		2001
Per Series C Preferred Unit(3):
	Ordinary income		$	—	$	1.08	$	1.16
	Capital gains			—		0.30		1.00
		Total	$	—	$	1.38	$	2.16

			2003		2002		2001
Per Series D Preferred Unit:
	Ordinary income		$	0.99	$	1.71	$	1.18
	Capital gains			1.20		0.48		1.01
		Total	$	2.19	$	2.19	$	2.19

			2003		2002		2001
Per Series H, K, L Preferred Unit(4)(5):
	Ordinary income		$	1.52	$	2.62	$	—
	Capital gains			1.86		0.74		—
		Total	$	3.38	$	3.36	$	—

			2003		2002		2001
Per Series I Preferred Unit(4)(6):
	Ordinary income		$	3,447.00	$	5,982.46	$	—
	Capital gains			4,213.00		1,677.54		—
		Total	$	7,660.00	$	7,660.00	$	—

			2003		2002		2001
Per Series J Preferred Unit(4)(7):
	Ordinary income		$	—	$	1.34	$	—
	Capital gains			—		0.37		—
		Total	$	—	$	1.71	$	—

(1)	The Series A Preferred Units were called for redemption during the fourth quarter of 2003.
(2)	The Series B Preferred Units were redeemed in full plus accrued dividends during May 2001.
(3)	The Series C Preferred Units were redeemed in full plus accrued dividends during August 2002.
(4)	The Series H, I, J, K and L Preferred Units were issued as a result of the Smith Merger.

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(5)	The Series H Preferred Units were converted into Common Units on May 15, 2003. The dividend paid on the Series H Preferred Units prior to conversion was $1.27, the taxability of which is proportionate to Series K and L Preferred Units above.
(6)	The Series I Preferred Units have a par value of $100,000 per share.
(7)	The Series J Preferred Units were converted into Common Units during July 2002.

      Distributions are paid on a quarterly basis and equal one-fourth of the total annual amount listed above unless otherwise noted. As of February 13, 2004, we had approximately 1015 record holders of A-1 Common Units and no beneficial holders of A-1 Common Units.

      Our tax return for the year ended December 31, 2003 has not been filed, and the taxability information for 2003 is based upon the best available data we have. Our tax returns for prior years have not been examined by the Internal Revenue Service and, therefore, the taxability of the distributions may be subject to change.

      In July 2002, 684,931 Series J Preferred Units were converted to Common Units. In August 2002, we redeemed 1,965,315 Series C Preferred Units at liquidation value plus accrued distributions. In addition, 3,000,000 Series E, F, and G Perpetual Preferred Units converted to Operating Trust Perpetual Preferred Units and 870,523 DownREIT Operating Partnership Units converted to A-1 Common Units in August 2002. In September 2002, 480,000 of the Series E Preferred Units were redeemed at liquidation value plus accrued distributions. The Series H Preferred Units were converted into Common Units during May 2003. In October 2003, we called the Series A Preferred Units for redemption. Of the 2.9 million Series A Convertible Preferred Units outstanding, 2.8 million were converted to Common Units and the remaining were redeemed for cash and retired. During 2003 and 2002 we issued 1,955,908 and 339,727 Common Units of the Operating Trust as partial consideration for real estate respectively. All units were issued in transactions exempt from registration under Section 4(2) of the Securities Act of 1933 and the rules thereunder.

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, 1999 to 2003. We believe that net earnings 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 the caption “Apartment Community Operations” for a reconciliation of NOI to Earnings from Operations. This data is qualified in its entirety by, and should be read in conjunction with, “Item 7. Management’s Discussion and Analysis of Financial

23

Condition and Results of Operations” and the financial statements and related notes that have been included or incorporated by reference in this Annual Report (in thousands, except per unit data):

		Years Ended December 31,
		2003		2002		2001		2000			1999
Operations Summary(1)(2):
Total revenues(3)		$	900,375	$	861,757	$	555,968	$	585,495		$	552,638
Property operating expenses (rental expenses and real estate taxes)			319,681		303,925		177,415		185,136			181,947
Net Operating Income			561,360		548,370		366,648		368,952			343,710
Depreciation on real estate investments			187,677		167,029		102,477		115,658			109,676
Interest expense			186,832		190,005		88,081		107,231			94,471
General and administrative expense			49,838		45,710		27,434		24,303			21,975
Earnings from operations			108,262		127,619		130,070		139,295			140,920
Gains on dispositions of depreciated real estate, net(4)			—		35,950		108,748		101,251			63,121
Income from unconsolidated entities			5,745		53,602		10,998		(449	)		—
Net earnings from discontinued apartment communities(5)			380,184		144,769		23,580		29,334			26,098
Preferred Unit distributions			26,153		34,309		25,877		25,340			23,733
Net earnings attributable to Common Units:
	— Basic		468,038		322,416		239,697		236,045			204,526
	— Diluted		480,910		322,416		250,917		244,625			204,526
Common Unit distributions			365,009		344,590		221,196		201,257			208,018
Per Unit Data:
Net earnings attributable to Common Units:
	— Basic	$	2.20	$	1.59	$	1.78	$	1.79		$	1.46
	— Diluted		2.18		1.58		1.77		1.78			1.46
Common Unit cash distributions paid			1.71		1.70		1.64		1.54			1.48
Cash distributions paid per unit:
	Series A Preferred Unit(6)		2.11		2.29		2.21		2.07			1.99
	Series B Preferred Unit(7)		—		—		0.79		2.25			2.25
	Series C Preferred Unit(8)		—		1.38		2.16		2.16			2.16
	Series D Preferred Unit		2.19		2.19		2.19		2.19			0.88
	Series E Preferred Unit(9)		2.09		0.70		—		—			—
	Series F Preferred Unit(9)		2.03		0.68		—		—			—
	Series G Preferred Unit(9)		2.16		0.72		—		—			—
	Series H, J, K and L Preferred Units(10)		3.38		3.36		—		—			—
	Series I Preferred Share(10)(11)		7,660.00		7,660.00		—		—			—
Weighted average Common Units outstanding:
	— Basic		212,288		202,781		134,589		131,874			139,801
	— Diluted		220,758		203,804		142,090		137,730			139,829

(1)	Includes Ameriton for all years presented.
(2)	Net earnings from discontinued operations have been reclassified for all years presented.

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(3)	Annual revenues inclusive of discontinued operations for 2003, 2002, 2001, 2000 and 1999 were $1.03 billion, $1.01 billion, $737 million, $732 million and $675 million, respectively.
(4)	Gains on the disposition of real estate investments classified as held for sale after January 1, 2002 are included in discontinued operations.
(5)	Represents property-specific components of net earnings and gains/losses on the disposition of real estate classified as held for sale subsequent to January 1, 2002.
(6)	The Series A Preferred Units were called for redemption during the fourth quarter of 2003; of the 2.9 million Preferred Units outstanding, 2.8 million were converted to Common Units and the remaining were redeemed.
(7)	All of the outstanding Series B Preferred Units were redeemed on May 7, 2001. During 2001, cash distributions of $0.79 per unit were paid for the period from January 1, 2001 to May 7, 2001.
(8)	All of the outstanding Series C Preferred Units were redeemed at liquidation value plus accrued dividends in August 2002.
(9)	In August 2002, the DownREIT Perpetual Preferred Units were converted into Operating Trust Perpetual Preferred Units.

(10)

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. In July 2002, Series J Preferred Units were converted into Common Units. During the fourth quarter 2001, we paid approximately $5.8 million of distributions on the Series H, I, J, K and L Preferred Units that were declared by Smith Residential prior to the Smith Merger.

(11)

Series I Preferred Units have a par value of $100,000 per unit.

	December 31,
	2003		2002		2001		2000		1999
Financial Position:
Real estate owned, at cost	$	8,738,116	$	7,406,437	$	6,755,786	$	4,113,206	$	4,198,420
Real estate held for sale(1)		261,064		1,891,298		1,856,427		1,200,394		1,030,988
Investments in and advances to unconsolidated entities		86,367		116,594		240,719		64,993		39,868
Total assets		8,921,695		9,096,026		8,700,722		5,117,459		5,360,477
Unsecured credit facilities		103,790		365,578		188,589		193,719		493,536
Long-Term Unsecured Debt		1,871,965		1,776,103		1,333,890		1,401,262		1,276,572
Total liabilities		4,184,592		4,714,687		4,305,117		2,767,774		2,735,729
Preferred units		210,120		355,221		374,114		286,856		297,635
Unitholders’ equity		4,017,669		3,799,141		3,631,518		2,251,606		2,567,506
Other Common Unitholders’ interest (at redemption value)		707,924		579,598		669,502		—		—
Number of Common Units outstanding		220,063		205,328		199,973		122,838		139,008

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		Years Ended December 31,
		2003			2002			2001			2000			1999
Other Data:
Net cash flows provided by (used in):
	Operating activities	$	349,441		$	445,645		$	332,153		$	322,077		$	295,654
	Investing activities		422,421			(191,003	)		387,694			71,789			(274,236	)
	Financing activities		(779,478	)		(248,823	)		(721,897	)		(394,861	)		(21,465	)

(1)  Previous years have been restated to include all assets that were classified as sold or held for sale after January 1, 2002 and sold in subsequent years.

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

The Company

      We are engaged primarily in the acquisition, development, management and operation of apartment communities throughout the United States. Archstone-Smith is structured as an UPREIT, under which substantially all property ownership and business operations are conducted through the Operating Trust and our subsidiaries and affiliates. Archstone-Smith is our sole trustee and owned approximately 88.5% of our Common Units at December 31, 2003.

The Smith Merger

      During October 2001, shareholders of both Archstone and Smith Residential (a publicly traded REIT which primarily developed, owned and managed high-rise apartment properties and garden apartment communities in Washington, D.C., Chicago, Boston and Southeast Florida) approved the Smith Merger. The combined company operates under the name Archstone-Smith Operating Trust. The Common Shares of our majority owner, Archstone-Smith are traded on the New York Stock Exchange (NYSE: ASN). The total purchase price paid for Smith Residential aggregated approximately $4.0 billion and corresponds to a purchase price of approximately $136,000 per operating apartment unit acquired. This transaction was structured as a tax-free merger and was accounted for under the purchase method of accounting.

Results of Operations

Overview

      In conjunction with our capital recycling strategy, rental revenues and rental expense, including real estate taxes will fluctuate based upon the timing and amount of dispositions, acquisitions and development lease-ups. As a result, in addition to the performance of our same store portfolio, disposition gains, and the corresponding loss of ongoing income from disposed assets, as well as the new income generated from acquisitions and developments, all contribute to the overall financial performance of Archstone-Smith.

      Basic net earnings attributable to Common Units increased approximately $145.6 million, or 45.2%, in 2003 as compared to 2002. This increase is largely attributable to:

•  An increase in gains during 2003 of $353.6 million as compared to $139.6 million during 2002, associated with an increase in the dispositions of depreciated real estate assets;

•  Lower interest expense associated with lower debt extinguishment costs and lower debt balances during 2003 and a reduction in interest rates on floating rate debt and refinanced debt;

•  A reduction in preferred share dividends during 2003 due to the conversion of Series A and Series H Preferred Shares into Common Shares in 2003 and the conversion of Series J Preferred Shares into Common Shares and the redemption of Series A Preferred Shares during 2002; and

•  Increased rental revenue and corresponding increase in rental expense due to the acquisition of operating communities and the continued lease-up and stabilization of development communities.

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      These increases were partially offset by:

•  A decline in rental revenue from our Same-Store portfolio of 1.4% for the twelve months ended December 31, 2003 as compared to the same period in 2002 (the same store population excludes all Ameriton communities), primarily due to a decline in potential effective rent per unit and a decrease in average occupancy;

•  The loss of rental revenue and a corresponding decrease in rental expense due to $1.6 billion and $602.1 million in dispositions during the twelve months ended December 31, 2003 and 2002, respectively; and

•  An increase of $24.8 million in expense associated with moisture infiltration and resulting mold during 2003 as compared to 2002.

      Basic net earnings attributable to Common Units increased approximately $82.7 million, or 34.5%, in 2002 as compared to 2001. This increase is largely attributable to:

•  An increase in overall rental revenue and a corresponding increase in rental expense due to the acquisition of properties in the Smith Merger;

•  A $35.4 million gain on the sale of CES, an unconsolidated entity acquired in the Smith Merger; and

•  Increased gains from the disposition of real estate during 2002 of $139.6 million as compared to $108.7 million during 2001 as well as unconsolidated entities acquired in the Smith Merger; and

•  Increased rental revenue and a corresponding increase in rental expense due to the acquisition of operating communities and the continued lease-up and stabilization of development communities.

      These increases were partially offset by:

•  The loss of rental revenue and a corresponding decrease in rental expense in 2002 due to the $1.3 billion of garden community dispositions in non-core markets during 2001 (including Archstone-Smith joint venture transactions) and $602.1 million of dispositions in 2002;

•  Same-Store rental revenue decline of 0.4% due primarily to a decline in potential effective rent per unit;

•  Same-Store rental expense increase of 4.4% in 2002 as compared to 2001 primarily due to increase in real estate taxes, insurance, make ready and personnel expenses;

•  Higher depreciation, interest and general and administrative expenses due principally to the Smith Merger;

•  Charges of $11.3 million relating to moisture infiltration and resulting mold issues at one of our high-rise properties in Southeast Florida during the third and fourth quarters of 2002; and

•  A $32.1 million increase in debt extinguishments costs due to the prepayment of mortgages.

      Our strongest core markets based on Same-Store revenue growth during 2003 included Southern California and the Greater Washington, D.C. Metropolitan Area. The San Francisco Bay Area, Seattle and Chicago continued to present the greatest challenges for revenue growth.

Apartment Community Operations

      We utilize net operating income (NOI) as the primary measure to evaluate the performance of our operating communities. NOI is defined as rental revenues less rental expense and real estate taxes for each of our operating properties. 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

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property performance. The following is a reconciliation of Same-Store NOI to Earnings from Operations (in thousands):

		2003			2002			2001
Same-Store NOI		$	479,787		$	486,268		$	432,100
NOI for properties not in Same-Store including Ameriton properties, which are not included in discontinued operations			155,786			203,020			191,181
NOI classified as discontinued operations — communities sold			(57,608	)		(123,619	)		(99,556	)
NOI classified as discontinued operations — communities held for sale			(16,605	)		(17,299	)		(21,180	)
Smith NOI prior to merger included in Same-Store calculation			—			—			(135,897	)
	Net Operating Income		561,360			548,370			366,648
Other income			19,334			9,462			11,905
Depreciation on real estate investments			(187,677	)		(167,029	)		(102,477	)
Interest expense			(186,832	)		(190,005	)		(88,081	)
General and administrative expenses			(49,838	)		(45,710	)		(27,434	)
Other expense and provision for possible loss on investments			(48,085	)		(27,469	)		(30,491	)
	Earnings from operations	$	108,262		$	127,619		$	130,070

      At December 31, 2003, investments in operating apartment communities comprised over 99% of our total real estate portfolio, based on NOI. The following table summarizes the overall performance of our apartment communities during 2003, 2002 and 2001 (in thousands, except for units and percentages):

Garden Communities(1)	2003			2002			2001
Rental revenues	$	526,143		$	504,643		$	485,017
Property operating expenses		175,574			166,652			157,029
Net Operating Income	$	350,569		$	337,991		$	327,988
Average number of operating units		50,725			58,189			57,979
Operating margin (Net Operating Income/rental revenues)		66.6	%		67.0	%		67.6	%
Average occupancy percentage		95.0	%		95.0	%		94.5	%

High-Rise Properties(1)(2)	2003			2002			2001
Rental revenues	$	351,634		$	341,131		$	54,917
Property operating expenses		143,456			133,623			19,841
Net Operating Income	$	208,178		$	207,508		$	35,076
Average number of operating units		20,917			21,659			21,149
Operating margin (Net Operating Income/rental revenues)		59.2	%		60.8	%		63.9	%
Average occupancy percentage		93.2	%		93.8	%		95.4	%

(1)	Net earnings from discontinued operations have been reclassified for all years presented.
(2)	High-rise properties were acquired in the Smith Merger on October 31, 2001. Therefore, 2001 includes only 2 months of operating results.

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      NOI for the entire apartment portfolio, including properties reported in discontinued operations, decreased by $13.2 million, or 2.4%, during 2003 as compared to 2002. This decrease was principally attributable to:

•  A decline in rental revenue from our Same-Store portfolio of 1.4% for the twelve months ended December 31, 2003 as compared to the same period in 2002 (the same store population excludes all Ameriton communities), primarily due to a decline in potential effective rent per unit and a decrease in average occupancy; and

•  The loss of rental revenue and the corresponding decrease in rental expense due to $1.6 billion and $602.1 million in dispositions during the twelve months ended December 31, 2003 and 2002, respectively.

      This decrease was partially offset by increased revenue from the acquisition of operating communities and the continued lease-up and stabilization of development communities.

      NOI for the entire apartment portfolio, including properties reported in discontinued operations, increased by $182.4 million, or 50.2%, during 2002 as compared to 2001. These increases were principally attributable to:

•  The inclusion of a full year of rental revenue and rental expense from high-rise properties acquired in the Smith Merger;

•  The continued successful Lease-Up and Stabilization of apartment communities; and,

•  The acquisition of seven apartment communities in 2002.

      These increases were partially offset by:

•  The loss of rental revenue and the corresponding decrease in rental expense due to $1.3 billion of dispositions in 2001 and $602.1 million of dispositions in 2002; and

•  Declining Same-Store revenue, combined with increases in property taxes and insurance.

      The following table reflects revenue, expense and NOI growth for Same-Store communities during each respective comparison period (the Same-Store population excludes all Ameriton communities):

		Same-Store			Same-Store			Same-Store
		Revenue			Expense			NOI
		Growth/			Growth/			Growth/
		(Decline)			(Decline)			(Decline)
2003
	Garden		(2.4	%)		(2.0	%)		(2.6	%)
	High-Rise		0.3	%		(1.0	%)		1.0	%
	Total		(1.4	%)		(1.6	%)		(1.3	%)
2002
	Garden		(1.3	%)		3.2	%		(3.3	%)
	High-Rise		1.5	%		6.7	%		(1.1	%)
	Total		(0.4	%)		4.4	%		(2.7	%)
2001(1)
	Garden		5.1	%		4.4	%		5.4	%
	High-Rise		7.0	%		3.0	%		9.4	%
	Total		5.7	%		3.9	%		6.5	%

(1)  Includes a full year of results for assets acquired in the Smith Merger.

      We anticipate Same-Store NOI growth to be flat to negative two percent during 2004. We view job growth as one of the most important drivers of demand in our business. If job growth does not begin to

29

improve throughout 2004, the assumptions mentioned above may prove to be overly optimistic. Conversely, if we experience substantial job growth earlier in the year, our assumptions may be conservative.

Other Income

      Other income increased by $9.9 million, or 104.3% in 2003 as compared to 2002. This increase is principally attributable to the collection of contingent proceeds related to indemnification of certain CES accounts receivable over 120 days and dividend income on stock investments.

      Other income decreased by $2.4 million, or 20.5%, in 2002 as compared to 2001. This decrease is principally attributable to lower interest income caused by lower restricted cash balances because of reduced disposition activity, coupled with lower interest rates. This decrease was partially offset by higher fee income from our joint ventures.

Depreciation Expense

      The $3.3 million, or 1.6% decrease in depreciation expense, including properties reported in discontinued operations, in 2003 as compared to 2002 is due principally to increased disposition activity during 2003.

      The $69.8 million, or 51.0% increase in depreciation expense, including properties reported in discontinued operations, in 2002 as compared to 2001 is due principally to additional depreciation expense associated with properties acquired in the Smith Merger.

Interest Expense

      The $32.5 million, or 13.1%, decrease in interest expense, including interest on properties reported in discontinued operations in 2003 as compared to 2002, is the result of lower debt balances, a reduction in interest rates on floating rate debt and refinanced debt, and the repayment of Long-Term Unsecured Debt with proceeds from our unsecured credit facilities, which were at lower average interest rates during the period.

      The $96.8 million, or 64.1%, increase in interest expense, including interest on properties reported in discontinued operations, in 2002 as compared to 2001 is the result of the incremental debt assumed in the Smith Merger, which was partially offset by a lower average cost of variable rate debt. Capitalized interest increased due to an increase in the number of properties under construction from the addition of properties acquired in the Smith Merger.

General and Administrative Expenses

      The $4.1 million, or 9.0%, increase in general and administrative expenses in 2003 as compared to 2002 relates primarily to additional severance costs and legal fees incurred during 2003, as well as increased depreciation of capitalized costs associated with our new RM program called LRO^TM and our new on-site property management software.

      The $18.3 million, or 66.6%, increase in general and administrative expenses in 2002 as compared to 2001 relates primarily to the incremental overhead incurred in connection with the Smith Merger. In addition, the amortization of capitalized costs associated with our new RM program called LRO^TM, which began in December 2001, contributed to the increase in 2002.

Other Expenses

      The $20.6 million, or 75.1% increase in other expense in 2003 as compared to 2002 is primarily related to an increase in moisture infiltration and resulting mold costs and a $3.5 million increase in Ameriton income taxes. The moisture infiltration costs pertain to estimated and incurred legal fees and estimated settlement costs, additional residential property repair and replacement costs and temporary resident relocation expenses. These increases were partially offset by lower merger integration costs associated with the Smith Merger as well as lower pursuit cost write-offs during 2003.

30

      The $11.9 million, or 76.5% increase in other expense in 2002 as compared to 2001 is primarily related to an increase in moisture infiltration costs and a $5.4 million increase in Ameriton income taxes. The moisture infiltration costs pertain to estimated and incurred legal fees and estimated settlement costs, additional residential property repair and replacement costs and temporary resident relocation expenses. These increases were partially offset by lower merger integration costs associated with the Smith Merger.

Income From Unconsolidated Entities

      Income from unconsolidated entities decreased by $47.9 million in 2003 as compared to 2002 primarily due to the gain on sale of CES recognized in December 2002.

      Income from unconsolidated entities increased by $42.6 million in 2002 as compared to 2001 primarily as a result of the following factors:

•  The $6.5 million increase in net earnings from CES and SMC, both acquired in the Smith Merger;

•  The $35.4 million gain on sale of CES to a third party in December 2002; and

•  The $4.8 million increase in our share of the net earnings from real estate joint ventures. This increase is primarily due to the formation of three operating community joint ventures during 2001 and three joint ventures acquired in the Smith Merger.

Preferred Unit Distributions

      Preferred Unit distributions decreased by $8.2 million, or 23.8% during 2003 as compared to 2002. This decrease was primarily attributable to the conversion of Series A and Series H Preferred Units into Common Units in 2003 and the conversion of Series J Preferred Units into Common Units during 2002, as well as the redemption of the Series C Preferred Units in 2002. The decrease in Preferred Unit distributions due to conversions was off-set by an increase in Common Unit distributions.

      Preferred Unit distributions increased by $8.4 million, or 32.6%, in 2002 as compared to 2001 due to the issuance of Series H, I, J, K and L Preferred Units in connection with the Smith Merger and the treatment of unit issuance costs associated with the 2001 redemption of Series B Preferred Units as additional 2001 distributions. This increase was partially offset by the redemption of the Series C Preferred Units in August 2002 and lower distributions on Series A Preferred Units resulting from periodic conversions into Common Units by shareholders.

Discontinued Operations

      For properties accounted for as discontinued operations, the results of operations 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 were classified as discontinued operations include rental revenue, rental expense, real estate tax, depreciation expense, and interest expense (actual interest expense for encumbered properties and a pro-rata allocation of interest expense for any unencumbered portion up to our weighted average leverage ratio), as well as the net gain or loss on the eventual disposal of properties held for sale.

      Consistent with our capital recycling program, we had 10 operating apartment communities, representing 2,651 units (unaudited), classified as held for sale under the provisions of SFAS 144, at December 31, 2003. Accordingly, we have classified the operating earnings from these 10 properties within discontinued operations for the years ended December 31, 2003, 2002 and 2001. During the twelve months ended December 31, 2003, we sold 48 operating communities. The operating results of these 48 communities and the related gain/loss on sale are also included in discontinued operations for 2003, 2002 and 2001. Lastly, discontinued operations for the years ended December 31, 2002 and 2001, include the net operating results of 12 operating communities and one retail property which were sold during 2002. Four apartment communities that were sold during 2002 were held for sale at December 31, 2001, and therefore gains and related operating income for these

31

dispositions are not classified as discontinued operations in accordance with SFAS 144. The following is a summary of net earnings from discontinued operations (in thousands):

	Years Ended December 31,
	2003			2002			2001
Rental revenues	$	125,584		$	233,479		$	181,498
Rental expenses		(39,352	)		(69,554	)		(45,704	)
Real estate taxes		(12,019	)		(23,007	)		(15,058	)
Depreciation on real estate investments		(15,679	)		(39,596	)		(34,390	)
Interest expense(1)		(28,236	)		(57,596	)		(62,766	)
Provision for possible loss on real estate investment		(3,714	)		(2,611	)		—
Gain on dispositions of real estate investments, net		353,600			103,654			—
	$	380,184		$	144,769		$	23,580

(1)  The portion of interest expense included in discontinued operations that is allocated to properties based on the company’s leverage ratio was $23.0 million, $38.7 million and $51.6 million for 2003, 2002 and 2001, respectively.

Gains on Dispositions of Real Estate Investments

      We recognized $353.6 million, $139.6 million and $108.7 million of net gains on the disposition of depreciated real estate assets (including properties reported in discontinued operations), during 2003, 2002 and 2001, respectively. These gains have resulted from our capital redeployment program, which involves the disposition of operating communities in non-core markets with less attractive growth prospects to fund investments in our core protected markets, and opportunistic dispositions by Ameriton.

Liquidity and Capital Resources

Financial Flexibility

      We are committed to maintaining a strong balance sheet and preserving our financial flexibility, which we believe enhances our ability to capitalize on attractive investment opportunities as they become available. As a result of the significant cash flow generated by our operations, cash positions at December 31, 2003, the available capacity under our unsecured credit facilities, and anticipated proceeds from the forward sale of marketable equity securities to be settled during 2004, we believe our liquidity and financial condition are sufficient to meet all of our reasonably anticipated cash flow needs in 2004.

Operating Activities

      Our net cash flows provided by operating activities decreased by $96.2 million, or 21.6%, during 2003 as compared to 2002. This decrease was principally due to lower net earnings before gains on the disposition of depreciated real estate and payment of expenses related to remediation of moisture infiltration and resulting mold that were accrued in previous years.

      Our net cash flows provided by operating activities increased by $113.5 million, or 34.2%, in 2002 as compared to 2001, principally due to an increase in earnings from operations due to the Smith Merger, which was partially offset by lower Same-Store revenue and lost revenue and corresponding decrease in rental expense resulting from our 2002 and 2001 disposition activity. For a more complete discussion of the factors affecting our operating performance, see our accompanying Statement of Cash Flows in this Annual Report.

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Investing and Financing Activities

      During 2003, cash flows provided by investing activities increased by approximately $613.4 million or 321.2%. This increase was primary attributable to a $984.1 million increase in proceeds from the disposition of real estate assets and a reduction in cash used to purchase marketable securities during 2003 as compared to 2002. This was partially offset by an increase in the balance of our tax-deferred escrow account and a $93.9 million decreased cash flow from unconsolidated entities.

      During 2002, cash flows from investing activities decreased $578.7 million or 149.3% as compared to 2001. The decrease was principally attributable to a $595.7 million reduction in proceeds from dispositions, a $305.0 million increase in investments in real estate, and an increase in purchases of marketable securities and other assets. These decreases were partially offset by the $236.9 million increase in cash flows from restricted cash in tax-deferred exchange escrow, a $129.5 million increase in cash flows from our investment in and advances to our unconsolidated investees and other investing activities.

      During 2003, cash used in financing activities increased by $530.7 million or 213.3%, as compared to 2002. This is principally due to a $438.8 million net reduction in our unsecured credit facility and a $283.5 million reduction in the total proceeds received from long-term unsecured debt offerings. This increase in cash used in financing activities was partially offset by a $361.7 million reduction in principal payments on mortgages payable.

      During 2002, cash used in financing activities decreased $473.1 million, or 65.5%, as compared to 2001. This decrease is primarily attributable to the issuance of senior unsecured notes for net proceeds of $530.8 million during 2002 and the $401.1 million increase in the net proceeds provided by our credit facilities used to finance investing activities. These increases were partially offset by principal prepayments on mortgages payable, including prepayment penalties, which increased $589.8 million and dividends and distributions on Common Units, Preferred Units and minority interest in the amounts of $344.6 million, $34.4 million and $5.2 million, respectively, during 2002 as compared to $221.2 million, $17.8 million and $8.4 million, respectively, during 2001.

      Significant non-cash investing and financing activities for the years ended December 31, 2003, 2002 and 2001 are as follows:

•  Issued $14.2 million and $8.7 million of Class B Common Units as partial consideration for property acquired during 2003 and 2002, respectively;

•  Issued $33.4 million of A-1 Common Units in exchange for real estate during 2003;

•  Holders of Series H Preferred Units converted $71.5 million of their units into into Common Units during 2003;

•  Redeemed $25.5 million and $41.7 million A-1 Common Units for Common Units during 2003 and 2002, respectively;

•  Holders of Series J Preferred Units converted $25 million of their units into Common Units during 2002;

•  Recorded an accrual related to moisture infiltration and resulting mold remediation for $11.3 million at one of our high-rise properties in Southeast Florida during 2002;

•  Assumed mortgage debt of $55.4 million, $195.6 million and $167.3 million (excluding mortgage debt assumed in the Smith Merger) during 2003, 2002 and 2001, respectively, in connection with the acquisition of apartment communities;

•  Holders of Series A Preferred Units converted $71.9 million, $5.7 million and $3.8 million of their units into Common Units during 2003, 2002 and 2001, respectively; and

•  Entered into joint venture transactions formed through our contribution of apartment communities and land in exchange for cash and an ownership interest in each of the ventures with an aggregate carrying value of $5.0 million during the year ended December 31, 2001.

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Scheduled Debt Maturities and Interest Payment Requirements

      We have structured the repayments of our long-term debt to create a relatively level principal maturity schedule and to avoid significant repayment obligations in any year, which would impact our financial flexibility. We have $113.5 million in scheduled maturities during 2004, and we have $319.9 million and $355.6 million of long-term debt maturing during 2005 and 2006, respectively. See Note 6 in our audited financial statements in this Annual Report for additional information on scheduled debt maturities.

      In October 2003, we completed the renewal of our unsecured revolving credit facility provided by a group of financial institutions led by JPMorgan Chase Bank. The $600 million facility matures in October, 2006 and has a one-year extension feature, exercisable at our option. The facility bears interest at the greater of prime or the federal funds rate plus 0.50%, or at our option, LIBOR plus 0.60%. The spread over LIBOR can vary from LIBOR plus 0.50% to LIBOR plus 1.25% based upon the rating of our Long-Term Unsecured Debt. The facility contains an accordion feature that allows us to expand the commitment up to $900 million at any time during the life of the facility, subject to lenders providing additional commitments. Under the agreement, we pay a facility fee of 0.15% of the commitment, which can vary from 0.125% to 0.200% based upon the ratings of our Long-Term Unsecured Debt.

      We also have a short-term unsecured borrowing agreement with JPMorgan Chase Bank, which provides for maximum borrowings of $100 million. The agreement bears interest at an overnight rate agreed to at the time of borrowing and ranged from 1.65% to 1.95% during 2003. There were $6.8 million and $17.1 million of borrowings outstanding under this agreement at December 31, 2003 and 2002, respectively.

      We had $5.0 million outstanding on our unsecured line of credit, $1.1 million outstanding under letters of credit and an available balance of $693.9 million on our unsecured credit facilities at February 13, 2004.

      Our unsecured credit facilities, Long-Term Unsecured Debt and mortgages payable had effective weighted average interest rates of 2.55%, 6.22% and 5.57%, respectively, as of December 31, 2003. All of these rates give effect to debt issuance costs, fair value hedges, the amortization of fair market value purchase adjustments and other fees and expenses, as applicable.

      Our debt instruments generally contain covenants common to the type of facility or borrowing, including financial covenants establishing minimum debt service coverage ratios and maximum leverage ratios. We were in compliance with all financial covenants pertaining to our debt instruments as of and for the year ended December 31, 2003.

Unitholder Distribution Requirements

      Based on anticipated distribution levels for 2004 and the number of units outstanding as of December 31, 2003, we anticipate that we will pay the following distributions in 2004 (in thousands, except per unit amounts):

			Per Unit		Total
Common unit distributions:
	Common Units		$	1.72	$	334,991
	A-1 Common Unit distributions(1)			1.72		43,518
	Series D Preferred Unit distributions			2.19		4,288
	Series E Preferred Unit distributions(1)			2.09		2,341
	Series F Preferred Unit distributions(1)			2.03		1,624
	Series G Preferred Unit distributions(1)			2.16		1,296
	Series I Preferred Unit distributions(2)			7,660.00		3,830
	Series K Preferred Unit distributions			3.40		2,267
	Series L Preferred Unit distributions			3.40		2,179
		Total distribution requirements			$	396,334

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(1)	See Note 9 in our audited financial statements in this Annual Report for more information on minority interests.
(2)	Series I Preferred Units have a par value of $100,000 per unit.

Unit Repurchase and Redemption Activity

      In May 2003, 2,640,325 Series H Preferred Units were converted into Common Units. In October 2003, the Series A Preferred Units were called for redemption. Of the 2.9 million Series A Preferred Units outstanding, 2.8 million were converted to Common Units and the remaining were redeemed for cash and retired.

      In July 2002, 684,931 Series J Preferred Units were converted into Common Units. In August 2002, we redeemed all of our Series C Preferred Units at $25.00 per Unit plus accrued distributions. In addition, 3,000,000 Series E, F, and G Preferred Units were issued in exchange for the DownREIT Perpetual Preferred Units, and 870,523 DownREIT OP Units were exchanged for A-1 Common Units in August 2002. In September 2002, 480,000 of the Series E Preferred Units were redeemed at liquidation value plus accrued distributions. In 2003 and 2002, Archstone-Smith repurchased 614,100 and 668,900 Common Units. The repurchase of Common Units and the redemption of Series C and E Preferred Units were funded through borrowings under our unsecured credit facility, which was repaid with proceeds from dispositions and the issuance of long-term debt.

Planned Investments

      Following is a summary of planned investments as of December 31, 2003, including amounts for Ameriton (dollar amounts in thousands). 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 for communities under construction in accordance with construction contracts with general contractors.

				Planned Investments
		Units		Discretionary		Committed
Communities under redevelopment			4,681	$	29,109	$	16,082
Communities under construction			5,008		—		482,280
Communities In Planning and Owned			3,693		620,519		—
Communities In Planning and Under Control			112		9,084		—
Community acquisitions under contract			1,539		325,652		—
	Total		15,033	$	984,364	$	498,362

      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 during 2004 and 2005. We expect to start construction on approximately $300-$400 million, based on Total Expected Investment, of communities that are currently In Planning, in 2004. We expect to fund the costs of these development projects over a two-to-three year period following the date construction commences. No assurances can be given that communities we do not currently own will be acquired or 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 from our capital redeployment program and borrowings under our

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unsecured credit facilities, prior to arranging long-term financing. Consistent with our performance in 2003, we anticipate that net cash flow from operating activities during 2004 will be sufficient to fund anticipated distribution requirements and debt principal amortization payments. To fund planned investment activities, we had $693.9 million in available capacity on our unsecured credit facilities and approximately $187.6 million of cash on hand at February 13, 2004. In addition, we expect to complete the disposition of $400-$600 million of operating communities during 2004. During 2004, we will receive approximately $128.5 million from the sale of certain marketable securities in accordance with our forward sales agreement. See Item 7A for a discussion of our hedging activities.

      In March 2003, we filed a shelf registration statement on Form S-3 to register an additional $335 million in unsecured debt securities. In June 2003, we issued $250 million in long-term unsecured senior notes due in June 2008 for net proceeds of $247.2 million. These notes bear interest at a coupon rate of 3.0% annually, with an effective interest rate of 3.2%. The net proceeds were used to repay outstanding balances on our unsecured credit facility.

      In February 2002, we issued $200 million in long-term unsecured ten-year senior notes with an effective interest rate of 6.6%. In May 2002, Archstone-Smith filed a shelf registration statement on Form S-3 to register $500 million in equity securities, which can be issued in the form of Common or Preferred Shares. In August 2002, we issued $300 million in long-term unsecured senior five-year notes with an effective interest rate of 5.2%. In November 2002, we issued $35 million in long-term unsecured five-year senior notes with an effective interest rate of 4.9%.

      As of February 13, 2004, Archstone-Smith and the Operating Trust collectively have $1.1 billion available in shelf registered securities which can be issued based on our ability to affect offerings on satisfactory terms based on prevailing market conditions.

Litigation and Contingencies

      During 2002, we accrued or incurred a liability for $30.8 million relating to moisture infiltration and resulting mold issues at Harbour House, a high-rise property in Southeast Florida that became subject to litigation in the third quarter of 2002. Of this amount, $11.3 million represents amounts expensed for the estimated cost of repairing or replacing residents’ property, temporary resident relocation expenses and incurred legal fees. The remaining $19.5 million represents costs capitalized in accordance with GAAP pertaining to remediation and capital improvements to the building.

      During 2003, we recorded additional costs of $30.7 million for moisture infiltration and resulting mold at Harbour House. Of this amount, $25.7 million represents amounts expensed for estimated and incurred legal fees associated with known and anticipated costs for Archstone-Smith’s counsel and plaintiffs’ counsel, as well as estimated settlement costs based upon the settlement agreement, additional resident property repair and replacement costs and temporary resident relocation expenses. The estimated settlement accrual is inclusive of all pending legal claims at this property other than for those individuals who have opted out of the settlement and are pursuing or may pursue individual claims. The remaining $5.0 million pertains to an increase in our accrual estimate for capitalized costs associated with remediation and capital improvements. As of December 31, 2003, total cash payments related to moisture infiltration and mold remediation at this property were $45.1 million. We anticipate incurring the remaining $16.4 million over the next six to twelve months.

      The Harbour House accrual represents management’s best estimate of the probable and reasonably estimable costs and is based, in part, on estimates obtained from third-party contractors and actual costs incurred to date. It is possible that these estimates could increase or decrease as better information becomes available. Not all plaintiffs have accepted the court-approved settlement, which could result in further court proceedings and potential legal fees and damages not contemplated in our current accrual. It is not possible to predict the likelihood of claims by individuals who have opted out of the settlement, nor is it reasonably possible to estimate the amount of any potential loss related to these claims.

      We are also party to alleged moisture infiltration and resulting mold lawsuits at other apartment properties. We believe these suits are without merit, nonetheless, in certain instances we have negotiated a

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settlement with certain of the plaintiffs in an effort to expedite the resolution of their claims and avoid potentially protracted litigation and associated attorney’s fees. During 2003 we expensed approximately $10.4 million for estimated and incurred legal fees associated with known and anticipated costs for Archstone-Smith’s counsel and plaintiffs’ counsel, as well as estimated settlement costs based upon the status of discussions, additional resident property repair and replacement costs and temporary resident relocation expenses pertaining to these claims. These estimates represent management’s best estimate of the probable and reasonably estimable costs and are based, in part, on estimates obtained from third-party contractors and actual costs incurred to date. It is possible that these estimates could increase or decrease as better information becomes available. Not all plaintiffs have accepted the negotiated settlement, and further court proceedings and additional legal fees and damages may be required to fully resolve these claims. We have not accrued for renovation and equipment upgrades at these properties, as these costs are part of our previously existing and ongoing plans and not a result of the legal claims. Accordingly, we will capitalize or expense costs associated with these issues as they are incurred, in accordance with GAAP.

      We are aggressively pursuing recovery of a significant portion of these costs from our insurance carriers. As of December 31, 2003, we have received approximately $1.6 million of initial insurance recoveries pertaining to moisture infiltration and resulting mold claims. We are still in discussions with our insurance providers and therefore no estimate for future insurance recoveries has been recorded. In addition, we are continuing to pursue potential recoveries from third parties who we believe bear responsibility for a considerable portion of the costs we have incurred. We cannot make assurances that we will obtain these recoveries or that our ultimate liability associated with these claims will not be material to our results of operations.

      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.

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:

Internal Cost Capitalization

      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. 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. Because the estimation of capitalizable internal costs requires management’s judgment, we believe internal cost capitalization is a “critical accounting estimate.”

      If future accounting rules limit our ability to capitalize internal costs or if our development activity decreased significantly without a proportionate decrease in internal costs, there could be an increase in our operating expenses. For example, if hypothetically, we were to reduce our development and land acquisition activity by 25% with no corresponding decrease in internal costs, our net earnings per Common Unit could decrease by approximately 1.2% or $0.02 based on 2003 amounts.

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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.

      When determining if there is an indication of impairment, 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 asset’s fair value.

      The apartment industry uses capitalization rates as the primary measure of 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 the prevailing rate for the market or submarket. 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. For example, we would value a community with annual NOI of $10 million at $142.9 million using a 7.0% capitalization rate, whereas that same community would be valued at $125.0 million if the actual capitalization rate were 8.0%. Historically we have had limited and infrequent impairment charges, and the majority of our apartment community sales have produced gains. For example, we have sold approximately $5.4 billion of real estate assets (excluding Ameriton) over the last eight years, which produced $829.1 million in gains at an unleveraged internal rate of return of approximately 12.8%. We evaluate a real estate asset for potential impairment when events or changes in circumstances indicate that its carrying amount may not be recoverable.

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 “significant accounting estimate.”

      Total capital expenditures were 1.4% and 2.2% of weighted average gross real estate as of December 31, 2003 and 2002, respectively. The growth in capital expenditures was principally due to significant redevelopment efforts in our high-rise portfolio acquired in the Smith Merger.

      Additionally, depreciation expense as a percentage of depreciable real estate was 3.2%, 3.1% and 3.7% or $1.04, $1.16 and $1.00 per Unit for the years ended December 31, 2003, 2002 and 2001, respectively. If the actual weighted average useful life were determined to be one year shorter or longer than management’s

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current estimate, our annual depreciation expense would increase or decrease approximately 3.1% or $0.03 per Common Unit. See Note 1 in our audited financial statements in this Annual Report for additional detail on depreciable lives.

Pursuit Costs

      We incur costs relating to the potential acquisition of real estate which we refer to as pursuit costs. To the extent that these costs are identifiable with a specific property and would be capitalized if the property were already acquired, the costs are accumulated by project and capitalized in the Other Asset section of the balance sheet. If these conditions are not met, the costs are expensed as incurred. Capitalized costs include but are not limited to earnest money, option fees, environmental reports, traffic reports, surveys, photos, blueprints, direct and incremental personnel costs and legal costs. Upon acquisition, the costs are included in the basis of the acquired property. When it becomes probable that a prospective acquisition will not be acquired, the accumulated costs for the property are charged to other expense on the statement of earnings in the period such a determination is made.

      Because of the inherent judgment involved in evaluating whether a prospective property will ultimately be acquired, we believe capitalizable pursuit costs are a “critical accounting estimate.” If it were determined that a quarter of our prospective acquisitions were deemed improbable as of December 31, 2003, other expense for the year ended December 31, 2003 would increase approximately 8.2% or $0.02 per unit, excluding refundable earnest money.

Moisture Infiltration and Mold Remediation Costs

      Accounting for correction of moisture infiltration and mold remediation costs is considered a “critical accounting estimate” because significant judgment is required by management to determine when to record a liability, how much should be accrued as a liability and whether such costs meet the criteria for capitalization.

      We estimate and accrue costs related to correcting the moisture infiltration and remediating resulting mold when we anticipate incurring costs because of the threat of litigation or the assertion of a legal claim. When we incur costs at our own discretion, the cost is recognized as incurred. Moisture infiltration and resulting mold remediation costs are only capitalized when it is determined by management that such remediation 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.

      There are considerable uncertainties that affect our ability to estimate the ultimate cost of correction and remediation efforts. These uncertainties include, but are not limited to, assessing the exact nature and extent of the issues, the extent of required remediation efforts and the varying costs of alternative strategies for addressing the issues. Any accrual represents management’s best estimate of the probable and reasonably estimable costs and is based, in part, on estimates obtained from third-party contractors and actual costs incurred to date. It is possible that these estimates could increase or decrease as better information becomes available.

      We accrue for litigation settlement costs when a loss contingency is both probable and the amount of loss can be reasonably estimated. Estimating the likelihood and amount of a loss contingency requires significant judgment by management and is therefore considered a “critical accounting estimate”. We base these estimates on the best information available as of the end of the period, which includes, but is not limited to, estimates obtained from third-party contractors as well as actual costs incurred to date. It is possible that these estimates could increase or decrease as better information becomes available. We generally recognize legal expenses as incurred; however, if such fees are related to the accrual for a known legal settlement, we accrue for the related incurred and anticipated legal fees at the same time we accrue the cost of settlement.

      Our eventual costs to correct moisture infiltration and remediate resulting mold could be significantly different from current estimates. For example, if current outstanding accruals were to increase or decrease by

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25% and the ratio between the expensed and capitalized portion remained constant, our net earnings per Common Unit would increase or decrease by approximately $0.02.

Off Balance Sheet Arrangements

      Investments in entities that are not controlled through majority economic interest are not consolidated and are reported as investments in unconsolidated entities. Our investments in unconsolidated entities consist of an $86.4 million investment in real estate joint ventures, which generally consists of our percentage ownership in the GAAP equity of the joint ventures.

      CES is a service business that we acquired during the Smith Merger in 2001 and prior to its sale had been reported as an unconsolidated entity in our financial statements. CES provides engineering services for commercial and residential real estate owners across the country. On December 19, 2002, CES was sold to a third party for $178 million in cash. We recorded a $35.4 million net gain on the sale of the business or $0.16 per share on a fully diluted basis. Approximately $6.7 million in contingent proceeds related to indemnification of accounts receivable over 120 days was excluded from the gain. We have recognized $5.8 million of these contingent proceeds during 2003, as this is the amount of the indemnified accounts receivable collected.

      As a condition of sale, we agreed to indemnify the buyer for certain representations and warranties contained in the sale contract. The indemnifications terminate on June 30, 2004, and while we do not believe it is probable that the indemnities will reach the maximum amount, the related liability is limited to a maximum exposure of $44.5 million with exceptions including third party claims, insurance, arbitration, environmental issues and collection of specified accounts receivable, each of which is without deduction or limitation. There are no recourse provisions available to us to recover any potential future payments from third parties.

      SMC is a service business that we acquired in the Smith Merger during 2001. We sold SMC during February 2003 to former members of SMC’s senior management. Prior to the sale, we reported SMC as an unconsolidated entity in our financial statements. We received two notes receivable totaling $5.8 million and bearing an interest rate of 7.0% as consideration for the sale. The first note for $3.5 million had principal payments that began in October 2003 with payment in full by February 2008. The second note for $2.3 million was fully repaid along with all accrued interest due during May 2003. For accounting purposes, we will not recognize the divestiture until our responsibilities for certain performance guarantees, which pertain to ongoing construction projects at the time of sale, expire. Such performance guarantees currently total $2.7 million, based on information provided by these companies, and we expect them to expire during 2004. Principal and interest payments received prior to the recognition of this transaction as a divestiture will be recorded as a reduction to our investment basis, which is included in other assets in the accompanying condensed consolidated balance sheets.

      Prior to their sale, we extended approximately $54.7 million in performance bond guarantees relating to contracts entered into by CES and SMC, which are customary to the type of business in which these entities engage. As of December 31, 2003, $2.7 million of these performance bond guarantees were still outstanding, based upon information provided by these companies. The Operating Trust, our subsidiaries and investees have not been required to perform on these guarantees, nor do we anticipate being required to perform on such guarantees. We also will not extend any such performance bond guarantees in the future due to the sale of both CES and SMC. Since we believe that our risk of loss under these contingencies is remote, no accrual for potential loss has been made in the accompanying financial statements. There are recourse provisions available to us to recover any potential future payments from the new owners of CES and SMC.

      As part of the Smith Merger, we are required to indemnify the former Smith Partnership unitholders for any personal income tax expense resulting from the sale of high-rise properties identified in the shareholders’ agreement between Archstone-Smith, the Operating Trust, Robert H. Smith and Robert P. Kogod.

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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 (amounts in millions):

						2006 and		2008 thru
		2004		2005		2007		2096		Total
Scheduled long-term debt maturities		$	113.5	$	319.9	$	871.0	$	2,495.2	$	3,799.6
Unsecured credit facilities(1)			6.8		—		97.0		—		103.8
Development and redevelopment expenditures			498.4		—		—		—		498.4
Performance bond guarantees(2)			38.6		0.4		—		—		39.0
Lease commitments and other(3)			7.3		6.8		12.9		202.5		229.5
	Total	$	664.6	$	327.1	$	980.9	$	2,697.7	$	4,670.3

(1)	In October 2003, we completed the renewal of our unsecured revolving line of credit. The new facility has a total capacity of $600 million and a three-year term, with a one-year extension option available at our discretion.
(2)	Our subsidiaries and investees have not been required to perform on these guarantees, nor do we anticipate being required to perform on such guarantees. Since we believe that our risk of loss under these contingencies is remote, no accrual for potential loss has been made in the accompanying financial statements. We are still obligated for performance bond guarantees for CES and SMC subsequent to their sale, but there are recourse provisions available to us to recover any potential future payments from the new owners of CES and SMC.
(3)	Lease commitments relate principally to ground lease payments as of December 31, 2003.

Related Party Transactions

      In 2003, we acquired our chief executive officer’s voting interest in Ameriton for approximately $72,000 and now own 100% of the voting and non-voting stock of Ameriton. Our chief executive officer’s initial investment in Ameriton Holdings, LLC was $50,000. Before this transaction, we owned 100% of the non-voting stock in Ameriton, representing a 95% economic interest and Ameriton Holdings owned 100% of the voting stock of Ameriton, representing a 5% economic interest. We also owned a non-voting membership interests in Ameriton Holdings representing a 95% economic interest and our chief executive officer owned 100% of the voting membership interest in Ameriton Holdings representing a 5% economic interest. Accordingly, the Operating Trust did not have a direct or indirect voting interest in Ameriton. Our chief executive officer did not receive any loans or other consideration from the Operating Trust, our subsidiaries or our affiliates in connection with the purchase of his interests in Ameriton.

      Ameriton paid approximately $1.5 million and $3.38 million to certain officers and employees of the Operating Trust related to realized returns on investments sold during 2003 and 2002, respectively, none of which were made to members of Ameriton’s board. Four members of Ameriton’s board (James H. Polk, III, John C. Schweitzer, R. Scot Sellers and Charles E. Mueller, Jr.) were Trustees of Archstone-Smith or executive officers of the Operating Trust.

      Prior to the sale in December 2002, our interest in CES was structured similarly to that of our interest in Ameriton, as described above, whereby an entity managed by our chief executive officer held 100% of the voting stock. Our chief executive officer did not receive any loans or other consideration from the Operating Trust, our subsidiaries or our affiliates in connection with the purchase of his interests in CES. In connection with the sale, our chief executive officer’s received proceeds of $5,325 and his initial basis was $19,093. All CES board members (Ernest A Gerardi, Jr., Robert H. Smith, Dana K. Hamilton and Messrs. Sellers and Mueller) were Trustees of Archstone-Smith or executive officers of the Operating Trust. Furthermore,

41

Mr. Gerardi was an officer of CES. In connection with the sale of CES, Mr. Gerardi received a disposition incentive bonus of $2.75 million.

      Prior to the sale in February 2003, our interest in SMC was structured similarly to that of our interest in Ameriton, as described above, whereby an entity managed by our chief executive officer held 100% of the voting stock. Our chief executive officer did not receive any loans or other consideration from the Operating Trust, our subsidiaries or our affiliates in connection with the purchase of his interests in SMC. In connection with the sale, our chief executive officer’s received proceeds of $8,626 and his initial basis was $4,410. All SMC board members (Robert P. Kogod, Ms. Hamilton and Messrs. Smith, Sellers and Mueller) were Trustees of Archstone-Smith or executive officers of the Operating Trust. During February 2003, we sold our interest in SMC.

      During 1997, as part of the employee share purchase plan, certain officers and other employees purchased Common Shares of Archstone-Smith. Archstone-Smith financed 95% of the total purchase price by issuing notes representing approximately $17.1 million. As of December 31, 2003, the aggregate outstanding balances on these notes were approximately $1.1 million. In an effort to eliminate all employee loans, Archstone-Smith made an offer to the remaining participants of this plan to repurchase their Common Shares as of December 27, 2002, using the closing price of Archstone-Smith Common Shares on that date. The proceeds of the repurchase were used to pay off the outstanding loan balance, with any excess going to the participant. In addition, the participant received one fully vested and exercisable option for each share that was repurchased, with a term not to exceed the remaining term on the promissory note for the outstanding loan. No stock-based employee compensation expense was recognized in-connection with the issuance of these fully vested and exercisable options, as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant and are not considered replacement awards. A total of 81,685 Common Shares were repurchased for a total of $1.9 million.

New Accounting Pronouncements

      In December 2003, the FASB issued FASB Interpretation No. 46 “Consolidation of Variable Interest Entities” (revised). This Interpretation replaces FASB Interpretation No. 46, “Consolidation of Variable Interest Entities”, which was issued in January 2003 and clarifies the application of Accounting Research Bulletin No. 51 “Consolidated Financial Statements”. FIN 46R requires us to consolidate our existing variable interest entities in which we have the majority variable interest. Due to the adoption of this Interpretation, we have consolidated the results of Ameriton, for all periods presented. We have evaluated all other joint ventures and found there to be no material impact.

      In April 2003, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” We adopted this Statement for contracts or hedging relationships entered into or modified after June 30, 2003. Its purpose is to provide more consistent application and clarification of SFAS 133. The adoption of SFAS 149 did not have a material impact on our financial position, net earnings or cash flows.

      In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This Statement is effective for financial instruments entered into or modified after May 31, 2003, with the exception of the application to non-controlling (minority) interests in finite-life entities, which has been deferred indefinitely. The Statement requires that certain financial instruments, formerly presented as equity, be classified as liabilities. The adoption of SFAS 150 did not have a material impact on our financial position, net earnings or cash flows.

      In December 2003, the FASB issued SFAS No. 132, “Employer Disclosure about Pension and Other Post Retirement Benefits” (revised). This statement is effective for financial statements with fiscal years ending after December 15, 2003. The statement revises the necessary disclosures about pension plans. The adoption of SFAS 132 (revised) did not have a material impact on our financial position, net earnings or cash flows.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Stock Investments

      We have both 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. During 2001, we concluded that our investments in private service and technology companies were impaired due to the financial position of the investees. Since the decline was deemed to be other than temporary, we recorded a $12.2 million provision for possible loss on investments during 2001.

Use of Derivatives in 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. These derivatives are designated as either cash flow or fair value hedges. We are also exposed to price risk associated with changes in the fair value of certain equity securities. We have entered into forward sale agreements to protect against a reduction in the fair value of these securities. We have designated this forward sale as a fair value hedge. 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 loss from the use of these hedging instruments.

      We formally assess, both at inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. We measure hedge effectiveness by comparing the changes in the fair value or cash flows of the derivative instrument with the changes in the fair value or cash flows of the hedged item. We exclude the hedging instrument’s time value component when assessing hedge effectiveness. If it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, we will discontinue hedge accounting prospectively.

      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. During the 3rd quarter of 2003, we entered into a forward sale agreement with a notional amount, which represents the fair value of the underlying marketable securities, of approximately $46.8 million. In the 4th quarter of 2003, we entered into two additional forward sale agreements with a notional amount of approximately $81.7 million. The forward sales agreements fair value at December 31, 2003 and 2002 were $250,000 and $0, respectively. The sale of certain marketable securities in accordance with forward sale contracts is expected to result in realized gains of approximately $22.0 million in 2004.

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      The following table summarizes the notional amount, carrying value and estimated fair value of our derivative financial instruments, as of December 31, 2003 (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 Fair
				Amount		Date Range		Value
Cash flow hedges:
	Interest rate caps			$	34,508		2005	$	—
	Interest rate swaps				150,000		2006		(9,819	)
		Total cash flow hedges		$	184,508		2005-2006	$	(9,819	)
Fair value hedges:
	Interest rate swaps			$	104,005		2006-2008	$	8,822
	Total rate of return swaps				69,756		2004-2007		3,762
	Forward sales agreement				128,500		2004		250
		Total fair value hedges		$	302,261		2004-2008	$	12,834
			Total hedges	$	486,769		2004-2008	$	3,015

Interest Rate Sensitive Liabilities

      The table below provides information about our liabilities that are sensitive to changes in interest rates as of December 31, 2003. As the table incorporates only those exposures that existed as of December 31, 2003, it does not consider those exposures or positions, which could arise after that date. Moreover, because there were no firm commitments to actually sell these instruments at fair value as of December 31, 2003, 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 fair value hedges and other fees or expenses, where applicable (in thousands)

																								Estimated
																						Total		Fair
				2004			2005			2006			2007			2008			Thereafter			Balance		Value(1)
Interest rate sensitive liabilities:
	Unsecured Credit Facilities			$	6,790		$	—		$	97,000		$	—		$	—		$	—		$	103,790	$	103,790
		Average nominal interest rate(2)			1.95	%		—			1.95	%		—			—			—			—		—
	Long-Term Unsecured Debt:
		Fixed rate		$	51,250		$	251,250		$	51,250		$	386,250		$	311,250		$	719,917		$	1,771,167	$	1,942,491
			Average nominal interest rate(2)		7.24	%		8.01	%		7.29	%		5.30	%		3.84	%		7.30	%		—		—
		Variable rate(3)		$	—		$	—		$	—		$	—		$	23,711		$	77,087		$	100,798	$	100,798
			Average nominal interest rate(2)														1.60	%		1.76	%		—		—
	Mortgages payable:
		Fixed rate debt		$	48,142		$	21,134		$	301,268		$	95,825		$	123,788		$	942,283		$	1,532,440	$	1,637,683
			Average nominal interest rate(2)		7.26	%		7.25	%		6.13	%		6.71	%		6.93	%		7.29	%		—		—
		Variable rate debt		$	14,130		$	47,560		$	3,124		$	33,237		$	2,644		$	294,490		$	395,185	$	395,189
			Average nominal interest rate(2)		2.32	%		3.08	%		1.04	%		2.76	%		1.05	%		1.27	%		—		—

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(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, 2003. The weighted average effective interest rate on the unsecured credit facilities, Long- Term Unsecured Debt and mortgages payable was 2.55%, 6.22% and 5.57%, respectively, as of December 31, 2003.
(3)	Represents unsecured tax-exempt bonds.

Item 8. Financial Statements and Supplementary Data

      Our Balance Sheets as of December 31, 2003 and 2002, and our Statements of Earnings, Unitholders’ Equity, Other Common Unitholders’ Interest and Comprehensive Income and Cash Flows for each of the years in the three-year period ended December 31, 2003 and Schedule III — Real Estate and Accumulated Depreciation, together with the reports of KPMG LLP, independent auditors, are included under Item 15 of this Annual Report and are incorporated herein by reference. Selected quarterly financial data is presented in Note 12 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-14(c) under the Securities Exchange Act of 1934). 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, 2003, to ensure that information required to be disclosed in reports that are filed or submitted under the Securities Exchange Act are recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Subsequent to December 31, 2003, there were no significant changes in the Operating Trust’s disclosure controls or in other factors that could significantly affect these controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

Part III

Item 10. Trustees and Executive Officers of the Registrant

      Archstone-Smith is our sole trustee and is responsible for the oversight and management of the Operating Trust. All of the property ownership and business operations of Archstone-Smith are conducted through the Operating Trust. For information regarding Archstone-Smith’s business, see “Item 1 — Business.” For information regarding Archstone-Smith’s senior officers, who also serve as the senior officers of the Operating Trust, see “Item 1. Business — Officers of the Operating Trust.” For information regarding our Code of Ethics, see “Item 1 — Business — Available Information and Code of Ethics.” Information regarding the trustees of Archstone-Smith will be contained in Archstone-Smith’s definitive proxy statement relating to the 2004 Annual Meeting of Shareholders to be held on May 20, 2004 (the “Archstone-Smith Proxy Statement”), which is incorporated herein by reference. Please see the Archstone-Smith Proxy Statement for further information.

      Section 16(a) of the Securities Exchange Act of 1934 requires the Operating Trust to report whether or not, based on its review of reports to the SEC filed by beneficial owners of more that 10% of any class of equity

45

securities registered under Section 12 of the Securities Act of 1933, any such required reports were not filed or were filed untimely. There were no such failures to report or late reports during 2003.

Item 11. Executive Compensation

      Our sole trustee is responsible for the oversight and management of the Operating Trust and performs the day-to-day management of the Operating Trust through its officers. No compensation is paid to Archstone-Smith for acting as trustee. Each officer of our sole trustee holds the same officer position with the Operating Trust and is compensated for his or her service to Archstone-Smith and the Operating Trust, considered as a single enterprise. Information concerning the compensation of the executive officers of Archstone-Smith will be contained in the Archstone-Smith Proxy Statement, which is incorporated herein by reference. Please see the Archstone-Smith Proxy Statement for further information.

