UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10 - Q

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

For the quarterly period ended March 31, 2004

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

Commission File Number: 000-22683

GABLES REALTY LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its Charter)

777 Yamato Road, Suite 510
Boca Raton, Florida 33431
(Address of principal executive offices, including zip code)

(561) 997-9700

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 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.

(X)  YES                      (  ) NO

Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act)
(X)   YES              (  ) NO

GABLES REALTY LIMITED PARTNERSHIP
FORM 10 - Q INDEX

PART I. – FINANCIAL INFORMATION
ITEM 1. – UNAUDITED FINANCIAL STATEMENTS

GABLES REALTY LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEETS (Unaudited and Amounts in Thousands, Except Per Unit Data)
	March 31,		December 31,
	2004   .		2003       .
ASSETS:
Real estate assets:
Land	$        279,741		$          283,015
Buildings	1,361,529		1,367,086
Furniture, fixtures and equipment	143,453		140,077
Construction in progress	143,182		146,041
Investment in joint ventures	10,163		11,456
Undeveloped land	29,072		15,822
Real estate assets before accumulated depreciation	1,967,140		1,963,497
Less:  accumulated depreciation	(305,890	)	(297,464	)
Net real estate assets	1,661,250		1,666,033
Cash and cash equivalents	7,858		5,915
Restricted cash	5,667		6,116
Deferred financing costs, net	4,422		5,029
Other assets, net	40,642		41,983
Total assets	$    1,719,839		$    1,725,076
LIABILITIES AND  PARTNERS' CAPITAL:
Notes payable	$    1,024,152		$   1,003,100
Accrued interest payable	6,547		13,751
Preferred distributions payable	374		374
Real estate taxes payable	8,112		15,792
Accounts payable and accrued expenses – construction	9,727		12,549
Accounts payable and accrued expenses – operating	15,505		16,466
Security deposits	4,081		4,048
Series Z Preferred Units, at $25.00 liquidation preference, 180 units issued      and outstanding, including accrued and unpaid distributions	5,802		5,746
Total liabilities	1,074,300		1,071,826
Limited partners’ common capital interest (4,231 and 4,353 common units,
respectively), at cash redemption value	150,250		148,595
Commitments and contingencies
Partners' capital:
General partner (334 and 331 common units, respectively)	6,641		6,675
Limited partner (28,881 and 28,449 common units, respectively)	373,648		382,980
Preferred partners (1,600 Series C-1 Preferred Units and 3,000
Series D Preferred Units), at $25.00 liquidation preference	115,000		115,000
Total partners’ capital	495,289		504,655
Total liabilities, partners’ capital interest and partners’ capital	$ 1,719,839		$1,725,076
See notes to consolidated financial statements.

 

 

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

        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 management, development and construction, corporate rental housing and brokerage services to third parties and unconsolidated joint ventures. Substantially all of our third-party management businesses are conducted through a wholly-owned subsidiary, Gables Residential Services.

       As of March 31, 2004, the Trust was an 87.3% 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 organizational 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 of our real estate assets primarily in connection with the IPO and the 1998 acquisition of the real estate assets and operations of Trammell Crow Residential South Florida. A unit of limited partnership interest in the Operating Partnership is referred to herein as a “unit.” We are obligated to redeem each common unit held by a person other than the Trust at the request of the holder for an amount equal to the fair market value of a share of the Trust's common shares at the time of such redemption, provided that the Trust, at its option, may elect to acquire each common unit presented for redemption for one common share or cash. Such limited partners' redemption rights are reflected in "limited partners' capital interest" in our 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 with substantially identical rights as the common or preferred shares, as applicable, to the Trust.

       Distributions to holders of units are made to enable the Trust to make distributions to its 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 March 31, 2004, we managed a total of 167 multifamily apartment communities owned by us and our third-party clients comprising 46,529 apartment homes.  As of March 31, 2004, we owned 76 stabilized multifamily apartment communities comprising 20,212 apartment homes, an indirect 25% interest in one stabilized apartment community comprising 345 apartment homes, an indirect 20% interest in three stabilized apartment communities comprising 1,029 apartment homes, and an indirect 8.3% interest in three stabilized apartment communities comprising 1,118 apartment homes. We also owned seven multifamily apartment communities under development or in lease-up at March 31, 2004 that are expected to comprise 2,123 apartment homes upon completion and an indirect 20% interest in two apartment communities under development or in lease-up at March 31, 2004 that are expected to comprise 373 apartment homes upon completion.  In addition, as of March 31, 2004, we owned three parcels of land on which we intend to develop three apartment communities that we currently expect will comprise an estimated 716 apartment homes. We also have rights to acquire additional parcels of land, either through options or long-term conditional contracts, on which we believe we could develop nine communities that we currently expect would comprise an estimated 2,654 apartment homes. Any future development is subject to obtaining permits and other governmental approvals, as well as our ongoing business review, and may not be undertaken or completed.

2. COMMON AND PREFERRED EQUITY ACTIVITY

Secondary Common Share Offerings

        Since its IPO, the Trust has issued a total of 17,331 common shares in nine offerings, generating $426.8 million in net proceeds which were generally used (1) to reduce outstanding indebtedness under our interim financing vehicles utilized to fund our development and acquisition activities and (2) for general working capital purposes, including funding of future development and acquisition activities.  The most recent offering, involving the issuance of 2,500 common shares that generated $79.0 million in net proceeds, closed on August 26, 2003. 

Preferred Share Offerings

        On May 8, 2003, the Trust issued 3,000 shares of 7.5% Series D Cumulative Redeemable Preferred Shares with a liquidation preference of $25.00 per share. The net proceeds from this issuance of approximately $72.4 million were used to reduce outstanding indebtedness under our interim financing vehicles. The Series D Preferred Shares may be redeemed at the Trust’s option at $25.00 per share plus accrued and unpaid dividends on or after May 8, 2008. The Series D 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 with a liquidation preference of $25.00 per share in a private placement to an institutional investor.  The net proceeds from this issuance of $39.7 million, together with the net proceeds of $39.7 million from the concurrent issuance of $40 million of senior unsecured notes, were used to retire approximately $82.5 million of unsecured indebtedness at an interest rate of 8.3% that was scheduled to mature in December 2002.  Pursuant to a registration rights agreement with the purchaser of the Series C Preferred Shares, the Trust registered a new series of preferred shares with the Securities and Exchange Commission and offered to exchange those shares on a one-for-one basis for the outstanding Series C Preferred Shares.  The dividend rate, preferences and other terms for the new preferred shares, or 7.875% Series C-1 Cumulative Redeemable Preferred Shares, are identical in all material respects to the Series C Preferred Shares, except that the Series C-1 Preferred Shares are freely tradable by a holder.  The exchange offer was consummated on September 5, 2003 and did not generate any cash proceeds for the Trust.  The Series C-1 Preferred Shares may be redeemed at the Trust’s option at $25.00 per share plus accrued and unpaid dividends on or after September 27, 2006.  The Series C-1 Preferred Shares are not subject to any sinking fund or convertible into any other securities of the Trust.

        On June 18, 1998, the Trust issued 180 shares of 5.0% Series Z Cumulative Redeemable Preferred Shares with a liquidation preference of $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 the Trust’s option at any time for $25.00 per share plus accrued and unpaid dividends.  Dividends on the Series Z Preferred Shares are cumulative from the issuance date and the first dividend payment date is June 18, 2008.  Thereafter, dividends will be paid annually in arrears.  The Series Z Preferred Shares are not subject to any sinking fund or convertible into any other securities of the Trust.

        On July 24, 1997, the Trust issued 4,600 shares of 8.30% Series A Cumulative Redeemable Preferred Shares with a liquidation preference of $25.00 per share. The net proceeds from this offering of $111.0 million were used to reduce outstanding indebtedness under our interim financing vehicles. The Trust redeemed all outstanding Series A Preferred Shares for $115 million on August 9, 2002 with proceeds from our $180 million senior unsecured note issuance on July 8, 2002. 

Issuances of Common Operating Partnership Units

       Since its IPO, the Trust has issued a total of 4,421 common units in connection with the 1998 acquisition of the real estate assets and operations of Trammell Crow Residential South Florida, 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 our interim financing vehicles. On November 17, 2003, we redeemed each of the 2,000 outstanding Series B Preferred Units at $25.00 per unit plus accrued and unpaid distributions.  The redemption price of the Series B Preferred Units exceeded the related carrying value by the $1.3 million of issuance costs that were originally incurred and classified as a reduction to partners’ capital.  In the fourth quarter of 2003, the $1.3 million excess was reflected as a reduction to earnings in arriving at net income available to common unitholders, in accordance with the July 2003 clarification of EITF Abstracts, Topic No. D-42, "The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock" (Note 5).

Common Equity Repurchase Program

        The Trust’s board of trustees implemented a common equity repurchase program pursuant to which the Trust is authorized to purchase up to $200 million of its outstanding common shares or units. The Trust views the repurchase of common equity with consideration of other investment alternatives when capital is available to be deployed.  The Trust has repurchased shares from time to time in open market and privately negotiated transactions, depending on market prices and other prevailing 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 common units on the same terms and for the same aggregate price.  After redemption, the common units redeemed by us are no longer deemed outstanding.  Common units have also been repurchased for cash upon their presentation for redemption by unitholders.  As of March 31, 2004, we had redeemed 4,806 common units, including 4,506 common units redeemed by the Trust, for a total of $116.0 million, including $0.2 million in related commissions.

Shelf Registration Statement

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

3. BASIS OF PRESENTATION

       The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and 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 GAAP, through either majority voting interest or contractual agreements. Our investments in non-controlled joint ventures are accounted for using the equity method.  All significant intercompany accounts and transactions have been eliminated in consolidation.

       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 March 31, 2004 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, 2003.

      Certain amounts in the 2003 financial statements have been reclassified to conform to the 2004 presentation.

4.  PORTFOLIO AND OTHER FINANCING ACTIVITY

Community Dispositions Subject to Discontinued Operations Reporting

       In March 2004, we sold an apartment community located in Orlando comprising 231 apartment homes.  The net proceeds from this sale were $27.0 million and were used to pay down outstanding borrowings under our interim financing vehicles.  In connection with the sale transaction, we were relieved of a $2.0 million note payable obligation. The gain from the sale of this community was $2.4 million and was recognized in the first quarter of 2004. 

      During 2003, we sold four apartment communities located in Houston comprising 1,373 apartment homes and an apartment community located in Dallas comprising 300 apartment homes. The net proceeds from these sales were $112.1 million and were used to pay down outstanding borrowings under our interim financing vehicles. The aggregate gain from the sale of these five communities was $37.7 million.  One of these sales occurred during the first quarter of 2003, resulting in a $5.0 million gain which was recognized in the first quarter of 2003.  The other sales occurred during the third and fourth quarters of 2003.

        Historical operating results and gains are reflected as discontinued operations in the accompanying consolidated statements of operations (Note 6).

