Unless the context otherwise requires, all references to "we," "our" or "us" in this report refer collectively to Gables Realty Limited Partnership and its subsidiaries.

1.   ORGANIZATION AND FORMATION

        Gables Realty Limited Partnership (the "Operating Partnership") is the entity through which Gables Residential Trust (the "Trust"), a real estate investment trust (a "REIT"), conducts substantially all of its business and owns, either directly or indirectly through subsidiaries, substantially all of its assets. The Trust was formed in 1993 under Maryland law to continue and expand the operations of its privately owned predecessor organization. The Trust completed its initial public offering on January 26, 1994.  

       We are a fully integrated real estate company engaged in the multifamily apartment community management, development, construction, acquisition and disposition businesses. We also provide related brokerage and corporate rental housing services. Substantially all of our third-party management businesses are conducted through a wholly-owned subsidiary, Gables Residential Services.

       As of September 30, 2002, the Trust was an 80.6% economic owner of our common equity. The Trust controls us through Gables GP, Inc. ("Gables GP"), a wholly-owned subsidiary of the Trust and our sole general partner. This structure is commonly referred to as an umbrella partnership REIT or "UPREIT." The board of directors of Gables GP, the members of which are the same as the members of the Trust's board of trustees, manages our affairs by directing the affairs of Gables GP. The Trust's limited partnership and indirect general partnership interests in us entitle it to share in our cash distributions, and in our profits and losses in proportion to its ownership interest therein and entitles the Trust to vote on all matters requiring a vote of the limited partners. Generally, our other limited partners are persons who contributed their direct or indirect interests in certain real estate assets to us primarily in connection with the IPO and the 1998 acquisition of the real estate assets and operations of Trammell Crow Residential South Florida ("South Florida"). We are obligated to redeem each common unit of limited partnership interest ("Unit") held by a person other than the Trust at the request of the holder for an amount equal to the fair market value of a share of the Trust's common shares at the time of such redemption, provided that we, at our option, may elect to acquire each Unit presented for redemption for one common share or cash. Such limited partners' redemption rights are reflected in "limited partners' capital interest" in the accompanying consolidated balance sheets at the cash redemption amount at the balance sheet date. The Trust's percentage ownership interest in us will increase with each redemption. In addition, whenever the Trust issues common shares or preferred shares, it is obligated to contribute any net proceeds to us and we are obligated to issue an equivalent number of common or preferred Units, as applicable, to the Trust.

       Distributions to holders of Units are made to enable distributions to be made to the Trust's shareholders under its dividend policy. The Trust must currently distribute 90% of its ordinary taxable income to its shareholders. We make distributions to the Trust to enable it to satisfy this requirement.

       As of September 30, 2002, we managed a total of 159 multifamily apartment communities comprising 45,047 apartment homes for assets owned by us and our third-party clients. At September 30, 2002, we owned 73 stabilized multifamily apartment communities comprising 20,325 apartment homes, an indirect 25% interest in one stabilized apartment community comprising 345 apartment homes, an indirect 20% interest in two stabilized apartment communities comprising 621 apartment homes, and an indirect 8.3% interest in three stabilized apartment communities comprising 1,118 apartment homes. We also owned nine multifamily apartment communities under development or in lease-up at September 30, 2002 that are expected to comprise 2,142 apartment homes upon completion and an indirect 20% interest in three apartment communities under development or in lease-up at September 30, 2002 that are expected to comprise 891 apartment homes upon completion. In addition, as of September 30, 2002, we owned parcels of land on which we intend to develop three apartment communities that we currently expect will comprise an estimated 1,217 apartment homes. We also have rights to acquire additional parcels of land on which we believe we could develop communities. Any future development is subject to our obtaining permits and other governmental approvals, as well as our ongoing business review, and may not be undertaken or completed.

Secondary Common Share Offerings

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

Preferred Share Issuances and Redemptions

        On July 24, 1997,  the Trust issued 4,600 shares of 8.30% Series A Cumulative Redeemable Preferred Shares (liquidation preference $25.00 per share). The net proceeds from this offering of $111.0 million were used to reduce outstanding indebtedness under interim financing vehicles. On August 9, 2002,  the Trust redeemed the Series A Preferred Shares at $25.00 per share plus accrued and unpaid dividends.

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

       On September 27, 2002, the Trust issued 1,600 shares of 7.875% Series C Cumulative Redeemable Preferred Shares (liquidation preference $25.00 per share) in a private placement.  The net proceeds from this issuance of $39.8 million, together with the net proceeds from the concurrent issuance of $40 million of senior unsecured notes (Note 4), were used to retire $82.5 million of senior unsecured notes at an interest rate of 8.3% that were scheduled to mature in December 2002.  The Series C Preferred Shares may be redeemed at $25.00 per share plus accrued and unpaid dividends on or after September 30, 2006.  The Series C Preferred Shares are not subject to any sinking fund or convertible into any other securities of the Trust.