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

      Archstone-Smith owns all of the outstanding voting securities of the Operating Trust. The following table sets forth information as of February 13, 2004, regarding beneficial ownership of A-1 Common Units by each person known by us to be beneficial owners of more than 5% of the A-1 Common Units, by each of Archstone-Smith’s trustees, by each of Archstone-Smith’s five most highly compensated executive officers and by all of Archstone-Smith’s trustees and executive officers as a group. Each person named in the table has sole voting and investment power with respect to all A-1 Common Units shown as beneficially owned by such person, except as otherwise set forth in the notes to the table. The address of each person listed below is c/o Archstone-Smith Trust, 9200 E. Panorama Circle, Suite 400, Englewood, Colorado 80112.

	Number of A-1
	Common Units			Percentage of All
Name of Beneficial Owner	Beneficially Owned			A-1 Common Units
James A. Cardwell		—			—
Ernest A. Gerardi		51,350			0.2	%
Ned S. Holmes		—			—
Robert P. Kogod		3,522,094	(1)		14.0	%
James H. Polk, III		—			—
John M. Richman		—			—
John C. Schweitzer		—			—
R. Scot Sellers		—			—
Robert H. Smith		3,607,801	(1)		14.3	%
Richard A. Banks		—			—
J. Lindsay Freeman		—			—
Dana K. Hamilton		—			—
Charles E. Mueller, Jr.		—			—
James D. Rosenberg		—			—
All Archstone-Smith trustees and executive officers as a group (14 persons)		3,851,477	(2)		15.3	%

(1)  Mr. Smith has shared voting power with respect to 3,418,655 of such A-1 Common Units and shared dispositive power with respect to 3,418,655 of such A-1 Common Units, of the 3,418,655 A-1 Common Units for which Mr. Smith shares voting power and dispositive power, 88,887 are owned by Mr. Smith’s spouse and 3,329,768 are owned by Charles E. Smith Management, Inc., of which Mr. Smith is a director and the vice president, secretary and treasurer. Mr. Kogod has shared voting power with respect to 3,398,510 of such A-1 Common Units and shared dispositive power with respect to 3,398,510 of such A-1 Common Units, of the 3,398,510 A-1 Common Units for which Mr. Kogod shares voting power and

46

dispositive power, 68,742 are owned by Mr. Kogod’s spouse and 3,329,768 are owned by Charles E. Smith Management, Inc., of which Mr. Kogod is a director and the president. The Operating Trust does not maintain any compensation plans under which its equity securities may be issued. However, officers and employees of the Operating Trust and of our sole trustee may receive compensation under compensation plans maintained by Archstone-Smith. Information concerning the equity compensation plans of Archstone-Smith will be contained in the Archstone-Smith Proxy Statement, which is incorporated herein by reference. Please see the Archstone-Smith Proxy Statement for further details.

(2)

The 3,329,768 A-1 Common Units that are owned by Charles E. Smith Management, Inc. are reported twice, once as beneficially owned by Mr. Smith and again as beneficially owned by Mr. Kogod, but are only counted once in the calculation of beneficial ownership of Archstone-Smith’s trustees and executive officers as a group.

Item 13. Certain Relationships and Related Transactions

      All of the property ownership and business operations of Archstone-Smith are conducted through the Operating Trust. In the normal course of business, because of our structure as an UPREIT, Archstone-Smith conducts all of its operations through the Operating Partnership and, as a result, engages in a significant number of transactions with and on behalf of the Operating Trust. Information concerning certain relationships and related transactions between Archstone-Smith and its trustees, executive officers, holders of more than 10% of its Common Shares and related persons, will be contained in the Archstone-Smith Proxy Statement, which is incorporated herein by reference. Please see the Archstone-Smith Proxy Statement for further information.

Item 14. Principal Accountants Fees and Services

RATIFICATION OF RELATIONSHIP WITH PUBLIC ACCOUNTANTS

      Subject to shareholder ratification, the Audit Committee has selected KPMG LLP, certified public accountants, to serve as the auditors of the Operating Trust’s books and records for the coming year. KPMG LLP has served as our auditors since 1980. A representative of KPMG LLP is expected to be present at the annual meeting, and will be given an opportunity to make a statement if that representative desires to do so and will be available to respond to appropriate questions.

      Ratification of the appointment of KPMG LLP as our auditors for the current fiscal year will require that the votes cast in favor of ratification exceed the votes cast against ratification. Abstention and brokers non-votes are not counted for purposes of determining whether this proposal has been approved.

      The fees billed by KPMG LLP in 2003 and 2002 for services provided to the Operating Trust were as follows:

	2003		2002
Audit Fees(1)	$	815,450	$	690,000
Audit-Related Fees(2)		186,800		416,633
Tax Fees(3)		281,949		151,930
All Other Fees(4)		—		—
TOTAL	$	1,284,199	$	1,258,563

(1)  “Audit Fees” are the aggregate fees billed by KPMG LLP for professional services rendered for the audit of the Operating Trust’s annual financial statements for the years ended December 31, 2003 and December 31, 2002 and the reviews of the financial statements included in our quarterly reports on Form 10-Q during 2003 and 2002. “Audit Fees” also includes amounts billed for registration statements filed in 2003 and 2002 and related comfort letters and consent.

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(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 2003 or 2002 for tax services, including tax compliance, tax advice or tax planning.
(4)	“All Other Fees” are fees billed by KPMG LLP in 2003 or 2002 that are not included in the above classifications.

Pre-Approval Process

      All services provided by KPMG LLP in 2003 were, and all services to be provided by KPMG LLP in 2004 will be, permissible under applicable laws and regulations and have been, and will continue to be, pre-approved by the Audit Committee. In accordance with applicable law, the Operating Trust is required to disclose the non-audit services approved by the Audit Committee performed by KPMG LLP. Non-audit services are defined as services other than those provided in connection with an audit or a review of the financial statements of a company. The Audit Committee approved the engagement of KPMG LLP for non-audit services, consisting of certain specified tax-related services during 2003 and 2004, provided that the fees for these services did not exceed $400,000 in the aggregate or $100,000 for any one service.

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Part IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

      The following documents are filed as part of this report:

      (a) Financial Statements and Schedule:

1. Financial Statements

See Index to Financial Statements and Schedule on page 50 of this report, which is incorporated herein by reference.

2. Financial Statement Schedule:

See Schedule III on page 89 of this report, which is incorporated herein by reference.

All other schedules have been omitted since the required information is presented in the financial statements and the related notes or is not applicable.

3. Exhibits

See Index to Exhibits on page 92 of this report, which is incorporated herein by reference.

(b)  Reports on Form 8-K:

The following reports on Form 8-K were filed during the last quarter of the period covered by this report:

Date Filed		Items Reported		Financial Statements
	6/10/03		5		No
	6/12/03		5.7		No

(c)  Exhibits:

The Exhibits required by Item 601 of Registration S-K are listed in the Index to Exhibits on page 92 of this Annual Report, which is incorporated herein by reference.

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INDEX TO FINANCIAL STATEMENTS AND SCHEDULE

		Page
Archstone-Smith Operating Trust
	Independent Auditors’ Report		51
	Consolidated Balance Sheets as of December 31, 2003 and 2002		52
	Consolidated Statements of Earnings for the years ended December 31, 2003, 2002 and 2001		53
	Consolidated Statements of Unitholders’ Equity, Other Common Unitholders’ Interest and Comprehensive Income for the years ended December 31, 2003, 2002 and 2001		54
	Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001		55
	Notes to Consolidated Financial Statements		56
	Independent Auditors’ Report on Financial Statement Schedule		88
	Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2003		89
	Signatures		91
	Index to Exhibits		92

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INDEPENDENT AUDITORS’ REPORT

The Trustee and Unitholders

Archstone-Smith Operating Trust:

      We have audited the accompanying consolidated balance sheets of Archstone-Smith Operating Trust and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of earnings, unitholders’ equity, other common unitholders’ interest and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2003. These consolidated financial statements are the responsibility of Archstone-Smith Operating Trust’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Archstone-Smith Operating Trust and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.

      As discussed in Note 1 to the consolidated financial statements, effective July 1, 2003, Archstone-Smith Operating Trust adopted FASB Interpretation No. 46 “Consolidation of Variable Interest Entities” (revised). As a result, the accompanying consolidated financial statements, referred to above, have been restated to reflect the consolidated financial position and results of operations of Archstone-Smith Operating Trust and certain previously unconsolidated entities in accordance with accounting principles generally accepted in the United States of America.

KPMG LLP

Denver, Colorado

February 9, 2004

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ARCHSTONE-SMITH OPERATING TRUST

CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

			December 31,
			2003		2002
ASSETS
Real estate			$	8,738,116	$	7,406,437
Real estate — held for sale				261,064		1,891,298
Less accumulated depreciation				648,982		578,855
				8,350,198		8,718,880
Investments in and advances to unconsolidated entities				86,367		116,594
		Net investments		8,436,565		8,835,474
Cash and cash equivalents				5,230		12,846
Restricted cash in tax-deferred exchange escrow				180,920		—
Other assets				298,980		247,706
		Total assets	$	8,921,695	$	9,096,026
LIABILITIES AND EQUITY
Liabilities:
	Unsecured credit facilities		$	103,790	$	365,578
	Long-Term Unsecured Debt			1,871,965		1,776,103
	Mortgages payable			1,891,991		1,838,386
	Mortgages payable — held for sale			35,634		341,611
	Distributions payable			1,593		91,616
	Accounts payable			27,086		29,157
	Accrued expenses and other liabilities			252,533		272,236
		Total liabilities		4,184,592		4,714,687
Minority interest				11,510		2,600
Other common unitholders’ interest, at redemption value (A-1 Common Units: 25,301,069 in 2003 and 24,621,853 in 2002)				707,924		579,598
Unitholders’ equity:
	Convertible Preferred Units			50,000		194,671
	Perpetual Preferred Units			160,120		160,550
	Common unitholder’s equity (A-2 Common Units: 194,762,263 units in 2003 and 180,705,795 units in 2002)			3,793,314		3,456,259
	Accumulated other comprehensive earnings (loss)			14,235		(12,339	)
		Total unitholders’ equity		4,017,669		3,799,141
		Total liabilities and equity	$	8,921,695	$	9,096,026

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

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ARCHSTONE-SMITH OPERATING TRUST

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per unit amounts)

			Years Ended December 31,
			2003		2002		2001
Revenues:
	Rental revenues		$	881,041	$	852,295	$	544,063
	Other income			19,334		9,462		11,905
		Total revenues		900,375		861,757		555,968
Expenses:
	Rental expenses			235,351		226,633		130,982
	Real estate taxes			84,330		77,292		46,433
	Depreciation on real estate investments			187,677		167,029		102,477
	Interest expense			186,832		190,005		88,081
	General and administrative expenses			49,838		45,710		27,434
	Provisions for possible loss on investments			—		—		14,927
	Other expenses			48,085		27,469		15,564
		Total expenses		792,113		734,138		425,898
Earnings from operations				108,262		127,619		130,070
	Less: minority interest			—		5,215		7,822
	Plus: gains on dispositions of depreciated real estate, net			—		35,950		108,748
	Income from unconsolidated entities			5,745		53,602		10,998
Net earnings before discontinued operations				114,007		211,956		241,994
	Plus: net earnings from discontinued apartment communities			380,184		144,769		23,580
Net earnings				494,191		356,725		265,574
	Less: Preferred Unit distributions			26,153		34,309		25,877
Net earnings attributable to Common Units — Basic			$	468,038	$	322,416	$	239,697
Weighted average Common Units outstanding:
	Basic			212,288		202,781		134,589
	Diluted			220,758		203,804		142,090
Net earnings per Common Unit — Basic:
	Net earnings before discontinued operations		$	0.41	$	0.88	$	1.60
	Discontinued operations, net			1.79		0.71		0.18
	Net earnings		$	2.20	$	1.59	$	1.78
Net earnings per Common Unit — Diluted:
	Net earnings before discontinued operations		$	0.41	$	0.87	$	1.60
	Discontinued operations, net			1.77		0.71		0.17
	Net earnings		$	2.18	$	1.58	$	1.77
Distributions paid per Common Unit			$	1.71	$	1.70	$	1.64

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

53

ARCHSTONE-SMITH OPERATING TRUST

CONSOLIDATED STATEMENTS OF UNITHOLDERS’ EQUITY, OTHER COMMON

UNITHOLDERS’ INTEREST AND COMPREHENSIVE INCOME

Years Ended December 31, 2003, 2002 and 2001

(In thousands)

			Convertible			Perpetual
			Preferred			Preferred						Accumulated
			Units at			Units at						Other						Other
			Aggregate			Aggregate			Common			Comprehensive			Total			Common
			Liquidation			Liquidation			Unitholder’s			Income			Unitholders’			Unitholders’
			Preference			Preference			Equity			(Loss)			Equity			Interest			Total
Balances at December 31, 2000.			$	82,651		$	204,205		$	1,961,933		$	2,817		$	2,251,606		$	—		$	2,251,606
	Comprehensive income:
		Net earnings		—			—			257,992			—			257,992			7,582			265,574
		Cumulative effect of adoption of SFAS 133.		—			—			—			3,831			3,831			—			3,831
		Change in fair value of cash flow hedges		—			—			—			(9,290	)		(9,290	)		—			(9,290	)
		Reclassification adjustment on realized gains		—			—			—			(2,167	)		(2,167	)		—			(2,167	)
		Change in fair value of marketable securities		—			—			—			(708	)		(708	)		—			(708	)
	Comprehensive income attributable to Common Units																					257,240
	Preferred Unit distributions			—			—			(25,877	)		—			(25,877	)		—			(25,877	)
	Common Unit distributions			—			—			(245,035	)		—			(245,035	)		(10,903	)		(255,938	)
	Units issued in connection with Smith Merger			146,500			50,000			1,361,641			—			1,558,141			628,598			2,186,739
	Repurchase of units, net of expenses			—			(772	)		(50,000	)		—			(50,772	)		—			(50,772	)
	Redemption of Series B Preferred Units			—			(104,670	)		—			—			(104,670	)		—			(104,670	)
	A-1 Common Units converted into A-2 Common Units			—			—			1,373			—			1,373			(1,373	)		—
	Adjustment to redemption value			—			—			(45,484	)		—			(45,484	)		45,484			—
	Other, net			(3,800	)		—			46,492			—			42,692			—			42,692
Balances at December 31, 2001.				225,351			148,763			3,263,035			(5,517	)		3,631,632			669,388			4,301,020
	Comprehensive income:
		Net earnings		—			—			314,815			—			314,815			41,910			356,725
		Change in fair value of cash flow hedges		—			—			—			(7,554	)		(7,554	)		—			(7,554	)
		Change in fair value of marketable securities		—			—			—			732			732			—			732
	Comprehensive income attributable to Common Units																					349,903
	Preferred Unit distribution			—			—			(34,309	)		—			(34,309	)		—			(34,309	)
	UPREIT Preferred Unit distribution			—			—			1,839			—			1,839			(1,839	)		—
	Common Unit distributions			—			—			(306,189	)		—			(306,189	)		(41,782	)		(347,971	)
	A-1 Common Units converted into A-2 Common Units			—			—			41,723			—			41,723			(41,723	)		—
	Conversion of Preferred Units into Common Units			(30,680	)		—			30,680			—			—			—			—
	Conversion of DownREIT Perpetual Preferred Units			—			73,180			—			—			73,180			—			73,180
	Common Unit repurchases			—			—			(15,362	)		—			(15,362	)		—			(15,362	)
	Preferred Unit repurchases			—			(49,393	)		(11	)		—			(49,404	)		—			(49,404	)
	Proceeds from Dividend Reinvestment Plan (DRIP)			—			—			45,471			—			45,471			—			45,471
	Adjustment to redemption value			—			—			67,499			—			67,499			(67,499	)		—
	Other, net			—			(12,000	)		47,068			—			35,068			21,143			56,211
Balances at December 31, 2002.				194,671			160,550			3,456,259			(12,339	)		3,799,141			579,598			4,378,739
	Comprehensive income:
		Net earnings		—			—			433,657			—			433,657			60,534			494,191
		Change in fair value of cash flow hedges		—			—			—			3,439			3,439			—			3,439
		Change in fair value of marketable securities		—			—			—			23,135			23,135			—			23,135
	Comprehensive income attributable to Common Units																					520,765
	Preferred Unit distribution			—			—			(26,153	)		—			(26,153	)		—			(26,153	)
	UPREIT Preferred Unit Distribution			—			—			5,156			—			5,156			(5,156	)		—
	Common Unit distributions			—			—			(245,460	)		—			(245,460	)		(31,575	)		(277,035	)
	A-1 Common Units converted into A-2 Common Units			—			—			25,534			—			25,534			(25,534	)		—
	Conversion of Preferred Units into Common Units			(143,416	)		—			143,416			—			—			—			—
	Common Unit repurchases			—			—			(13,163	)		—			(13,163	)		—			(13,163	)
	Preferred Unit repurchases			(1,255	)		(430	)		(196	)		—			(1,881	)		—			(1,881	)
	Exercise of Options			—			—			43,420			—			43,420			—			43,420
	Proceeds from Dividend Reinvestment Plan (DRIP)			—			—			48,126			—			48,126			—			48,126
	Issuance of A-1 Common Units			—			—			—			—			—-			47,575			47,575
	Adjustment to redemption value			—			—			(112,337	)		—			(112,337	)		112,337			—
	Other, net			—						35,055			—			35,055			(30,485	)		4,570
Balances at December 31, 2003.			$	50,000		$	160,120		$	3,793,314		$	14,235		$	4,017,669		$	707,294		$	4,724,963

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

54

ARCHSTONE-SMITH OPERATING TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

			Years Ended December 31,
			2003			2002			2001
Operating activities:
	Net earnings		$	494,191		$	356,725		$	265,574
	Adjustments to reconcile net earnings to net cash flow provided by operating activities:
		Depreciation and amortization		210,427			212,178			140,435
		Gains on dispositions of depreciated real estate, net		(353,600	)		(139,604	)		(108,748	)
		Provisions for possible loss on investments		3,714			2,611			14,927
		Minority interest		—			4,871			3,224
	Change in other assets			19,441			(25,597	)		(2,554	)
	Change in accounts payable, accrued expenses and other liabilities			(18,583	)		40,462			24,546
	Other, net			(6,149	)		(6,001	)		(5,251	)
		Net cash flow provided by operating activities		349,441			445,645			332,153
Investing activities:
	Real estate investments			(932,777	)		(910,544	)		(605,498	)
	Change in investments in and advances to unconsolidated entities, net			30,227			124,125			(5,354	)
	Proceeds from dispositions, net of closing costs			1,563,556			579,451			1,175,199
	Change in tax-deferred exchange escrow			(180,920	)		120,421			(116,440	)
	Other, net			(57,665	)		(104,456	)		(60,213	)
		Net cash flow provided by (used in) investing activities		422,421			(191,003	)		387,694
Financing activities:
	Proceeds from Long-Term Unsecured Debt			247,225			530,774			—
	Payments on Long-Term Unsecured Debt			(171,250	)		(97,500	)		(69,700	)
	Principal prepayment of mortgages payable, including prepayment penalties			(343,368	)		(705,103	)		(115,293	)
	Regularly scheduled principal payments on mortgages payable			(11,934	)		(11,761	)		(5,243	)
	Proceeds from mortgage notes payable			76,017			247,797			67,594
	Proceeds from (payments on) unsecured credit facilities, net			(261,788	)		176,989			(224,130	)
	Proceeds from Common Units issued under DRIP and employee stock options			91,546			69,772			24,818
	Repurchase of Common Units and Preferred Units			(15,044	)		(64,776	)		(50,772	)
	Redemption of Perpetual Preferred Units			—			(12,000	)		(104,670	)
	Cash distributions paid on Common Units			(365,009	)		(344,590	)		(221,196	)
	Cash distributions paid on Preferred Units			(28,371	)		(34,351	)		(17,788	)
	Cash distributions paid to minority interests			—			(5,165	)		(8,406	)
	Other, net			2,498			1,091			2,889
		Net cash flow used in financing activities		(779,478	)		(248,823	)		(721,897	)
Net change in cash and cash equivalents				(7,616	)		5,819			(2,050	)
Cash and cash equivalents at beginning of period				12,846			7,027			9,077
Cash and cash equivalents at end of period			$	5,230		$	12,846		$	7,027

See Note 15 for supplemental information on non-cash investing and financing activities.

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

55

ARCHSTONE-SMITH OPERATING TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2003, 2002 and 2001

(The glossary included in this Annual Report is hereby incorporated by reference)

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

Business

      Archstone-Smith is structured as an UPREIT under which all property ownership and business operations are conducted through the Operating Trust. Archstone-Smith is our sole trustee and owns approximately 88.5% of our outstanding common units. As used herein, “we”, “our” and the “company” refers to the Operating Trust and Archstone-Smith, collectively, except where the context otherwise requires. Archstone-Smith is an equity REIT organized under the laws of the State of Maryland. We focus on creating value for our shareholders by acquiring, developing and operating apartments in markets characterized by: (i) protected locations with limited land on which to build new housing; (ii) expensive single-family home prices; and (iii) a strong, diversified economic base and job growth potential.

Principles of Consolidation

      The accounts of the Operating Trust 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 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. 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.

      We adopted FASB Interpretation No. 46 “Consolidation of Variable Interest Entities” (revised) on July 1, 2003. As a result, the accompanying consolidated financial statements have been restated to reflect the consolidated financial position and results of operations of Archstone-Smith Trust and certain previously unconsolidated entities in accordance with accounting principles generally accepted in the United States of America. We previously accounted for Ameriton using the equity method.

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 those estimates. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period they are determined to be necessary. Actual results could differ from management’s estimates.

Discontinued Operations

      In October 2001, the FASB issued SFAS 144, “Accounting for Impairment or Disposal of Long-Lived Assets” which became effective on January 1, 2002. For properties accounted for under SFAS 144, 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 interest expense (actual interest expense for encumbered properties and a pro-rata allocation of interest expense for any unencumbered portion up to our weighted average leverage ratio). The net gain or loss on the eventual disposal of the held for sale properties is also required to be classified as discontinued operations. Properties sold by our unconsolidated entities are not included in discontinued operations and related gains or losses are reported as a component of income from unconsolidated entities.

56

ARCHSTONE-SMITH OPERATING TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 Tax-Deferred Exchange Escrow

      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.

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 shareholders’ 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.

Real Estate and Depreciation

      Real estate, other than properties held for sale, is carried at cost. 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.

      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.

      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. 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. Assets to be disposed of 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 of a disposed group classified as held for sale would be 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. 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

57

ARCHSTONE-SMITH OPERATING TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 is computed over the expected useful lives of depreciable property on a straight-line basis as follows:

Buildings and related land improvements	20-40 years
Furniture, fixtures, equipment and other	5-10 years
Intangible value of lease agreements	6-12  months

Interest

      During 2003, 2002 and 2001, the total interest paid in cash on all outstanding debt was $244.8 million, $269.8 million and $163.7 million, respectively.

      We capitalize interest during the construction period as part of the cost of apartment communities under development. Interest capitalized during 2003, 2002 and 2001 aggregated $26.9 million, $32.4 million and $31.6 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 are subject to the provisions of EITF 96-19. 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 old debt is expensed upon replacement with new debt. 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 for 2003, 2002 and 2001 was $4.5 million, $5.0 million and $3.9 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.

Interest Rate Contracts/ Forward Sales Contracts

      We utilize derivative financial instruments to manage our interest rate risk and designate these financial instruments as hedges of specific liabilities or anticipated transactions. During 2003, we adopted SFAS No. 149 “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”. Under SFAS 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. The changes in the fair value of a fair value hedge and the fair value of the items hedged are recorded in earnings for each reporting period. The change in the fair value of effective cash flow hedges are carried on our financial statements as a component of

58

ARCHSTONE-SMITH OPERATING TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

accumulated other comprehensive income (loss). If effective, fair value hedges have no impact on our current earnings.

Revenue and Gain Recognition

      We generally lease our apartment units under operating leases with terms of one year or less. Rental revenue is recognized evenly over the lease term. 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. 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).

Rental Expenses

      Rental expenses shown on the accompanying Statements of Earnings include costs associated with on-site and property management personnel, utilities (net of utility reimbursements from residents), repairs and maintenance, property insurance, marketing, landscaping and other on-site and related administrative costs.

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 cost of settlement.

Stock-Based Compensation

      As of December 31, 2003, the company has one stock-based employee compensation plan. Effective January 1, 2003, the company adopted the fair value recognition provision of FASB Statement No. 123, “Accounting for Stock-Based Compensation,” prospectively to all employee awards granted, modified or settled after January 1, 2003, which results in expensing of options. There were no significant employee awards granted during the twelve months ended December 31, 2003. For employee awards granted prior to January 1, 2003, the company accounted for this plan under the recognition and measurement provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. With respect to options granted under the plan prior to January 1, 2003, no stock-based employee compensation expense is reflected in the accompanying condensed consolidated statements of earnings, as all options granted under those plans had an exercise price equal to the market value of the underlying Archstone-Smith common stock on the date of grant. The following table illustrates the effect on net earnings and earnings per share if the fair value based method had been applied to all outstanding and unvested awards in each period (dollar amounts in thousands, except per share amounts):

	Years Ended December 31,
	2003			2002			2001
Net earnings attributable to Common Units — Basic	$	468,038		$	322,416		$	239,697
Add: Stock-based employee compensation expense included in reported net earnings		—			—			—
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards		(1,982	)		(2,094	)		(1,669	)
Pro forma net earnings attributable to Common Units — Basic	$	466,056		$	320,322		$	238,028

59

ARCHSTONE-SMITH OPERATING TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		Years Ended December 31,
		2003		2002		2001
Net earnings per Common Unit:
	Basic — as reported	$	2.20	$	1.59	$	1.78
	Basic — pro forma	$	2.20	$	1.58	$	1.77
	Diluted — as reported	$	2.18	$	1.58	$	1.77
	Diluted — pro forma	$	2.17	$	1.57	$	1.75

      The pro forma amounts above were calculated using the Black-Scholes model, using the following assumptions:

	2003			2002			2001
Weighted average risk-free interest rate		3.48	%		3.54	%		4.06	%
Weighted average dividend yield		6.92	%		6.74	%		6.79	%
Weighted average volatility		15.33	%		19.58	%		15.67	%
Weighted average expected option life		5.0  years			5.0  years			5.0  years

Federal 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 and have made all required distributions of our taxable income. See Note 14 for more information on income taxes.

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 and changes in the fair value of effective cash flow hedges as described above (see — Interest Rate Contracts).

60

ARCHSTONE-SMITH OPERATING TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Per Unit Data

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

		Years Ended December 31,
		2003		2002		2001
Reconciliation of numerator between basic and diluted net earnings per Common Share(1):
Net earnings attributable to Common Units — Basic		$	468,038	$	322,416	$	239,697
	Dividends on Convertible Preferred Units		12,872		—		9,696
	Minority interest		—		—		1,524
Net earnings attributable to Common Units — Diluted		$	480,910	$	322,416	$	250,917
Reconciliation of denominator between basic and diluted net earnings per Common Share(1):
Weighted average number of Common Units outstanding — Basic			212,288		202,781		134,589
	Assumed conversion of Preferred Units into Common Shares		7,972		—		5,844
	Minority interest		—		—		943
	Incremental options and warrants		498		1,023		714
Weighted average number of Common Units outstanding — Diluted			220,758		203,804		142,090

(1)  Excludes the impact of 13.1 million convertible equity securities during 2002 as they were anti-dilutive.

Reclassifications

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

New Accounting Pronouncements

      In December 2003, the FASB issued FASB Interpretation No. 46 “Consolidation of Variable Interest Entities” (revised). This Interpretation replaces FASB Interpretation No. 46, “Consolidation of Variable Interest Entities”, which was issued in January 2003 and clarifies the application of Accounting Research Bulletin No. 51 “Consolidated Financial Statements”. FIN 46R requires us to consolidate our existing variable interest entities in which we have the majority variable interest. Due to the adoption of this Interpretation, we have consolidated the results of Ameriton, for all periods presented.

      In April 2003, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” We adopted this Statement for contracts or hedging relationships entered into or modified after June 30, 2003. Its purpose is to provide more consistent application and clarification of SFAS 133. The adoption of SFAS 149 did not have a material impact on our financial position, net earnings or cash flows.

      In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This Statement is effective for financial instruments entered into or modified after May 31, 2003, with the exception of the application to non-controlling (minority) interests in finite-life entities, which has been deferred indefinitely. The Statement requires that certain financial instruments, formerly presented as equity, be classified as liabilities. The adoption of SFAS 150 did not have a material impact on our financial position, net earnings or cash flows.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      In December 2003, the FASB issued SFAS No. 132, “Employer Disclosure about Pension and Other Post retirement Benefits” (revised). This statement is effective for financial statements with fiscal years ending after December 15, 2003. The statement revises the necessary disclosures about pension plans. The adoption of SFAS 132 (revised) did not have a material impact on our financial position, net earnings or cash flows.

(2)     Smith Merger

      On October 31, 2001, we completed our merger with Smith Partnership which primarily developed, owned, and managed high-rise properties and garden communities in Washington, D.C., Chicago, Boston and Southeast Florida. The purpose of the Smith Merger was to expand our portfolio in key protected markets. Following is a sequential outline of events that occurred prior to the merger closing:

(i)	In October 2001, Archstone was reorganized into an UPREIT structure. To facilitate this reorganization, Archstone formed a wholly-owned subsidiary named Archstone-Smith. Archstone-Smith then formed a wholly-owned subsidiary. Archstone merged with the wholly-owned subsidiary, became a wholly-owned subsidiary of Archstone-Smith and changed its name to Archstone-Smith Operating Trust. The Operating Trust is the successor entity to Archstone and Archstone-Smith is the successor registrant to Archstone;
(ii)	Smith Partnership then merged with and into the Operating Trust, with the Operating Trust remaining as the successor entity; and
(iii)	Finally, Smith Residential merged with and into Archstone-Smith, who remains the majority owner of the Operating Trust.

      The merger of Smith Partnership and the Operating Trust and the merger of Smith Residential with Archstone-Smith are collectively referred to in aggregate as the Smith Merger.

      Holders of Smith Residential common stock received 1.975 Archstone-Smith Common Shares for each share of Smith Residential common stock owned and holders of Smith Residential preferred shares received one Archstone-Smith preferred share for each Smith Residential preferred share owned. Holders of Smith Partnership common units received 1.975 A-1 Common Units for each Smith Partnership unit owned and holders of Smith Partnership preferred units received one Operating Trust preferred unit for each unit owned. Additionally, the Operating Trust assumed the outstanding debt and other liabilities and acquired the assets of Smith Partnership. Archstone-Smith issued 52.1 million Common Shares and 4.6 million preferred shares to holders of Smith Residential common and preferred stock and succeeded to Smith Residential’s interest in Smith Partnership. The Operating Trust issued 52.1 million A-2 Common Units and 4.6 million preferred units for Smith Residential’s interest in Smith Partnership and 25.5 million A-1 Common Units for the Smith Partnership unitholders’ interest in Smith Partnership. Additionally, all outstanding Smith Residential employee stock options and restricted share grants vested immediately prior to the Smith Merger. As a result, the holders of such options and restricted share grants were given the choice of replacement options in Archstone-Smith or a cash payment equal to the intrinsic value of the award based on a cash payment of $49.48 per option.

      The Smith Merger was structured as a tax-free merger and was accounted for using the purchase method of accounting. Because the transaction was completed during late 2001, all information necessary to complete the purchase price allocation was not available. During 2002, we finalized the estimates associated with certain information that was not available at the time the transaction was consummated. We adjusted the original purchase price allocation by approximately $31.8 million in 2002 to reflect the net amount of the finalized unrecorded liabilities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The following summary of the assets acquired and liabilities assumed were recorded at the estimated fair value as determined by management, based on information available and on assumptions of future performance (dollar amounts in thousands);

Real estate		$	3,771,789
Investment in and advances to unconsolidated entities			164,831
Other assets			32,017
	Total assets acquired	$	3,968,637
Unsecured credit facilities		$	219,000
Mortgages payable			1,402,962
Other accrued expenses and accounts payables			148,885
	Total liabilities assumed	$	1,770,847

      Since the Smith Merger closed on October 31, 2001, the accompanying Consolidated Statements of Earnings include Smith Residential’s results of operations for the last two months of 2001. The following summarized pro forma unaudited information assumes that the Smith Merger had occurred on January 1, 2001. The pro forma results of operations include estimates and assumptions which management believes are reasonable. These results are not necessarily indicative of what the results of operations would have been had the business combination been in effect on the dates indicated, or which may result in the future (dollar amounts in thousands):

		Pro Forma
		Year Ended
		December 31,
		2001(1)
Total revenues		$	1,036,614
Net earnings attributable to Common Units before discontinued operations		$	303,235
Net earnings attributable to Common Units(2)		$	345,612
Net earnings per Common Unit:
	Basic	$	1.77
	Diluted	$	1.74

(1)	Net earnings from discontinued operations have been reclassified.
(2)	Includes $5.3 million in merger related costs and $14.9 million in provision for loss on investments.

Sale of Consolidated Engineering Services

      Consolidated Engineering Services is a service business that we acquired in the Smith Merger in 2001, and prior to its sale had been reported as an unconsolidated entity in our financial statements. CES provides engineering services for commercial and residential real estate across the country. On December 19, 2002, CES was sold to a third party for $178 million in cash. We recorded a $35.4 million net gain on the sale of the business or $0.16 per share on a fully diluted basis. Excluded from the gain was approximately $6.7 million in contingent proceeds related to indemnification of certain accounts receivable over 120 days. During 2003, $5.8 million of these accounts receivable were collected and recognized in other income.

      As a condition of sale, we agreed to indemnify the buyer for certain representations and warranties contained in the sale contract. The indemnifications terminate on June 30, 2004, and while we do not believe it

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

is probable that the indemnities will reach the maximum amount, the related liability is limited to a maximum exposure of $44.5 million with exceptions including third-party claims, insurance, arbitration and environmental issues, each of which is without deduction or limitation. There are no recourse provisions available to us to recover potential future payments from third parties.

Sale of Smith Management Construction, Inc.

      Smith Management Construction, Inc. (SMC) is a service business that we acquired in the Smith Merger during 2001. We sold SMC during February 2003 to members of SMC’s senior management. Prior to the sale, we reported SMC as an unconsolidated entity in our financial statements. We received two notes receivable totaling $5.8 million and bearing an interest rate of 7.0% as consideration for the sale. The first note for $3.5 million has principal payments that began in October 2003 with payment in full by February 2008. The second note for $2.3 million was fully repaid along with all accrued interest due during May 2003. For accounting purposes, we will not recognize the divestiture until our responsibilities for certain performance guarantees, which pertain to ongoing construction projects at the time of sale, expire. Principal and interest payments received prior to the recognition of this transaction as a divestiture will be recorded as a reduction to our investment basis, which is included in other assets in the accompanying consolidated balance sheets.

(3)     Real Estate

Investments in Real Estate

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

			December 31,
			2003				2002
			Investment		Units		Investment		Units
Archstone-Smith Operating Trust apartment communities:
	Operating communities		$	8,067,075		63,848	$	8,380,779		75,693
	Communities under construction			301,634		2,607		328,390		2,295
	Development communities In Planning:
		Owned		95,911		2,633		89,501		2,870
		Under control(2)		—		112		—		428
	Total development communities In Planning			95,911		2,745		89,501		3,298
	Total Archstone-Smith Operating Trust apartment communities			8,464,620		69,200		8,798,670		81,286
	Ameriton apartment communities			494,338		5,646		458,914		6,241
	Land			9,648				9,697
	Other			30,574				30,454
		Total real estate	$	8,999,180		74,846	$	9,297,735		87,527

(1)	Unit information is based on management’s estimates and has not been audited or reviewed by our independent auditors.
(2)	Our investment as of December 31, 2003 and December 31, 2002 for development communities Under Control was $1.1 million and $2.7 million, respectively, and are reflected in the “Other assets” caption of our Consolidated Balance Sheets.

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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 stringent 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):

			Years Ended December 31,
			2003			2002
Balance at January 1			$	9,297,735		$	8,612,213
	Apartment properties acquired in the Smith Merger(1)			—			31,877
	Acquisition-related expenditures			573,768			539,652
	Redevelopment expenditures			69,649			152,428
	Recurring capital expenditures			48,960			40,683
	Development expenditures, excluding land acquisitions			91,430			247,044
	Acquisition and improvement of land for development			125,581			107,727
	Dispositions			(1,209,956	)		(439,847	)
	Provision for possible loss on investments			(3,714	)		(2,611	)
		Net apartment community activity		(304,282	)		676,953
Other:
	Disposition of retail asset acquired in Smith Merger			—			(5,990	)
	Change in other real estate assets			5,727			14,559
		Net other activity		5,727			8,569
Balance at December 31			$	8,999,180		$	9,297,735

(1)  Reflects purchase accounting adjustment in 2002.

      At December 31, 2003, we had unfunded contractual commitments of $498.4 million related to communities under construction and under redevelopment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(4)     Discontinued Operations

      Consistent with our capital recycling program, we had 10 operating apartment communities, representing 2,651 units (unaudited), classified as held for sale under the provisions of SFAS 144, at December 31, 2003. Accordingly, we have classified the operating earnings from these 10 properties within discontinued operations for the years ended December 31, 2003, 2002 and 2001. During the twelve months ended December 31, 2003, we sold 48 operating communities. The operating results of these 48 communities and the related gain/loss on sale are also included in discontinued operations for 2003, 2002 and 2001. Lastly, discontinued operations for the years ended December 31, 2002 and 2001, include the net operating results of 12 operating communities and one retail property which were sold during 2002. Four apartment communities that were sold during 2002 were held for sale at December 31, 2001, and therefore gains and related operating income for these dispositions are not classified as discontinued operations in accordance with SFAS 144. The following is a summary of net earnings from discontinued operations (in thousands):

	Years Ended December 31,
	2003			2002			2001
Rental revenues	$	125,584		$	233,479		$	181,498
Rental expenses		(39,352	)		(69,554	)		(45,704	)
Real estate taxes		(12,019	)		(23,007	)		(15,058	)
Depreciation on real estate investments		(15,679	)		(39,596	)		(34,390	)
Interest expense(1)		(28,236	)		(57,596	)		(62,766	)
Provision for possible loss on real estate investment		(3,714	)		(2,611	)		—
Gain on dispositions of real estate investments, net		353,600			103,654			—
	$	380,184		$	144,769		$	23,580

(1)  The portion of interest expense included in discontinued operations that is allocated to properties based on the company’s leverage ratio was $23.0 million, $38.7 million and $51.6 million for 2003, 2002 and 2001, respectively.

(5)     Investments in and Advances to Unconsolidated Entities

Service Businesses

      SMC and CES were service businesses that we acquired in the Smith Merger during 2001. We sold CES in 2002 to a third party and we sold SMC in 2003 to former members of SMC’s senior management. Prior to the sales, we reported both CES and SMC as unconsolidated entities in our financial statements.

Archstone Management Services

      During May 2003, we sold Archstone Management Services, our third-party management business. The transaction includes management contracts for 32 communities comprising 10,665 units. The $6.5 million sales price will be paid in three installments based on the retention of the contracts acquired. Since the ultimate sales proceeds are contingent upon the retention of management contracts existing at the time of the sale, the gain is being deferred. We will recognize the gain from this sale when the required retention period expires in the second quarter of 2004.

Real Estate Joint Ventures

      At December 31, 2003, we had investments in 11 Operating Trust real estate joint ventures. Our ownership percentage of economic interests range from 20% to 48%. The voting interest for major decisions is

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split 50/50 between ourselves and the venture partners. At December 31, 2003, Ameriton had seven real estate joint ventures in which the venture partners are the development/managing members. Voting on major investment decisions are split 50/50 and our venture partners handle all day-to-day operational decisions. Economic interest in the ventures varies depending upon the ultimate return of the venture. Because we do not control the voting interest of these joint ventures, we account for these entities using the equity method. In aggregate, these ventures own 16,817 apartment units. At December 31, 2003, the investment balance consists of $42.9 million in Archstone-Smith Operating Trust joint ventures and $43.5 million in Ameriton joint ventures. At December 31, 2002, the investment balance consists of $54.9 million in Archstone-Smith Operating Trust joint ventures and $61.7 million in Ameriton joint ventures.

Summary Financial Information

      Combined summary balance sheet data for our investments in unconsolidated entities follows (in thousands):

			2003		2002
Assets:
	Real estate		$	1,283,904	$	1,263,302
	Other assets			29,577		28,880
		Total assets	$	1,313,481	$	1,292,182
Liabilities and owners’ equity:
	Inter-company debt payable to Archstone-Smith		$	2,779	$	5,105
	Mortgages payable			913,142		842,959
	Other liabilities			20,804		25,270
		Total liabilities		936,725		873,334
	Owners’ equity			376,756		418,848
		Total liabilities and owners’ equity	$	1,313,481	$	1,292,182

      Selected summary results of operations for our significant unconsolidated investees presented on a stand-alone basis follows:

		2003			2002			2001
Operating Trust Joint Ventures:
	Revenues	$	145,567		$	145,061		$	97,338
	Net earnings		7,726			16,118			10,130
Ameriton Joint Ventures:
	Revenues	$	11,549		$	9,977		$	33,776
	Net earnings		(4,569	)		(1,716	)		(157	)
Service Businesses:
	Revenues	$	—		$	432,193		$	79,246
	Net earnings		—			5,227			2,885
Total:
	Revenues	$	157,116		$	587,231		$	210,360
	Net earnings	$	3,157		$	19,629		$	12,858

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Our income from unconsolidated entities differs from the stand-alone net earnings from the investees presented above due to various accounting adjustments made in accordance with GAAP. Examples of these differences include: (i) only recording our proportionate share of net earnings in the unconsolidated investees; (ii) the impact of certain eliminating inter-company transactions; (iii) adjustments to depreciation and amortization expense resulting from applying purchase accounting in connection with the Smith Merger; (iv) timing differences in income recognition due to deferral of gains on contribution of properties to joint ventures; and (v) a gain on the sale of CES, as previously discussed.

      As a matter of policy, we 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 are required to guarantee the mortgages. However, such guarantees are fully non-recourse to us. All off-balance sheet contingent liabilities, with the exception of outstanding performance bonds, and all third-party debt incurred by our unconsolidated investees are fully non-recourse to us. As such, the extent of our exposure to financial losses is limited solely to our investment in each of the unconsolidated investees.

(6) Borrowings

Unsecured Credit Facilities

      In October 2003, we completed the renewal of our unsecured revolving credit facility provided by a group of financial institutions led by JPMorgan Chase Bank. The $600 million facility matures in October, 2006 and has a one-year extension feature, exercisable at our option. The facility bears interest at the greater of prime or the federal funds rate plus 0.50%, or at our option, LIBOR plus 0.60%. The spread over LIBOR can vary from LIBOR plus 0.50% to LIBOR plus 1.25% based upon the rating of our Long-Term Unsecured Debt. The facility contains an accordion feature that allows us to expand the commitment up to $900 million at any time during the life of the facility, subject to lenders providing additional commitments. Under the agreement, we pay a facility fee of 0.15% of the commitment, which can vary from 0.125% to 0.200% based upon the ratings of our Long-Term Unsecured Debt.

      The following table summarizes our revolving credit facility borrowings under our line of credit (in thousands, except for percentages):

	Years Ended
	December 31,
	2003			2002
Total unsecured revolving credit facility	$	600,000		$	700,000
Borrowings outstanding at December 31		97,000			348,500
Outstanding letters of credit under this facility		1,050			11,890
Weighted average daily borrowings		231,354			248,398
Maximum borrowings outstanding during the period		511,500			465,000
Weighted average daily nominal interest rate		1.95	%		2.26	%
Weighted average daily effective interest rate		2.55	%		3.08	%

      We also have a short-term unsecured borrowing agreement with JPMorgan Chase Bank, which provides for maximum borrowings of $100 million. The agreement bears interest at an overnight rate agreed to at the time of borrowing and ranged from 1.65% to 1.95% during 2003. There were $6.8 million and $17.1 million of borrowings outstanding under this agreement at December 31, 2003 and 2002, respectively.

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Long-Term Unsecured Debt

      During June 2003, we issued $250 million of long-term unsecured senior notes due in June 2008 for net proceeds of $247.2 million. These notes bear interest at a coupon rate of 3.0% annually, with an effective interest rate of 3.2%. The net proceeds were used to repay outstanding balances on our unsecured credit facilities.

      In February 2002, we issued $200 million in long-term unsecured ten-year senior notes with an effective interest rate of 6.6% from our shelf registration statement. In May 2002, we filed a shelf registration statement on Form S-3 to register an additional $422.8 million (for a total of $800 million) in unsecured debt securities. These registration statements were declared effective in June 2002. In August 2002, we issued $300 million in long-term unsecured senior five-year notes with an effective interest rate of 5.2% from its shelf registration statement. In November 2002, we issued $35 million in long-term unsecured five-year senior notes with an effective interest rate of 4.9% from its shelf registration statement. As of December 31, 2003, we had $550 million available in debt shelf registered securities which can be issued subject to our ability to affect offerings on satisfactory terms based on prevailing market conditions.

      A summary of our Long-Term Unsecured Debt outstanding at December 31, 2003 and 2002 follows (dollar amounts in thousands):

								Balance at		Balance at		Average
					Effective			December 31,		December 31,		Remaining Life
Type of Debt		Coupon Rate(1)			Interest Rate(2)			2003		2002		(Years)
Long-term unsecured senior notes			6.35	%		6.46	%	$	1,771,167	$	1,669,396		5.40
Unsecured tax-exempt bonds			1.72	%		1.93	%		100,798		106,707		20.56
	Total/average		6.10	%		6.22	%	$	1,871,965	$	1,776,103		6.22

(1)	Represents a fixed rate for the long-term unsecured notes and a variable rate for the unsecured tax-exempt bonds.
(2)	Includes the effect of fair value hedges, loan cost amortization and other ongoing fees and expenses, where applicable.

      The $1.8 billion of long-term unsecured senior notes generally have semi-annual interest payments and either amortizing annual principal payments or balloon payments due at maturity. The unsecured tax-exempt bonds require semi-annual payments and are due upon maturity with $23.7 million maturing in 2008 and $77.1 million maturing in 2029. The notes are redeemable at our option, in whole or in part, and the unsecured tax-exempt bonds are redeemable at our option upon sale of the related property. The redemption price is generally equal to the sum of the principal amount of the notes being redeemed plus accrued interest through the redemption date plus a standard make-whole premium, if any.

Mortgages Payable

      Our 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). A

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summary of mortgages payable outstanding for the years ending December 31, 2003 and December 31, 2002 follows (dollar amounts in thousands):

					Principal Balance(2)
					at December 31,
		Effective
		Interest Rate(1)			2003		2002
Fannie Mae secured debt(3)			6.56	%	$	538,106	$	540,364
Freddie Mac secured line of credit			2.74	%		21,705		71,110
Conventional fixed rate			6.33	%		973,171		1,137,548
Tax-exempt fixed rate			n/a			—		7,035
Tax-exempt floating rate			1.83	%		317,351		337,352
Construction Loans			4.19	%		56,129		63,738
Other			3.85	%		21,163		22,850
	Total/average mortgage debt		5.57	%	$	1,927,625	$	2,179,997

(1)	Includes the effect of fair value hedges, credit enhancement fees, the amortization of fair market value purchase adjustment, and other related costs, where applicable, as of December 31, 2003.
(2)	Includes net fair market value adjustment recorded in connection with the Smith Merger of $58.5 million and $69.7 million at December 31, 2003 and 2002, respectively.
(3)	Represents a long-term secured debt agreement with Fannie Mae. The Fannie Mae secured debt matures on dates ranging from January 2006 to July 2009, although we have the option to extend the term of any portion of the debt for up to an additional 30-year period at any time, subject to Fannie Mae’s approval.

      The change in mortgages payable during 2003 and 2002 consisted of the following (in thousands):

		2003			2002
Balance at January 1		$	2,179,997		$	2,454,508
	Issuance of new mortgages(1)		76,017			247,797
	Mortgage assumptions related to property acquisitions		55,362			205,542
	Regularly scheduled principal amortization		(11,934	)		(11,760	)
	Prepayments, final maturities and other		(371,817	)		(716,090	)
Balance at December 31		$	1,927,625		$	2,179,997

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(1)  Represents proceeds from mortgages originated by Ameriton.

Scheduled Debt Maturities

      Approximate principal payments due during each of the next five calendar years and thereafter, are as follows (in thousands):

		Long Term Unsecured Debt				Mortgages Payable
		Regularly				Regularly
		Scheduled		Final		Scheduled		Final
		Principal		Maturities		Principal		Maturities
		Amortization		and Other		Amortization		and Other		Total
2004		$	31,250	$	20,000	$	13,093	$	49,179	$	113,522
2005			31,250		220,000		14,119		54,575		319,944
2006			31,250		20,000		13,273		291,119		355,642
2007			31,250		355,000		14,575		114,487		515,312
2008			31,250		303,711		16,142		110,290		461,393
Thereafter(1)			399,917		397,087		185,945		1,050,828		2,033,777
	Total	$	556,167	$	1,315,798	$	257,147	$	1,670,478	$	3,799,590

(1)  The average annual principal payments due from 2009 to 2023 are $123.7 million per year.

Other

      The book value of total assets pledged as collateral for mortgage loans and other obligations at December 31, 2003 and 2002 is $3.8 billion and $3.8 billion, respectively. Our debt instruments generally contain covenants common to the type of facility or borrowing, including financial covenants establishing minimum debt service coverage ratios and maximum leverage ratios. We were in compliance with all financial covenants pertaining to our debt instruments at December 31, 2003. See Note 11 for a summary of derivative financial instruments used in connection with our debt instruments.

(7) Distributions to Unitholders

      The payment of distributions is subject to the discretion of the Archstone-Smith Board and is dependent upon our strategy, financial condition and operating results. In December 2003, we announced an anticipated increase in the annual distribution from $1.71 to $1.72 per Common Unit.

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      The following table summarizes the cash distributions paid per unit on Common Units and Preferred Units during 2003, 2002 and 2001:

	2003		2002		2001
Common Units and A-1 Units	$	1.71	$	1.70	$	1.64
Series A Preferred Units(1)		2.11		2.29		2.21
Series B Preferred Units(2)		—		—		0.79
Series C Preferred Units(3)		—		1.38		2.16
Series D Preferred Units		2.19		2.19		2.19
Series E Preferred Units(4)		2.09		0.70		—
Series F Preferred Units(4)		2.03		0.68		—
Series G Preferred Units(4)		2.16		0.72		—
Series H Preferred Units(5),(6)		1.27		3.36		—
Series I Preferred Units(5),(7)		7,660.00		7,660.00		—
Series J Preferred Units(5)		—		1.71		—
Series K Preferred Units(5)		3.38		3.36		—
Series L Preferred Units(5)		3.38		3.36		—

(1)	The Series A Preferred Units were called for redemption during the fourth quarter of 2003; of the 2.9 million Preferred Units outstanding, 2.8 million were converted to Common Units and the remaining were redeemed.
(2)	All of the outstanding Series B Preferred Units were redeemed on May 7, 2001.
(3)	The Series C Preferred Units were redeemed at liquidation value, plus accrued and unpaid distributions, on August 20, 2002.
(4)	In August 2002, all DownREIT Perpetual Preferred Unites were converted into Operating Trust Perpetual Preferred Units.
(5)	Series H, I, J, K and L did not exist before the Smith Merger.
(6)	The Series H Preferred Units were converted into Common Units on May 15, 2003.
(7)	The Series I Preferred Units have a par value of $100,000.
(8)	The Series J Preferred Units were converted into Common Units on July 13, 2002.

(8) Unitholders’ Equity

A-1 Common Units

      In connection with the Smith Merger, the Operating Trust issued approximately 25.5 million A-1 Common Units to former Smith Partnership unitholders. These units are redeemable at the option of the A-1 Common Unitholders. The Operating Trust must redeem the A-1 Common Units with cash or Archstone-Smith has the option to redeem the A-1 Common Units with Common Shares. The A-1 Common Unitholders’ aggregate interest in the Operating Trust was approximately 11.5% at December 31, 2003.

      During 2003, we issued 1,955,908 Common Units in exchange for real estate. In 2002, we issued 339,727 Class B Common Units as partial consideration for a real estate acquisition. In April 2002, Archstone-Smith issued 149,319 unregistered Common Shares in exchange for 149,319 Class B Common Units previously issued. In August 2002, we converted 870,523 of DownREIT operating units into A-1 Common Units in connection with the merger with our DownREIT Operating Partnerships.

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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 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.

Preferred Unit Redemption and Conversions

      The Series A Preferred Units were called for redemption during the fourth quarter of 2003. Of the 2.9 million Series A Preferred Units outstanding, 2.8 million were converted to Common Units and the remaining were redeemed. During May 2003, the Series H Preferred Shares were converted into Common Units. In August 2002, we redeemed Series C Preferred Units at liquidation value, plus accrued and unpaid distributions for a total of $49.7 million. In July 2002, the Series J Preferred Units were converted to Common Units.

Common Unit Repurchase

      In 2003, we repurchased 614,100 Common Units for an average price of $21.38 per unit. In 2002, we repurchased 668,900 Common Units for an average price of $22.97 per unit.

Preferred Units

      A summary of our Convertible Preferred Units outstanding at December 31, 2003 and 2002, including their significant rights, preferences, and privileges follows:

							Annual
							Dividend		December 31,
	Redemption		Conversion		Liquidation		Rate Per
Description	Date		Ratio		Value		Unit		2003		2002
									(Amounts in
									thousands)
Series A Preferred Units; 2,926,835 Units issued and outstanding at December 31, 2002(1)		—		—		—	$	—	$	—	$	73,171
Series H Preferred Units; 2,640,325 Units issued and outstanding at December 31, 2002(2)		—		—		—		—		—		71,500
Series K Preferred Units; 666,667 Units issued and outstanding at December 31, 2003 and December 31, 2002(3)(4)		10/01/04		1.975		37.50		3.38		25,000		25,000
Series L Preferred Units; 641,026 Units issued and outstanding at December 31, 2003 and December 31, 2002(3)(4)		11/05/05		1.975		39.00		3.38		25,000		25,000
									$	50,000	$	194,671

(1)	The Series A Preferred Units were called for redemption during the fourth quarter of 2003; of the 2.9 million Preferred Units outstanding, 2.8 million were converted to Common Units and the remaining were redeemed.
(2)	The Series H Preferred Units were converted into Common Units on May 15, 2003.

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(3)	The distribution is calculated as the higher of the annual distribution rate per unit, or the distribution on Common Units as if converted. The distribution reflected here is the actual distribution that would be paid based on the current Common Unit distribution.
(4)	Series K and L Preferred Units may be redeemed for cash at our option, in whole or in part, at the redemption price equal to the liquidation value plus accrued distributions. Additionally, Series K and L unitholders have the right to convert into Common Units at their discretion.

      A summary of our Perpetual Preferred Units outstanding at December 31, 2003 and 2002, including their significant rights, preferences, and privileges follows:

					Annual		December 31,
	Redemption		Liquidation		Dividend Rate
Description	Date(1)		Value		Per Unit		2003		2002
							(Amounts in
							Thousands)
Series D Preferred Units; 1,957,606 and 1,974,806 units issued and outstanding at December 31, 2003 and 2002, respectively(1)		08/06/04		25.00	$	2.19	$	48,940	$	49,370
Series E Preferred Units; 1,120,000 units issued and outstanding at December 31, 2003 and 2002, respectively(2)		08/13/04		25.00		2.09		27,123		27,123
Series F Preferred Units; 800,000 units issued and outstanding at December 31, 2003 and 2002, respectively(2)		09/27/04		25.00		2.03		19,464		19,464
Series G Preferred Units; 600,000 units issued and outstanding at December 31, 2003 and 2002, respectively(2)		03/03/05		25.00		2.16		14,593		14,593
Series I Preferred Units; 500 units issued and outstanding at December 31, 2003 and 2002, respectively(1)		02/01/28		100,000		7,660		50,000		50,000
							$	160,120	$	160,550

(1)	Series D and 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 share, plus accrued and unpaid dividends, if any, on or after the redemption dates indicated.
(2)	In August 2002, 3,000,000 DownREIT Perpetual Preferred Units were converted into Operating Trust Perpetual Preferred Units.

      The holders of our Preferred Units do not have preemptive rights over the holders of Common Units, but have limited voting rights under certain circumstances. The Preferred Units have no stated maturity, are not subject to any sinking fund requirements and we are not obligated to redeem or retire the units. 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 all series of Preferred Units rank equally as to distributions and liquidation proceeds. All dividends due and payable on Preferred Units have been accrued and paid as of the end of each fiscal year.

      If six quarterly dividends payable (whether or not consecutive) on any series or class of Preferred Units that are of equal rank with respect to distributions and any distribution of assets, shall not be paid in full, the number of Archstone-Smith Trustees shall be increased by two and the holders of all such Preferred Units voting as a class regardless of series or class, shall be entitled to elect the two additional trustees. Whenever all distributions in arrears have been paid, the right to elect the two additional trustees shall cease and the terms of such trustees shall terminate.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Dividend Reinvestment and Share Purchase Plan

      Archstone-Smith’s dividend reinvestment and share purchase plan was designed and implemented to increase ownership in the company by private investors. Under the plan, holders of Archstone-Smith Common Shares and Operating Trust A-1 Common Units have the ability to automatically reinvest their cash dividends and distributions to purchase additional Common Shares. In October 2003, we announced that shares issued under the Dividend Reinvestment and Share Purchase Plan would be acquired through open market purchases or in negotiated transactions with third parties pursuant to the automatic reinvestment of dividends or pursuant to optional cash payments under the plan. As a result, Common Shares acquired by investors under the plan are not currently entitled to a discount.

(9) Benefit Plans

      Our long-term incentive plan was approved in 1997, and was modified in connection with the Smith Merger. There have been four 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) restricted Common Share unit awards with a DEU feature; and (iv) employee unit purchase program with matching options without the DEU feature, granted only in 1997 and 1998.

      No more than 20,000,000 share or option awards in the aggregate may be granted under the plan and no individual may be awarded more than 1,000,000 share or option awards in any one-year period. The plan has a 10-year term. As of December 31, 2003, Archstone-Smith had 8,840,740 shares available for future grants. No annual option awards were made in 2003, as option awards for 2003 were approved and granted in January 2004. Beginning in 2004, the Board voted to eliminate regular option awards to officers with the title of Senior Vice President or above.

Share Options and Trustee Options

      The exercise price of each employee option granted is equal to the fair market value at the close of business on the day immediately preceding the date of grant. The options awarded through mid-2001 generally vest at a rate of 25% per year; options granted after mid-2001 generally vest at the rate of 33 1/3% a year.

      Additionally, Archstone-Smith has authorized 400,000 Common Shares for issuance to their outside trustees under the equity plan for outside trustees. The exercise price of outside trustee options is equal to the average of the high and low prices on the date of grant. All options granted to outside trustees before 1999 have been exercised or cancelled. The options issued to outside trustees between 1999 and 2001 have a DEU feature, a 10-year term and vest over a four-year period. Beginning in 2002 options are no longer issued to outside trustees.

      During 1997, as part of the employee share purchase plan, certain officers and other employees purchased Common Shares of Archstone-Smith. The company financed 95% of the total purchase price by issuing notes representing approximately $17.1 million. Loans made to employees in connection with the employee share purchase plan are recourse loans and the associated receivable is recorded as a reduction of shareholders’/unitholders’ equity. As of December 31, 2003, the aggregate outstanding balances on these notes were approximately $1.1 million.

      In an effort to eliminate all employee loans, Archstone-Smith made an offer to the remaining participants of this plan to repurchase their Common Shares as of December 27, 2002, using the closing price of Archstone-Smith Common Shares on that date. The proceeds of the repurchase were used to pay off the outstanding loan balance, with any excess going to the participant. In addition, the participant received one fully vested and exercisable option for each share that was repurchased, with a term not to exceed the remaining term on the promissory note for the outstanding loan. A total of 81,685 Common Shares were repurchased for a total of $1.9 million. The fully vested stock options issued in connection with the repurchase

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of outstanding common shares were accounted for under the recognition and measurement provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Additionally, no stock-based employee compensation expense is reflected in the Consolidated Statement of Earnings, as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant and would not be considered a replacement award.

      A summary of all options outstanding at December 31, 2003 follows:

				Exercise Prices						Weighted-Average
		Number of								Remaining
		Options		Range		Average		Expiration Date		Contractual Life
Matching options under the 1997 employee share purchase program			485,202	$	21.19-$22.44	$	22.19		2007-2008		3.71 years
Options with DEUs			969,212		19.00- 22.94		20.51		2007-2009		5.05 years
Options without DEUs			3,853,064		21.91- 28.86		24.77		2007-2013		8.04 years
Outside Trustees			71,250		22.56- 23.95		23.06		2009-2011		6.43 years
Exchanged options			1,009,014		15.07- 23.18		19.99		2007-2011		6.22 years
	Total		6,387,742	$	15.07-$28.86	$	23.15

      A summary of the status of Archstone-Smith Trust’s option plans as of December 31, 2003, 2002 and 2001, and changes during the years ended on those dates is presented below:

					Weighted		Number of
		Number of			Average		Options
		Options			Exercise Price		Exercisable
Balance/ Average at December 31, 2000			4,153,213		$	22.29		1,182,120
	Granted		1,236,560			26.30
	Smith Merger replacement options		3,338,220			18.41
	Exercised		(404,254	)		26.02
	Forfeited		(216,111	)		22.42
Balance/ Average at December 31, 2001			8,107,628		$	21.33		5,131,390
	Granted		2,680,143			24.15
	Exercised		(1,210,890	)		26.28
	Forfeited		(340,519	)		23.94
Balance/ Average at December 31, 2002			9,236,362		$	22.44		5,314,210
	Granted		15,823			22.42
	Exercised		(2,101,605	)		19.58
	Forfeited		(762,838	)		24.38
Balance/ Average at December 31, 2003			6,387,742		$	23.15		4,546,725

Restricted Share Unit Awards

      Restricted Share Unit awards are granted at the market value of the underlying Common Shares on the date of grant. To compute the total compensation expense to be recognized, the fair value of each share on the grant date is multiplied by the number of shares granted. We then recognize this stock-based employee compensation expense over the vesting period, which ranges from two to five years. The total expense

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recognized in connection with these awards, including the DEUs for the years ending December 31, 2003, December 31, 2002 and December 31, 2001 was $5.6 million, $4.6 million, and $4.2 million, respectively.

