##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



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FORM 10-K

|                   |  |                                                                                         
|------------------ |  | ----------------------------------------------------------------------------------------
|(Mark One)        
|                  
|(BOX WITH AN X)    |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|                  
|                   |  | For the Fiscal Year Ended December 31, 2000                                             
|                  
|(EMPTY BALLOT BOX) |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-12590

GABLES RESIDENTIAL TRUST
(Exact name of Registrant as specified in its charter)



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|                                         |  |                    
|---------------------------------------- |  | -------------------
|Maryland                                 |  | 58-2077868         
|(State or other jurisdiction of          |  | (I.R.S. employer   
|incorporation or organization)           |  | identification no.)
|                                        
|2859 Paces Ferry Road, Suite 1450       
|Atlanta, Georgia                         |  | 30339              
|(Address of principal executive offices) |  | (Zip Code)         

Registrants telephone number, including area code: (770) 436-4600



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Securities registered pursuant to Section 12(b) of the Act:

|                                         |  |                                          
|---------------------------------------- |  | -----------------------------------------
|Title of Each Class                      |  | Name of Each Exchange on which Registered
|Common Shares of Beneficial Interest,    |  | New York Stock Exchange                  
|par value $0.01 per share               
|                                        
|8.30% Series A Cumulative Redeemable     |  | New York Stock Exchange                  
|Preferred Shares of Beneficial Interest,
|par value $0.01 per share               

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.







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.

As of March 16, 2001, the aggregate market value of the 22,816,936 common
shares held by non-affiliates of the Registrant was $640,471,394 based upon the
closing price of $28.07 on the New York Stock Exchange composite tape on such
date. (For this computation, the Registrant has excluded the market value of
all common shares reported as beneficially owned by executive officers and
trustees of the Registrant; such exclusion shall not be deemed to constitute an
admission that any such person is an affiliate of the Registrant.) As of
March 16, 2001, there were outstanding 23,254,982 common shares.

DOCUMENTS INCORPORATED BY REFERENCE

Information contained in Gables Proxy Statement relating to its Annual
Meeting of Shareholders to be held May 15, 2001 is incorporated by reference in
Part III, Items 10, 11, 12 and 13.



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TABLE OF CONTENTS



|             |                                                                                               |  |  |  |  |  |  | 
|------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|             | ITEM 1. BUSINESS                                                                             
|             | ITEM 2. PROPERTIES                                                                           
|             | ITEM 3. LEGAL PROCEEDINGS                                                                    
|             | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|             | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS                
|             | ITEM 6. SELECTED FINANCIAL AND OPERATING INFORMATION                                         
|             | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|             | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|             | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|             | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|             | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|             | ITEM 11. EXECUTIVE COMPENSATION                                                              
|             | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|             | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|             | ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULE AND REPORTS ON FORM 8-K                 
|EXHIBIT 10.5
|EXHIBIT 10.6
|EXHIBIT 21.1
|EXHIBIT 23.1



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FORM 10-K ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 2000
TABLE OF CONTENTS

|     |  |                                                                                       |  |      |    |  |  |  |  |  |  | 
|---- |  | ------------------------------------------------------------------------------------- |  | ---- | -- |  |  |  |  |  |  | 
|     |  | PART I                                                                               
|Item |  |                                                                                       |  | Page
|No.  |  |                                                                                       |  | No. 
|     |  |                                                                                       |  |     
|1.   |  | Business                                                                              |  |      | 1  | 
|2.   |  | Properties                                                                            |  |      | 15 | 
|3.   |  | Legal Proceedings                                                                     |  |      | 19 | 
|4.   |  | Submission of Matters to a Vote of Security Holders                                   |  |      | 19 | 
|    
|     |  | PART II                                                                              
|    
|5.   |  | Market for Registrants Common Equity and Related Shareholder Matters                 |  |      | 20 | 
|6.   |  | Selected Financial and Operating Information                                          |  |      | 20 | 
|7.   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  |      | 23 | 
|7A   |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |      | 37 | 
|8.   |  | Financial Statements and Supplementary Data                                           |  |      | 38 | 
|9.   |  | Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure  |  |      | 38 | 
|    
|     |  | PART III                                                                             
|    
|10.  |  | Directors and Executive Officers of the Registrant                                    |  |      | 38 | 
|11.  |  | Executive Compensation                                                                |  |      | 38 | 
|12.  |  | Security Ownership of Certain Beneficial Owners and Management                        |  |      | 38 | 
|13.  |  | Certain Relationships and Related Transactions                                        |  |      | 38 | 
|    
|     |  | PART IV                                                                              
|    
|14.  |  | Exhibits, Financial Statements and Schedule and Reports on Form 8-K                   |  |      | 38 | 



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##### Table of Contents



PART I

Unless the context otherwise requires, all references to we, our or us in
this report refer collectively to Gables Residential Trust (Gables), a
Maryland real estate investment trust (REIT) and its subsidiaries, including
Gables Realty Limited Partnership, a Delaware limited partnership, considered
as a single enterprise. Gables GP, Inc., a wholly-owned subsidiary of Gables
Residential Trust, is the sole general partner of Gables Realty Limited
Partnership.







|        |  |         
|------- |  | --------
|ITEM 1. |  | BUSINESS

We are one of the largest owners, operators and developers of multifamily
apartment communities in demand- driven markets that have high job growth and
have shown resiliency to national economic downturns in the United States. We
are a REIT formed in 1993 under Maryland law to continue and expand the
multifamily apartment community management, development, construction,
acquisition, and disposition operations of our privately owned predecessor
organization. We completed our initial public offering on January 26, 1994.
Our executive offices are located at 2859 Paces Ferry Road, Suite 1450,
Atlanta, Georgia 30339, and our common shares are listed on the NYSE under the
symbol GBP. Substantially all of our business is conducted through and all of
our interests in property are held by or through Gables Realty Limited
Partnership (the Operating Partnership). We control the Operating
Partnership through Gables GP, Inc. (Gables GP), a wholly-owned subsidiary
and the sole general partner of the Operating Partnership. This structure is
commonly referred to as an umbrella partnership REIT or UPREIT. At December
31, 2000, we were a 77.6% economic owner of the common equity of the Operating
Partnership.

Business Objectives and Strategy

Our objective is to increase shareholder value by producing consistent,
high quality earnings that result in dividend growth and annual total returns
which exceed the multifamily sector average. To achieve this objective, we
employ a number of business strategies which are outlined below:

Investment Strategy. Our long-term investment strategy is research-driven
and aimed at achieving sustainable growth in operating cash flow while reducing
exposure to inherent volatility associated with real estate supply/demand
dynamics. We believe the success of a real estate investment is predicated on
three basic factors  (1) macro-market fundamentals, (2) specific sub-market
dynamics, and (3) product decisions.

Our objective is to have a portfolio of assets in approximately six to
eight strategically selected markets that are complementary through economic
diversity and characterized by high job growth and resiliency to national
economic downturns. We believe such a portfolio will provide predictable growth
in operating cash flow on a sustainable basis.

Real estate is a cyclical business and, as a long-term owner and operator
of apartment communities, we believe it is important to evaluate performance
potential throughout various economic cycles. It is also our belief that job
creation and household formation are key components of demand for apartment
communities. Research has shown that certain markets in the United States
create more jobs and are more resilient to national economic downturns than
others. In addition, the industrial job base of various markets can provide
economic diversity through portfolio allocation that, in turn, can reduce
volatility in performance. These factors, along with other macro-demographic
characteristics, have led us to identify markets in which to make real estate
investments.

We believe that within a macro-market environment, apartment communities
located in different sub-markets can have different economic performance, and
that specific sub-market locations are an important factor in determining the
potential economic success of an investment. Factors that differentiate
specific sub-markets within a macro-market include, among other items,
proximity to employment centers, entertainment and shopping, quality of
education systems, availability of land that could be used to introduce new
apartment communities, and the local entitlement process. It is our belief that
apartment communities located in close proximity to these areas and areas with
high barriers to entry through lack of available land and/or difficult
entitlement processes should produce economic performance that exceeds that of
apartment communities in locations without those characteristics. We generally
refer to our desired locations as in-fill or master-planned community
locations versus suburban locations that lack many of these differentiating
characteristics. A key component used to identify in-fill/master-planned
communities is the average cost per square foot for single family housing. We
believe the single family housing market is very efficient in pricing the
quality of housing and the proximity of neighborhoods to employment centers,
entertainment, shopping, and quality

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education systems. By identifying these
highly desirable sub-markets where people are spending the most on a per square
foot basis to live, and targeting them for investment, we believe we can
achieve above-average economic performance from our apartment communities.

The third component of our investment strategy is product specific. Our
target customer is the affluent renter-by-choice who desires a high quality
apartment community in which to live. We perform extensive market research,
both internal and external, in an effort to design apartment communities that
meet the current and future desires of our target customers. In addition, we
invest for the long term by acquiring and developing apartment communities with
high quality construction materials and amenities. We believe that long-term
maintenance and capital expenditure requirements are reduced by investing
additional capital up front in apartment communities built with quality
construction materials. The timeless design and high quality of the product
targeted to the affluent renter-by-choice also gives us a competitive advantage
over many other apartment owners through our ability to sell assets to
condominium converters at prices in excess of apartment valuations. We have
received numerous local and national awards and recognition for the quality of
our apartment communities.

In order to execute our investment strategy, we believe it is important to
maintain a strong local presence in each of our markets. Through our local
expertise, we stay abreast of current market conditions and can proactively
adjust tactics in anticipation of changes in market fundamentals. In addition,
we believe we have a competitive advantage over many other apartment community
owners through the vertical integration of our organization. We have expertise
in all facets of apartment community investment, including the disciplines of
construction, development, acquisition and disposition. Since 1982, we have
been involved in the development, acquisition and disposition of approximately
33,000, 20,000 and 25,000 apartment homes, respectively.

Operating Strategy.We adhere to a strategy of owning and operating high
quality, class AA/A apartment communities under the Gables® brand.
We believe that such communities, when located in highly desirable areas to
live and supplemented with high quality service and amenities, attract the
affluent renter-by-choice who is willing to pay a premium for location
preference, superior service and high quality communities. The resulting
portfolio should maintain high levels of occupancy and rental rates. This,
coupled with more predictable operating expenses and reduced capital
expenditure requirements associated with high quality construction materials,
should lead to operating margins that exceed national averages for the
multifamily sector and sustainable growth in operating cash flow.

We are continuing to pursue a long-standing strategy of brand name
development by linking the Gables name to our communities. This strategy is
intended to reinforce our reputation for excellent service and build
recognition of our multifamily communities as a high quality, recognizable
brand. We believe that increased consumer recognition of the Gables brand
name in each of our markets enhances our ability to attract new residents,
increases the markets perception of our communities as high quality
residential developments, and enhances our relationships with local
authorities.

We operate our communities to maximize sustainable cash flow growth and
create long-term value. This is achieved by proactive marketing and leasing of
apartment homes, providing the best possible resident service, generating
economies of scale to lower expenses, and maintaining the communities to the
highest standards. We believe that excellent service and branding thereof will
distinguish us from our competitors, retain current residents and attract new
prospects.

We employ a number of operating strategies based on market fundamentals
and prediction models in order to maximize the sustainability of growth in
operating cash flow. Financial and marketing information is collected and
distributed through local and wide-area networks from on-site computer systems
at all of our communities, and effectively summarizes operating and marketing
data critical for making accurate daily decisions. The system also compiles
demographic profile information on prospective and current residents, allowing
us to effectively target our customer base through our branding efforts. We
also utilize the Internet extensively as a marketing tool to attract new
customers through our award-winning web site at www.gables.com. Capturing and
analyzing macro-market and sub-market data through our sophisticated operating
systems allows us to perform analyses via our proprietary prediction models. As
a result of these analyses, we may choose an operating strategy for a
particular market aimed at maximizing rental rate growth while increasing
short-term vacancy exposure. In other scenarios, a focus on maximizing
occupancy at the expense of rental rate growth may deliver the best operating
cash flow growth. We may also utilize different operating strategies for assets
that are targeted for disposition in order to maximize the sales price based on
current

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market underwriting conditions. These and other operating strategies
are employed to maximize sustainable cash flow growth and create long-term
value for shareholders.

Human Resources Strategy.Our aim is to be the employer of choice within
the industry, with a mission of Taking Care of the Way People Live. A
cornerstone of our strategy involves innovative human resource practices that
we believe will attract and retain the highest calibre associates. Because of
our long-established presence as a fully integrated apartment management,
development, construction, acquisition and disposition company within our
markets, we have the ability to offer multi-faceted career opportunities among
the various disciplines within the industry. Approximately 13% of our
associates have tenure in excess of 10 years. Average tenure for executive
officers, vice presidents and regional managers, and property managers is over
thirteen years, nine years and four years, respectively. We believe the
experience, expertise and depth of our bench strength is a competitive
advantage.

We believe our success with human resource strategies is primarily due to
our empowerment of associates and our career development and training. By
empowering associates to make decisions at a local level where the point of
service occurs, we increase customer and associate satisfaction. We operate
each of our apartment communities as a business unit. Property managers and
staff are responsible for achieving specific economic goals associated with
revenues, occupancy and expenses, in addition to maintaining assets to a high
standard in order to ensure long-term success potential. Empowering associates
with responsibility and encouraging decision making requires hiring the highest
calibre associate and allocating extensive resources to training and career
development.

We are committed to training at all levels within the organization, from
newly hired associates to the board of trustees. This commitment is aimed at
ensuring the competitive advantage inherent in the expertise of our associates
and deep bench strength, which facilitates succession planning at all levels.
Our service-oriented philosophy is branded and reinforced through our college
of career development, Gables University. This comprehensive training system
for our employees is overseen by full-time training coordinators and offers
classes in a variety of different schools, such as the School of Leasing,
School of People Resources and School of Maintenance Development. Additionally,
there are degree programs which are completed with graduation ceremonies.
Service is also reinforced with quarterly I Made a Difference recognition
ceremonies, where personal achievement by associates is acknowledged by senior
management in each of the markets where we operate. We believe recognition
programs reinforce our culture and branding philosophy.

A key component to achieving our objectives is the alignment of interests
between associates and shareholders. Ownership of stock options and shares is
held at all levels within our company and includes property and maintenance
managers as well as members of the board of trustees. Approximately 300 of our
associates have equity ownership in Gables, and therefore have their interests
aligned with all other shareholders.

Capital Strategy.Our objective is to maximize return on invested
capital. By doing so, we believe we will achieve growth in earnings per share
and net asset value per share. An integral part of our capital strategy
involves maintaining financial flexibility via a conservative balance sheet
that is investment grade. We have investment grade, senior unsecured debt
ratings from Moodys Investors Service and Standard and Poors of Baa2 and BBB,
respectively. Our preferred shares are also investment grade rated by those
firms at baa3 and BBB-, respectively. We believe our conservative credit
profile provides security for shareholders and is a competitive advantage over
companies without the financial flexibility associated with investment grade
balance sheets.

Our attention to return on invested capital manifests itself through a
very focused approach to managing our capital structure. We are able to
recycle existing capital through asset dispositions, which allows us to
re-deploy capital into investments with higher return potential. In certain
situations, we may also capitalize on the arbitrage that exists between the
private market valuation of our assets and a discounted public market valuation
of our common shares by selling assets and repurchasing stock. We have access
to capital through a variety of sources, including common equity, preferred
equity and private equity via direct investment, in addition to internally
generated equity through asset dispositions and retained cash flow.

Ancillary Business Strategy.We are involved in ancillary businesses
related to our core business and competencies. These business lines include
third-party property management, furnished corporate apartments, development
and construction services, and asset disposition brokerage services. Our
expertise in these areas stems from our core competencies. In addition, we are
innovative in identifying and capitalizing on new services to our resident
customers that provide for increases in earnings and high returns on invested
capital. Regular feedback from resident customers and our clients provides
avenues for enhanced service and earnings potential.

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As of December 31, 2000, we managed 53 multifamily communities for third
parties, comprising approximately 18,196 apartment homes. These fee management
contracts are maintained with a total of 27 owners. In addition to contributing
to earnings, engaging in fee management allows us to create economies of scale
by leveraging our management operations costs and providing access to
development and acquisition opportunities, as well as providing additional
market knowledge.

2000 Significant Events.During 2000, the amount of common shares
authorized for repurchase under our common equity repurchase program was
increased from $100 million to $150 million. Through December 31, 2000, we
had repurchased $102 million of our common shares and equivalents at an average
price of $23.88.

During 2000, we continued our disposition and acquisition efforts aimed at
strategically repositioning our portfolio for optimal performance. We received
gross sales proceeds of approximately $145 million through dispositions of
existing assets. We exited the San Antonio market by selling two assets
comprising 544 apartment homes and sold a majority interest in three Tennessee
assets comprising 618 apartment homes in Nashville and 500 apartment homes in
Memphis. We sold an apartment community in Dallas comprising 126 apartment
homes and an apartment community in Houston comprising 228 apartment homes to
condominium converters. In addition, we sold a parcel of land adjacent to an
existing community located in Atlanta. The sales proceeds were used to fund
development and acquisition activities, pay down outstanding borrowings,
including a fixed-rate note payable that encumbered one of the assets, and
purchase common shares under our common equity repurchase program.

We also acquired a community in Austin comprising 160 apartment homes
increasing the percentage of our revenue contribution from Austin to 10%. We
paid $5.7 million in cash and assumed a $14.1 million secured fixed-rate note.

Apartment Portfolio.As of December 31, 2000, we owned 73 stabilized
multifamily apartment communities comprising 21,422 apartment homes, an
indirect 25% interest in two stabilized apartment communities comprising 663
apartment homes, an indirect 20% interest in five stabilized apartment
communities comprising 1,571 apartment homes, and an indirect 9% interest in
three stabilized apartment communities comprising 1,118 apartment homes. We
also owned seven multifamily apartment communities under development or in
lease-up at December 31, 2000 that are expected to comprise 1,819 apartment
homes upon completion and an indirect 20% interest in three apartment
communities under development or in lease-up at December 31, 2000 that are
expected to comprise 900 apartment homes upon completion. In addition, as of
December 31, 2000, we owned parcels of land on which we intend to develop four
apartment communities that we currently expect will comprise an estimated 1,125
apartment homes. We also have rights to acquire additional parcels of land on
which we believe we could develop communities. Any future development is
subject to permits and other governmental approvals, as well as our ongoing
business review, and may not be undertaken or completed.

