SUMMIT PROPERTIES INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001 Commission file number 1-12792

SUMMIT PROPERTIES INC.
(Exact name of registrant as specified in its charter)

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MARYLAND 56-1857807
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

309 EAST MOREHEAD STREET
SUITE 200
CHARLOTTE, NORTH CAROLINA 28202
(Address of principal executive offices) (Zip Code)

(704) 334-3000
(Registrant's telephone number, including area code)

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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
(Title of each class) (Name of each exchange on which registered)

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

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

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

The aggregate market value of the voting stock held by nonaffiliates of the
Registrant, as of March 4, 2002 was $581,005,639.

The number of shares of the Registrant's Common Stock, par value $.01 per
share, outstanding as of March 4, 2002 was 27,190,191.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Registrant's 2002 Annual Meeting of
Stockholders, to be filed with the Securities and Exchange Commission within 120
days after the end of the year covered by this Form 10-K, are incorporated by
reference herein as portions of Part III of this Form 10-K.

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TABLE OF CONTENTS

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PART I

This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Our actual results could differ materially
from those set forth in the forward-looking statements. Certain factors that
might cause such a difference are discussed in this report on Form 10-K,
including the section entitled "Forward-Looking Statements" on page 15. Unless
the context otherwise requires, all references to "we," "our" or "us" in this
report refer collectively to Summit Properties Inc., a Maryland corporation
("Summit"), and its subsidiaries, including Summit Properties Partnership, L.P.,
a Delaware limited partnership (the "Operating Partnership"), considered as a
single enterprise. Summit is the sole general partner of the Operating
Partnership.

ITEM 1. BUSINESS

OUR COMPANY

Summit is a real estate investment trust that focuses on the development,
acquisition, and management of luxury apartment communities. We have received a
number of national awards including the "Customer Service Award for Excellence"
from CEL & Associates, Inc. for an unprecedented fourth year in a row in 2001.
As of December 31, 2001, we owned or held an ownership interest in 59 completed
communities comprised of 18,260 apartment homes with an additional 1,368
apartment homes under construction in six new communities. We are a fully
integrated organization with multifamily development, construction, acquisition
and management expertise. As of December 31, 2001, we had approximately 535
employees.

We conduct our business principally through the Operating Partnership of which
Summit is the sole general partner and an 88.4% economic owner as of December
31, 2001. Our property management, certain construction, and other businesses
are conducted through our subsidiaries, Summit Management Company, a Maryland
corporation, and Summit Apartment Builders, Inc., a Florida corporation.
Throughout this report, we refer to Summit Management Company as the "Management
Company" and to Summit Apartment Builders, Inc. as the "Construction Company."

We operate throughout the Southeast, Midwest, and Mid-Atlantic states, as well
as in Texas, and have chosen to focus our current efforts in seven core markets
consisting of Atlanta, Austin, Charlotte, Dallas, Raleigh-Durham, South Florida
and Washington, D.C. In keeping with this strategy, we have established city
operating offices in five of these core markets. These city offices have direct
responsibility for development, construction, and management of the communities
in their geographic markets. We believe that this decentralized structure
provides us with superior local knowledge and experience in each market.

OPERATING PHILOSOPHY

We view customer service as one of our key values and seek to provide our
residents with experienced, well-trained and attentive management staffs.
Utilizing a hiring process known as "Success By Selection," we distill potential
candidates down to those who believe in superior customer service. Once hired,
every associate enters into a comprehensive training program called "Ask for
Action." This training program ensures that all associates have a clear
understanding of their job responsibilities, the high standards of performance
expected of them, and the importance of excellent customer service. We have also
developed several classes focusing on excellence in property management to
provide on-going training for our associates and to further enhance associate
productivity. We believe that this training regimen, along with the "Success by
Selection" hiring process, has provided a higher quality management staff,
evidenced by high resident satisfaction at our communities. As indicated above,
we are an unprecedented four-time recipient of the CEL & Associates, Inc.
"Customer Service Award for Excellence," which is based on survey results of
apartment residents throughout the country.

We have long stressed the importance of developing strong customer relationships
with our residents. Our commitment to resident satisfaction is evidenced by our
"Peak Services". Among the many Peak Services are: a 30 Day Happiness Guarantee
where residents can move from one of our communities without early lease

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termination charges if they are not satisfied with their home during the first
30 days; Same Day Maintenance Service and Emergency Maintenance available 24
hours a day; Business Services; Package Acceptance and Delivery; Loaner Living
Accessories where we provide convenience tools for our residents' use; No
Nonsense Transfer Policy where residents can easily move from one Summit
community to another without incurring many of the additional fees normally
associated with such a move; and a free current run Video Library.

We believe that this commitment to service excellence, in addition to the
upscale features of our communities and outstanding locations in our core
markets, has allowed us to charge rents to our residents that rank among the
market leaders in our industry.

BUSINESS AND GROWTH STRATEGIES

In addition to superior customer service, we have identified four other
strategies to create long term value for our stockholders: Disciplined Capital
Management; Strategic Market Selection; Decentralized, Fully Integrated
Operating Teams; and Sound Risk Management.

Disciplined Capital Management. We have determined that currently our most
efficient source of capital continues to be contained within our existing
portfolio of communities. By disposing of older communities in less desirable
locations, and redeploying that capital in new communities in our core markets,
we are able to create value in two ways. First, we have historically realized
higher returns, on average, from the newer communities where this "Recycled
Capital" has been utilized as compared to the older communities that have
provided this capital. Second, this Capital Recycling Program has reduced the
weighted average age of the communities in our portfolio to approximately six
years. This reduction in average age has resulted in lower maintenance costs and
has allowed us to better adapt our product to constantly changing market
demands. Although we anticipate continuing this strategy of reinvesting capital
obtained from dispositions into the development of new communities, there can be
no assurance that we will be able to complete our disposition strategy or that
assets identified for sale can be sold, or sold on satisfactory terms.

Strategic Market Selection. One of our strategies is to be a market-leading
operator of luxury apartment homes in a carefully selected group of core
markets. We believe employment growth is a critical economic factor which
affects apartment occupancy and rental rates in our markets. Based on a
historical comparison of employment growth in our seven core markets versus the
U.S. average (excluding our core markets), these markets have typically
generated higher job growth over a long period of time and recovered from
economic downturns more quickly. We believe that by operating in these core
markets we have a better opportunity to maximize the economic return from our
communities by optimizing the trade-off between increasing rental rates and
maintaining high occupancy levels. Consistent with this strategy, we are
typically among the rental rate leaders in our markets. Our affluent resident
profile and well-trained property management staff support this strategy.

We are continuing a consolidation process of exiting our markets that are
smaller or have less operating efficiency and reinvesting the sale proceeds into
new communities in our core markets. We believe this strategy will improve our
financial performance by improving economies of scale, concentrating market
knowledge, and increasing brand awareness.

Decentralized, Fully Integrated Operating Teams. We have integrated property
management, development, and construction on a local level through our "City
Team" concept. Each of the City Teams includes a developer employed by Summit
adept at visualizing market opportunities, construction personnel at the
Construction Company who specialize in building luxury apartment communities,
and management personnel at the Management Company experienced in the marketing,
leasing and maintenance of luxury apartment communities. Working within
well-understood corporate guidelines under the direction of senior management at
our headquarters, these teams operate as autonomous units. As a result, we
believe we will be able to select outstanding sites, build high-quality
communities both in terms of architecture and construction techniques, and
operate the communities to generate rents that rank among the market leaders. We
believe this integrated approach will create premium quality communities and
increased customer satisfaction.

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Sound Risk Management. We endeavor to practice sound risk management with
respect to our portfolio of communities. Potential developments proposed by the
various City Teams are vigorously reviewed by a panel of senior management at
our headquarters prior to the start of construction of a community. We believe
that this combination of locally generated development opportunities, together
with centralized review and assessment, produces a premium quality community
with manageable risk.

DEVELOPMENT PROGRAM

Through our City Teams we maintain an active development program. Focusing on
development allows us to build premium quality communities that generate rents
that rank among market leaders. It also provides returns which generally exceed
those achieved on acquisitions.

Although we have historically focused on suburban apartment communities, we have
developed, or are currently developing, several communities in downtown areas in
our Atlanta, Charlotte, South Florida and Washington, D.C. core markets. These
urban-oriented communities will augment our portfolio of primarily suburban
communities.

In 2001, we completed development of four communities, adding 1,655 apartment
homes to our portfolio. These four communities represent a total investment of
approximately $139.6 million. The communities completed in 2001 are Summit
Crest, Summit Overlook, Summit Peachtree City and Summit Deerfield. We sold
Summit Deerfield (498 apartment homes) during the year ended December 31, 2001.

We utilize the Construction Company, in addition to third-party general
contractors, to build our new communities. Of the 1,368 apartment homes under
development as of December 31, 2001, 92.3% are being built by the Construction
Company.

The following provides summary information regarding the six communities under
construction as of December 31, 2001 (dollars in thousands):

(1) Consists primarily of land held for development and other predevelopment
costs.

As with any development project, there are uncertainties and risks associated
with the development of the communities described above. While we have prepared
development budgets and have estimated completion and stabilization target dates
based on what we believe are reasonable assumptions in light of current
conditions, there can be no assurance that actual costs will not exceed current
budgets or that we will not experience construction delays due to the
unavailability of materials, weather conditions or other events. Similarly,
market conditions at the time these communities become available for leasing
will affect rental rates and the period of time necessary to achieve
stabilization, and could result in achieving stabilization later than currently
anticipated. See "Management's Discussions and Analysis of Financial Condition
and Results of Operations -- Development Activity" beginning on page 32 for a
discussion of uncertainties and risks associated with our development activity.

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ACQUISITION AND DISPOSITION PROGRAM

While we have emphasized development of new apartment communities as one of our
strategies for growth, we also have the expertise to capitalize on expansion
opportunities through the strategic acquisition of communities that meet our
investment criteria. We have acquired more than 9,000 apartment homes since our
initial public offering in 1994. Recent acquisitions have generally been
concentrated in our core markets. We believe our city teams give us an advantage
in identifying and underwriting attractive acquisition opportunities. In 2001,
elevated purchase prices for acquisitions in the open market would have
generally resulted in economic performance for those assets that was
unattractive when compared to the potential economic performance of our
development program. As a result, we made no open market acquisitions in 2001.
However, this pricing dynamic also created an opportunity for us to increase our
disposition activity, thereby enhancing our Capital Recycling Program, which is
dependent on the execution of attractively priced dispositions.

During 2001, we disposed of nine communities and a parcel of land for an
aggregate sales price of $167.6 million. For the most part, these communities
were located outside our core markets and, as such, did not fit into our
strategic market selection strategy. The proceeds from these dispositions
provided the basis for our Capital Recycling Program.

COMPANY HISTORY

We were formed in 1993 to continue and expand the multifamily development,
construction, acquisition, operation, management and leasing businesses of the
predecessor entities through which we historically conducted operations prior to
our initial public offering.

The predecessor entities were founded by one of our Co-Chairmen of the Board,
William B. McGuire, Jr., in 1972. In 1981, William F. Paulsen joined the
predecessor entity as Chief Executive Officer and shepherded the growth of its
multifamily development and management activities. We have elected to be treated
as a real estate investment trust ("REIT") for federal income tax purposes. We
completed our initial public offering of common stock on February 15, 1994.

We are a Maryland corporation and a self-administered and self-managed REIT. Our
common stock is listed on the New York Stock Exchange (NYSE) under the symbol
"SMT." Our executive offices are located at 309 East Morehead Street, Suite 200,
Charlotte, North Carolina 28202. Our telephone number is (704) 334-3000 and our
facsimile number is (704) 333-8340. We also maintain offices in Atlanta,
Georgia; Austin, Texas; Bethesda, Maryland; Ft. Lauderdale, Florida; and
Raleigh, North Carolina.

2001 SIGNIFICANT EVENTS

On March 12, 2000, our Board of Directors authorized a new common stock
repurchase program pursuant to which we were authorized to purchase up to an
aggregate of $25 million of outstanding common stock, par value $.01 per share.
During 2001, our Board of Directors increased the size of the common stock
repurchase program to $56.0 million. During 2001, we repurchased 8,800 shares of
our common stock under this program for an aggregate purchase price, including
commissions, of $197,000, or an average price per share of $22.39.

On April 20, 2000, we commenced a new program for the sale by the Operating
Partnership of up to $250 million aggregate principal amount of medium-term
notes due nine months or more from the date of issuance. During 2001, the
Operating Partnership issued notes with an aggregate principal amount of $60.0
million in connection with the new program. We had medium-term notes with an
aggregate principal amount of $112.0 million outstanding in connection with this
medium-term note program as of December 31, 2001.

On March 28, 2001, we announced a succession plan under which William F.
Paulsen, Co-Chairman of the Board of Directors, began a transition from his
position as Chief Executive Officer. Effective July 1, 2001, Steven R. LeBlanc,
former President and Chief Operating Officer, succeeded Mr. Paulsen as Chief
Executive Officer. At the same time, Michael L. Schwarz, previously Executive
Vice President and Chief Financial Officer, assumed Mr. LeBlanc's
responsibilities for property operations and is now Executive Vice President
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and Chief Operating Officer. On December 20, 2001, we announced that Gregg
Adzema, former Senior Vice President of Finance and Accounting was promoted to
Executive Vice President and Chief Financial Officer. We also announced on
December 20, 2001 that Doug Brout, previously Executive Vice President of
Acquisitions and Dispositions, was promoted to the newly created position of
Executive Vice President of Investments.

THE OPERATING PARTNERSHIP

The Operating Partnership was formed on January 14, 1994, and is the entity
through which principally all of our business is conducted. We control the
Operating Partnership as the sole general partner and as the holder of 88.4% of
the common units of limited partnership interest in the Operating Partnership as
of December 31, 2001. As of December 31, 2001, the Operating Partnership had
outstanding 3.4 million Series B and 2.2 million Series C Cumulative Perpetual
Preferred Units. As the sole general partner of the Operating Partnership, we
have the exclusive power to manage and conduct the business of the Operating
Partnership, subject to certain voting rights of holders of preferred units of
limited partnership interest. Subject to the rights and preferences of the
outstanding preferred units, our general and limited partnership interests in
the Operating Partnership as of December 31, 2001, entitled us to share in 88.4%
of the cash distributions from, and in the profits and losses of, the Operating
Partnership.

Each common unit may be redeemed by the holder for cash equal to the fair market
value of a share of our common stock or, at our option, one share of our common
stock, subject to adjustment. We presently determine on a case-by-case basis
whether we will elect to issue shares of common stock in connection with a
redemption of common units rather than paying cash. With each redemption of
common units for common stock, our percentage ownership interest in the
Operating Partnership will increase. Similarly, when we acquire a share of
common stock under our common stock repurchase program or otherwise, we
simultaneously dispose of one common unit of the Operating Partnership. In
addition, whenever we issue shares of common stock for cash, we will contribute
any resulting net proceeds to the Operating Partnership and the Operating
Partnership will issue an equivalent number of common units to us.

The Operating Partnership cannot be terminated, except in connection with a sale
of all or substantially all of our assets, for a period of 99 years from the
date of formation without a vote of the limited partners of the Operating
Partnership.

COMPETITION

Within each market, our communities compete directly with other rental
apartments, condominiums and single-family homes that are available for rent or
sale. These housing alternatives could adversely affect our ability to lease
apartment homes and increase or maintain our rents. In addition, various
entities, including insurance companies, pension and investment funds,
partnerships, investment companies and other multifamily REITs, compete with us
for the acquisition of existing communities and the development of new
communities, some of which may have greater resources than us. We compete
against these firms and other housing alternatives by stressing customer
service, market presence and experience.