Community and Land Dispositions Not Subject to Discontinued Operations Reporting

       In March 2004, we sold our 20% ownership interest in an apartment community located in Houston comprising 186 apartment homes to our partner in the Gables Residential Apartment Portfolio JV (the "GRAP JV").  The net proceeds from this sale were $1.6 million, resulting in a gain of $0.4 million which was recognized in the first quarter of 2004.

        In February 2004, we sold a parcel of land in San Antonio.  The net proceeds from this sale were $1.7 million and resulted in no gain or loss.

        Historical operating results and gains are included in continuing operations in the accompanying consolidated statements of operations (Note 6).

Community Acquisitions

       On December 19, 2003, we acquired an apartment community for renovation located in South Florida comprising 36 apartment homes for approximately $4.1 million in cash.  This community is adjacent to a land parcel that we acquired in January 2004 for the future development of an apartment community that we currently expect will comprise 261 apartment homes.

       On July 15, 2003, we acquired an apartment community located in Washington, D.C. comprising 211 apartment homes for approximately $54.6 million in cash, including approximately $1.6 million of closing costs.

       On May 30, 2003, we acquired an apartment community located in Dallas comprising 334 apartment homes for approximately $33.5 million in cash. 
           
       On February 20, 2003, we acquired an apartment community located in Austin that is subject to a long-term ground lease and is comprised of 239 apartment homes and 7,366 square feet of retail space for approximately $30.2 million in cash.        

Other Acquisitions

       On May 23, 2003, we acquired property management contracts for 10,684 apartment homes in 32 multifamily apartment communities from Archstone Management Services Incorporated.  The services rendered under acquired management contracts for 9,184 apartment homes transitioned to us over the ensuing three month period.  The services to be rendered under the remaining management contracts for 1,500 apartment homes did not transition to us in 2003 for various reasons associated with the underlying assets, including sale prior to transition and location.  The purchase price of approximately $6.5 million was structured to be paid in three installments based on the retention of the contracts acquired.  As of March 31, 2004, we had funded $4.3 million of the purchase price in two installments.  The amount of the third installment will be determined and paid in the second quarter of 2004.
 
Senior Unsecured Note Issuance

       On September 27, 2002, we issued $40 million of senior unsecured notes in two series in a private placement to an institutional investor: $30 million at an interest rate of 5.86% maturing in September 2009 and $10 million at an interest rate of 6.10% maturing in September 2010. The net proceeds of $39.7 million, together with the net proceeds of $39.7 million from the concurrent issuance by the Trust of the 7.875% Series C Preferred Shares, were used to retire approximately $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.  Pursuant to a registration rights agreement with the purchaser of the $40 million of senior unsecured notes, we registered new notes with the Securities and Exchange Commission, and offered to exchange those new notes for the original notes.  The new notes, also issued in two series, are identical in all material respects to the original 5.86% notes due 2009 and the 6.10% notes due 2010, except that the new notes are freely tradable by a holder.  The exchange offer was consummated on September 5, 2003 and did not generate any cash proceeds for us.

5. RECENT ACCOUNTING PRONOUNCEMENTS

          In January 2003, FIN 46, "Consolidation of Variable Interest Entities," was issued, and was subsequently replaced by FIN 46R in December 2003.  In general, a variable interest entity ("VIE") is an entity that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities.  Previously, a company generally had only consolidated another entity in its financial statements if it controlled the entity through voting interests.  FIN 46R changes that by requiring a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss from the VIE's activities or is entitled to receive a majority of the entity's residual returns or both.  The provisions of FIN 46R are effective for the first interim period ending after March 15, 2004.  The adoption of FIN 46R did not have a significant impact on our financial statements or result in the consolidation of any previously unconsolidated entities.

         In May 2003, SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” was issued.  SFAS No. 150 (effective for us July 1, 2003) establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.  Upon adoption of SFAS No. 150, we reclassified our mandatorily redeemable Series Z Preferred Units to the liability section of our balance sheet and, beginning July 1, 2003, have recorded distributions on the Series Z Preferred Units as interest expense in our statements of operations.  The adoption of SFAS No. 150 did not have a significant impact on our financial statements.

        In July 2003, EITF Abstracts, Topic No. D-42, "The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock," was clarified. Topic No. D-42 requires that, in arriving at net earnings available to common shareholders in the calculation of earnings per share, the excess of (1) the fair value of the consideration transferred to the holders of preferred stock over (2) the carrying amount of the preferred stock in the balance sheet be subtracted from net earnings. In July 2003, it was clarified that the carrying amount of the preferred stock should be reduced by the issuance costs of the preferred stock, regardless of where in the stockholders' equity section those costs were initially classified upon issuance.  Prior to this clarification, we had not considered issuance costs in determining the carrying amount of preferred stock. This clarification of Topic No. D-42 was required to be reflected retroactively in the third quarter of 2003, by restating the financial statements of prior periods in accordance with the provisions of paragraphs 27-30 of APB Opinion No. 20, “Accounting Changes.” We redeemed our Series B Preferred Units in November 2003. The redemption price of the Series B Preferred Units exceeded the related carrying value by issuance costs originally incurred and classified as a reduction to partners’ capital of $1.3 million.  In accordance with this clarification, we subtracted the $1.3 million original issuance costs in arriving at net income available to common unitholders in the fourth quarter of 2003.  We will also apply the provisions of Topic No. D-42 to any future redemptions of preferred stock.

6.  DISCONTINUED OPERATIONS

        We adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” effective January 1, 2002.  SFAS No. 144 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 reflected as discontinued operations in the consolidated statements of operations for all periods presented. During the three months ended March 31, 2004, we sold one wholly-owned operating real estate asset.  During 2003, we sold the following wholly-owned operating real estate assets:  one during the first quarter, two during the third quarter and two during the fourth quarter.  The operating results for these six wholly-owned assets sold are reflected as discontinued operations in the accompanying 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 March 31, 2004 or December 31, 2003.

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

		Three Months          Ended March 31,
		2004		2003
Total property revenues		$ 610		$4,176
Property operating and maintenance expense     (exclusive of items shown separately below) Real estate asset depreciation and amortization Interest expense    Total expenses		270 204         145     619		1,776 941      594   3,311
Operating income from discontinued operations		(     9	)	865
Gain on disposition of discontinued operations		2,382		5,042
Income from discontinued operations		$2,373		$5,907

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:

	Three Months           Ended March 31,
	2004		2003
Basic and diluted income available to common unitholders (numerator):
Income from continuing operations (net of preferred distributions) – basic and diluted    Income from discontinued operations – basic and diluted    Net income available to common unitholders – basic and diluted Common units (denominator): Average common units outstanding – basic Incremental common units from assumed conversions of:    Stock options    Other Average common units outstanding – diluted	$3,417 $2,373 $5,790 33,277 135          13   33,425		$  5,532 $  5,907 $11,439 30,300 28          9 30,337

8.  SEGMENT REPORTING

       Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our senior management group.

        We own, operate and develop multifamily apartment communities in major markets located in Texas, Georgia, Florida, Washington, D.C. and Tennessee.  Such apartment communities generate rental revenue and other income through the leasing of apartment homes to a diverse base of residents.  The operating performance of each of our communities is affected by the supply and demand dynamics within the immediate submarket or neighborhood of the major market that each community is located in.  We evaluate the performance of each of our apartment communities on an individual basis. However, because each of our apartment communities has similar economic characteristics, residents, and products and services, our apartment communities have been aggregated into one reportable segment. This segment comprised 94% and 93% of our total revenues for the three months ended March 31, 2004 and 2003, respectively.

        The primary financial measure for our reportable business segment is net operating income (NOI), which represents total property revenues less property operating and maintenance expenses.  Property operating and maintenance expenses represent direct property operating and maintenance expenses as reflected in our accompanying statements of operations and exclude certain expenses included in the determination of net income such as property management and other indirect operating expenses, interest expense and depreciation and amortization expense.  These items are excluded from NOI in order to provide results that are more closely related to a property’s results of operations.  NOI is also used by industry analysts and investors to measure operating performance of our apartment communities. Current year NOI is compared to prior year NOI and current year budgeted NOI as a measure of financial performance. The NOI yield or return on total capitalized costs is an additional measure of financial performance.

       NOI from our wholly-owned apartment communities included in continuing operations, and a reconciliation thereof to income from continuing operations before equity in income of joint ventures  (this caption in the accompanying statements of operations is the most directly comparable GAAP measure to NOI) is as follows:

	Three Months         Ended March 31,
	2004		2003
Total property revenues Less:  Property operating and maintenance expenses	$56,621 (20,772	)	$52,717   ( 18,344	)
Net operating income (NOI)	$35,849		$34,373
Less other expenses:
Real estate asset depreciation and amortization	(14,020	)	(12,124		)
Property management (owned and third party)	(  4,286	)	(  3,486		)
Ancillary services	(  1,064	)	(  1,225		)
Interest expense and credit enhancement fees	(11,157	)	(10,921		)
Amortization of deferred financing costs	(     505	)	(     424		)
General and administrative	(  2,974	)	(  2,333		)
Corporate asset depreciation and amortization	(     498	)	(     342		)
Total other expenses	(34,504	)	(30,855		)
Add other revenues:
Property management revenues	2,154		1,849
Ancillary services revenues	1,214		1,873
Interest income	8		73
Other revenues	406		46
Total other revenues	3,782		3,841
Income from continuing operations before equity in income    of  joint ventures	$5,127		$7,359

        All other measurements for our reportable segment are disclosed in our consolidated financial statements.

         We also provide management, development and construction, corporate apartment home and brokerage services to third parties and unconsolidated joint ventures. These operations, on an individual and aggregate basis, do not meet the quantitative thresholds for segment reporting set forth in SFAS No. 131.

9.  STOCK OPTIONS

       Beginning January 1, 2003, we adopted the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” for stock-based employee compensation.  Under the prospective method of adoption selected by us, the recognition provisions of SFAS No. 123 apply to all new employee option awards granted by the Trust after December 31, 2002.  Prior option awards will continue to be accounted for under APB Opinion No. 25, “Accounting for Stock Issued to Employees,” under which no compensation cost has been recognized since all options have been granted with an exercise price equal to the fair value of the Trust’s common shares on the date of grant.  Had compensation cost on all outstanding and unvested option awards been determined consistent with SFAS No. 123, our net income available to common unitholders and earnings per unit would have been reduced to the following pro forma amounts:

	Three Months         Ended March 31,
	2004		2003
Net income available to common unitholders, as reported Deduct:  Total stock-based employee compensation expense    determined under fair value based method for all option awards Net income available to common unitholders, pro forma Earnings per unit:      Basic – as reported      Basic – pro forma      Diluted – as reported      Diluted – pro forma	$5,790            - $5,790 $0.17 $0.17 $0.17 $0.17		$11,439 (      16 $11,423 $0.38 $0.38 $0.38 $0.38	)

10. COMMITMENTS AND CONTINGENCIES

Development and Construction Commitments

       We currently have six communities under development that are expected to comprise 1,890 apartment homes upon completion and an indirect 20% ownership interest in one development community that is expected to comprise 76 apartment homes upon completion.  The estimated costs to complete the development of these assets total $96 million at March 31, 2004, including $5 million of costs pertaining to the single-family lot development adjacent to our Gables Montecito development community.  These costs are expected to be initially funded by $13 million in construction loan proceeds and $83 million in borrowings under our credit facilities.