Our apartment communities generate rental revenue and other income through
the leasing of apartment homes to a diverse base of residents. We evaluate the
performance of each of our apartment communities on an individual basis.
However, because each of our apartment communities has similar economic
characteristics, residents, and products and services, they have been
aggregated into one reportable segment which comprise 95%, 95%, and 96% of our
total revenues for the years ended December 31, 2000, 1999, and 1998,
respectively.

Management Structure.We have been responsible for the development or
acquisition of approximately 53,000 apartment homes since 1982 and our senior
management team has, on average, in excess of 13 years experience in the
multifamily industry. We provide a full range of integrated real estate
services through a staff of approximately 1,315 employees who have expertise in
property operations, development, acquisition, disposition and construction.
We maintain offices in Atlanta, Boca Raton, Houston and Dallas, each with its
own fully integrated organization, including experienced in-house management,
development, acquisition, and disposition staffs with specific knowledge of the
particular markets served. We believe that our competitive strength and growth
potential lie in our in-depth knowledge of the changing opportunities available
in each local market and in our locally focused management structure, which
enables highly experienced development, acquisition, and disposition personnel
to pursue opportunities in each market and highly experienced on-site managers
to make the day-to-day decisions needed to maximize the performance of our
existing properties. Our finance, accounting and administrative functions are
controlled by a central staff located in Atlanta.

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Competitive Advantages.We believe that we have several competitive
advantages. These advantages include:



| |  | A fully integrated organization: a fully integrated organization with
a track record of approximately eighteen years in all phases of real
estate property management, development, acquisition, disposition,
construction, rehabilitation, financing and marketing.                                 
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Product focus: a portfolio concentration of Class AA/A apartment
communities that are targeted toward the affluent renter-by-choice,
are located primarily in in-fill locations and master-planned
communities, and include garden, townhome and higher density apartment
communities.               
| 
| |  | Local presence in multiple markets: an established local presence in
each of our markets, which we serve through an experienced staff with
superior knowledge of local markets and a culture which provides
incentives for outstanding performance at all levels.                                    
| 
| |  | Strategic portfolio diversification: an established market presence in
strategically selected major markets that are geographically
independent, rely on diverse economic foundations, and have shown job
growth substantially above national averages and resiliency to
national economic downturns.
| 
| |  | Brand recognition: a service-oriented philosophy which focuses on
offering extensive resident amenities and services in high quality
apartment homes to increase occupancy, rental rates and net operating
income.                                                                                   

The Operating Partnership

Structured as an UPREIT, the Operating Partnership is the entity through
which we conduct substantially all of our business and own, either directly or
indirectly through subsidiaries, all of our assets. As of December 31, 2000,
we held directly, or indirectly through Gables GP, 77.6% of the common equity
of the Operating Partnership. Through Gables GP, our wholly-owned subsidiary
and the sole general partner of the Operating Partnership, we control the
Operating Partnership. The board of directors of Gables GP, the members of
which are the same as the members of our board of trustees, manages the affairs
of the Operating Partnership by directing the affairs of the general partner of
the Operating Partnership. Our limited partner and indirect general partner
interests in the Operating Partnership entitle us to share in cash
distributions from, and in the profits and losses of, the Operating Partnership
in proportion to our economic interest and entitle us to vote on all matters
requiring a vote of the limited partners.

Generally, the other limited partners of the Operating Partnership are
persons who contributed their direct or indirect interests in certain
properties to the Operating Partnership primarily in connection with the IPO
and the acquisition of Trammell Crow Residential South Florida. The Operating
Partnership is obligated to redeem each common unit of limited partnership
interest (Unit) held by a person other than us, at the request of the holder,
for an amount equal to the fair market value of a common share at the time of
redemption, provided that we, at our option, may elect to acquire each Unit
presented for redemption for one common share or cash. With each redemption,
our percentage ownership interest in the Operating Partnership will increase.
In addition, whenever we issue common shares or preferred shares, we are
obligated to contribute any net proceeds to the Operating Partnership, and the
Operating Partnership is obligated to issue an equivalent number of common or
preferred Units, as applicable, to us.

We may cause the Operating Partnership to issue additional Units to
acquire land parcels for the development of apartment communities or operating
apartment communities in transactions that in certain circumstances defer some
or all of the sellers tax consequences. We believe that many potential
sellers of multifamily residential properties have a low tax basis in their
properties and would be more willing to sell the properties in transactions
that defer federal income taxes. Offering Units instead of cash for properties
may provide potential sellers partial federal income tax deferral.

The Management Company

Our fee management operations are conducted through Gables Residential
Services, Inc., a subsidiary of the Operating Partnership. Gables Residential
Services also provides other services to third parties, including construction,
brokerage and corporate rental housing. A portion of these services are, or
may also be, provided by the Operating Partnership directly, to the extent
consistent with the gross income requirements for REITs under the Internal
Revenue Code of 1986, as amended (the Code). To maintain our qualification
as a REIT while realizing income from our fee

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management and related service
business, the Operating Partnership owns 100% of the nonvoting common stock
which represents 98.99% of the total equity of Gables Residential Services and
1% of the voting common stock which represents .01% of the total equity of
Gables Residential Services. The non-voting common stock and voting common
stock owned by the Operating Partnership together represent 99% of the equity
interests in Gables Residential Services. Executive officers of Gables GP
hold, in the aggregate, the remaining 1% of the equity in Gables Residential
Services, representing 99% of the voting common stock. The voting common stock
held by Gables GPs executive officers is subject to a provision of the bylaws
of Gables Residential Services that is designed to ensure that the stock will
be held by officers of Gables GP at all times. This bylaw provision of Gables
Residential Services cannot be amended without the vote of 100% of the
outstanding voting common stock of such company.

Competition

All of our communities are located in developed areas that include other
apartment communities. The number of competitive multifamily communities in a
particular area could have a material effect on our ability to lease apartment
homes at our present communities or any newly developed or acquired community,
as well as on the rents charged. We may be competing for development and
acquisition opportunities with others that have greater resources than we do,
including other REITs. In addition, our communities must compete for residents
against new and existing homes and condominiums. The home affordability index
in all of our markets is above the national average. This competitive
environment is partially offset by the propensity to rent for households in our
markets which in all cases exceeds the national average.

The fee management business is highly competitive, and we face competition
from a variety of local, regional and national firms. We compete against these
firms by stressing the quality and experience of our employees, the services
provided by us, and the market presence and experience we have developed over
the past eighteen years. We may nevertheless lose some of our third party
management business, particularly when such properties are sold.

Environmental Matters

Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property, and may be held liable to a governmental
entity or to third parties for property damage and for investigation and
clean-up costs incurred by such parties in connection with the contamination.
Such laws, ordinances and regulations typically impose clean-up responsibility
and liability without regard to whether the owner knew of or caused the
presence of the contaminants, and the liability under such laws has been
interpreted to be joint and several unless the harm is divisible and there is a
reasonable basis for allocation of responsibility. The cost of investigation,
remediation or removal of such substances may be substantial, and the presence
of such substances or the failure to properly remediate the contamination on
such property may adversely affect the owners ability to sell or rent such
property or to borrow using such property as collateral. Persons who arrange
for the disposal or treatment of hazardous or toxic substances may also be
liable for the costs of removal or remediation of such substances at the
disposal or treatment facility, whether or not such facility is owned or
operated by such person. 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. Finally, the owner or operator of
a site may be subject to common law claims by third parties based on damages
and costs resulting from environmental contamination emanating from a site. In
connection with the ownership, operation, management and development of our
communities and other real properties, we may be potentially liable for such
damages and costs.

Certain federal, state and local laws, ordinances and regulations govern
the removal, encapsulation and disturbance of asbestos-containing materials
(ACMs) when such materials are in poor condition or in the event of
construction, remodeling, renovation or demolition of a building. Such 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 such costs.

In addition, recent studies have linked radon, a naturally-occurring
substance, to increased risks of lung cancer. While there are currently no
state or federal requirements regarding the monitoring for, presence of, or
exposure to radon in indoor air, the U.S. Environmental Protection Agency and
the Surgeon General recommend testing residences for the presence of radon in
indoor air, and the EPA further recommends that concentrations of radon in
indoor air be limited to less than 4 picocuries per liter of air (the
Recommended Action Level). The presence of radon in

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concentrations equal to
or greater than the Recommended Action Level in a community may adversely
affect our ability to rent apartment homes in that community and the market
value of the community.

Finally, recently-enacted federal legislation will eventually require
owners and landlords of residential housing constructed prior to 1978 to
disclose to potential tenants or purchasers any known lead-paint hazards and
will impose treble damages for failure to so notify. In addition, lead-based
paint in any of our communities may result in lead poisoning in children
residing in that community if chips or particles of such lead-based paint are
ingested, and we may be held liable under state laws for any such injuries
caused by ingestion of lead-based paint by children living at our communities.

Our assessments of our communities have not revealed any environmental
liability that we believe would have a material adverse effect on our business,
assets or results of operations, nor are we aware of any such material
environmental liability. Nevertheless, it is possible 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 (1) future laws, ordinances or regulations will not impose any
material environmental liability, or (2) the current environmental condition of
our communities will not be affected by tenants, the condition of land or
operations in the vicinity of the properties, such as the presence of
underground storage tanks, or the actions of third parties unrelated to us.

We believe that no ACMs were used in connection with the construction of
our communities or will be used in connection with future construction. Our
environmental assessments have revealed the presence of potentially friable
ACMs at two of our communities. We have programs in place to maintain and
monitor ACMs. We believe our communities are in compliance in all material
respects with all federal, state and local laws, ordinances and regulations
regarding hazardous or toxic substances or petroleum products. We have not been
notified by any governmental authority and are not otherwise aware of any
material non-compliance, liability or claim relating to hazardous or toxic
substances or petroleum products in connection with any of our present
properties that would involve substantial expenditure, and we do not believe
that compliance with applicable environmental laws or regulations will have an
adverse material effect on us, our financial condition or results of
operations.

Costs of Compliance with Americans with Disabilities Act and Similar Laws

Under the Americans with Disabilities Act of 1990 (the ADA), all places
of public accommodation are required to meet certain federal requirements
related to access and use by disabled persons. These requirements became
effective in 1992. We believe that our communities are substantially in
compliance with present requirements of the ADA as they apply to multifamily
dwellings. A number of additional federal, state and local laws exist which
also may require modifications to our communities or regulate certain further
renovations with respect to access by disabled persons. For example, the Fair
Housing Amendments Act of 1988 (the FHAA) requires apartment communities
first occupied after March 13, 1990 to be accessible to the handicapped.
Non-compliance with the FHAA could result in the imposition of fines or an
award of damages to private litigants. We believe that our communities that
are subject to the FHAA are substantially in compliance with this law.

Additional legislation may impose further burdens or restrictions on
owners with respect to access by disabled persons. The ultimate amount of the
cost of compliance with the ADA 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 certain renovations may limit application of our investment
strategy in certain instances or reduce overall returns on our investments.

Insurance

We carry comprehensive liability, fire, extended coverage and rental loss
insurance with respect to all of our completed communities, with policy
specifications, insured limits and deductibles customarily carried for similar
properties. We carry similar insurance with respect to our development
properties, but with certain appropriate exceptions given the undeveloped
nature of these properties. There are, however, certain types of losses, such
as losses arising from acts of war, that are not generally insured because they
are either uninsurable or not economically insurable. Should an uninsured loss
or a loss in excess of insured limits occur, we could lose our capital invested
in a particular property as well as the anticipated future revenues from the
property and would continue to be obligated on any mortgage indebtedness or
other obligations related to the property. Any uninsured loss or loss in
excess of insured limits would adversely affect us.

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Employees

We provide a full range of real estate services through a staff of
approximately 1,315 employees, including an experienced management team. There
are no collective bargaining agreements with any of our employees. We believe
relations with our employees are excellent.

Tax Matters

We have elected to be taxed as a REIT under the Code. For the tax year
ending December 31, 2000, a REIT must distribute at least 95% of its ordinary
taxable income. As a result of recently enacted tax legislation, effective for
tax years beginning after December 31, 2000, the distribution requirement has
been reduced from 95% to 90% of a REITs ordinary taxable income. Provided we
maintain our qualification as a REIT, we generally will not be subject to
federal income tax on distributed net income. We currently utilize
Gables Residential Services to provide management and other services
to third parties that a REIT may be prohibited from providing. The
taxable income of Gables Residential Services, if any, is subject to
tax at regular corporate rates.

The recently enacted tax legislation also alters the requirements for
qualification as a REIT. In particular, the new legislation generally
liberalizes, from the perspective of our historic operations, the asset
diversification requirements applicable to REITs. Effective for tax years
beginning after December 31, 2000, a REIT may own the securities of a taxable
REIT subsidiary without limitation on the REITs voting control over the
subsidiary, provided that not more than 20% of the value of the REITs total
assets is represented by securities of one or more taxable REIT subsidiaries.
A taxable REIT subsidiary would include a corporation in which we directly or
indirectly own stock and which has elected to be treated as a taxable REIT
subsidiary.

Policies with Respect to Significant Business Activities

The following is a discussion of our investment, financing and other
significant policies. These policies have been determined by our board of
trustees and may be amended or revised from time to time by the board of
trustees without a vote of the shareholders, except that (1) we cannot change
our policy of holding assets and conducting business only through the Operating
Partnership, Gables Residential Services and other permitted subsidiaries
without the consent of the holders of Units as provided in the partnership
agreement of the Operating Partnership, (2) changes in policies with respect to
conflicts of interest must be consistent with legal requirements, and (3) we
cannot take any action intended to terminate our qualification as a REIT
without the approval of the holders of two-thirds of our common shares.

Investment Policies. We will conduct all of our investment activities
through the Operating Partnership and its subsidiaries. Our investment
objectives are to provide quarterly cash distributions and achieve long-term
capital appreciation through increases in our value. We may purchase
income-producing multifamily apartments or other types of properties for
long-term investment, expand and improve the communities presently owned or
other properties purchased, or sell communities or other properties, in whole
or in part, when circumstances warrant. We may also participate with third
parties in apartment community ownership through joint ventures or other types
of co-ownership. Equity investments may be subject to existing mortgage
financing and other indebtedness or financing or indebtedness incurred in
connection with acquiring or refinancing these investments. Debt service on
such financing or indebtedness will have a priority over common shares and any
distributions thereon.

While we emphasize equity real estate investments in multifamily apartment
communities, we may, at the discretion of the board of trustees, invest in
other types of equity real estate investments and mortgages, including
participating or convertible mortgages and other real estate interests. We
currently intend to invest in apartment communities in specifically identified
markets. However, future development or investment activities will not be
limited to any geographic area or product type or to a specified percentage of
our assets. We will not have any limit on the amount or percent of our assets
invested in one property. Subject to the percentage of ownership limitations
and gross income and asset tests necessary for REIT qualification, we may also
invest in securities of other REITs, other entities engaged in real estate
activities or which provide services to the real estate industry, or securities
of other issuers, including for the purpose of exercising control over such
entities. We may enter into joint ventures or partnerships for the purpose of
obtaining an equity interest in a particular property in accordance with our
investment policies. These investments may permit us to own interests in
larger assets without unduly restricting diversification and, therefore, add
flexibility in structuring our portfolio. We will not enter into a joint
venture or partnership to make an investment that would not otherwise meet our
investment policies. Investment in these securities is also subject to our
policy not to be treated as an investment company under the Investment Company
Act of 1940.

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Financing Policies. Our debt to total market capitalization ratio,
defined as our total consolidated debt as a percentage of the December 31, 2000
market value of our outstanding common shares and Units plus total consolidated
debt and preferred shares and Units at liquidation value, was approximately
43.3% at December 31, 2000. Excluding construction-related indebtedness, this
ratio was 39.0% at December 31, 2000. This ratio will fluctuate with changes
in the price of our common shares and the number of outstanding common shares
or other forms of shares of beneficial interest, and differs from the
debt-to-book capitalization ratio, which is based upon book values. This
percentage will increase as we use financing to continue construction of our
development communities and acquire additional multifamily apartment
communities. As the debt-to-book capitalization ratio may not reflect the
current income potential of a companys assets and operations, we believe that,
in most circumstances, the debt to total market capitalization ratio may
provide an alternate indication of leverage for a company whose assets are
primarily income-producing real estate and should be evaluated along with the
debt service coverage and underlying components of our indebtedness.

We currently have a policy of incurring debt only if the ratio of debt to
total market capitalization would be 60% or less. Our declaration of trust and
bylaws do not, however, limit the amount or percentage of indebtedness that we
may incur. In addition, we may from time to time modify our debt policy in
light of current economic conditions, relative costs of debt and equity
capital, market values of our communities, general conditions in the market for
debt and equity securities, fluctuations in the market price of common shares,
growth opportunities and other factors. Accordingly, we may increase our debt
to total market capitalization ratio beyond the limits described above. To the
extent that the board of trustees decides to obtain additional capital, we may
raise capital through asset dispositions, additional equity offerings, debt
financings or retention of funds from operations as allowable under the Code in
order to maintain REIT tax status, or a combination of these methods. We
presently anticipate that any additional borrowings would be made through the
Operating Partnership, although we might incur indebtedness, the proceeds of
which would be loaned to the Operating Partnership. Borrowings may be
unsecured or may be secured by any or all of our assets, the Operating
Partnership or any existing or new property owning partnership, and may have
full or limited recourse to all or any portion of our assets, the Operating
Partnership or any existing or new property owning partnership. Indebtedness
incurred by us may be in the form of bank borrowings, tax-exempt bonds,
purchase money obligations to sellers of apartment communities or other
properties, publicly or privately placed debt instruments or financing from
institutional investors or other lenders. The proceeds from any of our
borrowings may be used for working capital to refinance existing indebtedness
and to finance acquisitions, expansions or development of new communities and
other properties, and for the payment of distributions. We have not
established any limit on the number or amount of mortgages that may be placed
on any single property or on our portfolio as a whole.

We currently have a senior unsecured debt rating of BBB from Standard and
Poors and Baa2 from Moodys Investors Service. Our Series A Preferred Shares
currently have a rating of BBB- from Standard and Poors and baa3 from Moodys
Investors Service. We intend to adhere to financing policies that will allow
us to maintain these investment grade credit ratings.