Issuances of Common Operating Partnership Units

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

Issuance of Preferred Operating Partnership Units

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

Common Equity Repurchase Program

       We have a common equity repurchase program pursuant to which the Trust is authorized to purchase up to $150 million of its outstanding common shares or Units. The Trust has repurchased shares from time to time in open market and privately negotiated transactions, depending on market prices and other conditions, using proceeds from sales of selected assets.   Whenever the Trust repurchases common shares from shareholders, we are required to redeem from the Trust an equivalent number of Units on the same terms and for the same aggregate price.  After redemption, the Units redeemed by us are no longer deemed outstanding.  Units have also been repurchased for cash upon their presentation for redemption by unitholders. As of September 30, 2002, we had redeemed 4,476 Units, including 4,181 Units redeemed by the Trust, for a total of $107,814, including related commissions of $167.

Shelf Registration Statement

       We have an effective shelf registration statement on file with the Securities and Exchange Commission that currently provides $500 million of equity capacity.   The debt portion of this shelf registration statement has been fully utilized after our February 2001 and July 2002 senior unsecured note offerings.  

3. BASIS OF PRESENTATION

       The accompanying consolidated financial statements include the consolidated accounts of the Operating Partnership and its subsidiaries, including Gables Residential Services. We consolidate the financial statements of all entities in which we have a controlling financial interest, as that term is defined under generally accepted accounting principles ("GAAP"), through either majority voting interest or contractual agreements. Our investments in non-majority owned and/or non-controlled joint ventures are accounted for using the equity method.  All significant intercompany accounts and transactions have been eliminated in consolidation. 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Amounts in Thousands, Except Property and Per Unit Data)

       The accompanying interim unaudited financial statements have been prepared in accordance with GAAP for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, all adjustments (consisting only of normally recurring adjustments) considered necessary for a fair presentation for these interim periods have been included. The results of operations for the interim period ended September 30, 2002 are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the financial statements included in our Form 10-K for the year ended December 31, 2001.

       Certain amounts in the 2001 financial statements have been reclassified to conform to the 2002 presentation.

4. PORTFOLIO AND OTHER FINANCING ACTIVITY

Community Dispositions Subject to Discontinued Operations Reporting

       In January 2002, we sold an operating apartment community in Houston comprising 256 apartment homes. The net proceeds from this sale were $15.3 million and were used to paydown outstanding borrowings under our credit facilities.  The gain from the sale of this community was $2.2 million.

       In March 2002, the Gables Residential Apartment Portfolio JV (the "GRAP JV") sold an operating apartment community located in Houston comprising 382 apartment homes for $31.0 million.  Our share of the net sales proceeds after repayment of construction loan indebtedness of $14.0 million was $3.1 million, resulting in a gain of $0.7 million.

       Historical operating results and gains are reflected in discontinued operations.  See Notes 5 and 6 for further discussion.

Community and Land Dispositions Not Subject to Discontinued Operations Reporting

       In January 2002, we sold (i) a 13.3 acre parcel of land in Houston that was adjacent to the 256 apartment home community sold and (ii) an operating apartment community in Houston comprising 246 apartment homes.  In March 2002, we sold an operating apartment community in Atlanta comprising 311 apartment homes.  The net proceeds from these sales were $46.8 million and were used to paydown outstanding borrowings under our credit facilities.  The gain from the land sale was $0.8 million and the aggregate gain from the sale of the two communities was $17.9 million.

       In March 2002, the GRAP JV sold an operating apartment community located in South Florida comprising 320 apartment homes for $27.7 million.  Our share of the net sales proceeds after repayment of construction loan indebtedness of $11.4 million was $3.0 million, resulting in a gain of $1.0 million.

      The GRAP JV sold an operating  apartment community located in Dallas comprising 222 apartment homes in July 2002 and an operating apartment community in South Florida comprising 290 apartment homes in September 2002.  The aggregate sales price for these two communities was $45.4 million.  Our share of the net sales proceeds after repayment of construction loan indebtedness of $21.2 million was $4.6 million, resulting in a gain of $0.9 million.

       During 2001, we contributed our interest in certain land and development rights to the Gables Residential Apartment Portfolio JV Two (the "GRAP JV Two") in return for (1) cash of $18.5 million and (2) capital account credit of $4.6 million.  The $2.8 million of gain we have recorded associated with this contribution was recognized when earned using the percentage of completion method since we serve as the developer and general contractor for the joint venture. As of September 30, 2002, we had recognized $2.8 million of this gain.  We recognized $0.3 million and $0.4 million of this gain during the three months ended September 30, 2002 and 2001, respectively, and $1.2 million and $1.2 million during the nine months ended September 30, 2002 and 2001, respectively.  