       At March 31, 2004, we owned three parcels of land on which we intend to develop three communities that we currently expect will comprise 716 apartment homes.  We also had rights to acquire additional parcels of land, either through options or long-term conditional contracts, on which we believe we could develop nine communities that we currently expect would comprise an estimated 2,654 apartment homes.  Any future development is subject to obtaining permits and other governmental approvals, as well as our ongoing business review, and may not be undertaken or completed.

       We have letter of credit and performance obligations of approximately $7.7 million related to our wholly-owned development and construction activities.  As the related development and construction activities are completed, such obligations will be reduced accordingly.

       We are currently serving as general contractor for the construction of five apartment communities for third parties and unconsolidated joint ventures under "cost plus a fee" contracts with guaranteed maximum prices on the costs of construction of approximately $57 million in aggregate.  The construction of these assets was 43% complete in aggregate at March 31, 2004.  Under these contracts, we are obligated to fund any construction cost overruns that are not recovered through a change order.  In addition, we are entitled to a share of the savings generated under these contracts, if any, in the form of an incentive fee.  We are also providing general contractor or construction management services for several construction projects related to existing apartment communities owned by third parties.  Because our clients are obligated to fund the costs that are incurred on their behalf pursuant to the related contract, we net the reimbursement of these costs against the billings for such costs.  Development and construction fees are recognized when earned using the percentage of completion method. During the three months ended March 31, 2004 and 2003, we recognized $0.4 million and $0.6 million, respectively, in development and construction fees under related contracts with gross billings of $8.8 million and $11.4 million, respectively.  Such development and construction fees are included in ancillary services revenues in the accompanying statements of operations.

Operating Leases

       We are party to two long-term ground leases for two apartment communities in Austin with initial terms expiring in 2044 and 2065. We have paid the ground lease rent in full for these leases through the initial term. The prepaid lease payments, net of accumulated amortization, are included in other assets, net in the accompanying balance sheets. We are party to long-term ground leases for an apartment community in Atlanta and an apartment community in Austin with initial terms expiring in 2075 and 2069, respectively. The payments under the Atlanta lease and the Austin lease are made on a monthly and quarterly basis, respectively. We are also party to operating leases for office space with various terms. Rent incurred under these operating leases was $527 and $503 for the three months ended March 31, 2004 and 2003, respectively.  Future minimum lease payments under these operating leases at March 31, 2004 are as follows:

Joint Venture Indebtedness and Related Recourse Guarantee Obligations

       The apartment community owned and operated by the Arbors of Harbortown JV, in which we have a 25% ownership interest, is secured by a $16.4 million tax-exempt bond obligation which bears interest at a low-floater rate.  The credit enhancement for the bond obligation is provided by our venture partner and expires in May 2006.  The maturity date of the underlying bond issue is April 2013.   None of the bond indebtedness is recourse to us.

       The apartment community owned by the GRAP JV, in which we have a 20% ownership interest, is secured by a $28.0 million permanent loan that bears interest at a fixed rate of 4.2% and matures in November 2008.  None of this indebtedness is recourse to us.

       At March 31, 2004, two of the four communities owned by the Gables Residential Apartment Portfolio JV Two (the “GRAP JV Two”), in which we have a 20% ownership interest, are secured by construction loans with committed fundings of $21.8 million.  The loans have initial maturity dates of  October 2004 and June 2005 and have two extension options that, if exercised, would result in final maturity dates of April 2007 and June 2007, respectively.  As of March 31, 2004, there was an aggregate of $18.2 million of indebtedness outstanding under these construction loans which currently bear interest at spreads over LIBOR of 1.60% and 1.70%.  We have a limited payment guaranty on these two loans, pursuant to which we are obligated to pay to the lender a stipulated percentage of all amounts of principal, interest and any other indebtedness becoming due and payable on the loans that is not paid by the borrower, subject to a maximum guaranteed amount of $7.1 million.  At March 31, 2004, the portion of the $18.2 million of outstanding principal that is recourse to us is $5.5 million.  There are no principal amortization requirements through the initial maturity dates.  The inability of the venture to pay any principal or interest under these loans when due would require us to perform under this guaranty obligation.  To the extent we are required to make a payment to the lender under the guaranty agreement, our venture partner would be obligated to pay us its share of that payment based on its ownership interest percentage in the venture.  We have not recorded a liability on our accompanying consolidated balance sheets in connection with this recourse obligation that was entered into prior to January 1, 2003.

      The remaining two communities owned by the GRAP JV Two are secured by permanent loans totaling $39.5 million which mature in November 2008 and bear interest at fixed rates of 4.25% and 4.30%.  None of the indebtedness associated with these two permanent loans is recourse to us. 

       Each of the three communities owned by the CMS Tennessee Multifamily JV, in which we have a 8.26% ownership interest, is secured by a conventional fixed-rate loan with a maturity of January 2011.  As of March 31, 2004, there was an aggregate of $51.6 million of indebtedness outstanding under these loans which bear interest at a rate of 7.22%.  None of this indebtedness is recourse to us.

Archstone Management Services Acquisition

        In May 2003, we acquired property management contracts for 10,684 apartment homes in 32 multifamily apartment communities from Archstone Management Services Incorporated.   The purchase price of approximately $6.5 million was structured to be paid in three installments based on the retention of the contracts acquired.  As of March 31, 2004, we had funded $4.3 million of the purchase price in two installments.  The amount of the third installment will be determined and paid in the second quarter of 2004.  

Contingencies

      The entities comprising Gables Realty Limited Partnership are subject to various legal proceedings and claims that arise in the ordinary course of business.  We believe that these matters are generally covered by insurance. While the resolution of these matters cannot be predicted with certainty, we believe that the final outcome of such matters will not have a material adverse effect on our financial statements.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Amounts in Thousands, Except Property and Per Unit Data)

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

       We are the entity through which Gables Residential Trust (the "Trust"), a real estate investment trust (a "REIT"), conducts substantially all of its business and owns, either directly or indirectly through subsidiaries, substantially all of its assets. We are focused within the multifamily industry in demand-driven markets throughout the United States that have exhibited high job growth and resiliency to economic downturns.  Our operating performance is based predominantly on net operating income (NOI) from our apartment communities. NOI, which represents total property revenues less property operating and maintenance expenses (as reflected in the consolidated statements of operations), is affected by the demand and supply dynamics within our markets. See Note 8, Segment Reporting, to the accompanying consolidated financial statements for further discussion of our use of NOI as the primary financial measure of performance for our apartment communities.  Our performance is also affected by the general availability and cost of capital and our ability to develop and acquire additional apartment communities with returns in excess of our long-term weighted average cost of capital.

Business Objective and Strategies

       The Trust’s objective is to increase shareholder value by producing consistent high quality earnings to sustain dividends and annual total returns that exceed the NAREIT Apartment Index. To achieve that objective, we employ a number of business strategies. First, our long-term investment strategy is research-driven, with the objective of creating a portfolio of high quality assets in strategically selected markets that are complementary through economic diversity and characterized by high job growth and resiliency to national economic downturns. We believe such a portfolio will provide predictable operating cash flow performance that exceeds the national average on a sustainable basis. Second, we adhere to a strategy of owning and operating high quality, class AA/A apartment communities under the Gables brand in Established Premium Neighborhoods,™ or EPNs. EPNs are generally characterized as areas with the highest prices for single-family homes on a per square foot basis. We believe that communities, when located in EPNs and supplemented with high quality service and amenities, attract the affluent renter-by-choice who is willing to pay a premium for location preference, superior service and high quality communities. The resulting portfolio should maintain high levels of occupancy and rental rates relative to overall market conditions. This, coupled with more predictable operating expenses and reduced capital expenditure requirements associated with high quality construction materials, should lead to operating margins that exceed national averages for the apartment sector and sustainable growth in operating cash flow. Third, our aim is to be recognized as the employer of choice within the industry. Our mission of Taking Care of the Way People Live® involves innovative human resource practices that we believe will attract and retain the highest caliber associates. Because of our long-established presence as a fully integrated apartment management, development, construction, acquisition and disposition company within our markets, we have the ability to offer multi-faceted career opportunities among the various disciplines within the industry. Finally, our capital strategy is to generate a return on invested capital that exceeds our long-term weighted average cost of capital while maintaining financial flexibility through a conservative, investment grade credit profile. We judiciously manage our capital and we redeploy capital through the reinvestment of asset disposition proceeds into our business.

        We believe we are well positioned to continue achieving our objectives because (1) the markets we have selected for investment are projected to continue to experience job growth that exceed national averages, (2) our EPN locations are expected to outperform local market results and (3) national demand for apartments is expected to increase during the next five to ten years as the demographic group referred to as the Echo Boomer generation begins to form new households.

        In the ordinary course of our business, we evaluate the continued ownership of our assets relative to available opportunities to acquire and develop new assets and relative to available equity and debt capital financing.  We sell assets if we determine that such sales are the most attractive sources of capital for redeployment in our business, for repayment of debt, for repurchase of stock and for other uses. We maintain staffing levels sufficient to meet our existing development, construction, acquisition and property operating activities. When market conditions warrant, we adjust staffing levels in an attempt to mitigate a negative impact on our results of operations.

        We have experienced slight declines in rental revenues on a same store basis since 2002 as compared to prior years.  This is primarily due to national economic weakness, coupled with low mortgage rates that have resulted in an increase in home purchases by apartment residents.  However, the rate of decline has been diminishing and we expect that operating fundamentals for our business will improve as we move through 2004 as job growth, and the balance between supply and demand, improves in our markets.  The job growth prospects for our markets are partially related to national economic conditions.  We expect job growth to continue in our markets, but it is uncertain whether, and to what extent, the national economy and related job growth will improve in 2004.

        On a same store basis, we expect (1) total property revenues in 2004 to be relatively consistent with 2003 levels and (2) property operating and maintenance expenses for 2004 to increase over 2003 levels generally in line with inflation.  We intend to capitalize on our expectations of improving operating fundamentals by increasing our investment activity for both acquisition and development of new communities.  At the same time, we intend to take advantage of attractive valuations for apartment communities by continuing to sell assets that are no longer consistent with our strategy.

Forward-Looking Statements

        This report contains forward-looking statements within the meaning of the federal securities laws. Actual results or developments could differ materially from those projected in such statements as a result of the risk factors set forth in the relevant paragraphs of “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our accompanying consolidated financial statements and notes thereto.