Conflict of Interest Policies. As part of their employment agreements,
each of Chris Wheeler (Chairman, President and Chief Executive Officer), Jordan
Clark (Chief Investment Officer), Mike Hefley (Chief Operating Officer), and
Marvin Banks (Chief Financial Officer) is bound by a non-competition covenant.
These non-competition covenants provide that, during the term of employment and
for a period of one year following termination of employment, under certain
circumstances, each individual is prohibited from directly or indirectly
competing with us with respect to any multifamily apartment residential real
estate property management, development, construction, acquisition or
disposition activities undertaken or being considered by us. These employment
agreements also contain certain non-solicitation covenants wherein each
individual subject to the agreement is prohibited, during the term of
employment and for a period of one year following employment, from directly or
indirectly (1) soliciting or inducing any of our present or future employees
to accept employment with such individual or any person or entity associated
with such individual, (2) employing, or causing any person or entity associated
with such individual to employ, any of our present or future employees without
providing us prior written notice of such proposed employment, or (3) either
for himself or for any other person or entity, competing for or soliciting the
third party owners with whom we have an existing property management agreement.
The employment agreements terminate on January 1, 2002, but are automatically
extended for additional one-year periods unless notice is given by us or the
employee three months prior to the agreements expiration that the agreement
will not be renewed.

In addition, trustees as well as officers (Senior Management) are bound
by a conflict of interest policy which narrowly focuses on business activities
of Senior Management which may compete directly with our business in the
multifamily sector. Under this policy, Senior Management must refrain from
engaging in activities such as serving as a

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director, trustee, officer,
employee, partner, consultant, agent, investor, lender, or a significant
financial stakeholder in an enterprise that engages, or proposes to engage in
the acquisition, development, management, ownership, operation or disposition
of multifamily residential real estate property in any market in which we are
currently present or contemplating entering.

Senior Management may engage in certain permissible competitive
activities, although potentially competitive with us. These activities which
are similar to the activities described in the preceding paragraph, include any
proposed activity that is fully disclosed to and approved by the chairman of
the board, any proposed activity which involves either fewer than 30
residential units or a total value of less than $3.0 million, and relates to a
property that is not located within a five mile radius of our existing or
proposed properties, and any activity by a trustee, if such activity is an
incidental or non-recurring part of the regular duties and responsibilities
associated with his or her employment.

We have adopted a policy that, without the approval of a majority of our
trustees who are neither officers nor affiliated with us, we will not (1)
acquire from or sell to any trustee, officer or employee or any entity in which
a trustee, officer or employee of our company beneficially owns more than a 1%
interest, or acquire from or sell to any affiliate of any of the foregoing, any
of our assets or other property, (2) make any loan to or borrow from any of the
foregoing persons, or (3) engage in any other transaction with any of the
foregoing persons.

Risk Factors

Before you invest in our securities, you should be aware that there are
various risks, including those described below. You should consider carefully
these risk factors together with all of the information included or
incorporated by reference in this document before you decide to purchase our
securities. This section includes certain forward-looking statements.

Development and construction risks could impact our profitability.We
intend to continue to develop and construct multifamily apartment home
communities. Our development and construction activities may be exposed to the
following risks:

|  |  |                                                                                                                                                                                                                                                                                                                                                             
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We may be unable to obtain, or face delays in obtaining,
necessary zoning, land-use, building, occupancy, and other required
governmental permits and authorizations, which could result in
increased costs and could require us to abandon our activities
entirely with respect to the project for which we are unable to
obtain permits or authorizations;
| 
| |  | We may abandon development opportunities that we have already
begun to explore and as a result we may fail to recover expenses
already incurred in connection with exploring such development
opportunities;                                                                                                                                                
| 
| |  | We may incur construction costs for a community which exceed
our original estimates due to increased materials, labor or other
costs, which could make completion of the community uneconomical and
we may not be able to increase rents to compensate for the increase
in construction costs;                                                              
| 
| |  | Occupancy rates and rents at a newly completed development may
fluctuate depending on a number of factors, including market and
economic conditions, and may result in the community not being
profitable;                                                                                                                                                  
| 
| |  | We may not be able to obtain financing with favorable terms for
the development of a community, which may make us unable to proceed
with its development; and                                                                                                                                                                                               
| 
| |  | We may be unable to complete construction and lease-up of a
community on schedule, resulting in increased debt service expense
and construction costs.                                                                                                                                                                                                      

Construction costs have been increasing in our target markets, and the
cost to update acquired communities has, in some cases, exceeded our original
estimates. We may experience similar cost increases in the future. Our
inability to charge rents that will be sufficient to offset the effects of any
increases in construction costs may impact our profitability.

Acquisitions may not yield anticipated results.We intend to continue to
acquire multifamily apartment home communities on a select basis. Our
acquisition activities and their success may be exposed to the following risks:

|  |  |                                                                                          
|- |  | -----------------------------------------------------------------------------------------
| |  | The acquired property may fail to perform as we expected in analyzing our investment; and

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|  |  |                                                                                                       
|- |  | ------------------------------------------------------------------------------------------------------
| 
| 
| 
| 
| |  | Our estimate of the costs of repositioning or redeveloping the acquired property may prove inaccurate.

Policy of limiting debt level may be changed.While our current policy is
not to incur debt that would make our ratio of debt to total market
capitalization greater than 60%, our declaration of trust and bylaws do not
contain any such limitations. Our ratio of debt to total market capitalization
as of December 31, 2000 was 43%. Because we do not have any debt incurrence
restrictions in our declaration of trust or bylaws, we could increase the
amount of outstanding debt at any time. In the event that the price of our
common shares increases, we could incur additional debt without increasing the
ratio of debt to total market capitalization and without a concurrent increase
in our ability to service such additional debt.

Incurrence of additional debt and related issuance of equity may be
dilutive to shareholders.Future issuance of equity may dilute the interest of
existing shareholders. To the extent that additional equity securities are
issued to finance future developments and acquisitions instead of incurring
additional debt, the interests of our existing shareholders could be diluted.
Our ability to execute our business strategy depends on our access to an
appropriate blend of debt financing, including unsecured lines of credit and
other forms of secured and unsecured debt, and equity financing, including
common and preferred equity.

Insufficient cash flow could affect our debt financing and create
refinancing risk.We are subject to the risks normally associated with debt
financing, including the risk that our cash flow will be insufficient to meet
required payments of principal and interest. We anticipate that only a small
portion of the principal of our debt will be repaid prior to maturity. Although
we may be able to use cash flow to make future principal payments, we cannot
assure you that sufficient cash flow will be available to make all required
principal payments. Therefore, we are likely to need to refinance at least a
portion of our outstanding debt as it matures. There is a risk that we may not
be able to refinance existing debt or that the terms of any refinancing will
not be as favorable as the terms of the existing debt.

Rising interest rates would increase interest costs and could affect the
market price of our securities.We expect to incur variable rate debt under
credit facilities in connection with the acquisition, construction and
reconstruction of multifamily apartment communities in the future, as well as
for other purposes. Accordingly, if interest rates increase, so will our
interest costs to the extent the variable rate increase is not hedged
effectively. In addition, an increase in market interest rates may lead
purchasers of our securities to demand a higher annual yield, which could
adversely affect the market price of our outstanding securities.

Interest rate hedging contracts may involve material changes and may not
provide adequate protection.From time to time when we anticipate offerings of
debt securities, we may seek to decrease our exposure to fluctuations in
interest rates during the period prior to the pricing of the securities by
entering into interest rate hedging contracts. We may do so to increase the
predictability of our financing costs. Also, from time to time we rely on
interest rate hedging contracts to offset our exposure to moving interest rates
with respect to debt financing arrangements at variable interest rates. The
settlement of interest rate hedging contracts has in the past and may in the
future involve charges to earnings that may be material in amount. Such
charges are typically driven by the extent and timing of fluctuations in
interest rates. Despite our efforts to minimize our exposure to interest rate
fluctuations, there is no guarantee that we will be able to maintain our
hedging contracts at their existing levels of coverage or that the amount of
coverage maintained will cover all of our outstanding indebtedness at any such
time. If our efforts are unsuccessful, we may not meet our objective of
reducing the extent of our exposure to interest rate fluctuations.

Bond compliance requirements could limit income and restrict use of
communities and cause favorable financing to become unavailable.Some of our
multifamily apartment communities are financed with obligations issued by
various local government agencies or instrumentalities, the interest on which
is exempt from federal income taxation. These obligations are commonly
referred to as tax-exempt bonds. The bond compliance requirements for our
current tax-exempt bonds, and the requirements of any future tax-exempt bond
financing, may have the effect of limiting our income from communities subject
to such financing. Under the terms of our tax-exempt bonds, we must comply
with various restrictions on the use of the communities financed by such bonds,
including a requirement that a percentage of apartments be made available to
low and middle income households. In addition, some of our tax-exempt bond
financing documents require that a financial institution guarantee payment of
the principal of, and interest on, the bonds. The guarantee may take the form
of a letter of credit, surety bond, guarantee agreement or other additional
collateral. If the financial institution defaults in its guarantee
obligations, or we are unable to renew the applicable guarantee or otherwise
post satisfactory collateral, a default will occur under the applicable
tax-exempt bonds and the community could be foreclosed upon.

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Failure to generate sufficient revenue could limit cash flow available for
distributions to shareholders.If our communities do not generate revenues
sufficient to meet our operating expenses, including debt service and capital
expenditures, our cash flow and ability to pay distributions to our
shareholders will be adversely affected. The following factors, among others,
may adversely affect the revenues generated by our apartment communities:

|  |  |                                                                                                                                                        
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the national and local economic climates;                                                                                                              
| 
| |  | local real estate market conditions, such as oversupply of apartment homes;                                                                            
| 
| |  | the perceptions by prospective residents of the safety, convenience and attractiveness of our communities
and the neighborhoods where they are located;
| 
| |  | our ability to provide adequate management, maintenance and insurance; and                                                                             
| 
| |  | increased operating costs, including real estate taxes and utilities.                                                                                  

Significant expenditures associated with each investment such as debt
service payments, if any, real estate taxes, insurance and maintenance costs
are generally not reduced when circumstances cause a reduction in income from a
community. For example, if we mortgage a community to secure payment of debt
and are unable to meet the mortgage payments, we could sustain a loss as a
result of foreclosure on the community or the exercise of other remedies by the
mortgagee.

Unfavorable changes in market and economic conditions could hurt occupancy
or rental rates.The market and economic conditions in metropolitan areas of
our current markets in the United States may significantly affect apartment
home occupancy or rental rates. Occupancy and rental rates in those markets,
in turn, may significantly affect our profitability and our ability to satisfy
our financial obligations. The risks that may affect conditions in those
markets include the following:

|  |  |                                                                                                                                                                                                                    
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the economic climate which may be adversely impacted by plant
closings, industry slowdowns and other factors;                                                                                                      
| 
| |  | real estate conditions such as an oversupply of, or a reduced demand for, apartment homes;                                                                                                                         
| 
| |  | a decline in household formation that adversely affects occupancy or rental rates;                                                                                                                                 
| 
| |  | the inability or unwillingness of residents to pay rent increases;                                                                                                                                                 
| 
| |  | the potential effect of rent control or rent stabilization
laws, or other laws regulating housing, on any of our communities,
which could prevent us from raising rents to offset increases in
operating costs; and
| 
| |  | the rental market which may limit the extent to which rents may
be increased to meet increased expenses without decreasing occupancy
rates.                                                                        

Any of these risks could adversely affect our ability to achieve our
desired yields on our communities and to make expected distributions to
shareholders.

Difficulty of selling apartment communities could limit flexibility.Real
estate in metropolitan areas of the United States can be hard to sell,
especially if market conditions are poor. This may limit our ability to change
our portfolio promptly in response to changes in economic or other conditions.
In addition, federal tax laws limit our ability to sell communities that we
have owned for fewer than four years, and this may affect our ability to sell
communities without adversely affecting returns to our shareholders.

Increased competition could limit our ability to lease apartment homes or
increase or maintain rents.Our apartment communities in metropolitan areas
compete with numerous housing alternatives in attracting residents, including
other rental apartments and single-family homes that are available for rent, as
well as new and existing single-family homes for sale. Competitive residential
housing in a particular area could adversely affect our ability to lease
apartment homes and to increase or maintain rents.

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Significant new operations and acquired communities under management
require integration with the existing business and, if not properly integrated,
could create inefficiencies.Our ability to manage growth effectively will
require us, among other things, to successfully apply our experience in
managing our existing portfolio of multifamily apartment communities to a
larger number of properties. In addition, we must be able to successfully
manage the integration of new management and operations personnel as our
organization grows in size and complexity.

Failure to succeed in new markets may limit growth.We may make selected
acquisitions outside of our current market areas from time to time, if
appropriate opportunities arise. Our historical experience in our current
markets located in the United States does not ensure that we will be able to
operate successfully in other market areas new to us. We may be exposed to a
variety of risks if we choose to enter into new markets. These risks include,
among others:

|  |  |                                                                                      
|- |  | -------------------------------------------------------------------------------------
| |  | a lack of market knowledge and understanding of the local economies;                 
| 
| |  | an inability to obtain land for development or to identify acquisition opportunities;
| 
| |  | an inability to obtain construction tradespeople; and                                
| 
| |  | an unfamiliarity with local governmental and permitting procedures.                  

Decrease of fee management business would result in decrease in revenues.
We manage properties owned by third parties for a fee. Most of our management
contracts are terminable upon 30-days notice. There is a risk that the
management contracts will be terminated and/or that the rental revenues upon
which management fees are based will decline and management fee income will
decrease accordingly.

Share ownership limit may prevent takeovers beneficial to shareholders.
For us to maintain our qualification as a REIT for federal income tax purposes,
not more than 50% in value of our outstanding shares of beneficial interest may
be owned, directly or indirectly, by five or fewer individuals. As defined for
federal income tax purposes, the term individuals includes a number of
specified entities. Our declaration of trust includes restrictions regarding
transfers of our shares of beneficial interest and ownership limits that are
intended to assist us in satisfying such limitations. The ownership limit may
have the effect of delaying, deferring or preventing someone from taking
control of us, even though such a change of control could involve a premium
price for our shareholders or otherwise could be in our shareholders best
interests.

Limits on changes in control may discourage takeover attempts beneficial
to shareholders.Our declaration of trust, our bylaws and Maryland law may
have the effect of discouraging a third party from attempting to acquire us
which makes a change in control more unlikely. The result may be a limitation
on the opportunity for shareholders to receive a premium for their common
shares over then-prevailing market prices.

Compliance or failure to comply with Americans with Disabilities Act and
other similar laws could result in substantial costs.The ADA generally
requires that public accommodations, including office buildings and hotels be
made accessible to disabled persons. Noncompliance could result in imposition
of fines by the federal government or the award of damages to private
litigants. If, pursuant to the ADA, we are required to make substantial
alterations and capital expenditures in one or more of our properties,
including the removal of access barriers, it could adversely affect our
financial condition and results of operations, as well as the amount of cash
available for distribution to our shareholders.

A number of additional federal, state and local laws exist that impact our
communities with respect to access thereto by disabled persons. For example,
the FHAA requires that apartment communities first occupied after March 13,
1990 be accessible to the handicapped. Noncompliance with the FHAA could result
in the imposition of fines or an award of damages to private litigants.

We cannot predict the ultimate cost of compliance with the ADA or other
similar legislation. The costs could be substantial.

Failure to qualify as a REIT would cause us to be taxed as a corporation
which would significantly lower funds available for distribution to
shareholders.If we fail to qualify as a REIT for federal income tax purposes,
we will be taxed as a corporation. We believe that we are organized and
qualified as a REIT and intend to operate in a manner that

13



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will allow us to
continue to qualify. However, we cannot assure you that we are qualified as
such, or that we will remain qualified as such in the future. This is because
qualification as a REIT involves the application of highly technical and
complex provisions of the Code as to which there are only limited judicial and
administrative interpretations, and involves the determination of various
factual matters and circumstances not entirely within our control. In
addition, future legislation, new regulations, administrative interpretations
or court decisions may significantly change the tax laws or the application of
the tax laws with respect to qualification as a REIT for federal income tax
purposes or the federal income tax consequences of such qualification.

If, in any taxable year, we fail to qualify as a REIT, we will be subject
to federal income tax on our taxable income at regular corporate rates, plus
any applicable alternative minimum tax. In addition, unless we are entitled to
relief under applicable statutory provisions, we would be disqualified from
treatment as a REIT for the four taxable years following the year in which we
lose our qualification. The additional tax liability resulting from the
failure to qualify as a REIT would significantly reduce or eliminate the amount
of funds available for distribution to our shareholders. Furthermore, we would
no longer be required to make distributions to our shareholders.

Potential liability for environmental contamination could result in
substantial costs.We are in the business of acquiring, owning, operating and
developing real estate properties. From time to time we will sell to third
parties some of our properties. Under various federal, state and local
environmental laws, we may be required, often regardless of our knowledge or
responsibility but solely because of our current or previous ownership or
operation of real estate, to investigate and remediate the effects of hazardous
or toxic substances or petroleum product releases at those properties. We may
also be held liable to a governmental entity or to third parties for property
damage and for investigation and clean-up costs incurred by us in connection
with any contamination. These costs could be substantial. The presence of
such substances or the failure to properly remediate the contamination may
materially and adversely affect our ability to borrow against, sell or rent the
affected property. In addition, applicable environmental laws create liens on
contaminated sites in favor of the government for damages and costs it incurs
in connection with the contamination.