      There were no RSU grants awarded under the Long-Term Incentive Plan in 2003. Instead, 2003 RSUs were approved and granted in January 2004. During 2002 and 2001 Archstone-Smith awarded 341,048 and 168,066 RSUs with a DEU feature, respectively, to certain employees under the long-term incentive plan, of which 88,366 have been forfeited. Twelve thousand RSUs with a DEU feature were awarded to trustees under the equity plan for outside trustees, none of which has been forfeited. Each RSU provides the holder with one Common Share upon settlement. The RSUs and related DEU feature vest at 20%-50% per year over a two to five-year period. We recognize the value of the awards and the related DEUs as compensation expense over the vesting period.

Dividend Equivalent Units

      Under the modified long-term incentive plan, participants who are awarded RSUs may be credited with DEUs equal to the amount of dividends paid on Common Shares with respect to such awards. The DEUs are awarded annually each year and vest under substantially the same terms as the underlying share options or RSUs.

      DEUs credited in relation to options are calculated by taking the average number of options held at each record date and multiplying by the difference between the average annual dividend yield on Common Shares and the average dividend yield for the Standard & Poor’s 500 Stock Index. DEUs credited in relation to RSUs are calculated by taking the average number of RSUs held at each record date and multiplying by the average annual dividend yield on Common Shares. DEUs credited in relation to existing DEUs are calculated by taking the number of DEUs at December 31 and multiplying by the average annual dividend yield on Common Shares.

      As of December 31, 2003, there were a total of 246,964 DEUs outstanding awarded to 85 holders of options and RSUs. The outstanding DEUs were valued at $6.9 million on December 31, 2003 based upon market price of the Common Shares on that date. We recognize the value of the DEUs awarded as compensation expense over the vesting period. The matching options granted in connection with the 1997 employee purchase program and all of the employee options granted after 1999 (including the converted Smith Residential options) do not have a DEU feature.

401(k) Plan and Nonqualified Deferred Compensation 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 employees’ annual contribution. Contributions by employees to the 401(k) plan are subject to federal limitations of $12,000 during 2003. The matching employer contributions are made in Common Shares, which vest between years of service at 20% per year. The Smith Residential nonqualified deferred compensation plan and the outside trustees deferred fee plan were merged into our existing nonqualified savings plan to form a new on-going nonqualified deferred compensation plan on January 1, 2002. Generally, the deferred compensation plan permits only deferrals of compensation by eligible employees and non-employee trustees. No employer contributions are currently being made to that plan. Amounts deferred under the deferred compensation plan are invested among a variety of investments as directed by the participants, and are generally deferred until termination of employment or service as a trustee.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Deferral of Fees by Non-Employee Trustees

      Pursuant to the terms of the nonqualified deferred compensation plan, each non-employee member of our Board has the opportunity to defer receipt of all or a portion of the service fees they otherwise would have been paid in cash. If a participant elects to have their fees deferred, the fees accrue in the form of phantom shares equal to the number of Common Shares that could have been purchased on the date the fee was credited. Dividends are calculated on the phantom shares and additional phantom shares are credited. Distribution of phantom shares may be deferred to a later date. Upon settlement, phantom shares convert into Common Shares on a 1-to-1 basis. Alternatively, the Trustee can elect to have his or her fees deferred and invested in one or more of the investment funds that are otherwise available under the deferred compensation plan. Upon settlement such investments are paid out in cash.

(10) Financial Instruments and Hedging Activities

Fair Value of Financial Instruments

      At December 31, 2003 and 2002, the fair values of cash and cash equivalents, restricted cash held in a tax-deferred exchange escrow accounts, receivables and accounts payable 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):

		Balance at December 31, 2003				Balance at December 31, 2002
		Carrying		Estimated		Carrying			Estimated
		Amounts		Fair Value		Amounts			Fair Value
Borrowings:
	Unsecured credit facilities	$	103,790	$	103,790	$	365,578		$	365,578
	Long-Term Unsecured Debt		1,871,695		2,043,289		1,776,103			1,969,102
	Mortgages payable		1,927,625		2,032,872		2,179,997			2,059,081
Interest rate contracts:
	Interest rate swaps	$	2,765	$	2,765	$	(1,235	)	$	(1,235	)
	Interest rate caps		—		—		3			3
Forward Contracts:
	Forward sales agreements	$	250	$	250	$	—		$	—

      All 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 shareholders’ equity. As of December 31, 2003 and 2002, our investments in publicly traded equity securities included in other assets were $144.7 million and $85.2 million, respectively. 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 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, management considers events and circumstances that may signal the impairment of an investment. During 2001, we concluded that our investments in private service and technology companies were impaired due to the investees’ financial position. Since the decline was other than temporary, we recorded a $12.2 million provision for possible loss on investments during the year ended December 31, 2001.

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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. These derivatives are designated as either cash flow or fair value hedges. We are also exposed to price risk associated with changes in the fair value of certain equity securities. We have entered into forward sale agreements to protect against a reduction in the fair value of these securities. We have designated this forward sale as a fair value hedge. 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 loss from the use of these hedging instruments.

      We formally assess, both at inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. We measure hedge effectiveness by comparing the changes in the fair value or cash flows of the derivative instrument with the changes in the fair value or cash flows of the hedged item. We exclude the hedging instrument’s time value component when assessing hedge effectiveness. If it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, we will discontinue hedge accounting prospectively.

      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. During the 3rd quarter of 2003, we entered into a forward sale agreement with a notional amount, which represents the fair value of the underlying marketable securities, of approximately $46.8 million. In the 4th quarter of 2003, we entered into two additional forward sale agreements with a notional amount of approximately $81.7 million. The forward sales agreements fair value at December 31, 2003 and 2002 were $250,000 and $0, respectively. The sale of certain marketable securities in accordance with forward sale contracts is expected to result in realized gains of approximately $22.0 million in 2004.

Derivatives and Hedging Activities

      We adopted SFAS No. 133/138, “Accounting for Derivative Instruments and Hedging Activities” on January 1, 2001. This accounting standard requires companies to carry all derivative instruments on the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, on the reason for holding it. We use only qualifying hedges that are designated specifically to reduce borrowing costs. This is typically accomplished using interest rate swaps, interest rate caps or by locking in rates on anticipated debt issuances.

      Upon adoption of SFAS No. 133/138, on January 1, 2001 we recorded a net transition loss of $205,000 in other expense and a net transition unrealized gain of $3.8 million in other comprehensive income, related to the cumulative effect of an accounting change. During the years ended December 31, 2003, 2002 and 2001 we recorded a net charge of $(100,665), $311,868 and $19,000, respectively, to interest expense relating to an interest rate swap designated as a cash flow hedge that was more than 100% effective at offsetting interest rates on the underlying hedged debt. As a matter of policy, we pursue hedging strategies that we expect will result in the lowest overall borrowing costs and least degree of earnings volatility possible under the new accounting standards.

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      In April 2003, we adopted SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” We adopted this Statement for contracts or hedging relationships entered into or modified after June 30, 2003. Its purpose is to provide more consistent application and clarification of SFAS 133.

      The following table summarizes the notional amount, carrying value and estimated fair value of our derivative financial instruments, as of December 31, 2003 (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 Fair
				Amount		Date Range		Value
Cash flow hedges:
	Interest rate caps			$	34,508		2005	$	—
	Interest rate swaps				150,000		2006		(9,819	)
		Total cash flow hedges		$	184,508		2005-2006	$	(9,819	)
Fair value hedges:
	Interest rate swaps			$	104,005		2006-2008	$	8,822
	Total rate of return swaps				69,756		2004-2007		3,762
	Forward sales agreement				128,500		2004		250
		Total fair value hedges		$	302,261		2004-2008	$	12,834
			Total hedges	$	486,769		2004-2008	$	3,015

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(11) Selected Quarterly Financial Data

      Selected quarterly financial data (in thousands, except per unit amounts) for 2003 and 2002 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.

			(Unaudited)
			Three Months Ended
												Year Ended
			3-31(1)		6-30(1)			9-30(1)		12-31(1)		12-31(1)
2003:
	Total revenues		$	221,250	$	221,924		$	226,398	$	230,803	$	900,375
	Earnings from operations			39,322		16,050			24,730		28,160		108,262
	Gains on dispositions of depreciated real estate, net(2)			—		—			—		—		—
	Income from unconsolidated entities			455		(1,161	)		1,714		4,737		5,745
	Less minority interest:
		Perpetual Preferred Units		—		—			—		—		—
		Convertible operating partnership units		—		—			—		—		—
	Plus net earnings from discontinued operations			58,010		59,595			151,273		111,306		380,184
	Less Preferred Unit distributions			8,358		7,251			6,128		4,416		26,153
	Net earnings attributable to Common Units — Basic		$	89,429	$	67,233		$	171,589	$	139,787	$	468,038
	Net earnings per Common Unit:(3)
		Basic	$	0.43	$	0.32		$	0.80	$	0.64	$	2.20
		Diluted	$	0.43	$	0.32		$	0.79	$	0.63	$	2.18
2002:
	Total revenues		$	211,844	$	215,065		$	216,325	$	218,523	$	861,757
	Earnings from operations			48,353		42,045			28,983		8,238		127,619
	Gains on dispositions of depreciated real estate, net(2)			2,231		22,212			3,500		8,007		35,950
	Income from unconsolidated entities			3,603		8,078			3,748		38,173		53,602
	Less minority interest:
		Perpetual preferred units		1,567		1,567			1,095		—		4,229
		Convertible operating partnership units		370		370			246		—		986
	Plus net earnings from discontinued operations			14,128		23,900			36,732		70,009		144,769
	Less Preferred Unit distributions			8,759		8,681			7,702		9,167		34,309
	Net earnings attributable to Common Units — Basic		$	57,619	$	85,617		$	63,920	$	115,260	$	322,416
	Net earnings per Common Unit:(3)
		Basic	$	0.29	$	0.43		$	0.31	$	0.56	$	1.59
		Diluted	$	0.29	$	0.42		$	0.31	$	0.56	$	1.58

81

ARCHSTONE-SMITH OPERATING TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(1)	Net earnings from discontinued operations have been reclassified for all periods presented.
(2)	Excludes gains on properties included in net earnings from discontinued operations.
(3)	Due to rounding, the sum of the quarterly per unit amounts do not equal the year-to-date totals.

(12) 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 criteria, which permit the garden communities and high-rise properties to be aggregated into two reportable segments. Additionally, we believe that same store sales disclosure of the portfolio of communities fully operating in both periods is a meaningful way to assess our operating results. We rely primarily on NOI for purposes of making decisions about allocating resources and assessing segment performance. We also believe NOI is a valuable means of comparing period-to-period property performance.

      Following are reconciliations of each reportable segment’s (i) revenues to consolidated revenues; (ii) Net Operating Income to consolidated earnings from operations; and (iii) assets to consolidated assets, for the periods indicated (in thousands):

				Years Ended December 31,
				2003		2002		2001
Reportable apartment communities segment revenues:
	Same-Store:
		Garden communities		$	430,002	$	364,021	$	316,933
		High-rise properties			339,084		309,616		51,938
	Non Same-Store:
		Garden communities			96,141		140,622		168,085
		High-rise properties			12,550		31,515		2,979
Other non-reportable operating segment revenues					3,264		6,521		4,128
			Total segment and consolidated revenues	$	881,041	$	852,295	$	544,063

				Years Ended December 31,
				2003		2002		2001
Reportable apartment communities segment NOI:
	Same-Store:
		Garden communities		$	291,573	$	246,743	$	216,157
		High-rise properties			201,657		190,729		33,056
	Non Same-Store:
		Garden communities			58,996		91,248		111,831
		High-rise properties			6,521		16,779		2,020
Other non-reportable operating segment NOI					2,613		2,871		3,584
			Total segment NOI		561,360		548,370		366,648

82

ARCHSTONE-SMITH OPERATING TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

			Years Ended December 31,
			2003			2002			2001
Reconciling items:
	Other income			19,334			9,462			11,905
	Depreciation on real estate investments			(187,677	)		(167,029	)		(102,477	)
	Interest expense			(186,832	)		(190,005	)		(88,081	)
	General and administrative expenses			(49,838	)		(45,710	)		(27,434	)
	Provision for possible loss on investments			—			—			(14,927	)
	Other expenses			(48,085	)		(27,469	)		(15,564	)
		Consolidated earnings from operations	$	108,262		$	127,619		$	130,070

				Years Ended December 31,
				2003		2002
Reportable operating communities segment assets:
	Same-Store:
		Garden communities		$	3,586,989	$	3,508,051
		High-rise properties			2,466,129		2,432,925
	Non same-Store:
		Garden communities			1,195,470		1,669,614
		High-rise properties			1,072,039		1,067,975
Other non-reportable operating segment assets					29,571		40,315
			Total segment assets		8,350,198		8,718,880
Reconciling items:
		Investment in and advances to unconsolidated entities			86,367		116,594
		Cash and cash equivalents			5,230		12,846
		Restricted cash in tax-deferred exchange escrow			180,920		—
		Other assets			298,980		247,706
			Consolidated total assets	$	8,921,695	$	9,096,026

      Total capital expenditures for garden communities were $42.5 million and $58.0 million for the years ended December 31, 2003 and 2002, respectively. Total capital expenditures for high-rise properties were $86.3 million and $136.3 million for the years ended December 31, 2003 and 2002, respectively.

(13) Income Taxes

      These consolidated financial statements have been presented as if the company were a partnership for all periods presented. For income tax purposes, the company was subject to regulations under the Internal Revenue Code pertaining to REITs through October 31, 2001 and to partnerships subsequent to that date. In either case, as a REIT or a partnership, our income is not generally subject to federal income taxes and no provision for income taxes is included in the accompanying Consolidated Statements of Earnings.

      As a partnership, we make distributions to our partners and allocate our taxable income to our partners. The major portion of distributions and income are paid/ allocated to Archstone-Smith Trust with the remainder paid/ allocated to third party unitholders.

83

ARCHSTONE-SMITH OPERATING TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The following table reconciles net earnings to taxable income subject to dividend distribution requirement for the years ended December 31(in thousands):

		For the Year Ended December 31,
		2003			2002			2001
		(estimated)
GAAP net earnings		$	494,191		$	356,725		$	265,574
Book to tax differences:
	Gain on sale of CES(1)		—			(43,623	)		—
	Depreciation and amortization(2)		(1,513	)		(22,348	)		(5,722	)
	Gain or loss from capital transactions(3)		(124,390	)		(25,685	)		23,109
	Deferred compensation and gain contingencies		859			17,323			—
	Merger expenses		—			—			(21,673	)
	Other, net		11,704			3,400			3,991
Taxable income, including capital gains		$	380,851		$	285,792		$	265,279

(1)	In December 2002, CES was sold to a third party. See Note 2 for details.
(2)	In January 1999, we began using accelerated depreciable lives for tax purposes. This change resulted in higher depreciation expense on newly acquired assets for tax purposes relative to GAAP. This was partially offset by the Smith Merger in 2001 as GAAP depreciation expense for the Smith assets was based on fair value and tax depreciation was based on a lower historical tax basis.

      Distributions have been made as follows:

		For the Year Ended December 31,
		2003		2002		2001
Distributions to Archstone-Smith Trust		$	340,819	$	334,316	$	240,073
Distributions to unitholders			47,489		45,165		10,460
	Total Distributions	$	388,308	$	379,481	$	250,533

      All distributions made to Archstone-Smith were subsequently paid to its shareholders.

      The following table summarizes the taxability of our dividends for the past three years:

	For the Year Ended December 31,
	2003			2002			2001
Ordinary income		45.0	%		78.0	%		54.0	%
Capital gains(1)		55.0	%		22.0	%		46.0	%
		100.0	%		100.0	%		100.0	%

(1)  Includes 6.2%, 22.0% and 13.0% of unrecaptured section 1250 gains in 2002, 2001, and 2000, respectively.

      As a taxable REIT subsidiary, Ameriton is subject to state and federal income taxes. Income tax expense, which has been included in other expense was $15.9 million, $12.4 million and $7.0 million for the years ended December 31, 2003, 2002 and 2001, respectively. The primary difference between income taxes attributable to income from continuing operations and the amount computed by applying the U.S. federal income tax rate of 35% to pretax income was state income taxes. Deferred income taxes reflect the estimated net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts for income tax purposes. Ameriton’s deferred tax assets and liabilities

84

ARCHSTONE-SMITH OPERATING TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

primarily relate to the deductibility of depreciation expense and deferred compensation accruals for income tax purposes.

(14) Commitments and Contingencies

Commitments

      At December 31, 2003 we had seven non-cancelable ground leases for certain apartment communities and buildings that expire between 2050 and 2095. 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-cancellable operating leases with fixed annual rental payments.

      The future minimum lease payments payable under non-cancelable leases are as follows at December 31, 2003 (in thousands):

2004		$	3,178
2005			3,179
2006			3,180
2007			3,181
2008			3,183
Thereafter (2009-2096)			193,241
	Total	$	209,142

      See Note 3 for real estate related commitments.

Guarantees and Indemnifications

      We have extended approximately $54.7 million in performance bond guarantees relating to contracts entered into by CES and SMC, which are customary to the type of business in which these entities engage. As of December 31, 2003, $2.7 million of these performance bond guarantees were still outstanding, based upon information provided by these companies. The Operating Trust, our subsidiaries and investees have not been required to perform on these guarantees, nor do we anticipate being required to perform on such guarantees. Since we believe that our risk of loss under these contingencies is remote, no accrual for potential loss has been made in the accompanying financial statements. There are recourse provisions available to us to recover any potential future payments from the new owners of CES and SMC.

      In connection with the sale of CES, we have indemnified the buyer for certain representations and warranties contained in the sale contract. The indemnifications terminate on June 30, 2004, and while we do not believe it is probable that the indemnities will reach the maximum amount, the related liability is limited to a maximum exposure of $44.5 million with exceptions including third party claims, insurance, arbitration and environmental issues, each of which is without deduction or limitation. There are no recourse provisions available to us to recover any potential future payments from third parties.

      Except as noted above, we do not guarantee third-party debt incurred by our unconsolidated investees. Occasionally, the investees are required to guarantee their mortgages. However, such guarantees are fully non-recourse to the Operating Trust or to Archstone-Smith. All off-balance sheet contingent liabilities and all third-party debt incurred by our unconsolidated investees are fully non-recourse to us. As such, the extent of our exposure to financial losses is limited solely to our investment in each of the unconsolidated investees. See Note 5 for a summary of our investments in and advances to unconsolidated entities.

85

ARCHSTONE-SMITH OPERATING TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      As part of the Smith Merger, we are required to indemnify the former Smith Partnership unitholders for any personal income tax expense resulting from the sale of high-rise properties identified in the shareholders’ agreement between Archstone-Smith, the Operating Trust, Robert H. Smith and Robert P. Kogod.

Litigation and Contingencies

      During 2002, we accrued or incurred a liability for $30.8 million relating to moisture infiltration and resulting mold issues at Harbour House, a high-rise property in Southeast Florida that became subject to litigation in the third quarter of 2002. Of this amount, $11.3 million represents amounts expensed for the estimated cost of repairing or replacing residents’ property, temporary resident relocation expenses and incurred legal fees. The remaining $19.5 million represents costs capitalized in accordance with GAAP pertaining to remediation and capital improvements to the building.

      During 2003, we recorded additional costs of $30.7 million for moisture infiltration and resulting mold at Harbour House. Of this amount, $25.7 million represents amounts expensed for estimated and incurred legal fees associated with known and anticipated costs for Archstone-Smith’s counsel and plaintiffs’ counsel, as well as estimated settlement costs based upon the settlement agreement, additional resident property repair and replacement costs and temporary resident relocation expenses. The estimated settlement accrual is inclusive of all pending legal claims at this property other than for those individuals who have opted out of the settlement and are pursuing or may pursue individual claims. The remaining $5.0 million pertains to an increase in our accrual estimate for capitalized costs associated with remediation and capital improvements. As of December 31, 2003, total cash payments related to moisture infiltration and mold remediation at this property were $45.1 million. We anticipate incurring the remaining $16.4 million over the next six to twelve months.

      The Harbour House accrual represents management’s best estimate of the probable and reasonably estimable costs and is based, in part, on estimates obtained from third-party contractors and actual costs incurred to date. It is possible that these estimates could increase or decrease as better information becomes available. Not all plaintiffs have accepted the court-approved settlement, which could result in further court proceedings and potential legal fees and damages not contemplated in our current accrual. It is not possible to predict the likelihood of claims by individuals who have opted out of the settlement, nor is it reasonably possible to estimate the amount of any potential loss related to these claims.

      We are also party to alleged moisture infiltration and resulting mold lawsuits at other apartment properties. We believe these suits are without merit, nonetheless, in certain instances we have negotiated a settlement with certain of the plaintiffs in an effort to expedite the resolution of their claims and avoid potentially protracted litigation and associated attorney’s fees. During 2003 we expensed approximately $10.4 million for estimated and incurred legal fees associated with known and anticipated costs for Archstone-Smith’s counsel and plaintiffs’ counsel, as well as estimated settlement costs based upon the status of discussions, additional resident property repair and replacement costs and temporary resident relocation expenses pertaining to these claims. These estimates represent management’s best estimate of the probable and reasonably estimable costs and are based, in part, on estimates obtained from third-party contractors and actual costs incurred to date. It is possible that these estimates could increase or decrease as better information becomes available. Not all plaintiffs have accepted the negotiated settlement, and further court proceedings and additional legal fees and damages may be required to fully resolve these claims. We have not accrued for renovation and equipment upgrades at these properties, as these costs are part of our previously existing and ongoing plans and not a result of the legal claims. Accordingly, we will capitalize or expense costs associated with these issues as they are incurred, in accordance with GAAP.

      We are aggressively pursuing recovery of a significant portion of these costs from our insurance carriers. As of December 31, 2003, we have received approximately $1.6 million of initial insurance recoveries pertaining to moisture infiltration and resulting mold claims. We are still in discussions with our insurance providers and therefore no estimate for future insurance recoveries has been recorded. In addition, we are

86

ARCHSTONE-SMITH OPERATING TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

continuing to pursue potential recoveries from third parties who we believe bear responsibility for a considerable portion of the costs we have incurred. We cannot make assurances that we will obtain these recoveries or that our ultimate liability associated with these claims will not be material to our results of operations.

      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.

(15) Supplemental Cash Flow Information

      Significant non-cash investing and financing activities for the years ended December 31, 2003, 2002 and 2001 are as follows:

•  Issued $14.2 million and $8.7 million of Class B Common Units as partial consideration for property acquired during 2003 and 2002, respectively;

•  Issued $33.4 million of A-1 Common Units in exchange for real estate during 2003;

•  Converted $71.5 million Series H Preferred Units into Common Units during 2003;

•  Redeemed $25.5 million and $41.7 million A-1 Common Units for Common Units during 2003 and 2002, respectively;

•  Converted $25 million Series J Preferred Shares into Common Units during 2002;

•  Recorded an accrual related to moisture infiltration and resulting mold remediation for $11.3 million at one of our high-rise properties in Southeast Florida during 2002;

•  Assumed mortgage debt of $55.4 million, $195.6 million and $167.3 million (excluding mortgage debt assumed in the Smith Merger) during 2003, 2002 and 2001, respectively, in connection with the acquisition of apartment communities;

•  Holders of Series A Preferred Units converted $71.9 million, $5.7 million and $3.8 million of their units into Common Units during 2003, 2002 and 2001, respectively;

•  Entered into joint venture transactions formed through our contribution of apartment communities and land in exchange for cash and an ownership interest in each of the ventures with an aggregate carrying value of $5.0 million during the year ended December 31, 2001.

87

INDEPENDENT AUDITORS’ REPORT

The Trustee and Unitholders

Archstone-Smith Operating Trust:

      Under date of February 9, 2004, we reported on the consolidated balance sheets of Archstone-Smith Operating Trust and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of earnings, unitholders’ equity, other common unitholders’ interest and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2003. In connection with our audits of the aforementioned financial statements, we also audited the related financial statement schedule. This financial statement schedule is the responsibility of Archstone-Smith Operating Trust’s management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.

      In our opinion, such financial statement schedule as listed in the accompanying index, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all respects, the information set forth therein.

      As discussed in Note 1 to the consolidated financial statements, effective July 1, 2003, Archstone-Smith Operating Trust adopted FASB Interpretation No. 46 “Consolidation of Variable Interest Entities” (revised). As a result, the accompanying consolidated financial statements, referred to above, have been restated to reflect the consolidated financial position and results of operations of Archstone-Smith Operating Trust and certain previously unconsolidated entities in accordance with accounting principles generally accepted in the United States of America.

KPMG LLP

Denver, Colorado

February 9, 2004

ARCHSTONE-SMITH OPERATING TRUST

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2003

(Dollar amounts in thousands)

						Initial Cost to
						Archstone-Smith Trust				Costs
										Capitalized
				Encum-				Buildings &		Subsequent to
		Units		brances		Land		Improvements		Acquisition
Apartment Communities:
Garden Communities:
	Albuquerque, New Mexico		664		—		6,317		7,624		28,433
	Atlanta, Georgia		3,327		43,549		41,973		165,508		82,170
	Austin, Texas		1,446		10,979		6,828		26,791		55,324
	Boston, Massachusetts		1,606		62,246		75,201		50,514		136,786
	Chicago, Illinois		1,313		42,748		85,603		50,544		7,534
	Dallas, Texas		1,282		—		7,231		34,861		25,070
	Denver, Colorado		1,949		8,500		17,477		46,104		102,513
	Houston, Texas		2,024		38,819		20,298		34,045		64,495
	Inland Empire, California		1,594		16,811		12,663		71,769		12,469
	Greater NYC Metropolitan Area		160		—		5,775		1,225		29,390
	Los Angeles, California		2,982		102,876		172,665		131,612		246,274
	Orange County, California		1,647		77,427		25,612		46,136		108,020
	Orlando, Florida		312		—		3,110		17,620		892
	Phoenix, Arizona		1,709		26,830		20,231		3,215		94,644
	Portland, Oregon		576		—		3,520		—		34,175
	Raleigh, North Carolina		1,324		13,712		13,499		76,490		6,741
	San Antonio, Texas		224		—		1,644		—		11,182
	San Diego, California		3,406		61,628		55,215		136,874		157,008
	San Francisco, California		5,819		81,969		186,172		326,826		257,361
	Seattle, Washington		2,808		28,354		33,195		99,046		102,532
	Southeast, Florida		1,566		10,938		39,169		118,942		5,128
	Ventura County, California		1,251		—		11,623		52,832		58,625
	Greater Washington, D.C. Metropolitan Area		9,739		229,211		256,353		583,057		380,915
	West Coast, Florida		746		—		5,430		30,765		7,826
Garden Communities Total			49,474		856,597		1,106,804		2,112,400		2,015,507
High-Rise Properties:
	Boston, Massachusetts		1,113		62,408		41,345		121,883		41,221
	Chicago, Illinois		3,516		131,996		138,162		406,868		80,247
	Southeast Florida		4,824		80,783		178,362		231,776		157,064
	Greater NYC Metropolitan Area		902		124,198		72,340		154,735		17,577
	Greater Washington, D.C. Metropolitan Area		11,537		671,643		532,997		1,133,630		301,804
High-Rise Properties Total			21,892		1,071,028		963,206		2,048,892		597,913
Total Apartment Communities- Operating and Under Construction			71,366		1,927,625		2,070,010		4,161,292		2,613,420
Other:
Development communities In Planning and Owned			3,368
Hotel, retail and other assets
Total real estate assets			74,734

[Additional columns below]

[Continued from above table, first column(s) repeated]

		Gross Amount at Which
		Carried at Year End
				Buildings &				Accumulated			Construction		Year
		Land		Improvements		Totals		Depreciation			Year		Acquired
Apartment Communities:
Garden Communities:
	Albuquerque, New Mexico		8,183		34,191		42,374		(10,635	)		1981-1996		1991-1996
	Atlanta, Georgia		50,966		238,685		289,651		(40,447	)		1978-2003		1998-2001
	Austin, Texas		15,124		73,819		88,943		(11,311	)		1979-1996		1993
	Boston, Massachusetts		47,245		215,256		262,501		(21,264	)		1975-2002		1999-2003
	Chicago, Illinois		26,691		116,990		143,681		(17,421	)		1968-1988		1999-2001
	Dallas, Texas		10,194		56,968		67,162		(14,795	)		1983-1998		1993-1998
	Denver, Colorado		19,605		146,489		166,094		(20,034	)		1981-2002		1992-2001
	Houston, Texas		15,057		103,781		118,838		(16,287	)		1972-1996		1994-1996
	Inland Empire, California		14,417		82,484		96,901		(17,117	)		1985-1990		1995-1997
	Greater NYC Metropolitan Area		6,312		30,078		36,390		(1,111	)		2001-2002		2000
	Los Angeles, California		99,081		451,470		550,551		(13,336	)		1985-2002		1998-2003
	Orange County, California		26,276		153,492		179,768		(22,709	)		1986-2002		1996-1999
	Orlando, Florida		3,703		17,919		21,622		(3,847	)		1988		1998
	Phoenix, Arizona		21,700		96,390		118,090		(11,218	)		1980-2001		1993-1997
	Portland, Oregon		9,528		28,167		37,695		(6,706	)		1985-1998		1995-1996
	Raleigh, North Carolina		14,641		82,089		96,730		(18,935	)		1985-1999		1998
	San Antonio, Texas		3,718		9,108		12,826		(2,773	)		1979-1996		1992-1993
	San Diego, California		55,389		293,708		349,097		(32,413	)		1985-2001		1996-1998
	San Francisco, California		139,064		631,295		770,359		(85,040	)		1965-2002		1995-2003
	Seattle, Washington		41,947		192,826		234,773		(36,712	)		1986-2003		1995-1999
	Southeast, Florida		43,669		119,570		163,239		(9,704	)		1986-2001		1998-2003
	Ventura County, California		10,207		112,873		123,080		(10,901	)		1985-2002		1997-1999
	Greater Washington, D.C. Metropolitan Area		282,944		937,381		1,220,325		(57,257	)		1941-2002		1998-2003
	West Coast, Florida		5,661		38,360		44,021		(8,207	)		1982-1988		1998
Garden Communities Total			971,322		4,263,389		5,234,711		(490,180	)
High-Rise Properties:
	Boston, Massachusetts		41,709		162,740		204,449		(8,365	)		1986-1998		2001
	Chicago, Illinois		89,557		535,720		625,277		(30,311	)		1969-2003		2001
	Southeast Florida		184,020		383,182		567,202		(20,604	)		1964-2000		2001
	Greater NYC Metropolitan Area		69,110		175,542		244,652		(6,351	)				2002
	Greater Washington, D.C. Metropolitan Area		582,621		1,385,810		1,968,431		(87,196	)		1923-2002		2001
High-Rise Properties Total			967,017		2,642,994		3,610,011		(152,827	)
Total Apartment Communities- Operating and Under Construction			1,938,339		6,906,383		8,844,722		(643,007	)
Other:
Development communities In Planning and Owned							114,236
Hotel, retail and other assets							40,222		(5,975	)
Total real estate assets							8,999,180		(648,982	)

89

SCHEDULE III

      The following is a reconciliation of the carrying amount and related accumulated depreciation of our investment in real estate, at cost (in thousands):

		Year Ended December 31,
Carrying Amounts		2003			2002			2001
Balance at January 1		$	9,297,735		$	8,612,213		$	5,313,600
Apartment communities:
	Apartment properties acquired in the Smith Merger		—			31,877			3,733,936
	Acquisition-related expenditures		573,768			539,652			370,398
	Redevelopment expenditures		69,649			152,428			39,176
	Recurring capital expenditures		48,960			40,683			20,269
	Development expenditures, excluding land acquisitions		91,430			247,044			108,436
	Acquisition and improvement of land for development		125,581			107,727			89,506
	Dispositions		(1,209,956	)		(439,847	)		(1,066,451	)
	Provision for possible loss on investments		(3,714	)		(2,611	)		(2,710	)
Net apartment community activity		$	(304,282	)	$	676,953		$	3,292,560
Other:
	Disposition of retail asset acquired in the Smith Merger		—			(5,990	)		5,976
	Change in other real estate assets		5,727			14,559			77
Net other activity			5,727			8,569			6,053
Balance at December 31.		$	8,999,180		$	9,297,735		$	8,612,213

	December 31,
Accumulated Depreciation	2003			2002			2001
Balance at January 1	$	578,855		$	412,894		$	378,451
Depreciation for the year(1)		200,356			206,625			136,867
Accumulated depreciation on real estate dispositions		(130,229	)		(40,563	)		(102,424	)
Other		—			(101	)		—
Balance at December 31	$	648,982		$	578,855		$	412,894

(1)  Depreciation is net of $3.0 million for our intangible asset related to the value of leases in place for real estate assets acquired in 2003.

90

ARCHSTONE-SMITH OPERATING TRUST

SIGNATURES

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

ARCHSTONE-SMITH OPERATING TRUST

BY:  /s/ R. SCOT SELLERS

R. SCOT SELLERS

Chairman of the Board and

Chief Executive Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated:

Signature		Title	Date
/s/ R. SCOT SELLERS R. Scot Sellers		Chief Executive Officer (principal executive officer)	March 5, 2004
/s/ CHARLES E. MUELLER, JR. Charles E. Mueller, Jr.		Executive Vice President and Chief Financial Officer (principal financial officer)	March 5, 2004
/s/ MARK A. SCHUMACHER Mark A. Schumacher		Senior Vice President and Controller (principal accounting officer)	March 5, 2004
ARCHSTONE-SMITH TRUST
By:	/s/ R. SCOT SELLERS Chief Executive Officer	Trustee	March 5, 2004

91

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
	3	.1	Amended and Restated Declaration of Trust of Archstone-Smith Trust (incorporated by reference to Exhibit 4.1 to the Archstone-Smith Trust’s Current Report of Form 8-K filed with the SEC on November 1, 2001)
	3	.2	Amended and Restated Bylaws of Archstone-Smith Trust (incorporated by reference to Exhibit 4.2 to the Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on November 1, 2001)
	4	.1	Indenture, dated as of February 1, 1994, between Archstone-Smith Operating Trust (formerly Archstone Communities Trust) and Morgan Guaranty Trust Company of New York, as Trustee relating to Archstone-Smith Operating Trust’s (formerly Archstone Communities Trust) unsecured senior debt securities (incorporated by reference to Exhibit 4.2 to Archstone-Smith Operating Trust’s (formerly Archstone Communities Trust) Annual Report on Form 10-K for the year ended December 31, 1993)
	4	.2	First Supplemental Indenture, dated February 2, 1994, among Archstone-Smith Operating Trust (formerly Archstone Communities Trust), Morgan Guaranty Trust Company of New York and State Street Bank and Trust Company, as successor Trustee (incorporated by reference to Exhibit 4.3 to Archstone-Smith Operating Trust’s (formerly Archstone Communities Trust) Current Report on Form 8-K dated July 19, 1994)
	4	.3	Indenture, dated as of August 14, 1997, between Security Capital Atlantic Incorporated and State Street Bank and Trust Company, as Trustee (incorporated by reference to Exhibit 4.8 to Security Capital Atlantic Incorporated’s Registration Statement on Form S-11 (File No. 333-30747))
	4	.4	Rights Agreement, dated as of December 1, 2003, by and between Archstone-Smith Trust and Mellon Investor Services, LLC, including the form of rights certificate
	4	.5	Form of Archstone-Smith Trust common share ownership certificate (incorporated by reference to Exhibit 3.3 to Archstone-Smith Trust’s Registration Statement on Form S-4 (File No. 333-63734))
	4	.8	Form of Archstone-Smith Trust share certificate for Series D Preferred Shares (incorporated by reference to Exhibit 3.6 to Archstone-Smith Trust’s Registration Statement on Form S-4 (File No. 333-63734))
	4	.10	Form of Archstone-Smith Trust share certificate for Series I Preferred Shares (incorporated by reference to Exhibit 3.8 to Archstone-Smith Trust’s Registration Statement on Form S-4 (File No. 333-63734))
	4	.12	Form of Archstone-Smith Trust share certificate for Series K Preferred Shares (incorporated by reference to Exhibit 3.10 to Archstone-Smith Trust’s Registration Statement on Form S-4 (File No. 333-63734))
	4	.13	Form of Archstone-Smith Trust share certificate for Series L Preferred Shares (incorporated by reference to Exhibit 3.11 to Archstone-Smith Trust’s Registration Statement on Form S-4 (File No. 333-63734))
	10	.1	Amended and Restated Declaration of Trust of Archstone-Smith Operating Trust (incorporated by reference to Exhibit 4.3 to the Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on November 1, 2001)
	10	.2	Amended and Restated Bylaws of Archstone-Smith Operating Trust (incorporated by reference to Exhibit 4.4 to the Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on November 1, 2001)
	10	.3	Amendment to 1996 Share Option Plan for Outside Trustees (incorporated by reference to Exhibit 4.6 to Archstone Communities Trust’s Registration Statement on Form S-8 (File No. 333-60815))

92

INDEX TO EXHIBITS — (Continued)

Number			Description
	10	.4	Archstone-Smith Trust 2001 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.14 to Archstone-Smith Trust’s Registration Statement on Form S-4 (File No. 333-63734))
	10	.5	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)
	10	.6	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’s Annual Report on Form 10-K for the year ended December 31, 2003)
	10	.7	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	.8	Credit Agreement, dated December 20, 2000, among Archstone-Smith Operating Trust (formerly Archstone Communities Trust) and The Chase Manhattan Bank, as administrative agent, and Wells Fargo Bank, N.A., as syndication agent, and Bank of America, N.A., as documentation agent (incorporated by reference to Exhibit 99.4 to Archstone Communities Trust’s Current Report on Form 8-K dated February 16, 2001)
	10	.9	Agreement and First Amendment, dated as of September 21, 2001, to Credit Agreement, dated as of December 20, 2000, by and among Archstone-Smith Operating Trust (formerly Archstone Communities Trust) and the financial institutions named therein (incorporated by reference to Exhibit 10.2 to Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on November 1, 2001)
	10	.10	Agreement and Second Amendment, dated as of November 1, 2001, to Credit Agreement, dated as of December 20, 2000, by and among Archstone-Smith Operating Trust (formerly Archstone Communities Trust) and the financial institutions named therein (incorporated by reference to Exhibit 10.3 to Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on November 1, 2001)
	10	.11	Parent Agreement, dated as of November 1, 2001, by and among Archstone-Smith Operating Trust and Chase Manhattan Bank, in its capacity as Agent for the lenders under the Credit Agreement, dated as of December 20, 2000, as amended, by and among Archstone-Smith Operating Trust (formerly Archstone Communities Trust) and the financial institutions named therein (incorporated by reference to Exhibit 10.4 to Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on November 1, 2001)
	10	.12	Amended and Restated Credit Agreement, dated as of October 30, 2003, by and among Archstone-Smith Operating Trust, as borrower, and Archstone-Smith Trust as parent, and J.P. Morgan Chase Bank, as administrative agent, and Bank of America, N.A., and Wells Fargo Bank, N.A., as syndication agents, and Bank One, N.A. and Commerzbank A.G., New York Branch, as documentation agents
	10	.13	Archstone Dividend Reinvestment and Share Purchase Plan (incorporated by reference to the prospectus contained in Archstone-Smith Trust’s Registration Statement on Form S-3 (No. 333-44639-01))
	10	.14	Shareholders’ Agreement, dated as of October 31, 2001, by and among Archstone-Smith Trust, Archstone-Smith Operating Trust, Robert H. Smith and Robert P. Kogod (incorporated by reference to Exhibit 10.1 to Archstone-Smith Trust’s Current Report on Form 8-K filed with the SEC on November 1, 2001)
	10	.15	Noncompetition Agreement by and among Charles E. Smith Residential Realty, Inc., Charles E. Smith Residential Realty L.P. and Robert P. Kogod and Robert H. Smith (incorporated by reference to Exhibit 10.1 of Charles E. Smith Residential Realty, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1994)
	10	.16	Registration Rights and Lock-up Agreement (incorporated by reference to Exhibit 10.2 of Charles E. Smith Residential Realty, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1994)

93

INDEX TO EXHIBITS — (Continued)

Number			Description
	10	.17	License Agreement between Charles E. Smith Management, Inc. and Charles E. Smith Residential Realty, Inc. (incorporated by reference to Exhibit 10.35 of Charles E. Smith Residential Realty, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1994)
	10	.18	License Agreement between Charles E. Smith Management, Inc. and Charles E. Smith Residential Realty L.P. (incorporated by reference to Exhibit 10.36 of Charles E. Smith Residential Realty, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1994)
	10	.19	Deed of Trust and Security Agreement between Smith Property Holdings Three L.P. (“Smith Three”) and The Northwestern Mutual Life Insurance Company (“Northwestern”) (incorporated by reference to Exhibit 10.2 of Charles E. Smith Residential Realty, Inc.’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1994)
	10	.20	Guarantee of Recourse Obligations by Smith Three and Charles E. Smith Residential Realty L.P. (incorporated by reference to Exhibit 10.3 of Charles E. Smith Residential Realty, Inc.’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1994)
	10	.21	Absolute Assignment of Leases and Rents between Smith Three and Northwestern (incorporated by reference to Exhibit 10.4 of Charles E. Smith Residential Realty, Inc.’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1994)
	10	.22	Promissory Note of Smith Three to Northwestern (incorporated by reference to Exhibit 10.5 of Charles E. Smith Residential Realty, Inc.’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1994)
	10	.23	Purchase Money Deed of Trust and Security Agreement between Smith Property Holdings Three (D.C.) L.P. (“Smith Three D.C.”) and Northwestern (incorporated by reference to Exhibit 10.6 of Charles E. Smith Residential Realty, Inc.’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1994)
	10	.24	Guarantee of Recourse Obligations by Smith Three D.C. and Charles E. Smith Residential Realty L.P. (incorporated by reference to Exhibit 10.7 of Charles E. Smith Residential Realty, Inc.’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1994)
	10	.25	Absolute Assignment of Leases and Rents between Smith Three D.C. and Northwestern (incorporated by reference to Exhibit 10.8 of Charles E. Smith Residential Realty, Inc.’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1994)
	10	.26	Purchase Money Promissory Note of Smith Three D.C. to Northwestern (incorporated by reference to Exhibit 10.9 of Charles E. Smith Residential Realty, Inc.’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1994)
	10	.27	Supplemental Loan Agreement by and among Smith Property Holdings Two L.P. (“Smith Two”), Smith Property Holdings Two (D.C.) L.P. (“Smith Two D.C.”) and Green Park Financial Limited Partnership (“Green Park”) (incorporated by reference to Exhibit 10.47 of Charles E. Smith Residential Realty, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1998)
	10	.28	Supplemental Loan Agreement by and among Smith Property Holdings One L.P. (“Smith One D.C.”), Smith Property Holdings One (D.C.) L.P. (“Smith One D.C.”) and GMAC (incorporated by reference to Exhibit 10.13 of Charles E. Smith Residential Realty, Inc.’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1994)
	10	.29	Multi-family Note of Smith One to GMAC (incorporated by reference to Exhibit 10.14 of Charles E. Smith Residential Realty, Inc.’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1994)
	10	.30	Multi-family Note of Smith One D.C. to GMAC (incorporated by reference to Exhibit 10.15 of Charles E. Smith Residential Realty, Inc.’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1994)
	10	.31	Absolute Assignment of Leases and Rents by Smith One D.C. to GMAC (incorporated by reference to Exhibit 10.16 of Charles E. Smith Residential Realty, Inc.’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1994)

94

INDEX TO EXHIBITS — (Continued)

Number			Description
	10	.32	Property Management Agreement by and between Smith One and Charles E. Smith Residential Realty L.P. (incorporated by reference to Exhibit 10.17 of Charles E. Smith Residential Realty, Inc.’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1994)
	10	.33	Multi-family Deed of Trust, Assignment of Rents and Security Agreement between Smith One D.C. and GMAC (incorporated by reference to Exhibit 10.18 of Charles E. Smith Residential Realty, Inc.’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1994)
	10	.34	Commercial Leasing and Property Management Agreement between Smith Three and the Operating Partnership (incorporated by reference to Exhibit 10.19 of Charles E. Smith Residential Realty, Inc.’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1994)
	10	.35	Credit Agreement By and Among Smith Property Holdings Lincoln Towers LLC and Smith Property Holdings McClurg Court LLC, as Borrower and Columbia National Real Estate Finance, Inc., as Lender. (incorporated by reference to Exhibit 99.1 of Charles E. Smith Residential Realty, Inc.’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2000)
	10	.36	Articles Supplementary for Series E Cumulative Redeemable Preferred Units of Beneficial Interest of Archstone-Smith Operating Trust (incorporated by reference to Exhibit 10.1 of Archstone-Smith’s Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2002)
	10	.37	Articles Supplementary for Series F Cumulative Redeemable Preferred Units of Beneficial Interest of Archstone-Smith Operating Trust (incorporated by reference to Exhibit 10.2 of Archstone-Smith’s Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2002)
	10	.38	Articles Supplementary for Series G Cumulative Redeemable Preferred Units of Beneficial Interest of Archstone-Smith Operating Trust (incorporated by reference to Exhibit 10.3 of Archstone-Smith’s Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2002)
	12	.1	Computation of Ratio of Earnings to Fixed Charges
	12	.2	Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Share Dividends
	21		Subsidiaries of Archstone-Smith
	23	.1	Consent of KPMG LLP
	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
	99	.1	Corporate Governance Guidelines (incorporated by reference to Exhibit 99.1 of Archstone-Smith’s Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2003)
	99	.3	Audit Committee Charter (incorporated by reference to Exhibit 99.3 of Archstone-Smith’s Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2003)
	99	.4	Management Development and Executive Compensation Committee Charter (incorporated by reference to Exhibit 99.4 of Archstone-Smith’s Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2003)
	99	.5	Nominating and Corporate Governance Committee Charter (incorporated by reference to Exhibit 99.5 of Archstone-Smith’s Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2003)

95 EX-4.4 3 d13102exv4w4.htm EX-4.4 RIGHTS AGREEMENT DATED AS OF 12/1/03

RIGHTS AGREEMENT

between

ARCHSTONE-SMITH TRUST

and

MELLON INVESTOR SERVICES LLC

Rights Agent

Dated as of December 1, 2003

TABLE OF CONTENTS

		Page
Section 1.	Certain Definitions		1
Section 2.	Appointment of Rights Agent		5
Section 3.	Issuance of Right Certificates		6
Section 4.	Form of Right Certificates		8
Section 5.	Countersignature and Registration		9
Section 6.	Transfer, Division, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates		9
Section 7.	Exercise of Rights; Purchase Price; Expiration Date of Rights		10
Section 8.	Cancellation and Destruction of Right Certificates		12
Section 9.	Availability of Preferred Shares		12
Section 10.	Preferred Shares Record Date		13
Section 11.	Adjustment of Purchase Price, Number of Shares or Number of Rights		13
Section 12.	Certificate of Adjusted Purchase Price or Number of Shares		20
Section 13.	Consolidation, Merger or Sale or Transfer of Assets or Earning Power		20
Section 14.	Fractional Rights and Fractional Shares		22
Section 15.	Rights of Action		24
Section 16.	Agreement of Right Holders		24
Section 17.	Right Certificate Holder Not Deemed a Shareholder		25
Section 18.	Concerning the Rights Agent		25
Section 19.	Merger or Consolidation or Change of Name of Rights Agent		25
Section 20.	Rights and Duties of Rights Agent		26
Section 21.	Change of Rights Agent		28
Section 22.	Issuance of New Right Certificates		29
Section 23.	Redemption		29
Section 24.	Exchange		30
Section 25.	Notice of Certain Events		32
Section 26.	Notices		32
Section 27.	Supplements and Amendments		33
Section 28.	General Limitations on Redemption, Modification or Termination of Rights or Amendment to Agreement		34
Section 29.	Successors		34
Section 30.	Benefits of this Agreement		34
Section 31.	Severability		34
Section 32.	Governing Law		34
Section 33.	Counterparts		34
Section 34.	Descriptive Headings		34
Section 35.	Determinations and Actions by the Board of Trustees		34
Section 36.	Limitation of Liability		35
Exhibit A	-           Terms of Series B Junior Participating Preferred Shares
Exhibit B	-           Form of Right Certificate

2

RIGHTS AGREEMENT

     Rights Agreement, dated as of December 1, 2003 (this “Agreement”), between Archstone-Smith Trust, a Maryland real estate investment trust (the “Trust”), and Mellon Investor Services LLC, a New Jersey limited liability company, as rights agent (the “Rights Agent”). This Agreements amends and supersedes that certain Rights Agreement, dated as of August 31, 2001, between the Trust and the Rights Agent.

WITNESSETH:

     WHEREAS, the Board of Trustees of the Trust (the “Board of Trustees”) has authorized and declared a dividend of one preferred share purchase right (a “Right”) for each Common Share (as hereinafter defined) of the Trust outstanding as of the close of business on the effective date of the Primary Archstone Merger (as such term is defined in the Amended and Restated Agreement and Plan of Merger, dated as of May 3, 2001, by and among Archstone, the Trust, Charles E. Smith Residential Realty, Inc. and Charles E. Smith Residential Realty L.P. (the “Merger Agreement”) (the “Record Date”), each Right representing the right to purchase one one-hundredth of a Preferred Share (as hereinafter defined), upon the terms and subject to the conditions herein set forth, and has further authorized and directed the issuance of one Right with respect to each Common Share that shall become outstanding between the Record Date and the Expiration Date (as such term is hereinafter defined).

     NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:

     Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated:

     “Acquiring Person” shall mean any Person (as hereinafter defined) who or which, together with all Affiliates and Associates (as such terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as hereinafter defined) of 15% or more of the Common Shares of the Trust then outstanding, but shall not include the Trust, any Subsidiary (as hereinafter defined) of the Trust, or any employee benefit plan of the Trust or of any Subsidiary of the Trust or any entity holding Common Shares for or pursuant to the terms of any such plan. Notwithstanding the foregoing, no Person shall become an “Acquiring Person” as the result of (i) an acquisition of Common Shares by the Trust which, by reducing the number of Common Shares outstanding, increases the proportionate number of Common Shares beneficially owned by such Person to 15% or more of the Common Shares of the Trust then outstanding, or (ii) the acquisition by such Person of newly issued Common Shares directly from the Trust (it being understood that a purchase from an underwriter or other intermediary is not directly from the Trust); provided, however, that if a Person shall become the Beneficial Owner of 15% or more of the Common Shares of the

Trust then outstanding by reason of Common Share purchases by the Trust or the receipt of newly issued Common Shares directly from the Trust and shall, after such Common Share purchases or direct issuance by the Trust, become the Beneficial Owner of any additional Common Shares of the Trust, then such Person shall be deemed to be an “Acquiring Person”; provided further, however, that any transferee from such Person who becomes the Beneficial Owner of 15% or more of the Common Shares of the Trust then outstanding shall nevertheless be deemed to be an “Acquiring Person.” Notwithstanding the foregoing, if the Board of Trustees determines in good faith that a Person who would otherwise be an “Acquiring Person,” as defined pursuant to the foregoing provisions of this paragraph, has become such inadvertently, and such Person divests as promptly as practicable (and in any event within ten Business Days after notification by the Trust) a sufficient number of Common Shares so that such Person would no longer be an Acquiring Person, as defined pursuant to the foregoing provisions of this paragraph, then such Person shall not be deemed to be an “Acquiring Person” for any purposes of this Agreement.

     “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Agreement.

     “Agreement” shall have the meaning set forth in the preamble hereto.

     “Archstone” shall mean Archstone Communities Trust, a Maryland real estate investment trust.

     A Person shall be deemed the “Beneficial Owner” of and shall be deemed to have “beneficial ownership” of or to “beneficially own” any securities:

     (i) which such Person or any of such Person’s Affiliates or Associates beneficially owns, directly or indirectly;

     (ii) which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, whether written or oral (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities, but only to the extent such securities are held for a period consistent with such a bona fide public offering), or upon the exercise of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange; (B) the sole or shared right to vote or dispose of (including any such right pursuant to any agreement, arrangement or

2

understanding, whether written or oral); provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or (C) “beneficial ownership” (as determined pursuant to Rule 13d-3 (or any successor rule) of the General Rules and Regulations under the Exchange Act); or

     (iii) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person or any of such Person’s Affiliates or Associates has any agreement, arrangement or understanding, whether written or oral (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities, but only to the extent such securities are held for a period consistent with such a bona fide public offering) for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to clause (B) of subparagraph (ii) of this definition) or disposing of any securities of the Trust.

     Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase “then outstanding,” when used with reference to the Beneficial Ownership of securities of the Trust by any Person, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to own beneficially hereunder.

     Notwithstanding anything in this definition of Beneficial Ownership to the contrary, any “clearing agency,” as defined in Section 3(a)(23) of the Exchange Act, which is holding securities solely in its capacity as a clearing agency, shall not be deemed to be the Beneficial Owner of such securities.

     “Business Day” shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in New York or New Jersey are authorized or obligated by law or executive order to close.

     “Board of Trustees” shall have the meaning set forth in the preamble hereto.

     “Close of business” on any given date shall mean 5:00 P.M., Eastern time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., Eastern time, on the next preceding Business Day.

3

     “Common Shares” when used with no direct reference or with reference to the Trust shall mean the common shares of beneficial interest, $0.01 par value per share, of the Trust. “Common Shares” when used with reference to any Person other than the Trust shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or the equity securities or other equity interest having power to control or direct the management of such other Person.

     “Distribution Date” shall have the meaning set forth in Section 3 hereof.

     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

     “Exchange Ratio” shall have the meaning set forth in Section 24 hereof.

     “Expiration Date” shall have the meaning set forth in Section 7 hereof.

     “Final Expiration Date” shall have the meaning set forth in Section 7 hereof.

     “Merger Agreement” shall have the meaning set forth in the preamble hereto.

     “NASDAQ” shall have the meaning set forth in Section 11(d)(i) hereof.

     “NYSE” shall have the meaning set forth in Section 11(d)(i) hereof.

     “Person” shall mean any individual, firm, corporation, limited liability company, partnership, trust or other entity, and shall include any successor (by merger or otherwise) of such entity.

     “Preferred Shares” shall mean the Series B Junior Participating Preferred Shares of Beneficial Interest, $0.01 par value per share, of the Trust having the rights and preferences set forth on Exhibit A to this Agreement.

     “Principal Party” shall have the meaning set forth in Section 13(b) hereof.

     “Purchase Price” shall have the meaning set forth in Section 4 hereof.

     “Record Date” shall have the meaning set forth in the preamble hereto.

     “Redemption Date” shall have the meaning set forth in Section 7 hereof.

     “Redemption Price” shall have the meaning set forth in Section 23 hereof.

     “Right” shall have the meaning set forth in the preamble hereto.

     “Rights Agent” shall have the meaning set forth in the preamble hereto.

     “Right Certificate” shall have the meaning set forth in Section 3 hereof.

4

     “Securities Act” shall mean the Securities Act of 1933, as amended.

     “Shares Acquisition Date” shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) promulgated under the Exchange Act) by the Trust or an Acquiring Person that an Acquiring Person has become such.

     “Subsidiary” of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. For purposes of this Agreement, Archstone shall be deemed a Subsidiary of the Trust and each Subsidiary of Archstone shall likewise be deemed a Subsidiary of the Trust.

     “Trading Day” shall have the meaning set forth in Section 11(d)(i) hereof.

     “Triggering Event” shall mean any event described in Section 11(a)(ii) or Section 13(a) hereof.

     “Trust” shall have the meaning set forth in the preamble hereto.

     Any determination or interpretation required in connection with any of the definitions contained in this Section 1 shall be made by the Board of Trustees in their good faith judgment, which determination shall be final and binding on the Rights Agent and on all shareholders of the Trust.

     Section 2. Appointment of Rights Agent. The Trust hereby appoints the Rights Agent to act as agent for the Trust in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Trust may from time to time appoint such co-Rights Agents as it may deem necessary or desirable upon ten days’ prior written notice to the Rights Agent. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such co-Rights Agent.

     Section 3. Issuance of Right Certificates.

     (a) Until the earlier of (i) the close of business on the tenth day after the Shares Acquisition Date, (ii) the close of business on the fifteenth Business Day (or such later date as may be determined by action of the Board of Trustees prior to such time as any Person becomes an Acquiring Person) after the date of the commencement by any Person (other than the Trust, any Subsidiary of the Trust, any employee benefit plan of the Trust or of any Subsidiary of the Trust or any entity holding Common Shares for or pursuant to the terms of any such plan) of, or of the first public announcement of the intention of any Person (other than the Trust, any Subsidiary of the Trust, any employee benefit plan of the Trust or of any Subsidiary of the Trust or any entity holding Common Shares for or pursuant to the terms of any such plan) to commence, a tender or exchange offer the consummation of which would result in any Person becoming the Beneficial Owner of Common Shares aggregating 15% or more of the then

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outstanding Common Shares, or (iii) the close of business on the tenth Business Day (or such later date as may be determined by action of the Board of Trustees prior to such time as any Person becomes an Acquiring Person) after the date of filing by any Person (other than the Trust, any Subsidiary of the Trust, or any employee benefit plan of the Trust or any Subsidiary of the Trust or any entity holding Common Shares for or pursuant to the terms of any such Plan) of, or the first public announcement of the intention of any Person (other than the Trust, any Subsidiary of the Trust, or any employee benefit plan of the Trust or any Subsidiary of the Trust or any entity holding Common Shares for or pursuant to the terms of any such Plan) to file, any application, request, submission or other document with any federal or state regulatory authority seeking approval of, attempting to rebut any presumption of control upon, or otherwise indicating an intention to enter into, any transaction or series of transactions the consummation of which would result in any Person (other than the Trust, any Subsidiary of the Trust, or any employee benefit plan of the Trust or any Subsidiary of the Trust or any entity holding Common Shares for or pursuant to the terms of any such Plan) becoming the Beneficial Owner of Common Shares aggregating 15% or more of the then outstanding Common Shares, other than a transaction in which newly issued Common Shares are issued directly by the Trust to such Person (including any such date which is after the date of this Agreement and prior to the issuance of the Rights; the earlier of such dates being herein referred to as the “Distribution Date”), (x) the Rights will be evidenced (subject to the provisions of Section 3(b) hereof) by the certificates for Common Shares registered in the names of the holders thereof (which certificates shall also be deemed to be certificates for Rights) and not by separate certificates, and (y) the Rights will be transferable only in connection with the transfer of the underlying Common Shares (including a transfer to the Trust). As soon as practicable after the Distribution Date, the Trust will prepare and execute, the Rights Agent will countersign, and the Trust will send or cause to be sent (and the Rights Agent, at the expense of the Trust, will, if requested, send) by first-class, insured, postage-prepaid mail, to each record holder of Common Shares as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Trust, a Right Certificate, in substantially the form of Exhibit B hereto (a “Right Certificate”), evidencing one Right for each Common Share so held. As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates.

     The Trust shall promptly notify the Rights Agent in writing upon the occurrence of the Distribution Date and, if such notification is given orally, the Trust shall confirm same in writing on or prior to the Business Day next following. Until such notice is received by the Rights Agent, the Rights Agent may presume conclusively for all purposes that the Distribution Date has not occurred.

     (b) With respect to certificates for Common Shares outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof, and registered holders of Common Shares shall also be the registered holders of the associated Rights (regardless of whether such ownership is indicated on the Common Share certificates). Until the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date, the transfer of any certificate for Common Shares shall also constitute the transfer of the Rights associated with the Common Shares represented thereby.

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     (c) Rights shall be issued in respect of all Common Shares which are issued (whether or not previously issued) after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date. Certificates evidencing such Common Shares shall also be deemed to be certificates for Rights. Certificates evidencing both Common Shares and Rights in accordance with this Section 3 which are executed and delivered (whether or not the Common Shares represented thereby were previously issued or are presented for transfer) by the Trust (including, without limitation, certificates representing reacquired Common Shares referred to in the last sentence of this paragraph (c)) after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date shall have impressed on, printed on, written on or otherwise affixed to them a legend that by itself or together with prior legends is substantially to the following effect:

This certificate also evidences and entitles the holder hereof to certain rights as set forth in the Rights Agreement between Archstone-Smith Trust (the “Trust”) and Mellon Investor Services LLC, dated as of August 31, 2001 (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Trust. Under certain circumstances, as set forth in the Rights Agreement, the Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Trust will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge promptly after receipt of a written request therefor. Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person or an Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, shall become null and void.

Until the Distribution Date, the Rights associated with the Common Shares shall be evidenced by the certificates evidencing the associated Common Shares alone (regardless of whether any such certificate contains the above legend), and the transfer of any such certificate shall also constitute the transfer of the Rights associated with the Common Shares represented thereby. In the event that the Trust purchases or acquires any Common Shares after the Record Date but prior to the Distribution Date, any Rights associated with such Common Shares shall be deemed canceled and retired so that the Trust shall not be entitled to exercise any Rights associated with the Common Shares which are no longer outstanding.