Common and Preferred Equity Activity

Secondary Common Share Offerings

       Since its initial public offering in January 1994, the Trust has issued a total of 17,331 common shares in nine offerings, generating $426.8 million in net proceeds which were generally used (1) to reduce outstanding indebtedness under our interim financing vehicles utilized to fund our development and acquisition activities and (2) for general working capital purposes, including funding of future development and acquisition activities.  The most recent offering, involving the issuance of 2,500 common shares that generated $79.0 million in net proceeds, closed on August 26, 2003. 

Preferred Share Offerings

       On May 8, 2003, the Trust issued 3,000 shares of 7.5% Series D Cumulative Redeemable Preferred Shares with a liquidation preference of  $25.00 per share. The net proceeds from this issuance of approximately $72.4 million were used to reduce outstanding indebtedness under our interim financing vehicles. The Series D Preferred Shares may be redeemed at the Trust’s option at $25.00 per share plus accrued and unpaid dividends on or after May 8, 2008. The Series D 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 with a liquidation preference of $25.00 per share in a private placement to an institutional investor.  The net proceeds from this issuance of $39.7 million, together with the net proceeds of $39.7 million from the concurrent issuance of $40 million of senior unsecured notes, were used to retire approximately $82.5 million of unsecured indebtedness at an interest rate of 8.3% that was scheduled to mature in December 2002.  Pursuant to a registration rights agreement with the purchaser of the Series C Preferred Shares, the Trust registered a new series of preferred shares with the Securities and Exchange Commission and offered to exchange those shares on a one-for-one basis for the outstanding Series C Preferred Shares.  The dividend rate, preferences and other terms for the new preferred shares, or 7.875% Series C-1 Cumulative Redeemable Preferred Shares, are identical in all material respects to the Series C Preferred Shares, except that the Series C-1 Preferred Shares are freely tradable by a holder.  The exchange offer was consummated on September 5, 2003 and did not generate any cash proceeds for the Trust.  The Series C-1 Preferred Shares may be redeemed at the Trust’s option at $25.00 per share plus accrued and unpaid dividends on or after September 27, 2006.  The Series C-1 Preferred Shares are not subject to any sinking fund or convertible into any other securities of the Trust.

        On June 18, 1998, the Trust  issued 180 shares of 5.0% Series Z Cumulative Redeemable Preferred Shares with a liquidation preference of $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 the Trust’s option at any time for $25.00 per share plus accrued and unpaid dividends.  Dividends on the Series Z Preferred Shares are cumulative from the issuance date and the first dividend payment date is June 18, 2008.  Thereafter, dividends will be paid annually in arrears.  The Series Z Preferred Shares are not subject to any sinking fund or convertible into any other securities of the Trust.

        On July 24, 1997, the Trust issued 4,600 shares of 8.30% Series A Cumulative Redeemable Preferred Shares with a liquidation preference of $25.00 per share. The net proceeds from this offering of $111.0 million were used to reduce outstanding indebtedness under our interim financing vehicles. The Trust redeemed all outstanding Series A Preferred Shares for $115 million on August 9, 2002 with proceeds from our $180 million senior unsecured note issuance on July 8, 2002.

Issuances of Common Operating Partnership Units

       Since its IPO, the Trust has issued a total of 4,421 common units in connection with the 1998 acquisition of the real estate assets and operations of Trammell Crow Residential South Florida, 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 our interim financing vehicles. On November 17, 2003, we redeemed each of the 2,000 outstanding Series B Preferred Units at $25.00 per unit plus accrued and unpaid distributions.  The redemption price of the Series B Preferred Units exceeded the related carrying value by the $1.3 million of issuance costs that were originally incurred and classified as a reduction to partners’ capital.  In the fourth quarter of 2003, the $1.3 million excess was reflected as a reduction to earnings in arriving at net income available to common unitholders, in accordance with the July 2003 clarification of EITF Abstracts, Topic No. D-42, "The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock." See Note 5 to the accompanying consolidated financial statements.

Common Equity Repurchase Program

        The Trust’s board of trustees implemented a common equity repurchase program pursuant to which the Trust is authorized to purchase up to $200 million of its outstanding common shares or units. The Trust views the repurchase of common equity with consideration of other investment alternatives when capital is available to be deployed.  The Trust has repurchased shares from time to time in open market and privately negotiated transactions, depending on market prices and other prevailing 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 common units on the same terms and for the same aggregate price.  After redemption, the common units redeemed by us are no longer deemed outstanding.  Common units have also been repurchased for cash upon their presentation for redemption by unitholders.  As of March 31, 2004, we had redeemed 4,806 common units, including 4,506 common units redeemed by the Trust, for a total of $116.0 million, including $0.2 million in related commissions.

Shelf Registration Statement

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

Portfolio and Other Financing Activity

Community Dispositions Subject to Discontinued Operations Reporting

        In March 2004, we sold an apartment community located in Orlando comprising 231 apartment homes.  The net proceeds from this sale were $27.0 million and were used to pay down outstanding borrowings under our interim financing vehicles.  In connection with the sale transaction, we were relieved of a $2.0 million note payable obligation.  The gain from the sale of this community was $2.4 million and was recognized in the first quarter of 2004. 

       During 2003, we sold four apartment communities located in Houston comprising 1,373 apartment homes and an apartment community located in Dallas comprising 300 apartment homes. The net proceeds from these sales were $112.1 million and were used to pay down outstanding borrowings under our interim financing vehicles. The aggregate gain from the sale of these five communities was $37.7 million.  One of these sales occurred during the first quarter of 2003, resulting in a $5.0 million gain which was recognized in the first quarter of 2003.  The other sales occurred during the third and fourth quarters of 2003.

       Historical operating results and gains are reflected as discontinued operations in the accompanying consolidated statements of operations.  See Note 6 to the accompanying consolidated financial statements for further discussion.

Community and Land Dispositions Not Subject to Discontinued Operations Reporting

        In March 2004, we sold our 20% ownership interest in an apartment community located in Houston comprising 186 apartment homes to our partner in the Gables Residential Apartment Portfolio JV (the "GRAP JV").  The net proceeds from this sale were $1.6 million, resulting in a gain of $0.4 million which was recognized in the first quarter of 2004.

        In February 2004, we sold a parcel of land in San Antonio.  The net proceeds from this sale were $1.7 million and resulted in no gain or loss.

        Historical operating results and gains are included in continuing operations in the accompanying consolidated statements of operations. See Note 6 to the accompanying consolidated financial statements for further discussion.

Community Acquisitions

       On December 19, 2003, we acquired an apartment community for renovation located in South Florida comprising 36 apartment homes for approximately $4.1 million in cash.  This community is adjacent to a land parcel that we acquired in January 2004 for the future development of an apartment community that we currently expect will comprise 261 apartment homes.

       On July 15, 2003, we acquired an apartment community located in Washington, D.C. comprising 211 apartment homes for approximately $54.6 million in cash, including approximately $1.6 million of closing costs.

       On May 30, 2003, we acquired an apartment community located in Dallas comprising 334 apartment homes for approximately $33.5 million in cash. 
           
       On February 20, 2003, we acquired an apartment community located in Austin that is subject to a long-term ground lease and is comprised of 239 apartment homes and 7,366 square feet of retail space for approximately $30.2 million in cash.

Other Acquisitions

       On May 23, 2003, we acquired property management contracts for 10,684 apartment homes in 32 multifamily apartment communities from Archstone Management Services Incorporated.  The services rendered under acquired management contracts for 9,184 apartment homes transitioned to us over the ensuing three month period.  The services to be rendered under the remaining management contracts for 1,500 apartment homes did not transition to us in 2003 for various reasons associated with the underlying assets, including sale prior to transition and location.  The purchase price of approximately $6.5 million was structured to be paid in three installments based on the retention of the contracts acquired.  As of March 31, 2004, we had funded $4.3 million of the purchase price in two installments.  The amount of the third installment will be determined and paid in the second quarter of 2004.
    
Senior Unsecured Note Issuance

       On September 27, 2002, we issued $40 million of senior unsecured notes in two series in a private placement to an institutional investor: $30 million at an interest rate of 5.86% maturing in September 2009 and $10 million at an interest rate of 6.10% maturing in September 2010. The net proceeds of $39.7 million, together with the net proceeds of $39.7 million from the concurrent issuance by the Trust of the 7.875% Series C Preferred Shares, were used to retire approximately $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.  Pursuant to a registration rights agreement with the purchaser of the $40 million of senior unsecured notes, we registered new notes with the Securities and Exchange Commission, and offered to exchange those new notes for the original notes.  The new notes, also issued in two series, are identical in all material respects to the original 5.86% notes due 2009 and the 6.10% notes due 2010, except that the new notes are freely tradable by a holder.  The exchange offer was consummated on September 5, 2003 and did not generate any cash proceeds for us.

Critical Accounting Policies and Recent Accounting Pronouncements

       Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and a summary of our significant accounting policies is included in Notes 4 and 6 to the consolidated financial statements included in our Form 10-K for the year ended December 31, 2003. Note 5 to the accompanying consolidated financial statements includes a summary of recent accounting pronouncements and their actual or expected impact on our consolidated financial statements. Our preparation of the financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. Our actual results may differ from these estimates. As an owner, operator and developer of apartment communities, our critical accounting policies relate to revenue recognition, cost capitalization and asset impairment evaluation.

Revenue Recognition

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

       Property management: We provide property management services to third parties and unconsolidated joint ventures. Property management fees are recognized when earned.

       Ancillary services: We provide development and construction, corporate rental housing and brokerage services to third parties and unconsolidated joint ventures. Development and construction services are typically provided under "cost plus a fee" contracts.  Because our clients are obligated to fund the costs that are incurred on their behalf pursuant to the related contract, we net the reimbursement of these costs against the billings for such costs.  Development and construction fees are recognized when earned using the percentage of completion method.  During the three months ended March 31, 2004 and 2003, we recognized $0.4 million and $0.6 million, respectively, in development and construction fees under related contracts with gross billings of $8.8 million and $11.4 million, respectively.  Corporate rental housing revenues and brokerage commissions are recognized when earned.

       Gains on sales of real estate assets: Gains on sales of real estate assets are recognized pursuant to the provisions of SFAS No. 66, "Accounting for Sales of Real Estate."  The specific timing of the recognition of the sale and the related gain is measured against the various criteria in SFAS No. 66 related to the terms of the transactions and any continuing involvement associated with the assets sold.  To the extent the sales criteria are not met, we defer gain recognition until the sales criteria are met.

Cost Capitalization

        As a vertically integrated real estate company, we have in-house investment professionals involved in the development, construction and acquisition of apartment communities. Direct internal costs associated with development and construction activities for wholly-owned assets are included in the capitalized development cost of such assets. Direct internal costs associated with development and construction activities for third parties and unconsolidated joint ventures are reflected in ancillary services expense as the related services are being rendered. As required by GAAP, we expense all internal costs associated with the acquisition of operating apartment communities to general and administrative expense in the period such costs are incurred.