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|        |  |           
|------- |  | ----------
|ITEM 2. |  | PROPERTIES

As of December 31, 2000, we owned or had an interest in 83 stabilized
communities consisting of 24,774 apartment homes, and owned or had an interest
in 10 development/lease-up communities consisting of 2,719 apartment homes.
The communities, comprising a total of 27,493 apartment homes, are located in
Texas, Georgia, Florida and Tennessee. The following table shows the locations
of the communities and the number of apartment homes in each metropolitan area:

|                  |        |            |                       |          |                           |       |              |            |  |          |    |       |  |       |       |        |              |  |     |       |  |  |            |        |  |  |            |       |  
|----------------- | ------ | ---------- | --------------------- | -------- | ------------------------- | ----- | ------------ | ---------- |  | -------- | -- | ----- |  | ----- | ----- | ------ | ------------ |  | --- | ----- |  |  | ---------- | ------ |  |  | ---------- | ----- | -
|                  |        |            | Number of Communities |          | Number of Apartment Homes
|                  |        |            |                       |          |                          
|                  |        |            |                       |          |                           |       |              |            |  |          |    |       |  |       |       |        |              |  |     |       |  |  |            |        |  |  | Percent of
|                  |        |            |                       |          |                           |       | Development/ |            |  |          |    |       |  |       |       |        | Development/ |  |     |       |  |  | Total Apt.
|Location          |        | Stabilized |                       | lease-up |                           | Total |              | Stabilized |  | lease-up |    | Total |  | Homes
|                  |        |            |                       |          |                           |       |              |            |  |          |    |       |  |      
|Houston, TX(1)    |        |            | 21                    |          |                           |       | 1            |            |  |          | 22 |       |  |       | 7,002 |        |              |  | 296 |       |  |  | 7,298      |        |  |  | 26.6       | %    
|                 
|                 
|                 
|                 
|Atlanta, GA(2)    |        |            | 20                    |          |                           |       | 2            |            |  |          | 22 |       |  |       | 6,199 |        |              |  | 263 |       |  |  | 6,462      |        |  |  | 23.5       | %    
|                 
|                 
|                 
|                 
|Boca Raton, FL(3) |        |            | 17                    |          |                           |       | 2            |            |  |          | 19 |       |  |       | 4,729 |        |              |  | 610 |       |  |  | 5,339      |        |  |  | 19.4       | %    
|                 
|                 
|                 
|                 
|Dallas, TX(4)     |        |            | 9                     |          |                           |       | 2            |            |  |          | 11 |       |  |       | 2,181 |        |              |  | 467 |       |  |  | 2,648      |        |  |  | 9.6        | %    
|                 
|                 
|                 
|                 
|Austin, TX        |        |            | 7                     |          |                           |       |             |            |  |          | 7  |       |  |       | 1,677 |        |              |  |    |       |  |  | 1,677      |        |  |  | 6.1        | %    
|                 
|                 
|                 
|                 
|Memphis, TN(5)    |        |            | 3                     |          |                           |       |             |            |  |          | 3  |       |  |       | 1,309 |        |              |  |    |       |  |  | 1,309      |        |  |  | 4.8        | %    
|                 
|                 
|                 
|                 
|Orlando, FL       |        |            | 2                     |          |                           |       | 2            |            |  |          | 4  |       |  |       | 511   |        |              |  | 763 |       |  |  | 1,274      |        |  |  | 4.6        | %    
|                 
|                 
|                 
|                 
|Nashville, TN(6)  |        |            | 4                     |          |                           |       |             |            |  |          | 4  |       |  |       | 1,166 |        |              |  |    |       |  |  | 1,166      |        |  |  | 4.2        | %    
|                 
|                 
|                 
|                 
|Tampa, FL         |        |            |                      |          |                           |       | 1            |            |  |          | 1  |       |  |       |      |        |              |  | 320 |       |  |  | 320        |        |  |  | 1.2        | %    
|                  |        |            |                       |          |                           |       |              |            |  |          |    |       |  |       |       |        |              |  |     |       |  |  |            |        |  |  |            |      
|                  | Totals |            |                       | 83       |                           |       |              | 10         |  |          |    | 93    |  |       |       | 24,774 |              |  |     | 2,719 |  |  |            | 27,493 |  |  |            | 100.0 | %
|                  |        |            |                       |          |                           |       |              |            |  |          |    |       |  |       |       |        |              |  |     |       |  |  |            |        |  |  |            |      



|(1) |  | Includes a stabilized community comprising 318 apartment homes in
which we have a 25% interest and a stabilized community comprising 382
apartment homes in which we have a 20% interest.   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes a stabilized community comprising 435 apartment homes in
which we have a 20% interest.                                                                                             
|   
|(3) |  | Includes two stabilized communities comprising 532 apartment homes
and two development/lease-up communities comprising 610 apartment homes
in which we have a 20% interest.                 
|   
|(4) |  | Includes one stabilized community comprising 222 apartment homes and
one development/lease-up community comprising 290 apartment homes in
which we have a 20% interest.                     
|   
|(5) |  | Includes one stabilized community comprising 345 apartment homes in
which we have a 25% interest and one stabilized community comprising 500
apartment homes in which we have a 9% interest.
|   
|(6) |  | Includes two stabilized communities comprising 618 apartment homes in
which we have a 9% interest.                                                                                          

Stabilized Communities. We developed 40 communities consisting of 11,641
apartment homes and acquired 43 communities consisting of 13,133 apartment
homes. We manage and operate all of the stabilized communities, which are
typically two and three-story garden apartments, townhomes and higher-density
apartments. As of December 31, 2000, the communities had an average scheduled
monthly rental rate per apartment home of $917 or $0.92 per square foot and a
physical occupancy rate of 96%. The average age of the communities is
approximately nine years.

Most of our communities offer many attractive features designed to enhance
their market appeal, such as vaulted ceilings, fireplaces, dishwashers,
disposals, washer/dryer connections, ice-makers, patios and decks.
Recreational facilities include swimming pools, fitness facilities,
playgrounds, picnic areas and tennis and racquetball courts. In many
communities, we make amenities and services such as aerobic classes, resident
social events, dry cleaning pickup and delivery, and the use of fax, computer
and copy equipment available to residents. In-depth market research, including
periodic focus groups with residents and feedback from on-site management
personnel, is used to refine and enhance management services and community
design. Additional information regarding our stabilized communities at December
31, 2000 follows:

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Stabilized Community Features as of December 31, 2000

|                  |                              |                          |  |    |   |       |  |            |       |             |  |           |           |              |  |      |       |          |  |           |  |             |  |           |   |         |  |         |  |  |  |                 |       |  |  |    |    |   |   |                |     |  |   |      |      | 
|----------------- | ---------------------------- | ------------------------ |  | -- | - | ----- |  | ---------- | ----- | ----------- |  | --------- | --------- | ------------ |  | ---- | ----- | -------- |  | --------- |  | ----------- |  | --------- | - | ------- |  | ------- |  |  |  | --------------- | ----- |  |  | -- | -- | - | - | -------------- | --- |  | - | ---- | ---- | 
|                  |                              |                          |  |    |   |       |  |            |       |             |  |           |           |              |  |      |       |          |  |           |  |             |  |           |   |         |  |         |  |  |  |                 |       |  |  |    |    |   |   | Scheduled Rent
|                  |                              |                          |  |    |   |       |  | Number of  |       | Approximate |  |           |           |              |  | Year |       |          |  |           |  |             |  |           |   | Average |  |         |  |  |  | at 12/31/00 Per
|                  |                              |                          |  |    |   |       |  | Apartment  |       | Rentable    |  | Total     |           | Constructed/ |  |      |       |          |  | Year      |  | Unit Size   |  | Occupancy |   |        
|Community Name(1) |                              |                          |  |    |   | Homes |  | Sq. Ft.(2) |       | Acreage     |  | Renovated |           |              |  |      |       | Acquired |  | (Sq. Ft.) |  | at 12/31/00 |  | Unit      |   | Sq. Ft.
|                  |                              |                          |  |    |   |       |  |            |       |             |  |           |           |              |  |      |       |          |  |           |  |             |  |           |   |        
|Houston, TX      
|                 
|                 
|                 
|                 
|                  | Austin Colony                |                          |  | (3 | ) |       |  | 237        |       |             |  | 231,621   |           |              |  | 11.0 |       |          |  | 1984      |  |             |  |           |   |         |  | 1998    |  |  |  | 977             |       |  |  | 94 | %  |   | $ | 889            |     |  | $ | 0.91 |     
|                 
|                 
|                 
|                 
|                  | Baybrook Village             |                          |  |    |   |       |  | 776        |       |             |  | 620,428   |           |              |  | 26.4 |       |          |  | 1981      |  |             |  |           |   |         |  | 1990    |  |  |  | 800             |       |  |  | 97 | %  |   |   | 612            |     |  |   | 0.76 |     
|                 
|                 
|                 
|                 
|                  | Gables Bradford Place        |                          |  | (3 | ) |       |  | 372        |       |             |  | 320,322   |           |              |  | 13.3 |       |          |  | 1991      |  |             |  |           |   |         |  |        |  |  |  | 861             |       |  |  | 97 | %  |   |   | 773            |     |  |   | 0.90 |     
|                 
|                 
|                 
|                 
|                  | Gables Bradford Pointe       |                          |  | (3 | ) |       |  | 360        |       |             |  | 276,417   |           |              |  | 13.5 |       |          |  | 1990      |  |             |  |           |   |         |  |        |  |  |  | 768             |       |  |  | 99 | %  |   |   | 685            |     |  |   | 0.89 |     
|                 
|                 
|                 
|                 
|                  | Gables Champions             |                          |  |    |   |       |  | 404        |       |             |  | 367,588   |           |              |  | 29.7 |       |          |  | 1995      |  |             |  |           |   |         |  | 1997    |  |  |  | 910             |       |  |  | 95 | %  |   |   | 764            |     |  |   | 0.84 |     
|                 
|                 
|                 
|                 
|                  | Gables CityPlaza             |                          |  |    |   |       |  | 246        |       |             |  | 217,374   |           |              |  | 7.5  |       |          |  | 1995      |  |             |  |           |   |         |  |        |  |  |  | 884             |       |  |  | 98 | %  |   |   | 936            |     |  |   | 1.06 |     
|                 
|                 
|                 
|                 
|                  | Gables Cityscape             |                          |  | (3 | ) |       |  | 252        |       |             |  | 214,824   |           |              |  | 6.8  |       |          |  | 1991      |  |             |  |           |   |         |  |        |  |  |  | 852             |       |  |  | 98 | %  |   |   | 871            |     |  |   | 1.02 |     
|                 
|                 
|                 
|                 
|                  | Gables CityWalk/Waterford Sq |                          |  | (3 | ) |       |  | 317        |       |             |  | 255,823   |           |              |  | 8.7  |       |          |  | 1990/85   |  |             |  |           |   |         |  | --/1992 |  |  |  | 807             |       |  |  | 97 | %  |   |   | 854            |     |  |   | 1.06 |     
|                 
|                 
|                 
|                 
|                  | Gables Edgewater             |                          |  |    |   |       |  | 292        |       |             |  | 257,339   |           |              |  | 12.2 |       |          |  | 1990      |  |             |  |           |   |         |  |        |  |  |  | 881             |       |  |  | 97 | %  |   |   | 809            |     |  |   | 0.92 |     
|                 
|                 
|                 
|                 
|                  | Gables Meyer Park I          |                          |  |    |   |       |  | 345        |       |             |  | 297,054   |           |              |  | 11.0 |       |          |  | 1993      |  |             |  |           |   |         |  |        |  |  |  | 861             |       |  |  | 97 | %  |   |   | 959            |     |  |   | 1.11 |     
|                 
|                 
|                 
|                 
|                  | Gables New Territory         |                          |  |    |   |       |  | 256        |       |             |  | 233,652   |           |              |  | 15.0 |       |          |  | 1998      |  |             |  |           |   |         |  |        |  |  |  | 913             |       |  |  | 96 | %  |   |   | 867            |     |  |   | 0.95 |     
|                 
|                 
|                 
|                 
|                  | Gables of First Colony       |                          |  |    |   |       |  | 324        |       |             |  | 321,848   |           |              |  | 13.3 |       |          |  | 1996      |  |             |  |           |   |         |  | 1997    |  |  |  | 993             |       |  |  | 96 | %  |   |   | 900            |     |  |   | 0.91 |     
|                 
|                 
|                 
|                 
|                  | Gables Piney Point           |                          |  | (3 | ) |       |  | 246        |       |             |  | 227,880   |           |              |  | 7.5  |       |          |  | 1994      |  |             |  |           |   |         |  |        |  |  |  | 926             |       |  |  | 99 | %  |   |   | 881            |     |  |   | 0.95 |     
|                 
|                 
|                 
|                 
|                  | Gables Pin Oak Green         |                          |  |    |   |       |  | 582        |       |             |  | 593,478   |           |              |  | 14.4 |       |          |  | 1990      |  |             |  |           |   |         |  | 1996    |  |  |  | 1,020           |       |  |  | 96 | %  |   |   | 915            |     |  |   | 0.90 |     
|                 
|                 
|                 
|                 
|                  | Gables Pin Oak Park          |                          |  |    |   |       |  | 477        |       |             |  | 486,308   |           |              |  | 11.9 |       |          |  | 1992      |  |             |  |           |   |         |  | 1996    |  |  |  | 1,020           |       |  |  | 93 | %  |   |   | 964            |     |  |   | 0.95 |     
|                 
|                 
|                 
|                 
|                  | Gables Raveneaux             |                          |  | (4 | ) |       |  | 382        |       |             |  | 401,327   |           |              |  | 20.9 |       |          |  | 2000      |  |             |  |           |   |         |  |        |  |  |  | 1,051           |       |  |  | 95 | %  |   |   | 972            |     |  |   | 0.93 |     
|                 
|                 
|                 
|                 
|                  | Lions Head                   |                          |  | (3 | ) |       |  | 277        |       |             |  | 233,796   |           |              |  | 10.3 |       |          |  | 1983      |  |             |  |           |   |         |  | 1998    |  |  |  | 844             |       |  |  | 97 | %  |   |   | 726            |     |  |   | 0.86 |     
|                 
|                 
|                 
|                 