ENVIRONMENTAL MATTERS

Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required, in many instances regardless of knowledge or responsibility, to
investigate and remediate the effects of hazardous or toxic substances or
petroleum product releases at that property. The owner or operator of real
estate may be held liable to a governmental entity or to third parties for
property damage and for investigation and remediation costs incurred by those
parties in connection with the contamination, which may be substantial. The
presence of these substances, or the failure to properly remediate the
contamination, may adversely affect the owner's ability to borrow against, sell
or rent that property. In addition, some environmental laws create a lien on the
contaminated site in favor of the government for damages and costs it incurs in
connection with the contamination. In connection with the ownership, operation,
management and development of our communities and other real properties, we may
be potentially liable for these damages and costs.

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Certain federal, state and local laws, ordinances and regulations govern the
removal, encapsulation and disturbance of asbestos-containing materials, or
ACMs, when these materials are in poor condition or in the event of
construction, remodeling, renovation or demolition of a building. These laws,
ordinances and regulations may impose liability for release of ACMs and may
provide for third parties to seek recovery from owners or operators of real
properties for personal injury associated with ACMs. In connection with the
ownership, operation, management and development of our communities and other
real properties, we may be potentially liable for these costs.

Finally, when excessive moisture accumulates in buildings or on building
materials, mold growth will often occur, particularly if the moisture problem
remains undiscovered or is not addressed. Some molds are known to produce potent
toxins or irritants. Concern about indoor exposure to mold has been increasing
as exposure to mold may cause a variety of health effects and symptoms,
including severe allergic or other reactions. As a result, the presence of mold
at one of our communities could require us to undertake a costly remediation
program to contain or remove the mold from the affected community. Such a
remediation program could necessitate the temporary relocation of some or all of
the community's residents or the complete rehabilitation of the community.

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

ITEM 2. PROPERTIES

OUR COMMUNITIES

As of December 31, 2001, we owned, and operated through the Operating
Partnership, 54 completed communities with 16,739 apartment homes. Forty-two of
the communities were completed after January 1, 1990 and, as of December 31,
2001, the weighted average age of our completed communities was approximately
six years. We have an additional 1,368 apartment homes under construction, which
have not yet begun lease-up. As of December 31, 2001, we also held an ownership
interest in five completed communities with 1,521 apartment homes through joint
ventures. The following is a summary of the 54 completed communities by market
(the table below does not include joint venture communities):

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All of our communities target middle to upper income apartment renters as
customers and have amenities, apartment home sizes and mixes consistent with the
desires of this resident population.

The following table highlights information regarding these 54 completed
communities:

(1) Average physical occupancy is defined as the number of apartment homes
occupied divided by the total number of apartment homes contained in the
communities, expressed as a percentage. Average physical occupancy has been
calculated using the average occupancy that existed on Sunday during each
week of the period.

(2) Represents the average monthly net rental revenue per occupied apartment
home.

(3) Communities that reached stabilization (93% physical occupancy) at least
two years prior to the beginning of the current year.

(4) Collateral for fixed rate mortgage of $137.3 million.

(5) Summit Foxcroft is held by a partnership in which we are a 75% managing
general partner.

(6) Collateral for a fixed rate mortgage of $8.2 million.

(7) Collateral for letters of credit in an aggregate amount of $23.0 million
which serve as collateral for $22.2 million in tax exempt bonds.

(8) Communities that were stabilized in 2001 but did not stabilize at least two
years prior to the beginning of the current year.

(9) Summit Russett was built in two phases which were completed in separate
years. As a result, phase I was a stabilized development community and
phase II was a community in lease-up as of December 31, 2001. Summit
Russett I and Summit Russett II are treated as one community in the summary
of completed communities by market table on page 8.

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(10) A community which we have acquired is not considered fully stabilized until
owned for one year or more as of the beginning of the current year.

(11) Communities that were in lease-up during 2001. As with any community in
lease-up, there are uncertainties and risks. While we have estimated
stabilization target dates and rental rates based on what we believe are
reasonable assumptions in light of current conditions, there can be no
assurance that actual rental rates will not be less than current budgets or
that we will not experience delays in reaching stabilization of these
communities.

(12) The apartment homes at Summit Grandview stabilized during the fourth
quarter of 2001. The information in the table represents data for the
apartment homes only. The 75,203 square feet of commercial space at Summit
Grandview was 69.9% occupied and 76.3% leased as of December 31, 2001.

Information with respect to total debt secured by 24 of our communities having
an aggregate net book value of $423.9 million as of December 31, 2001, is as
follows (dollars in thousands):

The aggregate maturities for secured debt as of December 31, 2001 are (in
thousands):

2002........................................................ $ 6,179
2003........................................................ 6,584
2004........................................................ 7,014
2005........................................................ 41,983
2006........................................................ 40,586
Thereafter.................................................. 213,214
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Total....................................................... $315,560
========

(1) Interest rate as of December 31, 2001.

(2) Annual debt service for variable rate loans represents 2001 costs and
includes letter of credit fees and other bond related costs.

COMMUNITY MANAGEMENT

Our property management staff operates each of our communities. The management
team for each community includes supervision by a regional vice-president and
regional property manager, as well as on-site management and maintenance
personnel and an off-site support staff. On-site community management teams
perform leasing and rent collection functions and coordinate resident services.
All personnel are extensively trained and are encouraged to continue their
education through both internally-designed and outside courses.

ITEM 3. LEGAL PROCEEDINGS

We are not, nor are any of our communities presently subject to any material
litigation nor, to our knowledge, is any litigation threatened against us or any
of the communities, other than routine actions for negligence or other claims
and administrative proceedings arising in the ordinary course of business, some
of which are expected to be covered by liability insurance and all of which
collectively are not expected to have a material adverse effect on our business,
financial condition or results of operations.

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

No matters were submitted to a vote of our security holders during the fourth
quarter of 2001.

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PART II

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

Our common stock began trading on the NYSE on February 8, 1994 under the symbol
"SMT." The following table sets forth the quarterly high and low sales prices
per share reported on the NYSE during 2001 and 2000:

On March 4, 2002, the last reported sale price of our common stock on the NYSE
was $22.25. On March 4, 2002, there were 1,368 holders of record of 27,190,191
shares of our common stock.

We declared a dividend of $0.4625 per share of common stock for each of the four
quarters in 2001, which was paid on May 15, 2001 for the first quarter, August
15, 2001 for the second quarter, November 15, 2001 for the third quarter and
February 15, 2002 for the fourth quarter.

We declared a dividend of $0.4375 per share of common stock for each of the four
quarters in 2000, which was paid on May 15, 2000 for the first quarter, August
15, 2000 for the second quarter, November 15, 2000 for the third quarter and
February 15, 2001 for the fourth quarter.

We intend to continue to make regular quarterly dividends to holders of shares
of our common stock. Future dividends will be declared at the discretion of our
Board of Directors and will depend on actual cash flow, our financial condition,
our capital requirements, the annual distribution requirements under the REIT
provisions of the Internal Revenue Code, and such other factors as our Board of
Directors may deem relevant. Our Board of Directors may modify our dividend
policy from time to time.

On November 16, 2001, we issued to a limited partner of the Operating
Partnership 4,772 shares of our common stock in exchange for the corresponding
number of common units. These shares were issued in reliance on an exemption
from registration under Section 4(2) of the Securities Act of 1933, as amended.
In light of the information we obtained in connection with this transaction,
management believes that we may rely on such exemption.

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ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected consolidated financial and other
information on a consolidated historical basis as of and for each of the years
in the five-year period ended December 31, 2001. This table should be read in
conjunction with our consolidated financial statements and related notes which
accompany this report, as well as the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section of this report (amounts
in thousands except per share and property information).

SELECTED FINANCIAL DATA
SUMMIT PROPERTIES INC. (HISTORICAL)

(1) We consider funds from operations ("FFO") to be an appropriate measure of
performance of an equity REIT. We compute FFO in accordance with standards
established by the National Association of Real Estate Investment Trusts
("NAREIT"). FFO, as defined by NAREIT, represents net income (loss)
excluding gains or losses from sales of property, plus depreciation of real
estate assets, and after adjustments for unconsolidated partnerships and
joint ventures, all determined on a consistent basis in accordance with
accounting principles generally accepted in the United States of America
("GAAP"). Our methodology for calculating FFO may differ from the
methodology for calculating FFO utilized by other real estate companies, and
accordingly, may not be comparable to other real estate companies.

We believe that FFO is helpful to investors as a measure of the performance
of an equity REIT because, along with cash flows from operating activities,
financing activities and investing activities, it provides investors with an
understanding of our ability to incur and service debt and to make capital
expenditures. FFO should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of our financial
performance or to cash flows from operating activities (determined in
accordance with GAAP) as a measure of our liquidity, nor is it indicative of
funds available to fund our cash needs, including our ability to make
dividend or distribution payments.

FFO is calculated as follows (dollars in thousands):

(2) Represents the total number of completed communities and apartment homes in
those completed communities owned at the end of the period (excludes joint
venture communities).

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(3) Represents the total number of apartment homes in communities completed
during the period and owned at the end of the period (excludes joint venture
communities).

(4) The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of pre-tax income from
continuing operations (including gains on sale of real estate) plus fixed
charges (excluding capitalized interest). Fixed charges consist of interest
expense (whether expensed or capitalized), dividends to preferred
unitholders in the Operating Partnership, the estimated interest component
of rent expense and the amortization of debt issuance costs. To date, we
have not issued any preferred stock; therefore, the ratios of earnings to
combined fixed charges and preferred stock dividend requirements are the
same as the ratios of earnings to fixed charges presented.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Unless the context otherwise requires, all references to "we," "our" or "us" in
this report refer collectively to Summit Properties Inc., a Maryland corporation
("Summit"), and its subsidiaries, including Summit Properties Partnership, L.P.,
a Delaware limited partnership (the "Operating Partnership"), considered as a
single enterprise. Summit is the sole general partner of the Operating
Partnership.

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. You can identify forward-looking statements by
the use of the words "believe," "expect," "anticipate," "intend," "estimate,"
"assume" and other similar expressions which predict or indicate future events
and trends and which do not relate to historical matters. In addition,
information concerning the following are forward-looking statements:

- - the future operating performance of stabilized communities, including
estimated growth rates;

- - the proposed development, acquisition or disposition of communities;

- - anticipated construction commencement and completion dates and lease-up dates;
and

- - estimated development costs.

You should not rely on forward-looking statements because they involve known and
unknown risks, uncertainties and other factors, some of which are beyond our
control. These risks, uncertainties and other factors may cause our actual
results, performance or achievements to be materially different from the
anticipated future results, performance or achievements expressed or implied by
the forward-looking statements. Factors which could have a material adverse
effect on our operations and future prospects include, but are not limited to:

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

- - uncertainties associated with our development activities, including the
failure to obtain zoning and other approvals, actual costs exceeding our
budgets and increases in construction costs;

- - the failure of acquisitions to yield expected results;

- - the failure to sell communities marketed for sale, including properties
currently under contract for sale which are subject to customary closing
conditions, or to sell these communities in a timely manner or on favorable
terms;

- - construction delays due to the unavailability of materials, weather conditions
or other delays;

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

15

- - supply and demand for apartment communities in our current and proposed market
areas, especially our core markets described below;

- - availability and cost of financing and access to cost-effective capital;

- - the inability to refinance existing indebtedness or to refinance existing
indebtedness on favorable terms;

- - changes in interest rates;

- - legislative and regulatory changes, including changes to laws governing the
taxation of real estate investment trusts ("REITs");

- - changes in accounting principles generally accepted in the United States of
America ("GAAP"), or policies and guidelines applicable to REITs; and

- - those factors discussed below and in the sections entitled "Operating
Performance of our Fully Stabilized Communities" beginning on page 19 of this
report and "Factors Affecting the Performance of Our Development Communities"
beginning on page 32 of this report.

You should consider these risks and uncertainties in evaluating forward-looking
statements and you should not place undue reliance on forward-looking
statements. These forward-looking statements represent our estimates and
assumptions only as of the date of this report. We do not undertake to update
these forward-looking statements. You should read the following discussion in
conjunction with our consolidated financial statements and related notes which
accompany this report.

Summit is a real estate operating company that has elected REIT status and
focuses on the operation, development and acquisition of "Class A" luxury
apartment communities located throughout the Southeast, Midwest and Mid-Atlantic
United States, as well as in Texas. We focus our efforts in seven core markets,
with particular emphasis on Washington, D.C., South Florida and Atlanta,
Georgia. Our other core markets are Dallas and Austin, Texas and Raleigh-Durham
and Charlotte, North Carolina. Because we focus on these seven core markets,
changes in local economic and market conditions in these markets may
significantly affect our current operations and future prospects.

We have experienced weakening fundamentals, primarily a decline in demand for
apartment homes, in all of our markets during the year and particularly during
the last half of 2001. This weakness has been due to the downturn in the
national economy, as well as declining economic conditions in our core markets,
especially Atlanta, Austin, Charlotte and Raleigh-Durham. Local demand for
apartment homes has declined due to lower job growth, a primary driver of
apartment demand. Although the current political and economic environment is
unpredictable, we expect these trends to continue.

HISTORICAL RESULTS OF OPERATIONS

Our net income is generated primarily from operations of our apartment
communities. The changes in operating results from period to period reflect
changes in existing community performance and changes in the number of apartment
homes due to development, acquisition and disposition of communities. Where
appropriate, comparisons are made on a "fully stabilized communities,"
"acquisition communities," "stabilized development communities," "communities in
lease-up" and "disposition communities" basis in order to adjust for changes in
the number of apartment homes. We consider a community to be "stabilized" when
it has attained a physical occupancy level of at least 93%. A community that we
have acquired is deemed "fully stabilized" when we have owned it for one year or
more as of the beginning of the year. We consider a community that we have
developed to be "fully stabilized" when stabilized for the two prior years as of
the beginning of the current year. We consider a community to be a "stabilized
development" community when stabilized as of the beginning of the current year
but not the entire two prior years. A community in lease-up is one that has
commenced rental operations but was not stabilized as of the beginning of the
current year. A community's average physical occupancy is defined as the number
of apartment homes occupied divided by the total number of apartment homes
contained in the community, expressed as a percentage. Average physical
occupancy has been calculated using the average of the occupancy that existed on
Sunday during each week of the period. Average monthly rental revenue presented
represents the average monthly net rental
16

revenue per occupied apartment home. Our methodology for calculating average
physical occupancy and average monthly rental revenue may differ from the
methodology used by other apartment companies, and accordingly, may not be
comparable to other apartment companies.

Results of Operations for the Years Ended December 31, 2001, 2000 and 1999

Income before minority interest of common unitholders in the Operating
Partnership, gain on sale of real estate assets, impairment loss on investments
in technology companies and dividends to preferred unitholders in the Operating
Partnership decreased from $48.3 million in 2000 to $44.1 million in 2001
primarily due to an increase of $900,000 in general and administrative costs
related to severance costs for senior staff reductions and an increase of
$900,000 in our reserve for pursuit costs for projects we are no longer
pursuing; an increase in depreciation expense of $2.5 million due to the
initiation of depreciation on recently developed communities, as well as a full
year of depreciation on communities acquired during the second half of 2000,
offset by the absence of a full year of depreciation on communities sold during
2000 and 2001; and an increase in interest expense of $1.2 million as a result
of increased average indebtedness outstanding, all offset by an increase in
property operating income from 2000 to 2001 of $1.4 million. This same measure
increased from $42.3 million in 1999 to $48.3 million in 2000 primarily due to
increased property operating income at stabilized communities, as well as the
addition of property operating income from communities in lease-up, partially
offset by a decrease in property operating income due to the disposition of
communities.