        Our real estate development pursuits are subject to obtaining permits and other governmental approvals, as well as our ongoing business review of the underlying real estate fundamentals and the impact on our capital structure. We do not always move forward with development of our real estate pursuits, and therefore, we regularly evaluate the viability of real estate pursuits and the recoverability of capitalized pursuit costs. Based on this review, we expense any costs that are deemed unrealizable at that time to general and administrative expense.

        During the development and construction of a new apartment community, we capitalize related interest costs, as well as other carrying costs such as property taxes and insurance. We begin to expense these items as the construction of the community becomes substantially complete and the residential apartment homes become available for initial occupancy. Accordingly, we gradually reduce the amounts we capitalize as construction is being completed.

        Expenditures in excess of $1 for purchases of a new asset with a useful life in excess of one year and for replacements and repairs that extend the useful life of the asset are capitalized and depreciated over their useful lives. Recurring value retention capital expenditures are typically incurred every year during the life of an apartment community and include such expenditures as carpet, flooring and appliances. Non-recurring capital expenditures are costs that are generally incurred in connection with a major project impacting an entire community, such as roof replacement, parking lot resurfacing, exterior painting and siding replacement. Value-enhancing capital expenditures are costs for which an incremental value is expected to be achieved from increasing the NOI potential for a community or recharacterizing the quality of the income stream with an anticipated reduction in potential sales cap rate for items such as replacement of wood siding with a masonry-based hardi-board product, amenity upgrades and additions, installation of security gates and additions of covered parking. Recurring value retention and non-recurring and/or value-enhancing capital expenditures do not include costs incurred in connection with a major renovation of an apartment community. Repairs and maintenance, such as landscaping maintenance, interior painting and cleaning and supplies used in such activities, are expensed as incurred.

Depreciation and Asset Impairment Evaluation

        Under GAAP, real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired.  Depreciation is computed on a straight-line basis over the estimated useful lives of 20 to 40 years for buildings and improvements and 5 years for furniture, fixtures and equipment. As required by GAAP, we periodically evaluate our real estate assets to determine if there has been any impairment in their carrying value and record impairment losses if there are indicators of impairment and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. No such impairment losses have been recognized to date.

Purchase Price Allocation for Apartment Community Acquisitions

        In connection with the acquisition of an apartment community, we perform a valuation and allocation to each asset and liability acquired in such transaction, based on their estimated fair values at the date of acquisition. The valuation of assets acquired subsequent to July 1, 2001, the effective date of SFAS No. 141, "Business Combinations," includes both tangible assets and intangible assets. Tangible asset values, consisting of land, buildings and improvements, and furniture, fixtures and equipment, are reflected in real estate assets and depreciated over their estimated useful lives. Intangible asset values, consisting of at-market, in-place leases and resident relationships, are reflected in other assets and amortized over the average remaining lease term of the acquired resident relationships.

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 reflected as discontinued operations in the consolidated statements of operations for all periods presented. During the three months ended March 31, 2004, we sold one wholly-owned operating real estate asset.  During 2003, we sold the following wholly-owned operating real estate assets:  one during the first quarter, two during the third quarter and two during the fourth quarter.  The operating results for these six wholly-owned assets sold are reflected as discontinued operations in the accompanying 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 March 31, 2004 or December 31, 2003.

Results of Operations

Comparison of operating results for the three months ended March 31, 2004  (the “2004 Period”) to the three months ended March 31, 2003 (the “2003 Period”)

       Our net income is generated primarily from the operation of our apartment communities and the disposition of assets that no longer meet our investment criteria. For purposes of evaluating comparative operating performance, we categorize our operating communities based on the period each community reaches stabilized occupancy. A community is considered to have achieved stabilized occupancy on the earlier to occur of (1) attainment of 93% physical occupancy or (2) one year after completion of construction. The combined operating performance for all of our wholly-owned apartment communities that are included in continuing operations for the 2004 Period and the 2003 Period is summarized as follows:

       Total property revenues increased $3,904, or 7.4%, from $52,717 to $56,621 due to an increase in the number of apartment homes resulting from the development, lease-up and acquisition of additional communities, as well as an increase in number of available apartment homes associated with renovation activities at several of our communities.  These increases were partially offset by a 3.5% decrease in same-store performance as a result of national economic weakness.

        Property operating and maintenance expenses, as reflected in our consolidated statements of operations, increased $2,428, or 13.2%, from $18,344 to $20,772 due to an increase in the number of apartment homes resulting from the development, lease-up and acquisition of additional communities, as well as an increase in the number of available apartment homes associated with renovation activities at several of our communities.  In addition, same-store expenses increased 2.9% due to increases in property taxes, payroll and redecorating expenses partially offset by decreases in marketing and utilities expenses. 

        Additional information for the 61 same-store apartment communities presented in the preceding table is as follows:

(a)  Physical occupancy represents gross potential rent less physical vacancy loss as a percentage of gross potential rent.  Economic occupancy represents
actual rental revenue collected divided by gross potential rent.  Thus, economic occupancy differs from physical occupancy in that it takes into account
concessions, non-revenue producing apartment homes and delinquencies.

        Property management revenues increased $305, or 16.5%, from $1,849 to $2,154 due primarily to a net increase of approximately 2,900 apartment homes managed for third parties and unconsolidated joint ventures from an average of 22,900 in the 2003 Period to 25,800 in the 2004 Period.  This net increase in units managed is due primarily to the May 2003 acquisition of the Archstone Management Business, offset in part by a net decrease in apartment homes managed for third parties due primarily to sales.

        Ancillary services revenues decreased $659, or 35.2%, from $1,873 to $1,214 due primarily to a decrease of $406 in corporate rental housing revenue, a decrease of $153 in development and construction fee revenue and a decrease of $100 in third-party brokerage services revenue.  Such decreases were due to volume declines in services rendered.              

        Interest income decreased $65, or 89.0%, from $73 to $8 due to a decrease in interest-bearing deposits and a decrease in interest rates.

        Other revenues increased $360, or 782.6%, from $46 to $406 due primarily to income earned during the 2004 Period related to certain non-routine items.

        Real estate asset depreciation and amortization increased $1,896, or 15.6%, from $12,124 to $14,020 due primarily to the impact of the development and acquisition of additional communities and capital improvements made to existing operating communities, as well as a non-recurring adjustment recorded to depreciation in the 2004 Period of $707. 

        Property management expense for communities owned by us and third parties increased $800, or 22.9%, from $3,486 to $4,286 due to an increase of approximately 3,400 apartment homes under management from an average of 43,500 in the 2003 Period to an average of 46,900 in the 2004 Period due primarily to the May 2003 acquisition of the Archstone Management Business and the lease-up of additional owned communities, offset in part by a net decrease in apartment homes managed for third parties due primarily to sales. 

        Ancillary services expense decreased $161, or 13.1%, from $1,225 to $1,064 due primarily to a decrease in development and construction expenses of $116 and a decrease in corporate rental housing expenses of $42.  Such decreases are due to volume declines in services rendered.

        Interest expense and credit enhancement fees increased $236, or 2.2%, from $10,921 to $11,157.  An increase in outstanding indebtedness associated with the November 2003 redemption of our Series B Preferred Units and an increase in operating debt associated with the development and acquisition of additional communities was offset in part by a decrease in interest rates for variable-rate borrowings and a decrease in outstanding indebtedness associated with 2004 and 2003 sale activities, the May 2003 issuance of our Series D Preferred Shares and the August 2003 issuance of 2,500 common shares.

        Amortization of deferred financing costs increased $81, or 19.1%, from $424 to $505 due primarily to increased financing costs associated with the modification of our unsecured revolving credit facility in February 2003 and December 2003.

        General and administrative expense increased $641, or 27.5%, from $2,333 to $2,974 due primarily to increases in travel expenses related to our national meeting in the 2004 Period, professional fees and long-term compensation costs.  These increases were partially offset by a decrease in internal acquisition costs associated with the acquisition of an operating apartment community in the 2003 Period.

        Corporate asset depreciation and amortization increased $156, or 45.6%, from $342 to $498 due primarily to an increase in amortization resulting from the management contracts acquired in connection with the May 2003 acquisition of the Archstone Management Business.

        Equity in income of joint ventures increased $389, or 409.5%, from $95 to $484 due primarily to the sale of our 20% ownership interest in an apartment community located in Houston to our joint venture partner, resulting in a $432 gain recognized in the 2004 Period.

        Our share of the operating results for the apartment communities owned by the unconsolidated joint ventures in which we have an interest during the 2004 Period and the 2003 Period is as follows:

		2004 Period								Total
		Stabilized(a)		Development     & Lease-up (b)		Sales (c)		Total		2003 Period
Our share of joint venture results: Rental and other property revenues Property operating and maintenance expenses (exclusive of items shown separately below)      Property net operating income (NOI) Interest expense and credit enhancement fees Amortization of deferred costs Other      Funds from operations (FFO) Gain on sale of previously depreciated operating real       estate assets Real estate asset depreciation      Equity in income of joint ventures Number of operating communities Number of apartment homes in operating communities Average percent occupied during the year		$ 1,046   (    427     619 (    251 (      12   (        8     348 -   (    313 $      35 7 2,492 91%	) ) ) ) )	$   146  (      65      81 (      21 (        5 (        1      54 -   (     46 $       8 1 297 80%	) ) ) ) )	$      97   (      43       54 (      11 (        1   (        1       41 432   (      32 $    441 1 186 94%	) ) ) ) )	$1,289   (   535    754 (    283 (      18   (     10    443 432   (    391 $   484 9 2,975 90%	) ) ) ) )	$1,146   (    468    678  (   207  (     16   (     20    435 - (    340 $     95 9 2,975 80%	) ) ) ) )

(a) Communities that were owned and fully stabilized throughout the 2004 Period.
(b) Communities in the development and/or lease-up phase that were not fully stabilized during all or any of the 2004 Period.
(c) Communities that were sold subsequent to January 1, 2004.

        Income from discontinued operations decreased $3,534, or 59.8%, from $5,907 to $2,373 due primarily to the $5,042 gain on disposition of discontinued operations recognized in the 2003 Period, partially offset by the $2,382 gain on disposition of discontinued operations recognized in the 2004 Period.

        Distributions to preferred unitholders increased $272, or 14.2%, from $1,922 to $2,194 due primarily to the $75 million issuance of our Series D Preferred Shares in May 2003, partially offset by the $50 million redemption of our Series B Preferred Units in November 2003.