|                  | Metropolitan Uptown          |                          |  | (5 | ) |       |  | 318        |       |             |  | 290,141   |           |              |  | 8.9  |       |          |  | 1995      |  |             |  |           |   |         |  |        |  |  |  | 912             |       |  |  | 89 | %  |   |   | 1,032          |     |  |   | 1.13 |     
|                 
|                 
|                 
|                 
|                  | Rivercrest I                 |                          |  | (3 | ) |       |  | 140        |       |             |  | 118,020   |           |              |  | 5.1  |       |          |  | 1982      |  |             |  |           |   |         |  | 1987    |  |  |  | 843             |       |  |  | 96 | %  |   |   | 727            |     |  |   | 0.86 |     
|                 
|                 
|                 
|                 
|                  | Rivercrest II                |                          |  | (3 | ) |       |  | 140        |       |             |  | 118,020   |           |              |  | 5.0  |       |          |  | 1983      |  |             |  |           |   |         |  | 1998    |  |  |  | 843             |       |  |  | 94 | %  |   |   | 716            |     |  |   | 0.85 |     
|                 
|                 
|                 
|                 
|                  | Windmill Landing             |                          |  | (3 | ) |       |  | 259        |       |             |  | 224,689   |           |              |  | 9.8  |       |          |  | 1984      |  |             |  |           |   |         |  | 1998    |  |  |  | 868             |       |  |  | 98 | %  |   |   | 724            |     |  |   | 0.83 |     
|                  |                              |                          |  |    |   |       |  |            |       |             |  |           |           |              |  |      |       |          |  |           |  |             |  |           |   |         |  |         |  |  |  |                 |       |  |  |    |    |   |   |                |     |  |   |      |     
|                  |                              | Totals/Weighted Averages |  |    |   |       |  |            | 7,002 |             |  |           | 6,307,949 |              |  |      | 262.2 |          |  |           |  |             |  |           |   |         |  |         |  |  |  |                 | 901   |  |  |    | 96 | % |   | $              | 832 |  |   | $    | 0.92 | 
|                  |                              |                          |  |    |   |       |  |            |       |             |  |           |           |              |  |      |       |          |  |           |  |             |  |           |   |         |  |         |  |  |  |                 |       |  |  |    |    |   |   |                |     |  |   |      |     
|                 
|Atlanta, GA      
|                 
|                 
|                 
|                 
|                  | Briarcliff Gables            |                          |  |    |   |       |  | 104        |       |             |  | 128,976   |           |              |  | 5.2  |       |          |  | 1995      |  |             |  |           |   |         |  |        |  |  |  | 1,240           |       |  |  | 97 | %  |   | $ | 1,193          |     |  | $ | 0.96 |     
|                 
|                 
|                 
|                 
|                  | Buckhead Gables              |                          |  |    |   |       |  | 162        |       |             |  | 122,548   |           |              |  | 3.5  |       |          |  | 1994      |  |             |  | (6        | ) |         |  | 1994    |  |  |  | 756             |       |  |  | 97 | %  |   |   | 890            |     |  |   | 1.18 |     
|                 
|                 
|                 
|                 
|                  | Dunwoody Gables              |                          |  | (3 | ) |       |  | 311        |       |             |  | 290,396   |           |              |  | 10.4 |       |          |  | 1995      |  |             |  |           |   |         |  |        |  |  |  | 934             |       |  |  | 96 | %  |   |   | 893            |     |  |   | 0.96 |     
|                 
|                 
|                 
|                 
|                  | Gables Cityscape             |                          |  |    |   |       |  | 192        |       |             |  | 159,360   |           |              |  | 5.5  |       |          |  | 1989      |  |             |  |           |   |         |  | 1994    |  |  |  | 830             |       |  |  | 98 | %  |   |   | 935            |     |  |   | 1.13 |     
|                 
|                 
|                 
|                 
|                  | Gables Metropolitan          |                          |  | (4 | ) |       |  | 435        |       |             |  | 487,472   |           |              |  | 15.0 |       |          |  | 2000      |  |             |  |           |   |         |  |        |  |  |  | 1,121           |       |  |  | 93 | %  |   |   | 1,241          |     |  |   | 1.11 |     
|                 
|                 
|                 
|                 
|                  | Gables Mill                  |                          |  |    |   |       |  | 438        |       |             |  | 406,676   |           |              |  | 36.1 |       |          |  | 1988      |  |             |  |           |   |         |  | 1997    |  |  |  | 928             |       |  |  | 95 | %  |   |   | 905            |     |  |   | 0.97 |     
|                 
|                 
|                 
|                 
|                  | Gables Northcliff            |                          |  |    |   |       |  | 82         |       |             |  | 127,990   |           |              |  | 12.7 |       |          |  | 1978      |  |             |  |           |   |         |  | 1997    |  |  |  | 1,561           |       |  |  | 96 | %  |   |   | 1,273          |     |  |   | 0.82 |     
|                 
|                 
|                 
|                 
|                  | Gables at Sugarloaf          |                          |  |    |   |       |  | 386        |       |             |  | 387,901   |           |              |  | 29.7 |       |          |  | 1998      |  |             |  |           |   |         |  |        |  |  |  | 1,005           |       |  |  | 95 | %  |   |   | 919            |     |  |   | 0.91 |     
|                 
|                 
|                 
|                 
|                  | Gables Vinings               |                          |  |    |   |       |  | 315        |       |             |  | 336,735   |           |              |  | 15.2 |       |          |  | 1997      |  |             |  |           |   |         |  |        |  |  |  | 1,069           |       |  |  | 94 | %  |   |   | 1,088          |     |  |   | 1.02 |     
|                 
|                 
|                 
|                 
|                  | Gables Walk                  |                          |  |    |   |       |  | 310        |       |             |  | 367,226   |           |              |  | 19.7 |       |          |  | 1996 - 97 |  |             |  |           |   |         |  | 1997    |  |  |  | 1,185           |       |  |  | 95 | %  |   |   | 1,168          |     |  |   | 0.99 |     
|                 
|                 
|                 
|                 
|                  | Gables Wood Arbor            |                          |  | (3 | ) |       |  | 140        |       |             |  | 127,540   |           |              |  | 9.9  |       |          |  | 1987      |  |             |  |           |   |         |  |        |  |  |  | 911             |       |  |  | 94 | %  |   |   | 781            |     |  |   | 0.86 |     
|                 
|                 
|                 
|                 
|                  | Gables Wood Crossing         |                          |  | (3 | ) |       |  | 268        |       |             |  | 257,012   |           |              |  | 22.3 |       |          |  | 1985 - 86 |  |             |  |           |   |         |  |        |  |  |  | 959             |       |  |  | 97 | %  |   |   | 780            |     |  |   | 0.81 |     
|                 
|                 
|                 
|                 
|                  | Gables Wood Glen             |                          |  | (3 | ) |       |  | 380        |       |             |  | 377,340   |           |              |  | 23.8 |       |          |  | 1983      |  |             |  |           |   |         |  |        |  |  |  | 993             |       |  |  | 96 | %  |   |   | 728            |     |  |   | 0.73 |     
|                 
|                 
|                 
|                 
|                  | Gables Wood Knoll            |                          |  | (3 | ) |       |  | 312        |       |             |  | 311,064   |           |              |  | 19.6 |       |          |  | 1984      |  |             |  |           |   |         |  |        |  |  |  | 997             |       |  |  | 95 | %  |   |   | 768            |     |  |   | 0.77 |     
|                 
|                 
|                 
|                 
|                  | Lakes at Indian Creek        |                          |  | (3 | ) |       |  | 603        |       |             |  | 552,384   |           |              |  | 49.8 |       |          |  | 1969 - 72 |  |             |  |           |   |         |  | 1993    |  |  |  | 916             |       |  |  | 91 | %  |   |   | 673            |     |  |   | 0.73 |     
|                 
|                 
|                 
|                 
|                  | Rock Springs Estates         |                          |  |    |   |       |  | 295        |       |             |  | 298,302   |           |              |  | 28.7 |       |          |  | 1945 - 92 |  |             |  |           |   |         |  | 1997    |  |  |  | 1,011           |       |  |  | 95 | %  |   |   | 959            |     |  |   | 0.95 |     
|                 
|                 
|                 
|                 
|                  | Roswell Gables I             |                          |  | (3 | ) |       |  | 384        |       |             |  | 417,288   |           |              |  | 28.3 |       |          |  | 1995      |  |             |  |           |   |         |  |        |  |  |  | 1,087           |       |  |  | 92 | %  |   |   | 945            |     |  |   | 0.87 |     
|                 
|                 
|                 
|                 
|                  | Roswell Gables II            |                          |  | (3 | ) |       |  | 284        |       |             |  | 334,268   |           |              |  | 28.3 |       |          |  | 1997      |  |             |  |           |   |         |  |        |  |  |  | 1,177           |       |  |  | 94 | %  |   |   | 964            |     |  |   | 0.82 |     
|                 
|                 
|                 
|                 
|                  | Spalding Gables              |                          |  | (3 | ) |       |  | 252        |       |             |  | 249,333   |           |              |  | 11.2 |       |          |  | 1995      |  |             |  |           |   |         |  |        |  |  |  | 989             |       |  |  | 98 | %  |   |   | 946            |     |  |   | 0.96 |     
|                 
|                 
|                 
|                 
|                  | Wildwood Gables              |                          |  | (3 | ) |       |  | 546        |       |             |  | 619,710   |           |              |  | 37.9 |       |          |  | 1992 - 93 |  |             |  | (6        | ) |         |  | 1991    |  |  |  | 1,135           |       |  |  | 94 | %  |   |   | 956            |     |  |   | 0.84 |     
|                  |                              |                          |  |    |   |       |  |            |       |             |  |           |           |              |  |      |       |          |  |           |  |             |  |           |   |         |  |         |  |  |  |                 |       |  |  |    |    |   |   |                |     |  |   |      |     
|                  |                              | Totals/Weighted Averages |  |    |   |       |  |            | 6,199 |             |  |           | 6,359,521 |              |  |      | 412.8 |          |  |           |  |             |  |           |   |         |  |         |  |  |  |                 | 1,026 |  |  |    | 95 | % |   | $              | 927 |  |   | $    | 0.90 | 
|                  |                              |                          |  |    |   |       |  |            |       |             |  |           |           |              |  |      |       |          |  |           |  |             |  |           |   |         |  |         |  |  |  |                 |       |  |  |    |    |   |   |                |     |  |   |      |     
|                 
|Boca Raton, FL   
|                 
|                 
|                 
|                 
|                  | Boca Place                   |                          |  | (3 | ) |       |  | 180        |       |             |  | 175,812   |           |              |  | 9.4  |       |          |  | 1984      |  |             |  |           |   |         |  | 1998    |  |  |  | 977             |       |  |  | 98 | %  |   | $ | 899            |     |  | $ | 0.92 |     
|                 
|                 
|                 
|                 
|                  | Cotton Bay                   |                          |  | (3 | ) |       |  | 444        |       |             |  | 436,460   |           |              |  | 37.6 |       |          |  | 1986      |  |             |  |           |   |         |  | 1998    |  |  |  | 983             |       |  |  | 95 | %  |   |   | 763            |     |  |   | 0.78 |     
|                 
|                 
|                 
|                 
|                  | Gables Palma Vista           |                          |  | (4 | ) |       |  | 189        |       |             |  | 273,606   |           |              |  | 12.0 |       |          |  | 2000      |  |             |  |           |   |         |  |        |  |  |  | 1,448           |       |  |  | 97 | %  |   |   | 1,552          |     |  |   | 1.07 |     
|                 
|                 
|                 
|                 
|                  | Hampton Lakes                |                          |  | (3 | ) |       |  | 300        |       |             |  | 317,004   |           |              |  | 11.0 |       |          |  | 1986      |  |             |  |           |   |         |  | 1998    |  |  |  | 1,057           |       |  |  | 94 | %  |   |   | 801            |     |  |   | 0.76 |     
|                 
|                 
|                 
|                 
|                  | Hampton Place                |                          |  |    |   |       |  | 368        |       |             |  | 352,528   |           |              |  | 14.1 |       |          |  | 1985      |  |             |  |           |   |         |  | 1998    |  |  |  | 958             |       |  |  | 96 | %  |   |   | 767            |     |  |   | 0.80 |     
|                 
|                 
|                 
|                 
|                  | Kings Colony                 |                          |  | (3 | ) |       |  | 480        |       |             |  | 426,590   |           |              |  | 18.8 |       |          |  | 1986      |  |             |  |           |   |         |  | 1998    |  |  |  | 889             |       |  |  | 99 | %  |   |   | 805            |     |  |   | 0.91 |     
|                 
|                 
|                 
|                 
|                  | Mahogany Bay                 |                          |  | (3 | ) |       |  | 328        |       |             |  | 330,459   |           |              |  | 25.4 |       |          |  | 1986      |  |             |  |           |   |         |  | 1998    |  |  |  | 1,007           |       |  |  | 96 | %  |   |   | 812            |     |  |   | 0.81 |     
|                 
|                 
|                 
|                 
|                  | Mizner on the Green          |                          |  |    |   |       |  | 246        |       |             |  | 311,176   |           |              |  | 8.9  |       |          |  | 1996      |  |             |  |           |   |         |  | 1998    |  |  |  | 1,265           |       |  |  | 99 | %  |   |   | 1,700          |     |  |   | 1.34 |     
|                 
|                 
|                 
|                 
|                  | San Michele I                |                          |  |    |   |       |  | 249        |       |             |  | 332,683   |           |              |  | 32.4 |       |          |  | 1998      |  |             |  |           |   |         |  | 1998    |  |  |  | 1,336           |       |  |  | 93 | %  |   |   | 1,488          |     |  |   | 1.11 |     
|                 
|                 
|                 
|                 
|                  | San Michele II               |                          |  | (4 | ) |       |  | 343        |       |             |  | 475,506   |           |              |  | 32.4 |       |          |  | 2000      |  |             |  |           |   |         |  |        |  |  |  | 1,386           |       |  |  | 96 | %  |   |   | 1,459          |     |  |   | 1.05 |     
|                 
|                 
|                 
|                 
|                  | San Remo                     |                          |  |    |   |       |  | 180        |       |             |  | 329,978   |           |              |  | 11.8 |       |          |  | 1995      |  |             |  |           |   |         |  | 1998    |  |  |  | 1,833           |       |  |  | 98 | %  |   |   | 1,309          |     |  |   | 0.71 |     
|                 
|                 
|                 
|                 
|                  | Town Colony                  |                          |  | (3 | ) |       |  | 172        |       |             |  | 147,724   |           |              |  | 10.0 |       |          |  | 1985      |  |             |  |           |   |         |  | 1998    |  |  |  | 859             |       |  |  | 99 | %  |   |   | 880            |     |  |   | 1.02 |     
|                 
|                 
|                 
|                 
|                  | Vinings at Boynton Beach I   |                          |  |    |   |       |  | 252        |       |             |  | 302,148   |           |              |  | 18.0 |       |          |  | 1996      |  |             |  |           |   |         |  | 1998    |  |  |  | 1,199           |       |  |  | 97 | %  |   |   | 966            |     |  |   | 0.81 |     