OPERATING PERFORMANCE OF OUR PORTFOLIO OF COMMUNITIES

We evaluate community performance based on growth of property operating income,
which is defined as rental and other property revenues less property operating
and maintenance expense. We believe that property operating income is a
meaningful measure for an investor's analysis of community performance as it
represents the most consistent, comparable operating performance among our
communities. Depreciation is a fixed cost not controllable by our property
management staff and not all communities are encumbered by financing
instruments. Therefore, all property operating and maintenance expense amounts
in this Management's Discussion and Analysis section are presented before
depreciation, interest and amortization. Property operating income does not
include any allocation of corporate overhead. You should not consider property
operating income as an alternative to net income (determined in accordance with
GAAP) as an indication of our financial performance or as an alternative to cash
flows from operating activities (determined in accordance with GAAP), as a
measure of our liquidity. Our calculation of property operating income may
differ from the methodology and definition used by other apartment companies,
and accordingly, may not be comparable to similarly entitled measures used by
other apartment companies.

17

The operating performance of our communities is summarized below (dollars in
thousands):

A summary of our apartment homes (excluding joint ventures) for the years ended
December 31, 2001, 2000 and 1999 is as follows:

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OPERATING PERFORMANCE OF OUR FULLY STABILIZED COMMUNITIES

The operating performance of our fully stabilized communities is summarized
below (dollars in thousands except average monthly rental revenue):

Rental and other revenue increased from 2000 to 2001 due to higher average
rental rates and increased revenue from sources other than rental income, such
as water sub-meter income, trash fees and redecorating fees. The 1.2% property
revenue growth rate decreased when compared to the prior year growth rate as a
result of lower occupancy levels due to the slowing economy and a decline in job
growth. In 2002, we expect the rate of revenue growth to be below the rate seen
in 2001 due to continued weak job growth and national economic expectations. We
believe our expectation relative to property revenue growth is based on
reasonable assumptions as to future economic conditions and the quantity of
competitive apartment communities in the markets in which we do business.
However, there can be no assurance that actual results will not differ from this
assumption, especially due to the unpredictable nature of the current economy.

Property operating and maintenance expense increased by 4.6% from 2000 to 2001.
Personnel costs increased from 2000 to 2001 primarily due to a one-time policy
change which decreased discounts offered to employees who rent apartment homes
at our communities resulting in commensurate increases in those employees'
salaries. The decrease in advertising costs from 2000 to 2001 is primarily the
result of a reduction in media advertising and locator fees. Utility costs
increased from 2000 to 2001 as a result of rising gas prices, as well as an
increase in vacant utility costs driven by lower occupancy. Real estate tax
costs increased as a result of higher assessments for our communities in 2001
over 2000, primarily in Texas. Other operating expenses increased from 2000 to
2001 as a result of the cost of internet connectivity projects at our
communities during 2001. As a percentage of total property revenues, property
operating and maintenance expense increased to 33.7% in 2001 from 32.6% in 2000.
In 2002, we expect the rate of operating and maintenance expense growth to be
below the rate seen in 2001 due to reduced pressure on salaries and third party
service costs, as well as an

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internal focus on expense control. However, there can be no assurance that
actual results will not differ from this expectation, especially due to the
unpredictable nature of the current economy.

Rental and other revenue increased from 1999 to 2000 due to higher rental rates,
higher occupancy rates and increased revenue from sources other than rental
income such as telephone, cable and water sub-meter income. The 4.0% property
revenue growth rate from 1999 to 2000 was stable when compared to the 1998 to
1999 rate of growth of 4.1%.

Property operating and maintenance expenses increased by 1.1% from 1999 to 2000.
For those communities considered fully stabilized for the 2000 to 1999
comparison, as a percentage of total property revenues, property operating and
maintenance expense decreased to 32.5% in 2000 from 33.4% in 1999.

OPERATING PERFORMANCE OF OUR ACQUISITION COMMUNITIES

Acquisition communities for the years ended December 31, 2001 and 2000 consist
of Summit Sweetwater and Summit Shiloh (representing a total of 490 apartment
homes), both located in Atlanta, Georgia, in each of which we acquired our joint
venture partner's 51% interest on August 1, 2000. There were no community
acquisitions during 2001 or 1999. The operating performance of our acquisition
communities is summarized below (dollars in thousands except average monthly
rental revenue):

The unleveraged yield on investment for the communities acquired during 2000,
defined as property operating income divided by total acquisition cost, was 9.4%
for the year ended December 31, 2001.

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OPERATING PERFORMANCE OF OUR STABILIZED DEVELOPMENT COMMUNITIES

We had 15 communities with a total of 4,668 apartment homes (Summit Ballantyne,
Summit Largo, Summit Sedgebrook, Summit Governor's Village, Summit Lake, Summit
Westwood, Summit New Albany, Summit Fair Lakes, Summit Hunter's Creek, Summit
Russett I, Summit Doral, Summit Ashburn Farm, Summit Deer Creek, Summit Reunion
Park I and Summit Fairview) which were stabilized during the entire year ended
December 31, 2001, but were stabilized subsequent to January 1, 1999. The
comparison of the years ended December 31, 2000 and 1999 represents 14
communities with a total of 4,885 apartment homes (Summit Ballantyne, Summit
Norcroft II, Summit Sedgebrook, Summit Governor's Village, Summit Lake, Summit
Westwood, Summit New Albany I, Summit Fair Lakes, Summit Stonefield, Summit
Russett I, Summit Doral, Summit Plantation II, Summit Las Palmas and Summit
Camino Real).

The operating performance of our stabilized development communities is
summarized below (dollars in thousands except average monthly rental revenue):

The unleveraged yield on those communities considered stabilized development
communities in 2001, defined as property operating income divided by total
development cost, was 10.6% for the year ended December 31, 2001.

OPERATING PERFORMANCE OF OUR COMMUNITIES IN LEASE-UP

We had six communities in lease-up during the year ended December 31, 2001. The
following is a summary of five of the six communities in lease-up during 2001
(dollars in thousands):

(1) Summit Russett II stabilized during 2001.

(2) The apartment homes at Summit Grandview stabilized during the fourth quarter
of 2001. Stabilization, occupancy and percent leased information in the
table above represents data for the apartment homes only. The 75,203 square
feet of commercial space at Summit Grandview was 69.9% occupied and 76.3%
leased as of December 31, 2001.

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The actual stabilization dates for our communities in lease-up may be later than
anticipated. The rental rates that we may charge also may be less than expected,
and we may need to offer rent concessions to the residents.

In addition to the communities listed in the table above, Summit Lenox, located
in Atlanta, Georgia, is an existing community with 431 apartment homes which
underwent major renovations during 2000 and 2001. The renovations included
upgrades of the interior of the apartment homes (new cabinets, fixtures and
other interior upgrades), and upgrades to the parking lots and landscaping, as
well as new balconies and exterior painting of buildings. The renovations
required certain apartment homes to be unavailable for rental over the course of
the projects. The operations of Summit Lenox are included in lease-up
communities results due to the renovation work. The renovation work at Summit
Lenox was complete as of December 31, 2001. Summit Lenox was 89.6% occupied at
that date.

We had 14 communities with 3,915 apartment homes in lease-up during the year
ended December 31, 2000 (Summit New Albany II, Summit Largo, Summit Hunter's
Creek, Summit Deer Creek, Summit Ashburn Farm, Reunion Park by Summit I, Summit
Russett II, Summit Grandview, Summit Deerfield, Summit Overlook, Summit Crest,
Summit Peachtree City, Summit Lenox and Summit Fairview).

The operating performance of our lease-up communities is summarized below
(dollars in thousands):

OPERATING PERFORMANCE OF OUR DISPOSITION COMMUNITIES

Disposition communities consist of the former Summit Palm Lake, Summit Arbors,
Summit Radbourne, Summit Lofts, Summit Stony Point, Summit Gateway, Summit
Deerfield, Summit Waterford and Summit Walk, all of which were sold during the
year ended December 31, 2001. The 2000 disposition communities consist of the
former Summit Creekside, Summit Eastchester, Summit Sherwood, Summit River
Crossing, Summit Blue Ash, Summit Park and Summit Village, all of which were
sold during the year ended December 31, 2000. The 1999 disposition communities
consist of the former Summit Hampton, Summit Oak, Summit Beacon Ridge, Summit
Heron's Run, Summit McIntosh, Summit Perico and Summit East Ridge, all of which
were sold during the year ended December 31, 1999.

The operating performance of the disposition communities is summarized below
(dollars in thousands):

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OPERATING PERFORMANCE OF SUMMIT MANAGEMENT COMPANY

The Operating Partnership owns 1% of the voting stock and 99% of the non-voting
stock of Summit Management Company (the "Management Company"). The remaining 99%
of voting stock and 1% of non-voting stock are held by one of the Co-Chairmen of
our Board of Directors. As a result of this stock ownership, the Operating
Partnership has a 99% economic interest and the Co-Chairman has a 1% economic
interest in the Management Company. Because of our ability to exercise
significant influence, the Management Company is accounted for on the equity
method of accounting. The operating performance of the Management Company and
its wholly owned subsidiary, Summit Apartment Builders, Inc. ("the Construction
Company"), is summarized below (dollars in thousands):

The increase in revenue from 2000 to 2001 is primarily due to an increase in
fees earned from managing our lease-up communities. Operating expenses remained
stable in 2001 as compared to 2000, decreasing by only $221,000. In addition,
interest expense decreased from 2000 to 2001 due to the repayment of an
intercompany loan during 2000.

The increase in revenue from 1999 to 2000 was primarily the result of an
increase in the management fee charged to the Operating Partnership's
communities from 2.50% in 1999 to 2.75% in 2000 and higher revenues from
increased construction activity of the Construction Company. The increase in the
management fee is the first increase since our initial public offering in 1994.
The increase in interest expense resulted from an intercompany loan made to the
Management Company by the Operating Partnership in late 1999 for the purpose of
purchasing a parcel of land in Raleigh, North Carolina. The Management Company
sold this parcel of land on February 29, 2000 resulting in a gain on sale of
$238,000. The increase in operating expenses for the year was a result of
increased construction activities and increased personnel at the Management
Company in order to better support our growth objectives, including improving
the operating performance of our stabilized communities.

Third party apartment homes under management were 1,004 in 2001, 1,723 in 2000
and 2,435 in 1999. Property management fees from third parties were $913,000 in
2001, $1.1 million in 2000 and $1.3 million in 1999. Property management fees
from third parties as a percentage of total property management revenues were
12.4% in 2001, 16.1% in 2000 and 20.3% in 1999.

All of the construction revenues are from contracts with the Operating
Partnership.

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OTHER INCOME AND EXPENSES

Interest income decreased by $1.3 million to $2.3 million in 2001 compared to
2000, primarily due to a $1.0 million decrease in interest earned on proceeds
from property sales placed in escrow in accordance with like-kind exchange
income tax regulations. Interest income increased by $562,000 to $3.6 million in
2000 compared to 1999, primarily due to interest earned on notes receivable of
$809,000 as well as an increase of $429,000 in interest earned on employee stock
loans over 1999, offset by a decrease in interest earned on proceeds from
property sales placed in escrow in accordance with like-kind exchange income tax
regulations of $739,000.

Other income decreased by $86,000 to $532,000 in 2001 compared to 2000,
primarily as a result of a decrease in dividends earned on an equity investment.
Other income increased by $329,000 to $618,000 in 2000 compared to 1999,
primarily as a result of a credit enhancement fee earned in connection with a
property that is being developed by a third party, as well as dividends earned
on an equity investment.

Depreciation expense increased by $2.5 million to $39.1 million in 2001 compared
to 2000, primarily due to depreciation expense related to the initiation of
depreciation on recently developed communities as well as a full year of
depreciation on communities acquired during the second half of 2000, offset by
the absence of a full year of depreciation on communities sold during 2000 and
2001. Depreciation expense increased by $2.2 million to $36.6 million in 2000
compared to 1999, primarily due to depreciation expense related to the 2000
acquisitions and increased depreciation of communities in lease-up.

Interest expense increased by $1.2 million in 2001 compared to 2000 primarily
due to an increase of $45.9 million in our average indebtedness outstanding,
offset by a decrease in the effective interest rate of 0.34% (7.04% to 6.70%) in
2001 as compared to 2000. Interest expense increased by $1.4 million in 2000
compared to 1999 primarily due to an increase of $56.4 million in our average
indebtedness outstanding and an increase in the effective interest rate of 0.39%
(6.65% to 7.04%) in 2000 as compared to 1999.

General and administrative expenses before non-recurring charges of $1.8 million
were $4.8 million for the year ended December 31, 2001. Approximately $900,000
of the non-recurring charges is related to an increase in our reserve for the
costs of abandoned pursuit projects and approximately $900,000 is related to
severance costs associated with senior staff reductions in our organization.
General and administrative expenses before non-recurring charges have remained
relatively stable as a percentage of total revenues. As a percentage of total
revenues, general and administrative expenses before non-recurring charges were
2.5% in 2001, 2.5% in 2000 and 2.2% in 1999.

The $34.4 million gain on sale of assets in 2001 resulted from the disposition
of one parcel of land and nine communities. The nine communities were (referred
to below using former community names):

The communities disposed of in 2001 were part of our plan to dispose of assets
that no longer meet our growth objectives or to make desired changes in the
number of apartment homes in each of our markets. We believe that by
concentrating our efforts and capital in a limited number of large markets we
will gain a competitive advantage as we improve operational efficiencies, build
a more significant brand name and improve market

24

knowledge. Also, by disposing of assets that no longer meet our long-term growth
objectives, capital is provided to fund the development of new assets with
higher growth potential.

The $38.5 million gain on sale of assets in 2000 resulted from the disposition
of seven communities. The $17.4 million gain on sale of assets in 1999 also
resulted from the disposition of seven communities.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Net cash provided by operating activities decreased from $71.0 million for the
year ended December 31, 2000 to $66.5 million for the year ended December 31,
2001, primarily due to a $4.2 million decrease in income before gain on sale of
real estate assets, impairment loss on technology investments and minority
interest of common unitholders in the Operating Partnership.

Net cash provided by investing activities was $6.2 million for the year ended
December 31, 2001. Net cash used in investing activities was $118.2 million for
the year ended December 31, 2000. The increase in cash provided by investing
activities is due to a decrease of $33.4 million in cash expended for
acquisition communities from 2000, a decrease in cash used for the construction
of real estate assets and land acquisitions of $56.4 million and an increase of
$42.8 million in proceeds from the sale of communities, offset by an increase in
cash used to invest in real estate joint ventures of $4.3 million and a decrease
in net cash received for notes receivable of $2.9 million. In addition to cash
proceeds received in connection with 2001 dispositions, proceeds from the sale
of communities represent funds expended from like-kind exchange escrows. In the
event that the proceeds from these property sales are not fully invested in
qualified like-kind property during the required time period, a special
distribution may be made or company level tax may be incurred.

Net cash used in financing activities was $74.1 million for the year ended
December 31, 2001. Net cash provided by financing activities was $46.2 million
for the year ended December 31, 2000. The increase in cash used in financing
activities during 2001 is primarily due to a decrease in net borrowings from
2000 to 2001 of $111.0 million on our unsecured credit facility and a decrease
in proceeds received from the issuance of mortgage debt of $48.3 million, all
offset by a decrease in repayments of unsecured notes and mortgages in the
aggregate amount of $18.1 million, an increase in net borrowings on unsecured
medium-term notes of $3.0 million, a decrease in cash used for the repurchase of
common stock and the acquisition of minority interest in the aggregate amount of
$9.6 million, a decrease in cash used for employee notes receivable of $8.6
million and a decrease in cash used for deferred financing charges of $1.3
million.