       In addition, during the three months ended September 30, 2002 and 2001, we recognized $0.0 million and $0.1 million, respectively, of deferred gain associated with a parcel of land we sold in 2000. During the nine months ended September 30, 2002 and 2001, we recognized $0.1 million and $0.6 million, respectively, of deferred gain associated with this land sale.
       
       During 2001, we sold an apartment community located in Atlanta comprising 386 apartment homes, an apartment community located in Houston comprising 776 apartment homes, an apartment community located in Dallas comprising 536 apartment homes and a 2.5 acre parcel of land adjacent to one of our development communities located in Atlanta. The net proceeds from these sales totaled $93.6 million, $9 million of which was deposited into an escrow account and used to fund acquisition activities. The balance of the net proceeds was used to repay a $16 million note assumed in connection with our September 2001 acquisition of the Gables State Thomas Ravello community and to paydown outstanding borrowings under interim financing vehicles. The gain from the land sale was $0.9 million and the aggregate gain from the sale of the previously depreciated operating real estate assets was $34.1 million, all of which was recognized in 2001. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Amounts in Thousands, Except Property and Per Unit Data)

      Historical operating results and gains are reflected in continuing operations.  See Notes 5 and 6 for further discussion.

Community Acquisitions

       On September 28, 2001, we acquired the 80% membership interest of our venture partner in the GRAP JV in the Gables State Thomas Ravello apartment community located in Dallas comprising 290 apartment homes. In consideration for such community, we paid $12 million in cash and assumed a $16 million secured variable-rate note. This consideration was based on a valuation of the asset of $31 million and is net of our $3 million share of the venture distribution. We recorded a $5 million charge to unusual items in the third quarter of 2001 associated with the write-off of building components that are being replaced in connection with a remediation program to address water infiltration issues plaguing the asset.

       On August 28, 2001, we acquired an apartment community located in Washington, D.C. comprising 82 apartment homes for approximately $25 million.
       
       On August 1, 2001, we acquired the 75% interest of our venture partner in the Gables Metropolitan Uptown apartment community located in Houston comprising 318 apartment homes. The asset was valued at approximately $27 million.

       On March 30, 2001, we acquired the 80% membership interests of our venture partner in the GRAP JV in the Gables Palma Vista and Gables San Michelle II apartment communities located in South Florida comprising 532 apartment homes for $66 million. This cash consideration was based on a valuation of the assets of $75 million and is net of our $9 million share of the venture distribution.

Other Acquisition

       In May 2001, we acquired a property management company based in Washington, D.C. that  managed approximately 3,600 units in 24 multifamily apartment communities located in Washington, D.C. and the surrounding area at the time of the acquisition  (the "D.C. Management Co.").  The total investment is approximately $1.6 million and is structured to be paid in three installments based on results of the acquired business operations.

Senior Unsecured Note Issuance

       On February 22, 2001, we issued $150 million of senior unsecured notes which bear interest at an annual rate of  7.25%, were priced to yield 7.29% and mature in February 2006. The net proceeds of $148.5 million were used to reduce borrowings under our unsecured credit facilities and repay our $40 million term loan, which had a November 2001 maturity date.

      On July 8, 2002, we issued $180 million of senior unsecured notes which bear interest at an annual rate of 5.75%, were priced to yield 5.81% and mature in July 2007.  The net proceeds of $178 million were used to redeem all outstanding shares of the 8.3% Series A Cumulative Redeemable Preferred Shares totaling $115 million on August 9, 2002 and to reduce borrowings under our unsecured credit facilities.

       On September 27, 2002, we issued $40 million of senior unsecured notes in two tranches in a private placement:  $30 million at an annual rate of 5.86% maturing in September 2009, and $10 million at an annual rate of 6.10% maturing in September 2010.  The net proceeds of $39.8 million, together with the net proceeds from the concurrent issuance of Series C Preferred Shares (Note 2), were used to retire $82.5 million of senior unsecured notes at an interest rate of 8.3% that were scheduled to mature in December 2002.  We did not incur any prepayment costs in connection with the early debt retirement.
       