     Section 4. Form of Right Certificates.

     (a) The Right Certificates (and the forms of election to purchase Preferred Shares and of assignment to be printed on the reverse thereof) shall be substantially the same as Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Trust may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or

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with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Right Certificates shall entitle the holders thereof to purchase such number of one one-hundredths of a Preferred Share as shall be set forth therein at the price per one one-hundredth of a Preferred Share set forth therein (the “Purchase Price”), but the amount and type of securities purchasable upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein.

     (b) Any Right Certificate issued pursuant to Section 3(a) or Section 22 hereof that evidences Rights beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or any Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes an Acquiring Person, or (iii) a transferee of an Acquiring Person (or any Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding, whether written or oral, regarding the transferred Rights or (B) a transfer which the Board of Trustees otherwise concludes in good faith is part of a plan, arrangement or understanding, whether written or oral, which has as a primary purpose or effect the avoidance of Section 7(e) hereof, and any Right Certificate issued pursuant to Section 6 or Section 11 hereof upon the transfer, exchange, replacement or adjustment of any other Right Certificate referred to in this sentence, shall contain (to the extent feasible and otherwise reasonably identifiable as such) the following legend:

The Rights evidenced by this Right Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Right Certificate and the Rights evidenced hereby may become void in the circumstances specified in Section 7(e) of such Agreement.

The provisions of Section 7(e) hereof shall apply whether or not any Right Certificate actually contains the foregoing legend.

     Section 5. Countersignature and Registration. The Right Certificates shall be executed on behalf of the Trust by its Chairman of the Board, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, General Counsel, any Division President, any Vice President, or its Secretary, either manually or by facsimile signature, shall have affixed thereto the Trust’s seal or a facsimile thereof, and shall be attested by the Secretary or an Assistant Secretary of the Trust, either manually or by facsimile signature. The Right Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless countersigned. In case any officer of the Trust who shall have signed any of the Right Certificates shall cease to be such officer of the Trust before countersignature by the Rights Agent and issuance and delivery by the Trust, such Right Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Trust with the same force and effect as though the person

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who signed such Right Certificates had not ceased to be such officer of the Trust; and any Right Certificate may be signed on behalf of the Trust by any person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Trust to sign such Right Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer.

     Following the Distribution Date, and receipt by the Rights Agent of notice of the Distribution Date and such other necessary information as reasonably requested by the Rights Agent, the Rights Agent will keep or cause to be kept, at its office designated for such purpose, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates.

     Section 6. Transfer, Division, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject to the provisions of Sections 4(b), 7(e), 14 and 24 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the earlier of the Redemption Date or the Final Expiration Date, any Right Certificate or Right Certificates may be transferred, divided, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of Preferred Shares (or, following a Triggering Event, Common Shares or other securities or property, as the case may be) as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, divide, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, divided, combined or exchanged at the office of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Trust shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Right Certificate until the registered holder shall have properly completed and signed the certificate contained in the form of assignment on the reverse side of such Right Certificate and the Trust shall have been provided with such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Trust or Rights Agent shall reasonably request. Thereupon the Rights Agent shall, subject to Sections 4 and 7 hereof, countersign and deliver to the person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Trust may require payment of a sum sufficient to cover any tax or charge that may be imposed in connection with any transfer, division, combination or exchange of Right Certificates. The Rights Agent shall have no duty or obligation under this Section unless and until it is reasonably satisfied that all such taxes and/or charges have been paid or that adequate provision has been made for such payment.

     Upon receipt by the Trust and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Trust’s request, reimbursement to the Trust and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if

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mutilated, the Trust will make and deliver a new Right Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.

     Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.

     (a) Subject to Section 7(e) hereof, the registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the office of the Rights Agent designated for such purpose, together with payment of the Purchase Price with respect to each surrendered Right for the total number of Preferred Shares (or Common Shares or other securities or property, as the case may be) as to which the Rights are exercised, at or prior to the earliest of (i) the close of business on August 31, 2011 (the “Final Expiration Date”), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the “Redemption Date”), or (iii) the time at which such Rights are exchanged by the Trust as provided in Section 24 hereof (the earliest to occur of the events described in (i), (ii) and (iii) being herein referred to as the “Expiration Date”).

     (b) The Purchase Price for each one one-hundredth of a Preferred Share pursuant to the exercise of a Right shall initially be $75.00, shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below.

     (c) Upon receipt of a Right Certificate evidencing exercisable Rights, with the form of election to purchase and the certificate on the reverse side of the Right Certificate duly executed, accompanied by payment of the Purchase Price for the Preferred Shares (or Common Shares or other securities or property, as the case may be) to be purchased and an amount equal to any applicable tax or charge required to be paid by the holder of such Right Certificate in accordance with Section 9 hereof by certified check, cashier’s check or money order payable to the order of the Trust, the Rights Agent shall thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares (or make available, if the Rights Agent is the transfer agent of the Preferred Shares) certificates for the number of Preferred Shares to be purchased and the Trust hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) if the Trust shall have elected to deposit the Preferred Shares issuable upon exercise of the Rights with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one one-hundredths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares evidenced by such receipts shall be deposited by the transfer agent therefor with the depositary agent) and the Trust shall direct the depositary agent to comply with such request, (ii) when appropriate, requisition from the Trust the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt, deliver such cash referred to in clause (ii) above to or upon the order of the registered holder of such Right Certificate. In

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the event that the Trust is obligated to issue other securities (including Common Shares) of the Trust, pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Trust will make all arrangements necessary so that such other securities, cash and/or property are available for distribution by the Rights Agent, if and when appropriate.

     (d) In case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to the registered holder of such Right Certificate or to his duly authorized assigns, subject to the provisions of Section 14 hereof.

     (e) Notwithstanding anything in this Agreement to the contrary, from and after the occurrence of a Triggering Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes an Acquiring Person, or (iii) a transferee of an Acquiring Person (or any Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming an Acquiring Person and receives such Rights pursuant to either (x) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding, whether written or oral, regarding the transferred Rights or (y) a transfer which the Board of Trustees otherwise concludes in good faith is part of a plan, arrangement or understanding, whether written or oral, which has as a primary purpose or effect the avoidance of this Section 7(e), shall become null and void without any further action, and any holder of such Rights shall thereupon have no rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise, from and after the occurrence of a Triggering Event. The Trust shall use all reasonable efforts to ensure that the provisions of this Section 7(e) are complied with, but shall have no liability to any holder of Rights for the inability to make any determinations with respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder.

     (f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Trust shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless the certificate contained in the form of election to purchase set forth on the reverse side of the Right Certificate surrendered for such exercise shall have been properly completed and signed by the registered holder thereof and the Trust shall have been provided with such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Trust or the Rights Agent shall reasonably request.

     (g) The Trust covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares (and, following the occurrence of a Triggering Event, Common Shares and/or other securities), the number of Preferred Shares (and, following the occurrence of a Triggering Event, Common Shares and/or other securities) that will be sufficient to permit the exercise in full of all outstanding Rights.

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     Section 8. Cancellation and Destruction of Right Certificates. All Right Certificates surrendered for the purpose of exercise, transfer, division, combination or exchange shall, if surrendered to the Trust or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Rights Agreement. The Trust shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Trust otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Right Certificates to the Trust, or shall, at the written request of the Trust, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Trust.

     Section 9. Availability of Preferred Shares. The Trust covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares (and, following the occurrence of a Triggering Event, Common Shares and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such Preferred Shares (and, following the occurrence of a Triggering Event, Common Shares and/or other securities), subject to payment of the Purchase Price, be duly and validly authorized and issued and fully paid and nonassessable.

     The Trust further covenants and agrees that it will pay when due and payable any and all taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any Preferred Shares (or Common Shares and/or other securities, as the case may be) upon the exercise of Rights. The Trust shall not, however, be required to pay any tax or charge which may be payable in respect of any transfer or delivery of Right Certificates to a person other than, or the issuance or delivery of certificates or depositary receipts for the Preferred Shares (or Common Shares and/or other securities, as the case may be) in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue or to deliver any certificates or depositary receipts for Preferred Shares (or Common Shares and/or other securities, as the case may be) upon the exercise of any Rights until any such tax shall have been paid (any such tax or charge being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Trust’s or Rights Agent’s reasonable satisfaction that no such tax or charge is due.

     Section 10. Preferred Shares Record Date. Each person in whose name any certificate for Preferred Shares (or Common Shares and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the shares or securities represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable taxes or charges) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Shares (or Common Shares and/or other securities, as the case may be) transfer books of the Trust are closed, such person shall be deemed to have become the record holder of such shares or securities on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Shares (or Common Shares and/or other securities, as the case may be) transfer books of the Trust are

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open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a holder of Preferred Shares (or Common Shares and/or other securities, as the case may be) for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Trust, except as provided herein.

     Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights. The Purchase Price, the number of Preferred Shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.

(a)      (i) In the event the Trust shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of Preferred Shares or (D) issue any of its shares in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Trust is the continuing or surviving entity), except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Shares transfer books of the Trust were open, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of the Trust issuable upon exercise of one Right. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.

     (ii) Subject to Section 24 hereof, in the event any Person becomes an Acquiring Person, each holder of a Right, except as provided below and in Section 7(e) hereof, shall thereafter have a right to receive, upon exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares of the Trust as shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable and dividing that product by (B) 50% of the then current per share market price of the Trust’s Common Shares (determined pursuant to Section 11(d) hereof) on the date of the occurrence of such event. In the event that any Person shall become an Acquiring Person and the Rights shall then be outstanding, the Trust shall not take any action which would eliminate or diminish the benefits intended to be afforded by the Rights.

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     (iii) In lieu of issuing Common Shares of the Trust in accordance with Section 11(a)(ii) hereof, the Trust may, in the sole discretion of the Board of Trustees, elect to (and, in the event that the Board of Trustees has not exercised the exchange right contained in Section 24 hereof and there are not sufficient issued but not outstanding and authorized but unissued Common Shares to permit the exercise in full of the Rights in accordance with Section 11(a)(ii) hereof, the Trust shall) take all such action as may be necessary to authorize, issue or pay, upon the exercise of the Rights, cash (including by way of a reduction of the Purchase Price), property, other securities or any combination thereof having an aggregate value equal to the value of the Common Shares of the Trust which otherwise would have been issuable pursuant to Section 11(a)(ii) hereof, which aggregate value shall be determined by a majority of the Board of Trustees. For purposes of the preceding sentence, the value of the Common Shares shall be determined pursuant to Section 11(d) hereof and the value of any equity securities which a majority of the Board of Trustees determines to be equivalent to a Common Share (including the Preferred Shares, in such ratio as the Board of Trustees shall determine) shall be deemed to have the same value as the Common Shares. Any such election by the Board of Trustees must be made and publicly announced within 60 days following the date on which the event described in Section 11(a)(ii) hereof shall have occurred. Following the occurrence of the event described in Section 11(a)(ii) hereof, a majority of the Board of Trustees then in office may suspend the exercisability of the Rights for a period of up to 60 days following the date on which the event described in Section 11(a)(ii) hereof shall have occurred to the extent that the Board of Trustees has not determined whether to exercise the Trust’s right of election under this Section 11(a)(iii). In the event of any such suspension, the Trust shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended. The Trust shall notify the Rights Agent whenever it makes a public announcement pursuant this Section 11(a)(iii) and give the Rights Agent a copy of such announcement.

     (b) In case the Trust shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Shares (or shares having the same rights, privileges and preferences as the Preferred Shares (“equivalent preferred shares”)) or securities convertible into Preferred Shares or equivalent preferred shares at a price per Preferred Share or equivalent preferred share (or having a conversion price per share, if a security convertible into Preferred Shares or equivalent preferred shares) less than the then current per share market price of the Preferred Shares (as defined in Section 11(d) hereof) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares outstanding on such record date plus the number of Preferred Shares which the aggregate offering price of the total number of Preferred Shares and/or equivalent preferred shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and the denominator of which shall be the number of Preferred Shares outstanding on such record date plus the number of additional Preferred Shares and/or equivalent preferred

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shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of the Trust issuable upon exercise of one Right. In case such subscription price is paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Trustees, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and on the holders of the Rights. Preferred Shares owned by or held for the account of the Trust shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

     (c) In case the Trust shall fix a record date for the making of a distribution to all holders of the Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Trust is the continuing or surviving entity) of evidences of indebtedness or assets (other than a regular periodic cash dividend or a dividend payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the then current per share market price of the Preferred Shares on such record date, less the fair market value (as determined in good faith by the Board of Trustees, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants attributable to one Preferred Share and the denominator of which shall be such current per share market price (as such term is defined in Section 11(d)(i) hereof) of the Preferred Shares; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of the Trust to be issued upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

     (d)      (i) For the purpose of any computation hereunder, other than under Section 11(a)(iii) hereof, the “current per share market price” of any security (a “Security” for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date, and for the purpose of any computation under Section 11(a)(iii) hereof, the “current per share market price” of a Security on any date shall be deemed to be the average of the daily closing prices per share of such Security for thirty (30) consecutive Trading Days immediately following such date; provided, however, that in the event that the current per share market price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares (other than the Rights), or (B) any subdivision, combination or reclassification of such Security and

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prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the “current per share market price” shall be appropriately adjusted to reflect the current market price per share equivalent (ex-dividend) of such Security. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on The New York Stock Exchange (the “NYSE”) or, if the Security is not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System (“NASDAQ”) or such other system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Trustees. If on any such date no market maker is making a market in the Security, the fair value of such Security on such date as determined in good faith by the Board of Trustees shall be used, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. The term “Trading Day” shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction of business or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day.

          (ii) For the purpose of any computation hereunder, the “current per share market price” of the Preferred Shares shall be determined in accordance with the method set forth in Section 11(d)(i) hereof. If the Preferred Shares are not publicly traded, the “current per share market price” of the Preferred Shares shall be conclusively deemed to be the current per share market price of the Common Shares of the Trust as determined pursuant to Section 11(d)(i) hereof (appropriately adjusted to reflect any share split, share dividend or similar transaction occurring after the date hereof), multiplied by one hundred. If neither the Common Shares of the Trust nor the Preferred Shares are publicly held or so listed or traded, “current per share market price” shall mean the fair value per share as determined in good faith by the Board of Trustees, whose determination shall be described in a statement filed with the Rights Agent, or, if at the time of such determination there is an Acquiring Person, by a majority of the members of the Board of Trustees then in office, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.

     (e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one one-millionth of a Preferred Share or one ten-thousandth of any other share

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or security, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the date of the expiration of the right to exercise any Rights.

     (f) If as a result of an adjustment made pursuant to Section 11(a) or Section 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of the Trust other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in this Section 11, and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Shares shall apply on like terms to any such other shares.

     (g) All Rights originally issued by the Trust subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-hundredths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

     (h) Unless the Trust shall have exercised its election as provided in Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c) hereof, each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-hundredths of a Preferred Share (calculated to the nearest one one-millionth of a Preferred Share) obtained by (i) multiplying (A) the number of one one-hundredths of a Preferred Share covered by a Right immediately prior to such adjustment by (B) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.

     (i) The Trust may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of one one-hundredths of a Preferred Share purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Trust shall make a public announcement of its election to adjust the number of Rights (with prompt written notice thereof to the Rights Agent), indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Trust shall, as promptly as practicable, cause to be distributed to holders of

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record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Trust, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Trust, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement.

     (j) Irrespective of any adjustment or change in the Purchase Price or the number of one one-hundredths of a Preferred Share issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of one one-hundredths of a Preferred Share which were expressed in the initial Right Certificates issued hereunder.

     (k) Before taking any action that would cause an adjustment reducing the Purchase Price below one one-hundredth of the then par value, if any, of the Preferred Shares issuable upon exercise of the Rights, the Trust shall take any action which may, in the opinion of its counsel, be necessary in order that the Trust may validly and legally issue fully paid and nonassessable Preferred Shares at such adjusted Purchase Price.

     (l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Trust may elect to defer (with prompt written notice thereof to the Rights Agent) until the occurrence of such event the issuance to the holder of any Right exercised after such record date of the Preferred Shares and other securities of the Trust, if any, issuable upon such exercise over and above the Preferred Shares and other securities of the Trust, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Trust shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares upon the occurrence of the event requiring such adjustment.

     (m) Anything in this Section 11 to the contrary notwithstanding, the Trust shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of the Preferred Shares, issuance wholly for cash of any Preferred Shares at less than the current market price, issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance of rights, options or warrants referred to hereinabove in Section 11(b) hereof, hereafter made by the Trust to holders of its Preferred Shares shall not be taxable to such shareholders.

     (n) In the event that at any time after the date of this Agreement and prior to the Distribution Date, the Trust shall (i) declare or pay any dividend on the Common Shares payable in Common Shares or (ii) effect a subdivision, combination or consolidation of the Common

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Shares (by reclassification or otherwise than by payment of dividends in Common Shares) into a greater or lesser number of Common Shares, then in any such case (x) the number of one one-hundredths of a Preferred Share purchasable after such event upon proper exercise of each Right shall be determined by multiplying the number of one one-hundredths of a Preferred Share so purchasable immediately prior to such event by a fraction, the numerator of which is the number of Common Shares outstanding immediately before such event and the denominator of which is the number of Common Shares outstanding immediately after such event, and (y) each Common Share outstanding immediately after such event shall have issued with respect to it that number of Rights which each Common Share outstanding immediately prior to such event had issued with respect to it. The adjustments provided for in this Section 11(n) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected.

     (o) So long as the shares issuable upon the exercise of the Rights may be listed on any national securities exchange, the Trust shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise.

     (p) The Trust shall use its best efforts to (i) file, as soon as practicable following the first occurrence of a Triggering Event, a registration statement under the Securities Act with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the date of the expiration of the Rights. The Trust will also take such action as may be appropriate under the blue sky laws of the various states. The Trust may temporarily suspend, for a period of time not to exceed 90 days, the exercisability of the Rights in order to prepare and file such registration statement or in order to comply with such blue sky laws. Upon any such suspension, the Trust shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended (with prompt written notice thereof to the Rights Agent).

     Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment occurs as provided in Section 11 or 13 hereof, the Trust shall promptly (a) prepare a certificate setting forth such adjustment, and a brief statement of the facts accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the Common Shares or the Preferred Shares a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 25 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall have no duty or liability with respect to, and shall not be deemed to have knowledge of any adjustment unless and until it shall have received such certificate.

     Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.

     (a) If after the Shares Acquisition Date, directly or indirectly, (x) the Trust shall consolidate with, or merge with and into, any other Person, (y) any Person shall consolidate with

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the Trust, or merge with and into the Trust and the Trust shall be the continuing or surviving entity of such merger and, in connection with such merger, all or part of the Common Shares shall be changed into or exchanged for stock or other securities of any other Person (or the Trust) or cash or any other property, or (z) the Trust shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating 50% or more of the assets or earning power of the Trust and its Subsidiaries (taken as a whole) to any Person or Persons other than the Trust or one or more of its wholly-owned Subsidiaries, then, and in each such case, proper provision shall be made so that (i) each holder of a Right (except as otherwise provided herein) shall thereafter have the right to receive, upon the exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of validly authorized and issued, fully paid, non-assessable and freely tradeable common shares of the Principal Party (as hereinafter defined), free and clear of all liens, rights of call or first refusal, encumbrances or other adverse claims, as shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable (or, if such Right is not then exercisable for a number of one one-hundredths of a Preferred Share, the number of such fractional shares for which it was exercisable immediately prior to an event described under Section 11(a)(ii) hereof) and dividing that product by (B) 50% of the then current per share market price of the common shares of such Principal Party (determined pursuant to Section 11(d) hereof) on the date of consummation of such consolidation, merger, sale or transfer; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, or otherwise, all the obligations and duties of the Trust pursuant to this Agreement; (iii) the term “Trust” shall thereafter be deemed to refer to such Principal Party; and (iv) such Principal Party shall take such steps (including, but not limited to, the authorization and reservation of a sufficient number of its common shares in accordance with Section 9 hereof) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its common shares thereafter deliverable upon the exercise of the Rights.

     (b) “Principal Party” shall mean:

     (i) In the case of any transaction described in (x) or (y) of the first sentence of Section 13(a) hereof, the Person that is the issuer of any securities into which Common Shares of the Trust are converted in such merger or consolidation, and if no securities are so issued, the Person that is the surviving entity of such merger or consolidation (including the Trust if applicable); and

     (ii) in the case of any transaction described in (z) of the first sentence in Section 13(a) hereof, the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions;

provided, however, that in any such case described in clauses (b)(i) and (b)(ii) above: (1) if the common shares of such Person are not at such time and have not been continuously over the

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preceding 12-month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the common shares of which are and have been so registered, “Principal Party” shall refer to such other Person; (2) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the common shares of two or more of which are and have been so registered, “Principal Party” shall refer to whichever of such Persons is the issuer of the common shares having the greatest aggregate market value; and (3) in case such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set forth in (1) and (2) above shall apply to each of the chains of ownership having an interest in such joint venture as if such party were a “Subsidiary” of both or all of such joint venturers and the Principal Parties in each such chain shall bear the obligations set forth in this Section 13 in the same ratio as their direct or indirect interests in such Person bear to the total of such interests.

     (c) The Trust shall not consummate any such consolidation, merger, sale or transfer unless the Principal Party shall have sufficient common shares authorized to permit the full exercise of the Rights and prior thereto the Trust and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that, as soon as practicable after the date of any consolidation, merger or sale of assets mentioned in paragraph (a) of this Section 13, the Principal Party will:

     (i) prepare and file a registration statement under the Securities Act, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, and will use its best efforts to cause such registration statement to (A) become effective as soon as practicable after such filing and (B) remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date;

     (ii) deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act; and

     (iii) take such actions as may be necessary or appropriate under the blue sky laws of the various states.

The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the event that one of the transactions described in this Section 13(a) shall occur at any time after the occurrence of a transaction described in Section 11(a)(ii) hereof, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a) hereof.

     Section 14. Fractional Rights and Fractional Shares.

     (a) The Trust shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, there may be

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paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if the Rights are not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Trustees. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Trustees shall be used or, if at the time of such determination there is an Acquiring Person, by a majority of the members of the Board of Trustees then in office, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.

     (b) The Trust shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share). Fractions of Preferred Shares in integral multiples of one one-hundredth of a Preferred Share may, at the election of the Trust, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Trust and a depositary selected by it; provided, that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Shares represented by such depositary receipts. In lieu of fractional Preferred Shares that are not integral multiples of one one-hundredth of a Preferred Share, the Trust may, to the extent necessary to reduce such fraction to an integral multiple of one one-hundredth, pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one one-hundredth of a Preferred Share. For the purposes of this Section 14(b), the current market value of one one-hundredth of a Preferred Share shall be one one-hundredth of the closing price of a Preferred Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise.

     (c) Following the occurrence of a Triggering Event, the Trust shall not be required to issue fractions of Common Shares upon exercise of the Rights or to distribute certificates which evidence fractional Common Shares. In lieu of fractional Common Shares, the Trust may pay to the registered holders of Right Certificates at the time such Rights are exercised as herein

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provided an amount in cash equal to the same fraction of the current market value of one Common Share. For purposes of this Section 14(c), the current market value of one Common Share shall be the closing price of one Common Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise.

     (d) The holder of a Right by the acceptance of the Right expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right (except as provided above). The Rights Agent shall have no duty or obligation with respect to this Section 14 and Section 24 below unless and until it has received specific instructions (and sufficient cash to make payments in lieu of issuing fractional shares, if required) from the Trust with respect to its duties or obligations under such Sections.

     Section 15. Rights of Action. All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Section 18 hereof, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Shares), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Shares), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Trust to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement.

     Section 16. Agreement of Right Holders. Every holder of a Right, by accepting the same, consents and agrees with the Trust and the Rights Agent and with every other holder of a Right that:

     (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Shares;

     (b) after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer;

     (c) the Trust and the Rights Agent may deem and treat the person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the associated Common Shares certificate made by anyone other than the Trust or the Rights Agent) for all purposes whatsoever, and neither the Trust nor the Rights Agent shall be affected by any notice to the contrary; and

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     (d) notwithstanding anything in this Agreement to the contrary, neither the Trust nor the Rights Agent shall have any liability to any holder of a Right or any other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, judgment, decree or ruling (whether interlocutory or final) issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority prohibiting or otherwise restraining performance of such obligation.

     Section 17. Right Certificate Holder Not Deemed a Shareholder. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Preferred Shares or any other securities of the Trust which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a shareholder of the Trust or any right to vote for the election of trustees or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any trust action, or to receive notice of meetings or other actions affecting shareholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof.

     Section 18. Concerning the Rights Agent. The Trust agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the preparation, delivery, amendment, administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Trust also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, damage, judgment, fine, penalty, claim, demand, settlement, cost or expenses (including, without limitation, the reasonable fees and expenses of legal counsel), incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent for any action taken, suffered or omitted by the Rights Agent in connection with the acceptance, administration, exercise and performance of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. The costs and expenses incurred in enforcing this right of indemnification shall be paid by the Trust. The provisions of this Section 18 and Section 20(c) below shall survive the termination of this Agreement, the exercise or expiration of the Rights or the resignation or removal of the Rights Agent.

     The Rights Agent shall be authorized and protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its acceptance and administration of this Agreement and the exercise and performance of its duties hereunder in reliance upon any Right Certificate or certificate for the Preferred Shares or Common Shares or for other securities of the Trust, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified

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or acknowledged, by the proper person or persons, or otherwise upon the advice of counsel as set forth in Section 20 hereof.

     Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, that such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered; any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.

     In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.

     Section 20. Rights and Duties of Rights Agent. The Rights Agent undertakes the duties and obligations expressly imposed by this Agreement (and no implied duties) upon the following terms and conditions, by all of which the Trust and the holders of Right Certificates, by their acceptance thereof, shall be bound:

     (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Trust or legal counsel for the Rights Agent), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it in good faith and in accordance with such opinion.

     (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of the current per share market price) be proved or established by the Trust prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the

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Chairman of the Board, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, General Counsel, any Division President, any Vice President, or the Secretary of the Trust and delivered to the Rights Agent; and such certificate shall be full and complete authorization to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted in good faith by it under the provisions of this Agreement in reliance upon such certificate.

     (c) The Rights Agent shall be liable hereunder to the Trust and any other Person only for its own gross negligence, bad faith or willful misconduct. Anything in this Agreement to the contrary notwithstanding, in no event shall the Rights Agent be liable for special, punitive, indirect, consequential or incidental loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage and regardless of the form of the action.

     (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Trust only.

     (e) The Rights Agent shall not have any liability for or be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Trust of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 7(e) hereof) or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Sections 3, 11, 13, 23 or 24 hereof, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after receipt of a certificate furnished pursuant to Section 12 hereof describing a change or adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares or Common Shares to be issued pursuant to this Agreement or any Right Certificate or as to whether any Preferred Shares or Common Shares will, when issued, be validly authorized and issued, fully paid and nonassessable.

     (f) The Trust agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.

     (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, General Counsel, any Division President, any Vice President, or the Secretary of the Trust, and to apply to such

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officers for advice or instructions in connection with its duties, and such instructions or advice shall be full and complete authorization and protection and the Rights Agent shall not be liable for any action taken, suffered or omitted by it in good faith in accordance with such advice or instructions of any such officer or for any delay in acting while waiting for those instructions. Any application by the Rights Agent for written instructions from the Trust may, at the option of the Rights Agent, set forth in writing any action proposed to be taken, suffered or omitted by the Rights Agent under this Agreement and the date on and/or after which such action shall be taken or suffered or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, suffered by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five Business Days after the date any officer of the Trust actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, prior to taking or suffering any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken, suffered or omitted.

     (h) The Rights Agent and any stockholder, affiliate, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Trust or its Subsidiaries or become pecuniarily interested in any transaction in which the Trust or its Subsidiaries may be interested, or contract with or lend money to the Trust or its Subsidiaries or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent or any such stockholder, affiliate, director, officer or employee from acting in any other capacity for the Trust or its Subsidiaries or for any other Person.

     (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself (through its directors, officers and employees) or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Trust resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof.

     (j) If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Trust.

     (k) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.

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     Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days’ notice in writing mailed to the Trust and to each transfer agent of the Common Shares or Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. The Trust may remove the Rights Agent or any successor Rights Agent upon 30 days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares or Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Trust shall appoint a successor to the Rights Agent. If the Trust shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Trust), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Trust or by such a court, shall be a Person or bank organized and doing business under the laws of the United States or of any other state of the United States, which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $100 million. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Trust shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares or Preferred Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

     Section 22. Issuance of New Right Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Trust may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by the Board of Trustees to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement.

     Section 23. Redemption.

     (a) The Board, by the affirmative vote of the Board of Trustees, may, at its option, at any time prior to such time as any Person becomes an Acquiring Person, redeem all but not less than all the then outstanding Rights at a redemption price of $0.001 per Right, appropriately adjusted to reflect any share split, share dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the “Redemption Price”). The

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preceding sentence notwithstanding, prior to the expiration of the period during which the Rights may be redeemed as specified therein (or such longer period as the Board of Trustees of the Trust may select pursuant to this sentence), the Board of Trustees of the Trust may extend, one or more times, the period during which the Rights may be redeemed beyond the close of business on the tenth day following the Shares Acquisition Date. The Trust may, at its option, pay the Redemption Price in cash, Common Shares (based on the current per share market price of the Common Shares at the time of redemption) or any other form of consideration deemed appropriate by the Board of Trustees. The redemption of the Rights by the Board of Trustees may be made effective at such time on such basis and with such conditions as the Board of Trustees in its sole discretion may establish.

     (b) Immediately upon the action of the Board of Trustees ordering the redemption of the Rights (or at the effective time of such redemption established by the Board of Trustees pursuant to the last sentence of paragraph (a) of this Section 23), and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. The Trust shall promptly give public notice of any such redemption (with prompt written notice thereof to the Rights Agent); provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Within 10 days after such action of the Board of Trustees ordering the redemption of the Rights or, if later, the effectiveness of the redemption of the Rights pursuant to the last sentence of paragraph (a), the Trust shall mail a notice of redemption to all the holders of the then outstanding Rights at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. The Trust may, at its option, discharge all of its obligations with respect to the Rights by (i) issuing a press release announcing the manner of redemption of the Rights, (ii) depositing with a bank or trust company having a capital and surplus of at least $100,000,000, funds necessary for such redemption, in trust, to be applied to the redemption of the Rights so called for redemption and (iii) arranging for the mailing of the Redemption Price to the registered holders of the Rights; then, and upon such action, all outstanding Right Certificates shall be null and void without further action by the Trust. Neither the Trust nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23, in Section 24 hereof, or in connection with the purchase of Common Shares prior to the Distribution Date.

     Section 24. Exchange.

     (a) The Board of Trustees may, at its option, at any time after a Triggering Event, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 7(e) hereof) for Common Shares at an exchange ratio of one Common Share per Right, appropriately adjusted to reflect any share split, share dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the “Exchange Ratio”). Notwithstanding the

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foregoing, the Board of Trustees shall not be empowered to effect such exchange at any time after any Person (other than the Trust, any Subsidiary of the Trust, any employee benefit plan of the Trust or of any Subsidiary of the Trust or any entity holding Common Shares for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Shares then outstanding.

     (b) Immediately upon the action of the Board of Trustees ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of Common Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Trust shall promptly give public notice of any such exchange (with prompt written notice thereof to the Rights Agent); provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Trust promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Shares for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become null and void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights.

     (c) In any exchange pursuant to this Section 24, the Trust, at its option, may substitute Preferred Shares (or equivalent preferred shares, as such term is defined in Section 11(b) hereof) for Common Shares exchangeable for Rights, at the initial rate of one one-hundredth of a Preferred Share (or equivalent preferred share) for each Common Share, as appropriately adjusted to reflect adjustments in the voting rights of the Preferred Shares pursuant to the terms thereof, so that the fraction of a Preferred Share delivered in lieu of each Common Share shall have the same voting rights as one Common Share.

     (d) In the event that there shall not be sufficient Common Shares or Preferred Shares issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Trust shall take all such action as may be necessary to authorize additional Common Shares or Preferred Shares for issuance upon exchange of the Rights.

     (e) The Trust shall not be required to issue fractions of Common Shares or to distribute certificates which evidence fractional Common Shares. In lieu of such fractional Common Shares, the Trust shall pay to the registered holders of the Right Certificates with regard to which such fractional Common Shares would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Common Share. For the purposes of this paragraph (e), the current market value of a whole Common Share shall be the closing price of a Common Share (as determined pursuant to the second sentence of Section

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11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24.

     Section 25. Notice of Certain Events.

     (a) In case the Trust shall propose at any time after the Distribution Date (i) to pay any dividend payable in shares of any class to the holders of its Preferred Shares or to make any other distribution to the holders of its Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of its Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of any class or any other securities, rights or options, (iii) to effect any reclassification of its Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), (iv) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of 50% or more of the assets or earning power of the Trust and its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the liquidation, dissolution or winding up of the Trust, or (vi) to declare or pay any dividend on the Common Shares payable in Common Shares or to effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares), then, in each such case, the Trust shall give to the Rights Agent and each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such share dividend, or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the Common Shares and/or Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 10 days prior to the record date for determining holders of the Preferred Shares for purposes of such action, and in the case of any such other action, at least 10 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares and/or Preferred Shares, whichever shall be the earlier.

     (b) In case any of the events set forth in Section 11(a)(ii) hereof shall occur, then the Trust shall as soon as practicable thereafter give to the Rights Agent and each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Section 11(a)(ii) hereof.

     Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Trust shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:

Archstone-Smith Trust
9200 E. Panorama Circle
Englewood, Colorado 80112
Attention: General Counsel

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     Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Trust or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Trust) as follows:

Mellon Investor Services LLC
600 North Pearl Street, Suite 1010
Dallas, Texas 75201-2884
Attention: _________________

With a copy to:

Mellon Investor Services LLC
85 Challenger Road
Ridgefield Park, NJ 07660
Attention: General Counsel

Notices or demands authorized by this Agreement to be given or made by the Trust or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Trust. Notices or demands sent by mail in accordance with this Section 26 shall be deemed given or made three Business Days after the date on which they are sent.

     Section 27. Supplements and Amendments. The Trust, by the affirmative vote of the Board of Trustees, may from time to time supplement or amend this Agreement without the approval of any holders of Right Certificates in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or to make or change any other provisions with respect to the Rights (including, without limitation, changes to the Purchase Price) which the Trust may deem necessary or desirable, any such supplement or amendment to be evidenced by a writing signed by the Trust and the Rights Agent; provided, however, that from and after such time as any Person becomes an Acquiring Person, this Agreement shall not be amended in any manner which would adversely affect the interests of the holders of Rights. Notwithstanding anything in this Agreement to the contrary, no supplement or amendment that changes the rights and duties of the Rights Agent under this Agreement will be effective against the Rights Agent without the execution of such supplement or amendment by the Rights Agent.

     Section 28. General Limitations on Redemption, Modification or Termination of Rights or Amendment to Agreement. Notwithstanding any provision of this Agreement to the contrary, in addition to any other approval that may be necessary, any redemption, modification or termination of the Rights, or any amendment to this Agreement, requiring the approval of the Board of Trustees must be approved by a majority of the members of the Board of Trustees.

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     Section 29. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Trust or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

     Section 30. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Trust, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares) any legal or equitable right, remedy or claim under this Agreement; and this Agreement shall be for the sole and exclusive benefit of the Trust, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares).

     Section 31. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

     Section 32. Governing Law. This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Maryland and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State, except that those provisions of this Agreement affecting the rights, duties and responsibilities of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.

     Section 33. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

     Section 34. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

     Section 35. Determinations and Actions by the Board of Trustees. The Board of Trustees shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board of Trustees or the Trust or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (a) interpret the provisions of this Agreement, and (b) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend this Agreement). All such actions, interpretations and determinations (including, for purpose of clause (b) above, all omissions with respect to the foregoing) which are done or made by the Board of Trustees in good faith, shall (x) be final, conclusive and binding on the Trust, the Rights Agent, the holders of the Right Certificates and all other parties, and (y) not subject the Board of Trustees to any liability to the holders of the Right Certificates. The Rights Agent shall be entitled to assume

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that the Board of Trustees has acted in good faith with respect to any such actions, interpretations and determinations.

     Section 36. Limitation of Liability. Any obligation or liability whatsoever of the Trust which may arise at any time under this Agreement or any obligation or liability which may be incurred by it pursuant to any other instrument, transaction or undertaking contemplated hereby shall be satisfied, if at all, out of the Trust’s assets only. To the maximum extent permissible under Maryland law, no such obligation or liability shall be personally binding upon, nor shall resort for the enforcement thereof had to, the property of any of its shareholders, Trustees, officers, employees or agents, regardless of whether such obligations or liability is in the nature of contract, tort or otherwise.

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested, all as of the day and year first above written.

ARCHSTONE-SMITH TRUST
By:	/s/ Caroline Brower
	Caroline Brower
	General Counsel and Secretary

Attest:
By:	/s/ Thomas S. Reif
	Thomas S. Reif
	Assistant Secretary

MELLON INVESTOR SERVICES LLC
By:	/s/ Cindy Bennett
	Name:	Cindy Bennett
	Title:	Client Service Manager

Attest:
By:	/s/ David Cary
	Name:	David Cary
	Title:	Vice President

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Exhibit A

SERIES B JUNIOR PARTICIPATING PREFERRED SHARES
OF BENEFICIAL INTEREST

     (a) Designation and Amount. There shall be a series of preferred shares of the Trust, $0.01 par value per share, which shall be designated “Series B Junior Participating Preferred Shares” (the “Series B Preferred Shares”), and the number of shares constituting that series shall be 4,500,000. Such number of shares may be increased or decreased by resolution of the Board of Trustees and by the filing of articles supplementary in accordance with the provisions of Title 8 of the Corporations and Associations Article of the Code of Maryland stating that such increase or reduction has been so authorized; provided, however, that no decrease shall reduce the number of Series B Preferred Shares to a number less than the number of Series B Preferred Shares then outstanding plus the number of Series B Preferred Shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Trust.

     (b) Dividends and Distributions.

     (i) Subject to the prior and superior rights of the holders of any shares of any class or series of preferred shares of the Trust ranking prior and superior to the Series B Preferred Shares with respect to dividends, the holders of Series B Preferred Shares shall be entitled to receive, when, as and if declared by the Board of Trustees out of funds legally available for the purpose, quarterly dividends payable in cash to holders of record on the last Business Day of January, April, July and October in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a Series B Preferred Share or fraction thereof, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in Common Shares (hereinafter defined) or a subdivision of the outstanding Common Shares (by a reclassification or otherwise), authorized on the common shares of beneficial interest, $0.01 par value per share, of the Trust (the “Common Shares”) since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any Series B Preferred Share or fraction thereof. In the event the Trust shall at any time following August 31, 2001 (i) declare any dividend on Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares or (iii) combine the outstanding Common Shares into a smaller number of shares, then in each such case the amount to which holders of Series B Preferred Shares were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying each such amount by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event.

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     (ii) The Trust shall declare a dividend or distribution on the Series B Preferred Shares as provided in paragraph (A) above at the time it declares a dividend or distribution on the Common Shares (other than a dividend payable in Common Shares).

     (iii) No dividend or distribution (other than a dividend or distribution payable in Common Shares) shall be paid or payable to the holders of Common Shares unless, prior thereto, all accrued but unpaid dividends to the date of that dividend or distribution shall have been paid to the holders of Series B Preferred Shares.

     (iv) Dividends shall begin to accrue and be cumulative on outstanding Series B Preferred Shares from the Quarterly Dividend Payment Date next preceding the date of issuance of such Series B Preferred Shares, unless the date of issuance of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue and be cumulative from the date of issuance of such shares, or unless the date of issuance is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of Series B Preferred Shares entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the Series B Preferred Shares in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Trustees may fix a record date for the determination of holders of Series B Preferred Shares entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof.

     (c) Voting Rights. The holders of Series B Preferred Shares shall have the following voting rights:

     (A) Subject to the provision for adjustment hereinafter set forth, each one one-hundredth of a Series B Preferred Share shall entitle the holder thereof to one vote on all matters submitted to a vote of the shareholders of the Trust. In the event the Trust shall at any time following August 31, 2001 (i) declare any dividend on Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares or (iii) combine the outstanding Common Shares into a smaller number of shares, then in each such case the number of votes per share to which holders of Series B Preferred Shares were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event.

     (B) Except as otherwise provided herein or required by law, the holders of Series B Preferred Shares and the holders of Common Shares and any other shares of beneficial interest of the Trust having general voting rights shall vote together as one class on all matters submitted to a vote of shareholders of the Trust.

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(C)      (i) Whenever, at any time or times, dividends payable on any Series B Preferred Shares shall be in arrears in an amount equal to at least six full quarterly dividends (whether or not declared and whether or not consecutive), the holders of record of the outstanding Series B Preferred Shares shall have the exclusive right, voting separately as a single class, to elect two trustees of the Trust at a special meeting of shareholders of the Trust or at the Trust’s next annual meeting of shareholders, and at each subsequent annual meeting of shareholders, as provided below. At elections for such trustees, the holders of Series B Preferred Shares shall be entitled to cast one vote for each one one-hundredth of a Series B Preferred Share held, subject to adjustment.

     (ii) Upon the vesting of such right of the holders of the Series B Preferred Shares, the maximum authorized number of members of the Board of Trustees shall automatically be increased by two and the two vacancies so created shall be filled by vote of the holders of the outstanding Series B Preferred Shares as hereinafter set forth. A special meeting of the shareholders of the Trust then entitled to vote shall be called by the Chairman of the Board or the Chief Executive Officer of the Trust, if requested in writing by the holders of record of not less than 10% of the Series B Preferred Shares then outstanding. At such special meeting, or, if no such special meeting shall have been called, then at the next annual meeting of shareholders of the Trust, the holders of the Series B Preferred Shares shall elect, voting as above provided, two trustees of the Trust to fill the aforesaid vacancies created by the automatic increase in the number of members of the Board of Trustees. At any and all such meetings for such election, the holders of a majority of the outstanding Series B Preferred Shares shall be necessary to constitute a quorum for such election, whether present in person or by proxy, and such two trustees shall be elected by the vote of at least a plurality of shares held by such shareholders present or represented at the meeting. Any trustee elected by holders of Series B Preferred Shares pursuant to this Section may be removed at any annual or special meeting, by vote of the holders of a majority of the Series B Preferred Shares, with or without cause. In case any vacancy shall occur among the trustees elected by the holders of the Series B Preferred Shares pursuant to this Section, such vacancy may be filled by the remaining trustee so elected, or his successor then in office, and the trustee so elected to fill such vacancy shall serve until the next meeting of shareholders for the election of trustees. After the holders of the Series B Preferred Shares shall have exercised their right to elect trustees in any default period and during the continuance of such period, the number of trustees shall not be further increased or decreased except by vote of the holders of Series B Preferred Shares as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series B Preferred Shares.

     (iii) The right of the holders of the Series B Preferred Shares, voting separately as a class, to elect two members of the Board of Trustees as aforesaid shall continue until, and only until, such time as all arrears in dividends (whether or not declared) on the Series B Preferred Shares shall have been paid or declared and set apart for payment, at which time such right shall terminate, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character

38

above-mentioned. Upon any termination of the right of the holders of the Series B Preferred Shares as a class to vote for trustees as herein provided, the term of office of all trustees then in office elected by the holders of Series B Preferred Shares pursuant to this Section shall terminate immediately. Whenever the term of office of the trustees elected by the holders of the Series B Preferred Shares pursuant to this Section shall terminate and the special voting powers vested in the holders of the Series B Preferred Shares pursuant to this Section shall have expired, the maximum number of members of the Board of Trustees shall be such number as may be provided for in the Bylaws of the Trust irrespective of any increase made pursuant to the provisions of this Section.

     (D) Except as otherwise provided herein or required by law, holders of Series B Preferred Shares shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Shares as provided herein) for taking any trust action.

     (d) Certain Restrictions.

     (A) Whenever any quarterly dividends or other dividends or distributions payable on the Series B Preferred Shares as provided in Section 2 are in arrears, then, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on Series B Preferred Shares outstanding shall have been paid in full, the Trust shall not:

     (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Shares, other than dividends paid or payable in such junior shares;

     (ii) declare or pay dividends on or make any other distributions on any shares ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Shares, except dividends paid ratably on the Series B Preferred Shares and all such parity shares on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

     (iii) redeem or purchase or otherwise acquire for consideration shares ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Shares, provided that the Trust may at any time redeem, purchase or otherwise acquire any such parity shares in exchange for shares of the Trust ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series B Preferred Shares; or

     (iv) purchase or otherwise acquire for consideration any Series B Preferred Shares, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Trustees) to all holders of such shares upon such terms as the Board of Trustees, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in

39

good faith will result in fair and equitable treatment among the respective series or classes.

     (B) The Trust shall not permit any subsidiary of the Trust to purchase or otherwise acquire for consideration any shares of the Trust unless the Trust could, under paragraph (A) of this Section, purchase or otherwise acquire such shares at such time and in such manner.

     (e) Reacquired Shares. Any Series B Preferred Shares purchased or otherwise acquired by the Trust in any manner whatsoever shall become authorized but unissued shares of beneficial interest and may be reissued as Common Shares or as part of a new series of preferred shares to be created by resolution or resolutions of the Board of Trustees, subject to the conditions and restrictions on issuance set forth herein.

     (f) Liquidation, Dissolution or Winding Up. (A) Upon any voluntary liquidation, dissolution or winding up of the Trust, no distribution shall be made to the holders of shares ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Shares unless, prior thereto, the holders of Series B Preferred Shares shall have received $1.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the “Series B Liquidation Preference”). Following the payment of the full amount of the Series B Liquidation Preference, no additional distributions shall be made to the holders of Series B Preferred Shares unless, prior thereto, the holders of Common Shares shall have received an amount per share (the “Common Adjustment”) equal to the quotient obtained by dividing (i) the Series B Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph C below to reflect such events as share splits, share dividends and recapitalizations with respect to the Common Shares) (such number in clause (ii), the “Adjustment Number”). Following the payment of the full amount of the Series B Liquidation Preference and the Common Adjustment in respect of all outstanding Series B Preferred Shares and Common Shares, respectively, holders of Series B Preferred Shares and holders of Common Shares shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio, on a per share basis, of the Adjustment Number to 1 with respect to such Series B Preferred Shares and Common Shares, on a per share basis, respectively.

     (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series B Liquidation Preference and the liquidation preferences of all other series of preferred shares, if any, which rank on a parity with the Series B Preferred Shares, then such remaining assets shall be distributed ratably to the holders of the Series B Preferred Shares and such parity shares in proportion to their respective liquidation preferences.

     (C) In the event the Trust shall at any time following August 31, 2001 (i) declare any dividend on Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares or (iii) combine the outstanding Common Shares into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator

40

of which is the number of Common Shares that were outstanding immediately prior to such event.

     (g) Consolidation, Merger, etc. In case the Trust shall enter into any consolidation, merger, combination or other transaction in which the Common Shares are exchanged for or changed into other shares or securities, cash and/or any other property, then in any such case, the Series B Preferred Shares shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of shares, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each Common Share is exchanged or changed. In the event the Trust shall at any time (i) declare any dividend on Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares or (iii) combine the outstanding Common Shares into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of Series B Preferred Shares shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event.

     (h) Redemption. The Series B Preferred Shares shall not be redeemable by the Trust. The preceding sentence shall not limit the ability of the Trust to purchase or otherwise deal in such shares to the extent permitted by law.

     (i) Ranking. The Series B Preferred Shares shall rank junior to all other series of the Trust’s preferred shares (whether with or without par value) as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise.

     (j) Amendment. Neither the Trust’s Declaration of Trust, nor any articles supplementary relating to the Series B Preferred Shares shall be amended in any manner which would materially alter or change the powers, preferences, rights or other terms of the Series B Preferred Shares so as to affect the holders of Series B Preferred Shares adversely without the affirmative vote of the holders of a majority or more of the outstanding Series B Preferred Shares, voting separately as a class.

     (k) Fractional Shares. Series B Preferred Shares may be issued in fractions of a share that are integral multiples of one-one hundredth of a share, which shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends and participate in distributions and to have the benefit of all other rights of holders of Series B Preferred Shares.

41

Exhibit B

[Form of Right Certificate]

Certificate No. R-                                                                 Rights

NOT EXERCISABLE AFTER AUGUST 31, 2011 OR EARLIER IF THE RIGHTS EXPIRE UNDER CERTAIN CIRCUMSTANCES OR ARE EXCHANGED OR REDEEMED BY THE TRUST. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE TRUST, AT $0.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS EVIDENCED BY THIS RIGHT CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHT CERTIFICATE AND THE RIGHTS EVIDENCED HEREBY MAY BECOME VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]*

Right Certificate

ARCHSTONE-SMITH TRUST

     This certifies that                                          , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of August 31, 2001 (the “Rights Agreement”), between Archstone-Smith Trust, a Maryland real estate investment trust (the “Trust”), and Mellon Investor Services LLC, a New Jersey limited liability company (the “Rights Agent”) to purchase from the Trust at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 p.m. (Eastern time) on August 31, 2011 or notice of redemption or exchange at the office of the Rights Agent (or its successors as Rights Agent) designated for such purpose, one one-hundredth of a fully paid, non-assessable Series B Junior Participating Preferred Share (a “Preferred Share”) of the Trust, at a purchase price of $75.00 per one one-hundredth of a Preferred Share (the “Purchase Price”), upon presentation and

* The portion of the legend in brackets shall be inserted only if applicable and shall replace the preceding sentence.

42

surrender of this Right Certificate with the appropriate Form of Election to Purchase and related Certificate duly executed. The number of Rights evidenced by this Right Certificate (and the number of Preferred Shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price per Preferred Share set forth above, are the number and Purchase Price as of the Record Date (as defined in the Rights Agreement), based on the Preferred Shares as constituted at such date. Capitalized terms not defined in this Right Certificate that are defined in the Rights Agreement shall have the meanings ascribed to them in the Rights Agreement.

     Upon the occurrence of a Triggering Event, if the Rights evidenced by this Right Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of any such Acquiring Person, (ii) under certain circumstances specified in the Rights Agreement, a transferee of any such Acquiring Person, Associate or Affiliate, or (iii) under certain circumstances specified in the Rights Agreement, a transferee of a person who, after such transfer, became an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such Rights shall become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence of any such Triggering Event.

     As provided in the Rights Agreement, the Purchase Price and the number and kind of Preferred Shares or other securities, which may be purchased upon the exercise of the Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events.

     This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Trust and the holders of the Right Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under certain circumstances specified in such Rights Agreement. Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent and are also available upon written request to the Rights Agent.

     This Right Certificate, with or without other Right Certificates, upon surrender at the principal corporate trust office of the Rights Agent, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of Preferred Shares as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised.

     Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Trust at its option at a redemption price of $0.001 per Right at any time prior to the earlier of (i) such time as any Person becomes an Acquiring Person or (ii) the close of business on the Final Expiration Date.

43

     No fractional Preferred Shares will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one one-hundredth of a Preferred Share, which may, at the election of the Trust, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement.

     No holder of this Right Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of Preferred Shares or of any other securities of the Trust which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Trust or any right to vote for the election of trustees or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any trust action, or, to receive notice of meetings or other actions affecting shareholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Rights Agreement.

     This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.

44

     WITNESS the facsimile signature of the proper officers of the Trust and its seal.

Dated as of                     , 20__
	ARCHSTONE-SMITH TRUST
	By:
		Name:
		Title:

Attest: (SEAL)
By:
	Name:
	Title:
Countersigned: MELLON INVESTOR SERVICES LLC
By:
	Authorized Signature

45

[Form of Reverse Side of Right Certificate]

FORM OF ASSIGNMENT

(To be executed by the registered holder if such holder desires to transfer the Right Certificate.)

FOR VALUE RECEIVED
assigns and transfers unto hereby sells,

(Please print name and address of transferee)

this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint                     Attorney, to transfer the within Right Certificate on the books of the within-named Trust, with full power of substitution.

Date:                                       , 20 __
	Signature

Signature Guaranteed:

Certificate

     The undersigned hereby certifies by checking the appropriate boxes that:

     (1) this Right Certificate o is o is not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement);

     (2) after due inquiry and to the best knowledge of the undersigned, it o did o did not acquire the Rights evidenced by this Right Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

Date:                                        , 20 __
	Signature

NOTICE

     The signature to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.

46

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to
exercise Rights represented by the
Right Certificate.)

To: ARCHSTONE-SMITH TRUST

     The undersigned hereby irrevocably elects to exercise                     Rights evidenced by this Right Certificate to purchase the Preferred Shares issuable upon the exercise of the Rights (or such other securities of the Trust or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of:

Please insert social security
or other identifying number:                                                                                                                                                         

(Please print name and address)

     If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance of such Rights shall be registered in the name of and delivered to:

Please insert social security
or other identifying number:                                                                                                                                                         

(Please print name and address)

Date:                                       , 20__
	Signature

Signature Guaranteed:

47

Certificate

     The undersigned hereby certifies by checking the appropriate boxes that:

     (1) the Rights evidenced by this Right Certificate o are o are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement);

     (2) after due inquiry and to the best knowledge of the undersigned, it o did o did not acquire the Rights evidenced by this Right Certificate from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

Dated:                                       , 20 __
	Signature

NOTICE

     The signature to the foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.

48

EX-4.4

exv4w4

EX-10.12

EXHIBIT 10.12

AMENDED AND RESTATED CREDIT AGREEMENT

Dated

October 30, 2003

among

ARCHSTONE-SMITH OPERATING TRUST,
as Borrower

and

ARCHSTONE-SMITH TRUST,
as Parent

and

JPMORGAN CHASE BANK,
as Administrative Agent

and
BANK OF AMERICA, N.A., and
WELLS FARGO BANK, N.A.
as Syndication Agents

and

BANK ONE, NA and
COMMERZBANK AG, NEW YORK BRANCH
as Documentation Agents

and

the Lenders Party Hereto

J. P. MORGAN SECURITIES INC.,
as Lead Arranger and Sole Bookrunner

TABLE OF CONTENTS

1. Definitions
2. The Loans
	2.1 Advances
	2.2 Letters of Credit
	2.3 Payments
	2.4 Pro Rata Treatment
	2.5 Non-Receipt of Funds by the Agent
	2.6 Sharing of Payments, Etc
	2.7 Fees
	2.8 Money Market Borrowings
	2.9 Reduction of Commitment
	2.10 Additional Guarantees
3. Conditions
	3.1 All Loans
	3.2 First Loan
	3.3 Options Available
	3.4 Designation and Conversion
	3.5 Special Provisions Applicable to Eurodollar Rate Borrowings and Money Market Loans
	3.6 Funding Offices; Adjustments Automatic
	3.7 Funding Sources, Payment Obligations
	3.8 Mitigation, Non-Discrimination
4. Representations and Warranties
	4.1 Organization
	4.2 Financial Statements
	4.3 Enforceable Obligations; Authorization
	4.4 Other Debt
	4.5 Litigation
	4.6 Taxes
	4.7 Regulation U
	4.8 Securities Act of 1933
	4.9 No Contractual or Corporate Restrictions
	4.10 Investment Company Act Not Applicable
	4.11 Public Utility Holding Company Act Not Applicable
	4.12 ERISA Not Applicable
5. Affirmative Covenants
	5.1 Taxes, Insurance, Existence, Regulations, Property, etc
	5.2 Financial Statements and Information
	5.3 Financial Tests
	5.4 Inspection
	5.5 Further Assurances
	5.6 Books and Records
	5.7 Insurance
	5.8 Notice of Certain Matters
	5.9 Use of Proceeds
	5.10 Expenses of and Claims Against the Agent and the Lenders
	5.11 Legal Compliance; Indemnification
	5.12 Borrower’s Performance
	5.13 Professional Services
	5.14 Capital Adequacy
	5.15 Property Pool
	5.16 DC Holdings
6. Negative Covenants
	6.1 Mergers, Consolidations and Acquisitions of Assets
	6.2 Redemption
	6.3 Nature of Business
	6.4 Transactions with Related Parties
	6.5 Limiting Agreements
	6.6 Parent Negative Covenants
7. Events of Default and Remedies
	7.1 Events of Default
	7.2 Remedies Cumulative
	7.3 Guaranty Proceeds
8. The Agent
	8.1 Appointment, Powers and Immunities
	8.2 Reliance
	8.3 Defaults
	8.4 Rights as a Lender
	8.5 Indemnification
	8.6 Non-Reliance on Agent and Other Lenders
	8.7 Failure to Act
	8.8 Resignation of Agent
	8.9 No Partnership
9. Renewal and Extension
	9.1 Procedure for Renewal and Extension
	9.2 Conditions to Renewal and Extension
10. Miscellaneous
	10.1 No Waiver, Amendments
	10.2 Notices
	10.3 Venue
	10.4 Choice of Law
	10.5 Survival; Parties Bound; Successors and Assigns
	10.6 Counterparts
	10.7 Usury Not Intended; Refund of Any Excess Payments
	10.8 Captions
	10.9 Severability
	10.10 Disclosures
	10.11 No Novation
	10.12 Limitation of Liability
	10.13 Entire Agreement
EX-4.4 Rights Agreement dated as of 12/1/03
EX-10.12 Amended and Restated Credit Agreement
EX-12.1 Computation of Ratio of Earnings
EX-12.2 Computation of Ratio of Earnings
EX-21 Subsidiaries of Archstone-Smith
EX-23.1 Consent of KPMG LLP
EX-31.1 Certification of CEO pursuant to Sec. 302
EX-31.2 Certification of CFO pursuant to Sec. 302
EX-32.1 Certification of CEO pursuant to Sec. 906
EX-32.2 Certification of CFO pursuant to Sec. 906

TABLE OF CONTENTS

1. Definitions		1
2. The Loans		17
	2.1 Advances	17
	2.2 Letters of Credit	19
	2.3 Payments	23
	2.4 Pro Rata Treatment	25
	2.5 Non-Receipt of Funds by the Agent	26
	2.6 Sharing of Payments, Etc	26
	2.7 Fees	27
	2.8 Money Market Borrowings	28
	2.9 Reduction of Commitment	32
	2.10 Additional Guarantees	32
3. Conditions.		32
	3.1 All Loans	33
	3.2 First Loan	33
	3.3 Options Available	34
	3.4 Designation and Conversion	34
	3.5 Special Provisions Applicable to Eurodollar Rate Borrowings and Money Market Loans	35
	3.6 Funding Offices; Adjustments Automatic	37
	3.7 Funding Sources, Payment Obligations	37
	3.8 Mitigation, Non-Discrimination	38
4. Representations and Warranties		39
	4.1 Organization	39
	4.2 Financial Statements	39
	4.3 Enforceable Obligations; Authorization	39
	4.4 Other Debt	39
	4.5 Litigation	39
	4.6 Taxes	40
	4.7 Regulation U	40
	4.8 Securities Act of 1933	40
	4.9 No Contractual or Corporate Restrictions	40
	4.10 Investment Company Act Not Applicable	40
	4.11 Public Utility Holding Company Act Not Applicable	40
	4.12 ERISA Not Applicable	40
5. Affirmative Covenants		40
	5.1 Taxes, Insurance, Existence, Regulations, Property, etc	41
	5.2 Financial Statements and Information	41

i

	5.3 Financial Tests	42
	5.4 Inspection	42
	5.5 Further Assurances	42
	5.6 Books and Records	42
	5.7 Insurance	42
	5.8 Notice of Certain Matters	42
	5.9 Use of Proceeds	42
	5.10 Expenses of and Claims Against the Agent and the Lenders	43
	5.11 Legal Compliance; Indemnification	43
	5.12 Borrower’s Performance	44
	5.13 Professional Services	45
	5.14 Capital Adequacy	45
	5.15 Property Pool	45
	5.16 DC Holdings	47
6. Negative Covenants		47
	6.1 Mergers, Consolidations and Acquisitions of Assets	47
	6.2 Redemption	47
	6.3 Nature of Business	47
	6.4 Transactions with Related Parties	48
	6.5 Limiting Agreements	48
	6.6 Parent Negative Covenants	49
7. Events of Default and Remedies		49
	7.1 Events of Default	49
	7.2 Remedies Cumulative	51
	7.3 Guaranty Proceeds	51
8. The Agent.		52
	8.1 Appointment, Powers and Immunities	52
	8.2 Reliance	53
	8.3 Defaults	54
	8.4 Rights as a Lender	54
	8.5 Indemnification	54
	8.6 Non-Reliance on Agent and Other Lenders	55
	8.7 Failure to Act	55
	8.8 Resignation of Agent	55
	8.9 No Partnership	56
9. Renewal and Extension		56
	9.1 Procedure for Renewal and Extension	56
	9.2 Conditions to Renewal and Extension	56
10. Miscellaneous.		57
	10.1 No Waiver, Amendments	57
	10.2 Notices	57
	10.3 Venue	57

ii

10.4 Choice of Law	58
10.5 Survival; Parties Bound; Successors and Assigns	58
10.6 Counterparts	62
10.7 Usury Not Intended; Refund of Any Excess Payments	62
10.8 Captions	62
10.9 Severability	62
10.10 Disclosures	62
10.11 No Novation	63
10.12 Limitation of Liability	63
10.13 Entire Agreement	63

SCHEDULE I: Guarantor

EXHIBITS:

A - Officer’s Certificate
B - Request for Loan
C - Note
C-1- Swing Loan Note
C-2- Master Note
D - Legal Opinion
E - Money Market Quote Request
F - Invitation for Money Market Quotes
G - Money Market Quote
H - Designation Agreement
I - Form of Guaranty
J - Assignment and Assumption Agreement
K - Form of Additional Guaranty

iii

AMENDED AND RESTATED
CREDIT AGREEMENT

     THIS AMENDED AND RESTATED CREDIT AGREEMENT (the “Agreement”) is made and entered into as of October 30, 2003, by and among ARCHSTONE-SMITH OPERATING TRUST, a Maryland real estate investment trust (the “Borrower”), ARCHSTONE-SMITH TRUST, a Maryland real estate investment trust, and the parent of the Borrower (the “Parent”), the financial institutions (including JPMC, the Syndication Agents and the Documentation Agents, the “Lenders”) which are now or may hereafter become signatories hereto, JPMORGAN CHASE BANK, a New York banking corporation (“JPMC”), as administrative agent for Lenders (in such capacity, “Agent”), BANK OF AMERICA, N.A. and WELLS FARGO BANK, N.A., and as syndication agents for Lenders (in such capacity, “Syndication Agents”), and BANK ONE, NA and COMMERZBANK AG, NEW YORK BRANCH, as documentation agents for Lenders (in such capacity, “Documentation Agents”).