The ratio of earnings to fixed charges was 1.83 to 1 for the year ended December
31, 2001 compared to 1.99 to 1 for the year ended December 31, 2000.

We have elected to be taxed as a REIT under Sections 856 and 860 of the Internal
Revenue Code of 1986, as amended. REITs are subject to a number of
organizational and operational requirements, including a requirement that 90% of
ordinary taxable income be distributed. As a REIT, we generally will not be
subject to federal income tax on net income to the extent taxable income is
distributed.

Our outstanding indebtedness as of December 31, 2001 totaled $717.6 million.
This amount includes $289.5 million in fixed rate conventional mortgages, $22.2
million of variable rate tax exempt bonds, $308.0 million of unsecured notes,
$3.9 million of tax exempt fixed rate loans, and $94.0 million under our
unsecured credit facility.

We expect to meet our short-term liquidity requirements (i.e., liquidity
requirements arising within 12 months) including recurring capital expenditures
relating to maintaining our existing properties, generally through our working
capital, net cash provided by operating activities and borrowings under our
unsecured credit facility. We believe that our cash provided by operating
activities will be adequate to meet operating requirements and payments of
dividends and distributions during the next twelve months.

We expect to meet our long-term liquidity requirements (i.e., liquidity
requirements arising after 12 months), such as scheduled mortgage debt
maturities, property acquisitions, financing of construction and development
activities and other non-recurring capital improvements, through the issuance of
unsecured notes and equity

25

securities, from undistributed funds from operations (see page 33), from
proceeds received from the disposition of certain properties, and, in connection
with the acquisition of land or improved property, through the issuance of
common units by the Operating Partnership.

Credit Facility

We have a syndicated unsecured line of credit in the amount of $225.0 million.
The credit facility provides funds for new development, acquisitions and general
working capital purposes. Loans under the credit facility bear interest at LIBOR
plus 100 basis points. The spread component of the aggregate interest rate will
change in the event of an upgrade or downgrade of our unsecured credit rating of
BBB- by Standard & Poor's Rating Services and Baa3 by Moody's Investors Service.
The credit facility is repayable monthly on an interest only basis with
principal due at maturity. The credit facility's initial three-year term was
scheduled to expire on September 26, 2003. On July 6, 2001, we closed on a
one-year extension option under this credit facility. The new maturity date is
September 26, 2004, and all other terms and covenants of the credit facility
remain unchanged. The credit facility had an average interest rate of 4.99% in
2001, 7.20% in 2000 and 6.06% in 1999 and an average balance outstanding of
$113.5 million in 2001, $119.8 million in 2000 and $99.2 million in 1999. In
addition, the maximum outstanding principal amount was $146.5 million in 2001,
$174.0 million in 2000 and $176.0 million in 1999. As of December 31, 2001, the
outstanding balance of the credit facility was $94.0 million, leaving $131.0
million of remaining availability on the $225.0 million commitment.

The credit facility also provides a bid sub-facility equal to a maximum of fifty
percent of the total facility ($112.5 million). This sub-facility provides us
with the choice to place borrowings in fixed LIBOR contract periods of thirty,
sixty, ninety and one hundred eighty days. We may have up to seven fixed LIBOR
contracts outstanding at any one time. Upon proper notifications, all lenders
participating in the credit facility may, but are not obligated to, participate
in a competitive bid auction for these fixed LIBOR contracts.

The credit facility requires that we comply with certain affirmative, negative
and financial covenants. We were in compliance with these covenants as of
December 31, 2001.

Medium-Term Notes

On April 20, 2000, we commenced a new program for the sale by the Operating
Partnership of up to $250.0 million aggregate principal amount of medium-term
notes ("MTNs"), due nine months or more from the date of issuance. During the
year ended December 31, 2001, the Operating Partnership issued notes with an
aggregate principal amount of $60.0 million in connection with the new MTN
program, including (a) $25.0 million of notes which are due on May 9, 2006 and
bear interest at 7.04% per year and (b) $35.0 million of notes which are due on
May 9, 2011 and bear interest at 7.703% per year. We had notes with an aggregate
principal amount of $112.0 million outstanding in connection with the new MTN
program as of December 31, 2001.

On May 29, 1998, we established a program for the sale by the Operating
Partnership of up to $95.0 million aggregate principal amount of MTNs due nine
months or more from the date of issuance. We had notes with an aggregate
principal amount of $25.0 million outstanding in connection with this MTN
program as of December 31, 2001. As a result of the commencement of the $250.0
million MTN program, we cannot issue any additional notes under the $95.0
million MTN program.

Preferred Units

As of December 31, 2001, the Operating Partnership had outstanding 3.4 million
preferred units of limited partnership interest designated as 8.95% Series B
Cumulative Redeemable Perpetual Preferred Units. These preferred units are
redeemable by the Operating Partnership on or after April 29, 2004 for cash at a
redemption price equal to the holder's capital account or, at our option, shares
of our 8.95% Series B Cumulative Redeemable Perpetual Preferred Stock, or a
combination of cash and shares of our 8.95% Series B Cumulative Redeemable
Perpetual Preferred Stock. Holders of the Series B preferred units have the
right to exchange these preferred units for shares of our Series B preferred
stock on a one-for-one basis, subject to adjustment: (a) on or after April 29,
2009, (b) if full quarterly distributions are not made for six
26

quarters, or (c) upon the occurrence of specified events related to the
treatment of the Operating Partnership or the preferred units for federal income
tax purposes. Distributions on the Series B preferred units are cumulative from
the date of original issuance and are payable quarterly at the rate of 8.95% per
year of the $25.00 original capital contribution. We made distributions to the
holders of the Series B preferred units in the aggregate amount of $7.6 million
during each of the years ended December 31, 2001 and 2000.

As of December 31, 2001, the Operating Partnership had outstanding 2.2 million
preferred units of limited partnership interest designated as 8.75% Series C
Cumulative Redeemable Perpetual Preferred Units. The preferred units are
redeemable by the Operating Partnership on or after September 3, 2004 for cash
at a redemption price equal to the holder's capital account. Holders of the
Series C preferred units have the right to exchange these preferred units for
shares of our Series C preferred stock on a one-for-one basis, subject to
adjustment: (a) on or after September 3, 2009, (b) if full quarterly
distributions are not made for six quarters, (c) upon the occurrence of
specified events related to the treatment of the Operating Partnership or the
preferred units for federal income tax purposes, or (d) if the holdings in the
Operating Partnership of the Series C unitholder exceed 18% of the total profits
of or capital interest in the Operating Partnership for a taxable year.
Distributions on the Series C preferred units are cumulative from the date of
original issuance and are payable quarterly at the rate of 8.75% per year of the
$25.00 original capital contribution. We made distributions to the holder of the
Series C preferred units in the aggregate amount of $4.8 million during each of
the years ended December 31, 2001 and 2000.

Common Stock Repurchase Program

On March 12, 2000, our Board of Directors authorized a common stock repurchase
program pursuant to which we were authorized to purchase up to an aggregate of
$25.0 million of currently issued and outstanding shares of our common stock.
During 2001, our Board of Directors increased the size of this common stock
repurchase program to $56.0 million. All repurchases have been, and will be,
made on the open market at prevailing prices or in privately negotiated
transactions. This authority may be exercised from time to time and in such
amounts as market conditions warrant. We repurchased 8,800 shares of our common
stock for an aggregate purchase price, including commissions, of $197,000, or an
average price of $22.39 per share during the year ended December 31, 2001 under
the common stock repurchase program. During the year ended December 31, 2000, we
repurchased 279,400 shares of our common stock for an aggregate purchase price,
including commissions, of $5.5 million, or an average price of $19.80 per share
under this program.

During 2000, we completed a common stock repurchase program pursuant to which we
were authorized to purchase up to an aggregate of $50.0 million of our common
stock. During 2000, we repurchased 131,900 shares of our common stock for an
aggregate purchase price, including commissions, of $2.5 million, or an average
price of $18.88 per share under this program. The total number of shares of our
common stock repurchased was 2.5 million shares for an aggregate purchase price,
including commissions, of $50.0 million, or an average price of $19.63 per share
under this program.

Employee Loan Program

Our Board of Directors believes that ownership of our common stock by our
executive officers and certain other qualified employees will align the
interests of these officers and employees with the interests of our
stockholders. To this end, our Board of Directors approved, and we instituted, a
loan program under which we may lend amounts to certain of our executive
officers and other qualified employees to (a) finance the purchase of our common
stock on the open market at then-current market prices, (b) finance the payment
of the exercise price of one or more stock options to purchase shares of our
common stock, or (c) finance the annual tax liability or other expenses of an
executive officer related to the vesting of shares of common stock which
constitute a portion of a restricted stock award granted to the executive
officer. We have amended the terms of the loan program from time to time since
its inception in 1997. The relevant officer or employee has executed a
promissory note and security agreement related to each loan extended. Each
outstanding note bears interest at a rate established on the date of the note,
is full recourse to the officers and employees and is collateralized by the
shares of our common stock which are the subject of the loans.

27

Impairment Loss

Management considers events and circumstances that may indicate impairment of an
investment, including operating performance and cash flow projections.
Management determined during the quarter ended June 30, 2001 that our
investments in Broadband Now, Inc. and Yieldstar Technology LLC were impaired
and that such impairment was other than temporary. As a result, we recorded an
impairment loss in the aggregate amount of $1.2 million, which represents our
entire investment in these two technology companies. We have no other technology
company investments.

Schedule of Debt

The following table sets forth information regarding our debt financing as of
December 31, 2001 and 2000 (dollars in thousands):

(1) All of the secured debt can be prepaid at any time. Prepayment of all
secured debt is generally subject to penalty or premium.

(2) Mortgage loan secured by the following communities:

Summit Ballantyne Summit Las Palmas Summit Plantation
Summit Del Ray Summit Meadow Summit St. Clair
Summit Glen Summit Norcroft Summit Windsor
Summit Highland Summit on the River

(3) Mortgage Loan secured by the following communities:

Summit Simsbury
Summit Touchstone

(4) The tax exempt bonds bear interest at various rates set by a remarketing
agent at the demand note index plus 0.50%, set weekly, or the lowest
percentage of prime which allows the resale at a price of par. The bonds are
enhanced by letters of credit from a financial institution, each of which
credit enhancement will terminate prior to the maturity dates of the related
bonds. In the event these credit enhancements are not renewed or replaced
upon termination, the related loan obligations will be accelerated.

The one-month LIBOR rate as of December 31, 2001 was 1.87%.

Our outstanding indebtedness (excluding our unsecured credit facility which
matures in 2004) had an average maturity of 5.6 years as of December 31, 2001.
The aggregate annual maturities of all outstanding debt as of December 31, 2001
(excluding our unsecured credit facility which had an outstanding balance of
$94.0 million as of December 31, 2001) are as follows (in thousands):

2002................................................ $ 47,179
2003................................................ 53,584
2004................................................ 57,014
2005................................................ 66,983
2006................................................ 65,586
Thereafter.......................................... 333,214
--------
Total.......................................... $623,560
========

Of the significant maturities in the above table, $16.0 million relates to the
unsecured bank notes that mature in 2002; $25.0 million relates to unsecured
notes due in 2002; $30.0 million relates to unsecured notes due in 2003; $17.0
million relates to unsecured medium-term notes due in 2003; $50.0 million
relates to unsecured notes due in 2004; $25.0 million relates to unsecured
medium-term notes due in 2005; $35.4 million relates to fixed-rate mortgage
notes due in 2005; $25.0 million relates to unsecured medium-term notes due in
2006; and $34.8 million relates to fixed-rate mortgage notes due in 2006.

29

Market Risk

Our capital structure includes the use of variable rate and fixed rate debt and,
therefore, we are exposed to the impact of changes in interest rates. We
generally 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 of the maturing debt. While we have historically had limited involvement
with derivative financial instruments, we may utilize such instruments in
certain situations to hedge interest rate exposure by modifying the interest
rate characteristics of related balance sheet instruments and prospective
financing transactions. We generally do not utilize derivative financial
instruments for trading or speculative purposes.

As of December 31, 2001, we had one interest rate swap with a notional amount of
$30.0 million, relating to $30.0 million of 6.625% fixed rate notes issued under
our MTN program. Under the interest rate swap agreement, through the maturity
date of December 15, 2003, (a) we have agreed to pay to the counterparty the
interest on a $30.0 million notional amount at a floating interest rate of
three-month LIBOR plus 11 basis points, and (b) the counterparty has agreed to
pay to us the interest on the same notional amount at the fixed rate. The
floating rate as of December 31, 2001 was 1.98%. The fair value of the interest
rate swap was $1.8 million as of December 31, 2001. The swap has been designated
as a fair value hedge of the underlying fixed rate debt obligation and has been
recorded as a reduction of the related debt instrument. We assume no
ineffectiveness as the interest rate swap meets the short-cut method conditions
required under FAS 133 for fair value hedges of debt instruments. Accordingly,
no gains or losses were recorded in income relative to our underlying debt and
interest rate swap.

The following table provides information about our interest rate swap and other
financial instruments that are sensitive to changes in interest rates and should
be read in conjunction with the accompanying consolidated financial statements
and related notes. For debt, the table presents principal cash flows and related
weighted average interest rates in effect as of December 31, 2001 by expected
maturity dates. The weighted average interest rates presented in this table for
the tax exempt variable rate debt are inclusive of credit enhancement fees. For
the interest rate swap, the table presents the notional amount and related
weighted average pay rate by year of maturity (dollars in thousands):

EXPECTED YEAR OF MATURITY

We estimate that the fair value of the debt approximates carrying value based
upon our effective borrowing rates for issuance of debt with similar terms and
remaining maturities.

30

ACQUISITIONS AND DISPOSITIONS

During the year ended December 31, 2001, we sold one parcel of land and nine
communities comprising 2,189 apartment homes for an aggregate sales price of
$167.6 million, resulting in an aggregate net gain on sale of $34.4 million. Net
proceeds from three of the nine communities, equaling $31.7 million, were placed
in escrow with a qualified intermediary in accordance with like-kind exchange
income tax rules and regulations. The parcel of land was located in Richmond,
Virginia and the nine communities sold were the former Summit Palm Lake, Summit
Arbors, Summit Radbourne, Summit Lofts, Summit Gateway, Summit Stony Point,
Summit Deerfield, Summit Waterford and Summit Walk.

During the year ended December 31, 2001, a joint venture in which we hold a 25%
interest, sold a community, the former Summit Station, for $11.9 million. This
sale resulted in the recognition by the joint venture of a gain of $1.1 million,
of which we recorded $271,000 based on our equity interest.

We acquired no communities during the year ended December 31, 2001.

During the year ended December 31, 2000, we sold seven communities comprising
1,676 apartment homes for an aggregate sales price of $103.9 million, resulting
in a gain on sale of $38.5 million. Net proceeds from six of the seven
communities, equaling $78.1 million, were placed in escrow with a qualified
intermediary in accordance with like-kind exchange income tax rules and
regulations. The communities sold were the former Summit Creekside, Summit
Eastchester, Summit Sherwood, Summit Blue Ash, Summit Park, Summit River
Crossing and Summit Village.