Debt Refinancing

       In May 2002, we called $48.4 million of secured tax-exempt bond indebtedness with an interest rate of 6.375% and re-issued the bonds on an unsecured basis at a rate of 4.75%. In connection with the early extinguishment of debt, we incurred a prepayment penalty of $1,451 and wrote-off unamortized deferred financing costs totaling $236. Such charges totaling $1,687 are reflected as an extraordinary loss in the statements of operations. The previous bonds required monthly principal amortization payments that were retained in an escrow account and were not applied to reduce the outstanding principal balance of the loan. Such principal payments held in escrow totaling $4,121 were released in May 2002. This refinancing transaction allowed us to improve our debt constant by 2.75%, unencumber six communities comprising 2,028 apartment homes and achieve a positive net present value result.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Amounts in Thousands, Except Property and Per Unit Data)

5. RECENT ACCOUNTING PRONOUNCEMENTS

       In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," was issued, establishing accounting and reporting standards requiring that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the statements of operations, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. SFAS No. 133, as amended by SFAS No. 137, was effective for us beginning January 1, 2001. The impact of SFAS No. 133 on our financial statements will depend on the extent, type and effectiveness of our hedging activities. SFAS No. 133 could increase volatility in net income and other comprehensive income. We had no derivative instruments in place from January 1, 2001 to September 30, 2002.

       In June 2001, SFAS No. 141, "Business Combinations," (effective for us July 1, 2001) and SFAS No. 142, "Goodwill and Other Intangible Assets," (effective for us January 1, 2002) were issued. SFAS No. 141 prohibits pooling-of-interests accounting for acquisitions. SFAS No. 142 specifies that goodwill and some intangible assets will no longer be amortized but instead will be subject to periodic impairment testing. We have not accounted for any of our business combinations since our IPO using the pooling method of accounting and did not have goodwill or other intangible assets at December 31, 2001 or September 30, 2002.  As a result, the adoption of SFAS No. 141 and SFAS No. 142 did not have a significant impact on our financial statements.

       In August 2001, SFAS No. 143, "Accounting for Asset Retirement Obligations," (effective for us January 1, 2003) was issued. SFAS No. 143 requires that entities recognize the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. We believe that the adoption of SFAS No. 143 will not have a significant impact on our financial statements.

        In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," (effective for us January 1, 2002) was issued. SFAS No. 144 addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of. The statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and among other factors, establishes criteria beyond that previously specified in SFAS No. 121 to determine when a long-lived asset is to be considered as held for sale. The implementation of SFAS No. 144 requires that the gains and losses from the disposition of certain real estate assets and the related historical operating results be included in discontinued operations in the statements of operations for all periods presented.  In the normal course of business, we recycle invested capital by disposing of existing assets and redeploying the proceeds in order to enhance total returns to shareholders.  Although net income is not affected, we expect to reclassify results previously included in continuing operations to discontinued operations for any qualifying dispositions in accordance with SFAS No. 144.  We believe that the impairment provisions of SFAS No. 144 are similar to SFAS No. 121 and that the adoption thereof will not have a significant impact on our financial statements.

       In April 2002, SFAS No. 145, "Rescission of SFAS Nos. 4, 44 and 64, Amendment of SFAS No. 13, and Technical Corrections," was issued.  SFAS No. 145 (effective for us January 1, 2003), among other things, eliminates therequirement that all gains and losses from the extinguishment of debt be aggregated and, if material, classified as an extraordinary item. However, a gain or loss arising from such an event or transaction would continue to be classified as an extraordinary item if the event or transaction is both unusual in nature and infrequent in occurrence per the criteria in APB No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions."  As part of the transition guidance, although net income would not be affected, gains and losses from debt extinguishment in prior periods that do not meet the criteria in APB No. 30 must be reclassified to continuing operations for all periods presented.
 
       In June 2002, SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," was issued.  SFAS No. 146 requires recording costs associated with exit or disposal activities at their fair values when a liability has been incurred.  Under previous guidance, certain exit costs were accrued upon management's commitment to an exit plan, which is generally before an actual liability has been incurred.  Adoption of SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002.  We believe that the adoption of SFAS No. 146 will not have a significant impact on our financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Amounts in Thousands, Except Property and Per Unit Data)

6.  DISCONTINUED OPERATIONS

       We adopted SFAS No. 144 effective January 1, 2002 which requires, among other things, that the operating results of certain real estate assets which have been sold subsequent to January 1, 2002, or otherwise qualify as held for disposition (as defined by SFAS No. 144), be included in discontinued operations in the statements of operations for all periods presented. Three of our wholly-owned operating real estate assets were sold during the first quarter of 2002.  We retained management of two of the three wholly-owned assets sold at terms commensurate with current market conditions.  Due to our continuing involvement with the operations of the two assets sold that we are continuing to manage, the operating results of these assets are included in continuing operations. The operating results for the one wholly-owned asset and one unconsolidated joint venture asset sold during the first quarter of 2002 are included in discontinued operations in the statements of operations for all periods presented. Interest expense has been allocated to the results of the discontinued operations in accordance with EITF No. 87-24.  We had no assets that qualified as held for disposition as defined by SFAS No. 144 at December 31, 2001 or September 30, 2002.

         Condensed financial information of the results of operations for the real estate assets sold included in discontinued operations is as follows:

7.   EARNINGS PER UNIT

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