Liquidity and Capital Resources

Cash Flows from Operating, Investing and Financing Activities

        Net cash provided by operating activities from continuing operations increased from $1,585 for the three months ended March 31, 2003 to $8,266 for the three months ended March 31, 2004 due to a change in other liabilities between periods of $3,271, a change in other assets between periods of $4,827 and an increase of $140 in income from continuing operations (a) before specified non-cash or non-operating items, including depreciation, amortization, equity in income of joint ventures, long-term compensation expense and  (b) after operating distributions received from joint ventures.  Such increases were offset in part by a change in restricted cash between periods of $1,557. Net cash provided by operating activities from discontinued operations decreased from $1,806 to $195 due to the disposition of discontinued operations in 2003 and 2004.

        We used $34,208 of net cash in investing activities for the three months ended March 31, 2003 compared to $12,459 for the three months ended March 31, 2004.  During the three months ended March 31, 2004, we expended (1) $39,780 related to acquisition, development, construction and renovation expenditures, (2) $2,084 related to recurring value retention capital expenditures for operating apartment communities, (3) $502 related to non-recurring and/or value-enhancing capital expenditures for operating apartment communities and (4) $327 related to our investment in joint ventures.   During the three months ended March 31, 2004, we received cash of  (1) $26,958 in connection with the disposition of discontinued operations, (2) $1,696 in connection with the sale of undeveloped land and (3) $1,580 from the sale of our joint venture real estate asset interest. During the three months ended March 31, 2003, we expended (1) $48,251 related to acquisition, development, construction and renovation expenditures, (2) $2,469 related to recurring value retention capital expenditures for operating apartment communities, (3) $1,835 related to non-recurring and/or value-enhancing capital expenditures for operating apartment communities and (4) $390 related to our investment in joint ventures.  During the three months ended March 31, 2003, we received cash of $18,737 in connection with the disposition of discontinued operations.

        We had $34,243 of net cash provided by financing activities for the three months ended March 31, 2003 compared to $5,941 for the three months ended March 31, 2004. During the three months ended March 31, 2004, we received net proceeds of  $23,046 from net borrowings and  $5,304 from the Trust’s issuance of common shares upon the exercise of share options.  We expended (1) $22,270 in common and preferred dividends and distributions, (2) $4 in deferred financing costs and (3) $135 of principal escrow payments deposited into escrow, net.  During the three months ended March 31, 2003, we received net proceeds of $56,299 from net borrowings  and we expended (1) $20,805 in common and preferred dividends and distributions, (2) $1,120 in deferred financing costs and (3) $131 of principal escrow payments deposited into escrow, net.

        The Trust has elected to be taxed as a REIT under the Internal Revenue Code. To qualify as a REIT, the Trust must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of the REIT’s ordinary taxable income to its shareholders.  It is the current intention of the Trust to adhere to these requirements and maintain its REIT status. As a REIT, the Trust generally will not be subject to federal income tax on distributed taxable income. We utilize Gables Residential Services, a taxable REIT subsidiary, to provide management and other services to third parties that we, as a REIT, may be prohibited from providing. Taxable REIT subsidiaries are subject to federal, state and local income taxes.

Contractual Obligations

        A summary of our contractual obligations at March 31, 2004 is as follows:

	Payments Due by Year
	2004	2005	2006	2007	2008	2009 &    Thereafter	Total
Regularly scheduled principal amortization payments	$  995	$  1,614	$  1,525	$   1,639	$ 1,252	$ 11,566	$ 18,591
Balloon principal payments due at maturity (a)	48,365	303,567	239,837	206,398	90,200	117,194	1,005,561
Total notes payable	49,360	305,181	241,362	208,037	91,452	128,760	1,024,152
Operating leases (b)	1,691	2,298	2,258	2,060	1,707	34,618	44,632
Deferred purchase price of the Archstone Management Business (c)	2,167	-	-	-	-	-	2,167
Manditorily redeemable Series Z Preferred Units (d)	-	-	-	-	2,250	4,500	6,750
Total	$53,218	$307,479	$243,620	$210,097	$95,409	$167,878	$1,077,701

(a)  Outstanding indebtedness for each tax-exempt bond issue is reflected in the preceding table using the earlier of the related bond maturity date or the bond enhancement facility maturity date, as applicable.
(b)  Includes two ground leases relating to apartment communities owned and operated by us.
(c)  Amount represents the maximum amount contingently payable in accordance with the purchase agreement.
(d)  Includes cumulative distributions of $2,250 from the June 1998 issuance date that are payable in June 2008.  Distributions from June 2008 to the June 2018 mandatory redemption date are payable annually and thus are excluded from the preceding table.

        We have various standing or renewable service contracts with vendors related to the operation of our communities.  These contracts have terms generally equal to one year or less and provide for cancellation with insignificant or no penalties.

        In addition to these contractual obligations, we currently have six communities under development that are expected to comprise 1,890 apartment homes upon completion and an indirect 20% ownership interest in one development community that is expected to comprise 76 apartment homes upon completion.  The estimated costs to complete the development of these assets total $96 million at March 31, 2004, including $5 million of costs pertaining to the single-family lot development adjacent to our Gables Montecito development community.  These costs are expected to be initially funded by $13 million in construction loan proceeds and $83 million in borrowings under our credit facilities described below. 

        At March 31, 2004, we owned three parcels of land on which we intend to develop three communities that we currently expect will comprise 716 apartment homes.  We also had rights to acquire additional parcels of land, either through options or long-term conditional contracts, on which we believe we could develop nine communities that we currently expect would comprise an estimated 2,654 apartment homes.  Any future development is subject to obtaining permits and other governmental approvals, as well as our ongoing business review, and may not be undertaken or completed.

       Additional information regarding our development activity is included in the “Development and Lease-up Communities” table below.

Funding of Short-term and Long-term Liquidity Requirements

        Our common and preferred distributions historically have been paid from cash provided by recurring real estate activities. We anticipate that such distributions will continue to be paid from cash provided by recurring real estate activities that include both operating activities and asset disposition activities when evaluated over a twelve-month period. This twelve-month evaluation period is relevant due to the timing of disposition activities and the payment of particular expense items that are accrued monthly but are paid on a less frequent basis, such as real estate taxes and interest on our senior unsecured notes.

        We have met and expect to continue to meet our short-term liquidity requirements through net cash provided by recurring real estate activities. Our net cash from recurring real estate activities has been adequate, and we believe that it will continue to be adequate, to meet both operating requirements and payment of dividends in accordance with REIT requirements. Recurring value retention capital expenditures and non-recurring and/or value-enhancing capital expenditures, in addition to regularly scheduled principal amortization payments, are also expected to be funded from recurring real estate activities that include both operating and asset disposition activities. We anticipate that acquisition, construction, development and renovation activities as well as land purchases, will be initially funded primarily through borrowings under our credit facilities and construction loans described below.

        We expect to meet our long-term liquidity requirements, including the balloon principal payments due at maturity of our notes payable and possible land and property acquisitions, through long-term secured and unsecured borrowings, the issuance of debt securities or equity securities, private equity investments in the form of joint ventures, or through the disposition of assets which, in our evaluation, may no longer meet our investment requirements.    

$300 Million Credit Facility

        We have an unsecured revolving credit facility with a committed capacity of $300 million provided by a syndicate of banks that has a maturity date of May 2005.  This facility was modified in February 2003 and December 2003 to, among other things, increase the committed capacity under the facility from $225 million to $252 million and from $252 million to $300 million, respectively.  Syndicated borrowings under this facility currently bear interest at our option of LIBOR plus 0.85% or prime minus 0.25%.  Fees for letters of credit issued under this facility are equal to the spread over LIBOR for syndicated borrowings.  In addition, we pay a facility fee currently equal to 0.20% of the $300 million committed capacity.  The spread over LIBOR for syndicated borrowings and the facility fee may be adjusted up or down based on changes in our senior unsecured credit ratings and our leverage ratios.  There are five stated pricing levels for (1) the spread over LIBOR for syndicated borrowings ranging from 0.70% to 1.25% and (2) the facility fee ranging from 0.15% to 0.30%.  A competitive bid option is available for borrowings up to 50% of the $300 million committed capacity, or $150 million.  This option allows participating banks to bid to provide us loans at a rate that is lower than the stated rate for syndicated borrowings.  At March 31, 2004, we had outstanding under the facility (1) $122 million in borrowings outstanding under the competitive bid option at an average interest rate of 1.53% and (2) $48 million of letters of credit, including $46 million of letters of credit enhancing four tax-exempt variable rate notes payable totaling $45 million.  Thus, we had $130 million of availability under the facility at March 31, 2004.  We expect to renew and/or renegotiate the facility prior to the May 2005 maturity date, however there can no assurance that such renewal and/or renegotiation will occur.

$75 Million Borrowing Facility

        We have a $75 million unsecured borrowing facility with a bank that has a maturity date of May 2005. The interest rate and maturity date related to each advance under this facility is agreed to by both parties prior to each advance. We had $18.7 million in borrowings outstanding under this facility at March 31, 2004 at an interest rate of 1.60%.

$10 Million Credit Facility

        We have a $10 million unsecured revolving credit facility with a bank that has a maturity date of May 2005.  Borrowings under this facility bear interest at the same scheduled interest rates for syndicated borrowings as the $300 million credit facility.  We had $1.1 million in borrowings outstanding under this facility at March 31, 2004 at an interest rate of 1.93%.

Secured Construction Loans

        We have committed fundings under eight construction-related financing vehicles for four wholly-owned development communities totaling $78.1 million from a bank. At March 31, 2004, we had drawn $36.6 million under these variable-rate financing vehicles and therefore have  $41.5 million of remaining capacity. Borrowings under these vehicles bear interest at a weighted average rate of 3.04% at March 31, 2004.

Restrictive Covenants

        Our secured and unsecured debt agreements generally contain representations, financial and other covenants and events of default typical for each specific type of facility or borrowing.

        The indentures under which our publicly traded and other unsecured debt securities have been issued contain the following limitations on the incurrence of indebtedness: (1) a maximum leverage ratio of 60% of total assets; (2) a minimum debt service coverage ratio of 1.50:1; (3) a maximum secured debt ratio of 40% of total assets; and (4) a minimum amount of unencumbered assets of  150% of total unsecured debt.  Our indentures also include other affirmative and restrictive covenants.

        Our ability to borrow under our unsecured credit facilities and secured construction loans is subject to our compliance with a number of financial covenants, affirmative covenants and other restrictions on an ongoing basis.  The principal financial covenants impacting our leverage are: (1) our total debt may not exceed 57.5% of our total assets; (2) our annualized interest coverage ratio may not be less than 2.0:1; (3) our annualized fixed charge coverage ratio may be not less than 1.75:1; (4) our total secured debt may not exceed 35% of our total assets, and the recourse portion of our secured debt may not exceed 10% of our total assets; (5) our unencumbered assets may not be less than 175% of our total unsecured debt; (6) our tangible net worth may not be less than $747.6 million; and (7) our floating rate debt may not exceed 30% of our total assets.  Such financing vehicles also restrict the amount of capital we can invest in specific categories of assets, such as unimproved land, properties under construction, non-multifamily properties, debt or equity securities, and unconsolidated affiliates.