     WHEREAS, the Borrower, the Agent and certain of the Lenders entered into a Credit Agreement dated as of December 20, 2000 (as amended to the date hereof, the “Original Credit Agreement”); and

     WHEREAS, the Borrower has requested that the Agent and the Lenders amend and restate the Original Credit Agreement and the Agent and the Lenders have agreed to do so pursuant to the terms of this Agreement; and

     WHEREAS, the Borrower desires to obtain Loans and obtain Letters of Credit (as such terms are hereinafter defined) from the Lenders; and

     WHEREAS, subject to and upon the terms and conditions set forth herein, the Lenders are willing to make Loans and provide for the issuance of Letters of Credit to the Borrower, as provided for herein;

     NOW, THEREFORE, in consideration of the premises and the covenants and agreements contained herein, the adequacy of which is hereby acknowledged, the parties hereto hereby agree that the aforementioned recitals are true and correct and hereby incorporated herein and that the parties hereto hereby agree as follows:

1. Definitions.

     Unless a particular word or phrase is otherwise defined or the context otherwise requires, capitalized words and phrases used in Credit Documents have the meanings provided below.

     Absolute Rate Auction shall mean a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.8.

     Acceptable Credit Rating shall mean a Credit Rating from two of Standard & Poor’s Rating Services, Moody’s Investors Service, Inc., or Fitch (one of which must be an S&P Rating or a Moody’s Rating) equal to a Credit Rating from Fitch, or an S&P Rating of BBB- or better, or a Moody’s Rating of Baa3 or better.

     Accounts, Equipment and Inventory shall have the respective meanings assigned to them in the Texas Business and Commerce Code in force on the date the document using such term was executed.

     Administrative Questionnaire means an Administrative Questionnaire in a form supplied by the Agent.

     Affiliate shall mean any Person controlling, controlled by or under common control with any other Person. For purposes of this definition, “control” (including “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or otherwise.

     Annual Audited Financial Statements shall mean the annual financial statements of a Person, including all notes thereto, which statements shall include a balance sheet as of the end of such fiscal year and an income statement and a statement of cash flows, all setting forth in comparative form the corresponding figures from the previous fiscal year, all prepared in conformity with Generally Accepted Accounting Principles and accompanied by a report and opinion of independent certified public accountants satisfactory to the Agent, which shall state that such financial statements, in the opinion of such accountants, present fairly the financial position of such Person as of the date thereof and the results of its operations for the period covered thereby in conformity with Generally Accepted Accounting Principles. Such statements shall be accompanied by a certificate of such accountants that in making the appropriate audit and/or investigation in connection with such report and opinion, such accountants did not become aware of any Default or, if in the opinion of such accountant any such Default exists, a description of the nature and status thereof. The Annual Audited Financial Statements shall be prepared on a consolidated basis in accordance with Generally Accepted Accounting Principles.

     Applicable Margin shall mean (a) if a Credit Rating is obtained from more than one agency, and one of the two highest Credit Ratings is an S&P Rating or a Moody’s Rating, the following percentage based on the corresponding Credit Rating which is the second highest, or (b) if the one of the two highest Credit Ratings in clause (a) above is not an S&P Rating or a Moody’s Rating, the following percentage based on the corresponding S&P Rating or Moody’s Rating which is the highest, or (c) if only one Credit Rating is obtained, which must be an S&P Rating or a Moody’s Rating, the following percentage based on the corresponding S&P Rating or Moody’s Rating:

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APPLICABLE MARGIN

APPLICABLE	EURODOLLAR RATE			BASE RATE
CREDIT RATING	BORROWING			BORROWING
A/A2 or better		0.500	%		0
A-/A3		0.525	%		0
BBB+/Baa1		0.600	%		0
BBB/Baa2		0.700	%		0
BBB-/Baa3		0.900	%		0
Worse than BBB-/Baa3		1.250	%		.25	%
or no Credit Rating

Each Applicable Margin shall be in effect whenever and for so long as the corresponding Credit Rating or no Credit Rating is in effect.

     Assignment and Assumption means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.5), and accepted by the Agent, in the form of Exhibit J or any other form approved by the Agent.

     Base Rate shall mean for any day a rate per annum equal to the Applicable Margin on that day plus the greater on a daily basis of (a) the Prime Rate for that day, or (b) the Federal Funds Effective Rate for that day plus one-half of one percent (-1/2%).

     Base Rate Borrowing shall mean that portion of the principal balance of the Loans at any time bearing interest at the Base Rate.

     Business Day shall mean a day other than (a) a day when the main office of the Agent is not open for business, or (b) a day that is a federal banking holiday in the United States of America.

     Calculation Date shall mean the beginning of the first full calendar quarter after the Stabilization Date.

     Capital Lease Obligations of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under Generally Accepted Accounting Principles, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with Generally Accepted Accounting Principles.

     Ceiling Rate shall mean, on any day, the maximum nonusurious rate of interest permitted for that day by whichever of applicable federal or Texas laws permits the higher interest rate, stated as a rate per annum. On each day, if any, that Texas law establishes the

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Ceiling Rate, the Ceiling Rate shall be the “weekly ceiling” (as defined in Chapter 303 of the Texas Finance Code, as amended (the “Texas Finance Code”)) for that day. The Agent may from time to time, as to current and future balances, implement any other ceiling under the Texas Finance Code by notice to the Borrower, if and to the extent permitted by the Texas Finance Code. Without notice to the Borrower or any other person or entity, the Ceiling Rate shall automatically fluctuate upward and downward as and in the amount by which such maximum nonusurious rate of interest permitted by applicable law fluctuates.

     Code shall mean the Internal Revenue Code of 1986, as amended, as now or hereafter in effect, together with all regulations, rulings and interpretations thereof or thereunder by the Internal Revenue Service.

     Commitment shall mean the commitment of the Lenders to lend funds under Section 2.1 of this Agreement, other than Swing Loans. The aggregate Commitment on the date hereof is $600,000,000.00.

     Committed Loan shall mean Loans other than Money Market Loans.

     Construction Interest shall mean Borrower’s interest expense for the construction of projects, which is capitalized in accordance with Generally Accepted Accounting Principles.

     Coverage Ratio shall mean the ratio of (a) the Borrower’s EBITDA (calculated by adding the Parent’s Interest Expense) for the immediately preceding four (4) calendar quarters, to (b) dividends or other distributions of any kind or character paid or payable with respect to any Disqualified Stock plus all of the Borrower’s and the Parent’s Interest Expense, in each case for the period used to calculate EBITDA.

     Credit Documents shall mean this Agreement, the Notes, any Guaranty, all instruments, certificates and agreements now or hereafter executed or delivered to the Agent or the Lenders pursuant to any of the foregoing, and all amendments, modifications, renewals, extensions, increases and rearrangements of, and substitutions for, any of the foregoing.

     Credit Rating shall mean the S&P Rating, the Moody’s Rating, or the rating assigned by Fitch to Borrower’s senior unsecured indebtedness.

     DC Holdings Entities shall mean Metropolitan Acquisition Finance LP, Smith Property Holdings Cronin’s Landing LP, Smith Property Holdings Crystal towers LP, Smith Property Holdings One LP, Smith Property Holdings Two LP, Smith Property Holdings Three LP, Smith Property Holdings Four LP, Smith Property Holdings Five LP, Smith Property Holdings Six LP, Smith Property Holdings Seven LP, Smith Property Holdings Alban Towers LLC, First Herndon Associates LP, Smith Property Holdings One (DC) LP, Smith Property Holdings Two (DC) LP, Smith Property Holdings Three (DC) LP, Smith Property Holdings Kenmore LP, Smith Property Holdings Five (DC) LP, Smith Property Holdings Six (DC) LP, Smith Property Holdings Van Ness LP, Smith Property Holdings Consulate LLC and Smith Property Holdings Columbia Road, Smith Property

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Holdings Aventura A LLC, Smith Property Holdings Aventura B LLC, Smith Property Holdings Aventura C LLC, Smith Property Sunset Pointe West LLC, Smith Property Holdings 4411 Connecticut Avenue LLC, and any Person formed solely for the purpose of owning Real Property in the District of Columbia.

     Debt to Total Asset Value Ratio shall mean the ratio (expressed as a percentage) of (a) the sum of the Borrower’s and the Parent’s Indebtedness to (b) Total Asset Value.

     Designated Lender shall mean a special purpose corporation that (a) shall have become a party to this Agreement pursuant to Section 10.5(f), and (b) is not otherwise a Lender.

     Designated Lender Notes shall mean promissory notes of the Borrower, substantially in the form of Exhibit C hereto, evidencing the obligation of the Borrower to repay Money Market Loans made by Designated Lenders, and Designated Lender Note means any one of such promissory notes issued under Section 10.5(f).

     Designating Lender shall have the meaning set forth in Section 10.5(f).

     Designation Agreement shall mean a designation agreement in substantially the form of Exhibit H attached hereto, entered into by a Lender and a Designated Lender and accepted by the Agent.

     Disqualified Stock shall mean any of the Borrower’s capital stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) (a) matures or is subject to mandatory redemption, pursuant to a sinking fund obligation or otherwise, (b) is convertible into or exchangeable or exercisable for Indebtedness or Disqualified Stock, (c) is redeemable at the option of the holder of such stock, or (d) otherwise requires any payments by Borrower, in each case on or before the Maturity Date.

     EBITDA means an amount derived from (a) net income (including all net cash gains and losses on dispositions of Real Property in accordance with Generally Accepted Accounting Principles), including (without duplication) the Equity Percentage of EBITDA for the Borrower’s Unconsolidated Affiliates, plus (b) to the extent included in the determination of net income, depreciation, amortization, Interest Expense, income taxes, deferred taxes and other non-cash charges, minority interest, extraordinary losses, prepayment penalties and make-whole costs paid in connection with prepayment of Indebtednesss, and payments made on Borrower’s preferred stock, minus (c) to the extent included in the determination of net income, any extraordinary gains, in each case, as determined on a consolidated basis in accordance with Generally Accepted Accounting Principles.

     Equity Percentage shall mean the aggregate ownership interest of Borrower in each Unconsolidated Affiliate, which shall be calculated as Borrower’s economic ownership interest in such Person, reflecting Borrower’s share of income and expenses of such Person.

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     Eurodollar Business Day shall mean a Business Day on which transactions in United States dollar deposits between banks may be carried on in the London interbank dollar market.

     Eurodollar Interbank Rate shall mean, for each Interest Period, the rate of interest per annum, rounded, if necessary, to the next highest whole multiple of one-sixteenth percent (1/16%), quoted by Agent at or before 11:00 a.m., London time (or as soon thereafter as practicable), on the date two (2) Eurodollar Business Days before the first day of such Interest Period, to be the arithmetic average of the prevailing rates per annum at the time of determination and in accordance with the then existing practice in the London interbank dollar market, for the offering to Agent by one or more prime banks selected by Agent in its sole discretion, in the London interbank dollar market, of deposits in United States dollars for delivery on the first day of such Interest Period and having a maturity equal to the length of such Interest Period and in an amount equal (or as nearly equal as may be) to the Eurodollar Rate Borrowing to which such Interest Period relates. Each determination by Agent of the Eurodollar Interbank Rate shall be prima facie evidence thereof.

     Eurodollar Rate shall mean for any day a rate per annum equal to the sum of the Applicable Margin for that day plus the Eurodollar Interbank Rate in effect on the first day of the Interest Period for the applicable Eurodollar Rate Borrowing. Each Eurodollar Rate is subject to adjustments for reserves, insurance assessments and other matters as provided for in Section 3.5 hereof.

     Eurodollar Rate Borrowing shall mean that portion of the principal balance of the Loans at any time bearing interest at a Eurodollar Rate.

     Eurodollar Reserve Requirement shall mean, on any day, the cost incurred by a Lender as a reserve requirement (including, without limitation, basic, supplemental, marginal and emergency reserves) applicable to “Eurocurrency liabilities,” as currently defined in Regulation D, all as specified by any Governmental Authority, including but not limited to those imposed under Regulation D, because of that Lender making a Eurodollar Rate Borrowing or a Money Market LIBOR Loan available to the Borrower.

     Event of Default shall mean any of the events specified as an event of default in Section 7 of this Agreement, and Default shall mean any of such events, whether or not any requirement for notice, grace or cure has been satisfied.

     Federal Funds Effective Rate shall to the extent necessary be determined by the Agent separately for each day and shall for each such day be a rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for each such day (or if any such day is not a Business Day, for the next immediately preceding Business Day) by the Federal Reserve Bank of New York, or if the weighted average of such rates is not so published for any such day which is a Business Day, the average of the quotations for any such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent.

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     Fee shall mean, collectively, the fee described in Section 2.7.

     Fitch shall mean Fitch, Inc.

     Fixed Charge Coverage Ratio shall mean the ratio of (a) the Borrower’s EBITDA (calculated by adding the Parent’s Interest Expense) for the immediately preceding four (4) calendar quarters, less Unit Capital Expenditures, to (b) dividends of any kind or character or other proceeds paid or payable with respect to any Disqualified Stock, plus all of the Borrower’s and the Parent’s Interest Expense, plus all of the principal payable and principal paid on the Borrower’s and the Parent’s Indebtedness (but not including prepayment penalties and make-whole costs not included in the calculation of EBITDA) other than (i) any final scheduled principal payment on any Indebtedness which pays such Indebtedness in full, to the extent the amount of such scheduled principal payment is greater than the scheduled principal payment immediately preceding such final scheduled principal payment and (ii) scheduled principal payments on the Borrower’s and the Parent’s Indebtedness incurred prior to October 30, 2003 which has a rating from Standard & Poor’s Rating Services, Moody’s Investor Service, Inc. or Fitch which is the equivalent of BBB-/Baa3 or better at the time of issuance, in each case for the period used to calculate EBITDA.

     Funding Loss shall mean, with respect to (a) Borrower’s payment or prepayment of principal of a Eurodollar Rate Borrowing or a Money Market Loan on a day other than the last day of the applicable Interest Period; (b) Borrower’s failure to borrow a Eurodollar Rate Borrowing or a Money Market Loan on the date specified by Borrower; (c) Borrower’s failure to make any prepayment of the Loans (other than Base Rate Borrowings) on the date specified by Borrower, or (d) any cessation of a Eurodollar Rate to apply to the Loans or any part thereof pursuant to Section 3.5, in each case whether voluntary or involuntary, any direct loss, expense, penalty, premium or liability incurred by any Lender (including but not limited to any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by a Lender to fund or maintain a Loan).

     Generally Accepted Accounting Principles shall mean, as to a particular Person, such accounting practice as, in the opinion of the independent accountants of recognized national standing regularly retained by such Person and acceptable to the Agent, conforms at the time to generally accepted accounting principles, consistently applied. Generally Accepted Accounting Principles means those principles and practices (a) which are recognized as such by the Financial Accounting Standards Board, (b) which are applied for all periods after the date hereof in a manner consistent with the manner in which such principles and practices were applied to the most recent audited financial statements of the relevant Person furnished to the Lenders or where a change therein has been concurred in by such Person’s independent auditors, and (c) which are consistently applied for all periods after the date hereof so as to reflect properly the financial condition, and results of operations and changes in financial position, of such Person. If there is a change in such accounting practice as to the Borrower that could affect the Borrower’s ability to comply with the terms of this Agreement, the parties hereto agree to review and discuss such

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changes in accounting practice and the terms of this Agreement for a period of no more than thirty (30) days with a view to amending this Agreement so that the financial measures of the Borrower’s operating performance and financial condition are substantially the same after such change as they were immediately before such change.

     Governmental Authority shall mean any foreign governmental authority, the United States of America, any State of the United States and any political subdivision of any of the foregoing, and any agency, department, commission, board, bureau, court or other tribunal having jurisdiction over the Agent, any Lender or the Borrower or their respective Property.

     Guarantor shall mean each Subsidiary of Borrower that executes a Guaranty as required by Section 5.15 hereof. Guarantor as of the date hereof is the Persons listed on Schedule I attached hereto.

     Guaranty (whether one or more) shall mean a Guaranty in the form of Exhibit I attached hereto and made a part hereof.

     Hedging Agreements shall mean any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging agreement.

     Historical Value shall mean the purchase price of Real Property (including improvements) and ordinary related purchase transaction costs, plus the cost of subsequent capital improvements made by the Borrower, less any provision for losses, all determined in accordance with Generally Accepted Accounting Principles. If the Real Property is purchased as a part of a group of properties, the Historical Value shall be calculated based upon a reasonable allocation of the aggregate purchase price by the Borrower, and consistent with Generally Accepted Accounting Principles.

     Indebtedness shall mean and include, without duplication (1) all obligations for borrowed money, (2) all obligations evidenced by bonds, debentures, notes or other similar agreements, (3) all obligations to pay the deferred purchase price of Property or services, except accrued expenses and trade accounts payable arising in the ordinary course of business (unless included in (6) below), (4) all guaranties and endorsements and other contingent obligations in respect of, or any obligations to purchase or otherwise acquire, Indebtedness of others (provided that, where the guarantor is not the sole owner of the Person whose Indebtedness is guaranteed, and where the guaranty is of that portion of the Indebtedness remaining unpaid after the collection of the collateral for the Indebtedness, the amount guaranteed that is less than twenty-five percent (25%) of the Historical Value of said related collateral will not be included in the calculation of Indebtedness), (5) all Indebtedness secured by any Lien existing on any interest of the Person with respect to which Indebtedness is being determined in Property owned subject to such Lien whether or not the Indebtedness secured thereby shall have been assumed, (6) accounts payable, dividends of any kind or character or other proceeds payable with respect to any stock and accrued expenses which in the aggregate are in excess of five percent (5%) of the undepreciated value of the assets of the Borrower, (7) payments received in consideration

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for sale of Borrower’s stock when the amount of the stock so sold is determined, and the date of delivery is, more than one (1) month after receipt of such payment and only to the extent that the obligation to deliver stock is not payable solely in stock of the Borrower, (8) all obligations under Hedging Agreements (calculated on a mark-to-market basis as of the reporting date) other than Hedging Agreements related to interest rates on identified outstanding borrowed money Indebtedness, and (9) all Capital Lease Obligations of such Person. Indebtedness shall be calculated on a consolidated basis in accordance with Generally Accepted Accounting Principles, including (without duplication) the Equity Percentage of Indebtedness for the Borrower’s Unconsolidated Affiliates.

     Interest Expense shall mean all of a Person’s paid, accrued or capitalized interest expense on such Person’s Indebtedness (whether direct, indirect or contingent, and including, without limitation, interest on all convertible debt), but excluding Construction Interest.

     Interest Options shall mean the Base Rate and the Eurodollar Rate, and “Interest Option” means either of them.

     Interest Payment Dates shall mean (a) the first (1st) day of each calendar month and the Maturity Date, for Base Rate Borrowings and Eurodollar Rate Borrowings; and (b) for Money Market Loans, the last day of each Interest Period and the maturity date of the Money Market Loans

     Interest Period shall mean:

     (1) For each Eurodollar Rate Borrowing, a period commencing on the date such Eurodollar Rate Borrowing was made and ending on the numerically corresponding day which is, subject to availability, (a) one (1), two (2), three (3) or six (6) months thereafter, or (b) seven (7), fourteen (14) or twenty-one (21) days thereafter for no more than four (4) time periods (provided that the first Eurodollar Rate Borrowing under this Agreement with an Interest Period of seven (7) days shall not count against the four time maximum) each calendar year in connection with payments of the Loans because of debt and/or equity sales by the Borrower, changes in the Lender Commitments, sales of major assets by the Borrower, or other similar reasons specifically approved by the Agent; provided that, (v) any Interest Period which would otherwise end on a day which is not a Eurodollar Business Day shall be extended to the next succeeding Eurodollar Business Day, unless such Eurodollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Eurodollar Business Day; (w) any Interest Period which begins on the last Eurodollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Eurodollar Business Day of the appropriate calendar month; (x) no Interest Period shall ever extend beyond the Maturity Date; and (y) Interest Periods shall be selected by Borrower in such a manner that the Interest Period with respect to any portion of the Loans which shall become due shall not extend beyond such due date .

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     (2) For each Money Market LIBOR Loan, the period commencing on the date such Money Market LIBOR Loan was made and ending one (1), two (2), three (3) or six (6) months thereafter, as the Borrower may elect in the applicable Notice of Money Market Borrowing in accordance with Section 2.8; provided that such Interest Period shall be limited as provided in clauses (1)(v) through (y) above.

     (3) With respect to each Money Market Absolute Rate Loan, the period commencing on the date such Money Market Absolute Rate was made and ending such number of days thereafter (but not less than 14 days) as the Borrower may elect in accordance with Section 2.8; provided that such Interest Period shall be limited as provided in clauses (1)(x) and (y) above.

     Issuing Bank (whether one or more) means JPMorgan Chase Bank and up to five (5) other Lenders, in their capacity as the issuer of Letters of Credit hereunder, and their successors in such capacity as provided in Section 2.2(i). The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

     LC Disbursement means a payment made by the Issuing Bank pursuant to a Letter of Credit.

     LC Exposure means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender at any time shall be its Percentage of the total LC Exposure at such time.

     Legal Requirement shall mean any law, statute, ordinance, decree, requirement, order, judgment, rule, regulation (or interpretation of any of the foregoing) of, and the terms of any license or permit issued by, any Governmental Authority.

     Lender Commitment means, for any Lender, the amount set forth opposite such Lender’s name on its signature page of this Agreement, or as may hereafter become a signatory hereto, as adjusted to reflect assignments or amendments made in accordance with this Agreement.

     Letter of Credit means any letter of credit issued pursuant to this Agreement.

     LIBOR Auction shall mean a solicitation of Money Market Quotes setting forth Money Market Margins based on the Eurodollar Interbank Rate pursuant to Section 2.8.

     Lien shall mean any mortgage, pledge, charge, encumbrance, security interest, collateral assignment, negative pledge or other lien or restriction of any kind, whether based on common law, constitutional provision, statute or contract, and shall include

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reservations, exceptions, encroachments, easements, rights of way, covenants, conditions, restrictions, leases and other title exceptions.

     Limiting Agreements shall mean any agreement, instrument or transaction, including, without limitation, a Person’s Organizational Documents, which has or may have the effect of prohibiting or limiting any Person’s ability to pledge assets in the Pool to secure Indebtedness.

     Loans shall mean the Loans described in Sections 2.1, 2.2 and 2.8 hereof. Loan shall mean any such Loan.

     Majority Lenders shall mean the Lenders with an aggregate amount in excess of fifty percent (50%) of the amount of the Commitment then outstanding, and after the Commitment has expired or terminated, shall mean Lenders with an aggregate amount in excess of fifty percent (50%) of the unpaid principal balance of the Revolving Credit Exposures.

     Material Adverse Change shall mean a change which could reasonably be expected to have a Material Adverse Effect.

     Material Adverse Effect means a material adverse effect on (a) the financial condition, or results of operations of Borrower and its Subsidiaries taken as a whole, (b) the ability of Borrower to perform its material obligations under the Credit Documents to which it is a party taken as a whole, (c) the validity or enforceability of such Credit Documents taken as a whole, or (d) the material rights and remedies of Lenders and Agent under the Credit Documents taken as a whole.

     Maturity Date shall mean three (3) years after the date hereof, unless extended pursuant to Section 9.

     Money Market Absolute Rate has the meaning set forth in Section 2.8.

     Money Market Absolute Rate Loan shall mean a loan to be made by a Lender pursuant to an Absolute Rate Auction.

     Money Market LIBOR Loan shall mean a loan to be made by a Lender pursuant to a LIBOR Auction.

     Money Market Loan shall mean a Money Market LIBOR Loan or a Money Market Absolute Rate Loan, as the context may require or allow.

     Money Market Margin has the meaning set forth in Section 2.8.

     Money Market Quote shall mean an offer by a Lender to make a Money Market Loan in accordance with Section 2.8.

     Moody’s Rating shall mean the senior unsecured debt rating from time to time received by the Borrower from Moody’s Investors Service, Inc.

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     Net Operating Income shall mean, for any income producing operating properties, the difference between (a) any cash rentals, proceeds and other income received from such Property (but excluding security or other deposits, or other income of an extraordinary and non-recurring nature) during the determination period, less (b) all cash costs and expenses (excluding interest expense and any expenditures that are capitalized in accordance with Generally Accepted Accounting Principles) incurred as a result of, or in connection with, or properly allocated to, the operation or leasing of such Property during the determination period. Net Operating Income shall be calculated on a consolidated basis in accordance with Generally Accepted Accounting Principles, and including (without duplication) the Equity Percentage of Net Operating Income for the Borrower’s Unconsolidated Affiliates.

     Non-recourse Debt shall mean any Indebtedness the payment of which the Borrower or any of its Subsidiaries is not obligated to make other than to the extent of any security therefor.

     Notes shall mean the promissory notes of the Borrower described in Section 2.1 hereof, including the Swing Loan Note, any and all renewals, extensions, modifications, rearrangements and replacements thereof and any and all substitutions therefor, and Note shall mean any one of them.

     Obligations shall mean, as at any date of determination thereof, the sum of (a) the aggregate Revolving Credit Exposures plus (b) all other liabilities, obligations and Indebtedness of any Parties under any Credit Document.

     Occupancy Level shall mean the occupancy level of a Property that is leased to bona fide tenants paying rent under written leases, based on the average of the actual occupancy level for the immediately preceding three (3) months.

     Officer’s Certificate shall mean a certificate in the form attached hereto as Exhibit A.

     Organizational Documents shall mean, with respect to a corporation, the certificate of incorporation, articles of incorporation and bylaws of such corporation; with respect to a partnership, the partnership agreement establishing such partnership; with respect to a joint venture, the joint venture agreement establishing such joint venture, and with respect to a trust, the instrument establishing such trust; in each case including any and all modifications thereof as of the date of the Credit Document referring to such Organizational Document and any and all future modifications thereof which are consented to by the Lenders.

     Parties shall mean all Persons other than the Agent, the Syndication Agents, the Documentation Agents or any Lender executing any Credit Document.

     Past Due Rate shall mean, on any day, a rate per annum equal to the Base Rate plus an additional three percent (3%) per annum, but in any event not to exceed the Ceiling Rate.

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     Percentage shall mean the amount, expressed as a percentage, of each Lender Commitment as compared to the Commitment, set forth opposite the Lender’s name on its signature page of this Agreement, or as may hereafter become signatory hereto, as adjusted or amended in accordance with this Agreement. If the Commitment has terminated or expired, the Percentage shall be determined based on the Revolving Credit Exposure most recently in effect, giving effect to any assignments.

     Permitted Encumbrances shall mean (a) encumbrances consisting of zoning restrictions, easements, or other restrictions on the use of Real Property, provided that such items do not materially impair the use of such property for the purposes intended and none of which is violated in any material respect by existing or proposed structures or land use; (b) the following: (i) Liens for taxes not yet due and payable, or being diligently contested in good faith, or where no Material Adverse Effect could reasonably be expected to result from such nonpayment or the imposition of such Lien; or (ii) materialmen’s, mechanic’s, warehousemen’s and other like Liens arising in the ordinary course of business, securing payment of Indebtedness whose payment is not yet due, or that are being contested in good faith by appropriate proceedings diligently conducted, and for or against which the Borrower has established adequate reserves in accordance with Generally Accepted Accounting Principles; (c) Liens for taxes, assessments and governmental charges or assessments that are being contested in good faith by appropriate proceedings diligently conducted, and for or against which the Borrower has established adequate reserves in accordance with Generally Accepted Accounting Principles; (d) Liens on Real Property which are insured around or against by title insurance; (e) Liens securing assessments or charges payable to a property owner association or similar entity which assessments are not yet due and payable or are being diligently contested in good faith; and (f) Liens securing this Agreement and Indebtedness hereunder.

     Person shall mean any individual, corporation, trust, unincorporated organization, Governmental Authority or any other form of entity.

     Pool shall have the meaning given to it in Section 5.15(a).

     Pool Value shall mean the Value of the Pool.

     Prime Rate shall mean, as of a particular date, the prime rate of interest per annum publicly announced from time to time by JPMC as its prime rate in effect at its principal office in New York, New York; each change in the Prime Rate shall be effective on the date such change is determined; which Prime Rate may not necessarily represent the Agent’s lowest or best rate actually charged to a customer.

     Proper Form shall mean in form and substance reasonably satisfactory to the Agent and the Majority Lenders.

     Property shall mean any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible.

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     QRS Entities shall mean Smith One, Inc., Smith Two, Inc., Smith Three, Inc., Smith Four, Inc., Smith Five, Inc., Smith Six, Inc. and Smith Seven, Inc.

     Quarterly Unaudited Financial Statements shall mean the quarterly financial statements of a Person, including all notes thereto, which statements shall include a balance sheet as of the end of such quarter and an income statement for such fiscal quarter, and for the fiscal year to date, a statement of cash flows for such quarter and for the fiscal year to date, subject to normal year-end adjustments, and a detailed listing of the Borrower’s Property and the Historical Value thereof, all setting forth in comparative form the corresponding figures for the corresponding fiscal period of the preceding year (or, in the case of the balance sheet, the end of the preceding fiscal year), prepared in accordance with Generally Accepted Accounting Principles except that the Quarterly Unaudited Financial Statements may contain condensed footnotes as permitted by regulations of the United States Securities and Exchange Commission, and certified as true and correct by a managing director, senior vice president, controller, co-controller or vice president of Borrower. The Quarterly Unaudited Financial Statements shall be prepared on a consolidated basis in accordance with Generally Accepted Accounting Principles.

     Rate Designation Date shall mean 1:00 p.m., New York, New York time, on the date three (3) Eurodollar Business Days preceding the first day of any proposed Interest Period.

     Real Property means, collectively, all interest in any land and improvements located thereon, together with all equipment, furniture, materials, supplies and personal property now or hereafter located at or used in connection with the land and all appurtenances, additions, improvements, renewals, substitutions and replacements thereof now or hereafter acquired by any Person.

     Regulation D shall mean Regulation D of the Board of Governors of the Federal Reserve System from time to time in effect and shall include any successor or other regulation relating to reserve requirements applicable to member lenders of the Federal Reserve System.

     Request for Loan shall mean a written request for a Committed Loan substantially in the form of Exhibit B.

     Revolving Credit Exposure means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Loans, the Swing Loans, and its LC Exposure at such time.

     S&P Rating shall mean the senior unsecured debt rating from time to time received by the Borrower from Standard & Poor’s Rating Services.

     Secured Debt means the Indebtedness of the Borrower or the Parent secured by a Lien, and any Indebtedness of any of the Borrower’s or the Parent’s Subsidiaries and Unconsolidated Affiliates owed to a Person not an Affiliate of the Borrower or the Parent or such Subsidiary.

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     Secured Debt to Total Asset Value Ratio means the ratio (expressed as a percentage) of Secured Debt to Total Asset Value.

     Stabilization Date shall mean, with respect to a property, the earlier of (a) eighteen (18) months from the date of acquisition of an income producing property by the Borrower or eighteen (18) months after substantial completion of construction or development of a new construction or development property, and (b) the date on which the Occupancy Level is at least ninety-three percent (93%).

     Stated Rate shall, on any day, mean whichever of the Base Rate, the Eurodollar Rate, or a rate applicable to Money Market Loans has been designated and provided pursuant to this Agreement; provided that, if on any day such rate shall exceed the Ceiling Rate for that day, the Stated Rate shall be fixed at the Ceiling Rate on that day and on each day thereafter until the total amount of interest accrued at the Stated Rate on the unpaid principal balance of the Notes equals the total amount of interest which would have accrued if there had been no Ceiling Rate. If the Notes mature (or are prepaid) before such equality is achieved, then, in addition to the unpaid principal and accrued interest then owing pursuant to the other provisions of the Credit Documents, Borrower promises to pay on demand to the order of the holders of the Notes interest in an amount equal to the excess (if any) of (a) the lesser of (i) the total interest which would have accrued on the Notes if the Stated Rate had been defined as equal to the Ceiling Rate from time to time in effect and (ii) the total interest which would have accrued on the Notes if the Stated Rate were not so prohibited from exceeding the Ceiling Rate, over (b) the total interest actually accrued on the Notes to such maturity (or prepayment) date.

     Subsidiary shall mean, as to a particular parent entity, any entity of which more than fifty percent (50%) of the indicia of voting equity or ownership rights (whether outstanding capital stock or otherwise) is at the time directly or indirectly owned by, such parent entity, or by one or more of its other Subsidiaries.

     Super-Majority Lenders shall mean the Lenders with an aggregate amount of sixty-six and sixty-seven hundredths percent (66.67%) or more of the amount of the Commitment then outstanding, and after the Commitment has expired or terminated, shall mean Lenders with an aggregate amount of sixty-six and sixty-seven hundredths percent (66.67%) or more of the unpaid balance of the Revolving Credit Exposures.

     Swing Loan shall mean a Loan made pursuant to Section 2.1(c) hereof.

     Swing Loan Note shall mean that certain promissory note dated of even date herewith in the original principal amount of $100,000,000.00 executed by the Borrower payable to the order of JPMC.

     Tangible Net Worth shall mean total assets (without deduction for accumulated depreciation) less (1) all intangibles and (2) all liabilities (including contingent and indirect liabilities), all determined in accordance with Generally Accepted Accounting Principles. The term “intangibles” shall include, without limitation, (i) deferred charges, and (ii) the

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aggregate of all amounts appearing on the assets side of any such balance sheet for franchises, licenses, permits, patents, patent applications, copyrights, trademarks, trade names, goodwill, treasury stock, experimental or organizational expenses and other like intangibles. The term “liabilities” shall include, without limitation, (i) Indebtedness secured by Liens on Property of the Person with respect to which Tangible Net Worth is being computed whether or not such Person is liable for the payment thereof, (ii) deferred liabilities, and (iii) obligations under leases which have been capitalized. Tangible Net Worth shall be calculated on a consolidated basis in accordance with Generally Accepted Accounting Principles.

     Taxes shall mean any tax, levy, impost, duty, charge or fee.

     Total Asset Value shall mean the sum of (without duplication) (a) the aggregate Value of all of the Real Property owned by the Borrower and its Subsidiaries on a consolidated basis plus (b) the amount of the Borrower’s cash and cash equivalents, excluding tenant security and other restricted deposits, plus (c) the total book value of all of the Borrower’s other assets not described in (a) or (b) above, excluding all intangibles and all equity investments in Unconsolidated Affiliates, plus (d) the Value of the Real Property, and cash and other assets of the type permitted, and as valued, in clauses (b) and (c) of this definition, owned by each of the Borrower’s Unconsolidated Affiliates, multiplied by the Equity Percentage for that Unconsolidated Affiliate, including gains on sales of assets to Unconsolidated Affiliates which must be deferred in accordance with Generally Accepted Accounting Principles. Total Asset Value shall be calculated on a consolidated basis in accordance with Generally Accepted Accounting Principles.

     Unconsolidated Affiliate shall mean, in respect of any Person, any other Person that is an Affiliate of such Person and in whom such Person holds a voting equity or other ownership interest and whose financial results would not be consolidated under Generally Accepted Accounting Principles with the financial results of such other Person on the consolidated financial statements of such first mentioned Person.

     Unit Capital Expenditure shall mean, on an annual basis, an amount equal to the sum of (a) the result of (i) the number of apartment units contained in each completed, operating Real Property owned by Borrower and any Subsidiary as of the last day of each of the immediately preceding four (4) calendar quarters, divided by four (4), and multiplied by (ii) $200.00; plus (b) for Unconsolidated Affiliates, the result of (i) the amount in clause (a) above for Unconsolidated Affiliates, multiplied by (ii) the Equity Percentage for each Unconsolidated Affiliate.

     Value means the sum of the following:

     (a) for Real Property that has reached the Calculation Date and that the Person has owned for the full determination period, the result of dividing (i) the aggregate Net Operating Income of the subject property ((1) beginning with the Calculation Date until the end of the third full calendar quarter after the Stabilization Date, based on the annualized Net Operating Income from the Calculation Date until the time of measurement, and (2)

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beginning with the fourth full calendar quarter after the Stabilization Date, based on the immediately preceding four (4) calendar quarter period), by eight percent (8%); plus

     (b)  for Real Property that is completed but has not reached the Calculation Date or that has not been owned by Borrower for the full determination period, the Historical Value of the subject property; plus

     (c)  for Real Property that is under construction or development, or that is undeveloped land, the Historical Value of the subject property.

2. The Loans.

     2.1 Advances. (a) Subject to the terms and conditions of this Agreement, each Lender severally agrees to make Committed Loans (other than Swing Loans) prior to the Maturity Date to the Borrower not to exceed an amount (in the aggregate, the “Commitment”) at any one time outstanding equal to the difference between the Lender’s Lender Commitment and the Lender’s Revolving Credit Exposure. Each such request for a Committed Loan by Borrower shall be deemed a request for a Committed Loan from each Lender equal to such Lender’s Percentage of the aggregate amount so requested, and such aggregate amount shall be in an amount at least equal to $1,000,000.00 and equal to a multiple of $100,000.00, or the difference between the Commitment and the aggregate Revolving Credit Exposures, whichever is less. Each repayment of the Committed Loans shall be deemed a repayment of each Lender’s Committed Loan equal to such Lender’s Percentage of the amount so repaid. The obligations of the Lenders hereunder are several and not joint, and the preceding two sentences will give rise to certain inappropriate results if special provisions are not made to accommodate the failure of a Lender to fund a Committed Loan as and when required by this Agreement; therefore, notwithstanding anything herein to the contrary, (A) no Lender shall be required to make Committed Loans at any one time outstanding in excess of such Lender’s Percentage of the Commitment, and (B) if a Lender fails to make a Committed Loan as and when required hereunder and Borrower subsequently makes a repayment on the Committed Loans, such repayment shall be split among the non-defaulting Lenders ratably in accordance with their respective Percentages until each Lender has its Percentage of all of the outstanding Committed Loans, and the balance of such repayment shall be divided among all of the Lenders in accordance with their respective Percentages. Notwithstanding the foregoing, borrowings and payments of Swing Loans shall be for JPMC’s own account. The Loans (other than Swing Loans) shall be evidenced by the Notes substantially in the form of Exhibit C attached hereto. The Borrower, the Agent and the Lenders agree that Chapter 346 of the Texas Finance Code shall not apply to this Agreement, the Notes or any Loan.

     (b) The Borrower shall give the Agent notice of each borrowing of a Committed Loan to be made hereunder as provided in Section 3.1, and the Agent shall deliver same to each Lender promptly thereafter. Not later than 12:00 noon, New York, New York time, on the date specified for each such borrowing of a Committed Loan hereunder other than Swing Loans, each Lender shall make available the amount of the Loan, if any, to be made by it on such date to the Agent at the Agent’s principal office in

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New York, New York, in immediately available funds, for the account of the Borrower. Such amounts received by the Agent will be held in Agent’s general ledger account. The amounts so received by the Agent shall, subject to the terms and conditions of this Agreement, be made available to the Borrower by wiring or otherwise transferring, in immediately available funds not later than 1:00 p.m., New York, New York time, such amount to an account designated by the Borrower and maintained with JPMC or any other account or accounts which the Borrower may from time to time designate to the Agent by a written notice as the account or accounts to which borrowings hereunder are to be wired or otherwise transferred. JPMC shall make available the amount of each Swing Loan by depositing the same in immediately available funds, in the foregoing account by 3:00 p.m., New York, New York time, on the date of the borrowing.

     (c) Subject to the terms and conditions hereof, if necessary to meet the Borrower’s funding deadlines, JPMC agrees to make Swing Loans to the Borrower at any time on or prior to the Maturity Date, not to exceed an amount at any one time outstanding equal to the lesser of (i) $100,000,000.00, or (ii) the difference between the Commitment and the aggregate Revolving Credit Exposures. Swing Loans shall constitute “Loans” for all purposes hereunder. Notwithstanding the foregoing, the aggregate amount of all Loans (including, without limitation, all Swing Loans) shall not at any time exceed the difference between the Commitment and the LC Exposure. Each request for a Swing Loan shall be in an amount at least equal to $1,000,000.00 and equal to a multiple of $100,000.00. If necessary to meet the Borrower’s funding deadlines, the Agent may treat any Request for Loan as a request for a Swing Loan from JPMC and JPMC may fund it as a Swing Loan. Within two (2) Business Days after each Swing Loan is funded, JPMC shall request that each Lender, and each Lender shall, on the first Business Day after such request is made, purchase a portion of any one or more Swing Loans in an amount equal to that Lender’s Percentage of such Swing Loans by funding under such Lender’s Note, such purchase to be made in accordance with the terms of Section 2.1(b) just as if the Lender were funding directly to the Borrower under its Note (such that all Lenders other than JPMC shall fund only under their respective Note and not under the Swing Loan Note). Unless the Agent knew or should have known when JPMC funded a Swing Loan that the Borrower had not satisfied the conditions in this Agreement to obtain a Loan, each Lender’s obligation to purchase an interest in the Swing Loans shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Lender or any other Person may have against JPMC or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or Event of Default or the termination of any Lender Commitment; (iii) any adverse change in the condition (financial or otherwise) of the Borrower or any of its Subsidiaries; (iv) any breach of this Agreement or any other Credit Documents by the Borrower, any of its Subsidiaries, the Agent or any other Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. Any portion of a Swing Loan not so purchased and converted may be treated by JPMC as a Committed Loan which was not funded by the non-purchasing Lenders as contemplated in Section 2.1(a), and as a funding by JPMC under the Commitment in excess of JPMC’s Percentage. Each Swing Loan, once so sold, shall cease to be a Swing Loan for the purposes of this Agreement, but shall be a Committed Loan

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made under the Commitment and each Lender’s Lender Commitment. The Swing Loans shall be evidenced by the Swing Loan Note substantially in the form of Exhibit C-1 attached hereto.

     (d)  So long as the Borrower is not then in Default and so long as the Borrower has not reduced the Commitment pursuant to Section 2.9, the Borrower may on two (2) occasions prior to October 30, 2006, request that the aggregate Commitment be increased, so long as (i) the aggregate Commitment does not exceed Nine Hundred Million Dollars ($900,000,000.00) (the “Maximum Commitment”), and (ii) each increase is a minimum of $50,000,000. If the Borrower requests that the aggregate Commitment be increased, the Agent shall use its best efforts to obtain increased or additional commitments up to the Maximum Commitment, and to do so the Agent may obtain additional lenders of its choice (and approved by Borrower, such approval not to be unreasonably withheld or delayed), and without the necessity of approval from any of the Lenders. The Borrower and each Guarantor shall execute an amendment to this Agreement, additional Notes and other documents as the Agent may reasonably require to evidence the increase of the Commitment, and the admission of additional Persons as Lenders, if necessary.

     2.2 Letters of Credit.

          (a) Subject to the terms and conditions set forth herein, the Borrower may request the issuance of Letters of Credit for its own account, in a form reasonably acceptable to the Agent and the Issuing Bank, at any time and from time to time before the Maturity Date. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

          (b) To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or facsimile (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Bank’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed $150,000,000.00 and (ii) the total Revolving Credit Exposures

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shall not exceed the total Commitment. Copies of all Letters of Credit and amendments, extensions and cancellations related thereto, must be delivered to the Agent and the other Lenders by the Issuing Bank.

          (c) Each Letter of Credit shall expire not later than the earlier of (i) three (3) years after date of issuance of the Letter of Credit (the “Maximum Outside Date”), and (ii) the close of business on the date that is ten (10) days prior to the Maturity Date (including the extension period provided in Section 9); provided, however, that Letters of Credit with an aggregate LC Exposure not exceeding $50,000,000.00 at any time may expire up to the earlier of October 30, 2008 and the Maximum Outside Date.

          (d) By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Agent, for the account of the Issuing Bank, such Lender’s Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction of the Commitment, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

          (e) If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Agent an amount equal to such LC Disbursement not later than 1:00 p.m., New York, New York time, on the date that such LC Disbursement is made if the Borrower shall have received notice of such LC Disbursement prior to 11:00 a.m., New York, New York time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 1:00 p.m., New York, New York time, on (i) the Business Day that the Borrower receives such notice, if such notice is received prior to 11:00 a.m., New York, New York time, on the day of receipt, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.1 that such payment be financed with a Base Rate Borrowing in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting Base Rate Borrowing. If the Borrower fails to make such payment when due, the Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender’s Percentage thereof. Promptly following receipt of such notice, each Lender shall pay to the Agent its Percentage

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of the payment then due from the Borrower, in the same manner as provided in Section 2.1(a) with respect to Loans made by such Lender (and Section 2.1(a) shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Lenders. Promptly following receipt by the Agent of any payment from the Borrower pursuant to this paragraph, the Agent shall distribute such payment to the Issuing Bank or, to the extent that Lenders have made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the funding of Base Rate Loans as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.

          (f) The Borrower’s obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. Neither the Agent, the Lenders nor the Issuing Bank shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the

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contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

          (g) The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly notify the Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Lenders with respect to any such LC Disbursement.

          (h) If the Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to Base Rate Loans; provided that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section, then the unpaid amount thereof shall bear interest from the date reimbursement was due until the date payment is made at the Past Due Rate. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment.

          (i) The Issuing Bank may be replaced at any time by written agreement among the Borrower, the Agent, the replaced Issuing Bank and the successor Issuing Bank. The Agent shall notify the Lenders of any such replacement of the Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.7(c). From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

          (j) If (i) any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Agent or the Majority Lenders demanding the deposit of cash collateral pursuant to this paragraph, or (ii) any Letter of Credit will expire after the Maturity Date as allowed by Section 2.2(c) then at least ten (10) days before the Maturity Date, the Borrower shall deposit in an account with the Agent, in the name of the Agent and for the benefit of the Lenders, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the

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obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (h) or (i) of Section 7.1. Such deposit shall be held by the Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement. The Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Agent and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, be applied to satisfy other obligations of the Borrower under this Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived.

     2.3 Payments.

          (a) Except to the extent otherwise provided herein, all payments of principal, interest and other amounts to be made by the Borrower hereunder, under the Notes and under the other Credit Documents shall be made in immediately available funds to the Agent at its principal office in New York, New York (or in the case of a successor Agent, at the principal office of such successor Agent in the United States), not later than 1:00 p.m., New York, New York time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day).

          (b) The Borrower may, at the time of making each payment hereunder, under any Note or under any other Credit Document, specify to the Agent the Loans or other amounts payable by the Borrower hereunder or thereunder to which such payment is to be applied (and in the event that it fails so to specify, such payment shall be applied to the Loans (first to the Swing Loans) or, if no Loans are outstanding, to other amounts then due and payable, provided that if no Loans or other amounts are then due and payable or an Event of Default has occurred and is continuing, the Agent may apply such payment to the Obligations in such order as it may elect in its sole discretion, but subject to the other terms and conditions of this Agreement, including without limitation Section 2.4 hereof). Each payment received by the Agent hereunder, under any Note or under any other Credit Document for the account of a Lender shall be paid promptly to such Lender, in immediately available funds. If the Agent receives a payment for the account of a Lender prior to 1:00 p.m., New York, New York time, such payment must be delivered to the Lender on that same day and if it is not so delivered due to the fault of the Agent, the Agent shall pay to the Lender entitled to the payment the interest accrued on the amount of the payment pursuant to said Lender’s Note from the date the Agent receives the payment to the

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date the Lender received the payment. The Agent may apply payments received from the Borrower to pay any unpaid principal and interest on the Swing Loans before making payment to each Lender of amounts due under the Notes other than the Swing Loan Note. Loans may be prepaid only if the accompanying Funding Loss, if any, is also paid.

          (c) If the due date of any payment hereunder or under any Note falls on a day which is not a Business Day or a Eurodollar Business Day, as the case may be, the due date for such payments shall be extended to the next succeeding Business Day or Eurodollar Business Day, respectively, and interest shall be payable for any principal so extended for the period of such extension; provided, however, that with respect to Eurodollar Rate Borrowings and Money Market LIBOR Loans if such extension would cause the Eurodollar Business Day of payment to fall in another calendar month, the payment shall be due on the Eurodollar Business Day next preceding the due date of the payment.

          (d) The Borrower shall give the Agent at least one (1) Business Day’s prior written notice of the Borrower’s intent to make any payment of principal or interest under the Credit Documents not scheduled to be paid under the Credit Documents. Any such notification of payment shall be irrevocable after it is made by the Borrower. Upon receipt by the Agent of such notification of payment, it shall deliver same to the other Lenders.

          (e) All payments by the Borrower hereunder or under any other Credit Documents shall be made free and clear of and without deduction for or on account of any Taxes, including withholding and other charges of any nature whatsoever imposed by any taxing authority excluding in the case of each Lender taxes imposed on or measured by its net income or franchise taxes imposed in lieu of net income taxes by the jurisdiction in which it is organized or through which it acts for purposes of this Agreement. If any withholding or deduction from any payment to be made to, or for the account of, a Lender by the Borrower hereunder or under any other Credit Document is required in respect of any Taxes pursuant to any applicable law, rule, or regulation, then the Borrower will (i) pay to the relevant authority the full amount required to be so withheld or deducted; (ii) to the extent available, promptly forward to the Agent an official receipt or other documentation satisfactory to the Agent evidencing such payment to such authority; and (iii) pay to the Agent, for the account of each affected Lender, such additional amount or amounts as are necessary to ensure that the net amount actually received by such Lender will equal the full amount such Lender would have received had no such withholding or deduction been required. Each Lender shall determine such additional amount or amounts payable to it (which determination shall, in the absence of manifest error, be conclusive and binding on the Borrower). If a Lender becomes aware that any such withholding or deduction from any payment to be made by the Borrower hereunder or under any other Credit Document is required, then such Lender shall promptly notify the Agent and the Borrower thereof stating the reasons therefor and the additional amount required to be paid under this Section. Each Lender shall execute and deliver to the Agent and Borrower such forms as it may be required to execute and deliver pursuant to subsection (f) below. To the extent that any such withholding or deduction results from the failure of a Lender to provide a form

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required by subsection (f) below (unless such failure is due to some prohibition under applicable Legal Requirements), the Borrower shall have no obligation to pay the additional amount required by clause (iii) above. Anything in this Section notwithstanding, if any Lender elects to require payment by the Borrower of any material amount under this Section, the Borrower may, within 60 days after the date of receiving notice thereof and so long as no Default shall have occurred and be continuing, elect to terminate such Lender as a party to this Agreement; provided that, concurrently with such termination the Borrower shall (1) if the Agent and each of the other Lenders shall consent, pay that Lender all principal, interest and fees and other amounts owed to such Lender through such date of termination or (2) have arranged for another institution approved by the Agent (such approval not to be unreasonably withheld) as of such date, to become a substitute Lender for all purposes under this Agreement in the manner provided in Section 10.5; provided further that, prior to substitution for any Lender, the Borrower shall have given written notice to the Agent of such intention and the Lenders shall have the option, but no obligation, for a period of 60 days after receipt of such notice, to increase their Commitments pro rata based on their Lender Commitments in order to replace the affected Lender in lieu of such substitution.

          (f) With respect to each Lender which is organized under the laws of a jurisdiction outside the United States, on the day of the initial borrowing from each such Lender hereunder and from time to time thereafter if requested by the Borrower or the Agent, such Lender shall provide the Agent and the Borrower with the forms prescribed by the Internal Revenue Service of the United States certifying as to such Lender’s status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to such Lender hereunder or other documents satisfactory to such Lender and the Agent indicating that all payments to be made to such Lender hereunder are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty. Unless the Borrower and the Agent shall have received such forms or such documents indicating that payments hereunder are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, the Borrower or the Agent shall withhold taxes from such payments at the applicable statutory rate in the case of payments to or for any Lender organized under the laws of a jurisdiction outside the United States.

     2.4 Pro Rata Treatment. Except to the extent otherwise provided herein: (a) each borrowing from the Lenders under Section 2.1(a) hereof shall be made ratably from the Lenders on the basis of their respective Percentages, except as provided in Section 2.7(c)(ii) each payment of the Fee (hereinafter defined) shall be made for the account of the Lenders, and shall be applied, pro rata, according to the Lenders’ respective Lender Commitment; and (b) each payment by the Borrower of principal or interest on the Committed Loans other than the Swing Loans, of any other sums advanced by the Lenders pursuant to the Credit Documents, and of any other amount owed to the Lenders other than the Fee, payments of Swing Loans, or any other sums designated by this Agreement as being owed to a particular Lender, shall be made to the Agent for the account of the Lenders pro rata in accordance with the respective unpaid principal amounts of the

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Committed Loans (other than Swing Loans) held by the Lenders. Payments of Swing Loans shall be for JPMC’s own account.

     2.5 Non-Receipt of Funds by the Agent. Unless the Agent shall have been notified by a Lender or the Borrower (the “Payor”) prior to the date on which such Lender is to make payment to the Agent of the proceeds of a Loan (or purchase of a portion of a Swing Loan) to be made by it hereunder or the Borrower is to make a payment to the Agent for the account of one or more of the Lenders, as the case may be (such payment being herein called the “Required Payment”), which notice shall be effective upon receipt, that the Payor does not intend to make the Required Payment to the Agent, the Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient on such date and, if the Payor has not in fact made the Required Payment to the Agent, the recipient of such payment shall, on demand, pay to the Agent the amount made available by the Agent together with interest thereon in respect of the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to (a) the Past Due Rate for such period if the recipient returning a Required Payment is the Borrower, or (b) the Federal Funds Effective Rate for such period if the recipient returning a Required Payment is the Agent or a Lender.

     2.6 Sharing of Payments, Etc. The Borrower agrees that, in addition to (and without limitation of) any right of set-off, bankers’ lien or counterclaim a Lender may otherwise have, each Lender shall be entitled, at its option, to offset balances held by it for the account of the Borrower at any of its offices, against any principal of or interest on any of such Lender’s Loans to the Borrower hereunder, or other Obligations of the Borrower hereunder, which is not paid (regardless of whether such balances are then due to the Borrower), in which case it shall promptly notify the Borrower and the Agent thereof, provided that such Lender’s failure to give such notice shall not affect the validity thereof. If a Lender shall obtain payment of any principal of or interest on any Committed Loan made by it under this Agreement (other than Swing Loans made by JPMC), or other Obligation then due to such Lender hereunder, through the exercise of any right of set-off, banker’s lien, counterclaim or similar right, or otherwise, it shall promptly purchase from the other Lenders portions of the Loans made or other Obligations held (other than Swing Loans made by JPMC), by the other Lenders in such amounts, and make such other adjustments from time to time as shall be equitable to the end that all the Lenders shall share the benefit of such payment (net of any expenses which may be incurred by such Lender in obtaining or preserving such benefit) pro rata in accordance with the unpaid principal and interest on the Obligations then due to each of them. To such end all the Lenders shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Borrower.

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     2.7 Fees. The Borrower shall pay fees equal to the following:

          (a) An amount payable as a facility fee by the Borrower to the Agent for the account of each Lender equal to the following percentage per annum multiplied by the Commitment (and after the Commitment terminates or expires, the aggregate Revolving Credit Exposures), which will be in effect whenever and for so long as the Borrower has received the corresponding Credit Rating (the method of determining the Credit Rating based on multiple ratings to be the same as set forth and used to determine the Credit Rating for the definition of Applicable Margin):

CREDIT RATING	FACILITY FEE
A/A2 or better		0.125	%
A-/A3		0.150	%
BBB+/Baa1		0.150	%
BBB/Baa2		0.150	%
BBB-/Baa3		0.200	%

If the Credit Rating is worse than BBB-/Baa3, or if there is no Credit Rating, then for that calendar quarter and for so long thereafter as the Credit Rating is worse than BBB-/Baa3 or if there is no Credit Rating, the facility fee will be equal to the daily unused amount of the Commitment (Swing Loans shall be deemed to be a utilization of the Commitment solely for the purposes of this Section 2.7(a)) multiplied by 0.250% per annum. The facility fee is payable in arrears on or before the tenth (10th) day of each January, April, July and October prior to termination or expiration of the Commitment, and on demand thereafter.

          (b) If the Maturity Date is extended pursuant to Section 9 of this Agreement, an amount payable as an extension fee by the Borrower to the Agent for the account of each Lender equal to 0.200% of each Lender’s Lender Commitment at that time payable on the first day of the extension.

          (c) (i) to the Agent for the account of each Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the Applicable Margin provided for Eurodollar Rate Borrowings on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the date of this Agreement to but excluding the later of the date of termination of the Commitment and the date on which there ceases to be any LC Exposure, and (ii) to the Issuing Bank a nonrefundable fronting fee which shall accrue at the rate of 0.100% per annum on the face amount of each Letter of Credit, as well as the Issuing Bank’s standard fees (not to be less than $1,500.00 per transaction) with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of March, June, September and December of each year shall be payable on the tenth (10th) day following such last day, commencing on the first such date to occur after the date of this Agreement; provided that all such fees shall be payable on the date on which the Commitment terminates and any such fees accruing after the date on which the

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Commitment terminates shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within ten (10) days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

     The Fee shall not be refundable (except as required by Section 3.1(c) of this Agreement). Any portion of the Fee which is not paid by the Borrower when due shall bear interest at the Past Due Rate from the date due until the date paid by the Borrower. The Fee shall be calculated on the actual number of days elapsed in a year deemed to consist of 360 days.

     2.8 Money Market Borrowings.

          (a) The Borrower may, as set forth in this Section, whenever at the time of the request therefor the Borrower has received an Acceptable Credit Rating, request the Lenders prior to the Maturity Date to make offers to make Money Market Loans to the Borrower, not to exceed, at such time, the lesser of (i) the difference between the Commitment and the aggregate Revolving Credit Exposures, and (ii) fifty percent (50%) of the Commitment. The Lenders may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. The Borrower shall pay the Agent a fee of $2,000.00 for each Money Market Quote Request provided below, payable monthly based on the requests for the previous month.

          (b) When the Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Agent (in care of Ms. Angelica M. Castillo, Loan and Agency Services, 1111 Fannin, Houston, Texas 77002, Facsimile No. 713-750-2228, telephone number 713-750-2513) by facsimile transmission a Money Market Quote Request (“Money Market Quote Request”) substantially in the form of Exhibit E hereto so as to be received no later than 12:00 noon, New York, New York time on (i) the fourth Eurodollar Business Day prior to the date of borrowing proposed therein, in the case of a LIBOR Auction or (ii) the Business Day next preceding the date of borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Lenders not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying:

     (x) the proposed date of borrowing, which shall be a Eurodollar Business Day in the case of a LIBOR Auction or a Business Day in the case of an Absolute Rate Auction, and

     (y) the aggregate amount of such borrowing, which shall be $20,000,000.00 or a larger multiple of $1,000,000.00.

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The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within five (5) Eurodollar Business Days (or such other number of days as the Borrower and the Agent may agree in writing ) of any other Money Market Quote Request.

          (c) Promptly upon receipt of a Money Market Quote Request, the Agent shall send to the Lenders by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit F hereto, which shall constitute an invitation by the Borrower to each Lender to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section.

          (d) (i) Each Lender may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be received by the Agent by telex or facsimile transmission not later than (x) 9:30 a.m. New York, New York time on the third Eurodollar Business Day prior to the proposed date of borrowing, in the case of a LIBOR Auction or (y) 9:30 a.m. New York, New York time on the proposed date of borrowing, in the case of an Absolute Rate Auction; provided that Money Market Quotes submitted by the Agent (or any affiliate of the Agent or its Designated Lender) in the capacity of a Lender may be submitted, and may only be submitted, if the Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than thirty (30) minutes prior to the applicable deadline for the other Lenders. Any Money Market Quote so made shall be irrevocable except with the written consent of the Agent given on the instructions of the Borrower. If, and only if, the Borrower elected in the applicable Money Market Quote Request to permit the Lenders to designate Designated Lenders to fund such Money Market Loans, such Money Market Loans may be funded by such Lender’s Designated Lender (if any) as provided in Section 10.5(f), however such Lender shall not be required to specify in its Money Market Quote whether such Money Market Loans will be funded by such Designated Lender.