16



---



##### Table of Contents



Stabilized Community Features as of December 31, 2000

|                           |                                |                             |                          |  |    |       |  |            |           |         |             |            |         |           |              |         |      |          |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 |       |  |    |     |    |   |     |                |       |   |      |      |      | 
|-------------------------- | ------------------------------ | --------------------------- | ------------------------ |  | -- | ----- |  | ---------- | --------- | ------- | ----------- | ---------- | ------- | --------- | ------------ | ------- | ---- | -------- |  | --------- | --------- | ----------- | --------- | ---- | --------- | ------- | ------- |  | ---- |  |  | --- | --------------- | ----- |  | -- | --- | -- | - | --- | -------------- | ----- | - | ---- | ---- | ---- | 
|                           |                                |                             |                          |  |    |       |  |            |           |         |             |            |         |           |              |         |      |          |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 |       |  |    |     |    |   |     | Scheduled Rent
|                           |                                |                             |                          |  |    |       |  |            | Number of |         | Approximate |            |         |           |              |         | Year |          |  |           |           |             |           |      |           |         | Average |  |      |  |  |     | at 12/31/00 Per
|                           |                                |                             |                          |  |    |       |  |            | Apartment |         | Rentable    |            | Total   |           | Constructed/ |         |      |          |  |           | Year      |             | Unit Size |      | Occupancy |         |        
|Community Name(1)          |                                |                             |                          |  |    | Homes |  | Sq. Ft.(2) |           | Acreage |             | Renovated  |         |           |              |         |      | Acquired |  | (Sq. Ft.) |           | at 12/31/00 |           | Unit |           | Sq. Ft.
|                           |                                |                             |                          |  |    |       |  |            |           |         |             |            |         |           |              |         |      |          |  |           |           |             |           |      |           |        
|Boca Raton, FL (continued)
|                          
|                          
|                          
|                          
|                           |                                | Vinings at Boynton Beach II |                          |  |    |       |  |            | 296       |         |             |            | 357,653 |           |              |         | 15.9 |          |  |           | 1997      |             |           |      |           |         |         |  | 1998 |  |  |     | 1,208           |       |  |    | 97  | %  |   | $   | 948            |       |   | $    | 0.78 |     
|                          
|                          
|                          
|                          
|                           |                                | Vinings at Hampton Village  |                          |  | (3 | )     |  |            | 168       |         |             |            | 202,752 |           |              |         | 8.6  |          |  |           | 1988      |             |           |      |           |         |         |  | 1998 |  |  |     | 1,207           |       |  |    | 98  | %  |   |     | 848            |       |   |      | 0.70 |     
|                          
|                          
|                          
|                          
|                           |                                | Vinings at Town Place       |                          |  | (3 | )     |  |            | 312       |         |             |            | 260,192 |           |              |         | 13.0 |          |  |           | 1987      |             |           |      |           |         |         |  | 1998 |  |  |     | 834             |       |  |    | 97  | %  |   |     | 865            |       |   |      | 1.04 |     
|                          
|                          
|                          
|                          
|                           |                                | Vinings at Wellington       |                          |  |    |       |  |            | 222       |         |             |            | 297,138 |           |              |         | 12.7 |          |  |           | 1998      |             |           |      |           |         |         |  | 1998 |  |  |     | 1,338           |       |  |    | 91  | %  |   |     | 1,033          |       |   |      | 0.77 |     
|                           |                                |                             |                          |  |    |       |  |            |           |         |             |            |         |           |              |         |      |          |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 |       |  |    |     |    |   |     |                |       |   |      |      |     
|                           |                                |                             | Totals/Weighted Averages |  |    |       |  |            |           | 4,729   |             |            |         | 5,329,409 |              |         |      | 292.0    |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 | 1,127 |  |    |     | 96 | % |     | $              | 1,017 |   |      | $    | 0.90 | 
|                           |                                |                             |                          |  |    |       |  |            |           |         |             |            |         |           |              |         |      |          |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 |       |  |    |     |    |   |     |                |       |   |      |      |     
|                          
|Dallas, TX                
|                          
|                          
|                          
|                          
|                           |                                | Arborstone                  |                          |  |    |       |  |            | 536       |         |             |            | 383,360 |           |              |         | 24.5 |          |  |           | 1985      |             |           |      |           |         |         |  | 1993 |  |  |     | 715             |       |  |    | 95  | %  |   | $   | 552            |       |   | $    | 0.77 |     
|                          
|                          
|                          
|                          
|                           |                                | Gables at Pearl Street      |                          |  |    |       |  |            | 108       |         |             |            | 117,688 |           |              |         | 3.6  |          |  |           | 1995      |             |           |      |           |         |         |  |     |  |  |     | 1,090           |       |  |    | 99  | %  |   |     | 1,370          |       |   |      | 1.26 |     
|                          
|                          
|                          
|                          
|                           |                                | Gables CityPlace            |                          |  |    |       |  |            | 232       |         |             |            | 244,056 |           |              |         | 7.1  |          |  |           | 1995      |             |           |      |           |         |         |  | 1997 |  |  |     | 1,052           |       |  |    | 97  | %  |   |     | 1,383          |       |   |      | 1.31 |     
|                          
|                          
|                          
|                          
|                           |                                | Gables Green Oaks I         |                          |  |    |       |  |            | 300       |         |             |            | 286,740 |           |              |         | 12.8 |          |  |           | 1996      |             |           |      |           |         |         |  |     |  |  |     | 956             |       |  |    | 95  | %  |   |     | 797            |       |   |      | 0.83 |     
|                          
|                          
|                          
|                          
|                           |                                | Gables Mirabella            |                          |  |    |       |  |            | 126       |         |             |            | 114,902 |           |              |         | 1.4  |          |  |           | 1996      |             |           |      |           |         |         |  | 1997 |  |  |     | 912             |       |  |    | 89  | %  |   |     | 1,196          |       |   |      | 1.31 |     
|                          
|                          
|                          
|                          
|                           |                                | Gables San Raphael          |                          |  | (4 | )     |  |            | 222       |         |             |            | 200,478 |           |              |         | 5.4  |          |  |           | 1999      |             |           |      |           |         |         |  |     |  |  |     | 903             |       |  |    | 97  | %  |   |     | 935            |       |   |      | 1.04 |     
|                          
|                          
|                          
|                          
|                           |                                | Gables Spring Park          |                          |  |    |       |  |            | 188       |         |             |            | 198,178 |           |              |         | 12.3 |          |  |           | 1996      |             |           |      |           |         |         |  |     |  |  |     | 1,054           |       |  |    | 98  | %  |   |     | 946            |       |   |      | 0.90 |     
|                          
|                          
|                          
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|                           |                                | Gables Turtle Creek         |                          |  |    |       |  |            | 150       |         |             |            | 150,930 |           |              |         | 3.1  |          |  |           | 1995      |             |           |      |           |         |         |  | 1996 |  |  |     | 1,006           |       |  |    | 98  | %  |   |     | 1,119          |       |   |      | 1.11 |     
|                          
|                          
|                          
|                          
|                           |                                | Gables Valley Ranch         |                          |  | (3 | )     |  |            | 319       |         |             |            | 325,534 |           |              |         | 14.8 |          |  |           | 1994      |             |           |      |           |         |         |  |     |  |  |     | 1,020           |       |  |    | 92  | %  |   |     | 936            |       |   |      | 0.92 |     
|                           |                                |                             |                          |  |    |       |  |            |           |         |             |            |         |           |              |         |      |          |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 |       |  |    |     |    |   |     |                |       |   |      |      |     
|                           |                                |                             | Totals/Weighted Averages |  |    |       |  |            |           | 2,181   |             |            |         | 2,021,866 |              |         |      | 85.0     |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 | 927   |  |    |     | 95 | % |     | $              | 920   |   |      | $    | 0.99 | 
|                           |                                |                             |                          |  |    |       |  |            |           |         |             |            |         |           |              |         |      |          |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 |       |  |    |     |    |   |     |                |       |   |      |      |     
|                          
|Austin, TX                
|                          
|                          
|                          
|                          
|                           |                                | Gables at the Terrace       |                          |  |    |       |  |            | 308       |         |             |            | 292,292 |           |              |         | 18.6 |          |  |           | 1998      |             |           |      |           |         |         |  | 1998 |  |  |     | 949             |       |  |    | 93  | %  |   | $   | 1,193          |       |   | $    | 1.26 |     
|                          
|                          
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|                           |                                | Gables Barton Creek         |                          |  | (3 | )     |  |            | 160       |         |             |            | 185,846 |           |              |         | 11.6 |          |  |           |          |             |           |      |           |         |         |  | 2000 |  |  |     | 1,162           |       |  |    | 93  | %  |   |     | 1,542          |       |   |      | 1.33 |     
|                          
|                          
|                          
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|                           |                                | Gables Bluffstone           |                          |  |    |       |  |            | 256       |         |             |            | 251,909 |           |              |         | 32.7 |          |  |           | 1998      |             |           |      |           |         |         |  |     |  |  |     | 984             |       |  |    | 96  | %  |   |     | 1,185          |       |   |      | 1.20 |     
|                          
|                          
|                          
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|                           |                                | Gables Central Park         |                          |  |    |       |  |            | 273       |         |             |            | 257,043 |           |              |         | 6.9  |          |  |           | 1997      |             |           |      |           |         |         |  |     |  |  |     | 942             |       |  |    | 100 | %  |   |     | 1,278          |       |   |      | 1.36 |     
|                          
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|                           |                                | Gables Great Hills          |                          |  |    |       |  |            | 276       |         |             |            | 228,930 |           |              |         | 23.7 |          |  |           | 1993      |             |           |      |           |         |         |  |     |  |  |     | 829             |       |  |    | 97  | %  |   |     | 902            |       |   |      | 1.09 |     
|                          
|                          
|                          
|                          
|                           |                                | Gables Park Mesa            |                          |  |    |       |  |            | 148       |         |             |            | 161,540 |           |              |         | 24.3 |          |  |           | 1992      |             |           |      |           |         |         |  | 1997 |  |  |     | 1,091           |       |  |    | 100 | %  |   |     | 1,191          |       |   |      | 1.09 |     
|                          
|                          
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|                           |                                | Gables Town Lake            |                          |  |    |       |  |            | 256       |         |             |            | 239,264 |           |              |         | 12.0 |          |  |           | 1996      |             |           |      |           |         |         |  |     |  |  |     | 935             |       |  |    | 95  | %  |   |     | 1,309          |       |   |      | 1.40 |     
|                           |                                |                             |                          |  |    |       |  |            |           |         |             |            |         |           |              |         |      |          |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 |       |  |    |     |    |   |     |                |       |   |      |      |     
|                           |                                |                             | Totals/Weighted Averages |  |    |       |  |            |           | 1,677   |             |            |         | 1,616,824 |              |         |      | 129.8    |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 | 964   |  |    |     | 96 | % |     | $              | 1,209 |   |      | $    | 1.25 | 
|                           |                                |                             |                          |  |    |       |  |            |           |         |             |            |         |           |              |         |      |          |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 |       |  |    |     |    |   |     |                |       |   |      |      |     
|                          
|Memphis, TN               
|                          
|                          
|                          
|                          
|                           |                                | Arbors of Harbortown        |                          |  | (5 | )     |  |            | 345       |         |             |            | 341,258 |           |              |         | 15.0 |          |  |           | 1991      |             |           |      |           |         |         |  |     |  |  |     | 989             |       |  |    | 97  | %  |   | $   | 863            |       |   | $    | 0.87 |     
|                          
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|                           |                                | Gables Cordova              |                          |  | (3 | )     |  |            | 464       |         |             |            | 434,461 |           |              |         | 32.2 |          |  |           | 1986      |             |           |      |           |         |         |  |     |  |  |     | 936             |       |  |    | 95  | %  |   |     | 666            |       |   |      | 0.71 |     
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|                           |                                | Gables Stonebridge          |                          |  | (7 | )     |  |            | 500       |         |             |            | 439,646 |           |              |         | 34.0 |          |  |           | 1993 - 96 |             |           |      |           |         |         |  | 1996 |  |  |     | 879             |       |  |    | 93  | %  |   |     | 683            |       |   |      | 0.78 |     
|                           |                                |                             |                          |  |    |       |  |            |           |         |             |            |         |           |              |         |      |          |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 |       |  |    |     |    |   |     |                |       |   |      |      |     
|                           |                                |                             | Totals/Weighted Averages |  |    |       |  |            |           | 1,309   |             |            |         | 1,215,365 |              |         |      | 81.2     |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 | 928   |  |    |     | 95 | % |     | $              | 725   |   |      | $    | 0.78 | 
|                           |                                |                             |                          |  |    |       |  |            |           |         |             |            |         |           |              |         |      |          |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 |       |  |    |     |    |   |     |                |       |   |      |      |     
|Nashville, TN             
|                          
|                           |                                | Brentwood Gables            |                          |  | (7 | )     |  |            | 254       |         |             |            | 287,594 |           |              |         | 14.5 |          |  |           | 1996      |             |           |      |           |         |         |  |     |  |  |     | 1,132           |       |  |    | 98  | %  |   | $   | 850            |       |   | $    | 0.75 |     
|                          
|                          
|                          
|                          
|                           |                                | Gables Hendersonville       |                          |  | (7 | )     |  |            | 364       |         |             |            | 342,982 |           |              |         | 21.0 |          |  |           | 1991      |             |           |      |           |         |         |  |     |  |  |     | 942             |       |  |    | 95  | %  |   |     | 654            |       |   |      | 0.69 |     
|                          
|                          
|                          
|                          
|                           |                                | Gables Hickory Hollow I     |                          |  | (3 | )     |  |            | 272       |         |             |            | 247,322 |           |              |         | 19.0 |          |  |           | 1988      |             |           |      |           |         |         |  |     |  |  |     | 909             |       |  |    | 92  | %  |   |     | 643            |       |   |      | 0.71 |     
|                          
|                          
|                          
|                          
|                           |                                | Gables Hickory Hollow II    |                          |  | (3 | )     |  |            | 276       |         |             |            | 259,704 |           |              |         | 18.0 |          |  |           | 1987      |             |           |      |           |         |         |  |     |  |  |     | 941             |       |  |    | 95  | %  |   |     | 659            |       |   |      | 0.70 |     
|                           |                                |                             |                          |  |    |       |  |            |           |         |             |            |         |           |              |         |      |          |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 |       |  |    |     |    |   |     |                |       |   |      |      |     
|                           |                                |                             | Totals/Weighted Averages |  |    |       |  |            |           | 1,166   |             |            |         | 1,137,602 |              |         |      | 72.5     |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 | 976   |  |    |     | 95 | % |     | $              | 696   |   |      | $    | 0.71 | 
|                           |                                |                             |                          |  |    |       |  |            |           |         |             |            |         |           |              |         |      |          |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 |       |  |    |     |    |   |     |                |       |   |      |      |     
|Orlando, FL               
|                          
|                           |                                | Gables Celebration          |                          |  |    |       |  |            | 231       |         |             |            | 267,417 |           |              |         | 8.8  |          |  |           | 1999      |             |           |      |           |         |         |  |     |  |  |     | 1,158           |       |  |    | 94  | %  |   | $   | 1,243          |       |   | $    | 1.07 |     
|                          
|                          
|                          
|                          
|                           |                                | Commons at Lake Bryan I     |                          |  | (8 | )     |  |            | 280       |         |             |            | 289,436 |           |              |         | 16.5 |          |  |           | 1998      |             |           |      |           |         |         |  |     |  |  |     | 1,034           |       |  |    | 100 | %  |   |     |               |       |   |      |     |     
|                           |                                |                             |                          |  |    |       |  |            |           |         |             |            |         |           |              |         |      |          |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 |       |  |    |     |    |   |     |                |       |   |      |      |     
|                           |                                |                             | Totals/Weighted Averages |  |    |       |  |            |           | 511     |             |            |         | 556,853   |              |         |      | 25.3     |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 | 1,090 |  |    |     | 97 | % |     | $              | 1,243 |   |      | $    | 1.07 | 
|                           |                                |                             |                          |  |    |       |  |            |           |         |             |            |         |           |              |         |      |          |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 |       |  |    |     |    |   |     |                |       |   |      |      |     
|                           | Grand Totals/Weighted Averages |                             |                          |  |    |       |  | 24,774     |           |         |             | 24,545,389 |         |           |              | 1,360.8 |      |          |  |           |           |             |           |      |           |         |         |  |      |  |  | 991 |                 |       |  | 96 | %   |    | $ | 917 |                |       | $ | 0.92 |     
|                           |                                |                             |                          |  |    |       |  |            |           |         |             |            |         |           |              |         |      |          |  |           |           |             |           |      |           |         |         |  |      |  |  |     |                 |       |  |    |     |    |   |     |                |       |   |      |      |     



|(1) |  | Except as noted in notes (4), (5), and (7), we hold fee simple title to each of the communities. Except as noted in notes (3), (4), (5), and (7), the communities are unencumbered.                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | In the Atlanta and Tennessee markets, rentable area is measured including any patio or balcony. In the Texas markets, rentable area is measured using only the heated area. In the Florida
markets, rentable area is measured using only the air conditioned area.
|   
|(3) |  | The denoted communities secure indebtedness totaling $381.5 million as of December 31, 2000.                                                                                                                                                                      
|   
|(4) |  | We hold an indirect 20% interest in these communities. These communities secure indebtedness totaling $78.1 million at December 31, 2000.                                                                                                                         
|   
|(5) |  | We hold an indirect 25% interest in these communities. These communities secure indebtedness totaling $34.8 million at December 31, 2000.                                                                                                                         
|   
|(6) |  | Year renovated; these communities were originally constructed as follows: Buckhead Gables: 1964 and Wildwood Gables: 1972.                                                                                                                                        
|   
|(7) |  | We hold an indirect 9% interest in these communities. These communities secure indebtedness totaling $52.1 million at December 31, 2000.                                                                                                                          
|   
|(8) |  | This community is leased to a single user group pursuant to a triple net master lease. Accordingly, scheduled rent data is not reflected.                                                                                                                         

17



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##### Table of Contents



Development and Lease-up Communities.The development communities have
been designed to generally resemble the stabilized communities we developed
previously and to offer similar amenities. The development communities and
recently completed communities reflect our continuing research of consumer
preferences for upscale multifamily rental housing and incorporate and
emphasize garage parking, increased privacy, high quality interiors, high speed
internet access, and private telephone and television systems. Additional
information regarding our development communities at December 31, 2000 follows:

|                                    |  |           |       |          |  |            |     |  |  |                              |    |        |  |          |     |        |  |            |     |     |  |           |    |   |  |                                |  |        |  |        |  |        |  |  |  |     |  |  |  | 
|----------------------------------- |  | --------- | ----- | -------- |  | ---------- | --- |  |  | ---------------------------- | -- | ------ |  | -------- | --- | ------ |  | ---------- | --- | --- |  | --------- | -- | - |  | ------------------------------ |  | ------ |  | ------ |  | ------ |  |  |  | --- |  |  |  | 
|                                    |  |           |       |          |  |            |     |  |  |                              |    |        |  |          |     |        |  |            |     |     |  |           |    |   |  |                               
|                                    |  |           |       |          |  |            |     |  |  |                              |    |        |  |          |     |        |  |            |     |     |  |           |    |   |  | Actual or Estimated Quarter of
|                                    |  | Number of |       | Total    |  |            |     |  |  | Percent at December 31, 2000 |   
|                                    |  | Apartment |       | Budgeted |  |            |     |  |  |                              |    | Const. |  | Initial  |     | Const. |  | Stabilized
|Community                           |  | Homes     |       | Cost     |  |            |     |  |  | Complete                     |    | Leased |  | Occupied |     | Start  |  | Occupancy  |     | End |  | Occupancy
|                                    |  |           |       |          |  |            |     |  |  |                              |    |        |  |          |     |        |  |            |     |     |  |          
|                                    |  |           |       |          |  | (millions) |     |  |  |                              |    |        |  |          |     |        |  |            |     |     |  |           |    |   |  |                                |  |        |  |        |  |        |  |  |  | (1)
|Wholly-Owned                       
|                                   
|                                   
|                                   
|                                   
|Development Communities:           
|                                   
|Orlando, FL                        
|                                   
|                                   
|                                   
|                                   
|Gables Chatham Square               |  |           | 448   |          |  | $          | 36  |  |  |                              |    |        |  |          | 96  | %      |  |            | 100 | %   |  |           | 86 | % |  | 2Q '99                         |  | 2Q '00 |  | 1Q '01 |  | 1Q '01
|                                   
|                                   
|                                   
|                                   
|Gables North Village                |  |           | 315   |          |  |            | 41  |  |  |                              |    |        |  |          | 67  | %      |  |            | 19  | %   |  |           | 4  | % |  | 4Q '99                         |  | 4Q '00 |  | 4Q '01 |  | 1Q '02
|                                   
|Atlanta, GA                        
|                                   
|                                   
|                                   
|                                   
|Gables Montclair                    |  |           | 183   |          |  |            | 24  |  |  |                              |    |        |  |          | 10  | %      |  |            |    |     |  |           |   |   |  | 3Q '00                         |  | 4Q '01 |  | 1Q '02 |  | 3Q '02
|                                   
|                                   
|                                   
|                                   
|Gables Paces                        |  |           | 80    |          |  |            | 21  |  |  |                              |    |        |  |          | 33  | %      |  |            |    |     |  |           |   |   |  | 3Q '00                         |  | 4Q '01 |  | 4Q '01 |  | 1Q '02
|                                   
|Dallas, TX                         
|                                   
|                                   
|                                   
|                                   
|Gables State Thomas Townhomes       |  |           | 177   |          |  |            | 36  |  |  |                              |    |        |  |          | 92  | %      |  |            | 30  | %   |  |           | 27 | % |  | 4Q '99                         |  | 3Q '00 |  | 2Q '01 |  | 4Q '01
|                                   
|Houston, TX                        
|                                   
|                                   
|                                   
|                                   
|Gables Meyer Park II                |  |           | 296   |          |  |            | 27  |  |  |                              |    |        |  |          | 1   | %      |  |            |    |     |  |           |   |   |  | 4Q '00                         |  | 4Q '01 |  | 2Q '02 |  | 3Q '02
|                                   
|Tampa, FL                          
|                                   
|                                   
|                                   
|                                   
|Gables West Park Village (2)        |  |           | 320   |          |  |            | 35  |  |  |                              |    |        |  |          | 6   | %      |  |            |    |     |  |           |   |   |  | 4Q '00                         |  | 4Q '01 |  | 3Q '02 |  | 4Q '02
|                                    |  |           |       |          |  |            |    
|                                   
|Wholly-Owned Totals                 |  |           | 1,819 |          |  | $          | 220 | 
|                                    |  |           |       |          |  |            |    
|                                   
|Co-Investment Development/ Lease-Up
|Communities (3), (4):              
|                                   
|Boca Raton, FL                     
|                                   
|                                   
|                                   
|                                   
|Gables Crestwood                    |  |           | 290   |          |  | $          | 25  |  |  |                              |    |        |  |          | 85  | %      |  |            | 24  | %   |  |           | 21 | % |  | 4Q '99                         |  | 3Q '00 |  | 2Q '01 |  | 4Q '01
|                                   
|                                   
|                                   
|                                   
|Gables Grande Isle                  |  |           | 320   |          |  |            | 23  |  |  |                              |    |        |  |          | 100 | %      |  |            | 76  | %   |  |           | 72 | % |  | 2Q '99                         |  | 1Q '00 |  | 3Q '00 |  | 2Q '01
|                                   
|Dallas, TX                         
|                                   
|                                   
|                                   
|                                   
|Gables Ravello                      |  |           | 290   |          |  |            | 33  |  |  |                              |    |        |  |          | 96  | %      |  |            | 46  | %   |  |           | 40 | % |  | 2Q '99                         |  | 2Q '00 |  | 1Q '01 |  | 3Q '01
|                                    |  |           |       |          |  |            |    
|                                   
|Co-Investment Totals                |  |           | 900   |          |  | $          | 81  |  |  |                              | (4 | )     
|                                    |  |           |       |          |  |            |    
|                                   
|Development totals                  |  |           | 2,719 |          |  | $          | 301 | 
|                                    |  |           |       |          |  |            |    



|(1) |  | Stabilized occupancy is defined as the earlier to occur of (1) 93%
occupancy or (2) one year after completion of construction.                                                                                                              
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | This development community includes 40,000 square feet of commercial
space.                                                                                                                                                                 
|   
|(3) |  | These communities were contributed into the Gables Residential Apartment
Portfolio JV in which we have a 20% interest.                                                                                                                      
|   
|(4) |  | Construction loan proceeds are expected to fund 50% of the total budgeted
costs. The remaining costs will be funded by capital contributions to the
venture from the venture partner and us in a funding ratio of 80% and 20%,
respectively.

18



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##### Table of Contents



Undeveloped Sites.As of December 31, 2000, we owned the following four
undeveloped sites on which we intend to develop multifamily communities in the
future. We also owned additional sites at December 31, 2000 that
are excluded from the table below because we do not currently intend
to develop apartment communities on these sites in the foreseeable
future.

|                       |  |                   |  |                    |       | 
|---------------------- |  | ----------------- |  | ------------------ | ----- | 
|                       |  |                   |  | Estimated Number  
|Undeveloped Sites      |  | Metropolitan Area |  | of Apartment Homes
|                       |  |                   |  |                   
|Gables Metropolitan II |  | Atlanta, GA       |  |                    | 285   | 
|                      
|                      
|                      
|                      
|Gables White Oak       |  | Houston, TX       |  |                    | 186   | 
|                      
|                      
|                      
|                      
|Gables State Thomas II |  | Dallas, TX        |  |                    | 204   | 
|                      
|                      
|                      
|                      
|Gables Northlake       |  | Boca Raton, FL    |  |                    | 450   | 
|                       |  |                   |  |                    |       | 
|Total                  |  |                   |  |                    | 1,125 | 
|                       |  |                   |  |                    |       | 

There can be no assurance of when or if the undeveloped sites will be
developed.

Development Rights.As of December 31, 2000 we had four development
rights.

|                                         |  |                   |  |                    |       |     |  |  |  | 
|---------------------------------------- |  | ----------------- |  | ------------------ | ----- | --- |  |  |  | 
|                                         |  |                   |  | Estimated Number  
|Development Rights                       |  | Metropolitan Area |  | of Apartment Homes
|                                         |  |                   |  |                   
|Gables West Park Village Phases II & III |  | Tampa, FL         |  |                    | 620   | (1)
|                                        
|                                        
|                                        
|                                        
|Gables Jenson                            |  | Boca Raton, FL    |  |                    | 400   |    
|                                        
|                                        
|                                        
|                                        
|Gables Jupiter                           |  | Jupiter, FL       |  |                    | 311   |    
|                                         |  |                   |  |                    |       |    
|Total                                    |  |                   |  |                    | 1,331 |    
|                                         |  |                   |  |                    |       |    

(1) This land parcel is
under option.