        In addition, we have a covenant under our unsecured credit facilities and secured construction loans that restricts our ability to make distributions in excess of stated amounts, which in turn restricts the Trust’s ability to declare and pay dividends.  In general, during any fiscal year, we may only distribute up to 100% of our consolidated income available for distribution.  This provision contains an exception to this limitation to allow us to make any distributions necessary to (1) allow the Trust to maintain its status as a REIT or (2) distribute 100% of the Trust’s taxable income.  We do not anticipate that this provision will adversely affect our ability to make distributions sufficient for the Trust to pay dividends under its current dividend policy.     

        Our credit facilities, construction loans and indentures are cross-defaulted and also contain cross default provisions with other of our material indebtedness.  We were in compliance with covenants and other restrictions included in our debt agreements as of March 31, 2004.  The indentures and the $300 million credit facility agreement containing the financial covenants discussed above, as well as the other material terms of our indebtedness, including definitions of the many terms used in and the calculations required by financial covenants, have been filed with the Securities and Exchange Commission as exhibits to our periodic or other reports.

        Our tax-exempt bonds contain customary covenants for this type of financing which require a specified percentage of the apartments in the bond-financed communities to be rented to individuals based upon income levels specified by U.S. government programs.

Off-Balance Sheet Arrangements

        We do not have any off-balance sheet arrangements that we believe have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources. 

        We account for our joint venture arrangements using the equity method.  Total indebtedness of our unconsolidated joint ventures is $153.6 million at March 31, 2004.  We have a $7.1 million maximum limited payment guaranty on two joint venture construction loans with committed fundings aggregating $21.8 million.  At March 31, 2004, there is $18.2 million of principal outstanding under these loans and the portion of this that is recourse to us is $5.5 million.  We do not believe that we will have any funding obligations under this limited payment guaranty.  The remaining $135.4 million of joint venture indebtedness is not recourse to us.

Inflation

        Substantially all of the leases at our apartment communities are for a term of one year or less.  In the event of significant inflation, this may enable us to realize increased rents upon renewal of existing leases or the beginning of new leases. Short-term leases generally minimize our risk from the adverse effects of inflation, although these leases generally permit residents to leave at the end of the lease term without penalty and therefore expose us to the effect of a decline in market rents. In a deflationary rent environment, as is currently being experienced in some of our markets, we are exposed to declining rents more quickly under these shorter term leases.

Certain Factors Affecting Future Operating Results

        This report contains forward-looking statements within the meaning of the federal securities laws.  The words "believe," "expect," "anticipate," "intend," "plan," "estimate," "assume" and other similar expressions which are predictions of or indicate future events and trends and which do not relate solely to historical matters identify forward-looking statements. These statements include, among other things, statements regarding our intent, belief or expectations with respect to the following: 

our ability to increase shareholder value by producing consistent high quality earnings to sustain dividends and annual total returns that exceed the multifamily sector average;

our ability to create a portfolio of high quality assets in strategically selected markets that are complementary through economic diversity and characterized by high job growth and resiliency to economic downturns;

the ability of our portfolio to maintain high levels of occupancy and rental rates relative to overall market conditions;

our ability to generate a return on invested capital that exceeds our long-term weighted average cost of capital while maintaining financial flexibility through a conservative, investment grade credit profile;

our expectation that the markets we have selected for investment will continue to experience job growth that exceeds national averages, and that our EPN locations will outperform local market results;

our ability to meet short-term liquidity requirements, including the payment of common and preferred distributions, through net cash provided by recurring real estate activities, and to meet long-term liquidity requirements through long-term secured and unsecured borrowings, the issuance of debt securities or equity securities, private equity investments in the form of joint ventures, or through the disposition of assets which, in our evaluation, may no longer meet our investment requirements; and

estimated development and construction costs for our development and lease-up communities, and anticipated construction commencement, completion, lease-up and stabilization dates for these communities.

        You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and may cause our actual results, performance or achievements to differ materially from anticipated future results, or the performance or achievements expressed or implied by such forward-looking statements. Factors that might cause such a difference include, but are not limited to:

national and local economic conditions generally, and the real estate market specifically, including changes in occupancy rates and market rents, a continued deceleration of economic conditions in our markets, and a failure of national and local economic conditions to rebound in a timely manner;

changes in job growth, household formation and population growth in our markets;

excess supply of and insufficient demand for apartment communities in our markets;

competition, which could limit our ability to secure attractive investment opportunities, lease apartment homes or increase or maintain rents;

our failure to sell apartment communities in a timely manner or on favorable terms;

uncertainties associated with our development and construction activities, including the failure to obtain zoning and other approvals, actual development and construction costs exceeding our budgeted estimates and construction material defects;

construction and lease-up may not be completed on schedule, resulting in increased debt service expense and construction costs and reduced rental revenues;

new debt or equity financing may not be available or may not be available on favorable terms, and existing indebtedness may mature in an unfavorable credit environment, preventing such indebtedness from being refinanced or, if financed, causing such refinancing to occur on terms that are not as favorable as the terms of existing indebtedness;

changes in interest rates;

cash flow from recurring real estate activities may be insufficient to meet our short-term liquidity requirements, including the payment of common and preferred distributions;

legislative, regulatory and accounting changes, including changes to laws governing the taxation of REITs or changes in GAAP; and

potential liability for uninsured losses and environmental contamination.

        While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Development and Lease-up Communities at March 31, 2004:

					Percent at March 31, 2004			Actual or Estimated Quarter of
Market	Community	No. of Apt. Homes	Total Budgeted Cost	Cost to Complete	Complete	Leased	Occupied	Constr- uction Start	Initial Occu- pancy	Constr- uction End	Stab- ilized Occupancy
			(millions)	(millions)							(a)
Wholly-Owned Development/Lease-up Communities:
Atlanta, GA	Gables Rock Springs III (b)	193	$       19	$       18	2%	--	--	1 Q 2004	2 Q 2005	4 Q 2005	4 Q 2005
Austin, TX	Gables Grandview (c)	458	56	8	85%	20%	15%	1 Q 2003	4 Q 2003	4 Q 2004	3 Q 2005
Houston, TX	Gables Augusta (c)	312	33	8	69%	15%	5%	1 Q 2003	1 Q 2004	4 Q 2004	2 Q 2005
South FL	Gables Floresta	311	39	8	74%	32%	23%	1 Q 2003	4 Q 2003	4 Q 2004	2 Q 2005
South FL	Gables Montecito (d)	450	56	48	4%	--	--	2 Q 2004	3 Q 2005	4 Q 2006	1 Q 2007
Tampa, FL	Gables Beach Park	166	23	1	95%	51%	24%	1 Q 2003	4 Q 2003	4 Q 2004	4 Q 2004
	Wholly-Owned Totals	1,890	$     226	$       91
Co-Investment Development/Lease-up Community (e):
Tampa, FL	Gables West Park Village III	76	$       10	$         5	41%	--	--	4 Q 2003	3 Q 2004	1 Q 2005	1 Q 2005
	Co-Investment Totals	76	$       10	$         5	(f)
Wholly-Owned Completed Community in Lease-up:
Atlanta, GA	Gables Rock Springs II (g)	233	$       25	$         -	100%	95%	91%	2 Q 2002	2 Q 2003	1 Q 2004	2 Q 2004
	Wholly-Owned Totals	233	$       25	$         -
Co-Investment Completed Community in Lease-up (e):
Tampa, FL	Gables West Park Village II	297	$       27	$         -	100%	91%	86%	2 Q 2002	1 Q 2003	4 Q 2003	2 Q 2004
	Co-Investment Totals	297	$       27	$         -
	(a) Stabilized occupancy is defined as the earlier to occur of (i) 93% occupancy or (ii) one year after completion of construction. (b) This community represents the reconstruction of 56 apartment homes previously owned and operated by us into 193 apartment homes. (c) These communities are secured by construction loans with an aggregate committed capacity of $43 million, of which $30 million was outstanding at March 31, 2004. (d) We are developing single-family lots adjacent to this community and have such lots under contract for sale once development is complete. Amounts pertaining to the single-family lots have been excluded from the disclosure above.  At March 31, 2004, $9 million in costs have been incurred pertaining to the single family lots, and the estimated cost to complete is $5 million. Such costs are included in construction in progress in the accompanying consolidated balance sheet. (e) These communities are owned by the GRAP JV Two, in which we hold an indirect 20% interest.  (f) Construction loan proceeds are expected to fund $4 million of the costs to complete at March 31, 2004.  The remaining costs will be funded by capital contributions to the venture from our venture partner and us in a funding ratio of 80% and 20%, respectively. (g) This community represents the reconstruction of 100 apartment homes previously owned and operated by us into 233 apartment homes.

        The projections and estimates contained in the table above are forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve risks and uncertainties and actual results may differ materially from those projected and estimated in such statements. Risks associated with our development, construction and lease-up activities, which could impact the forward-looking statements made, include: development opportunities may be abandoned; construction costs of a community may exceed original estimates, possibly making the community uneconomical; and construction and lease-up may not be completed on schedule, resulting in increased debt service and construction costs.

Stabilized Communities at March 31, 2004

		No. of Apt.	March 31, 2004			March 31, 2004         Market Rent Per
Community		Homes	Occupancy			Home	Square Foot
Atlanta, GA Briarcliff Gables Buckhead Gables Gables Cityscape Gables Metropolitan I (JV)  Gables Metropolitan II (JV) Gables Mill Gables Montclair Gables Northcliff Gables Paces Gables Rock Springs I Gables Vinings Gables Walk Gables Wood Arbor  Gables Wood Crossing Gables Wood Glen  Gables Wood Knoll Lakes at Indian Creek Roswell Gables I  Roswell Gables II Spalding Gables  Wildwood Gables Totals/Averages South FL Belmar Cotton Bay Gables Boca Place Gables Boynton Beach I Gables Boynton Beach II Gables Kings Colony Gables Mizner on the Green Gables Palma Vista Gables San Michele I Gables San Michele II  Gables San Remo Gables Town Colony Gables Town Place  Gables Wellington Hampton Lakes  Hampton Place Mahogany Bay  Vinings at Hampton Village   Totals/ Averages Houston,  TX Gables Austin Colony Gables Cityscape  Gables Citywalk/   Waterford Sq.  Gables Edgewater	104 162 182 435 274 438 183 82 80 132 315 310 140 268 380 312 603 384 284 252     546 5,866 36 444 180 252 296 480 246 189 249 343 180 172 312 222 300 368 328        168 4,765 237 252 317 292		94% 98% 99% 91% 89% 92% 92% 95% 93% 96% 93% 95% 95% 93% 92% 95% 86% 91% 91% 94%        96%     93% - 97% 96% 96% 93% 96% 96% 95% 96% 93% 91% 99% 96% 96% 95% 95% 96%    98%   95% 94% 94% 94% 97%	(a) (b)	$1,042 757 769 1,217 1,270 768 1,465 1,164 1,900 1,163 947 972 632 685 614 680 587 827 826 836     862 $ 878 $936 796  1,076 957 953 910 1,579 1,647 1,517 1,508 1,303 1,009 894 1,079 861 806 845     890 $1,059 $ 925 913 874 865		$0.84 1.00 0.93 1.09 1.14 0.83 0.96 0.75 1.15 1.00 0.89 0.82 0.69 0.71 0.62 0.68 0.64 0.76 0.70 0.84    0.76 $0.83 $0.61 0.81 1.10 0.80 0.79 1.00 1.25 1.14 1.08 1.09 0.96 1.18 1.07 0.93 0.82 0.84 0.84   0.74 $0.95 $0.95 1.07 1.08 0.98