          (ii) Each Money Market Quote shall be in substantially the form of Exhibit G hereto and shall in any case specify:

     (1) the principal amount of the Money Market Loan for which each offer is being made, which principal amount (w) may be greater than or less than the Lender Commitment of the quoting Lender, (x) must be $5,000,000.00 or a larger multiple of $500,000.00, (y) may not exceed the principal amount of Money Market Loans for which offers were requested, and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Lender may be accepted,

     (2) in the case of a LIBOR Auction, the margin (the “Money Market Margin”) above or below the applicable Eurodollar Interbank Rate ) offered

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for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such applicable rate, and

     (3) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the “Money Market Absolute Rate”) offered for each such Money Market Loan.

A Money Market Quote may set forth up to five (5) separate offers by the quoting Lender with respect to each Interest Period specified in the related Invitation for Money Market Quotes.

          (iii) Any Money Market Quote shall be disregarded if it:

     (1) is not substantially in conformity with Exhibit G hereto or does not specify all of the information required by subsection (d)(ii) above;

     (2) contains qualifying, conditional or similar language;

     (3) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or

     (4) arrives after the time set forth in subsection (d)(i) above.

          (e) The Agent shall promptly notify the Borrower (i) of the terms of each proper Money Market Quote and the identity of the Lender submitting such Money Market Quote, and (ii) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Lender with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Agent’s notice to the Borrower shall specify (1) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (2) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered, and (3) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted.

          (f) Not later than 10:30 a.m. New York, New York time on (i) the third Eurodollar Business Day prior to the proposed date of borrowing, in the case of a LIBOR Auction, or (ii) the proposed date of borrowing, in the case of an Absolute Rate Auction, the Borrower shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e) above. In the case of acceptance, such notice (a “Notice of Money Market Borrowing”) shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that:

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     (1) the aggregate principal amount of each borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request;

     (2) the principal amount of each borrowing must be $5,000,000.00 or a larger multiple of $500,000.00;

     (3) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be; and

     (4) the Borrower may not accept any offer that is described in subsection (d)(iii) above or that otherwise fails to comply with the requirements of this Agreement.

          (g) If offers are made by two or more Lenders with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Agent among such Lenders as nearly as possible (in multiples of $500,000.00, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. The Agent shall promptly (and in any event within one (1) Business Day after such offers are accepted) notify the Borrower and each such Lender in writing of any such allocation of Money Market Loans. Determinations by the Agent of the allocation of Money Market Loans shall be conclusive in the absence of manifest error.

          (h) Upon receipt of the Borrower’s Notice of Money Market Borrowing, the Agent shall, on the date such Notice of Money Market Borrowing is received by the Agent, promptly notify each Lender of the principal amount of the Money Market Loans accepted by the Borrower and of such Lender’s share (if any) of such Money Market Loans and such Notice of Money Market Borrowing shall not thereafter be revocable by the Borrower. Any Lender so notified shall fund such Money Market Loans at the times provided in Section 2.1(b). A Lender that is notified that it has been selected to make a Money Market Loan may designate its Designated Lender (if any) to fund such Money Market Loan on its behalf, as described in Section 10.5(f). Any Designated Lender which funds a Money Market Loan shall on and after the time of such funding become the obligee under such Money Market Loan and be entitled to receive payment thereof when due. No Lender shall be relieved of its obligation to fund a Money Market Loan, and no Designated Lender shall assume such obligation, prior to the time the applicable Money Market Loan is funded. Money Market Loans shall be evidenced by a promissory note in the form of Exhibit C-2 attached hereto.

          (i) Notwithstanding anything to the contrary contained herein, each Lender shall be required to fund its Percentage of each Committed Loan in accordance with Section 2.1 despite the fact that any Lender’s Lender Commitment may have been or may be exceeded as a result of such Lender’s making of Money Market Loans.

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          (j) Each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Eurodollar Interbank Rate for such Interest Period plus (or minus) the Money Market Margin quoted by the Lender making such Loan in accordance with Section 2.8. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Lender making such Loan in accordance with Section 2.8. Such interest shall be payable on each Interest Payment Date. Each Money Market Loan shall mature at the end of each Interest Period, as specified in the Money Market Quote.

     2.9 Reduction of Commitment.

          (a) Unless previously terminated, the Commitment shall terminate on the Maturity Date.

          (b) The Borrower may on three (3) occasions reduce the Commitment; provided that (i) each reduction in the Commitment shall be a minimum of $50,000,000, (ii) the total Commitment may not be reduced to less than $200,000,000, (iii) after any reduction in the Commitment, the Borrower’s option to increase the Commitment provided in Section 2.1(d) shall terminate, and (iv) no reduction in the Commitment will be allowed if a Default is then in existence.

          (c) The Borrower shall notify the Agent of any election to reduce the Commitment under Section 2.9(b) at least three (3) Business Days prior to the effective date of such reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Agent shall advise the Lenders of the contents thereof. Each notice delivered pursuant to this Section shall be irrevocable. Any reduction of the Commitment shall be permanent. Each reduction in the Commitment shall be made ratably among the Lenders in accordance with their respective Lender Commitments.

     2.10 Additional Guarantees. From time to time, certain of the direct or indirect owners of legal interests in the Borrower may request to guarantee collection of the unpaid balance of the Loans remaining after application of other recoveries against the Loans by the Administrative Agent and the Lenders. If the Borrower notifies the Administrative Agent of such a guarantee request and (a) supplies the Administrative Agent with the Organizational Documents of the proposed guarantor and any other information regarding the proposed guarantor as reasonably requested by the Administrative Agent or any of the Lenders, including any information that the Administrative Agent is required to obtain for any guarantor pursuant to applicable Legal Requirements, and (b) so long as the acceptance of the guarantee from the proposed guarantor does not violate any Legal Requirement applicable to the Administrative Agent or any of the Lenders, the Administrative Agent agrees, on behalf of the Lenders, to accept a guarantee from such proposed guarantor in the form attached hereto as Exhibit K.

3.     Conditions.

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     3.1 All Loans. The obligation of any Lender to make any Loan, or to issue, renew or extend any Letter of Credit, is subject to the accuracy of all representations and warranties of the Borrower on the date of such Loan, or issuance, renewal or extension of such Letter of Credit, to the performance by the Borrower of its obligations under the Credit Documents and to the satisfaction of the following further conditions: (a) the Agent shall have received the following, all of which shall be duly executed and in Proper Form: (1) for Committed Loans, a Request for Loan (i) by 12:00 noon, New York, New York time, one (1) Business Day before the date (which shall also be a Business Day) of the proposed Loan which is to be a Base Rate Borrowing (other than Swing Loans or Base Rate Borrowings to finance the reimbursement of an LC Disbursement as contemplated by Section 2.2(e) hereof), (ii) by 12:00 noon, New York, New York time, on the same Business Day of any proposed Swing Loan or Base Rate Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.2(e) hereof, provided that by 12:00 noon, New York, New York time on the date of the proposed Loan, Borrower shall also have notified JPMC by telephone of its request for a Loan, or (iii) by the Rate Designation Date of the proposed Loan which is to be a Eurodollar Rate Borrowing; (2) for Money Market Loans the information required by Section 2.8; (3) for Letters of Credit the documents required by Section 2.2 hereof; and (4) such other documents as the Agent may reasonably require to satisfy itself or the request of any Lender; (b) no Default or Event of Default shall have occurred and be continuing; (c) the making of the Loan or issuance, renewal or extension of such Letter of Credit, shall not be prohibited by any Legal Requirement (in which event the applicable portion of the Fee will not be charged to the Borrower); (d) the Borrower shall have paid all legal fees and expenses of the type described in Section 5.10 hereof through the date of such Loan; (e) in the case of a Committed Loan other than a Swing Loan, all Swing Loans then outstanding shall have been paid or shall be paid with the proceeds of such Loan and (f) the Agent shall have received an Officer’s Certificate certifying the information set forth therein as of the end of the immediately preceding fiscal quarter.

     3.2 First Loan. In addition to the matters described in Section 3.1 hereof, the obligation of the Lenders to make the first Loan under this Agreement is subject to the receipt by the Lenders of each of the following, in Proper Form: (a) the Notes, executed by the Borrower; (b) a separate certificate executed by each of the Secretary of the Borrower and the Secretary of the Parent dated as of the date hereof; (c) a separate certificate from the Secretary of State or other appropriate public official of Maryland as to the continued existence and good standing of each of the Parent and the Borrower; (d) a separate certificate from the appropriate public official of Maryland as to the due qualification and good standing of each of the Parent and the Borrower; (e) a legal opinion from independent counsel for the Parent, the Borrower and the Guarantors as to the matters set forth on Exhibit D acceptable to the Lenders; (f) policies of insurance addressed to the Agent reflecting the insurance required by Section 5.7 hereof; (g) an Officer’s Certificate in the form of Exhibit A as of the end of the immediately preceding fiscal quarter; (h) a certificate from Borrower and Parent setting forth the pro forma calculations of Secured Debt to Total Asset Value Ratio, Coverage Ratio, Fixed Charge Coverage Ratio, Tangible Net Worth, Debt to Total Asset Value Ratio, and the Pool pursuant to Section 5.15 (which include actual figures as of June 30, 2003; and (i) any Guaranty required by Section 5.15

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together with such Guarantors’ organizational documents and certificates of existence and good standing from the state of its organization; and to the further condition that, at the time of the initial Loan, all legal matters incident to the transactions herein contemplated shall be satisfactory to Locke Liddell & Sapp LLP, counsel for the Agent.

     3.3 Options Available. The outstanding principal balance of the Notes shall bear interest at the Base Rate; provided, that (1) all past due amounts, both principal and accrued interest, shall bear interest at the Past Due Rate, and (2) subject to the provisions hereof, Borrower shall have the option of having all or any portion of the principal balance of the Notes, other than the Swing Loan Note, from time to time outstanding bear interest at a Eurodollar Rate. The records of the Lenders with respect to Interest Options, Interest Periods and the amounts of Loans to which they are applicable shall be prima facie evidence thereof. Interest on the Loans shall be calculated at the Base Rate except where it is expressly provided pursuant to this Agreement that a Eurodollar Rate is to apply.

     3.4 Designation and Conversion. Borrower shall have the right to designate or convert its Interest Options in accordance with the provisions hereof. Provided no Event of Default has occurred and is continuing and subject to the provisions of Section 3.5, Borrower may elect to have a Eurodollar Rate apply or continue to apply to all or any portion of the principal balance of the Notes, other than the Swing Loan Note. Each change in Interest Options shall be a conversion of the rate of interest applicable to the specified portion of the Loans, but such conversion shall not change the respective outstanding principal balance of the Notes. The Interest Options shall be designated or converted in the manner provided below:

          (a) Borrower shall give Agent a Request for Loan. Each such written notice shall specify the amount of Loan which is the subject of the designation, if any; the amount of borrowings into which such borrowings are to be converted or for which an Interest Option is designated; the proposed date for the designation or conversion and the Interest Period, if any, selected by Borrower. The Request for Loan shall be irrevocable and shall be given to Agent no later than the applicable Rate Designation Date. The Agent shall promptly deliver the Request for Loan to the Lenders.

          (b) No more than twelve (12) Eurodollar Rate Borrowings with twelve (12) Interest Periods shall be in effect at any time.

          (c) Each designation or conversion of a Eurodollar Rate Borrowing shall occur on a Eurodollar Business Day.

          (d) Except as provided in Section 3.5 hereof, no Eurodollar Rate Borrowing shall be converted on any day other than the last day of the applicable Interest Period.

          (e) Unless a Request for Loan to the contrary is received as provided in this Agreement, each Eurodollar Rate Borrowing will convert to a Base Rate Borrowing after the expiration of the Interest Period.

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     3.5 Special Provisions Applicable to Eurodollar Rate Borrowings and Money Market Loans.

          (a) If the adoption of any applicable Legal Requirement or any change in any applicable Legal Requirement or in the interpretation or administration thereof by any Governmental Authority or compliance by the Lenders with any request or directive (whether or not having the force of law) of any central bank or other Governmental Authority shall at any time make it unlawful or impossible for any Lender to permit the establishment of or to maintain any Eurodollar Rate Borrowing or a Money Market Loan, or to increase the cost to such Lender of participating in or maintaining any Letter of Credit, the commitment of the Lenders to establish or maintain such Eurodollar Rate Borrowing or a Money Market Loan, or to issue or participate in Letters of Credit shall forthwith be suspended until such condition shall cease to exist and Borrower shall forthwith, upon demand by Agent to Borrower, (1) convert the Eurodollar Rate Borrowing with respect to which such demand was made to a Base Rate Borrowing; (2) convert the Money Market LIBOR Loan with respect to which such demand was made to a Loan bearing interest at the Base Rate; (3) pay all accrued and unpaid interest to date on the amount so converted; and (4) pay any amounts required to compensate the Lenders for any additional cost or expense which the Lenders may incur as a result of such adoption of or change in such Legal Requirement or in the interpretation or administration thereof and any Funding Loss which the Lenders may incur as a result of such conversion. If, when Agent so notifies Borrower, Borrower has given a Request for Loan specifying a Eurodollar Rate Borrowing or a Notice of Money Market Borrowing but the selected Interest Period has not yet begun, such Request for Loan or a Notice of Money Market Borrowing shall be deemed to be of no force and effect, as if never made, and the balance of the Loans specified in such Request for Loan shall bear interest at the Base Rate until a different available Interest Option shall be designated in accordance herewith.

          (b) If the adoption of any applicable Legal Requirement or any change in any applicable Legal Requirement or in the interpretation or administration thereof by any Governmental Authority or compliance by any Lender with any request or directive of general applicability (whether or not having the force of law) of any central bank or Governmental Authority shall at any time as a result of any portion of the principal balance of the Notes being maintained on the basis of a Eurodollar Rate or as a Money Market Loan, or as a result of any Lender issuing or participating in Letters of Credit:

(1)	subject any Lender (or make it apparent that any Lender is subject) to any Taxes, or any deduction or withholding for any Taxes, on or from any payment due under any Eurodollar Rate Borrowing, Money Market Loan or other amount due hereunder, other than income and franchise taxes of the United States and its political subdivisions; or
(2)	change the basis of taxation of payments due from Borrower to any Lender under any Eurodollar Rate Borrowing or Money Market

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	Loan (otherwise than by a change in the rate of taxation of the overall net income of a Lender); or
(3)	impose, modify, increase or deem applicable any reserve requirement (excluding that portion of any reserve requirement included in the calculation of the applicable interest rate), special deposit requirement or similar requirement (including, but not limited to, state law requirements and Regulation D) imposed, modified, increased or deemed applicable by any Governmental Authority against assets held by any Lender, or against deposits or accounts in or for the account of any Lender, or against loans made by any Lender, or against any other funds, obligations or other property owned or held by any Lender; or
(4)	impose on any Lender any other condition regarding any Eurodollar Rate Borrowing, Money Market Loan or Letter of Credit;

and the result of any of the foregoing is to increase the cost to any Lender of agreeing to make or of making, renewing or maintaining such Eurodollar Rate Borrowing or Money Market Loan, or issuing or participating in Letters of Credit, or reduce the amount of principal or interest received by any Lender, then, upon demand by Agent, Borrower shall pay to such Lender, from time to time as specified by such Lender, additional amounts which shall compensate such Lender for such increased cost or reduced amount. Agent will promptly notify Borrower in writing of any event which will entitle any Lender to additional amounts pursuant to this paragraph. A Lender’s determination of the amount of any such increased cost, increased reserve requirement or reduced amount shall be prima facie evidence thereof. Borrower shall have the right, if it receives from Agent any notice referred to in this paragraph, upon three Business Days’ notice to Agent, either (i) to repay in full (but not in part) any borrowing with respect to which such notice was given, together with any accrued interest thereon, or (ii) to convert the Eurodollar Rate Borrowing which is the subject of the notice to a Base Rate Borrowing or to convert the Money Market LIBOR Loan which is the subject of the notice to a Loan bearing interest at the Base Rate; provided, that any such repayment or conversion shall be accompanied by payment of (x) the amount required to compensate a Lender for the increased cost or reduced amount referred to in the preceding paragraph; (y) all accrued and unpaid interest to date on the amount so repaid or converted, and (z) any Funding Loss which any Lender may incur as a result of such repayment or conversion.

          (c) If for any reason with respect to any Interest Period Agent shall have determined (which determination shall be prima facie evidence thereof) that:

(1)      Agent is unable through its customary general practices to determine any applicable Eurodollar Rate, or

(2)     by reason of circumstances affecting the applicable market generally, Agent is not being offered deposits in United States dollars in such market, for the applicable Interest Period and in an amount equal to the

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amount of any applicable Eurodollar Rate Borrowing requested by Borrower, or

(3)     any applicable Eurodollar Rate will not adequately and fairly reflect the cost to the Lenders of making and maintaining such Eurodollar Rate Borrowing hereunder for any proposed Interest Period,

then Agent shall give Borrower notice thereof and thereupon, (A) any Request for Loan previously given by Borrower designating the applicable Eurodollar Rate Borrowing which has not commenced as of the date of such notice from Agent shall be deemed for all purposes hereof to be of no force and effect, as if never given, and (B) until Agent shall notify Borrower that the circumstances giving rise to such notice from Agent no longer exist, each Request for Loan requesting the applicable Eurodollar Rate shall be deemed a request for a Base Rate Borrowing, and any applicable Eurodollar Rate Borrowing then outstanding shall be converted, without any notice to or from Borrower, upon the termination of the Interest Period then in effect with respect to it, to a Base Rate Borrowing.

          (d) Borrower shall indemnify the Agent and each Lender against and hold the Agent and each Lender harmless from any Funding Loss. This agreement shall survive the payment of the Notes. A certificate as to any additional amounts payable pursuant to this subsection and setting forth the reasons for the Funding Loss submitted by Agent to Borrower shall be prima facie evidence thereof.

          (e) The Borrower shall pay to the Agent or a Lender the Eurodollar Reserve Requirement incurred by that Lender within thirty (30) days after written demand by Agent to the Borrower. The demand setting forth the Eurodollar Reserve Requirement shall be prima facie evidence thereof.

     3.6 Funding Offices; Adjustments Automatic. Any Lender may, if it so elects, fulfill its obligation as to any Eurodollar Rate Borrowing or Money Market Loan by causing a branch or affiliate of such Lender to make such Loan and may transfer and carry such Loan at, to, or for the account of, any branch office or affiliate of such Lender; provided, that in such event for the purposes of this Agreement such Loan shall be deemed to have been made by such Lender and the obligation of Borrower to repay such Loan shall nevertheless be to such Lender and shall be deemed held by it for the account of such branch or affiliate. Without notice to Borrower or any other person or entity, each rate required to be calculated or determined under this Agreement shall automatically fluctuate upward and downward in accordance with the provisions of this Agreement.

     3.7 Funding Sources, Payment Obligations. Notwithstanding any provision of this Agreement to the contrary, each Lender shall be entitled to fund and maintain its funding of all or any part of the Loans in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if each Lender had actually funded and maintained each Eurodollar Rate Borrowing and Money Market LIBOR Loan during each Interest Period through the

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purchase of deposits having a maturity corresponding to such Interest Period and bearing an interest rate equal to the interest rate for such Interest Period. Notwithstanding the foregoing, Funding Losses, increased costs and other obligations relating to Eurodollar Rate Borrowings and Money Market Loans described in Section 3.5 of this Agreement will only be paid by the Borrower as and when actually incurred by the Lenders.

     3.8 Mitigation, Non-Discrimination.

          (a) Each Lender will notify the Borrower through the Agent of any event occurring after the date of this Agreement which will require or enable such Lender to take the actions described in Sections 3.5(a) or (b) of this Agreement as promptly as practicable after it obtains knowledge thereof and determines to request such action, and (if so requested by the Borrower through the Agent) will designate a different lending office of such Lender for the applicable Eurodollar Rate Borrowing or Money Market Loan or will take such other action as the Borrower reasonably requests if such designation or action is consistent with the internal policy of such Lender and legal and regulatory restrictions, can be undertaken at no additional cost, will avoid the need for, or reduce the amount of, such action and will not, in the sole opinion of such Lender, be disadvantageous to such Lender (provided that such Lender will have no obligation to designate a different lending office which is located in the United States of America).

          (b) None of the Lenders shall be able to pass through to the Borrower changes and costs under Section 3.5 of this Agreement on a discriminating basis, such that such changes and costs are not also passed through by each Lender to other customers of such Lender similarly situated where such customer is subject to documents providing for such pass through.

          (c) If any Lender elects under Section 3.5 of this Agreement to suspend or terminate the availability of Eurodollar Rate Borrowings for any material period of time, and the event giving rise to such election is not generally applicable to all of the Lenders, the Borrower may within sixty (60) days after notification of such Lender’s election, and so long as no Event of Default is then in existence, either (i) demand that such Lender, and upon such demand, such Lender shall promptly, assign its Lender Commitment to another financial institution subject to and in accordance with the provisions of Section 10.5 of this Agreement for a purchase price equal to the unpaid balance of principal, accrued interest, the unpaid balance of the Fee and expenses owing to such Lender pursuant to this Agreement, or (ii) pay such Lender the unpaid balance of principal, accrued interest, the unpaid balance of the Fee and expenses owing to such Lender pursuant to this Agreement, whereupon, such Lender shall no longer be a party to this Agreement or have any rights or obligations hereunder or under any other Credit Documents, and the Commitment shall immediately and permanently be reduced by an amount equal to the Lender Commitment of such Lender.

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4. Representations and Warranties.

     To induce the Lenders to enter into this Agreement and to make the Loans, the Borrower represents and warrants to the Agent and the Lenders as follows:

     4.1 Organization. The Borrower is duly organized, validly existing and in good standing as a real estate investment trust under the laws of the state of Maryland; has all power and authority to conduct its business as presently conducted; and is duly qualified to do business and in good standing in every state where the location of its Property requires it to be qualified to do business, unless the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect.

     4.2 Financial Statements. The financial statements delivered to the Agent fairly present, in accordance with Generally Accepted Accounting Principles (provided, however, that the Quarterly Unaudited Financial Statements are subject to normal year-end adjustments and may contain condensed footnotes as permitted by regulations of the United States Securities and Exchange Commission), the financial condition and the results of operations of the Borrower as at the dates and for the periods indicated. No Material Adverse Change has occurred since the dates of such financial statements. The Borrower is not subject to any instrument or agreement which would materially prevent it from conducting its business as it is now conducted or as it is contemplated to be conducted.

     4.3 Enforceable Obligations; Authorization. The Credit Documents are legal, valid and binding obligations of the Parties, enforceable in accordance with their respective terms, except as may be limited by bankruptcy, insolvency and other laws affecting creditors’ rights generally and by general equitable principles. The execution, delivery and performance of the Credit Documents have all been duly authorized by all necessary action; are within the power and authority of the Parties; do not and will not contravene or violate any Legal Requirement or the Organizational Documents of the Parties; do not and will not result in the breach of, or constitute a default under, any agreement or instrument by which the Parties or any of their respective Property may be bound or affected, except where such breach or default could not reasonably be expected to have a Material Adverse Effect; and do not and will not result in the creation of any Lien upon any Property of any of the Parties except as expressly contemplated therein. All necessary permits, registrations and consents for such making and performance have been obtained except where the lack thereof would not reasonably be expected to have a Material Adverse Effect.

     4.4 Other Debt. The Borrower is not in default in the payment of any other Indebtedness or under any agreement, mortgage, deed of trust, security agreement or lease to which it is a party which default would reasonably be expected to have a Material Adverse Effect.

     4.5 Litigation. There is no litigation or administrative proceeding pending or, to the knowledge of the Borrower, threatened against, or any outstanding judgment, order or decree affecting, the Borrower before or by any Governmental Authority which is not

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adequately covered by insurance or which, if determined adversely to the Borrower could reasonably be expected to have a Material Adverse Effect. The Borrower is not in default with respect to any judgment, order or decree of any Governmental Authority which default could reasonably be expected to have a Material Adverse Effect.

     4.6 Taxes. The Borrower has filed all tax returns required to have been filed and paid all taxes shown thereon to be due, except those for which extensions have been obtained, those which are being contested in good faith and those for which the Borrower’s failure to file a return or pay could not reasonably be expected to have a Material Adverse Effect.

     4.7 Regulation U. None of the proceeds of any Loan or Letter of Credit will be used for the purpose of purchasing or carrying directly or indirectly any margin stock or for any other purpose that would constitute this transaction a “purpose credit” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System.

     4.8 Securities Act of 1933. Other than the Agent’s efforts in syndicating the Loans (for which the Agent is responsible) neither the Borrower nor any agent acting for it has offered the Notes or any similar obligation of the Borrower for sale to or solicited any offers to buy the Notes or any similar obligation of the Borrower from any Person other than the Agent or any Lender, and neither the Borrower nor any agent acting for it will take any action which would subject the sale of the Note to the provisions of Section 5 of the Securities Act of 1933, as amended.

     4.9 No Contractual or Corporate Restrictions. The Borrower is not a party to, or bound by, any contract, agreement or charter or other corporate restriction materially and adversely affecting its business, Property, assets, operations or condition, financial or otherwise.

     4.10 Investment Company Act Not Applicable. The Borrower is not an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.

     4.11 Public Utility Holding Company Act Not Applicable. The Borrower is not a “holding company”, or a “subsidiary company” of a “holding company”, or an “affiliate” of a “holding company”, or an affiliate of a “subsidiary company” of a “holding company”, as such terms are defined in the Public Utility Holding Company Act of 1935, as amended.

     4.12 ERISA Not Applicable. The Borrower is not subject to any requirements of the Employee Retirement Income Security Act of 1974 as amended from time to time, or any rules, regulations, rulings or interpretations adopted by the Internal Revenue Service or the Department of Labor thereunder.

5. Affirmative Covenants.

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     The Borrower covenants and agrees with the Agent and the Lenders that prior to the termination of this Agreement it will do, and if necessary cause to be done, each and all of the following:

     5.1 Taxes, Insurance, Existence, Regulations, Property, etc. At all times (a) pay when due all taxes and governmental charges of every kind upon it or against its income, profits or Property, unless and only to the extent that the same shall be contested in good faith and reserves which are adequate under Generally Accepted Accounting Principles have been established therefor, or unless such failure to pay could not reasonably be expected to have a Material Adverse Effect; (b) do all things necessary to preserve its existence, qualifications, rights and franchises in all States where such qualification is necessary or desirable, except where failure to obtain the same could not reasonably be expected to have a Material Adverse Effect; (c) comply with all applicable Legal Requirements in respect of the conduct of its business and the ownership of its Property except where failure to so comply could not reasonably be expected to have a Material Adverse Effect; and (d) cause its Property to be protected, maintained and kept in good repair (reasonable wear and tear excepted) and make all replacements and additions to its Property as may be reasonably necessary to conduct its business.

     5.2 Financial Statements and Information. Furnish or caused to be furnished (which may be by electronic access) to the Agent each of the following: (a) as soon as available and in any event within 90 days after the end of each fiscal year of the Parent, Annual Audited Financial Statements of the Borrower and the Parent; (b) as soon as available and in any event within 50 days after the end of each quarter (except the last quarter) of each fiscal year of the Parent, Quarterly Unaudited Financial Statements of the Borrower and the Parent; (c) concurrently with the financial statements provided for in Sections 5.2(a) and (b) hereof, an Officer’s Certificate, together with such schedules, computations and other information (including, without limitation, if provided to Borrower information as to Unconsolidated Affiliates of the Borrower), in reasonable detail, as may be required by the Agent to demonstrate compliance with the covenants set forth herein or reflecting any non-compliance therewith as of the applicable date, all certified as true, correct and complete by a managing director, vice president, senior vice president, controller, a co-controller of Borrower and of the Parent; (d) promptly after the filing thereof, all reports to or filings made by the Parent or the Borrower or any of its Subsidiaries with the Securities and Exchange Commission, including, without limitation, registration statements and reports on Forms 10-K, 10-Q and 8-K (or their equivalents); (e) within two (2) Business Days after the receipt thereof, a copy of the notification to the Borrower or to the Parent of the respective Credit Rating of each, or change therein, and (f) such other information relating to the financial condition and affairs of the Borrower and the Parent as from time to time may be reasonably requested by any Lender. The Agent will send to each Lender the information received by the Agent pursuant to this Section 5.2 promptly after the receipt thereof by Agent. The financial calculations for Sections 5.3, 5.15 and 6.4 shall be made (1) on the date of each Loan or issuance, renewal or extension of a Letter of Credit using the best information available to the Borrower, and (2) on the last day of each of the Parent’s fiscal quarters.

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     5.3 Financial Tests. Have and maintain on a consolidated basis in accordance with Generally Accepted Accounting Principles:

          (a) a Secured Debt to Total Asset Value Ratio no greater than forty percent (40%);

          (b) a Coverage Ratio of not less than 2.0:1.0;

          (c) a Fixed Charge Coverage Ratio of not less than 1.75:1.00;

          (d) a Tangible Net Worth of at least Three Billion Five Hundred Million Dollars ($3,500,000,000.00); and

          (e) a Debt to Total Asset Value Ratio no greater than sixty percent (60%).

     5.4 Inspection. In order to permit the Agent to ascertain compliance with the Credit Documents, during normal business hours permit the Agent to inspect its Property, to examine its files, books and records and make and take away copies thereof, and to discuss its affairs with its officers and accountants, all at such times and intervals and to such extent as a Lender may reasonably desire.

     5.5 Further Assurances. Promptly execute and deliver any and all other and further instruments which may be requested by the Agent to cure any defect in the execution and delivery of any Credit Document or more fully to describe particular aspects of the Borrower’s agreements set forth in the Credit Documents or so intended to be.

     5.6 Books and Records. Maintain books of record and account in accordance with Generally Accepted Accounting Principles.

     5.7 Insurance. Maintain insurance with such insurers, on such of its properties, in such amounts and against such risks as is consistent with insurance maintained by businesses of comparable type and size in the industry, and furnish the Agent satisfactory evidence thereof promptly upon request.

     5.8 Notice of Certain Matters. Notify the Agent promptly upon acquiring knowledge of the occurrence of any of the following: the institution or threatened institution of any lawsuit or administrative proceeding affecting the Borrower in which the claim exceeds $25,000,000.00 and if determined adversely could have a Material Adverse Effect; when the Borrower believes that there has been a Material Adverse Change; or the occurrence of any Event of Default or any Default. The Borrower will notify the Agent in writing at least thirty (30) Business Days prior to the date that the Borrower changes its name or the location of its chief executive office or principal place of business or the place where it keeps its books and records.

     5.9 Use of Proceeds. The proceeds of the Loans will be used for general business purposes, including (without limitation) for acquisition of multifamily real estate

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properties, for the development and enhancement of multifamily real estate properties, for the costs of construction of multifamily real estate projects owned or to be acquired by the Borrower, for repurchase of the Borrower’s stock, or for other investments permitted by this Agreement. Notwithstanding the foregoing, none of the proceeds of the Loans will be used to finance, fund or complete any hostile acquisition of any Person.

     5.10 Expenses of and Claims Against the Agent and the Lenders. To the extent not prohibited by applicable law, the Borrower will pay all reasonable costs and expenses incurred to third parties and reimburse the Agent and each Lender, as the case may be, for any and all reasonable expenditures of every character incurred or expended from time to time, in connection with (a) regardless of whether a Default or Event of Default shall have occurred, the Agent’s preparation, negotiation and completion of the Credit Documents, and (b) during the continuance of an Event of Default, all costs and expenses relating to the Agent’s and such Lender’s exercising any of its rights and remedies under this or any other Credit Document, including, without limitation, attorneys’ fees, legal expenses, and court costs; provided, that no rights or option granted by the Borrower to the Agent or any Lender or otherwise arising pursuant to any provision of this or any other instrument shall be deemed to impose or admit a duty on the Agent or any Lender to supervise, monitor or control any aspect of the character or condition of any property or any operations conducted in connection with it for the benefit of the Borrower or any other person or entity other than the Agent or such Lender. Notwithstanding the foregoing, the Borrower shall not be charged with any cost or expense incurred by the Agent or any Lender relating to disputes or claims among or between the Agent, the Lenders, or any of them unless during the continuance of an Event of Default and related to details of enforcement of the Lenders’ rights under the Credit Documents.

     5.11 Legal Compliance; Indemnification.

          (a) The Borrower shall operate its Property and businesses in full compliance with all Legal Requirements. It shall not constitute an Event of Default if there is a failure to comply with any Legal Requirement which failure could not reasonably be expected to have a Material Adverse Effect. The Borrower shall indemnify the Agent and each Lender, their directors, officers, employees and shareholders (the “Indemnified Parties”) for and defend and hold the Indemnified Parties harmless against any and all claims, demands, liabilities, causes of action, penalties, obligations, damages, judgments, deficiencies, losses, costs or expenses (including, without limitation, interest, penalties, attorneys’ fees, and amounts paid in settlement) threatened or incurred by reason of, arising out of or in any way related to (i) any failure of the Borrower to so comply with the provisions of any Legal Requirement, this Agreement or the other Credit Documents, or (ii) the Agent or any Lender’s making of the Loans, issuing or participating in any Letters of Credit, or any other acts or omissions taken or made in connection with the Loans or Letters of Credit (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of the Letter of Credit), and any and all matters arising out of any act, omission, event or circumstance, regardless of whether the act, omission, event or circumstance constituted a violation of any such Legal Requirement, this Agreement or the

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other Credit Documents at the time of its existence or occurrence. THE BORROWER SHALL INDEMNIFY THE AGENT AND EACH LENDER PURSUANT TO THIS SECTION REGARDLESS OF WHETHER THE ACT, OMISSION, FACTS, CIRCUMSTANCES OR CONDITIONS GIVING RISE TO SUCH INDEMNIFICATION WERE CAUSED IN WHOLE OR IN PART BY THE AGENT’S OR SUCH LENDER’S NEGLIGENCE (SIMPLE, BUT NOT GROSS NEGLIGENCE).

          (b) The Parent will comply with all Legal Requirements to maintain, and will at all times elect, qualify as and maintain, its status as a real estate investment trust under Section 856(c)(1) of the Code.

          (c) The Parent will (i) maintain at least one class of common shares of the Parent having trading privileges on the New York Stock Exchange or the American Stock Exchange, or which is listed on The NASDAQ Stock Market’s National Market; (ii) own, directly or indirectly, at least fifty-one percent (51%) of (1) the shares of beneficial interest of the Borrower, and (2) the Class A-2 Common Units of the Borrower and any other class of security issued by the Borrower with the power to elect the Trustees of the Borrower; (iii) maintain management and control of the Borrower; (iv) not sell, transfer or convey any of the shares of beneficial interest of the Borrower owned by the Parent, except (A) in payment of the purchase price of Property (including mergers with and acquisitions of Persons) acquired by the Borrower, (B) upon conversion or redemption of securities of the Borrower in accordance with their terms or (C) upon any repurchase by the Borrower of the Borrower’s securities from the Parent in connection with a repurchase by the Parent of the Parent’s securities; and (v) hold all of its assets and conduct all of its operations through the Borrower, the QRS Entities in existence on October 31, 2001 and one or more of the Borrower’s Subsidiaries.

     5.12 Borrower’s Performance. If the Borrower should fail to comply with any of the agreements, covenants or obligations of the Borrower under this Agreement or any other Credit Document which requires the payment of money, then the Agent (in the Borrower’s name or in Agent’s name) may, if such payment has not been made within ten (10) days after written request from Agent, perform or cause to be performed such agreement, covenant or obligation, for the account of the Borrower and at the Borrower’s sole expense, but shall not be obligated to do so. Any and all reasonable expenses thus incurred or paid by the Agent and by any Lender shall be the Borrower’s demand obligations to the Agent or such Lender and shall bear interest from the date of demand therefor until the date that the Borrower repays it to the Agent or the applicable Lender at the Past Due Rate. Upon making any such payment or incurring any such expense, the Agent or the applicable Lender shall be fully subrogated to all of the rights of the Person receiving such payment. Any amounts owing by the Borrower to the Agent or any Lender pursuant to this provision or any other provision of this Agreement shall automatically and without notice be secured by any collateral provided by the Credit Documents. The amount and nature of any such expense and the time when paid shall, absent manifest error, be fully established by the affidavit of the Agent or the applicable Lender or any of the Agent’s or the applicable Lender’s officers or agents.

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     5.13 Professional Services. Promptly upon the Agent’s request to satisfy itself or the request of any Lender, the Borrower shall: (a) allow an inspection and/or appraisal of the Borrower’s Property to be made by a Person approved by the Agent in its sole discretion; and (b) if the Agent believes that an Event of Default has occurred or is about to occur, cause to be conducted or prepared any other written report, summary, opinion, inspection, review, survey, audit or other professional service relating to the Borrower’s Property or any operations in connection with it (all as designated in the Agent’s request), including, without limitation, any accounting, auctioneering, architectural, consulting, engineering, design, legal, management, pest control, surveying, title abstracting or other technical, managerial or professional service relating to such property or its operations. So long as no Event of Default has occurred and is continuing, the foregoing shall not be at the Borrower’s expense.

     5.14 Capital Adequacy.

          (a) If after the date of this Agreement, the Agent or any Lender shall have determined that the adoption or effectiveness of any applicable law, rule or regulation regarding capital adequacy of general applicability, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Agent or any Lender with any request or directive regarding capital adequacy of general applicability (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the Agent’s or any Lender’s capital as a consequence of its obligations hereunder to a level below that which the Agent or such Lender could have achieved but for such adoption, change or compliance (taking into consideration the Agent’s or such Lender’s policies with respect to capital adequacy) by an amount deemed by the Agent or such Lender to be material, then from time to time, the Borrower shall pay to the Agent or such Lender such additional amount or amounts as will compensate the Agent or such Lender for such reduction.

          (b) A certificate of the Agent or such Lender setting forth such amount or amounts as shall be necessary to compensate the Agent or such Lender as specified in Section 5.14(a) hereof and making reference to the applicable law, rule or regulation shall be delivered as soon as practicable to the Borrower and shall be prima facie evidence thereof. The Borrower shall pay the Agent or such Lender the amount shown as due on any such certificate within fourteen (14) Business Days after the Agent or such Lender delivers such certificate. In preparing such certificate, the Agent or such Lender may employ such assumptions and allocations of costs and expenses as it shall in good faith deem reasonable and may use any reasonable averaging and attribution method.

     5.15 Property Pool.

          (a) The Borrower (or a Subsidiary of the Borrower if the conditions in clause (c) below are satisfied) will at all times own fee simple title to a pool (the “Pool”) of Real Property that is not subject to any Lien other than Permitted Encumbrances (the “Pool Real Estate”) and except as permitted by Section 6.5 with an aggregate Pool Value of at

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least one hundred sixty-seven percent (167%) of the Borrower’s Indebtedness other than Secured Debt outstanding from time to time, with the following characteristics:

     (i) the Borrower must provide the Agent with written confirmation that it has received from third party independent environmental consultants, written assessments for each Pool Real Estate in, or to be added to, the Pool that do not disclose any material environmental conditions or risks related to such properties, and

     (ii) the Property is not subject to or affected by any Limiting Agreement.

If requested by the Agent, the Borrower will provide to the Agent written assessments from third party independent environmental consultants for all Pool Real Estate acquired after the date of this Agreement. If Super-Majority Lenders determine that there are material environmental conditions existing on or risks to such properties, the properties will be excluded from the Pool.

          (b) Notwithstanding the foregoing, (i) the maximum Pool Value that can be attributable to the Value of land not improved for multifamily use (not including land that is either under development or planned for commencement of development within three (3) years after the date of acquisition) is five percent (5%) of the Pool Value after adding the effect of said land, (ii) the maximum Pool Value that can be attributable to the Value (in the aggregate) of Real Property that is under construction or development, that has not reached the Calculation Date, that has reached the Calculation Date but the Occupancy Level is less than eighty percent (80%), unimproved land that is planned for commencement of development within three (3) years after the date of acquisition, and land not improved for multifamily use, is twenty percent (20%) of the Pool Value after adding the effect of said Real Property and land; and (iii) the maximum Pool Value that can be attributable to the Value of improved property not used for multifamily residential use (property will be considered as multifamily residential use even if it includes other non-primary uses which are incidental to the residential use, such as retail or office) is ten percent (10%) of the Pool Value after adding the effect of said property.

          (c) If any Pool Real Estate is owned by a Subsidiary, then it may be included in the Pool only if:

     (i) the owner of the Pool Real Estate is either (1) a wholly owned Subsidiary of the Borrower or (2) if not a wholly owned Subsidiary, then (x) the value of the Pool Real Estate owned by such Subsidiary (“Partial Subsidiary Real Estate”) to be used in the calculation in clauses (a) and (b) above shall be as provided in clauses (a) and (b) multiplied by the cumulative percentage interest of the Subsidiary legally owned by the Borrower, (y) the maximum Pool Value that can be attributable to Partial Subsidiary Real Estate is seventeen and one-half percent (17-1/2%) of the Pool Value after adding the effect of the Partial Subsidiary Real Estate, and (z) the Borrower controls the right to sell, encumber or refinance the Partial Subsidiary Real Estate;

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     (ii) the owner of the Pool Real Estate (1) either (x) executes a Guaranty and delivers it to the Agent, together with such Subsidiary’s Organizational Documents and current certificates of existence and good standing for the state in which it is organized and such Guaranty must remain in full force and effect, or (y) if such Subsidiary is not wholly owned by the Borrower, has no Indebtedness other than Non-recourse Debt, and other than Indebtedness to the Borrower subordinated to the Indebtedness incurred under this Agreement on terms satisfactory to the Agent; and (2) would not at any time be in default of Sections 7.1(g), (h), (i), (j), or (k), if said subsections were applicable to said owner; and

     (iii) the indicia of ownership of the Subsidiary is not subject to a Lien (other than Permitted Encumbrances).

     5.16 DC Holdings. The Borrower shall maintain at least 99.5% aggregate ownership of the indicia of ownership of each DC Holdings Entity, and shall maintain management and control of each DC Holdings Entity.

6. Negative Covenants.

     The Borrower covenants and agrees with the Agent and the Lenders that prior to the termination of this Agreement it will not do any of the following:

     6.1 Mergers, Consolidations and Acquisitions of Assets. In any single transaction or series of related transactions, directly or indirectly: (a) liquidate or dissolve; (b) be a party to any merger or consolidation other than a merger or consolidation in which (i) the Borrower is the surviving entity after such merger or consolidation, or (ii) the individuals constituting the Borrower’s Board of Trustees immediately prior to such merger or consolidation represent a majority of the surviving entity’s Board of Directors or Board of Trustees after such merger or consolidation; or (c) sell, convey or lease all or substantially all of its assets.

     6.2 Redemption. At any time redeem, retire or otherwise acquire, directly or indirectly, any shares of its capital stock if such action would cause the Borrower to not be in compliance with this Agreement.

     6.3 Nature of Business. Change the nature of its business or enter into any business which is substantially different from the business in which it is presently engaged. Borrower’s primary business will be the ownership, operation and development of multi-family residential properties, and may include other business initiatives, investments and activities which are related, but incidental, to Borrower’s primary business, subject only to the limitations on specific loans and investments described below (“Specified Permitted Holdings”); provided, however, that the aggregate value of the Specified Permitted Holdings shall not at any time exceed thirty percent (30%) of the Total Asset Value after giving effect to the Specified Permitted Holdings.

     “Specified Permitted Holdings” means the following:

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          (a) securities received in settlement of liabilities created in the ordinary course of business, so long as the market value of such securities does not exceed five percent (5%) of the Total Asset Value after giving effect to such investment;

          (b) investments in Unconsolidated Affiliates that are engaged primarily in Borrower’s primary business as described in this section, so long as the aggregate amount of such investments does not exceed twenty percent (20%) of the Total Asset Value after giving effect to such investments;

          (c) loans, advances, and extensions of credit to Persons (who are not Affiliates of the Borrower), so long as the aggregate unpaid amount of such loans does not exceed ten percent (10%) of the Total Asset Value after giving effect to such loans;

          (d) investments in Persons not included in any other Specified Permitted Holdings so long as the aggregate value of all such investments (valued at the lower of cost or then market value) does not exceed ten percent (10%) of the Total Asset Value after giving effect to such investments;

          (e) investments in income producing Real Property that is not primarily multifamily residential property (property will be considered as primarily multifamily residential property even if it includes other non-primary uses which are incidental to the residential use, such as retail or office), so long as the aggregate Historical Value of such investments does not exceed ten percent (10%) of the Total Asset Value after giving effect to such investments;

          (f) investments in land not improved for multifamily use (not including land that is either under development or planned for commencement of development within three (3) years after the date of acquisition), so long as the aggregate Historical Value of such investments does not exceed seven and one-half percent (7-1/2%) of the Total Asset Value after giving effect to such investments; and

          (g) investments of any kind not included in any other Specified Permitted Holdings and which are not incidental to Borrower’s primary business as described in this Section, so long as the aggregate value of such investments (valued at the lower of cost or then market value) does not exceed five percent (5%) of the Total Asset Value after giving effect to such investments.

     6.4 Transactions with Related Parties. Enter into any transaction or agreement with any officer, director, or holder of more than five percent (5%) (based on voting rights) of the issued and outstanding capital stock of the Borrower (or any Affiliate of the Borrower), unless the same is upon terms substantially similar to those obtainable from qualified wholly unrelated sources, and is approved by the majority of the Borrower’s non-interested directors.

     6.5 Limiting Agreements. Neither Borrower nor any of its Subsidiaries has entered into, and after the date hereof, neither Borrower nor any of its Subsidiaries shall enter into, any Limiting Agreements; provided that so long as the Borrower has received

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an S&P Rating and a Moody’s Rating that are BBB/Baa2 or better (respectively), up to five percent (5%) of the Pool Value (after adding the effect of said property) may be subject to debt-related agreements (but not the related mortgages or pledges) that require the owner of the project to mortgage and pledge the project to secure the debt if the Borrower’s S&P Rating and Moody’s Rating are below BBB-/Baa3 (respectively).

     6.6 Parent Negative Covenants. The Parent will not (a) have any Subsidiary that is a “qualified REIT subsidiary” under Section 856 of the Code other than the QRS Entities; (b) own any Property other than the ownership interests of the Borrower, and the Parent’s ownership interests as of October 31, 2001 in the QRS Entities; (c) give or allow any Lien on any of its Property including the ownership interests of the Borrower; and (d) create, incur, suffer or permit to exist, or assume or guarantee, directly or indirectly, contingently or otherwise, or become or remain liable with respect to (i) any Indebtedness if the aggregate of such Indebtedness and the Indebtedness of the Borrower would violate Sections 5.3(a), (b), (c) or (e) if such aggregate Indebtedness is treated as the Borrower’s Indebtedness, and (ii) any Indebtedness of a Person other than the Parent.

7. Events of Default and Remedies.

     7.1 Events of Default. If any of the following events shall occur, then, as to the events described in Sections 7.1(b), (c), and (d), if the event has not been waived, cured or remedied within twenty (20) days after the Agent gives the Borrower notice of such event, at any time thereafter, and as to all of the other events described herein, at any time, the Agent may do any or all of the following: (1) without notice to the Borrower, declare the Notes to be, and thereupon the Notes shall forthwith become, immediately due and payable, together with all accrued interest thereon, without notice of any kind, notice of acceleration or of intention to accelerate, presentment and demand or protest, all of which are hereby expressly waived; (2) without notice to the Borrower, terminate the Commitment; (3) exercise, as may any other Lender, its rights of offset against each account and all other Property of the Borrower in the possession of the Agent or any such Lender, which right is hereby granted by the Borrower to the Agent and each Lender; and (4) exercise any and all other rights pursuant to the Credit Documents:

          (a) The Borrower shall fail to pay or prepay any principal of or interest on the Notes, any reimbursement obligation in respect of an LC Disbursement, or any fee or any other obligation hereunder within five (5) days after it was due; or

          (b) The Borrower or any Guarantor shall (i) fail to pay when due (whether on the scheduled maturity date or otherwise), or within any applicable period of grace, any principal of or interest on (1) any other Indebtedness, other than Non-recourse Debt or Disqualified Stock, in excess of $35,000,000.00 in principal amount, or (2) Non-recourse Debt in excess of $50,000,000.00 in principal amount; or (ii) fail to comply with Section 1004 of the Indenture dated February 1, 1994 between the Borrower and Morgan Guaranty Trust Company of New York, as Trustee, as said Section 1004 may be amended with the consent of the Majority Lenders; or

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          (c) Any written representation or warranty made in any Credit Document by or on behalf of the Borrower, when taken as a whole shall prove to have been incorrect, false or misleading in any material respect; or

          (d) Default shall occur in the punctual and complete performance of any covenant of the Borrower or any other Person other than the Agent or the Lenders contained in any Credit Document not specifically set forth in this Section; or

          (e) A final judgment or judgments in the aggregate for the payment of money in excess of $35,000,000.00 shall be rendered against the Borrower or any Guarantor and the same shall remain undischarged for a period of thirty (30) days during which execution shall not be effectively stayed; or

          (f) The Borrower shall not be in compliance with any provision of Section 6.3 during the period covered by an Officer’s Certificate and such non-compliance remains in existence on the date the next Officer’s Certificate is required to be presented to the Agent under Section 5.2(c) of this Agreement; provided, however, that such right to defer compliance shall be available to the Borrower for each such provision no more than once every twelve (12) months; or

          (g) Any order shall be entered in any proceeding against the Borrower or any Guarantor decreeing the dissolution, liquidation or split-up thereof, and such order shall remain in effect for more than thirty (30) days; or

          (h) The Borrower or any Guarantor shall make a general assignment for the benefit of creditors or shall petition or apply to any tribunal for the appointment of a trustee, custodian, receiver or liquidator of all or any substantial part of its business, estate or assets or shall commence any proceeding under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect; or

          (i) Any such petition or application shall be filed or any such proceeding shall be commenced against the Borrower or any Guarantor and the Borrower or such Guarantor by any act or omission shall indicate approval thereof, consent thereto or acquiescence therein, or an order shall be entered appointing a trustee, custodian, receiver or liquidator of all or any substantial part of the assets of such Person or granting relief to such Person or approving the petition in any such proceeding, and such order shall remain in effect for more than ninety (90) days; or

          (j) The Borrower or any Guarantor shall fail generally to pay its debts as they become due or suffer any writ of attachment or execution or any similar process to be issued or levied against it or any substantial part of its Property which is not released, stayed, bonded or vacated within thirty (30) days after its issue or levy; or

          (k) The Borrower or any Guarantor shall have concealed, removed, or permitted to be concealed or removed, any part of its Property, with intent to hinder, delay or defraud its creditors or any of them, or made or suffered a transfer of any of its Property

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which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or shall have made any transfer of its Property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid.

     7.2 Remedies Cumulative. No remedy, right or power conferred upon the Agent or the Lenders is intended to be exclusive of any other remedy, right or power given hereunder or now or hereafter existing at law, in equity, or otherwise, and all such remedies, rights and powers shall be cumulative.

     7.3 Guaranty Proceeds.

          (a) Notwithstanding any other provision of any Credit Document to the contrary, any funds, claims, or distributions actually received by Agent for the account of any Lender as a result of the enforcement of, or pursuant to, any Guaranty, net of Agent’s and Lenders’ expenses of collection thereof (such net amount, “Guaranty Proceeds”), shall be made available for distribution equally and ratably (in proportion to the aggregate amount of principal, interest and other amounts then owed in respect of the Obligations or of an issuance of Public Debt (as defined below), as the case may be) among the Agent, the Lenders and the trustee or trustees of any Indebtedness not subordinated to the Obligations (or to the holders thereof), issued by Borrower, before or after the date of this Agreement, in offerings registered under the Securities Act of 1933, as amended, or in transactions exempt from registration pursuant to rule 144A thereof (“Public Debt”). Agent is hereby authorized by Borrower, by each Lender and by each Guarantor (by its execution and delivery of the Guaranty to which it is party) to make such Guaranty Proceeds so available. No Lender shall have any interest in any amount paid over by Agent to the trustee or trustees in respect of any Public Debt (or to the holders thereof) pursuant to the foregoing authorization. This Section 7.3(a) shall apply (i) solely to Guaranty Proceeds and not to any payments, funds, claims or distributions received by Agent or Lenders directly or indirectly from Borrower or any other Person other than from a Guarantor pursuant to a Guaranty, and (ii) as to Public Debt issued after December 20, 2000, only if the documents governing the Public Debt provide for the same sharing with the Lenders of guaranty proceeds recovered to pay the Public Debt. Borrower is aware of the terms of the Guaranty, and specifically understands and agrees with Agent and the Lenders that, to the extent Guaranty Proceeds are distributed to holders of Public Debt or their respective trustees, such Guarantor has agreed that the Obligations will not be deemed reduced by any such distributions, and each Guarantor shall continue to make payments pursuant to its Guaranty until such times as the Obligations have been paid in full (and the Commitment has been terminated and any LC Exposure reduced to zero), after taking into account any such distributions of Guaranty Proceeds in respect of Indebtedness other than the Obligations.

          (b) Nothing contained herein shall be deemed (i) to limit, modify, or alter the rights of Agent and Lenders under any Guaranty, (ii) to subordinate the Obligations to any Public Debt, or (iii) to give any holder of Public Debt (or any trustee for such holder) any rights of subrogation.

          (c) This Agreement and each Guaranty are for the sole benefit of Agent and the Lenders and their respective successors and assigns. Nothing contained herein or in

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any Guaranty shall be deemed for the benefit of any holder of Public Debt, or any trustee for such holder; nor shall anything contained herein or therein be construed to impose on Agent or Lenders any fiduciary duties, obligations or responsibilities to the holder of any Public Debt or their trustees (including, but not limited to, any duty to pursue any Guarantor for payment under its Guaranty).

8. The Agent.

     8.1 Appointment, Powers and Immunities.

          (a) Each Lender hereby irrevocably appoints and authorizes the Agent to act as its agent hereunder and under the other Credit Documents with such powers as are specifically delegated to the Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental thereto. The Agent (i) shall not have any duties or responsibilities except those expressly set forth in this Agreement and the other Credit Documents, and shall not by reason of this Agreement or any other Credit Document be a trustee for any Lender; (ii) shall not be responsible to any Lender for any recitals, statements, representations or warranties contained in this Agreement or any other Credit Document, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Credit Document, or for the value, validity, effectiveness, genuineness, enforceability, execution, filing, registration, collectibility, recording, perfection, existence or sufficiency of this Agreement or any other Credit Document or any other document referred to or provided for herein or therein or any property covered thereby or for any failure by any Party or any other Person to perform any of its obligations hereunder or thereunder, and shall not have any duty to inquire into or pass upon any of the foregoing matters; (iii) shall not be required to initiate or conduct any litigation or collection proceedings hereunder or any other Credit Document except to the extent requested by the Majority Lenders; (iv) SHALL NOT BE RESPONSIBLE FOR ANY MISTAKE OF LAW OR FACT OR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY IT HEREUNDER OR UNDER ANY OTHER CREDIT DOCUMENT OR ANY OTHER DOCUMENT OR INSTRUMENT REFERRED TO OR PROVIDED FOR HEREIN OR THEREIN OR IN CONNECTION HEREWITH OR THEREWITH, INCLUDING, WITHOUT LIMITATION, PURSUANT TO ITS OWN NEGLIGENCE, BUT NOT INCLUDING AND EXCEPT FOR THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT; (v) shall not be bound by or obliged to recognize any agreement among or between the Borrower, the Agent, and any Lender other than this Agreement and the other Credit Documents, regardless of whether the Agent has knowledge of the existence of any such agreement or the terms and provisions thereof; (vi) shall not be charged with notice or knowledge of any fact or information not herein set out or provided to the Agent in accordance with the terms of this Agreement or any other Credit Document; (vii) shall not be responsible for any delay, error, omission or default of any mail, telegraph, cable or wireless agency or operator, and (viii) shall not be responsible for the acts or edicts of any Governmental Authority. The Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care.

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          (b) Without the prior written consent of Agent and all of the Lenders, Agent shall not (i) modify or amend in any respect whatsoever the interest rate provisions of the Credit Documents, (ii) increase the Commitment above $600,000,000.00 (provided that an increase requested in accordance with Section 2.1(d) must only be approved by the Lenders that are increasing their Commitments), (iii) extend the Maturity Date other than in accordance with the express provisions of the Credit Documents, (iv) extend or reduce the due date for, or change the amount of, the scheduled payments of principal or interest on the Loans, the LC Disbursements or the fees set forth in Section 2.7, (v) amend the definitions of Majority Lenders or Super-Majority Lenders or any requirement that certain actions be taken only with the consent of a certain number of the Lenders, (vi) amend or waive any provisions of Section 5.15 of this Agreement or (vii) release any Subsidiary from a Guaranty required under and delivered pursuant to Section 5.15, unless the Guaranty is no longer required pursuant to Section 5.15. From time to time upon Agent’s request, each Lender shall execute and deliver such documents and instruments as may be reasonably necessary to enable Agent to effectively administer and service the Loan in its capacity as lead lender and servicer and in the manner contemplated by the provisions of this Agreement.

          (c) Without the prior written consent of the Super-Majority Lenders, Agent shall not modify, amend or waive in any respect whatsoever the provisions of (i) Section 5.3 or the definitions of the financial covenants (or any component thereof) described in Section 5.3 (any modification, amendment or waiver of the provisions of, or definitions relating to, Section 5.3(e) must also be approved by the Agent, the Syndication Agents and the Documentation Agents), (ii) Section 5.11(c)(i), or (iii) Section 6.1.

          (d) All information provided to the Agent under or pursuant to the Credit Documents, and all rights of the Agent to receive or request information, or to inspect information or Property, shall be by the Agent on behalf of the Lenders. If any Lender requests that it be able to receive or request such information, or make such inspections, in its own right rather than through the Agent, the Borrower will cooperate with the Agent and such Lender in order to obtain such information or make such inspection as such Lender may reasonably require.

          (e) The Borrower shall be entitled to rely upon a written notice or a written response from the Agent as being pursuant to concurrence or consent of the Majority Lenders or the Super-Majority Lenders unless otherwise expressly stated in the Agent’s notice or response.

     8.2 Reliance. The Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, facsimile, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel (which may be counsel for the Borrower), independent accountants and other experts selected by the Agent. The Agent shall not be required in any way to determine the identity or authority of any Person delivering or executing the same. As to any matters not expressly provided for by this Agreement or any other Credit Document, the Agent shall in

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all cases be fully protected in acting, or in refraining from acting, hereunder and thereunder in accordance with instructions of the Majority Lenders, and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. If any order, writ, judgment or decree shall be made or entered by any court affecting the rights, duties and obligations of the Agent under this Agreement or any other Credit Document, then and in any of such events the Agent is authorized, in its sole discretion, to rely upon and comply with such order, writ, judgment or decree which it is advised by legal counsel of its own choosing is binding upon it under the terms of this Agreement, the relevant Credit Document or otherwise; and if the Agent complies with any such order, writ, judgment or decree, then it shall not be liable to any Lender or to any other Person by reason of such compliance even though such order, writ, judgment or decree may be subsequently reversed, modified, annulled, set aside or vacated.

     8.3 Defaults. The Agent shall not be deemed to have constructive knowledge of the occurrence of a Default (other than the non-payment of principal of or interest on Loans) unless it has received notice from a Lender or the Borrower specifying such Default and stating that such notice is a “Notice of Default”. In the event that the Agent receives such a notice of the occurrence of a Default, or whenever the Agent has actual knowledge of the occurrence of a Default, the Agent shall give prompt written notice thereof to the Lenders (and shall give each Lender prompt notice of each such non-payment). The Agent shall (subject to Section 8.7 hereof) take such action with respect to such Default as shall be directed by the Majority Lenders and within its rights under the Credit Documents and at law or in equity, provided that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, permitted hereby with respect to such Default as it shall deem advisable in the best interests of the Lenders and within its rights under the Credit Documents in order to preserve, protect or enhance the collectibility of the Loans, at law or in equity.

     8.4 Rights as a Lender. With respect to the Commitment and the Loans made, Agent, in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting in its agency capacity, and the term “Lender” or “Lenders” shall, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent may (without having to account therefor to any other Lender) as a Lender, and to the same extent as any other Lender, accept deposits from, lend money to and generally engage in any kind of banking, trust, letter of credit, agency or other business with the Borrower (and any of its Affiliates) as if it were not acting as the Agent but solely as a Lender. The Agent may accept fees and other consideration from the Borrower (in addition to the fees heretofore agreed to between the Borrower and the Agent) for services in connection with this Agreement or otherwise without having to account for the same to the Lenders.

     8.5 Indemnification. The Lenders agree to indemnify the Agent, its officers, directors, agents and Affiliates, ratably in accordance with each Lender’s respective Percentage, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever (INCLUDING BUT NOT LIMITED TO, THE CONSEQUENCES OF THE

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NEGLIGENCE OF THE AGENT) which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement or any other Credit Document or any other documents contemplated by or referred to herein or therein, or the transactions contemplated hereby or thereby (including, without limitation, interest, penalties, reasonable attorneys’ fees and amounts paid in settlement in accordance with the terms of this Section 8, but excluding, unless a Default has occurred and is continuing, normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents, INCLUDING BUT NOT LIMITED TO THE NEGLIGENCE OF THE AGENT, provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the party to be indemnified, or from the Agent’s default in the express obligations of the Agent to the Lenders provided for in this Agreement. The obligations of the Lenders under this Section 8.5 shall survive the termination of this Agreement and the repayment of the Obligations.