There can be no assurance of when or if the development rights will be
exercised.

The following is a Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of
1934, as amended. The projections contained in the tables above under the
captions Development and Lease-up Communities, Undeveloped Sites and
Development Rights are forward-looking statements. These forward-looking
statements involve risks and uncertainties, and actual results may differ
materially from those projected in the forward-looking statements. Risks
associated with our development, construction and land acquisition activities,
which could impact the forward-looking statements made, include: development
and acquisition opportunities may be abandoned; construction costs of a
community may exceed original estimates, possibly making the community
uneconomical; and construction and lease-up may not be completed on schedule,
resulting in increased debt service and construction costs. Development of the
undeveloped sites and development rights is subject to permits and other
governmental approvals as well as our ongoing business review of the underlying
real estate fundamentals and the impact on our capital structure. There can be
no assurance that we will decide or be able to develop the undeveloped sites,
complete development of all or any of the communities subject to the
development rights, or complete the number of apartment homes shown above.







|        |  |                  
|------- |  | -----------------
|ITEM 3. |  | LEGAL PROCEEDINGS

Neither we nor any of our communities is presently subject to any material
litigation or, to our knowledge, is any litigation threatened against us or any
of our 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
or financial condition.







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

No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 2000.

19



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##### Table of Contents



PART II







|        |  |                                                                      
|------- |  | ---------------------------------------------------------------------
|ITEM 5. |  | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Our common shares began trading on the NYSE on January 19, 1994 under the
symbol GBP. The following table sets forth the high and low sales prices per
share of our common shares for the periods indicated, as reported by the NYSE,
as well as the quarterly per share dividends declared to shareholders for the
period indicated.

|                                        |  |      |         |     |  |          |         |  |  |          |        | 
|--------------------------------------- |  | ---- | ------- | --- |  | -------- | ------- |  |  | -------- | ------ | 
|                                        |  |      |         |     |  |          |         |  |  | Dividend
|Quarter Ended                           |  | High |         | Low |  | Declared
|                                        |  |      |         |     |  |         
|March 31, 1999                          |  | $    | 24.5000 |     |  | $        | 21.6875 |  |  | $        | 0.5100 | 
|                                       
|                                       
|                                       
|                                       
|June 30, 1999                           |  |      | 25.7500 |     |  |          | 22.3750 |  |  |          | 0.5100 | 
|                                       
|                                       
|                                       
|                                       
|September 30, 1999                      |  |      | 25.0000 |     |  |          | 22.5625 |  |  |          | 0.5300 | 
|                                       
|                                       
|                                       
|                                       
|December 31, 1999                       |  |      | 25.3750 |     |  |          | 20.2500 |  |  |          | 0.5300 | 
|                                       
|                                       
|                                       
|                                       
|March 31, 2000                          |  |      | 23.7500 |     |  |          | 21.4375 |  |  |          | 0.5300 | 
|                                       
|                                       
|                                       
|                                       
|June 30, 2000                           |  |      | 26.2500 |     |  |          | 22.4375 |  |  |          | 0.5300 | 
|                                       
|                                       
|                                       
|                                       
|September 30, 2000                      |  |      | 29.3125 |     |  |          | 25.5625 |  |  |          | 0.5675 | 
|                                       
|                                       
|                                       
|                                       
|December 31, 2000                       |  |      | 28.9375 |     |  |          | 24.6250 |  |  |          | 0.5675 | 
|                                       
|                                       
|                                       
|                                       
|March 31, 2001 (through March 16, 2001) |  |      | 28.9000 |     |  |          | 26.6100 |  |  |          | 0.5675 | 

We have determined that, for federal income tax purposes, approximately
78.7% of the distributions for each of the four quarters of 2000 represented
ordinary dividend income, 17.3% represented capital gains and the remaining
4.0% represented return of capital to our common shareholders.

Distributions are declared at the discretion of the board of trustees and
will depend on our actual funds from operations, our financial condition,
capital requirements, annual distribution requirements under the REIT
provisions of the Code and other factors the board of trustees may deem
relevant. The board of trustees may modify our distribution policy from time
to time.

Certain of our debt agreements contain customary representations,
covenants and events of default, including covenants which restrict the ability
of the Operating Partnership to make distributions in excess of stated amounts,
which in turn restricts our discretion to declare and pay dividends. In
general, during any fiscal year the Operating Partnership may only distribute
up to 95% of its consolidated income that is available for distribution, as
defined in the related agreement, exclusive of distributions of capital gains
for such year. The applicable debt agreements contain exceptions to these
limitations to allow the Operating Partnership to make any distributions
necessary to allow us to maintain our status as a REIT. We do not anticipate
that this provision will adversely effect the ability of the Operating
Partnership to make distributions or our ability to declare dividends as
currently anticipated.

On March 16, 2001, there were approximately 600 holders of record of our
23,254,982 outstanding common shares. This does not include beneficial owners
for whom Cede & Co. or others act as nominee.







|        |  |                                             
|------- |  | --------------------------------------------
|ITEM 6. |  | SELECTED FINANCIAL AND OPERATING INFORMATION

The following table sets forth selected financial and operating
information which should be read in conjunction with our financial statements
and notes included elsewhere in this document. The consolidated operating
information for the years ended December 31, 2000, 1999 and 1998 has been
derived from our financial statements audited by Arthur Andersen LLP,
independent public accountants, whose report is included in this document. The
consolidated operating information for the years ended December 31, 1997 and
1996 has been derived from our audited financial statements not included in
Arthur Andersens report.

20



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##### Table of Contents



|                                                                               |                         |  |     |  |  |   |                                                            |         |      |   |           |         |      |   |           |         |  |   |           |         |  |   |          |         | 
|------------------------------------------------------------------------------ | ----------------------- |  | --- |  |  | - | ---------------------------------------------------------- | ------- | ---- | - | --------- | ------- | ---- | - | --------- | ------- |  | - | --------- | ------- |  | - | -------- | ------- | 
|                                                                               |                         |  |     |  |  |   | GABLES RESIDENTIAL TRUST                                  
|                                                                               |                         |  |     |  |  |   | SELECTED FINANCIAL AND OPERATING INFORMATION              
|                                                                               |                         |  |     |  |  |   |                                                           
|                                                                               |                         |  |     |  |  |   | 2000                                                       |         | 1999 |   | 1998      |         | 1997 |   | 1996     
|                                                                               |                         |  |     |  |  |   |                                                            |         |      |   |           |         |      |   |          
|                                                                               |                         |  |     |  |  |   | (Amounts in Thousands, Except Property and Per Share Data)
|Operating Information:                                                        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Rental revenues                                                                |                         |  |     |  |  | $ | 217,384                                                    |         |      | $ | 221,689   |         |      | $ | 199,292   |         |  | $ | 132,371   |         |  | $ | 104,543  |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Other property revenues                                                        |                         |  |     |  |  |   | 12,405                                                     |         |      |   | 12,121    |         |      |   | 9,988     |         |  |   | 6,322     |         |  |   | 4,928    |        
|                                                                               |                         |  |     |  |  |   |                                                            |         |      |   |           |         |      |   |           |         |  |   |           |         |  |   |          |        
|                                                                               | Total property revenues |  |     |  |  |   |                                                            | 229,789 |      |   |           | 233,810 |      |   |           | 209,280 |  |   |           | 138,693 |  |   |          | 109,471 | 
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Other revenues                                                                 |                         |  |     |  |  |   | 12,304                                                     |         |      |   | 11,787    |         |      |   | 8,120     |         |  |   | 5,436     |         |  |   | 7,353    |        
|                                                                               |                         |  |     |  |  |   |                                                            |         |      |   |           |         |      |   |           |         |  |   |           |         |  |   |          |        
|                                                                               | Total revenues          |  |     |  |  |   |                                                            | 242,093 |      |   |           | 245,597 |      |   |           | 217,400 |  |   |           | 144,129 |  |   |          | 116,824 | 
|                                                                               |                         |  |     |  |  |   |                                                            |         |      |   |           |         |      |   |           |         |  |   |           |         |  |   |          |        
|Property operating and maintenance
(exclusive of items shown separately below) |                         |  |     |  |  |   | 75,444                                                     |         |      |   | 78,689    |         |      |   | 70,502    |         |  |   | 47,592    |         |  |   | 38,693   |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Depreciation and amortization                                                  |                         |  |     |  |  |   | 44,500                                                     |         |      |   | 46,073    |         |      |   | 40,650    |         |  |   | 25,194    |         |  |   | 18,892   |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Property management (owned and third party)                                    |                         |  |     |  |  |   | 10,007                                                     |         |      |   | 8,893     |         |      |   | 7,977     |         |  |   | 5,696     |         |  |   | 5,617    |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Interest expense and credit enhancement fees                                   |                         |  |     |  |  |   | 45,539                                                     |         |      |   | 44,259    |         |      |   | 39,974    |         |  |   | 25,313    |         |  |   | 21,688   |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Amortization of deferred financing costs                                       |                         |  |     |  |  |   | 895                                                        |         |      |   | 919       |         |      |   | 984       |         |  |   | 992       |         |  |   | 1,348    |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|General and administrative                                                     |                         |  |     |  |  |   | 7,154                                                      |         |      |   | 5,796     |         |      |   | 6,242     |         |  |   | 3,248     |         |  |   | 3,045    |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Severance costs                                                                |                         |  |     |  |  |   |                                                           |         |      |   | 2,800     |         |      |   |          |         |  |   |          |         |  |   |         |        
|                                                                               |                         |  |     |  |  |   |                                                            |         |      |   |           |         |      |   |           |         |  |   |           |         |  |   |          |        
|                                                                               | Total expenses          |  |     |  |  |   |                                                            | 183,539 |      |   |           | 187,429 |      |   |           | 166,329 |  |   |           | 108,035 |  |   |          | 89,283  | 
|                                                                               |                         |  |     |  |  |   |                                                            |         |      |   |           |         |      |   |           |         |  |   |           |         |  |   |          |        
|Gain on sale of real estate assets                                             |                         |  |     |  |  |   | 29,467                                                     |         |      |   | 8,864     |         |      |   |          |         |  |   | 5,349     |         |  |   |         |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Loss on treasury locks                                                         |                         |  |     |  |  |   |                                                           |         |      |   |          |         |      |   | (5,637    | )       |  |   | (1,178    | )       |  |   |         |        
|                                                                               |                         |  |     |  |  |   |                                                            |         |      |   |           |         |      |   |           |         |  |   |           |         |  |   |          |        
|Income before minority interest and extraordinary loss, net                    |                         |  |     |  |  |   | 88,021                                                     |         |      |   | 67,032    |         |      |   | 45,434    |         |  |   | 40,265    |         |  |   | 27,541   |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Minority interest of common unitholders in Operating Partnership               |                         |  |     |  |  |   | (16,359                                                    | )       |      |   | (10,348   | )       |      |   | (7,142    | )       |  |   | (5,611    | )       |  |   | (4,640   | )      
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Minority interest of preferred unitholders in Operating Partnership            |                         |  |     |  |  |   | (4,312                                                     | )       |      |   | (4,312    | )       |      |   | (587      | )       |  |   |          |         |  |   |         |        
|                                                                               |                         |  |     |  |  |   |                                                            |         |      |   |           |         |      |   |           |         |  |   |           |         |  |   |          |        
|Income before extraordinary loss, net                                          |                         |  |     |  |  |   | 67,350                                                     |         |      |   | 52,372    |         |      |   | 37,705    |         |  |   | 34,654    |         |  |   | 22,901   |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Extraordinary loss, net of minority interest                                   |                         |  |     |  |  |   |                                                           |         |      |   |          |         |      |   |          |         |  |   | (602      | )       |  |   | (520     | )      
|                                                                               |                         |  |     |  |  |   |                                                            |         |      |   |           |         |      |   |           |         |  |   |           |         |  |   |          |        
|Net income                                                                     |                         |  |     |  |  |   | 67,350                                                     |         |      |   | 52,372    |         |      |   | 37,705    |         |  |   | 34,052    |         |  |   | 22,381   |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Dividends to preferred shareholders                                            |                         |  |     |  |  |   | (9,771                                                     | )       |      |   | (9,771    | )       |      |   | (9,665    | )       |  |   | (4,163    | )       |  |   |         |        
|                                                                               |                         |  |     |  |  |   |                                                            |         |      |   |           |         |      |   |           |         |  |   |           |         |  |   |          |        
|Net income available to common shareholders                                    |                         |  |     |  |  | $ | 57,579                                                     |         |      | $ | 42,601    |         |      | $ | 28,040    |         |  | $ | 29,889    |         |  | $ | 22,381   |        
|                                                                               |                         |  |     |  |  |   |                                                            |         |      |   |           |         |      |   |           |         |  |   |           |         |  |   |          |        
|Weighted average common shares outstanding  basic                             |                         |  |     |  |  |   | 23,694                                                     |         |      |   | 25,991    |         |      |   | 24,118    |         |  |   | 19,788    |         |  |   | 16,788   |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Weighted average common shares outstanding  diluted                           |                         |  |     |  |  |   | 30,439                                                     |         |      |   | 32,796    |         |      |   | 30,340    |         |  |   | 23,591    |         |  |   | 20,283   |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Per Common Share Information:                                                 
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Income before extraordinary loss, net  basic                                  |                         |  |     |  |  | $ | 2.43                                                       |         |      | $ | 1.64      |         |      | $ | 1.16      |         |  | $ | 1.54      |         |  | $ | 1.36     |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Net income  basic                                                             |                         |  |     |  |  |   | 2.43                                                       |         |      |   | 1.64      |         |      |   | 1.16      |         |  |   | 1.51      |         |  |   | 1.33     |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Income before extraordinary loss, net  diluted                                |                         |  |     |  |  |   | 2.43                                                       |         |      |   | 1.64      |         |      |   | 1.16      |         |  |   | 1.53      |         |  |   | 1.35     |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Net income  diluted                                                           |                         |  |     |  |  |   | 2.43                                                       |         |      |   | 1.64      |         |      |   | 1.16      |         |  |   | 1.50      |         |  |   | 1.32     |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Dividends paid                                                                 |                         |  |     |  |  |   | 2.20                                                       |         |      |   | 2.08      |         |      |   | 2.02      |         |  |   | 2.47      |         |  |   | 1.93     |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Dividends declared                                                             |                         |  |     |  |  |   | 2.20                                                       |         |      |   | 2.08      |         |      |   | 2.02      |         |  |   | 1.98      |         |  |   | 1.94     |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Other Information:                                                            
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Cash flows provided by operating activities                                    |                         |  |     |  |  | $ | 105,189                                                    |         |      | $ | 105,029   |         |      | $ | 90,555    |         |  | $ | 69,961    |         |  | $ | 51,956   |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Cash flows provided by (used in) investing activities                          |                         |  |     |  |  |   | 19,567                                                     |         |      |   | 80,928    |         |      |   | (359,263  | )       |  |   | (229,411  | )       |  |   | (213,923 | )      
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Cash flows (used in) provided by financing activities                          |                         |  |     |  |  |   | (128,467                                                   | )       |      |   | (185,048  | )       |      |   | 272,583   |         |  |   | 158,244   |         |  |   | 157,823  |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Funds from operations                                                          |                         |  | (1) |  |  |   | 90,605                                                     |         |      |   | 89,775    |         |      |   | 75,494    |         |  |   | 56,179    |         |  |   | 46,238   |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Gross operating margin                                                         |                         |  | (2) |  |  |   | 67.2                                                       | %       |      |   | 66.3      | %       |      |   | 66.3      | %       |  |   | 65.7      | %       |  |   | 64.7     | %      
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Completed communities at year-end                                              |                         |  |     |  |  |   | 84                                                         |         |      |   | 81        |         |      |   | 86        |         |  |   | 61        |         |  |   | 48       |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Apartment homes in completed communities at year-end                           |                         |  |     |  |  |   | 25,094                                                     |         |      |   | 23,941    |         |      |   | 25,288    |         |  |   | 18,479    |         |  |   | 15,244   |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Average monthly revenue per apartment home                                     |                         |  | (3) |  |  | $ | 830                                                        |         |      | $ | 810       |         |      | $ | 780       |         |  | $ | 755       |         |  | $ | 700      |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Balance Sheet Information:                                                    
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Real estate assets, before accumulated depreciation                            |                         |  |     |  |  | $ | 1,587,844                                                  |         |      | $ | 1,589,384 |         |      | $ | 1,682,122 |         |  | $ | 1,056,438 |         |  | $ | 784,932  |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Total assets                                                                   |                         |  |     |  |  |   | 1,453,020                                                  |         |      |   | 1,471,364 |         |      |   | 1,586,317 |         |  |   | 981,167   |         |  |   | 759,660  |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Total debt                                                                     |                         |  |     |  |  |   | 765,927                                                    |         |      |   | 755,485   |         |      |   | 812,788   |         |  |   | 435,362   |         |  |   | 390,321  |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Shareholders equity, minority interest
and Series Z Preferred Shares          |                         |  |     |  |  |   | 639,089                                                    |         |      |   | 660,453   |         |      |   | 718,765   |         |  |   | 513,497   |         |  |   | 334,637  |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Funds From Operations Reconciliation:                                         
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Net income available to common shareholders                                    |                         |  |     |  |  | $ | 57,579                                                     |         |      | $ | 42,601    |         |      | $ | 28,040    |         |  | $ | 29,889    |         |  | $ | 22,381   |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Minority interest of common unitholders in Operating Partnership               |                         |  |     |  |  |   | 16,359                                                     |         |      |   | 10,348    |         |      |   | 7,142     |         |  |   | 5,611     |         |  |   | 4,640    |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Real estate depreciation                                                       |                         |  | (4) |  |  |   | 45,289                                                     |         |      |   | 45,942    |         |      |   | 40,312    |         |  |   | 24,935    |         |  |   | 18,697   |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Extraordinary loss, net of minority interest                                   |                         |  |     |  |  |   |                                                           |         |      |   |          |         |      |   |          |         |  |   | 602       |         |  |   | 520      |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Gain on sale of previously depreciated real estate assets                      |                         |  |     |  |  |   | (28,622                                                    | )       |      |   | (9,116    | )       |      |   |          |         |  |   | (4,858    | )       |  |   |         |        
|                                                                               |                         |  |     |  |  |   |                                                            |         |      |   |           |         |      |   |           |         |  |   |           |         |  |   |          |        
|Funds from operations                                                          |                         |  |     |  |  | $ | 90,605                                                     |         |      | $ | 89,775    |         |      | $ | 75,494    |         |  | $ | 56,179    |         |  | $ | 46,238   |        
|                                                                               |                         |  |     |  |  |   |                                                            |         |      |   |           |         |      |   |           |         |  |   |           |         |  |   |          |        

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##### Table of Contents



NOTES TO SELECTED FINANCIAL AND OPERATING INFORMATION

(1) We consider funds from operations (FFO) to be a useful performance
measure of the operating performance of an equity REIT because, together with
net income and cash flows, FFO provides investors with an additional basis to
evaluate the ability of a REIT to incur and service debt and to fund
distributions and capital expenditures. We believe that in order to facilitate
a clear understanding of our operating results, FFO should be examined in
conjunction with net income as presented in the financial statements and data
included elsewhere in this report. We compute FFO in accordance with standards
established by the National Association of Real Estate Investment Trusts
(NAREIT). Effective January 1, 2000, NAREIT amended its definition of FFO to
include in FFO all non-recurring items, except those defined as extraordinary
items under GAAP and gains and losses from sales of depreciable operating
property. We are using the amended definition of FFO in reporting our results
for all periods on or after January 1, 2000. In addition, we have restated FFO
reported for prior periods. FFO, as defined by NAREIT, represents net income
(loss) determined in accordance with generally accepted accounting principles
(GAAP), excluding extraordinary items as defined under GAAP and gains or
losses from sales of depreciable operating property, plus certain non-cash
items, such as real estate depreciation and amortization, and after adjustments
for unconsolidated partnerships and joint ventures. FFO presented herein is
not necessarily comparable to FFO presented by other real estate companies due
to the fact that not all real estate companies use the same definition.
However, our FFO is comparable to the FFO of real estate companies that use the
NAREIT definition. FFO should not be considered as an alternative to net
income, an indicator of our operating performance or an alternative to cash
flows as a measure of liquidity. FFO does not measure whether cash flow is
sufficient to fund all of our cash needs, including principal amortization,
capital expenditures, and distributions to shareholders and unitholders.
Additionally, FFO does not represent cash flows from operating, investing or
financing activities as defined by GAAP. Reference is made to Managements
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources for a discussion of our cash needs and cash
flows.