On August 1, 2000, we exercised our option to purchase our joint venture
partner's interest in each of two communities, Summit Sweetwater and Summit
Shiloh, both located in Atlanta, Georgia. The acquisition of these two
communities added 490 apartment homes to our portfolio at an aggregate purchase
price of $36.0 million. The acquisitions were financed with the issuance of
96,455 common units valued, in the aggregate, at $2.2 million and the payment of
$33.8 million in cash.

During the year ended December 31, 1999, we sold seven communities comprising
1,518 apartment homes for an aggregate sales price of $76.0 million, resulting
in a gain on sale of $17.4 million. Net proceeds from the seven communities,
equaling $54.4 million, were placed in escrow with a qualified intermediary in
accordance with like-kind exchange income tax rules and regulations. The
communities sold were the former Summit Hampton, Summit Oak, Summit Beacon
Ridge, Summit Perico, Summit McIntosh, Summit Heron's Run and Summit East Ridge.

We acquired no communities during the year ended December 31, 1999.

COMMUNITIES BEING MARKETED FOR SALE

As of December 31, 2001, we had one apartment community, Summit Breckenridge,
located in Richmond, Virginia, under contract for sale. Summit Breckenridge is
expected to be sold during the second quarter of 2002. The sale of Summit
Breckenridge is subject to customary closing conditions. The assets of Summit
Breckenridge were recorded at the lower of cost or fair value less costs to
sell, or $8.0 million, as of December 31, 2001. The property operating income
from Summit Breckenridge represented less than 1.5% of our property operating
income for the year ended December 31, 2001. Proceeds from the sale of Summit
Breckenridge are expected to be used to fund future development.

31

DEVELOPMENT ACTIVITY

Development communities in process as of December 31, 2001 are summarized as
follows (dollars in thousands):

(1) Consists primarily of land held for development and other pre-development
costs.

The estimated cost to complete the development communities listed above of $95.4
million, as well as our commitment to purchase Summit Brickell for an estimated
price ranging from $50.5 million to $60.0 million (see the section entitled
"Commitments and Contingencies" below), represent substantially all of our
material commitments for capital expenditures as of December 31, 2001.

Factors Affecting the Performance of Our Development Communities

We are optimistic about the operating prospects of the communities under
construction. As with any development community, there are uncertainties and
risks associated with the development of the communities described above. While
we have prepared development budgets and have estimated completion and
stabilization target dates based on what we believe are reasonable assumptions
in light of current conditions, there can be no assurance that actual costs will
not exceed current budgets or that we will not experience construction delays
due to the unavailability of materials, weather conditions or other events. We
also may be unable to obtain, or experience delays in obtaining, all necessary
zoning, land-use, building, occupancy, and other required governmental permits
and authorizations.

Other development risks include the possibility of incurring additional costs or
liabilities resulting from increased costs for materials or labor or other
unexpected costs or defects in construction material, and the possibility that
financing may not be available on favorable terms, or at all, to pursue or
complete development activities. Similarly, market conditions at the time these
communities become available for leasing will affect the rental rates that may
be charged and the period of time necessary to achieve stabilization, which
could make one or more of the development communities unprofitable or result in
achieving stabilization later than currently anticipated.

In addition, we are conducting feasibility and other pre-development work for
five communities. We could abandon the development of any one or more of these
potential communities in the event that we determine that market conditions do
not support development, financing is not available on favorable terms or at
all, or we are unable to obtain necessary permits and authorizations, or due to
other circumstances which may prevent development. During 2001, we wrote off
pursuit costs associated with several potential communities and increased our
reserve for pursuit projects by $900,000 in anticipation of abandoning three
additional projects. There can be no assurance that, if we do pursue one or more
potential communities, that we will be able to complete construction within the
currently estimated development budgets or that construction can be started at
the time currently anticipated.

32

AMERICANS WITH DISABILITIES ACT AND SIMILAR LAWS

Under the Americans with Disabilities Act, all places of public accommodation
are required to meet federal requirements related to access and use by disabled
persons. We believe that our communities are substantially in compliance with
present requirements of the Americans with Disabilities Act as they apply to
multifamily dwellings. A number of additional federal, state and local laws
exist or may be imposed which also may require modifications to our communities
or regulate certain further renovations with respect to access by disabled
persons. The ultimate amount of the cost of compliance with the Americans with
Disabilities Act or related legislation is not currently ascertainable, and
while these costs are not expected to have a material effect on us, they could
be substantial. Limitations or restrictions on the completion of renovations may
limit application of our investment strategy in particular instances or reduce
overall returns on our investments.

INFLATION

Substantially all of the leases at our communities are for a term of one year or
less. The short-term nature of these leases generally serves to reduce the risk
of the adverse effect of inflation.

COMMITMENTS AND CONTINGENCIES

On January 19, 2000, the Operating Partnership entered into a real estate
purchase agreement with a third-party real estate developer. Under the terms of
the agreement, the Operating Partnership has agreed to purchase upon completion
a "Class A" mixed-use community, which will be called Summit Brickell, and is
located in Miami, Florida. The Operating Partnership will purchase Summit
Brickell upon the earlier of one year after construction completion or the
achievement of 80% occupancy. The Operating Partnership may extend this closing
obligation for six months after the initial purchase period. The Operating
Partnership expects to close on the purchase of Summit Brickell during late 2002
or in 2003. The final purchase price will be determined based on actual
construction costs plus a bonus to the developer based on the capitalized income
of the property at the time of purchase. The purchase price is expected to range
from $50.5 million to $60.0 million. The purchase of Summit Brickell by the
Operating Partnership is subject to customary closing conditions. The Operating
Partnership has issued a letter of credit in the amount of $13.0 million, which
will serve as a credit enhancement to the developer's construction loan. In the
event that any amount under the letter of credit is drawn upon, the Operating
Partnership shall be treated as having issued a loan to the developer in the
amount of such draw. Any such loan will accrue interest at a rate of eighteen
percent (18%) per annum.

We have employment agreements with two of our former executive officers, both of
whom resigned from such executive positions, but who remain as employees and
have agreed to provide various services to us from time to time over the next
ten years. Each employment agreement requires that we pay to the former officers
a base salary aggregating up to $2.1 million over the period from July 1, 2001
to December 31, 2011. Either party can terminate the employment agreements,
effective 20 business days after written notice is given. The full base salary
amount due shall be payable through 2011 whether or not the agreements are
terminated earlier in accordance with their terms.

FUNDS FROM OPERATIONS

We consider Funds From Operations ("FFO") to be an appropriate measure of
performance of an equity REIT. We compute FFO in accordance with standards
established by the National Association of Real Estate Investment Trusts
("NAREIT"). FFO, as defined by NAREIT, represents net income (loss) excluding
gains or losses from sales of property, plus depreciation of real estate assets,
and after adjustments for unconsolidated partnerships and joint ventures, all
determined on a consistent basis in accordance with GAAP. Funds Available for
Distribution ("FAD") is defined as FFO less capital expenditures funded by
operations (recurring capital expenditures). Our methodology for calculating FFO
and FAD may differ from the methodology for calculating FFO and FAD utilized by
other real estate companies, and accordingly, may not be comparable to other
real estate companies. FFO and FAD do not represent amounts available for
management's discretionary use because of needed capital expenditures or
expansion, debt service obligations,

33

property acquisitions, development, dividends and distributions or other
commitments and uncertainties. FFO and FAD should not be considered as
alternatives to net income (determined in accordance with GAAP) as an indication
of our financial performance or to cash flows from operating activities
(determined in accordance with GAAP) as a measure of our liquidity, nor are they
indicative of funds available to fund our cash needs, including our ability to
pay dividends or make distributions. We believe FFO and FAD are helpful to
investors as measures of our performance because, along with cash flows from
operating activities, financing activities and investing activities, they
provide investors with an understanding of our ability to incur and service debt
and make capital expenditures.

Funds from Operations and Funds Available for Distribution are calculated as
follows (dollars in thousands):

(1) Recurring capital expenditures are expected to be funded from operations and
consist primarily of exterior painting, new appliances, vinyl, blinds, tile,
wallpaper and carpet. In contrast, non-recurring capital expenditures, such
as major improvements, new garages and access gates, are expected to be
funded by financing activities and are, therefore, not included in the
calculation of FAD.

(2) Non-recurring capital expenditures for the years ended December 31, 2001 and
2000 primarily consisted of major renovations and upgrades of apartment
homes in the amounts of $749,000 in 2001 and $643,000 in 2000; $157,000 in
2001 and $74,000 in 2000 for access gates and security fences; $1.7 million
in 2001 and $1.7 million in 2000 in other revenue enhancement expenditures;
and $1.3 million in alternative landscaping mulch in 2001.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Market Risk" beginning on page 30 of this report.

34

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements and supplementary data are contained on the pages indicated
on the Index to Financial Statements on page 45 of this report.

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

Not applicable.

35

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

Incorporated herein by reference to our definitive proxy statement to be filed
with the Securities and Exchange Commission within 120 days after the end of the
year covered by this Form 10-K with respect to our Annual Meeting of
Stockholders to be held on May 14, 2002.

ITEM 11. EXECUTIVE COMPENSATION

Incorporated herein by reference to our definitive proxy statement to be filed
with the Securities and Exchange Commission within 120 days after the end of the
year covered by this Form 10-K with respect to our Annual Meeting of
Stockholders to be held on May 14, 2002.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Incorporated herein by reference to our definitive proxy statement to be filed
with the Securities and Exchange Commission within 120 days after the end of the
year covered by this Form 10-K with respect to our Annual Meeting of
Stockholders to be held on May 14, 2002.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Incorporated herein by reference to our definitive proxy statement to be filed
with the Securities and Exchange Commission within 120 days after the end of the
year covered by this Form 10-K with respect to our Annual Meeting of
Stockholders to be held on May 14, 2002.

36

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Financial Statements and Financial Statement Schedule

The consolidated financial statements are listed in the Index to Financial
Statements on page 45 of this Report.

(b) Reports on Form 8-K

We filed no reports on Form 8-K during the fourth quarter of 2001.

(c) Exhibits

As noted below, certain of the exhibits required by Item 601 of Regulation S-K
have been filed with previous reports by the Company and are incorporated by
reference herein.

43

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Summit Properties Inc. has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in Charlotte, North
Carolina on March 21, 2002.

SUMMIT PROPERTIES INC.

/s/ STEVEN R. LEBLANC
--------------------------------------
Steven R. LeBlanc
President and Chief Executive
Officer

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

44

INDEX TO FINANCIAL STATEMENTS

The following financial statements required to be included in Item 14(a)(1) are
listed below:

SUMMIT PROPERTIES INC.

45

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Summit Properties Inc.
Charlotte, North Carolina

We have audited the accompanying consolidated balance sheets of Summit
Properties Inc. (the "Company") as of December 31, 2001 and 2000, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2001. Our
audit for the year ended December 31, 2001 also included the financial statement
schedule listed in the Index to Financial Statements at Item 14. These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2001
and 2000, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

DELOITTE & TOUCHE LLP

Charlotte, North Carolina
January 23, 2002

46

SUMMIT PROPERTIES INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

See notes to consolidated financial statements.

47

SUMMIT PROPERTIES INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

See notes to consolidated financial statements.

48

SUMMIT PROPERTIES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)

See notes to consolidated financial statements.

49

SUMMIT PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

See notes to consolidated financial statements.

50

SUMMIT PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unless the context otherwise requires, all references to "we," "our" or "us" in
this report refer collectively to Summit Properties Inc., a Maryland corporation
("Summit"), and its subsidiaries, including Summit Properties Partnership, L.P.,
a Delaware limited partnership (the "Operating Partnership"), considered as a
single enterprise. Summit is the sole general partner of the Operating
Partnership.

1. ORGANIZATION AND FORMATION

Summit Properties Inc. was initially organized as a Maryland real estate
investment trust on December 1, 1993 under the Maryland Real Estate Investment
Trust Act. We became a Maryland corporation under the General Corporation Law of
Maryland on January 13, 1994. On February 15, 1994, we completed an initial
public offering of 10 million shares of common stock, par value $0.01 per share.
In connection with the initial public offering, we consummated a business
combination involving the partnerships which owned 27 communities and the
affiliated entities which provided development, construction, management and
leasing services to each of the communities prior to the initial public
offering. A portion of the proceeds from the initial public offering was used to
acquire an economic and voting interest in the Operating Partnership, which was
formed to succeed to substantially all of the interests of the property
partnerships in the communities and the operations of the Summit entities. We
became the sole general partner and the majority owner of the Operating
Partnership upon completion of the initial public offering and, accordingly,
report our investment in the Operating Partnership on a consolidated basis.

2. BASIS OF PRESENTATION

All significant intercompany accounts and transactions have been eliminated in
consolidation. The financial statements have been adjusted for the minority
interest of holders of common units of limited partnership interest in the
Operating Partnership. Minority interest of common unitholders in the Operating
Partnership is calculated at the balance sheet date based upon the percentage of
common units outstanding owned by partners other than Summit to the total number
of common units outstanding. Minority interest of common unitholders in the
Operating Partnership earnings is calculated based on the weighted average
common units outstanding during the period. Common units can be exchanged by the
holder for cash in an amount equal to the fair market value of an equivalent
number of shares of Summit common stock, or at our option, for shares of common
stock on a one-for-one basis (subject to adjustment). As of December 31, 2001,
there were 3,558,124 common units outstanding held by unitholders other than
Summit, and the closing market price of our common stock was $25.02 per share.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REAL ESTATE ASSETS AND DEPRECIATION -- We record our real estate assets at cost
less accumulated depreciation and, if necessary, adjust carrying value in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of" by reviewing whether the sum of the estimated future net cash flows
(undiscounted and without interest charges) from an asset to be held and used is
less than the book value of the asset. Assets to be disposed of are recorded at
the lower of carrying amount or fair value less costs to sell. No impairment
existed as of December 31, 2001.

Expenditures directly related to the acquisition, development and improvement of
real estate assets are capitalized at cost as land, buildings and improvements.
Improvements are categorized as either non-recurring or recurring capitalized
expenditures. Non-recurring capitalized expenditures primarily consist of the
cost of improvements such as new garages, water submeters, gated security access
and improvements made in conjunction with major renovations of apartment homes.
Recurring capitalized expenditures consist primarily of floor coverings,
furniture, appliances and equipment and exterior paint and carpentry. All of
these expenditures are capitalized and depreciated over the estimated useful
lives of the assets (buildings -- 40

51

years; building improvements -- 5 to 15 years; land improvements -- 15 years;
furniture, fixtures and equipment -- 5 to 7 years).

Repairs and maintenance, such as landscaping maintenance, interior painting and
cleaning and supplies used in such activities, are expensed as incurred. We
record the cost of all repairs and maintenance, including planned major
maintenance activities, recurring capital expenditures and non-recurring capital
expenditures as incurred and do not accrue for such costs in advance.

Interest costs incurred during the construction period are capitalized and
depreciated over the lives of the constructed assets. Interest capitalized was
$11.1 million in 2001, $11.1 million in 2000 and $7.9 million in 1999.

We capitalize the cost of our development department to the projects currently
under construction at a rate of 3.0% of such construction costs. Such costs are
then depreciated over the lives of the constructed assets upon their completion.
Such costs capitalized were $4.9 million in 2001, $5.4 million in 2000 and $4.5
million in 1999.

RENTAL REVENUE RECOGNITION -- We lease our residential properties under
operating leases with terms of generally one year or less. Rental revenue is
recognized on the accrual method of accounting as earned, which is not
materially different from revenue recognition on a straight-line basis. We lease
our office and retail space under operating leases with terms ranging from two
to ten years. Rental revenue for office and retail spaces is recognized on a
straight-line basis over the lives of the respective leases. Future minimum
rental payments to be received under our current office leases are as follows
(in thousands):

2002.................................................. $1,259
2003.................................................. 1,335
2004.................................................. 1,302
2005.................................................. 1,335
2006.................................................. 1,249
Thereafter............................................ 3,415
------
$9,895
------

Of the amounts listed above, $6.8 million represents amounts to be received from
Summit Management Company (the "Management Company"), which performs all
management and leasing activities for us, as well as management and leasing
activities for third parties.