     8.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it has received current financial information with respect to the Borrower and that it has, independently and without reliance on the Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and decision to enter into this Agreement and that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Credit Documents. The Agent shall not be required to keep itself informed as to the performance or observance by any Party of this Agreement or any of the other Credit Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of the Borrower or any Party except as specifically required by the Credit Documents. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Agent hereunder or the other Credit Documents, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower or any other Party (or any of their affiliates) which may come into the possession of the Agent. Each Lender assumes all risk of loss in connection with its Percentage in the Loans to the full extent of its Percentage therein. The Agent assumes all risk of loss in connection with its Percentage in the Loans to the full extent of its Percentage therein.

     8.7 Failure to Act. Except for action expressly required of the Agent, as the case may be, hereunder, or under the other Credit Documents, the Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction by the Lenders of their indemnification obligations under Section 8.5 hereof against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.

     8.8 Resignation of Agent. Subject to the appointment and acceptance of a successor Agent as provided below, the Agent may resign at any time by giving notice thereof to the Lenders and the Borrower. The Agent shall resign if it has assigned all of its

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Lender Commitment and Loans and is not an Issuing Bank. Upon any such resignation, (i) the Majority Lenders with the consent of the Borrower, so long as no Default is in existence, shall have the right to appoint a successor Agent so long as such successor Agent is also a Lender at the time of such appointment and (ii) the Majority Lenders shall have the right to appoint a successor Agent that is not a Lender at the time of such appointment so long as the Borrower consents to such appointment (which consent shall not be unreasonably withheld). If no successor Agent shall have been so appointed by the Majority Lenders and accepted such appointment within 30 days after the retiring Agent’s giving of notice of resignation, then the retiring Agent may, on behalf of the Lenders, and with the consent of the Borrower which shall not be unreasonably withheld, appoint a successor Agent. Any successor Agent shall be a bank which has an office in the United States and a combined capital and surplus of at least $500,000,000.00. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations as Agent thereafter arising hereunder and under any other Credit Documents, but shall not be discharged from any liabilities for its actions as Agent prior to the date of discharge. Such successor Agent shall promptly specify by notice to the Borrower its principal office referred to in Section 2.1 and Section 2.3 hereof. After any retiring Agent’s resignation hereunder as Agent, the provisions of this Section 8 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent.

     8.9 No Partnership. Neither the execution and delivery of this Agreement nor any of the other Credit Documents nor any interest the Lenders, the Agent or any of them may now or hereafter have in all or any part of the Obligations shall create or be construed as creating a partnership, joint venture or other joint enterprise between the Lenders or among the Lenders and the Agent. The relationship between the Lenders, on the one hand, and the Agent, on the other, is and shall be that of principals and agent only, and nothing in this Agreement or any of the other Credit Documents shall be construed to constitute the Agent as trustee or other fiduciary for any Lender or to impose on the Agent any duty, responsibility or obligation other than those expressly provided for herein and therein.

9. Renewal and Extension.

     9.1 Procedure for Renewal and Extension. The Borrower may extend the Maturity Date one (1) time by one (1) year by executing and delivering to the Agent a written request for extension (the “Extension Request”) at least thirty (30) days (but not more than ninety (90) days) prior to the Maturity Date.

     9.2 Conditions to Renewal and Extension. The extension of the Maturity Date under Section 9.1 of this Agreement shall be conditioned upon, among other things, the following terms and conditions (which shall be in addition to those required by Sections 2.7, 3 and 9.1 of this Agreement):

          (a) Execution by the Borrower of a renewal and extension agreement for each Note in Proper Form.

56

          (b) No Default must be in existence on the date of the Extension Request or on the Maturity Date (before extension).

          (c) Payment of the extension fee as set forth in Section 2.7(b).

          (d) Such other documents, instruments and items as Agent or any Lender shall reasonably require to document extension.

10. Miscellaneous.

     10.1 No Waiver, Amendments. No waiver of any Default shall be deemed to be a waiver of any other Default. No failure to exercise or delay in exercising any right or power under any Credit Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power preclude any further or other exercise thereof or the exercise of any other right or power. Except as may be prohibited by Section 8.1 hereof, no amendment, modification or waiver of any Credit Document shall be effective unless the same is in writing and signed by the Borrower and the Majority Lenders. No notice to or demand on the Borrower or any other Person shall entitle the Borrower or any other Person to any other or further notice or demand in similar or other circumstances.

     10.2 Notices. All notices under the Credit Documents shall be in writing and either (i) delivered against receipt therefor, or (ii) mailed by registered or certified mail, return receipt requested, in each case addressed as set forth herein, or to such other address as a party may designate. Notices shall be deemed to have been given (whether actually received or not) when delivered (or, if mailed, on the next Business Day). Provided, however, that as between the Agent and the Lenders and among the Lenders, notice may be given by telecopy or facsimile effective upon the earlier of actual receipt or confirmation of receipt by telephone.

     10.3 Venue. HARRIS COUNTY, TEXAS SHALL BE A PROPER PLACE OF VENUE TO ENFORCE PAYMENT OR PERFORMANCE OF THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS, UNLESS THE AGENT SHALL GIVE ITS PRIOR WRITTEN CONSENT TO A DIFFERENT VENUE. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS IN THE STATE OF TEXAS AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY PROCEEDING ARISING OUT OF ANY OF THE CREDIT DOCUMENTS BY SERVICE OF PROCESS AS PROVIDED BY TEXAS LAW. THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY OF THE CREDIT DOCUMENTS IN THE DISTRICT COURTS OF HARRIS COUNTY, TEXAS, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION, AND HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIMS THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH

57

COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE BORROWER (A) AGREES TO DESIGNATE AND MAINTAIN AN AGENT FOR SERVICE OF PROCESS IN THE STATE OF TEXAS IN CONNECTION WITH ANY SUCH SUIT, ACTION OR PROCEEDING AND TO DELIVER TO THE AGENT EVIDENCE THEREOF AND (B) IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY NOTICE GIVEN AS PROVIDED FOR IN THIS AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR THE LENDERS TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY APPLICABLE LAW. THE BORROWER HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST THE AGENT OR ANY LENDER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER CREDIT DOCUMENTS SHALL BE BROUGHT AND MAINTAINED IN THE DISTRICT COURTS OF HARRIS COUNTY, TEXAS, OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION.

     10.4 Choice of Law. THIS AGREEMENT, THE NOTES AND THE OTHER CREDIT DOCUMENTS HAVE BEEN NEGOTIATED, EXECUTED AND DELIVERED IN THE STATE OF TEXAS AND SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, INCLUDING ALL APPLICABLE FEDERAL LAW, FROM TIME TO TIME IN FORCE IN THE STATE OF TEXAS.

     10.5 Survival; Parties Bound; Successors and Assigns.

          (a) All representations, warranties, covenants and agreements made by or on behalf of the Borrower in connection herewith shall survive the execution and delivery of the Credit Documents, shall not be affected by any investigation made by any Person, and shall bind the Borrower and its successors, trustees, receivers and assigns and inure to the benefit of the successors and assigns of the Agent and the Lenders (including any Affiliate of the Issuing Bank that issues any Letter of Credit); provided, however, that (i) the Borrower may not assign or transfer any of its rights or obligations hereunder without the prior written consent of the Agent and all of the Lenders, and any such assignment or transfer without such consent shall be null and void, and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Affiliates of each of the Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

          (b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees all or a portion of its rights and obligations

58

under this Agreement (including all or a portion of its Lender Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:

     (A) the Borrower, provided that no consent of the Borrower shall be required if a Default has occurred and is continuing; and

     (B) the Agent.

          (ii) Assignments shall be subject to the following additional conditions:

     (A) except in the case of an assignment of the entire remaining amount of the assigning Lender’s Lender Commitment or Loans, the amount of the Lender Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Agent) shall not be less than $10,000,000 unless each of the Borrower and the Agent otherwise consent, provided that no such consent of the Borrower shall be required if a Default has occurred and is continuing;

     (B) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement;

     (C) the parties to each assignment shall execute and deliver to the Agent an Assignment and Assumption, together with a processing and recordation fee paid by the assigning Lender of $2,500; and

     (D) the assignee, if it shall not be a Lender, shall deliver to the Agent an Administrative Questionnaire.

          For the purposes of this Section 10.5, the term “Approved Fund” has the following meaning:

          “Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

          (iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this Section, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and

59

Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.5, 5.10, 5.11 and 10.7). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.

          (iv) The Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices, a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Lender Commitment of, and principal amount of the Loans owing to each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and Borrower, Agent, and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

          (v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

          (c) A Lender may sell participating interests to an Affiliate of the participating lender with written notice to the Agent and the Borrower but not any consent of the Agent, the Borrower or any other Lender, and may sell participating interests in any of its Loans to an Approved Fund so long as such participation shall (1) limit the voting rights of the participant, if any, to the ability to vote for changes in the amount of the Commitment, the interest rate on the Loans, and the Maturity Date, (2) for the Committed Loans, if the participant is not an Affiliate of the participating Lender, require the written consent of the Borrower (so long as no Default is in existence) and the Agent, such consent not to be unreasonably withheld, (3) for Committed Loans be in a minimum principal amount of at least $10,000,000.00 if participated to a Person not already a Lender, and (4) not reduce the Lender’s Lender Commitment which has not been participated to less than $10,000,000.00. In connection with any sale of a participating interest made in compliance with this Agreement, (i) the participating Lender shall continue to be liable for its Lender Commitment and its other obligations under the Credit Documents, (ii) the Agent, the Borrower and the other Lenders shall continue to deal solely and directly with the participating Lender in connection with such Lender’s rights and obligations under the Credit Documents, and (iii) the participant may not require the participating Lender to take or refrain from taking any action under the Credit Documents that is in conflict with the terms and provisions of the Credit Documents.

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          (d) Notwithstanding any provision hereof to the contrary, (i) any Lender may assign and pledge all or any portion of its Lender Commitment and Loans to a Federal Reserve Bank; provided, however, that any such assignment or pledge shall not relieve such Lender from its obligations under the Credit Documents; (ii) the Agent may not assign or participate its Lender Commitment so that its Lender Commitment after such assignment or participation is less than $15,000,000.00, to any Person other than an Affiliate of the Agent without the prior written consent of the Borrower, so long as no Default is in existence; and (iii) JPMC may assign, sell or participate all or any portion of the Swing Loan without the consent of the Borrower, the Agent or any other Lender.

          (e) The term of this Agreement shall be until the final maturity of the Notes and the payment of all amounts due under the Credit Documents.

          (f) Any Lender (each, a “Designating Lender”) may at any time designate one Designated Lender to fund Money Market Loans on behalf of such Designating Lender subject to the terms of this Section 10.5(f), and the provisions in Sections 10.5(b) and (c) shall not apply to such designation. No Lender may designate more than one (1) Designated Lender. The parties to each such designation shall execute and deliver to the Agent for its acceptance a Designation Agreement. Upon such receipt of an appropriately completed Designation Agreement executed by a Designating Lender and a designee representing that it is a Designated Lender, the Agent will accept such Designation Agreement and will give prompt notice thereof to the Borrower, whereupon, (i) the Borrower shall execute and deliver to the Designating Lender a Designated Lender Note payable to the order of the Designated Lender, (ii) from and after the effective date specified in the Designation Agreement, the Designated Lender shall become a party to this Agreement with a right (subject to the provisions of Section 2.8(b)) to make Money Market Loans on behalf of its Designating Lender pursuant to Section 2.8 after the Borrower has accepted a Money Market Loan (or portion thereof) of the Designating Lender, and (iii) the Designated Lender shall not be required to make payments with respect to any obligations in this Agreement except to the extent of excess cash flow of such Designated Lender which is not otherwise required to repay obligations of such Designated Lender which are then due and payable; provided, however, that regardless of such designation and assumption by the Designated Lender, the Designating Lender shall be and remain obligated to the Borrower, Agent and the Lenders for each and every obligation of the Designating Lender and its related Designated Lender with respect to this Agreement, including, without limitation, any indemnification obligations under Section 8.5 hereof and any sums otherwise payable to the Borrower by the Designated Lender. Each Designating Lender shall serve as the administrative agent of the Designated Lender and shall on behalf of, and to the exclusion of, the Designated Lender: (1) receive any and all payments made for the benefit of the Designated Lender and (2) give and receive all communications and notices and take all actions hereunder, including, without limitation, votes, approvals, waivers, consents and amendments under or relating to this Agreement and the other Credit Documents. Any such notice, communication, vote, approval, waiver, consent or amendment shall be signed by the Designating Lender as administrative agent for the Designated Lender and shall not be signed by the Designated Lender on its own behalf, and shall be binding upon the Designated Lender to the same extent as if signed by the Designated Lender on its own

61

behalf. The Borrower, the Agent and the Lenders may rely thereon without any requirement that the Designated Lender sign or acknowledge the same. No Designated Lender may assign or transfer all or any portion of its interest hereunder or under any other Credit Document, other than assignments to the Designating Lender which originally designated such Designated Lender or otherwise in accordance with the provisions of Sections 10.5(b) and (c). The Agent and each Lender agrees that it will not institute against any Designated Lender or join any other Person in instituting against any Designated Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any federal or state bankruptcy or similar law, until the later to occur of (x) one year and one day after the payment in full of the latest maturing commercial paper note issued by such Designated Lender and (y) the Maturity Date.

     10.6 Counterparts. This Agreement may be executed in several identical counterparts, and by the parties hereto on separate counterparts, and each counterpart, when so executed and delivered, shall constitute an original instrument, and all such separate counterparts shall constitute but one and the same instrument.

     10.7 Usury Not Intended; Refund of Any Excess Payments. It is the intent of the parties in the execution and performance of this Agreement to contract in strict compliance with the usury laws of the State of Texas and the United States of America from time to time in effect. In furtherance thereof, the Agent, the Lenders and the Borrower stipulate and agree that none of the terms and provisions contained in this Agreement or the other Credit Documents shall ever be construed to create a contract to pay for the use, forbearance or detention of money with interest at a rate in excess of the Ceiling Rate and that for purposes hereof “interest” shall include the aggregate of all charges which constitute interest under such laws that are contracted for, reserved, taken, charged or received under this Agreement. In determining whether or not the interest paid or payable, under any specific contingency, exceeds the Ceiling Rate, the Borrower, the Agent and the Lenders shall, to the maximum extent permitted under applicable law, (a) characterize any nonprincipal payment as an expense, fee or premium rather than as interest, (b) exclude voluntary prepayments and the effects thereof, and (c) “spread” the total amount of interest throughout the entire contemplated term of the Loans. The provisions of this paragraph shall control over all other provisions of the Credit Documents which may be in apparent conflict herewith.

     10.8 Captions. The headings and captions appearing in the Credit Documents have been included solely for convenience and shall not be considered in construing the Credit Documents.

     10.9 Severability. If any provision of any Credit Documents shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions shall not be affected or impaired thereby.

     10.10 Disclosures. Every reference in the Credit Documents to disclosures of the Borrower to the Agent and the Lenders in writing, to the extent that such references refer to disclosures at or prior to the execution of this Agreement, shall be deemed strictly to

62

refer only to written disclosures delivered to the Agent and the Lenders in an orderly manner concurrently with the execution hereof.

     10.11 No Novation. THE PARTIES HERETO HAVE ENTERED INTO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS SOLELY TO AMEND, RESTATE AND RESTRUCTURE THE TERMS OF, AND THE OBLIGATIONS OWING UNDER AND IN CONNECTION WITH, THE CREDIT AGREEMENT DATED DECEMBER 20, 2000 AMONG THE BORROWER, THE AGENT AND CERTAIN OF THE LENDERS. THE PARTIES DO NOT INTEND THIS AGREEMENT NOR THE TRANSACTIONS CONTEMPLATED HEREBY TO BE, AND THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL NOT BE CONSTRUED TO BE, A NOVATION OF ANY OF THE OBLIGATIONS OWING BY THE BORROWER UNDER OR IN CONNECTION WITH THE SAID CREDIT AGREEMENT.

     10.12 Limitation of Liability. NO OBLIGATION OR LIABILITY WHATSOEVER OF THE BORROWER WHICH MAY ARISE AT ANY TIME UNDER THIS AGREEMENT OR ANY OBLIGATION OR LIABILITY WHICH MAY BE INCURRED BY IT PURSUANT TO ANY OTHER CREDIT DOCUMENT SHALL BE PERSONALLY BINDING UPON, NOR SHALL RESORT FOR THE ENFORCEMENT THEREOF BE HAD TO THE PRIVATE PROPERTY OF, ANY OF THE BORROWER’S TRUSTEES OR SHAREHOLDERS REGARDLESS OF WHETHER SUCH OBLIGATION OR LIABILITY IS IN THE NATURE OF CONTRACT, TORT OR OTHERWISE.

     10.13 Entire Agreement. THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS TOGETHER CONSTITUTE A WRITTEN AGREEMENT AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth above.

ARCHSTONE-SMITH OPERATING TRUST

By:

Name:

Title:

Address:

9200 E. Panorama Circle

Suite 400

Englewood, Colorado 80112

Attention: Corporate Finance

The Parent joins in the execution of this Agreement to evidence its agreement to the provisions of Sections 5.2, 5.11(b) and (c), and 6.6 of this Agreement.

ARCHSTONE – SMITH TRUST

By:

Name:

Title:

64

Lender Commitment: $35,000,000.00	JPMORGAN CHASE BANK,
Percentage: 5.833333333%	as Agent and as a Lender
	By:
	Name:
	Title:
	Address:
	712 Main Street
	Houston, Texas 77002
	Attention: Manager, Real Estate Group
	Telecopy No.: 713/216-7713
	Telephone No.: Kent Kaiser
		713/216-8699

65

Lender Commitment: $30,000,000.00	CITICORP NORTH AMERICA, INC.
Percentage: 5.000000000%
	By:
	Name:
	Title:
	By:
	Name:
	Title:
	Address:
	390 Greenwich Street
	New York, New York 10013
	Attention: Mr. Michael Chlopak
	Telephone No.: 212/723-5899
	Telecopier No.: 212/723-8380

66

Lender Commitment: $35,000,000.00	BANK OF AMERICA, N.A.
Percentage: 5.833333333%
	By:
	Name:
	Title:
	Address:
	901 Main Street, 64th Floor
	Dallas, Texas 75202
	Attention: Charlotte Wai Deinhart
	Telephone No.: 214/209-9129
	Telecopier No.: 214/209-0995

67

Lender Commitment: $35,000,000.00	WELLS FARGO BANK, NATIONAL
Percentage: 5.833333333%	ASSOCIATION
	By:
	Name:
	Title:
	Address:
	4643 S. Ulster Street
	Suite 1400
	Denver, Colorado 80237
	Attention: Martia Kontak
	Telephone No.: 303/741-0800 X208
	Telecopy No.: 303/741-0867

68

Lender Commitment: $35,000,000.00	COMMERZBANK AG, NEW YORK
Percentage: 5.833333333%	BRANCH
	By:
	Name:
	Title:
	By:
	Name:
	Title:
	Address:
	Commerzbank AG, New York Branch
	2 World Financial Center
	New York, New York 10281-1050
	Attention: David Schwarz
	Telephone No.: 212/266-7632
	Telecopy No.: 212/266-7565

69

Lender Commitment: $20,000,000.00	MELLON BANK, N.A.
Percentage: 3.333333333%
	By:
	Name:
	Title:
	Address:
	One Mellon Bank Center, Room 5325
	Pittsburgh, PA 15258-0001
	Attention: James McDunn
	Telephone No.: 412/234-5344
	Telecopy No.:412/234-8657

70

Lender Commitment: $26,000,000.00	SOUTHTRUST BANK
Percentage: 4.333333333%
	By:
	Name:
	Title:
	Address:
	600 West Peachtree, Suite 2600
	Atlanta, Georgia 30308
	Attention: Jim Miller
	Telephone No.: 404/532-5259
	Telecopy No.: 404/532-5280

71

Lender Commitment: $30,000,000.00	SUNTRUST BANK
Percentage: 5.000000000%
	By:
	Name:
	Title:
	Address:
	8245 Boone Blvd., Suite 820
	Vienna, Virginia 22182
	Attention: Gregory T. Horstman
	Telephone No.: 703/902-9384
	Telecopy No.: 703/902-9245

72

Lender Commitment: $35,000,000.00	BANK ONE, NA
Percentage: 5.833333333%
	By:
	Name:
	Title:
	By:
	Name:
	Title:
	Address:
	Corporate Real Estate
	One Bank One Plaza, Suite IL1-0315
	Chicago, Illinois 60670-0374
	Attention: Angela L. Kleiman
	Telephone No.: 312/325-3120
	Telecopy No.: 312/325-3122

73

Lender Commitment: $26,000,000.00	UNION BANK OF CALIFORNIA, N.A.
Percentage: 4.333333333%
	By:
	Name:
	Title:
	Address:
	350 California Street, 7th Floor
	San Francisco, California 94120
	Attention: Karen Kokame
	Telephone No.: 415/705-7116
	Telecopy No.: 415/433-7438

74

Lender Commitment: $30,000,000.00	KEYBANK NATIONAL ASSOCIATION
Percentage: 5.000000000%
	By:
	Name:
	Title:
	Address:
	1675 Broadway, Suite 400
	Denver, Colorado 80202
	Attention:	Scott Childs and Cheryl
		Van Klompenberg
	Telephone No.: 720/904-4407/4441
	Telecopy No.: 720/904-4410/4420

75

Lender Commitment: $26,000,000.00	CITIZENS BANK OF MASSACHUSETTS
Percentage: 4.333333333%
	By:
	Name:
	Title:
	Address:
	One Citizens Plaza (RC0440)
	Providence, Rhode Island 02903
	Attention: Craig E. Schermerhorn
	Telephone No.: 401/455-5425
	Telecopy No.: 401/282-4485

76

Lender Commitment: $30,000,000.00	PNC BANK, NATIONAL ASSOCIATION
Percentage: 5.000000000%
	By:
	Name:
	Title:
	Address:
	One PNC Plaza, 19th Floor
	Mail Stop PL-POPP-19-2
	Pittsburgh, Pennsylvania 15222
	Attention: Paul Jamiolkowski
	Telephone No.: 412/768-3928
	Telecopy No.: 412/762-6500

77

Lender Commitment: $25,000,000.00	U.S. BANK NATIONAL ASSOCIATION
Percentage: 4.166666667%
	By:
	Name:
	Title:
	Address:
	918 17th Street, 5th Floor
	Denver, Colorado 80203
	Attention: Leanne Toler
	Telephone No.: 303/585-4172
	Telecopy No.: 303/585-4199

78

Lender Commitment: $10,000,000.00	SCOTIABANC, INC.
Percentage: 1.666666667%
	By:
	Name:
	Title:
	Address:
	600 Peachtree Street, Suite 2700
	Atlanta, Georgia 30308
	Attention: Bill Zarrett
	Telephone No.: 404/877-1504
	Telecopy No.: 404/888-8998

Lender Commitment: $20,000,000.00	THE BANK OF NOVA SCOTIA
Percentage: 3.333333333%
	By:
	Name:
	Title:
	Address:
	580 California Street, Suite 2100
	San Francisco, California 94104
	Attention: Abid Gilani
	Telephone No.: 415/816-9800
	Telecopy No.: 415/397-0791

79

Lender Commitment: $26,000,000.00	MANUFACTURERS AND TRADERS
Percentage: 4.333333333%	TRUST COMPANY
	By:
	Name:
	Title:
	Address:
	Mail Code 101-747
	25 South Charles Street, 17th Floor
	Baltimore, Maryland 21201
	Attention: Ken Crawford
	Telephone No.: 410/545-2369
	Telecopy No.: 410/545-2017

80

Lender Commitment: $26,000,000.00	MORGAN STANLEY BANK
Percentage:   4.333333333%
	By:
	Name:
	Title:
	Address:
	750 Seventh Avenue, 11th Floor
	New York, New York 10020
	Attention: Christopher Whelan
	Telephone No.: 212/762-2929
	Telecopy No.: 212/762-0346

81

Lender Commitment: $25,000,000.00	LASALLE BANK NATIONAL
Percentage: 4.166666667%	ASSOCIATION
	By:
	Name:
	Title:
	Address:
	135 South LaSalle Street
	Chicago, Illinois 60603
	Attention: Jay Palmer
	Telephone No.: 312/904-7211
	Telecopy No.: 312/904-6691

82

Lender Commitment: $20,000,000.00	BANK OF CHINA, NEW YORK BRANCH
Percentage: 3.333333333%
	By:
	Name:
	Title:
	Address:
	410 Madison Avenue
	New York, New York 10017
	Attention: Joseph Zeng
	Telephone No.: 212/935-3101 X408
	Telecopy No.: 212/308-4993

83

Lender Commitment: $20,000,000.00	LEHMAN BROTHERS BANK, FSB
Percentage: 3.333333333%
	By:
	Name:
	Title:
	Address:
	745 Seventh Avenue, 6th Floor
	New York, New York 10019
	Attention: Jane Gillard
	Telephone No.: 212/526-7417
	Telecopy No.: 646/758-2538

84

Lender Commitment: $15,000,000.00	COMPASS BANK
Percentage: 2.500000000%
	By:
	Name:
	Title:
	Address:
	15 South 20th Street, 15th Floor
	Birmingham, Alabama 35233
	Attention: Johanna Duke Paley
	Telephone No.: 205/297-3851
	Telecopy No.: 205/297-7994

85

Lender Commitment: $10,000,000.00	CHEVY CHASE BANK, F.S.B.
Percentage:   1.666666667%
	By:
	Name:
	Title:
	Address:
	7501 Wisconsin Avenue, 12th Floor
	Bethesda, Maryland 20814
	Attention: J. Jordan O’Neill, III
	Telephone No.: 240/497-7733
	Telecopy No.: 240/497-7714

86

Lender Commitment: $10,000,000.00	E. SUN COMMERCIAL BANK, LTD., LOS
Percentage: 1.666666667%	ANGELES BRANCH
	By:
	Name:
	Title:
	Address:
	17700 Castleton Street, Suite 500
	City of Industry, California 91748
	Attention: Nina Siu
	Telephone No.: 626/810-2400 X223
	Telecopy No.: 626/839-5531

87

SCHEDULE I

AMERITON Properties Incorporated

ASN Richardson Highlands LLC
ASN Roosevelt Center LLC
SCA North Carolina Limited Partnership

API Hibiscus LLC
API Jefferson Park LLC
API Methuen LLC
ASN Rockville LLC
Kentlands Village Business Trust

Briar Meadows Apartments LLC

ASN Bowie LLC
ASN Cambridge LLC
ASN Esplanade at Park Center LLC
ASN Estancia LLC
ASN Fairfax Corner LLC
ASN Lakeshore East LLC
ASN Miramar Lakes LLC
ASN Northgate, LLC
ASN Park Essex LLC
ASN Santa Monica LLC
ASN Saybrooke LLC
ASN Sussex Commons LLC
ASN Ventura LLC
ASN Warner Center, LLC
ASN Washington Boulevard LLC
ASN Watertown LLC
ASN Dakota Ridge LLC
ASN-Massachusetts Holdings (2) LLC
ASN-Massachusetts Holdings (3) LLC
ASN-Washington Holdings (1) LLC
ASN Wendemere, LLC
Courthouse Hill LLC
PTR-California Holdings (3) LLC
SCA Florida Holdings (2) LLC
Security Capital Atlantic Multifamily LLC
Smith Property Holdings Ballston Place L.L.C.
Smith Property Holdings Harbour House South L.L.C.
Smith Property Holdings Illinois Center L.L.C.

Smith Property Holdings Lincoln Towers L.L.C.
Smith Property Holdings One East Delaware L.L.C.
Smith Property Holdings Reston Landing L.L.C.
Smith Property Holdings South Beach Towers L.L.C.
Smith Property Holdings Sunset Pointe Court L.L.C.
Smith Property Holdings Sunset Pointe 3 L.L.C.
Smith Property Holdings Sunset Pointe North L.L.C.
Smith Property Holdings Superior Place L.L.C.

Smith Property Holdings Harbor House L.L.C.

First Herndon Associates Limited Partnership
Smith Property Holdings 4411 Connecticut L.L.C.
Smith Property Holdings Columbia Road L.P.
Smith Property Holdings Crystal Towers L.P.
Smith Property Holdings Five L.P.
Smith Property Holdings Six L.P.

2

OFFICER’S CERTIFICATE

     Archstone-Smith Operating Trust (the “Borrower”), Archstone-Smith Trust (the “Parent”), JPMorgan Chase Bank (“JPMC”), Wells Fargo Bank, N.A. and Bank of America, N.A., as Agents (the “Agents”) and certain other Lenders (the “Lenders”) entered into that certain Amended and Restated Credit Agreement (the “Agreement”) dated as of      , 2003, as the same may be amended. Any term used herein and not otherwise defined shall have the meaning ascribed to it in the Agreement.

          The undersigned hereby certifies that:

I.	I am a Vice President of the Borrower and a Vice President of the Parent, and I make these certifications on behalf of the Borrower or the Parent, as applicable.
II.	The Parent’s financial statements as of      as filed with the Securities and Exchange Commission (“SEC”), and the Borrower’s financial statements as of      delivered to JPMC, were prepared in conformity with generally accepted accounting principles consistently applied and present fairly the financial position of the Parent and of the Borrower, respectively, as of the date thereof and the results of its operations for the period covered thereby subject to normal year-end adjustments.
III.	Borrower hereby certifies the following as of the end of the period covered by the financial statements described above:

1.	Maximum Debt to Total Asset Value Ratio Calculation
	(Section 5.3 (e))

(A)	Indebtedness (Borrower and Parent)
	Total Unsecured Debt (per GAAP)	$
	Total Secured Debt (per GAAP)	$
	Guarantees, Endorsements and Other Contingent Obligations	$
	Obligations under Hedging Agreements, as defined	$
	Equity Percentage of Indebtedness of Unconsolidated Affiliates	$
	Other (pursuant to the Agreement)	$
	Total Indebtedness, as defined	$
(B)	Total Asset Value:
	Aggregated Net Operating Income from Stabilized Properties
	Divided by 8.00%	$
	Historical Value of Pre-Stabilized Properties	$
	Historical Value of Properties Under Construction	$
	Historical Value of Undeveloped Land	$
	Other Assets (excluding intangibles as defined by GAAP)	$
	Total Asset Value of Unconsolidated Affiliates	$

EXHIBIT A

Page 1 of 7 Pages

	Total Asset Value, as defined		$
(C)	Maximum Debt to Total Asset Value (Ratio of 1(A) to 1(B)) Required: Maximum:		60%
2.	Maximum Secured Debt Calculation
	(Section 5.3 (a))
	(A)    Secured Debt, as defined		$
	(B)    Total Asset Value, as defined		$
	(C)    Maximum Secured Debt to Total Asset Value
	(Ratio of 2(A) to 2(B))
	Required:Maximum:		40%
3.	Coverage Ratio Calculation
	(Section 5.3 (b))
(A)	Borrower’s EBITDA:
	Net Income (per GAAP)		$
	Plus:
	Depreciation and Amortization (per GAAP)		$
	Interest Expense, as defined, of Borrower and Parent		$
	Income Taxes (per GAAP)		$
	Extraordinary Gains/Losses (per GAAP)		$
	Payments on Borrower’s Preferred Stock (to the extent included in net income)		$
	Equity Percentage of EBITDA for		$
	Unconsolidated Affiliates		$
	Other (pursuant to the Agreement)		$
	Borrower’s EBITDA, as defined		$
(B)	Dividends and Distributions Paid with Respect to Disqualified Stock		$
(C)	Interest Expense, as defined, of Borrower and Parent		$
(D)	Sum of 3(B) and 3(C)		$
(E)	Coverage Ratio (Ratio of 3(A) to 3(D))		:    1.0
	Required:	Minimum of 2.0 to 1.0
4.	Fixed Charge Coverage Ratio Calculation
	(Section 5.3(c))
(A)	Borrower’s EBITDA, as defined		$
(B)	Unit Capital Expenditures		$
(C)	EBITDA minus Unit Capital Expenditures		$

EXHIBIT A

Page 2 of 7 Pages

(D)	Interest Expense, as defined, of Borrower and Parent		$
(E)	Payments and Payables on Disqualified Stock		$
(F)	Regularly Scheduled Principal Paid and Payable (Borrower and Parent)		$
(G)	Sum of 4(D), 4(E) and 4(F)		$
(H)	Fixed Charge Coverage Ratio (Ratio of 4(C) to 4(G))		1.0
	Required:	Minimum of 1.75 to 1.0
5.	Tangible Net Worth
	(Section 5.3(d))
	Assets		$
	Liabilities		$
	Tangible Net Worth, as defined		$
	Required:	Minimum of $3.500 billion
6.	Property Pool
	(Section 5.15)
(A)	Sum of the Aggregate Net Operating Income for Pool Real Estate That Has Reached the Stabilization Date Divided by 8.00% and the Aggregate Historical Value for Pool Real Estate That Has Not Reached the Stabilization Date		$
(B)	Outstanding Unsecured Indebtedness		$
(C)	Pool Value Divided by Outstanding Unsecured Indebtedness (6(A) divided by 6(B))		%
Required:		Minimum of 167%
(D)	Pool Value attributable to unimproved land (Maximum-5%)		$
(E)	Pool Value attributable to unimproved land, land under construction or development, projects that do not have 80% Occupancy Level, non-multifamily land, land that has not reached the Calculation Date (Maximum-20%)		$
(F)	Pool Value attributable to improved property that is not multifamily residential (Maximum-10%)		$
(G)	The Borrower confirms that it has received the environmental assessments required by Section 5.15(a)(i)
7.	Specified Permitted Holdings
	(Section 6.3)

EXHIBIT A

Page 3 of 7 Pages

(A)	Securities Received in Settlement Liabilities Created in the Ordinary Course of Business
	(Maximum – 5%)
(B)	Unconsolidated Affiliates Engaged in Permitted Businesses
	(Maximum – 20%)
(C)	Loans to Unaffiliated Persons
	(Maximum – 10%)
(D)	Other Securities
	(Maximum – 10%)
(E)	Income Producing Properties That Are Not Multifamily Residential
	(Maximum – 10%)
(F)	Unimproved Land
	(Maximum – 7.5%)
(G)	Unrelated, Non-Incidental Investments
	(Maximum – 5%)
(H)	Aggregate Value of the specified Permitted Holdings (sum of 7(A) through 7(H))
	(Maximum – 30%)

IV.	A review of the activities of the Borrower during the period covered by the financial statements has been made under my supervision and with a view to determining whether during such period the Borrower has kept, observed, performed and fulfilled all of its obligations under the Agreement.
	The Parent has made available its financial statements and related footnotes for the most recent period ended      , as filed with the SEC and can be accessed at http://www.sec.gov/. The Borrower has delivered to JPMC its financial statements and related footnotes for the most recent period ended      . The Parent’s and the Borrower’s earnings press releases and supplemental information for such period have been posted to the Parent’s website (         ). The financial statements were prepared in conformity with generally accepted accounting principles consistently applied (except for the omission of footnote disclosures and appropriately disclosed consistency exceptions) and present fairly the financial position of the Parent and the Borrower, respectively, as of the date thereof and the results of its operations for the period covered thereby subject to normal year-end adjustments.
V.	(Check either (A) or (B))

[  ] (A) The Borrower has kept, observed, performed and fulfilled each and every one of its obligations under the Agreement during the period covered by the applicable financial statements.

EXHIBIT A

Page 4 of 7 Pages

[  ] (B) The Borrower has kept, observed, performed and fulfilled each and every one of its obligations under the Agreement during the period covered by the applicable financial statements except for the following matters: [Describe all such defaults, specifying the nature, duration and status thereof and what action the Borrower has taken or proposes to take with respect thereto].

VI. With regard to Section 1004 of the Indenture dated as of February 1, 1994 between the Borrower and Morgan Guaranty Trust Company of New York, as Trustee (and using the terms defined therein), a certificate required thereunder showing compliance with Section 1004 is attached (only required for the fourth quarter Officer’s Certificate), for the most recent period ended           :

1.	(A)	Sum of Total Assets, Aggregate Purchase Price of Real Estate Assets, or Mortgages Receivable Acquired, and Securities Offering Proceeds Received to Purchase said Assets	$
	(B)	Maximum amount of Debt	$
	(C)	Debt	$
2.	(A)	Consolidated Income Available for Debt Service	$
	(B)	Annual Service Charge	$
	(C)	Ratio of Consolidated Income Available for Debt Service to Annual Service Charge
3.	(A)	Total Assets	$
	(B)	Maximum Secured Debt	$
	(C)	Secured Debt	$

VII. The Parent hereby certifies the following as to itself as of the end of the period covered by the financial statements dated           as filed with the SEC:

1.	Indebtedness	$
2.	Interest Expense	$

VIII. Check either (A) or (B)

[  ]	(A) The Parent has kept, observed, performed and fulfilled each and every one of its obligations under the Agreement during the period covered by the applicable financial statements.
[  ]	(B) The Parent has kept, observed, performed and fulfilled each and every one of its obligations under the Agreement during the period covered by the applicable financial statements except for the following matters:

EXHIBIT A

Page 5 of 7 Pages

[Describe all such defaults, specifying the nature, duration and status thereof and what action the Parent has taken or proposes to take with respect thereto]

Date:	Name:
		[Vice President Name]

(A manually signed Officer’s Certificate is available at the request of any Agent or Lender.)

EXHIBIT A

Page 6 of 7 Pages

POOL PROPERTY LIST

     List each property separately showing the Historical Value and the components, the city, the state, the Occupancy Level for the past three months, the number of units, the age of the property and net operating income.

EXHIBIT A

Page 7 of 7 Pages

REQUEST FOR LOAN

Date: _______________, 2003

JPMorgan Chase Bank
712 Main Street
Houston, Texas 77002
(“Agent”)

RE: Request for Loan Under Amended and Restated Credit Agreement (as amended from time to time, the “Credit Agreement”) dated as of      , 2003, among Archstone-Smith Operating Trust (the “Borrower”), the Agent and the Lenders as signatory to the Credit Agreement

Gentlemen:

     Borrower hereby requests [check as applicable] o a conversion of an existing Loan as provided below, and/or o an advance under the Credit Agreement, which is allowed pursuant to Section 5.9 of the Credit Agreement, in the amount of $            [minimum of $1,000,000.00 and in multiples of $100,000.00].

Maximum Principal Amount	$	600,000,000.00
Less the amount outstanding under the Credit Agreement (including Swing Loans and Money Market Loans)		($              .	)
Less the LC Exposure		($              .	)
Less the LC Exposure		($              .	)
Available amount		$               .
Less amount requested		($              .	)
Amount remaining to be advanced		$               .

EXHIBIT B

Page 1 of 3 Pages

The advance or conversion is to be made as follows:
A.	Base Rate Borrowing.
	1.	Amount of Base Rate Borrowing:	$              .
	2.	Date of Base Rate Borrowing	,20
B.	Eurodollar Rate Borrowing:
	1.	Amount of Eurodollar Rate Borrowing:	$              .
	2.	Amount of conversion of existing Loan to Eurodollar Rate Borrowing:	$              .
	3.	Number of Eurodollar Rate Borrowing(s) now in effect:
		[cannot exceed 12]
	4.	Date of Eurodollar Rate Borrowing or conversion:	,20
	5.	Interest Period:
	6.	Expiration date of current Interest Period as to this conversion:	,20
C.	Swing Loan.
	1.	Amount of Swing Loan:	$              .
		[minimum of $1,000,000.00 and in multiples of $100,000.00]
	2.	Date of Swing Loan:	,20

EXHIBIT B

Page 2 of 3 Pages

     Borrower hereby represents and warrants that the amounts set forth above are true and correct, that the amount above requested has actually been incurred, that the representations and warranties contained in the Credit Agreement are true and correct as if made as of this date, and that Borrower has kept, observed, performed and fulfilled each and every one of its obligations under the Credit Agreement as of the date hereof [except as follows:]

Very truly yours,

ARCHSTONE-SMITH OPERATING TRUST

By:

Name:

Title:

EXHIBIT B

Page 3 of 3 Pages

$[          ]      , 2003

     FOR VALUE RECEIVED ARCHSTONE-SMITH OPERATING TRUST, a Maryland real estate investment trust (herein called “Maker”) promises to pay to the order of [           ], a [     ] (“Payee”), at the offices of JPMorgan Chase Bank, a New York banking corporation, as “Agent” under the Credit Agreement, at 712 Main Street, Houston, Texas 77002, or at such other place as the holder (the “Holder”, whether or not Payee is such holder) of this note may hereafter designate in writing, in immediately available funds and in lawful money of the United States of America, the principal sum of [     ] Dollars ($[     ]) (or the unpaid balance of all principal advanced against this note, if that amount is less), together with interest on the unpaid principal balance of this note from time to time outstanding at the Stated Rate and interest on all past due amounts, both principal and accrued interest, at the Past Due Rate; provided, that for the full term of this note the interest rate produced by the aggregate of all sums paid or agreed to be paid to the Holder of this note for the use, forbearance or detention of the debt evidenced hereby (including, but not limited to, all interest on this note at the Stated Rate) shall not exceed the Ceiling Rate.

     1.     Definitions. Any terms not defined herein shall have the meaning given to them in the Amended and Restated Credit Agreement dated of even date herewith among the Maker, the Agent and certain other Lenders (as the same may be amended or modified the “Credit Agreement”).

     2.     Rates Change Automatically and Without Notice. Without notice to Maker or any other person or entity and to the full extent allowed by applicable law from time to time in effect, the Prime Rate and the Ceiling Rate shall each automatically fluctuate upward and downward as and in the amount by which Agent’s said prime rate, and such maximum nonusurious rate of interest permitted by applicable law, respectively, fluctuate.

     3.     Calculation of Interest. Interest shall be computed for the actual number of days elapsed in a year (up to 365, or 366 in a leap year) deemed to consist of 360 days, unless the Ceiling Rate would thereby be exceeded, in which event, to the extent necessary to avoid exceeding the Ceiling Rate, interest shall be computed on the basis of the actual number of days elapsed in the applicable calendar year in which it accrued.

     4.     Excess Interest Will be Refunded or Credited. If, for any reason whatever, the interest paid or received on this note during its full term produces a rate which exceeds the Ceiling Rate, the Holder of this note shall refund to the payor or, at the Holder’s option,

EXHIBIT C

Page 1 of 5 Pages

credit against the principal of this note such portion of that interest as shall be necessary to cause the interest paid on this note to produce a rate equal to the Ceiling Rate.

     5.     Interest Will be Spread. All sums paid or agreed to be paid to the Holder of this note for the use, forbearance or detention of the indebtedness evidenced hereby, to the extent permitted by applicable law and to the extent necessary to avoid violating applicable usury laws, shall be amortized, prorated, allocated and spread in equal parts throughout the full term of this note, so that the interest rate is uniform throughout the full term of this note.

     6.     Payment Schedule. The principal of this note shall be due and payable on the Maturity Date. Accrued and unpaid interest shall be due and payable on each Interest Payment Date. All payments shall be applied first to accrued interest, the balance to principal.

     7.     Prepayment. Maker may prepay this note only as provided in the Credit Agreement.

     8.     Revolving Credit. Upon and subject to the terms and conditions of the Credit Agreement and the other provisions of this note, Maker may borrow, repay and reborrow against this note at any time unless and until a default (however designated) or event (an “Event of Potential Default”) which, if not cured after notice or before the lapse of time (or both) would develop into a default under this note, the Credit Agreement or any other Credit Documents has occurred which the Holder has not declared to have been fully cured or waived, and (except as the Credit Agreement or any of the other Credit Documents may otherwise provide) there is no limit on the number of advances against this note so long as the total unpaid principal of this note at any time outstanding does not exceed the Payee’s Lender Commitment. Interest on the amount of each advance against this note shall be computed on the amount of the unpaid balance of that advance from the date it is made until the date it is repaid. If Maker’s right (if any) to borrow against this note shall ever lapse because of the occurrence of any default, it shall not be reinstated (or construed from any course of conduct or otherwise to have been reinstated) unless and until the Holder shall declare in a signed writing that it has been cured or waived. The unpaid principal balance of this note at any time shall be the total of all principal lent against this note to Maker or for Maker’s account less the sum of all principal payments and permitted prepayments on this note received by the Holder. Absent manifest error, the Holder’s computer records shall on any day conclusively evidence the unpaid balance of this note and its advances and payments history posted up to that day. All loans and advances and all payments and permitted prepayments made on this note may be (but are not required to be) endorsed by the Holder on the schedule attached hereto (which is hereby made a part hereof for all purposes) or otherwise recorded in the Holder’s computer

EXHIBIT C

Page 2 of 5 Pages

or manual records; provided, that any Holder’s failure to make notation of (a) any principal advance or accrual of interest shall not cancel, limit or otherwise affect Maker’s obligations or any Holder’s rights with respect to that advance or accrual, or (b) any payment or permitted prepayment of principal or interest shall not cancel, limit or otherwise affect Maker’s entitlement to credit for that payment as of the date of its receipt by the Holder. Maker and Payee expressly agree, as expressly allowed by Chapter 346 of the Texas Finance Code, that Chapter 346 (which relates to open-end line of credit revolving loan accounts) shall not apply to this note or to any loan evidenced by this note and that neither this note nor any such loan shall be governed by Chapter 346 or subject to its provisions in any manner whatsoever.

     9.     Credit Agreement. This note has been issued pursuant to the terms of the Credit Agreement, to which reference is made for all purposes. Advances against this note by Payee or other Holder hereof shall be governed by the Credit Agreement. Payee is entitled to the benefits of the Credit Agreement. As additional security for this note, Maker hereby grants to Payee and all other present and future Holders an express lien against, security interest in and contractual right of setoff in and to, all property and any and all deposits (general or special, time or demand, provisional or final) at any time held by the Payee or other Holder for any Maker’s credit or account.

     10.     Defaults and Remedies. Time is of the essence. Maker’s failure to pay any principal or accrued interest owing on this note when due and after expiration of any applicable period for notice and right to cure such a default which is specifically provided for in the Credit Agreement or any other provision of this note, or the occurrence of any default under the Credit Agreement or any other Credit Documents shall constitute default under this note, whereupon the Holder may elect to exercise any or all rights, powers and remedies afforded (a) under the Credit Agreement and all other papers related to this note and (b) by law, including the right to accelerate the maturity of this entire note.

     In addition to and cumulative of such rights, the Holder is hereby authorized at any time and from time to time after any such default, at Holder’s option, without notice to Maker or any other person or entity (all rights to any such notice being hereby waived), to set off and apply any and all of any Maker’s deposits at any time held by the Holder, and any other debt at any time owing by the Holder to or for the credit or account of any Maker, against the outstanding balance of this note, in such order and manner as Holder may elect in its sole discretion.

     The Holder’s right to accelerate this note on account of any late payment or other default shall not be waived or deemed waived by the Holder by reason of the Holder’s having previously accepted one or more late payments or by reason of any Holder’s otherwise not accelerating this note or exercising other remedies for any default, and no Holder shall ever be obligated or deemed obligated to notify Maker or any other person

EXHIBIT C

Page 3 of 5 Pages

that Holder is requiring strict compliance with this note or any papers securing or otherwise relating to it before such Holder may accelerate this note or exercise any other remedy.

     Nothing in this Section or elsewhere shall be construed as diminishing Holder’s absolute right to demand payment of all or any part of this note at any time.

     11.     Legal Costs. If any Holder of this note retains an attorney in connection with any such default or to collect, enforce or defend this note or any papers intended to secure or guarantee it in any lawsuit or in any probate, reorganization, bankruptcy or other proceeding, or if Maker sues any Holder in connection with this note or any such papers and does not prevail, then Maker agrees to pay to each such Holder, in addition to principal and interest, all reasonable costs and expenses incurred by such Holder in trying to collect this note or in any such suit or proceeding, including reasonable attorneys’ fees.

     12.     Waivers. Except only for any notices which are specifically required by the Credit Agreement, Maker and any and all co-makers, endorsers, guarantors and sureties severally waive notice (including, but not limited to, notice of intent to accelerate and notice of acceleration, notice of protest and notice of dishonor), demand, presentment for payment, protest, diligence in collecting and the filing of suit for the purpose of fixing liability and consent that the time of payment hereof may be extended and re-extended from time to time without notice to any of them. Each such person agrees that his, her or its liability on or with respect to this note shall not be affected by any release of or change in any guaranty or security at any time existing or by any failure to perfect or maintain perfection of any lien against or security interest in any such security or the partial or complete unenforceability of any guaranty or other surety obligation, in each case in whole or in part, with or without notice and before or after maturity.

     13.     Rate of Return Maintenance Covenant. If at any time after the date of this note, any Holder determines that (a) any applicable law, rule or regulation regarding capital adequacy of general applicability has been adopted or changed, or (b) its interpretation or administration by any governmental authority, central bank or comparable agency has changed, and determines that such change or the Holder’s compliance with any request or directive regarding capital adequacy of general applicability (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the Holder’s capital as a consequence of its obligations under this note or any related papers to a level below that which the Holder could have achieved but for such adoption, change or compliance (taking into consideration the Holder’s own capital adequacy policies) by an amount the Holder deems to be material, then Maker promises to pay from time to time to the order of the Holder such additional amount or amounts as will compensate the Holder for such reduction. A certificate of any Holder setting forth the amount or amounts necessary to compensate the Holder as specified above shall be given to Maker as soon as practicable

EXHIBIT C

Page 4 of 5 Pages

after the Holder has made such determination and shall be conclusive and binding, absent manifest error. Maker shall pay the Holder the amount shown as due on any such certificate within 15 days after the Holder gives it. In preparing such certificate, the Holder may employ such assumptions and make such allocations of costs and expenses as the Holder in good faith deems reasonable and may use any reasonable averaging and attribution method.

     14.     Governing Law, Jurisdiction and Venue. This note shall be governed by and construed in accordance with the laws of the State of Texas and the United States of America from time to time in effect.

     15.     General Purpose of Loan. Maker warrants and represents to Payee and all other Holders that all loans evidenced by this note are and will be for business, commercial, investment or other similar purpose and not primarily for personal, family, household or agricultural use.

     16.     Participations and Assignments. Payee and each other Holder reserves the right, exercisable in such Holder’s discretion and without notice to Maker or any other person, to sell participations, assign interests or both, in all or any part of this note or the debt evidenced by this note, in accordance with the Credit Agreement.

     17.     Limitation of Liability. No obligation or liability whatsoever of Maker which may arise at any time under this promissory note or any obligation or liability which may be incurred by it pursuant to any other instrument, transaction or undertaking contemplated hereby shall be personally binding upon, nor shall resort for the enforcement thereof be had to the private property of, any of Maker’s trustees or shareholders regardless of whether such obligation or liability is in the nature of contract, tort or otherwise.

ARCHSTONE-SMITH OPERATING TRUST

By:

Name:

Title:

EXHIBIT C

Page 5 of 5 Pages

SWING LOAN NOTE

$100,000,000.00      , 2003

     FOR VALUE RECEIVED ARCHSTONE-SMITH OPERATING TRUST, a Maryland real estate investment trust (herein called “Maker”) promises to pay to the order of JPMORGAN CHASE BANK, a New York banking corporation, at 712 Main Street, Houston, Texas 77002, or at such other place as the holder (the “Holder”, whether or not Payee is such holder) of this note may hereafter designate in writing, in immediately available funds and in lawful money of the United States of America, the principal sum of One Hundred Million Dollars ($100,000,000.00) (or the unpaid balance of all principal advanced against this note, if that amount is less), together with interest on the unpaid principal balance of this note from time to time outstanding at the Stated Rate and interest on all past due amounts, both principal and accrued interest, at the Past Due Rate; provided, that for the full term of this note the interest rate produced by the aggregate of all sums paid or agreed to be paid to the Holder of this note for the use, forbearance or detention of the debt evidenced hereby (including, but not limited to, all interest on this note at the Stated Rate) shall not exceed the Ceiling Rate.

     1.     Definitions. Any terms not defined herein shall have the meaning given to them in the Amended and Restated Credit Agreement dated of even date herewith among the Maker, and certain other Lenders (as the same may be amended or modified the “Credit Agreement”).

     2.     Rates Change Automatically and Without Notice. Without notice to Maker or any other person or entity and to the full extent allowed by applicable law from time to time in effect, the Prime Rate and the Ceiling Rate shall each automatically fluctuate upward and downward as and in the amount by which Holder’s said prime rate, and such maximum nonusurious rate of interest permitted by applicable law, respectively, fluctuate.

     3.     Calculation of Interest. Interest shall be computed for the actual number of days elapsed in a year (up to 365, or 366 in a leap year) deemed to consist of 360 days, unless the Ceiling Rate would thereby be exceeded, in which event, to the extent necessary to avoid exceeding the Ceiling Rate, interest shall be computed on the basis of the actual number of days elapsed in the applicable calendar year in which it accrued.

     4.     Excess Interest Will be Refunded or Credited. If, for any reason whatever, the interest paid or received on this note during its full term produces a rate which exceeds the Ceiling Rate, the Holder of this note shall refund to the payor or, at the Holder’s option, credit against the principal of this note such portion of that interest as shall be necessary to cause the interest paid on this note to produce a rate equal to the Ceiling Rate.

     5.     Interest Will be Spread. All sums paid or agreed to be paid to the Holder of this note for the use, forbearance or detention of the indebtedness evidenced hereby, to the extent permitted by applicable law and to the extent necessary to avoid violating applicable usury laws,

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shall be amortized, prorated, allocated and spread in equal parts throughout the full term of this note, so that the interest rate is uniform throughout the full term of this note.

     6.     Payment Schedule. The principal of this note shall be due and payable on the Revolving Credit Termination Date. Accrued and unpaid interest shall be due and payable on each Interest Payment Date. All payments shall be applied first to accrued interest, the balance to principal.

     7.     Prepayment. Maker may prepay this note only as provided in the Credit Agreement.

     8.     Revolving Credit. Upon and subject to the terms and conditions of the Credit Agreement and the other provisions of this note, Maker may borrow, repay and reborrow against this note at any time unless and until a default (however designated) or event (an “Event of Potential Default”) which, if not cured after notice or before the lapse of time (or both) would develop into a default under this note, the Credit Agreement or any other Credit Documents has occurred which the Holder has not declared to have been fully cured or waived, and (except as the Credit Agreement or any of the other Credit Documents may otherwise provide) there is no limit on the number of advances against this note so long as the total unpaid principal of this note at any time outstanding does not exceed $100,000,000.00. Interest on the amount of each advance against this note shall be computed on the amount of the unpaid balance of that advance from the date it is made until the date it is repaid. If Maker’s right (if any) to borrow against this note shall ever lapse because of the occurrence of any default, it shall not be reinstated (or construed from any course of conduct or otherwise to have been reinstated) unless and until the Holder shall declare in a signed writing that it has been cured or waived. The unpaid principal balance of this note at any time shall be the total of all principal lent against this note to Maker or for Maker’s account less the sum of all principal payments and permitted prepayments on this note received by the Holder. Absent manifest error, the Holder’s computer records shall on any day conclusively evidence the unpaid balance of this note and its advances and payments history posted up to that day. All loans and advances and all payments and permitted prepayments made on this note may be (but are not required to be) endorsed by the Holder on the schedule attached hereto (which is hereby made a part hereof for all purposes) or otherwise recorded in the Holder’s computer or manual records; provided, that any Holder’s failure to make notation of (a) any principal advance or accrual of interest shall not cancel, limit or otherwise affect Maker’s obligations or any Holder’s rights with respect to that advance or accrual, or (b) any payment or permitted prepayment of principal or interest shall not cancel, limit or otherwise affect Maker’s entitlement to credit for that payment as of the date of its receipt by the Holder. Maker and Payee expressly agree, as expressly allowed by Chapter 346 of the Texas Finance Code, that Chapter 346 (which relates to open-end line of credit revolving loan accounts) shall not apply to this note or to any loan evidenced by this note and that neither this note nor any such loan shall be governed by Chapter 346 or subject to its provisions in any manner whatsoever.

     9.     Credit Agreement. This note has been issued pursuant to the terms of the Credit Agreement, to which reference is made for all purposes. Advances against this note by Payee or other Holder hereof shall be governed by the Credit Agreement. Payee is entitled to the benefits

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of the Credit Agreement. As additional security for this note, Maker hereby grants to Payee and all other present and future Holders an express lien against, security interest in and contractual right of setoff in and to, all property and any and all deposits (general or special, time or demand, provisional or final) at any time held by the Payee or other Holder for any Maker’s credit or account.

     10.     Defaults and Remedies. Time is of the essence. Maker’s failure to pay any principal or accrued interest owing on this note when due and after expiration of any applicable period for notice and right to cure such a default which is specifically provided for in the Credit Agreement or any other provision of this note, or the occurrence of any default under the Credit Agreement or any other Credit Documents shall constitute default under this note, whereupon the Holder may elect to exercise any or all rights, powers and remedies afforded (a) under the Credit Agreement and all other papers related to this note and (b) by law, including the right to accelerate the maturity of this entire note.

     In addition to and cumulative of such rights, the Holder is hereby authorized at any time and from time to time after any such default, at Holder’s option, without notice to Maker or any other person or entity (all rights to any such notice being hereby waived), to set off and apply any and all of any Maker’s deposits at any time held by the Holder, and any other debt at any time owing by the Holder to or for the credit or account of any Maker, against the outstanding balance of this note, in such order and manner as Holder may elect in its sole discretion.

     The Holder’s right to accelerate this note on account of any late payment or other default shall not be waived or deemed waived by the Holder by reason of the Holder’s having previously accepted one or more late payments or by reason of any Holder’s otherwise not accelerating this note or exercising other remedies for any default, and no Holder shall ever be obligated or deemed obligated to notify Maker or any other person that Holder is requiring strict compliance with this note or any papers securing or otherwise relating to it before such Holder may accelerate this note or exercise any other remedy.

     Nothing in this Section or elsewhere shall be construed as diminishing Holder’s absolute right to demand payment of all or any part of this note at any time.

     11.     Legal Costs. If any Holder of this note retains an attorney in connection with any such default or to collect, enforce or defend this note or any papers intended to secure or guarantee it in any lawsuit or in any probate, reorganization, bankruptcy or other proceeding, or if Maker sues any Holder in connection with this note or any such papers and does not prevail, then Maker agrees to pay to each such Holder, in addition to principal and interest, all reasonable costs and expenses incurred by such Holder in trying to collect this note or in any such suit or proceeding, including reasonable attorneys’ fees.

     12.     Waivers. Except only for any notices which are specifically required by the Credit Agreement, Maker and any and all co-makers, endorsers, guarantors and sureties severally waive notice (including, but not limited to, notice of intent to accelerate and notice of acceleration, notice of protest and notice of dishonor), demand, presentment for payment,

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protest, diligence in collecting and the filing of suit for the purpose of fixing liability and consent that the time of payment hereof may be extended and re-extended from time to time without notice to any of them. Each such person agrees that his, her or its liability on or with respect to this note shall not be affected by any release of or change in any guaranty or security at any time existing or by any failure to perfect or maintain perfection of any lien against or security interest in any such security or the partial or complete unenforceability of any guaranty or other surety obligation, in each case in whole or in part, with or without notice and before or after maturity.

     13.     Rate of Return Maintenance Covenant. If at any time after the date of this note, any Holder determines that (a) any applicable law, rule or regulation regarding capital adequacy of general applicability has been adopted or changed, or (b) its interpretation or administration by any governmental authority, central bank or comparable agency has changed, and determines that such change or the Holder’s compliance with any request or directive regarding capital adequacy of general applicability (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the Holder’s capital as a consequence of its obligations under this note or any related papers to a level below that which the Holder could have achieved but for such adoption, change or compliance (taking into consideration the Holder’s own capital adequacy policies) by an amount the Holder deems to be material, then Maker promises to pay from time to time to the order of the Holder such additional amount or amounts as will compensate the Holder for such reduction. A certificate of any Holder setting forth the amount or amounts necessary to compensate the Holder as specified above shall be given to Maker as soon as practicable after the Holder has made such determination and shall be conclusive and binding, absent manifest error. Maker shall pay the Holder the amount shown as due on any such certificate within 15 days after the Holder gives it. In preparing such certificate, the Holder may employ such assumptions and make such allocations of costs and expenses as the Holder in good faith deems reasonable and may use any reasonable averaging and attribution method.

     14.     Governing Law, Jurisdiction and Venue. This note shall be governed by and construed in accordance with the laws of the State of Texas and the United States of America from time to time in effect.

     15.     General Purpose of Loan. Maker warrants and represents to Payee and all other Holders that all loans evidenced by this note are and will be for business, commercial, investment or other similar purpose and not primarily for personal, family, household or agricultural use.

     16.     Participations and Assignments. Payee and each other Holder reserves the right, exercisable in such Holder’s discretion and without notice to Maker or any other person, to sell participations, assign interests or both, in all or any part of this note or the debt evidenced by this note, in accordance with the Credit Agreement.

     17.     Limitation of Liability. No obligation or liability whatsoever of Maker which may arise at any time under this promissory note or any obligation or liability which may be incurred by it pursuant to any other instrument, transaction or undertaking contemplated hereby shall be personally binding upon, nor shall resort for the enforcement thereof be had to the

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private property of, any of Maker’s trustees or shareholders regardless of whether such obligation or liability is in the nature of contract, tort or otherwise.