Stabilized Communities at March 31, 2004 (continued)

		No. of  Apt.	March 31, 2004		March 31, 2004         Market Rent Per
Community		Homes	Occupancy		Home	Square Foot
Houston, TX (continued) Gables Lions Head  Gables Metropolitan Uptown Gables of First Colony Gables Piney Point Pin Oak Green Gables Pin Oak Park Gables Rivercrest I  Gables Rivercrest II Gables Windmill Landing   Totals/Averages Dallas, TX Gables at Pearl Street Gables CityPlace  Gables Ellis Street Gables Knoxbridge Gables Mirabella Gables Spring Park Gables State Thomas Townhomes Gables State Thomas Ravello Gables Turtle Creek Gables Valley Ranch Totals/Averages Austin, TX Gables at the Terrace Gables Barton Creek Gables Bluffstone Gables Central Park Gables Great Hills Gables Park Mesa Gables Town Lake Gables West Avenue    Totals/Averages Memphis, TN Arbors of Harbortown (JV) Gables Cordova  Gables Stonebridge (JV) Totals/Averages Nashville, TN Brentwood Gables (JV) Gables Hendersonville (JV) Gables Hickory Hollow I Gables Hickory Hollow II Totals/Averages	277 318 324 246 581 474 140 140     259 3,857 108 232 245 334 126 188 177 290 150    319 2,169 308 160 256 273 276 148 256    239 1,916 345 464    500 1,309 254 364 276    272 1,166		96% 92% 97% 96% 91% 92% 95% 96%   97%  94% 91% 98% 91% 98% 95% 93% 97% 93% 97%     95%    95% 94% 94% 93% 93% 93% 95%    94%   95%   94% 94% 87%   91%  90% 96% 93% 92%      90%  92%		$769 927 987 849 957 993 780 767     728 $ 894 $1,251 1,354 1,581 1,055 1,119 946 1,760 1,584 1,166      877 $1,260 $1,105 1,397 974 1,369 804 1,156 1,398   1,426 $1,189 $901 701    703 $755 $953 688 660    653 $731		$0.91 1.02 0.99 0.92 0.94 0.97 0.93 0.91    0.84 $0.97 $1.15 1.29 1.32 1.24 1.23 0.90 1.18 1.39 1.16    0.86 $1.18 $1.16 1.20 0.99 1.45 0.97 1.06 1.50   1.66 $1.25 $0.91 0.75   0.80 $0.81 $0.84 0.73 0.74   0.68 $0.75

Orlando, FL Gables Chatham Square Gables North Village The Commons at Little Lake Bryan Totals/Averages Tampa, FL Gables West Park Village I (JV) Totals/Averages Washington, D.C. Gables Dupont Circle Gables Woodley Park Totals/Averages	448 315    280 1,043 320 320    82      211     293	100% 93%    100%    98%   89%   89%     96%      ---  96%	(d)	- --- 1,122      --- $1,122 $1,187 $1,187 $2,683   2,222 $2,351	(c) (c)	--- 0.84      --- $0.84 $0.95 $0.95 $2.75   2.58 $2.63	(c) (c)
Grand Totals/Averages	22,704	94%		$  997		$0.97

 

(a) (b) (c) (d)

This community is not fully operational as of March 31, 2004; therefore, occupancy is based on apartment homes available for lease. This community was acquired by us in December 2003 for renovation and was 64% occupied at March 31, 2004.  This community is adjacent to a land parcel that Gables acquired in January 2004 for the future development of an estimated 261 apartment homes. This community is leased to a single user group pursuant to a triple net master lease.  Accordingly, scheduled rent data is not reflected as it is not comparable to the rest of our portfolio.  This community was in lease-up upon our acquisition in July 2003.  At March 31, 2004, the community was 89% occupied.

 

Portfolio Indebtedness Summary at March 31, 2004
Type of Indebtedness	Balance	Interest Rate (a)	Total    Rate (b)	Years to  Maturity
Fixed Rate: Unsecured fixed-rate notes Secured fixed-rate notes Unsecured tax-exempt fixed-rate loans Secured tax-exempt fixed-rate loans
	$ 498,668 117,280 48,365     10,510	6.59% 7.82% 4.75%    7.03%	6.59% 7.82% 4.75% 7.63%	2.64 4.73 0.25   20.83
Total fixed-rate indebtedness	$ 674,823	6.68%	6.69%	3.12
Variable Rate: Secured tax-exempt variable-rate loans Unsecured variable-rate credit facilities  (c) Secured variable-rate construction loans     Total variable-rate indebtedness	$ 170,955 141,777     36,597 $ 349,329	1.05% 1.54% 3.04%  1.46%	2.01% 1.54% 3.04% 1.93%	2.87 1.12       2.50     2.12
Total portfolio debt (d), (e)	$1,024,152	4.90%	5.06%	2.78

(a)  Interest Rate represents the weighted average interest rate incurred on our indebtedness, exclusive of deferred financing cost amortization
      and credit enhancement fees, as applicable.
(b)  Total Rate represents the Interest Rate (a) plus credit enhancement fees, as applicable.
(c)  Our credit facilities bear interest at various spreads over LIBOR.  For purposes of the years to maturity disclosure, all such indebtedness is
       presented using the May 2005 maturity date of our $300,000 unsecured credit facility. 
(d)  Interest associated with construction activities is capitalized as a cost of development and does not impact current earnings. The qualifying
      construction expenditures at March 31, 2004 for purposes of interest capitalization were $146,423.
(e)  Excludes (i) $16,350 of tax-exempt bonds related to a joint venture in which we own a 25% interest, (ii) $85,667 of indebtedness
      related to joint ventures in which we own a 20% interest, and (iii) $51,558 of  conventional indebtedness related to a joint venture in which
      we own an 8.26% interest.

SUPPLEMENTAL DISCUSSION - Funds From Operations

        Funds from operations (“FFO”) is used by industry analysts and investors as a supplemental operating performance measure of an equity REIT.  We calculate FFO in accordance with the definition that was adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”).  FFO, as defined by NAREIT, represents net income (loss) determined in accordance with GAAP, excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated operating real estate assets, plus specified non-cash items, such as real estate asset depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.

        Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time.  Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.  Thus, NAREIT created FFO as a supplemental measure of REIT operating performance that excludes historical cost depreciation, among other items, from GAAP net income.  The use of FFO, combined with the required primary GAAP presentations, has improved the understanding of operating results of REITs among the investing public and made comparisons of REIT operating results more meaningful.  We generally consider FFO to be a useful measure for reviewing our comparative operating and financial performance (although FFO should be reviewed in conjunction with net income which remains the primary measure of performance) because by excluding gains or losses related to sales of previously depreciated operating real estate assets and excluding real estate asset depreciation and amortization, FFO can help users compare the operating performance of a company’s real estate between periods or as compared to different companies.

        FFO presented herein is not necessarily comparable to the FFO of other REITs due to the fact that not all REITs use the NAREIT definition.  However, our FFO is comparable to the FFO of REITs that use the NAREIT definition.  FFO should not be considered an  alternative to net income as an indicator of our operating performance.  Additionally, FFO does not represent cash flows from operating, investing or financing activities as defined by GAAP.  Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” for a discussion of our cash needs and cash flows.  A reconciliation of FFO available to common unitholders from net income available to common unitholders (the most directly comparable GAAP measure to FFO available to common unitholders) is as follows:

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       Our capital structure includes the use of fixed-rate and variable rate indebtedness. As such, we are exposed to the impact of changes in interest rates. We periodically seek input from third-party consultants regarding market interest rate and credit risk in order to evaluate our interest rate exposure. In some situations, we may utilize derivative financial instruments in the form of rate caps, rate swaps or rate locks to hedge interest rate exposure by modifying the interest rate characteristics of related balance sheet instruments and prospective financing transactions. We do not utilize such instruments for trading or speculative purposes.  We did not have any derivative instruments in place at March 31, 2004 or December 31, 2003.

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

       Refer to our Annual Report on Form 10-K for the year ended December 31, 2003 for detailed disclosure about quantitative and qualitative disclosures about market risk. Quantitative and qualitative disclosures about market risk have not materially changed since December 31, 2003.


ITEM 4.  CONTROLS AND PROCEDURES

       We carried out an evaluation under the supervision and with the participation of senior management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness as of March 31, 2004 of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15 under the Securities Exchange Act 1934, as amended (the “Exchange Act”).  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. We continue to review and document our disclosure controls and procedures, including our internal controls and procedures for financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

       There was no change in internal control over financial reporting that occurred in the first quarter of 2004 that has materially affected or is reasonably likely to materially affect our internal controls over financial reporting.

Part II – Other Information

Item	1:					Legal Proceedings
						None
Item	2:					Changes in Securities
						As of March 31, 2004, we had 76 holders of common units (one general partner and 75 limited partners).  Each time the Trust issues shares of beneficial interest, it contributes the proceeds of such issuance to the Operating Partnership in return for a like number of units with rights and preferences analogous to the shares issued. During the period commencing on January  1, 2004 and ending on March 31, 2004, in connection with issuances of common shares by the Trust during that time period, the Operating Partnership issued an aggregate of 313,972 common units to the Trust. Such common units were issued in reliance on an exemption from registration under Section 4(2) of the Securities Act, and the rules and regulations promulgated thereunder, as these were transactions by an issuer not involving a public offering.  In light of the information obtained by us from the Trust in connection with these transactions, we believe we may rely on this exemption.
Item	3:					Defaults Upon Senior Securities
						None
Item	4:					Submission of Matters to a Vote of Security Holders
						None
Item	5:					Other Information
						None
Item	6:					Exhibits and Reports on Form 8-K
		(a)				Exhibits
		*	31.1			Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)
		*	31.2			Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)
		**	32.1			Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
						_____________
						*   Filed herewith
						** Furnished herewith
		(b)				Reports on Form 8-K
						(i)  A Form 8-K was furnished to the Securities and Exchange Commission on February 4, 2004 to disclose the Trust’s fourth quarter 2003 earnings press release and press release supplements dated February 3, 2004.

SIGNATURES

 

Pursuant to the requirements 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.