CASH AND CASH EQUIVALENTS -- For purposes of the statement of cash flows, we
consider all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.

RESTRICTED CASH -- Restricted cash is comprised primarily of resident security
deposits, bond repayment escrows, replacement reserve escrows, and proceeds from
apartment community sales deposited with a qualified intermediary in accordance
with like-kind exchange income tax rules and regulations.

DEFERRED FINANCING COSTS -- Deferred financing costs include fees and costs
incurred in conjunction with long-term financings and are amortized on the
straight-line method over the terms of the related debt, which approximates the
effective interest method.

ADVERTISING COSTS -- We expense advertising costs as incurred.

EQUITY METHOD INVESTMENTS -- We consolidate investments, including joint
ventures, in which we have control, generally those in which we have a direct
voting interest of more than 50%. We record investments in which we exercise
significant influence in accordance with APB Opinion No. 18 and AICPA Statement
of Position 78-9.

PER SHARE DATA -- Basic earnings per share are computed based upon the weighted
average number of shares outstanding during the respective period. The
difference between "basic" and "diluted" weighted average shares is the dilutive
effect of our stock options outstanding. The number of shares added to weighted
average shares outstanding for the diluted calculation was 310,227 in 2001,
200,618 in 2000 and 70,991 in 1999.

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Dilution caused by these options decreased earnings per share by $0.02 in 2001,
$0.01 in 2000 and had no effect on earnings per share in 1999.

ESTIMATES -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

NEW ACCOUNTING PRONOUNCEMENTS -- On June 29, 2001, the Financial Accounting
Standards Board approved SFAS No. 141, "Business Combinations" and No. 142,
"Goodwill and Other Intangible Assets." SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001 and that the use of the pooling-of-interest method is no longer
allowed. SFAS No. 142 requires that upon adoption, amortization of goodwill will
cease and instead, the carrying value of goodwill will be evaluated for
impairment on an annual basis. Identifiable intangible assets will continue to
be amortized over their useful lives and reviewed for impairment in accordance
with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets." SFAS No. 142 is effective for us beginning January 1, 2002 and we do
not expect its adoption to be material to our financial position and results of
operations.

The Financial Accounting Standards Board has approved SFAS No. 143, "Accounting
for Asset Retirement Obligations". SFAS No. 143 addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs, including legal
obligations that result from the acquisition, construction, development and/or
the normal operation of long-lived assets. It requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. The
associated asset retirement costs are capitalized as part of the carrying amount
of the long-lived asset. SFAS No. 143 is effective for fiscal years beginning
after June 15, 2002. We are evaluating the impact of the adoption of this
standard and have not yet determined the effect of adoption on our financial
position and results of operations.

The Financial Accounting Standards Board has approved SFAS 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 supersedes SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of " and amends Accounting Principles Bulletin ("APB") No.
30, "Reporting the Results of Operations -- Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." Along with establishing a single accounting model,
based on the framework established in SFAS No. 121, for long-lived assets to be
disposed of by sale, this standard retains the basic provisions of APB No. 30
for the presentation of discontinued operations in the income statement but
broadens that presentation to include a component of an entity. SFAS No. 144 is
effective for us beginning January 1, 2002 and we do not expect its adoption to
have a material impact on our financial position and results of operations.

RECLASSIFICATIONS -- Certain reclassifications have been made to the 2000 and
1999 financial statements to conform to the 2001 presentation.

4. REAL ESTATE JOINT VENTURES

We own a 25% equity interest in a joint venture named Station Hill, LLC
("Station Hill"), in which we and Hollow Creek, LLC, a subsidiary of a major
financial services company, are members. We are entitled to 25% of the joint
venture's cash flow based on our equity interest. If certain benchmarks are
achieved in the future, we would be entitled to a preferred return in excess of
25% of the cash flow. The operating agreement of the joint venture provides that
we will be entitled to 25% of the net proceeds upon liquidation of Station Hill,
although our interest in the residual value of the joint venture could increase
above or decrease below 25%. Our interest in the residual value of the joint
venture could decrease below 25% only if we had received a preferred return on
cash flow at any time prior to liquidation. Any such decrease would be limited
to the extent of the previous preferred return. Station Hill is accounted for on
the equity method of accounting and, therefore, our 25% equity interest is
presented in "(Income) Loss on equity investments: Real estate joint ventures"
in our consolidated statements of earnings.

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On August 1, 2001, Station Hill sold an apartment community located in Tampa,
Florida formerly known as Summit Station (230 apartment homes) for $11.9
million. The disposition of Summit Station resulted in the recognition of a gain
on sale by Station Hill of $1.1 million, of which our 25% equity share was
$271,000.

The following is a condensed balance sheet and income statement for Station Hill
as of and for the years ended December 31, 2001 and 2000. The balance sheet and
income statement set forth below reflect the financial position and operations
of Station Hill in its entirety, not just our interest in the joint venture.

We own a 49% interest in a joint venture which developed an apartment community
located in Atlanta, Georgia known as Summit Cheshire Bridge. This joint venture
is accounted for under the equity method of accounting and its operating results
are presented in "(Income) loss on equity investments: Real estate joint
ventures" in our consolidated statements of earnings. The construction costs
were funded primarily through a construction loan to the joint venture from an
unrelated third party equal to 100% of the construction costs. We had the right
to purchase our joint venture partner's interest in the joint venture, but
decided subsequent to December 31, 2001 not to exercise this option which
expired on January 17, 2002. Due to our decision not to purchase our joint
venture partner's interest, we were required to make a capital contribution of
25% of the joint venture's total construction loan amount, or $6.8 million. We
made our contribution on February 15, 2002. This contribution did not change our
equity interest in the joint venture. The balance sheet and income statement
information for the joint venture is not material to our consolidated financial
statements taken as a whole.

On May 25, 2001, we contributed $4.2 million for a 29.78% interest in a joint
venture that owns substantially all of the interests in a limited liability
company that will develop, through a third party contractor, an apartment
community in Miami, Florida. The community will consist of 323 apartment homes
and 17,795 square feet of office/retail space. The construction costs are being
funded through the equity which the joint

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venture contributed to the limited liability company and by a loan to that
company from an unrelated third party. In the event that construction costs
exceed the construction loan amount, we have agreed to lend to the joint
venture, which will in turn advance to the limited liability company, the amount
required to fund such cost overruns. This loan would accrue interest at the rate
of eleven percent (11%) per year. Upon completion of construction, the joint
venture will pay, or refinance, the construction loan. In the event the limited
liability company defaults on the construction loan, we have the right, under
certain circumstances, to cure the defaults, keep the construction loan in place
and complete construction of the community. The joint venture has also acquired
an adjacent piece of land. We are serving as the managing member of the joint
venture, and the Management Company will be the property management company for
the project after construction completion. This project is accounted for on the
equity method of accounting.

5. PROPERTY MANAGEMENT AND RELATED PARTY TRANSACTIONS

In conjunction with our formation, construction, management and leasing
activities for third parties were transferred to the Management Company and its
wholly-owned subsidiary, Summit Apartment Builders, Inc. (the "Construction
Company").

The Management Company also provides property management services to our
communities. Total fees for management services provided to our communities were
$6.5 million in 2001, $5.7 million in 2000 and $5.0 million in 1999.

Third party apartment homes under management were 1,004 in 2001, 1,723 in 2000
and 2,435 in 1999. Property management fees included $913,000 in 2001, $1.1
million in 2000 and $1.3 million in 1999. Property management fees from third
parties as a percentage of total property management revenues were 12.4% in
2001, 16.1% in 2000 and 20.3% in 1999.

In addition, the Management Company provides management services to apartment
communities held by partnerships in which certain of our directors are general
partners. The Management Company received management fees of $253,000 in 2001,
$253,000 in 2000 and $239,000 in 1999 for the performance of such services.

Construction Company revenue consists of fees on contracts with the Operating
Partnership. Revenue from construction contracts was $2.7 million in 2001, $2.5
million in 2000 and $1.8 million in 1999. The Construction Company's profits on
these contracts are eliminated in consolidation against our investment in real
estate. We had amounts payable to the Construction Company of $7.0 million as of
December 31, 2001 and $9.0 million as of December 31, 2000. This amount is
included in "Accounts payable and accrued expenses" in the accompanying
consolidated balance sheets. Also included in the accompanying consolidated
balance sheets under the caption "Other assets" is a receivable from the
Construction Company of $3.0 million as of December 31, 2001 and $2.1 million as
of December 31, 2000 as a result of construction advances.

The Management Company leases office space from one of our communities, Summit
Grandview. Scheduled rental payments to be received from the Management Company
through the lease expiration of September 30, 2010 are $6.8 million.

The Operating Partnership owns 1% of the voting stock and 99% of the non-voting
stock of the Management Company. The remaining 99% of voting stock and 1% of
non-voting stock are held by one of the Co-Chairmen of our Board of Directors.
As a result of this stock ownership, the Operating Partnership has a 99%
economic interest and the Co-Chairman has a 1% economic interest in the
Management Company. Because of our ability to exercise significant influence,
the Management Company is accounted for under the equity method of accounting.
The Management Company is not considered material to our consolidated financial
statements taken as a whole.

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The consolidated statements of earnings of the Management Company and the
Construction Company are summarized below (in thousands):

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6. NOTES PAYABLE

Notes payable consist of the following (in thousands):

The one-month London Interbank Offered Rate (LIBOR) as of December 31, 2001 was
1.87%.

MORTGAGE LOANS -- The 6.76% mortgage loan requires monthly principal and
interest payments on a 20-year, 8-month amortization schedule with a balloon
payment due at maturity in October 2008.

The 8.00% mortgage loan requires monthly principal and interest payments on a
30-year amortization schedule with a balloon payment due at maturity in
September 2005.

MORTGAGE NOTES -- The mortgage notes bear interest at fixed rates ranging from
6.75% to 8.00% and require either monthly interest payments only or monthly
interest and principal payments over the lives of the notes which have
maturities that range from the year 2005 to 2020. The weighted average interest
rate and debt maturity as of December 31, 2001 for these mortgage notes were
7.24% and six years.

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TAX EXEMPT MORTGAGE NOTE --The tax exempt mortgage note bears interest at a
fixed rate of 6.95% and requires monthly interest and principal payments over
the life of the note which matures November 2025.

MEDIUM-TERM NOTES -- On April 20, 2000, we commenced a new program for the sale
by the Operating Partnership of up to $250.0 million aggregate principal amount
of medium-term notes ("MTNs") due nine months or more from the date of issuance.
During the year ended December 31, 2001, the Operating Partnership issued notes
with an aggregate principal amount of $60.0 million in connection with the new
MTN program, including (a) $25.0 million of notes which are due on May 9, 2006
and bear interest at 7.04% per year and (b) $35.0 million of notes which are due
on May 9, 2011 and bear interest at 7.703% per year. We had notes with an
aggregate principal amount of $112.0 million outstanding in connection with the
new MTN program as of December 31, 2001.

On May 29, 1998, we established a program for the sale by the Operating
Partnership of up to $95.0 million aggregate principal amount of MTNs due nine
months or more from the date of issuance. We had notes with an aggregate
principal amount of $25.0 million outstanding in connection with this MTN
program as of December 31, 2001. As a result of the commencement of the $250.0
million MTN program, we cannot issue any additional notes under the $95.0
million MTN program.

UNSECURED NOTES -- The unsecured notes consist of $25.0 million of notes due
2002, $30.0 million of notes due 2003, $50.0 million of notes due 2004 and $50.0
million of notes due 2007. The unsecured notes require semi-annual interest
payments until the end of the respective terms. The medium-term notes and
unsecured notes require that we comply with certain affirmative, negative and
financial covenants. We were in compliance with these covenants as of December
31, 2001.

UNSECURED BANK NOTE -- The unsecured bank note represents a $16.0 million note
requiring quarterly interest only payments until the maturity date in August
2002. This note requires that we comply with certain affirmative, negative and
financial covenants. We were in compliance with these covenants as of December
31, 2001.

UNSECURED CREDIT FACILITY -- We have a syndicated unsecured line of credit in
the amount of $225.0 million. The credit facility provides funds for new
development, acquisitions and general working capital purposes. Loans under the
credit facility bear interest at LIBOR plus 100 basis points. The spread
component of the aggregate interest rate will change in the event of an upgrade
or downgrade of our unsecured credit rating of BBB- by Standard & Poor's Rating
Services and Baa3 by Moody's Investors Service. The credit facility is repayable
monthly on an interest only basis with principal due at maturity. Amounts are
borrowed for thirty, sixty or ninety day increments at the appropriate interest
rates for such time period. Therefore, amounts are borrowed and repaid within
those thirty, sixty or ninety day periods. The credit facility's initial
three-year term was scheduled to expire on September 26, 2003. On July 6, 2001,
we closed on a one-year extension option under this credit facility. The new
maturity date is September 26, 2004, and all other terms and covenants of the
credit facility remain unchanged. The credit facility had an average interest
rate of 4.99% in 2001, 7.20% in 2000 and 6.06% in 1999 and an average balance
outstanding of $113.5 million in 2001, $119.8 million in 2000 and $99.2 million
in 1999. In addition, the maximum outstanding principal amount was $146.5
million in 2001, $174.0 million in 2000 and $176.0 million in 1999. As of
December 31, 2001, the outstanding balance of the credit facility was $94.0
million, leaving $131.0 million of remaining availability on the $225.0 million
commitment.

The credit facility also provides a bid sub-facility equal to a maximum of fifty
percent of the total facility ($112.5 million). This sub-facility provides us
with the choice to place borrowings in fixed LIBOR contract periods of thirty,
sixty, ninety and one hundred eighty days. We may have up to seven fixed LIBOR
contracts outstanding at any one time. Upon proper notifications, all lenders
participating in the credit facility may, but are not obligated to, participate
in a competitive bid auction for these fixed LIBOR contracts.

The credit facility requires that we comply with certain affirmative, negative
and financial covenants. We were in compliance with these covenants as of
December 31, 2001.

VARIABLE RATE TAX EXEMPT BONDS -- The average effective interest rate of the
variable rate tax exempt bonds was 4.21% for the year ended December 31, 2001.
These bonds bear interest at various rates set by a

58

remarketing agent at the demand note index plus 0.50%, set weekly, or the lowest
percentage of prime which allows the resale at a price of par. The bonds contain
covenants which require that we lease or hold for lease 20% of the apartment
homes for moderate-income residents. The bonds require maintenance of letters of
credit or surety bonds (credit enhancements) aggregating to $23.0 million as of
December 31, 2001. The credit enhancements provide for a principal amortization
schedule which approximates a 25-year term during the term of the credit
enhancement.

Real estate assets with a net book value of $423.9 million serve as collateral
for the various debt agreements.

The aggregate maturities of all debt for each of the years ending December 31
are as follows (in thousands):

7. MINORITY INTEREST

Minority interest of common unitholders consists of the following as of December
31, 2001 and 2000 (in thousands):

As of December 31, 2001, there were 30,608,345 common units outstanding, of
which 27,050,221, or 88.4%, were owned by Summit and 3,558,124, or 11.6%, were
owned by other partners (including certain of our officers and directors).