ARCHSTONE-SMITH OPERATING TRUST

By:

Name:

Title:

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MASTER NOTE
Money Market Borrowings

$300,000,000.00      , 2003

     FOR VALUE RECEIVED ARCHSTONE-SMITH OPERATING TRUST, a Maryland real estate investment trust (herein called “Maker”) promises to pay to the order of            (“Payee”), at the offices of JPMorgan Chase Bank, a New York banking corporation, as “Agent” under the Credit Agreement, at 712 Main Street, Houston, Texas 77002, or at such other place as the holder (the “Holder”, whether or not Payee is such holder) of this note may hereafter designate in writing, in immediately available funds and in lawful money of the United States of America, the principal sum of Three Hundred Million Dollars ($300,000,000.00) (or the unpaid balance of all principal advanced against this note, if that amount is less), together with interest on the unpaid principal balance of this note from time to time outstanding at the Stated Rate for Money Market Loans and interest on all past due amounts, both principal and accrued interest, at the Past Due Rate; provided, that for the full term of this note the interest rate produced by the aggregate of all sums paid or agreed to be paid to the Holder of this note for the use, forbearance or detention of the debt evidenced hereby (including, but not limited to, all interest on this note at the Stated Rate for Money Market Loans) shall not exceed the Ceiling Rate.

     1.     Definitions. Any terms not defined herein shall have the meaning given to them in the Amended and Restated Credit Agreement dated of even date herewith among the Maker, the Agent and certain other Lenders (as the same has been and may be further amended or modified the “Credit Agreement”).

     2.     Rates Change Automatically and Without Notice. Without notice to Maker or any other person or entity and to the full extent allowed by applicable law from time to time in effect, the Prime Rate and the Ceiling Rate shall each automatically fluctuate upward and downward as and in the amount by which Agent’s said prime rate, and such maximum nonusurious rate of interest permitted by applicable law, respectively, fluctuate.

     3.     Calculation of Interest. Interest shall be computed for the actual number of days elapsed in a year (up to 365, or 366 in a leap year) deemed to consist of 360 days, unless the Ceiling Rate would thereby be exceeded, in which event, to the extent necessary to avoid exceeding the Ceiling Rate, interest shall be computed on the basis of the actual number of days elapsed in the applicable calendar year in which it accrued.

     4.     Excess Interest Will be Refunded or Credited. If, for any reason whatever, the interest paid or received on this note during its full term produces a rate which exceeds the Ceiling Rate, the Holder of this note shall refund to the payor or, at the Holder’s option, credit

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against the principal of this note such portion of that interest as shall be necessary to cause the interest paid on this note to produce a rate equal to the Ceiling Rate.

     5.     Interest Will be Spread. All sums paid or agreed to be paid to the Holder of this note for the use, forbearance or detention of the indebtedness evidenced hereby, to the extent permitted by applicable law and to the extent necessary to avoid violating applicable usury laws, shall be amortized, prorated, allocated and spread in equal parts throughout the full term of this note, so that the interest rate is uniform throughout the full term of this note.

     6.     Payment Schedule. The principal of this note shall be due and payable on the date set forth in each Notice of Money Market Borrowing with respect to the principal borrowed pursuant to said Notice, and the Maturity Date. Accrued and unpaid interest shall be due and payable on each Interest Payment Date. All payments shall be applied first to accrued interest, the balance to principal.

     7.     Prepayment. Maker may prepay this note only as provided in the Credit Agreement.

     8.     Revolving Credit. Upon and subject to the terms and conditions of the Credit Agreement and the other provisions of this note, Maker may borrow, repay and reborrow against this note at any time unless and until a default (however designated) or event (an “Event of Potential Default”) which, if not cured after notice or before the lapse of time (or both) would develop into a default under this note, the Credit Agreement or any other Credit Documents has occurred which the Holder has not declared to have been fully cured or waived, and (except as the Credit Agreement or any of the other Credit Documents may otherwise provide) there is no limit on the number of advances against this note so long as the total unpaid principal of this note at any time outstanding does not exceed $300,000,000.00. Interest on the amount of each advance against this note shall be computed on the amount of the unpaid balance of that advance from the date it is made until the date it is repaid. If Maker’s right (if any) to borrow against this note shall ever lapse because of the occurrence of any default, it shall not be reinstated (or construed from any course of conduct or otherwise to have been reinstated) unless and until the Holder shall declare in a signed writing that it has been cured or waived. The unpaid principal balance of this note at any time shall be the total of all principal lent against this note to Maker or for Maker’s account less the sum of all principal payments and permitted prepayments on this note received by the Holder. Absent manifest error, the Holder’s computer records shall on any day conclusively evidence the unpaid balance of this note and its advances and payments history posted up to that day. All loans and advances and all payments and permitted prepayments made on this note may be (but are not required to be) endorsed by the Holder on the schedule attached hereto (which is hereby made a part hereof for all purposes) or otherwise recorded in the Holder’s computer or manual records; provided, that any Holder’s failure to make notation of (a) any principal advance or accrual of interest shall not cancel, limit or otherwise affect Maker’s obliga-

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tions or any Holder’s rights with respect to that advance or accrual, or (b) any payment or permitted prepayment of principal or interest shall not cancel, limit or otherwise affect Maker’s entitlement to credit for that payment as of the date of its receipt by the Holder. Maker and Payee expressly agree, as expressly allowed by Chapter 346 of the Texas Finance Code, that Chapter 346 (which relates to open-end line of credit revolving loan accounts) shall not apply to this note or to any loan evidenced by this note and that neither this note nor any such loan shall be governed by Chapter 346 or subject to its provisions in any manner whatsoever.

     9.     Credit Agreement. This note has been issued pursuant to the terms of Section 2.8 of the Credit Agreement, to which reference is made for all purposes. Advances against this note by Payee or other Holder hereof shall be governed by the Credit Agreement. Payee is entitled to the benefits of the Credit Agreement. As additional security for this note, Maker hereby grants to Payee and all other present and future Holders an express lien against, security interest in and contractual right of setoff in and to, all property and any and all deposits (general or special, time or demand, provisional or final) at any time held by the Payee or other Holder for any Maker’s credit or account.

     10.     Defaults and Remedies. Time is of the essence. Maker’s failure to pay any principal or accrued interest owing on this note when due and after expiration of any applicable period for notice and right to cure such a default which is specifically provided for in the Credit Agreement or any other provision of this note, or the occurrence of any default under the Credit Agreement or any other Credit Documents shall constitute default under this note, whereupon the Holder may elect to exercise any or all rights, powers and remedies afforded (a) under the Credit Agreement and all other papers related to this note and (b) by law, including the right to accelerate the maturity of this entire note.

     In addition to and cumulative of such rights, the Holder is hereby authorized at any time and from time to time after any such default, at Holder’s option, without notice to Maker or any other person or entity (all rights to any such notice being hereby waived), to set off and apply any and all of any Maker’s deposits at any time held by the Holder, and any other debt at any time owing by the Holder to or for the credit or account of any Maker, against the outstanding balance of this note, in such order and manner as Holder may elect in its sole discretion.

     The Holder’s right to accelerate this note on account of any late payment or other default shall not be waived or deemed waived by the Holder by reason of the Holder’s having previously accepted one or more late payments or by reason of any Holder’s otherwise not accelerating this note or exercising other remedies for any default, and no Holder shall ever be obligated or deemed obligated to notify Maker or any other person that Holder is requiring strict compliance with this note or any papers securing or otherwise relating to it before such Holder may accelerate this note or exercise any other remedy.

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     Nothing in this Section or elsewhere shall be construed as diminishing Holder’s absolute right to demand payment of all or any part of this note at any time.

     11.     Legal Costs. If any Holder of this note retains an attorney in connection with any such default or to collect, enforce or defend this note or any papers intended to secure or guarantee it in any lawsuit or in any probate, reorganization, bankruptcy or other proceeding, or if Maker sues any Holder in connection with this note or any such papers and does not prevail, then Maker agrees to pay to each such Holder, in addition to principal and interest, all reasonable costs and expenses incurred by such Holder in trying to collect this note or in any such suit or proceeding, including reasonable attorneys’ fees.

     12.     Waivers. Except only for any notices which are specifically required by the Credit Agreement, Maker and any and all co-makers, endorsers, guarantors and sureties severally waive notice (including, but not limited to, notice of intent to accelerate and notice of acceleration, notice of protest and notice of dishonor), demand, presentment for payment, protest, diligence in collecting and the filing of suit for the purpose of fixing liability and consent that the time of payment hereof may be extended and re-extended from time to time without notice to any of them. Each such person agrees that his, her or its liability on or with respect to this note shall not be affected by any release of or change in any guaranty or security at any time existing or by any failure to perfect or maintain perfection of any lien against or security interest in any such security or the partial or complete unenforceability of any guaranty or other surety obligation, in each case in whole or in part, with or without notice and before or after maturity.

     13.     Rate of Return Maintenance Covenant. If at any time after the date of this note, any Holder determines that (a) any applicable law, rule or regulation regarding capital adequacy of general applicability has been adopted or changed, or (b) its interpretation or administration by any governmental authority, central bank or comparable agency has changed, and determines that such change or the Holder’s compliance with any request or directive regarding capital adequacy of general applicability (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the Holder’s capital as a consequence of its obligations under this note or any related papers to a level below that which the Holder could have achieved but for such adoption, change or compliance (taking into consideration the Holder’s own capital adequacy policies) by an amount the Holder deems to be material, then Maker promises to pay from time to time to the order of the Holder such additional amount or amounts as will compensate the Holder for such reduction. A certificate of any Holder setting forth the amount or amounts necessary to compensate the Holder as specified above shall be given to Maker as soon as practicable after the Holder has made such determination and shall be conclusive and binding, absent manifest error. Maker shall pay the Holder the amount shown as due on any such certificate within 15 days after the Holder gives it. In preparing such certificate, the Holder may employ such assumptions and make such allocations of costs and expenses as the Holder in good faith deems reasonable and may use any reasonable averaging and attribution method.

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     14.     Governing Law, Jurisdiction and Venue. This note shall be governed by and construed in accordance with the laws of the State of Texas and the United States of America from time to time in effect.

     15.     General Purpose of Loan. Maker warrants and represents to Payee and all other Holders that all loans evidenced by this note are and will be for business, commercial, investment or other similar purpose and not primarily for personal, family, household or agricultural use.

     16.     Participations and Assignments. Payee and each other Holder reserves the right, exercisable in such Holder’s discretion and without notice to Maker or any other person, to sell participations, assign interests or both, in all or any part of this note or the debt evidenced by this note, in accordance with the Credit Agreement.

     17.     Limitation of Liability. No obligation or liability whatsoever of Maker which may arise at any time under this promissory note or any obligation or liability which may be incurred by it pursuant to any other instrument, transaction or undertaking contemplated hereby shall be personally binding upon, nor shall resort for the enforcement thereof be had to the private property of, any of Maker’s trustees or shareholders regardless of whether such obligation or liability is in the nature of contract, tort or otherwise.

ARCHSTONE-SMITH OPERATING TRUST

By:

Name:

Title:

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Form of Money Market Quote Request

To:	JPMorgan Chase Bank (the “Agent”)
From:	Archstone-Smith Operating Trust (the “Borrower”)
Re:	Amended and Restated Credit Agreement (the “Credit Agreement”), dated      , 2003 among the Borrower, the Lenders parties thereto and the Agent

               We hereby give notice pursuant to Section 2.8 of the Credit Agreement that we request Money Market Quotes for the following proposed Money Market Loan(s):

     Date of Borrowing:      

Principal Amount	Interest Period
$

               Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the Adjusted Eurodollar Interbank Rate].

               The funding of Money Market Loans made in connection with this Money Market Quote Request [may/may not] be made by Designated Lenders.

               Terms used herein have the meanings assigned to them in the Credit Agreement.

ARCHSTONE-SMITH OPERATING TRUST
By:
	Name:
	Title:

Amount must be $20,000,000 or a larger multiple of $1,000,000.

Not less than one month (LIBOR Auction) or not less than 30 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period.

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EXHIBIT F

Form of Invitation for Money Market Quotes

To:	[Name of Lender]
RE:	Invitation for Money Market Quotes to Archstone-Smith Operating Trust (the “Borrower”)

     Pursuant to Section 2.8 of the Amended and Restated Credit Agreement dated      , 2003 among the Borrower, the Lenders parties thereto and the undersigned, as Agent, we are pleased on behalf of the Borrower to invite you to submit Money Market Quotes to the Borrower for the following proposed Money Market Loan(s):

Date of Borrowing:

Principal Amount	Interest Period
$

     Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the Adjusted Eurodollar Interbank Rate.]

     Please respond to this invitation by no later than      A.M. (New York, New York time) on [date].

JPMORGAN CHASE BANK,
as Agent
By:
	Authorized Officer

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Form of Money Market Quote

To:	JPMorgan Chase Bank, as Agent
RE:	Money Market Quote to Archstone-Smith Operating Trust (the “Borrower”)

     In response to your invitation on behalf of the Borrower dated      , 200     , we hereby make the following Money Market Quote on the following terms:

1.	Quoting Bank:
2.	Person to contact at Quoting Bank:
3.	We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and the following rates:

Principal	Interest	Money Market
Amount	Period	[Margin] [Absolute Rate]
$
$

[Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $     .]

       We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Amended and Restated Credit Agreement dated      , 2003 among the Borrower, the Lenders parties thereto and yourselves, as Agent, irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part.

	Very truly yours,
	[NAME OF LENDER]
Dated:	By:
		Authorized Officer

EXHIBIT G

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Form of Designation Agreement

Dated                , 200__

     Reference is made to that certain Amended and Restated Credit Agreement dated                , 2003 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”) among ARCHSTONE-SMITH OPERATING TRUST, the Lenders parties thereto, and JPMORGAN CHASE BANK (the “Agent”), as Agent. Terms defined in the Credit Agreement are used herein with the same meaning.

     [NAME OF DESIGNOR] (the “Designor”), [NAME OF DESIGNEE] (the “Designee”), the Agent and Borrower agree as follows:

     1.     The Designor hereby designates the Designee, and the Designee hereby accepts such designation, to have a right to make Money Market Loans pursuant to Section 2.8 of the Credit Agreement. Any assignment by Designor to Designee of its rights to make a Money Market Loan pursuant to such Section 2.8 shall be effective at the time of the funding of such Money Market Loan and not before such time.

     2.     Except as set forth in Section 7 below, the Designor makes no representation or warranty and assumes no responsibility pursuant to this Designation Agreement with respect to (a) any statements, warranties or representations made in or in connection with any Credit Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of any Credit Document or any other instrument and document furnished pursuant thereto and (b) the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under any Credit Document or any other instrument or document furnished pursuant thereto.

     3.     The Designee (a) confirms that it has received a copy of each Credit Document, together with copies of the financial statements referred to in Section 5.2 of the Credit Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Designation Agreement; (b) agrees that it will independently and without reliance upon the Agent, the Designor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under any Credit Document; (c) confirms that it is a Designated Lender; (d) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under any Credit Document as are delegated to the Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; and (e) agrees to be bound by each and every provision of each Credit Document and further agrees that it will perform in accordance with their terms all of the obligations which by the terms of any Credit Document are required to be performed by it as a Lender.

     4.     The Designee hereby appoints Designor as Designee’s agent and attorney in fact, and grants to Designor an irrevocable power of attorney, to receive payments made for the

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benefit of Designee under the Credit Agreement, to deliver and receive all communications and notices under the Credit Agreement and other Credit Documents and to exercise on Designee’s behalf all rights to vote and to grant and make approvals, waivers, consents or amendments to or under the Credit Agreement or other Credit Documents. Any document executed by the Designor on the Designee’s behalf in connection with the Credit Agreement or other Credit Documents shall be binding on the Designee. The Borrower, the Agent and each of the Lenders may rely on and are beneficiaries of the preceding provisions.

     5.     Following the execution of this Designation Agreement by the Designor and its Designee, it will be delivered to the Agent for acceptance by the Agent. The effective date for this Designation Agreement (the “Effective Date”) shall be the date of acceptance hereof by the Agent, unless otherwise specified on the signature page hereto.

     6.     The Agent hereby agrees that it will not institute against any Designee or join any other Person in instituting against any Designee any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any federal or state bankruptcy or similar law, until the later to occur of (i) one year and one day after the payment in full of the latest maturing commercial paper note issued by such Designee and (ii) the Revolving Credit Termination Date.

     7.     The Designor unconditionally agrees to pay or reimburse the Designee and save the Designee harmless against all liabilities, obligations, losses, damages, penalties, actions and judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed or asserted by any of the parties to the Credit Documents against the Designee, in its capacity as such, in any way relating to or arising out of this Designation Agreement or any other Credit Documents or any action taken or omitted by the Designee hereunder or thereunder, INCLUDING THE NEGLIGENCE OF THE DESIGNEE provided that the Designor shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements if the same results from the Designee’s gross negligence or willful misconduct.

     8.     As of the Effective Date the Designee shall be a party to the Credit Agreement with a right (subject to the provisions of Section 2.8(b)) to make Money Market Loans as a Lender pursuant to Section 2.8 of the Credit Agreement and the rights and obligations of a Lender related thereto; provided, however, that the Designee shall not be required to make payments with respect to such obligations except to the extent of excess cash flow of such Designee which is not otherwise required to repay obligations of such Designee, which are then due and payable. Notwithstanding the foregoing, the Designor, as administrative agent for the Designee, shall be and remain obligated to the Borrower, the Agent and the Lenders for each and every one of the obligations of the Designee and its Designor with respect to the Credit Agreement, including, without limitation, any indemnification obligations under Section 8.5 of the Credit Agreement and any sums otherwise payable to the Borrower by the Designee.

     9.     This Designation Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas.

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     10.     This Designation Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Designation Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Designation Agreement.

     IN WITNESS WHEREOF, the Designor and the Designee, intending to be legally bound, have caused this Designation Agreement to be executed by their officers thereunto duly authorized as of the date first above written.

Effective Date:
                         , 200     

[NAME OF DESIGNOR], as Designor

By:

Title:

[NAME OF DESIGNEE], as Designee

By:

Title:

Applicable Lending Office
(and address for notices):

[Address]

Accepted this _____ day of
______________, 200__

JPMORGAN CHASE BANK, as Agent

By:

Name:

Title:

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FORM OF GUARANTY

     THIS GUARANTY dated as of                , 2003 executed and delivered by each of the undersigned, whether one or more, (all each a “Guarantor” and collectively, the “Guarantors”), in favor of (a) JPMORGAN CHASE BANK, in its capacity as Agent (the “Agent”) for the Lenders under that certain Amended and Restated Credit Agreement dated as of October 30, 2003 by and among ARCHSTONE-SMITH OPERATING TRUST (the “Borrower”), the financial institutions party thereto and their assignees in accordance therewith (the “Lenders”), and the Agent (as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with its terms, the “Credit Agreement”) and (b) the Lenders.

     WHEREAS, pursuant to the Credit Agreement, the Lenders have made available to the Borrower certain financial accommodations on the terms and conditions set forth in the Credit Agreement;

     WHEREAS, each Guarantor is a wholly-owned Subsidiary of the Borrower;

     WHEREAS, the Borrower, each Guarantor and the other Subsidiaries of the Borrower, though separate legal entities, are mutually dependent on each other in the conduct of their respective businesses as an integrated operation and have determined it to be in their mutual best interests to obtain financing from the Agent and the Lenders through their collective efforts;

     WHEREAS, each Guarantor acknowledges that it will receive direct and indirect benefits from the Agent and the Lenders making such financial accommodations available to the Borrower under the Credit Agreement and, accordingly, each Guarantor is willing to guarantee the Borrower’s obligations to the Agent and the Lenders on the terms and conditions contained herein; and

     WHEREAS, each Guarantor’s execution and delivery of this Guaranty is one of the conditions precedent to the Agent and the Lenders making, or continuing to make, such financial accommodations to the Borrower.

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Guarantor, each Guarantor agrees as follows:

     Section 1. Guaranty. Each Guarantor hereby absolutely and unconditionally guaranties the due and punctual payment and performance of all of the following (collectively referred to as the “Obligations”): (a) all indebtedness and obligations owing by the Borrower to any of the Lenders or the Agent under or in connection with the Credit Agreement and any other Credit Document, including without limitation, the repayment of all principal of the Loans made by the Lenders to the Borrower under the Credit Agreement and the payment of all interest, fees, charges, reasonable attorneys fees and other amounts payable to any Lender or the Agent thereunder or in connection therewith; (b) any and all extensions, renewals, modifications, amendments or substitutions of the foregoing; and (c) all expenses, including, without limitation,

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reasonable attorneys’ fees and disbursements, that are incurred by the Lenders or the Agent in the enforcement of any of the foregoing or any obligation of such Guarantor hereunder.

     Section 2. Guaranty of Payment and Not of Collection. This Guaranty is a guaranty of payment, and not of collection, and a debt of each Guarantor for its own account. Accordingly, the Lenders and the Agent shall not be obligated or required before enforcing this Guaranty against any Guarantor: (a) to pursue any right or remedy the Lenders or the Agent may have against the Borrower, any other Guarantor or any other Person or commence any suit or other proceeding against the Borrower, any other Guarantor or any other Person in any court or other tribunal; (b) to make any claim in a liquidation or bankruptcy of the Borrower, any other Guarantor or any other Person; or (c) to make demand of the Borrower, any other Guarantor or any other Person or to enforce or seek to enforce or realize upon any collateral security held by the Lenders or the Agent which may secure any of the Obligations. In this connection, each Guarantor hereby waives the right of such Guarantor to require any holder of the Obligations to take action against the Borrower as provided by any Legal Requirement.

     Section 3. Guaranty Absolute. Each Guarantor guarantees that the Obligations will be paid strictly in accordance with the terms of the documents evidencing the same, regardless of any Legal Requirement now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Agent or the Lenders with respect thereto. The liability of each Guarantor under this Guaranty shall be absolute and unconditional in accordance with its terms and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including without limitation, the following (whether or not such Guarantor consents thereto or has notice thereof):

     (a)  (i) any change in the amount, interest rate or due date or other term of any of the Obligations, (ii) any change in the time, place or manner of payment of all or any portion of the Obligations, (iii) any amendment or waiver of, or consent to the departure from or other indulgence with respect to, the Credit Agreement, any other Credit Document, or any other document or instrument evidencing or relating to any Obligations, or (iv) any waiver, renewal, extension, addition, or supplement to, or deletion from, or any other action or inaction under or in respect of, the Credit Agreement, any of the other Credit Documents, or any other documents, instruments or agreements relating to the Obligations or any other instrument or agreement referred to therein or evidencing any Obligations or any assignment or transfer of any of the foregoing;

     (b)  any lack of validity or enforceability of the Credit Agreement, any of the other Credit Documents, or any other document, instrument or agreement referred to therein or evidencing any Obligations or any assignment or transfer of any of the foregoing;

     (c)  any furnishing to the Agent or the Lenders of any security for the Obligations, or any sale, exchange, release or surrender of, or realization on, any collateral security for the Obligations;

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     (d)  any settlement or compromise of any of the Obligations, any security therefor, or any liability of any other party with respect to the Obligations, or any subordination of the payment of the Obligations to the payment of any other liability of the Borrower;

     (e)  any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to any other Guarantor, the Borrower or any other Person, or any action taken with respect to this Guaranty by any trustee or receiver, or by any court, in any such proceeding;

     (f)  any nonperfection of any security interest or other Lien on any of the collateral securing any of the Obligations;

     (g)  any act or failure to act by the Borrower or any other Person which may adversely affect such Guarantor’s subrogation rights, if any, against the Borrower to recover payments made under this Guaranty;

     (h)  any application of sums paid by the Borrower or any other Person with respect to the liabilities of the Borrower to the Agent or the Lenders, regardless of what liabilities of the Borrower remain unpaid;

     (i)  any defect, limitation or insufficiency in the borrowing powers of the Borrower or in the exercise thereof; or

     (j)  any other circumstance which might otherwise constitute a defense available to, or a discharge of, any Guarantor hereunder.

     Section 4. Action with Respect to Obligations. The Lenders and the Agent may, at any time and from time to time, without the consent of, or notice to, any Guarantor, and without discharging any Guarantor from its obligations hereunder take any and all actions described in Section 3 and may otherwise: (a) amend, modify, alter or supplement the terms of any of the Obligations, including, but not limited to, extending or shortening the time of payment of any of the Obligations or the interest rate that may accrue on any of the Obligations; (b) amend, modify, alter or supplement the Credit Agreement or any other Credit Document; (c) sell, exchange, release or otherwise deal with all, or any part, of any collateral securing any of the Obligations; (d) release any Person liable in any manner for the payment or collection of the Obligations; (e) exercise, or refrain from exercising, any rights against the Borrower or any other Person (including, without limitation, any other Guarantor); and (f) apply any sum, by whomsoever paid or however realized, to the Obligations in such order as the Lenders or the Agent shall elect.

     Section 5. Representations and Warranties. Each Guarantor hereby makes to the Agent and the Lenders all of the representations and warranties made by the Borrower with respect to or in any way relating to such Guarantor in the Credit Agreement and the other Credit Documents, as if the same were set forth herein in full.

     Section 6. Covenants. Each Guarantor will comply with all covenants which the Borrower is to cause such Guarantor to comply with under the terms of the Credit Agreement or

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any other Credit Documents. Guarantor specifically agrees that to the extent Guaranty Proceeds (as defined in Section 7.3(a) of the Credit Agreement) are distributed to holders of Public Debt or their respective trustees (as defined in Section 7.3(a) of the Credit Agreement) pursuant to Section 7.3 of the Credit Agreement, the Obligations will not be deemed to be reduced by any such distributions and each Guarantor shall continue to make payments under this Guaranty until such time as the Obligations have been paid in full (and the Commitment has been terminated and any LC Exposure reduced to zero), after taking into account any such distributions of payments hereunder in report of Indebtedness other than the Obligations.

     Section 7. Waiver. Each Guarantor, to the fullest extent permitted by applicable law, hereby waives notice of acceptance hereof or any presentment, demand, protest or notice of any kind, and any other act or thing, or omission or delay to do any other act or thing, which in any manner or to any extent might vary the risk of such Guarantor or which otherwise might operate to discharge such Guarantor from its obligations hereunder.

     Section 8. Inability to Accelerate Loan. If the Agent and/or the Lenders are prevented from demanding or accelerating payment thereof by reason of any automatic stay or otherwise, the Agent and/or the Lenders shall be entitled to receive from each Guarantor, upon demand therefor, the sums which otherwise would have been due had such demand or acceleration occurred.

     Section 9. Reinstatement of Obligations. Each Guarantor agrees that this Guaranty shall continue to be effective or be reinstated, as the case may be, with respect to any Obligations if at any time payment of any such Obligations is rescinded or otherwise must be restored by the Agent and/or the Lenders upon the bankruptcy or reorganization of the Borrower or any Guarantor or otherwise.

     Section 10. Subrogation. Until all of the Obligations shall have been indefeasibly paid in full, no Guarantor shall have any right of subrogation and each Guarantor hereby waives any right to enforce any remedy which the Agent and/or the Lenders now have or may hereafter have against the Borrower, and each Guarantor hereby waives any benefit of, and any right to participate in, any security or collateral given to the Agent and the Lenders to secure payment or performance of any of the Obligations.

     Section 11. Payments Free and Clear. All sums payable by each Guarantor hereunder, whether of principal, interest, fees, expenses, premiums or otherwise, shall be paid in full, without set-off or counterclaim or any deduction or withholding whatsoever (including any withholding tax or liability imposed by any Governmental Authority, or any Legal Requirement promulgated thereby), and if any Guarantor is required by such Legal Requirement or by such Governmental Authority to make any such deduction or withholding, such Guarantor shall pay to the Agent and the Lenders such additional amount as will result in the receipt by the Agent and the Lenders of the full amount payable hereunder had such deduction or withholding not occurred or been required.

     Section 12. Set-off. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, each Lender is hereby authorized by each

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Guarantor, at any time or from time to time, without notice to any Guarantor or to any other Person, any such notice being hereby expressly waived, but subject to receipt of Agent’s prior written consent, to set-off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured) and any other indebtedness at any time held or owing by such Lender or any Affiliate of such Lender, to or for the credit or the account of each Guarantor against and on account of any of the Obligations then due and owing after the expiration of any applicable grace periods. Each Guarantor agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the applicable provisions of the Credit Agreement, may exercise rights of setoff or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of such Guarantor in the amount of such participation.

     Section 13. Subordination. Each Guarantor hereby expressly covenants and agrees for the benefit of the Agent and the Lenders that all obligations and liabilities of the Borrower or any other Guarantor to such Guarantor of whatever description, including without limitation, all intercompany receivables of such Guarantor from the Borrower or any other Guarantor (collectively, the “Junior Claims”) shall be subordinate and junior in right of payment to all Obligations. If an Event of Default shall have occurred and be continuing, then no Guarantor shall accept any direct or indirect payment (in cash, property, securities by setoff or otherwise) from the Borrower or any other Guarantor on account of or in any manner in respect of any Junior Claim until all of the Obligations have been indefeasibly paid in full.

     Section 14. Avoidance Provisions. It is the intent of each Guarantor, the Agent and the Lenders that in any Proceeding, such Guarantor’s maximum obligation hereunder shall equal, but not exceed, the maximum amount which would not otherwise cause the obligations of such Guarantor hereunder (or any other obligations of such Guarantor to the Agent and the Lenders) to be avoidable or unenforceable against such Guarantor in such Proceeding as a result of applicable law, including without limitation, (a) Section 548 of the Bankruptcy Code of 1978, as amended (the “Bankruptcy Code”) and (b) any state fraudulent transfer or fraudulent conveyance act or statute applied in such Proceeding, whether by virtue of Section 544 of the Bankruptcy Code or otherwise. The applicable laws under which the possible avoidance or unenforceability of the obligations of such Guarantor hereunder (or any other obligations of such Guarantor to the Agent and the Lenders) shall be determined in any such Proceeding are referred to as the “Avoidance Provisions”. Accordingly, to the extent that the obligations of any Guarantor hereunder would otherwise be subject to avoidance under the Avoidance Provisions, the maximum Obligations for which such Guarantor shall be liable hereunder shall be reduced to that amount which, as of the time any of the Obligations are deemed to have been incurred under the Avoidance Provisions, would not cause the obligations of any Guarantor hereunder (or any other obligations of such Guarantor to the Agent and the Lenders), to be subject to avoidance under the Avoidance Provisions. This Section is intended solely to preserve the rights of the Agent and the Lenders hereunder to the maximum extent that would not cause the obligations of any Guarantor hereunder to be subject to avoidance under the Avoidance Provisions, and no Guarantor nor any other Person shall have any right or claim under this Section as against the Agent and the Lenders that would not otherwise be available to such Person under the Avoidance Provisions.

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     Section 15. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of the financial condition of the Borrower, of the other Guarantors and of all other circumstances bearing upon the risk of nonpayment of any of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Agent or any Lender shall have any duty whatsoever to advise any Guarantor of information regarding such circumstances or risks.

     Section 16. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

     SECTION 17. JURISDICTION, VENUE.

     (a)  EACH GUARANTOR AGREES THAT THE FEDERAL DISTRICT COURT OF THE SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION, OR, AT THE OPTION OF THE AGENT, ANY STATE COURT LOCATED IN HARRIS COUNTY, TEXAS SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG ANY GUARANTOR, THE AGENT OR ANY OF THE LENDERS, PERTAINING DIRECTLY OR INDIRECTLY TO THIS GUARANTY OR ANY OTHER CREDIT DOCUMENT OR TO ANY MATTER ARISING HEREFROM OR THEREFROM OR ANY COLLATERAL. EACH GUARANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS. THE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE BRINGING OF ANY ACTION BY THE AGENT OR ANY LENDER OR THE ENFORCEMENT BY THE AGENT OR ANY LENDER IN ANY OTHER APPROPRIATE JURISDICTION. FURTHER, EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

     (b)  THE FOREGOING WAIVERS HAVE BEEN MADE WITH THE ADVICE OF COUNSEL AND WITH A FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF, AND SHALL SURVIVE THE PAYMENT OF THE OBLIGATIONS AND ALL OTHER AMOUNTS PAYABLE HEREUNDER OR UNDER THE OTHER CREDIT DOCUMENTS AND THE TERMINATION OF THIS GUARANTY.

     Section 18. Loan Accounts. The Agent may maintain books and accounts setting forth the amounts of principal, interest and other sums paid and payable with respect to the Obligations, and in the case of any dispute relating to any of the outstanding amount, payment or receipt of Obligation or otherwise, the entries in such account shall be binding upon each Guarantor as to the outstanding amount of such Obligations and the amounts paid and payable with respect thereto absent manifest error. The failure of the Agent to maintain such books and accounts shall not in any way relieve or discharge any Guarantor of any of its obligations hereunder.

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     Section 19. Waiver of Remedies. No delay or failure on the part of the Agent or the Lenders in the exercise of any right or remedy it may have against any Guarantor hereunder or otherwise shall operate as a waiver thereof, and no single or partial exercise by the Agent or the Lenders of any such right or remedy shall preclude other or further exercise thereof or the exercise of any other such right or remedy.

     Section 20. Successors and Assigns. Each reference herein to the Agent or the Lenders shall be deemed to include such Person’s respective successors and assigns (including, but not limited to, any holder of the Obligations) in whose favor the provisions of this Guaranty also shall inure, and each reference herein to any Guarantor shall be deemed to include the Guarantor’s successors and assigns, upon whom this Guaranty also shall be binding. The Lenders and the Agent may, in accordance with the applicable provisions of the Credit Agreement, assign, transfer or sell any Obligation, or grant or sell participation in any Obligations, to any Person or entity without the consent of, or notice to, any Guarantor and without releasing, discharging or modifying such Guarantor’s obligations hereunder. Each Guarantor hereby consents to the delivery by the Agent or any Lender to any assignee, transferee or participant of any financial or other information regarding the Borrower or any Guarantor. Each Guarantor may not assign or transfer its obligations hereunder to any Person.

     SECTION 21. JOINT AND SEVERAL OBLIGATIONS. THE OBLIGATIONS OF THE GUARANTORS HEREUNDER AND UNDER OTHER CREDIT DOCUMENTS SHALL BE JOINT AND SEVERAL, AND ACCORDINGLY, EACH GUARANTOR CONFIRMS THAT IT IS LIABLE FOR THE FULL AMOUNT OF THE OBLIGATIONS AND ALL OF THE OBLIGATIONS AND LIABILITIES OF EACH OF THE OTHER GUARANTORS HEREUNDER AND UNDER OTHER COURT DOCUMENTS.

     Section 22. Amendments. This Guaranty may not be amended except as provided in the Credit Agreement.

     Section 23. Payments. All payments made by any Guarantor pursuant to this Guaranty shall be made in Dollars, in immediately available funds to the Agent at its Lending Office, not later than 12:00 noon, New York, New York time on the date one (1) Business Day after demand therefor.

     Section 24. Notices. All notices, requests and other communications hereunder shall be in writing and shall be given as provided in the Loan Agreement. Each Guarantor’s address for notice is set forth below its signature hereto.

     Section 25. Severability. In case any provision of this Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

     Section 26. Headings. Section headings used in this Guaranty are for convenience only and shall not affect the construction of this Guaranty.

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     Section 27. Definitions. (a) For the purposes of this Guaranty:

     “Proceeding” means any of the following: (i) a voluntary or involuntary case concerning any Guarantor shall be commenced under the Bankruptcy Code or any other applicable bankruptcy laws; (ii) a custodian (as defined in the Bankruptcy Code or any other applicable bankruptcy laws) is appointed for, or takes charge of, all or any substantial part of the property of any Guarantor; (iii) any other proceeding under any applicable law, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding-up or composition for adjustment of debts, whether now or hereafter in effect, is commenced relating to any Guarantor; (iv) any Guarantor is adjudicated insolvent or bankrupt; (v) any order of relief or other order approving any such case or proceeding is entered by a court of competent jurisdiction; (vi) any Guarantor makes a general assignment for the benefit of creditors; (vii) any Guarantor shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; (viii) any Guarantor shall call a meeting of its creditors with a view to arranging a composition or adjustment of its debts; (ix) any Guarantor shall by any act or failure to act indicate its consent to, approval of or acquiescence in any of the foregoing; or (x) any corporate action shall be taken by any Guarantor for the purpose of effecting any of the foregoing.

     (b)  Terms not otherwise defined herein are used herein with the respective meanings given them in the Credit Agreement.

     IN WITNESS WHEREOF, each Guarantor has duly executed and delivered this Guaranty as of the date and year first written above.

[Guarantor Signature]

Address:
9200 E. Panorama Circle
Suite 400
Englewood, Colorado 80112
Attention: Corporate Finance

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ASSIGNMENT AND ASSUMPTION

     This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

     For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including any letters of credit, guarantees, and swingline loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

1.	Assignor:
2.	Assignee:
		[and is an Affiliate/Approved Fund of [identify Lender]1]
3.	Borrower:	Archstone-Smith Operating Trust
4.	Administrative Agent:	JPMorgan Chase Bank, as the administrative agent under the Credit Agreement
5.	Credit Agreement:	[The Amended and Restated Credit Agreement dated as of      , 2003 among Archstone-Smith Operating Trust, the Lenders parties thereto, JPMorgan Chase Bank, as Administrative Agent, and the other lenders parties thereto]

1 Select as applicable.

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6. Assigned Interest:

	Aggregate Amount of		Amount of
	Commitment/Loans		Commitment/Loans	Percentage Assigned of
Facility Assigned2	for all Lenders		Assigned	Commitment/Loans3
		$	$		%
		$	$		%
		$	$		%

Effective Date:               , 20      [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR

[NAME OF ASSIGNOR]

By:

Title:

ASSIGNEE

[NAME OF ASSIGNEE]

By:

Title:

2 Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g. “Revolving Commitment,” “Tranche A Commitment,” “Tranche B Commitment,” etc.)

3 Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.

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[Consented to and]4 Accepted:

JPMORGAN CHASE BANK, as
   Administrative Agent

By
	Title:

[Consented to:]5

[NAME OF RELEVANT PARTY]

By
	Title:

4 To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.

5 To be added only if the consent of the Borrower and/or other parties (e.g. Swingline Lender, Issuing Bank) is required by the terms of the Credit Agreement.

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ANNEX 1

STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION

          1. Representations and Warranties.

          1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

          1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.2 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (v) if it is a Foreign Lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

          2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.

          3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of Texas.

EXHIBIT J

Page 4 of 4

GUARANTY OF COLLECTION

     THIS GUARANTY (this “Guaranty”), dated as of                 is made by                      (the “Guarantor”), in favor of (a) JPMorgan Chase Bank, in its capacity as Administrative Agent (the “Agent”) for the Lenders under that certain Amended and Restated Credit Agreement dated as of October 30, 2003 by and among Archstone-Smith Operating Trust (the “Borrower”), the financial institutions party thereto and their assignees in accordance therewith (the “Lenders”), and the Agent (as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms, the “Credit Agreement”) and (b) the Lenders.

     PRELIMINARY STATEMENT. Capitalized terms not otherwise defined herein shall have the respective meanings assigned thereto under the Credit Agreement. The Guarantor is a beneficial common unitholder of the Borrower and therefore the Guarantor has determined that the making of the Loan by the Lenders benefited, directly or indirectly, the Guarantor. If other beneficial common unitholders of the Borrower have entered into similar guaranty agreements (the “Other Guarantees”) with the Agent as this Guaranty, they shall be referred to in this Guaranty as the “Other Guarantors.”

     NOW, THEREFORE, in consideration of the premises, the Guarantor hereby agrees as follows:

     SECTION 1. Guaranty. This guaranty constitutes a limited guaranty of collection. The Guarantor hereby guarantees the punctual collection when due, on a several basis, whether at stated maturity, by demand, acceleration or otherwise, of (a) that portion of the principal and interest outstanding on the indebtedness of the Borrower under the Credit Agreement that remains outstanding equal to $       [THIS NUMBER IS INTENDED TO BE THE ACTUAL AMOUNT OF GUARANTEE] less such amounts as the Agent has collected upon exercising all rights, assertion of all claims and demands and enforcement of all remedies available to it (other than this Guaranty and the Other Guarantees) under the Credit Documents, and (b) reasonable attorney’s fees and all costs and expenses incurred in enforcing any rights under this Guaranty (such obligations being the “Obligations”). An objective of this guaranty is that the Obligation shall be a “recourse liability” as defined in Treasury Regulation §1.752-1(a)(1), and the Guarantor shall bear the economic risk of loss with respect to such portion of the liabilities as is equal to the Obligations within the meaning of Treasury Regulation §1.752-2.

     SECTION 2. Guaranty Absolute. The Guarantor hereby guarantees that the Obligations will be paid strictly in accordance with their terms, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Agent with respect thereto. The liability of the Guarantor under this Guaranty shall be absolute and unconditional irrespective of:

(a)	Any lack of validity or enforceability of the Credit Agreement or any other Credit Documents or agreement relating thereto or executed in connection therewith;
(b)	Any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations or any other amendment or waiver of or any consent

EXHIBIT K

Page 1 of 4

	to any departure from the Credit Agreement, any other Credit Documents or any other documents or agreement relating thereto or executed in connection therewith;
(c)	Any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Obligations; or
(d)	Any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Borrower, any subsidiary of Borrower or any other person that is a party to the Credit Agreement, any other Credit Documents or any other document or agreement related thereto or executed in connection therewith (including any guarantor) in respect to the Obligations.

This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by the Agent or any Lender upon the insolvency, bankruptcy or reorganization of the Borrower or Guarantor or otherwise, all as though such payment had not been made. The obligations of the Guarantor under this Guaranty shall not be subject to reduction, termination or other impairment by reason of any setoff, recoupment, counterclaim or defense or for any other reason. This Guaranty is to be in addition to and is not to prejudice or be prejudiced by any other securities or guaranties (including any guaranty signed by the Guarantor) which the Agent may now or hereafter hold from or on account of the Borrower and is to be binding on the Guarantor as a continuing guaranty notwithstanding any payments from time to time made to the Agent or any settlement of account or disability or incapacity affecting the Guarantor or any other thing whatsoever.

     SECTION 3. Representations and Warranties. Guarantor hereby represents and warrants that it has the requisite power and authority to execute and deliver and to carry out this Guaranty and the transactions contemplated herein; and to perform its obligations hereunder. This Guaranty has been duly and validly executed and delivered by the Guarantor and constitutes a valid and legally binding agreement of the Guarantor, enforceable in accordance with its terms.

     SECTION 4. Waiver. The Guarantor waives any notice with respect to any of the Obligations and this Guaranty (it being the understanding of the Agent and the Guarantor that this Guaranty is a guaranty of collection and not of payment).

     SECTION 5. No Subrogation. The Guarantor will not exercise any rights which it may acquire by way of subrogation under this Guaranty or in respect of any security for the Obligations, by any payment made hereunder or otherwise.

     SECTION 6. Amendments, Etc. No amendment or waiver of any provision of this Guaranty nor consent to any departure by the Guarantor herefrom, shall be effective unless the same is in writing and signed by the Agent and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

     SECTION 7. Notices. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing or by facsimile, telegraph or

EXHIBIT K

Page 2 of 4

cable and mailed or sent or delivered as to each party hereto at the address for notices set forth under its name on the signature page hereof or, in the case of each party, at such other address as shall be designated by such party in a written notice to all other parties. All such notices and other communications shall be effective when received, and in the case of notice by facsimile, telegraph or cable, when sent, and upon receipt of an answer back, in each case addressed as set forth above.

     SECTION 8. No Waiver; Cumulative Remedies. No failure on the part of the Agent or any Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

     SECTION 9. Absolute and Continuing Guaranty. This Guaranty is an absolute and continuing guaranty and shall (a) remain in full force and effect until full payment of the Obligations or all amounts payable under this Guaranty, (b) be binding upon the Guarantor and its successors and assigns, and (c) inure to the benefit of the Agent and its successors and assigns.

     SECTION 10. Savings Clause. Nothing herein is intended to contract for, take, reserve, charge or receive interest or other consideration for the use, forbearance or detention of money at a rate in excess of the highest rate permitted by applicable laws (“Highest Lawful Rate”) nor shall the Guarantor be required to pay unearned interest. If any amount payable by the Guarantor hereunder is deemed to constitute unearned interest or if the Agent shall receive from the Guarantor any monies that are deemed to constitute interest at a rate in excess of the Highest Lawful Rate, then (a) the amount of interest which would otherwise be payable under this Guaranty shall be reduced to the amount allowed under applicable law, and (b) any unearned interest paid by the Guarantor or any interest paid by the Guarantor in excess of the Highest Lawful Rate shall, at the option of the Agent, be either refunded to the Guarantor or credited against the amounts payable by the Guarantor hereunder, in such order as the Agent shall determine.

     SECTION 11. Governing Law. This Guaranty shall be deemed to be executed by the parties hereto under the laws of the State of Texas, and shall be construed in accordance with the laws of Texas and applicable federal law.

     SECTION 12. Waiver of Suretyship Rights. By signing this Guaranty, Guarantor WAIVES each and every right to which it may be entitled by virtue of any suretyship law, including any rights it may have pursuant to Rule 31 of the Texas Rules of Civil Procedure, §17.001 of the Texas Civil Practice and Remedies Code and Chapter 34 of the Texas Business and Commerce Code, as the same may be amended from time to time.

     SECTION 13. Release of Claims. Guarantor hereby releases, discharges and acquits forever Agent, Lenders and their respective officers, directors, trustees, agents, employees and counsel (in each case, past, present or future) from any and all Claims existing as of the date hereof (or the date of actual execution hereof by Guarantor, if later). As used herein, the term “Claim” shall mean any and all liabilities, claims, defenses, demands, actions, causes of action,

EXHIBIT K

Page 3 of 4

judgments, deficiencies, interest, liens, costs or expenses (including court costs, penalties, attorneys’ fees and disbursements, and amounts paid in settlement) of any kind and character whatsoever, including claims for usury, breach of contract, breach of commitment, negligent misrepresentation or failure to act in good faith, in each case whether now known or unknown, suspected or unsuspected, asserted or unasserted or primary or contingent, and whether arising out of written documents, unwritten undertakings, course of conduct, tort, violations of laws or regulations or otherwise. To the maximum extent permitted by applicable law, Guarantor hereby waives all rights, remedies, claims and defenses based upon or related to Sections 51.003, 51.004 and 51.005 of the Texas Property Code, to the extent the same pertain or may pertain to any enforcement of this Guaranty.

     IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered as of the date first above written.

[Name of Guarantor]

By:

Name:

Title:

[Address of Guarantor]

EXHIBIT K

Page 4 of 4

EX-12.1 5 d13102exv12w1.htm EX-12.1 COMPUTATION OF RATIO OF EARNINGS

EXHIBIT 12.1

ARCHSTONE-SMITH OPERATING TRUST
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(Dollar amounts in thousands)

(Unaudited)

	Years Ended December 31,
	2003(1)		2002(1)		2001(1)		2000(1)		1999(1)
Earnings from operations	$	108,262	$	127,619	$	130,070	$	139,295	$	140,920
Add:
Interest expense		186,832		190,005		88,081		107,231		94,471
Earnings as adjusted	$	295,094	$	317,624	$	218,151	$	246,526	$	235,391
Fixed charges:
Interest expense	$	186,832	$	190,005	$	88,081	$	107,231	$	94,471
Capitalized interest		26,854		32,377		31,600		37,079		41,099
Total fixed charges	$	213,686	$	222,382	$	119,681	$	144,310	$	135,570
Ratio of earnings to fixed charges		1.4		1.4		1.8		1.7		1.7

(1) Net earnings from discontinued operations have been reclassified for all years presented.

90

EX-12.1

exv12w1

EX-12.2

EXHIBIT 12.2

ARCHSTONE-SMITH OPERATING TRUST
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED UNIT DISTRIBUTIONS

(Dollar amounts in thousands)

(Unaudited)

	Years Ended December 31,
	2003 (1)		2002 (1)		2001 (1)		2000 (1)		1999 (1)
Earnings from operations	$	108,262	$	127,619	$	130,070	$	139,295	$	140,920
Add:
Interest expense		186,832		190,005		88,081		107,231		94,471
Earnings as adjusted	$	295,094	$	317,624	$	218,151	$	246,526	$	235,391
Combined fixed charges and Preferred Unit distributions:
Interest expense	$	186,832	$	190,005	$	88,081	$	107,231	$	94,471
Capitalized interest		26,854		32,377		31,600		37,079		41,099
Total fixed charges		213,686		222,382		119,681		144,310		135,570
Preferred Unit distributions		20,997		32,185		25,877		25,340		23,733
Combined fixed charges and Preferred Unit distributions	$	234,683	$	254,567	$	145,558	$	169,650	$	159,303
Ratio of earnings to combined fixed charges and Preferred Unit distributions		1.3		1.2		1.5		1.5		1.5

(1) Net earnings from discontinued operations have been reclassified for all years presented.

91

EX-21

EXHIBIT 21

	State of
	Incorporation or
Subsidiary Name	Organization
1841 Columbia Road Custodian LLC	Delaware
1841 Columbia Road LLC	Delaware
AICP LLC	Delaware
Aircond Corporation	Delaware
Alban Towers, L.L.C.	Delaware
AMERITON Properties Incorporated	Maryland
API Barrington Hills, LLC	Delaware
API Chauncey Ranch LLC	Delaware
API Columbia Town Center LLC	Delaware
API CTC LLC	Delaware
API Genesis Park LLC	Delaware
API Hibiscus LLC	Delaware
API Jefferson Park LLC	Delaware
API Methuen LLC	Delaware
API Mission North LLC	Delaware
API Multifamily Properties I LLC	Delaware
API Verandahs B LLC	Delaware
API Verandahs GP1 LLC	Delaware
API Verandahs GP2 LLC	Delaware
Archstone Financial Services LLC	Delaware
Archstone Foundation	Colorado
Archstone Management Services Incorporated	Delaware
Archstone Property Investment Incorporated	Delaware
Archstone Property Investment LLC	Delaware
Archstone Property Management (California) Incorporated	Delaware
Archstone Property Management LLC	Delaware
Archstone Vinnin Square LLC	Delaware
Archstone-Smith Communities LLC	Delaware
ASN Bowie LLC	Delaware
ASN Calabasas I LLC	Delaware
ASN Calabasas II LLC	Delaware
ASN Cambridge LLC	Delaware
ASN Charles Daniels LLC	Delaware
ASN Cypress Cove LLC	Delaware
ASN Esplanade at Park Center LLC	Delaware
ASN Estancia LLC	Delaware
ASN Fairfax Corner LLC	Delaware
ASN Gresham Commons LLC	Delaware
ASN Lakeshore East LLC (fka SPH Lakeshore East LLC)	Delaware
ASN Las Flores LLC	Delaware
ASN Maple Leaf (Office) LLC	Delaware
ASN Maple Leaf Member LLC	Delaware
ASN Marina Del Rey LLC	Delaware
ASN Meadow Wood LLC	Delaware
ASN Miramar Lakes LLC	Delaware
ASN Multifamily Limited Partnership	Delaware
ASN Newport Crossing LLC	Delaware
ASN Northgate LLC	Delaware
ASN P&M Realty LLC	Delaware
ASN Park Essex LLC	Delaware
ASN Park Place LLC	Delaware
ASN Presidio View LLC	Delaware
ASN RH Member LLC	Delaware
ASN Richardson Highlands LLC	Delaware
ASN Rockville LLC	Delaware
ASN Roosevelt Center LLC	Delaware
ASN Santa Monica LLC	Delaware

92

	State of
	Incorporation or
Subsidiary Name	Organization
ASN Saybrooke LLC	Delaware
ASN Sonoma LLC	Delaware
ASN StoneRidge LLC	Delaware
ASN StoneRidge Manager LLC	Delaware
ASN Studio City LLC	Delaware
ASN Sussex Commons LLC	Delaware
ASN Technologies, Inc.	Delaware
ASN Ventura LLC	Delaware
ASN Villa Redondo LLC	Delaware
ASN Warner Center LLC	Delaware
ASN Washington Boulevard LLC	Delaware
ASN Watertown LLC	Delaware
ASN West End LLC	Delaware
ASN-Dakota Ridge, LLC	Delaware
ASN-Massachusetts Holdings (1) LLC	Delaware
ASN-Massachusetts Holdings (2) LLC	Delaware
ASN-Massachusetts Holdings (3) LLC	Delaware
ASN-Massachusetts Holdings (4) LLC	Delaware
ASN-Massachusetts Holdings (5) LLC	Delaware
ASN-Pinnacle LLC	Delaware
ASN-SAL Holdings LLC	Delaware
ASN-San Diego LLC	Delaware
ASN-SCP Utah Holdings 4 LLC	Delaware
ASN-SCP Utah Holdings 5 LLC	Delaware
ASN-Washington Holdings (1) LLC	Delaware
ASN-Wendemere, LLC	Delaware
Boca East LLC	Delaware
Brandywine Apartments of Maryland, LLC	Delaware
Briar Meadows Apartments LLC	Delaware
Casco Dunwoody LLC	Delaware
Casco GP LLC	Delaware
Casco Properties LP	Delaware
Casco Property Trust LLC	Delaware
Casco TN GP Inc.	Delaware
Casco TN LP	Delaware
Courthouse Hill L.L.C.	Delaware
Dearborn/Delaware Associates L.P.	Delaware
First Herndon Associates L.P.	Delaware
First Multifamily Properties LLC	Delaware
Heather Ridge Apartments Business Trust	Maryland
Heather Ridge Apartments Incorporated	Maryland
Interlocken Apartments, LLC	Delaware
Katahdin GP LLC	Delaware
Katahdin Properties LP	Delaware
Katahdin Property Trust LLC	Delaware
Kentlands Village Apartments LLC (Business Trust??)	Delaware
Las Palmas, L.L.C.	Delaware
Metropolitan Acquisition Finance L.P.	Delaware
Milestone Apartments Business Trust	Maryland
MIV (1) LLC	Delaware
MIV (2) LLC	Delaware
Monadnock Property Trust, LLC	Delaware
Monadnock Texas LP	Texas
Monterey Ranch Residential and Commercial Community Property Owners Association, Inc.	Texas
MP North Carolina GP Inc.	Delaware
MP North Carolina LP	Delaware
Mt. San Cierra L.L.C.	Arizona

93

	State of
	Incorporation or
Subsidiary Name	Organization
NEC Tatum & Bell Owners’ Association, Inc.	Arizona
Panorama Insurance Ltd.	Delaware
Pollard Gardens I L.L.C.	Virginia
PTR-California Holdings (1) LLC	Delaware
PTR-California Holdings (3) LLC	Delaware
PTR-Colorado (1), LLC	Colorado
Renaissance Manager, LLC	Delaware
Rosedale Commons, LLC	Delaware
Saddle Rock Apartments LLC	Delaware
SCA Florida Holdings (2) LLC	Delaware
SCA North Carolina Limited Partnership	Delaware
SCA-North Carolina (1) LLC	Delaware
SCA-North Carolina (2) LLC	Delaware
Second Multifamily Properties Limited Partnership	Delaware
Second Multifamily Properties LLC	Delaware
Security Capital Atlantic Multifamily LLC	Delaware
Sienna Project LLC	Delaware
Smith Employment Service L.P.	Delaware
Smith Property Holdings 2000 Commonwealth L.L.C.	Delaware
Smith Property Holdings 4411 Connecticut Avenue LLC	Delaware
Smith Property Holdings Alban Towers L.L.C.	Delaware
Smith Property Holdings Alban Towers Two, L.L.C.	Delaware
Smith Property Holdings Aventura A L.L.C.	Delaware
Smith Property Holdings Aventura B L.L.C.	Delaware
Smith Property Holdings Aventura C L.L.C.	Delaware
Smith Property Holdings Ballston Place LLC	Delaware
Smith Property Holdings Buchanan House L.L.C.	Delaware
Smith Property Holdings Columbia Road L.P.	Delaware
Smith Property Holdings Concord L.L.C.	Delaware
Smith Property Holdings Consulate L.L.C.	Delaware
Smith Property Holdings Cronin’s Landing L.P.	Massachusetts
Smith Property Holdings Crystal Houses L.L.C.	Delaware
Smith Property Holdings Crystal Plaza L.L.C.	Delaware
Smith Property Holdings Crystal Towers L.P.	Delaware
Smith Property Holdings Dearborn Place Manager L.L.C.	Delaware
Smith Property Holdings Five (D.C.) L.P.	Delaware
Smith Property Holdings Five L.P.	Delaware
Smith Property Holdings Four L.P.	Delaware
Smith Property Holdings Harbor House L.L.C.	Delaware
Smith Property Holdings Harbour House South, LLC	Delaware
Smith Property Holdings Illinois Center L.L.C.	Delaware
Smith Property Holdings Kenmore L.P.	Delaware
Smith Property Holdings Lakeshore East LLC (a.k.a. ASN Lakeshore East LLC)	Delaware
Smith Property Holdings Lincoln Towers L.L.C.	Virginia
Smith Property Holdings McClurg Court L.L.C.	Delaware
Smith Property Holdings New River L.L.C.	Delaware
Smith Property Holdings One (D.C.) L.P.	Delaware
Smith Property Holdings One East Delaware L.L.C.	Delaware
Smith Property Holdings One L.P.	Delaware
Smith Property Holdings Parc Vista L.L.C.	Delaware
Smith Property Holdings Plaza 440 LLC	Delaware
Smith Property Holdings Plaza 440 Manager L.L.C.	Delaware
Smith Property Holdings Reston Landing L.L.C.	Delaware
Smith Property Holdings Sagamore Towers L.L.C.	Delaware
Smith Property Holdings Seven L.P.	Delaware
Smith Property Holdings Six (D.C.) L.P.	Delaware
Smith Property Holdings Six L.P.	Delaware

94

	State of
	Incorporation or
Subsidiary Name	Organization
Smith Property Holdings South Beach Towers L.L.C.	Delaware
Smith Property Holdings Springfield L.L.C.	Delaware
Smith Property Holdings Sunset Pointe 3 L.L.C.	Delaware
Smith Property Holdings Sunset Pointe Court L.L.C.	Delaware
Smith Property Holdings Sunset Pointe North L.L.C.	Delaware
Smith Property Holdings Sunset Pointe South L.L.C.	Delaware
Smith Property Holdings Sunset Pointe West L.L.C.	Delaware
Smith Property Holdings Superior Place L.L.C.	Delaware
Smith Property Holdings Three (D.C.) L.P.	Delaware
Smith Property Holdings Three L.P.	Delaware
Smith Property Holdings Two (D.C.) L.P.	Delaware
Smith Property Holdings Two L.P.	Delaware
Smith Property Holdings Van Ness L.P.	Delaware
Smith Property Holdings Water Park Towers L.L.C.	Delaware
Smith Property Holdings Wilson L.L.C.	Delaware
Smith Realty Company	Maryland
SMP GP LLC	Delaware
SPH Springfield Station L.L.C.	Delaware
Technology Value Partners	Colorado
Tewksbury Apartments LLC	Delaware
Texas GP Properties LLC	Delaware
The 1841 Columbia Road Revocable Grantor Trust	Delaware
Turtle Run at Coral Springs L.L.C.	Delaware
Van Dorn Apartments LLC	Delaware
Westminster Estates, LLC	Delaware

95

EX-23.1

EXHIBIT 23.1

Independent Auditors’ Consent

The Board of Trustees
Archstone-Smith Operating Trust:

     We consent to incorporation by reference in registration statements No. 333-89164 (Form S-3), of Archstone-Smith Operating Trust and subsidiaries of our reports dated February 9, 2004, relating to the consolidated balance sheets of Archstone-Smith Operating Trust and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of earnings, unitholders’ equity, other common unitholders’ interest and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2003, and the related schedule, which reports appear in the December 31, 2003 Annual Report on Form 10-K of Archstone-Smith Operating Trust. Our report refers to the adoption of FASB Interpretation No. 46 “Consolidation of Variable Interest Entities” (revised), effective July 1, 2003.

KPMG LLP

Denver, Colorado
March 5, 2004

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, R. Scot Sellers, certify that:

1.	I have reviewed this annual report on Form 10-K of Archstone-Smith Operating Trust (the “registrant”).
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the years covered by annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the years presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of trustees (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

By:  /s/ R. SCOT SELLERS

R. Scot Sellers

Chairman and Chief Executive Officer

Date: March 5, 2004 EX-31.2 10 d13102exv31w2.htm EX-31.2 CERTIFICATION OF CFO PURSUANT TO SEC. 302

EXHIBIT 31.2

CERTIFICATIONS

I, Charles E. Mueller, Jr., certify that:

1.	I have reviewed this annual report on Form 10-K of Archstone-Smith Operating Trust (the “registrant”).
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the years covered by annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the years presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of trustees (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

By:  /s/ CHARLES E. MUELLER, JR.

Charles E. Mueller, Jr.

Chief Financial Officer

(Principal Financial Officer)

Date: March 5, 2004 EX-32.1 11 d13102exv32w1.htm EX-32.1 CERTIFICATION OF CEO PURSUANT TO SEC. 906

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      The undersigned, being the Chief Executive Officer of Archstone-Smith Operating Trust, a Maryland real estate investment trust (the “Issuer”), hereby certifies that the Annual Report on Form 10-K (the “Annual Report”) of the Issuer for the year ended December 31, 2003, which accompanies this certification, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. §78m(a)) and that the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

Date: March 5, 2004 /s/ R. SCOT SELLERS
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R. Scot Sellers, Chairman and Chief Executive Officer

EX-31.2

exv31w2

EX-32.1

exv32w1

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      The undersigned, being the Chief Financial Officer of Archstone-Smith Operating Trust, a Maryland real estate investment trust (the “Issuer”), hereby certifies, that the Annual Report on Form 10-K (the “Annual Report”) of the Issuer for the year ended December 31, 2003, which accompanies this certification, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. §78m(a)) and that the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

Date: March 5, 2004 /s/ CHARLES E. MUELLER
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Charles E. Mueller, Jr., Chief Financial Officer