Proceeds from common stock issued are contributed to the Operating Partnership
for an equivalent number of common units. Total common stock issued and related
proceeds contributed to the Operating Partnership for an equivalent number of
common units was 406,000 shares valued at $9.0 million ($22.15 per share
average) for the year ended December 31, 2001 and 468,000 shares valued at $8.1
million ($17.28 per share average) for the year ended December 31, 2000. No
individual transaction significantly changed our ownership percentage in the
Operating Partnership. Our ownership percentage in the Operating Partnership was
88.4% as of December 31, 2001, 85.8% as of December 31, 2000 and 85.6% as of
December 31, 1999.

Under certain circumstances, if the holders of common units request redemption
of their units, we can issue shares of common stock in exchange for those common
units on a one-for-one basis (subject to adjustment), or may purchase those
common units for cash. In addition to the amounts set forth in the preceding
paragraph, we issued 150,679 shares of common stock in exchange for common units
owned by other partners on a one-for-one basis during 2001. The shares exchanged
were valued based upon the market price per share of our common stock and had an
aggregate value of $4.0 million. During the year ended December 31, 2000, we
exchanged 55,677 shares of common stock valued at $1.2 million for an equivalent
number of common units and exchanged 93,945 common units for cash of $1.8
million.

We issued 66,376 common units at a price of $28.625 per unit as partial
consideration for the purchase of a building and parcel of land during the year
ended December 31, 2001. During the year ended December 31,

59

2001, the purchaser of the former Summit Radbourne and Summit Arbors communities
exchanged 741,148 common units valued at $17.6 million as partial consideration
for such purchase.

Common units issued for the purchase of communities were valued based upon the
market price per share of our common stock, as the common units can be exchanged
for shares of our common stock on a one-for-one basis (subject to adjustment).
We issued 96,455 common units valued at $2.2 million in connection with the
purchase of our joint venture partner's interest in each of two communities
during August 2000.

8. ACQUISITIONS AND DISPOSITIONS

During the year ended December 31, 2001, we sold one parcel of land and nine
communities comprising 2,189 apartment homes for an aggregate sales price of
$167.6 million, resulting in an aggregate net gain on sale of $34.4 million. Net
proceeds from three of the nine communities, equaling $31.7 million, were placed
in escrow with a qualified intermediary in accordance with like-kind exchange
income tax rules and regulations. In the event that the proceeds from these
property sales are not fully invested in qualified like-kind property during the
required time period, a special distribution may be made or company level tax
may be incurred. The parcel of land was located in Richmond, Virginia and the
nine communities sold were the former Summit Palm Lake, Summit Arbors, Summit
Radbourne, Summit Lofts, Summit Gateway, Summit Stony Point, Summit Deerfield,
Summit Walk and Summit Waterford.

During the year ended December 31, 2001, Station Hill, LLC, in which we own a
25% interest, sold a community, the former Summit Station, for $11.9 million.
This sale resulted in the recognition of a gain on sale by the joint venture of
$1.1 million, of which we recorded $271,000 in "(Income) loss on equity
investments: Real estate joint ventures" in the consolidated statement of
earnings. The purchaser of Summit Station assumed an $8.3 million mortgage and
paid the balance of the purchase price in cash.

During the year ended December 31, 2001, we acquired no communities.

During the year ended December 31, 2000, we sold seven communities comprising
1,676 apartment homes for an aggregate sales price of $103.9 million, resulting
in a gain on sale of $38.5 million. Net proceeds from six of the seven
disposition communities, equaling $78.1 million, were placed in escrow with a
qualified intermediary in accordance with like-kind exchange income tax rules
and regulations. The communities sold were the former Summit Creekside, Summit
Eastchester, Summit Sherwood, Summit River Crossing, Summit Blue Ash, Summit
Park and Summit Village. In the event that the proceeds from these property
sales are not fully invested in qualified like-kind property during the required
time period, a special distribution may be made or company level tax may be
incurred.

On August 1, 2000, we purchased our joint venture partner's interest in each of
two communities, Summit Shiloh (182 apartment homes) and Summit Sweetwater (308
apartment homes), for an aggregate purchase price of $36.0 million. We formerly
owned a 49% interest in separate joint ventures that developed these
communities. The acquisitions were primarily financed with the issuance of
96,455 common units valued at $2.2 million and the payment of $33.8 million in
cash.

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The following summary of selected unaudited pro forma results of operations
presents information as if the purchase of our joint venture partner's interest
in each of Summit Sweetwater and Summit Shiloh had occurred at the beginning of
each period presented. The pro forma information is provided for informational
purposes only and is not indicative of results that would have occurred or which
may occur in the future (in thousands, except per share amounts):

During the year ended December 31, 1999, we sold seven communities comprising
1,518 apartment homes for an aggregate sales price of $76.0 million, resulting
in a gain on sale of $17.4 million. Net proceeds from the seven communities,
equaling $54.4 million, were placed in escrow with a qualified intermediary in
accordance with like-kind exchange income tax rules and regulations. The
communities sold were the former Summit Hampton, Summit Oak, Summit Beacon
Ridge, Summit Perico, Summit McIntosh, Summit Heron's Run and Summit East Ridge.
In the event that the proceeds from these property sales are not fully invested
in qualified like-kind property during the required time period, a special
distribution may be made or company level tax may be incurred.

During the year ended December 31, 1999, we acquired no communities.

As of December 31, 2001, we had one apartment community, Summit Breckenridge,
located in Richmond, Virginia, under contract for sale. Summit Breckenridge is
expected to be sold during the second quarter of 2002. The sale of Summit
Breckenridge is subject to customary closing conditions. The assets of Summit
Breckenridge were recorded at the lower of cost or fair value less costs to
sell, or $8.0 million, as of December 31, 2001. The property operating income
from Summit Breckenridge represented less than 1.5% of our property operating
income for the year ended December 31, 2001. Proceeds from the sale of Summit
Breckenridge are expected to be used to fund future development.

9. INCOME TAXES

We have maintained, and intend to maintain, our election to be taxed as a real
estate investment trust ("REIT") under the Internal Revenue Code of 1986, as
amended. As a result, we generally will not be subject to federal and state
income taxation at the corporate level as long as we distribute annually at
least 90% of our taxable income, excluding net capital gains, as defined in the
Code, to our stockholders and satisfy certain other requirements. Accordingly,
no provision has been made for federal and state income taxes in the
accompanying consolidated financial statements.

SFAS No. 109, "Accounting for Income Taxes" requires a public enterprise to
disclose the aggregate difference in the basis of its net assets for financial
and tax reporting purposes. The carrying value reported in our consolidated
financial statements exceeded the tax basis by $100.0 million as of December 31,
2001 and $122.8 million as of December 31, 2000.

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A reconciliation of net income as reported for financial reporting purposes to
taxable income available to common stockholders for the year ended December 31,
2001 is as follows:

A schedule of per share distributions paid to be reported by stockholders is set
forth in the following table:

10. NOTES RECEIVABLE FROM EMPLOYEES

On September 8, 1997, our Board of Directors approved a Statement of Company
Policy, which has subsequently been amended and restated by the Board from time
to time, on loans to executive officers and certain key employees relating to
purchases of common stock. Pursuant to the loan program, we may lend amounts to
certain of our executive officers and key employees for one or more of the
following purposes: (a) to finance the purchase of common stock on the open
market at the then-current market prices; (b) to finance the payment of the
exercise price of one or more stock options to purchase shares of common stock
granted under our 1994 Stock Option and Incentive Plan, as amended and restated;
or (c) to finance the annual tax liability or other expenses related to the
vesting of shares of common stock which constitute a portion of a restricted
stock award granted under the 1994 Stock Option and Incentive Plan. Unless
otherwise determined on a case-by-case basis by our Board of Directors or its
compensation committee, the maximum aggregate amount we may loan to an executive
officer is $500,000, and the maximum aggregate amount we may loan to a qualified
employee other than an executive officer is $200,000. Each outstanding note
bears interest at a rate established on the date of the note, is full recourse
to the officers and employees and is collateralized by the shares of common
stock which are the subject of the loans. The notes are payable through the
application to the outstanding loan balance of all dividends and distributions
related to the collateral stock, first to interest, with the remainder, if any,
to outstanding principal. Each note becomes due and payable in full on the tenth
anniversary of the respective note. As of December 31, 2001, we had loans
receivable in the net amount of $14.5 million. We recorded interest income
related to the notes in the amounts of $856,000 in 2001, $677,000 in 2000 and
$248,000 in 1999.

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11. COMMITMENTS AND CONTINGENCIES

The estimated cost to complete six development projects currently under
construction was $95.4 million as of December 31, 2001. Anticipated construction
completion dates of the projects range from the second quarter of 2002 to the
fourth quarter of 2003.

We rent office space in several locations. Rental expense amounted to $108,000
in 2001, $108,000 in 2000 and $170,000 in 1999 ($882,000 in 2001, $848,000 in
2000 and $481,000 in 1999 including amounts recorded by the Management Company).

Future minimum rental payments to be made for those operating leases (including
those of the Management Company) that have initial or remaining non-cancelable
lease terms in excess of one year are as follows (in thousands):

Of the amounts shown above, $6.8 million of the total minimum rental payments
are for the Management Company's lease of office space in Summit Grandview.

On January 19, 2000, the Operating Partnership entered into a real estate
purchase agreement with a third-party real estate developer. Under the terms of
the agreement, the Operating Partnership has agreed to purchase upon completion
a "Class A" mixed-use community, which will be called Summit Brickell, and is
located in Miami, Florida. The Operating Partnership will purchase Summit
Brickell upon the earlier of one year after construction completion or the
achievement of 80% occupancy. The Operating Partnership may extend this closing
obligation for six months after the initial purchase period. The Operating
Partnership expects to close on the purchase of Summit Brickell during late 2002
or in 2003. The final purchase price will be determined based on actual
construction costs plus a bonus to the developer based on the capitalized income
of the property at the time of purchase. The purchase price is expected to range
from $50.5 million to $60.0 million. The purchase of Summit Brickell by the
Operating Partnership is subject to customary closing conditions. The Operating
Partnership has issued a letter of credit in the amount of $13.0 million, which
will serve as a credit enhancement to the developer's construction loan. In the
event that any amount under the letter of credit is drawn upon, the Operating
Partnership shall be treated as having issued a loan to the developer in the
amount of such draw. Any such loan will accrue interest at a rate of eighteen
percent (18%) per annum.

We have employment agreements with all of our executive officers. The employment
agreement for one of our executive officers provides for the payment of
severance benefits in certain circumstances. Generally, these benefits provide
for the payment of the executive officer's salary for a period of up to the
remaining term of the employment agreement. In addition, most of the executive
officers have severance agreements that provide for the payment of severance
benefits of up to three times such officer's annual base salary and cash bonus
in the event of the termination of the officer's employment under certain
circumstances following certain "change in control" or "combination
transactions" involving a consolidation or merger. The benefits payable under
the terms of the severance agreements are subject to reduction by the amount of
any severance benefits payable under applicable employment agreements.

We have employment agreements with two of our former executive officers both of
whom resigned from such executive positions, but who remain as employees and
have agreed to provide various services to us from time to time over the next
ten years. Each employment agreement requires that we pay to the former officer
a base

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salary aggregating up to $2.1 million over the period from July 1, 2001 to
December 31, 2011. Either party can terminate the employment agreements,
effective 20 business days after written notice is given. The full base salary
amount due shall be payable through 2011 whether or not the agreements are
terminated earlier in accordance with their terms.

We are obligated to redeem each common unit in the Operating Partnership at the
request of the holder for cash equal to the fair market value of one share of
common stock, except that we may elect to acquire each common unit presented for
redemption for one share of common stock (subject to adjustment).

12. EMPLOYEE BENEFIT PLANS

PROFIT SHARING PLAN

We have a defined contribution plan pursuant to Section 401(k) of the Internal
Revenue Code. Employees are eligible to contribute to the plan beginning on the
first day of the second calendar quarter after they are employed. Our matching
contributions begin on the same date as the employee's contributions and are
equal to one-half of each employee's contribution up to a maximum of 3% of each
employee's compensation. We made aggregate contributions of $329,000 in 2001,
$349,000 in 2000 and $306,000 in 1999.

STOCK OPTION PLAN

In 1994, we established the 1994 Stock Option and Incentive Plan under which
1,000,000 shares of our common stock were reserved for issuance. The incentive
plan was amended and restated in 1998 to, among other things, increase the
number of shares reserved for issuance from 1,000,000 to 3,000,000 shares. The
plan provides that the option price shall not be less than the fair market value
of the shares at the date of grant. The options have ten-year lives and vest in
three or five annual installments on the anniversaries of the date of grant,
except for shares granted to our independent directors, which vest on the date
of grant. We apply Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for our stock options. Accordingly, no
compensation cost has been recognized for our stock options.

A summary of changes in common stock options for the three years ended December
31, 2001 is as follows:

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Exercise prices for options outstanding as of December 31, 2001 ranged from
$16.50 to $24.56. The weighted average remaining contractual life of those
options is 7.3 years.

Options to purchase 848,408, 635,221 and 556,979 shares of common stock were
exercisable as of December 31, 2001, 2000 and 1999, respectively. The weighted
average exercise price for the shares exercisable as of December 31, 2001, 2000
and 1999 was $18.82, $18.35 and $18.33, respectively.

The fair value of options granted in 2001 was $2.35 and was estimated on the
date of grant using the Binomial option-pricing model with the following
weighted-average assumptions: dividend yield of 8.51%, expected volatility of
17%, risk free interest rate of 5.75% and expected lives of ten years.

The fair value of options granted in 2000 was $4.66 per share and was estimated
on the date of grant using the Binomial option-pricing model with the following
weighted-average assumptions: dividend yields ranging from 7.28% to 7.38%,
expected volatility of 20%, risk free interest rate of 5.75% and expected lives
of ten years.

The fair value of options granted in 1999 was $1.83 per share and was estimated
on the date of grant using the Binomial option-pricing model with the following
weighted-average assumptions: dividend yields ranging from 8.39% to 10.10%,
expected volatility of 20%, risk free interest rates ranging from 4.7% to 6.1%
and expected lives of ten years.

In addition, the incentive plan provides for the grant of stock to employees. We
granted 26,184 shares of restricted stock under the plan in 2001. The market
value of the restricted stock granted in 2001 totaled $647,000 and was recorded
as unamortized restricted stock compensation and is shown as a separate
component of stockholders' equity. During 2001, there were 12,202 shares of
restricted stock forfeited by employees no longer employed by a Summit entity
and 14,933 shares of restricted stock surrendered to satisfy the income tax
liability of the grantees related to the restricted stock grants. The aggregate
market value of these forfeited and surrendered shares was $503,000 in 2001. We
granted 64,499 shares of restricted stock (net of 4,000 shares forfeited and
7,856 shares surrendered to satisfy the income tax liability of grantees) valued
at $1.2 million under the plan in 2000. We granted 17,699 shares of restricted
stock (net of 6,828 shares forfeited) with a market value of $304,000 during
1999. Unearned compensation associated with the restricted stock is being
amortized to expense over the vesting periods, which range from three to five
years. We recognized expense relative to the stock grants of $98,000 in 2001,
$300,000 in 2000 and $365,000 in 1999.

During the year ended December 31, 2001, we issued 94,818 shares of restricted
stock valued at $2.4 million pursuant to our Performance Stock Award Plan.
One-half of these shares, valued at $1.2 million, vested on January 2, 2001, the
date of grant, and was accrued and recorded as a component of stockholders'
equity as of December 31, 2000. The remaining balance of $1.2 million was
recorded as a component of stockholders' equity during 2001. Grantees
surrendered 18,263 shares with a market value of $463,000 during 2001 to satisfy
their income tax liability associated with the shares issued to them under the
Performance Stock Award Plan. The remaining shares vest in two equal annual
installments on January 2, 2002 and January 2, 2003.

EMPLOYEE STOCK PURCHASE PLAN

In 1996, we established a non-qualified employee stock purchase plan. From 1996
through 1999, the plan allowed our employees to purchase up to $100,000 per year
of common stock. In December 1999, the plan was amended to decrease the maximum
annual purchase amount by a participant from $100,000 to $25,000. The price of
the shares of the common stock purchased will be the lesser of 85 percent of the
closing price of such shares either on (a) the first day of each six month
purchase period, or (b) the last day of each six month purchase period.

Total shares issued under the plan were 8,695 in 2001, 88,848 in 2000 and
144,513 in 1999. The market value of the shares issued was $229,000 in 2001,
$1.8 million in 2000 and $2.7 million in 1999. We apply Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for our Employee
Stock Purchase Plan and, accordingly, no compensation cost is required to be
recognized for this plan. An additional 9,828 shares with a market value of
$246,000 were issued in January 2002 under the plan.

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Had compensation cost for our 1994 Stock Option and Incentive Plan and Employee
Stock Purchase Plan been determined based on the fair value at the grant dates,
consistent with the method of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," our net income and net income
per share for the years ended December 31, 2001, 2000 and 1999 would have been
as follows (dollars in thousands except per share amounts):

13. DIVIDEND REINVESTMENT AND DIRECT STOCK PURCHASE PLAN

In November 1997, we replaced our existing dividend reinvestment plan with a new
dividend reinvestment and direct stock purchase plan. The plan provides both new
investors and existing shareholders of our stock (including common stock and
other classes of stock which may be outstanding from time to time) with a method
to purchase shares of common stock under the Stock Purchase Program component of
the plan. The plan also permits shareholders to designate all, a portion or none
of the cash dividends on their newly purchased common stock and cash dividends
on their existing stock for reinvestment in more shares of common stock through
the Dividend Reinvestment Program component of the plan. With respect to
reinvested dividends and optional cash payments, shares of common stock will be
purchased for the plan at a discount ranging from 0% to 5% (established from
time to time) from the market price, as more fully described in the prospectus
relating to the plan. Common stock will be purchased by the plan's agent (First
Union National Bank) directly from us or in open market or privately negotiated
transactions, as determined from time to time, to fulfill requirements for the
plan. At present, we expect that shares usually will be purchased directly from
us.

14. SHAREHOLDER RIGHTS AGREEMENT

On December 14, 1998, our Board of Directors adopted a shareholder rights
agreement. In connection with the adoption of the rights plan, our Board of
Directors declared a dividend distribution of one preferred stock purchase right
for each outstanding share of common stock to stockholders of record as of the
close of business on December 15, 1998. Currently, these rights are not
exercisable and trade with the shares of our common stock. Under the rights
plan, the rights generally become exercisable if a person becomes an "acquiring
person" by acquiring 15% or more of our common stock, or if a person commences a
tender offer that would result in that person owning 15% or more of our common
stock. In the event that a person becomes an "acquiring person," each holder of
a right (other than the acquiring person) would be entitled to acquire such
number of units of preferred stock (which are equivalent to shares of our common
stock) having a value of twice the exercise price of the right.

If we are acquired in a merger or other business combination transaction after
any such event, each holder of a right would then be entitled to purchase, at
the then-current exercise price, shares of the acquiring company's common stock
having a value of twice the exercise price of the right. The current exercise
price per right is $45.00.

The rights will expire at the close of business on December 14, 2008, unless we
previously redeem or exchange them as described below. The rights may be
redeemed in whole, but not in part, at a price of $0.01 per right (payable in
cash, shares of our common stock or other consideration deemed appropriate by
our Board of Directors) by our Board of Directors only until the earlier of (a)
the time at which any person becomes an "acquiring person" or (b) the expiration
date. At any time after any person becomes an "acquiring person," our Board of
Directors may, at its option, exchange all or any part of the then outstanding
and exercisable

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rights for shares of our common stock at an exchange ratio specified in the
rights plan. Our Board of Directors generally will not be empowered to effect
such exchange at any time after any person becomes the beneficial owner of 50%
or more of our common stock.

Until a right is exercised, the holder will have no rights as a stockholder
(beyond those as an existing stockholder), including the right to vote or to
receive dividends.

In connection with the establishment of the rights plan, our Board of Directors
approved the creation of preferred stock designated as Series A Junior
Participating Cumulative Preferred Stock with a par value of $0.01 per share.
Our Board also reserved 350,000 shares of preferred stock for issuance upon
exercise of the rights.

15. BUSINESS SEGMENTS

We develop, operate and acquire "Class A" luxury apartment communities primarily
in markets with high growth potential. We develop apartments solely for our own
use and do not perform development activities for third parties. All of our
communities target middle to upper income, prestige-conscious residents who
expect outstanding service and the latest in apartment design technology, as
well as convenience. Our communities provide amenities including swimming pools,
clubhouses, exercise rooms and "Peak Services." Peak Services include, but are
not limited to, Same Day Maintenance Service and Emergency Maintenance available
24 hours a day, business services, package acceptance and delivery, a video
library and loaner living accessories. All of our communities market themselves
through media advertising. Due to the similarities of our communities and their
similar economic characteristics as exhibited through similar long-term
financial performance, our communities have been aggregated into one reportable
segment.

16. PREFERRED UNITS

As of December 31, 2001, the Operating Partnership had outstanding 3.4 million
preferred units of limited partnership interest designated as 8.95% Series B
Cumulative Redeemable Perpetual Preferred Units. These preferred units are
redeemable by the Operating Partnership on or after April 29, 2004 for cash at a
redemption price equal to the holder's capital account, or at our option, shares
of our 8.95% Series B Cumulative Redeemable Perpetual Preferred Stock, or a
combination of cash and shares of our 8.95% Series B Cumulative Redeemable
Perpetual Preferred Stock. Holders of the Series B preferred units have the
right to exchange these preferred units for shares of our Series B preferred
stock on a one-for-one basis, subject to adjustment: (a) on or after April 29,
2009, (b) if full quarterly distributions are not made for six quarters, or (c)
upon the occurrence of specified events related to the treatment of the
Operating Partnership or the preferred units for federal income tax purposes.
Distributions on the Series B preferred units are cumulative from the date of
original issuance and are payable quarterly at the rate of 8.95% per year of the
$25.00 original capital contribution. We made distributions to the holders of
the Series B preferred units in the aggregate amount of $7.6 million during each
of the years ended December 31, 2001 and 2000.

As of December 31, 2001, the Operating Partnership had outstanding 2.2 million
preferred units of limited partnership interest designated as 8.75% Series C
Cumulative Redeemable Perpetual Preferred Units. The preferred units are
redeemable by the Operating Partnership on or after September 3, 2004 for cash
at a redemption price equal to the holder's capital account. Holders of the
Series C preferred units have the right to exchange these preferred units for
shares of our Series C preferred stock on a one-for-one basis, subject to
adjustment: (a) on or after September 3, 2009, (b) if full quarterly
distributions are not made for six quarters, (c) upon the occurrence of
specified events related to the treatment of the Operating Partnership or the
preferred units for federal income tax purposes, or (d) if the holdings in the
Operating Partnership of the Series C unitholder exceed 18% of the total profits
of or capital interest in the Operating Partnership for a taxable year.
Distributions on the Series C preferred units are cumulative from the date of
original issuance and are payable quarterly at the rate of 8.75% per year of the
$25.00 original capital contribution. We made distributions to the holder of the
Series C preferred units in the aggregate amount of $4.8 million during each of
the years ended December 31, 2001 and 2000.

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17. DERIVATIVE FINANCIAL INSTRUMENTS

We are exposed to capital market risk, such as changes in interest rates. To
manage the volatility relating to interest rate risk, we may enter into interest
rate hedging arrangements from time to time. We generally do not utilize
derivative financial instruments for trading or speculative purposes. On January
1, 2001, we adopted SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended. SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that
entities recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
cumulative effect of adopting SFAS 133 was not material to our financial
statements.

As of December 31, 2001, we had one interest rate swap with a notional amount of
$30.0 million, relating to $30.0 million of 6.625% fixed rate notes issued under
our MTN program. Under the interest rate swap agreement, through the maturity
date of December 15, 2003, (a) we have agreed to pay to the counterparty the
interest on a $30.0 million notional amount at a floating interest rate of
three-month LIBOR plus 11 basis points, and (b) the counterparty has agreed to
pay to us the interest on the same notional amount at the fixed rate. The
floating rate as of December 31, 2001 was 1.98%. The fair value of the interest
rate swap was $1.8 million as of December 31, 2001. The swap has been designated
as a fair value hedge of the underlying fixed rate debt obligation and has been
recorded as a reduction of the related debt instrument. We assume no
ineffectiveness as the interest rate swap meets the short-cut method conditions
required under SFAS 133 for fair value hedges of debt instruments. Accordingly,
no gains or losses were recorded in income relative to our underlying debt and
interest rate swap.

18. COMMON STOCK REPURCHASE PROGRAM

On March 12, 2000, our Board of Directors authorized a common stock repurchase
program pursuant to which we were authorized to purchase up to an aggregate of
$25.0 million of currently issued and outstanding shares of our common stock.
During 2001, our Board of Directors increased the size of this common stock
repurchase program to $56.0 million. All repurchases have been, and will be,
made on the open market at prevailing prices or in privately negotiated
transactions. This authority may be exercised from time to time and in such
amounts as market conditions warrant. We repurchased 8,800 shares of our common
stock for an aggregate purchase price, including commissions, of $197,000, or an
average price of $22.39 per share during the year ended December 31, 2001 under
the common stock repurchase program. During the year ended December 31, 2000, we
repurchased 279,400 shares of our common stock for an aggregate purchase price,
including commissions, of $5.5 million, or an average price of $19.80 per share
under this program.

During 2000, we completed a common stock repurchase program pursuant to which we
were authorized to purchase up to an aggregate of $50.0 million of our common
stock. During 2000, we repurchased 131,900 shares of our common stock for an
aggregate purchase price, including commissions, of $2.5 million, or an average
price of $18.88 per share under this program. The total number of shares of our
common stock repurchased was 2.5 million shares for an aggregate purchase price,
including commissions, of $50.0 million, or an average price of $19.63 per share
under this program.

19. IMPAIRMENT LOSS

Management considers events and circumstances that may indicate impairment of an
investment, including operating performance and cash flow projections.
Management determined during the quarter ended June 30, 2001 that our
investments in Broadband Now, Inc. and Yieldstar Technology LLC were impaired
and that such impairment was other than temporary. As a result, we recorded an
impairment loss in the amount of $1.2 million, which represents our entire
investment in these two technology companies. We have no other technology
company investments.

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20. SUPPLEMENTAL CASH FLOW INFORMATION

Non-cash investing and financing activities for the years ended December 31,
2001, 2000 and 1999 are as follows:

A. We sold nine communities during the year ended December 31, 2001. The
respective purchasers of two of the communities assumed the related
outstanding debt balances associated with such communities of $16.4
million in the aggregate. The respective purchaser of two of the
communities redeemed 741,148 common units valued at $17.6 million as
partial consideration in the transaction.

B. We purchased our joint venture partner's interest in each of two
communities during the year ended December 31, 2000 at an aggregate
purchase price of $36.0 million. The acquisitions were primarily
financed with the issuance of 96,455 common units in the aggregate
valued at $2.2 million as well as the payment of $33.8 million in cash
in the aggregate.

C. We sold seven communities during the year ended December 31, 1999. The
respective purchasers of three of the communities assumed the related
outstanding debt balances associated with such communities of $19.7
million in the aggregate.

D. We granted 26,184 shares of restricted stock valued at $647,000 during
2001. There were 12,202 shares of restricted stock forfeited and 14,933
shares of restricted stock surrendered to satisfy the income tax
liability of the grantees during 2001. The aggregate value of shares
forfeited and surrendered in 2001 was $503,000. We granted 64,499 shares
of restricted stock (net of 4,000 shares forfeited and 7,856 shares
surrendered to satisfy the income tax liability of the grantees) valued
at $1.2 million in 2000 and 17,669 shares of restricted stock (net of
6,828 shares forfeited) valued at $304,000 in 1999.

E. We issued 150,679 shares of common stock in exchange for 150,679 common
units during the year ended December 31, 2001. The value of these shares
of common stock was $4.0 million. We issued 55,677 shares of common
stock in exchange for 55,677 common units during the year ended December
31, 2000. The value of these shares of common stock was $1.1 million.

F. We accrued dividends and distributions payable of $14.2 million as of
December 31, 2001, $13.5 million as of December 31, 2000 and $13.0
million as of December 31, 1999.

21. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

The following disclosures of estimated fair value were determined by management
using available market information and appropriate valuation methodologies.
However, considerable judgment is necessary to interpret market data and develop
the related estimates of fair value. Accordingly, the estimates presented are
not necessarily indicative of the amounts that could be realized upon
disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts. The fair value estimates presented are based on
information available to management as of December 31, 2001 and 2000. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
re-valued for purposes of these financial statements since that date, and
current estimates of fair value may differ significantly from the amounts
presented.

Cash and cash equivalents, rents receivable, accounts payable, accrued expenses,
security deposits, other liabilities, tax exempt bond indebtedness and our
credit facility are carried at amounts which reasonably approximate their fair
values as of December 31, 2001 and 2000 due to either the short-term nature or
variable interest rates associated with such balances.

Fixed rate mortgage debt and fixed rate unsecured notes with a carrying value of
$601.4 million had an estimated aggregate fair value of $625.2 million as of
December 31, 2001. Fixed rate mortgage debt and fixed rate unsecured notes with
a carrying value of $585.0 million had an estimated aggregate fair value of
$583.3 million as of December 31, 2000. Rates currently available to us for debt
with similar terms and maturities were used to estimate the fair value of this
debt. The fair market value of long-term fixed rate debt

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is subject to changes in interest rates. Generally, the fair market value of
fixed interest rate debt will increase as interest rates fall and decrease as
interest rates rise.

The fair value of the interest rate swap described in footnote 17, "Derivative
Financial Instruments," was $1.8 million as of December 31, 2001.

22. GEOGRAPHIC CONCENTRATION (UNAUDITED)

Our communities are concentrated in seven core markets as follows:

23. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Quarterly financial information for the years 2001 and 2000 is as follows (in
thousands except per share data):

(1) The total of the four quarterly amounts for net income per share -- diluted
does not equal net income per share for the year ended December 31, 2001.
The difference is due to the use of a weighted average to compute the number
of shares outstanding for each quarter and for the year.

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71

SCHEDULE III
SUMMIT PROPERTIES INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
(DOLLARS IN THOUSANDS)

(1) Includes furniture, fixtures and equipment.

(2) The aggregate cost for federal income tax purposes as of December 31, 2001
is $1.0 billion.

(3) Encumbered by fixed rate mortgages of $137.3 million.

(4) Collateral for $23.0 million of letters of credit which serve as collateral
for $22.2 million in tax exempt bonds.

(5) Encumbered by fixed rate mortgage of $8.2 million.

(6) Property purchased; date reflects date construction completed.

(7) Community was presented in two phases in prior years. Date acquired
represents the date the first phase was acquired. The date of construction
represents the range from the start of the first phase to completion of the
second phase.

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SCHEDULE III
SUMMIT PROPERTIES INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
(DOLLARS IN THOUSANDS)

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

(1) Includes only apartment communities and does not include fixed assets used
in property development, construction and management of apartment
communities.

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