(2) Gross operating margin represents (a) total property revenues less
property operating and maintenance expenses (exclusive of real estate
depreciation expense) as a percentage of (b) total property revenues.

(3) Average monthly revenue per apartment home is equal to the average
monthly rental revenue collected during the period divided by the average
monthly number of apartment homes occupied during the period.

(4) Reflects real estate depreciation for both wholly-owned communities
and joint ventures.

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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Data)

---







|        |  |                                                                                      
|------- |  | -------------------------------------------------------------------------------------
|ITEM 7. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

We are a REIT focused within the multifamily industry in demand-driven
markets throughout the United States that have high job growth and are
resilient to economic downturns. Our operating performance relies
predominantly on net operating income from our apartment communities. Net
operating income is determined by rental revenues and operating expenses, which
are affected by the demand and supply dynamics within our markets. Our
performance is also affected by the general availability and cost of capital
and our ability to develop and acquire additional apartment communities with
returns in excess of our blended cost of capital.

Business Objectives and Strategy

Our objective is to increase shareholder value by producing consistent
high quality earnings to sustain dividend growth and annual total returns that
exceed the multifamily sector average. To achieve that objective, we employ a
number of business strategies. First, our long-term investment strategy is
research-driven with the objective of creating a portfolio of high quality
assets in approximately six to eight strategically selected markets that are
complementary through economic diversity and characterized by high job growth
and resiliency to national economic downturns. We believe such a portfolio will
provide predictable growth in operating cash flow on a sustainable basis.
Second, we adhere to a strategy of owning and operating high quality, class
AA/A apartment communities under the Gables® brand. We believe
that such communities, when located in highly desirable areas to live and
supplemented with high quality service and amenities, attract the affluent
renter-by-choice who is willing to pay a premium for location preference,
superior service and high quality communities. The resulting portfolio should
maintain high levels of occupancy and rental rates. This, coupled with more
predictable operating expenses and reduced capital expenditure requirements
associated with high quality construction materials, should lead to operating
margins that exceed national averages for the multifamily sector and
sustainable growth in operating cash flow. Third, our aim is to be recognized
as the employer of choice within the industry. Our mission of Taking Care of
the Way People Liveis a cornerstone of our strategy, involving innovative
human resource practices that we believe will attract and retain the highest
caliber associates. Because of our long-established presence as a fully
integrated apartment management, development, construction, acquisition and
disposition company within our markets, we have the ability to offer
multi-faceted career opportunities among the various disciplines within the
industry. Finally, our capital strategy is to maximize return on invested
capital while maintaining financial flexibility through a conservative,
investment grade credit profile. We judiciously manage our capital and are able
to recycle existing capital through asset dispositions. We believe the
successful execution of these strategies will result in operating cash flow and
dividend growth, producing annual total returns that exceed the multifamily
REIT sector average.

We believe we are well positioned to continue achieving our objectives
because of our long-established presence as a fully integrated real estate
company in our markets. This local market presence creates a competitive
advantage in generating increased cash flow from (1) property operations during
different economic cycles and (2) new investment opportunities that involve
site selection, market information and requests for entitlements and zoning
petitions.

Portfolio-wide occupancy levels have remained high and portfolio-wide
rental rates have continued to increase during each of the last several years.
We expect portfolio-wide rental expenses to increase at a rate slightly ahead
of inflation and believe that it will approximate the increase in property
revenues for the coming twelve months. Our ongoing evaluation of the growth
prospects for a specific asset may result in a determination to dispose of the
asset. In that event, we would intend to sell the asset and utilize the net
proceeds from any such sale to invest in new assets expected to have better
growth prospects, reduce indebtedness or, in certain circumstances with
appropriate approval from our board of trustees, repurchase outstanding common
shares. We maintain staffing levels sufficient to meet existing construction,
acquisition, and leasing activities. If market conditions warrant, we would
anticipate adjusting staffing levels to mitigate a negative impact on results
of operations.

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. Actual results or developments
could differ materially from those projected in such statements as a result of
the risk factors set forth under the Risk Factors section in Item 1, in the
relevant paragraphs of Managements Discussion and Analysis of Financial
Condition and Results of

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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Data)

---

Operations and elsewhere in this report. The following discussion and analysis
of our financial condition and results of operations should be read in
conjunction with our accompanying consolidated financial statements and notes
thereto.

Common and Preferred Equity Activity

Secondary Common Share Offerings

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

Preferred Share Offerings

On July 24, 1997, we issued 4,600 shares of 8.30% Series A Cumulative
Redeemable Preferred Shares (liquidation preference $25.00 per share). The net
proceeds from this offering of $111.0 million were used to reduce outstanding
indebtedness under interim financing vehicles. The Series A Preferred Shares
may be redeemed at $25.00 per share plus accrued and unpaid dividends on or
after July 24, 2002. The Series A Preferred Shares have no stated maturity,
sinking fund or mandatory redemption and are not convertible into any other
Gables securities.

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

Issuances of Common Operating Partnership Units

Since the IPO, the Operating Partnership has issued a total of 4,421 Units
in connection with the 1998 acquisition of the properties and operations of
Trammell Crow Residential South Florida (South Florida), the acquisition of
other operating apartment communities, and the acquisition of a parcel of land
for future development.

Issuance of Preferred Operating Partnership Units

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

Common Equity Repurchase Program

We have a common equity repurchase program pursuant to which we are
authorized to purchase up to $150 million of our outstanding common shares or
Units. We have repurchased shares from time to time in open market and
privately negotiated transactions, depending on market prices and other
conditions, using proceeds from sales of selected assets. Units have also been
repurchased for cash upon their presentation for redemption by unitholders. As
of December 31, 2000, we had repurchased 3,980 common shares and 287 Units for
a total of $102,048.

Shelf Registration Statement

We have an effective shelf registration statement on file with the
Securities and Exchange Commission providing $500 million of equity capacity
and $300 million of debt capacity. We believe it is prudent to maintain shelf
registration capacity in order to facilitate future capital raising activities.
To date, there have been no issuances under this shelf registration statement
other than the issuance of $150 million of senior unsecured notes in February
2001.

24



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Data)

---

Portfolio and Other Financing Activity

Community Dispositions (exclusive of joint venture transactions)

During 2000, we sold an apartment community located in Dallas comprising
126 apartment homes, an apartment community located in Houston comprising 228
apartment homes, two apartment communities located in San Antonio comprising
544 apartment homes, and a parcel of land adjacent to an existing apartment
community located in Atlanta. The net proceeds from these sales totaled $81
million, $30 million of which was deposited into an escrow account and is being
used to fund development and acquisition activities. The balance of the net
proceeds was used to paydown outstanding borrowings under interim financing
vehicles and purchase common shares and Units under our common equity
repurchase program. The total gain from these sales was $20.4 million, of
which $19.6 million was recognized in 2000. The remaining gain of $0.8 million
was deferred at December 31, 2000 and will be recognized when earned using the
percentage of completion method because we serve as the developer and general
contractor for the purchaser of the land parcel and have a commitment to
construct an apartment community on the parcel of land sold.

During 1999, we sold three apartment communities located in Atlanta
comprising 676 apartment homes, two apartment communities located in Memphis
comprising 490 apartment homes, an apartment community located in Houston
comprising 412 apartment homes, and an outparcel of land from an existing
development community located in Dallas. The net proceeds from these sales
totaled $96.7 million and were used to pay down outstanding borrowings under
interim financing vehicles and purchase common shares and Units under our
common equity repurchase program. The total gain from these sales was $8.9
million.

CMS Tennessee Multifamily Joint Venture

On December 28, 2000, we sold 91% of our interests in three apartment
communities comprising 1,118 apartment homes to a joint venture with CMS
Companies. Two of these communities are located in Nashville and the third is
located in Memphis. We currently have a 1% general partner interest and an 8%
limited partner interest in this venture. In addition, we serve as the
property manager. We received net proceeds of approximately $61 million in
connection with this sale and we recognized a gain of approximately $9.9
million. The net proceeds were used to repay a fixed-rate note payable with an
outstanding principal balance of approximately $18.6 million that encumbered
one of the assets and to reduce borrowings under our interim financing
vehicles.

Gables Residential Apartment Portfolio Joint Venture

On March 26, 1999, we entered into a joint venture in which our economic
ownership interest is currently 20%. The business purpose of the joint venture
is to develop, own and operate eight multifamily apartment communities, located
in four of our markets. We serve as the managing member of the venture and
have responsibility for all day-to-day operating matters. We also serve as the
property manager, developer and general contractor for construction activities.
On March 26, 1999, we contributed our interest in seven of the development
communities to the joint venture in return for (1) cash of $60.3 million and
(2) an initial capital account in the joint venture of $15.2 million. On
December 2, 1999, we contributed our interest in the eighth development
community to the joint venture in return for (1) cash of $4.8 million and (2)
an increase in the initial capital account in the joint venture of $1.2
million. As of the respective contribution dates, we (1) had commenced
construction of four of the communities, (2) owned the land for the future
development of three of the communities, and (3) owned the acquisition right
for the land for the future development of one of the communities. The capital
budget for the development of the eight communities is $238 million and is
being funded with 50% equity and 50% debt. The equity component is being funded
80% by the venture partner and 20% by us. Our portion of the equity was funded
through contributions of cash and property. As of December 31, 2000, we had
funded our total equity commitment of $23.8 million to
the joint venture. At December 31, 2000, construction was complete with
respect to six of the eight communities and five of the six completed
communities had reached a stabilized occupancy level.

Community Acquisition

During the third quarter of 2000, we acquired an apartment community
located in Austin comprising 160 apartment homes. In consideration for such
community, we paid $5.7 million in cash and assumed a $14.1 million secured
fixed-rate note.

25



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Data)

---

Portfolio Acquisitions

On April 1, 1998, we acquired the properties and operations of South
Florida, which consisted of fifteen multifamily apartment communities
containing a total of 4,197 apartment homes, and all of South Floridas
residential construction and development and third party management activities.
In consideration for those properties and operations, we (1) paid $155.0
million in cash, (2) assumed $135.9 million of tax-exempt debt, and (3) issued
2,348 Units valued at $64.9 million. In addition, on January 1, 2000, we
issued 470 Units valued at $10.4 million and paid cash of $0.3 million related
to a deferred portion of the purchase price. The acquisition increased the
size of our portfolio under management on April 1, 1998 from 28,000 to 40,000
apartment homes.

In April 1998, we acquired four multifamily apartment communities
comprising a total of 913 apartment homes located in Houston, Texas
(Greystone). In connection with that acquisition, we assumed $31.0 million
of indebtedness at fair value and issued 665 Units valued at $18.0 million.
In addition, in December 1999, we issued 34 Units valued at $0.9 million
related to a deferred portion of the purchase price that was contingent upon
1999 economic performance.

26



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Data)

---

Results of Operations

Comparison of operating results for the year ended December 31, 2000 to the year ended December 31, 1999

Our net income is generated primarily from the operation of our apartment
communities. For purposes of evaluating comparative operating performance, we
categorize our operating communities based on the period each community reaches
stabilized occupancy. A community is considered to have achieved stabilized
occupancy on the earlier to occur of (1) attainment of 93% physical occupancy
or (2) one year after completion of construction. The operating performance
for all of our apartment communities combined for the years ended December 31,
2000 and 1999 is summarized as follows:

|                                                                                    |  |                          |         |      |  |        |         |        |  |   |         |   |  |  |       |   
|----------------------------------------------------------------------------------- |  | ------------------------ | ------- | ---- |  | ------ | ------- | ------ |  | - | ------- | - |  |  | ----- | --
|                                                                                    |  | Years Ended December 31,
|                                                                                    |  |                         
|                                                                                    |  |                          |         |      |  |        |         |        |  | $ |         | %
|                                                                                    |  | 2000                     |         | 1999 |  | Change |         | Change
|                                                                                    |  |                          |         |      |  |        |         |       
|Rental and other property revenues:                                                
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Same store communities(1)                                                           |  | $                        | 199,124 |      |  | $      | 193,019 |        |  | $ | 6,105   |   |  |  | 3.2   | % 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Communities stabilized during 2000 but not 1999(2)                                  |  |                          | 13,750  |      |  |        | 12,590  |        |  |   | 1,160   |   |  |  | 9.2   | % 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Development and lease-up communities(3)                                             |  |                          | 991     |      |  |        |        |        |  |   | 991     |   |  |  |      | % 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Acquired communities(4)                                                             |  |                          | 914     |      |  |        |        |        |  |   | 914     |   |  |  |      | % 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Sold communities(5)                                                                 |  |                          | 15,010  |      |  |        | 28,201  |        |  |   | (13,191 | ) |  |  | (46.8 | )%
|                                                                                    |  |                          |         |      |  |        |         |        |  |   |         |   |  |  |       |   
|Total property revenues                                                             |  | $                        | 229,789 |      |  | $      | 233,810 |        |  | $ | (4,021  | ) |  |  | (1.7  | )%
|                                                                                    |  |                          |         |      |  |        |         |        |  |   |         |   |  |  |       |   
|Property operating and maintenance expenses                                        
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|(exclusive of real estate depreciation and amortization):                          
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Same store communities(1)                                                           |  | $                        | 65,460  |      |  | $      | 64,370  |        |  | $ | 1,090   |   |  |  | 1.7   | % 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Communities stabilized during 2000 but not 1999(2)                                  |  |                          | 4,462   |      |  |        | 3,844   |        |  |   | 618     |   |  |  | 16.1  | % 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Development and lease-up communities(3)                                             |  |                          | 77      |      |  |        |        |        |  |   | 77      |   |  |  |      | % 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Acquired communities(4)                                                             |  |                          | 323     |      |  |        |        |        |  |   | 323     |   |  |  |      | % 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Sold communities(5)                                                                 |  |                          | 5,122   |      |  |        | 10,475  |        |  |   | (5,353  | ) |  |  | (51.1 | )%
|                                                                                    |  |                          |         |      |  |        |         |        |  |   |         |   |  |  |       |   
|Total specified expenses                                                            |  | $                        | 75,444  |      |  | $      | 78,689  |        |  | $ | (3,245  | ) |  |  | (4.1  | )%
|                                                                                    |  |                          |         |      |  |        |         |        |  |   |         |   |  |  |       |   
|Revenues in excess of specified expenses                                            |  | $                        | 154,345 |      |  | $      | 155,121 |        |  | $ | (776    | ) |  |  | (0.5  | )%
|                                                                                    |  |                          |         |      |  |        |         |        |  |   |         |   |  |  |       |   
|Revenues in excess of specified expenses as a percentage of total
property revenues |  |                          | 67.2    | %    |  |        | 66.3    | %      |  |   |        |   |  |  | 0.9   | % 
|                                                                                    |  |                          |         |      |  |        |         |        |  |   |         |   |  |  |       |   



|(1) |  | Communities which were owned and fully stabilized throughout both 2000 and
1999.                        
|--- |  | --------------------------------------------------------------------------------------------------------
|   
|(2) |  | Communities which were completed and fully stabilized during 2000 but
not 1999.                         
|   
|(3) |  | Communities in the development/lease-up phase which were not fully
stabilized during all or any of 2000.
|   
|(4) |  | Communities which were acquired or in renovation subsequent to January 1,
1999.                         
|   
|(5) |  | Communities which were sold subsequent to January 1, 1999.                                              

Total property revenues decreased $4,021 or 1.7%, from $233,810 to
$229,789 due primarily to the sale of seven apartment communities during the
second half of 2000 and six apartment communities during the second half of
1999. This decrease is offset in part by an increase in rental rates on
communities stabilized throughout both periods (same store) and an increase
in the number of apartment homes resulting from the development of additional
communities as well as the acquisition of an apartment community in Austin.
Following is additional data regarding the increases in total property revenues
for three of the five community categories presented in the preceding table:

27



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Data)

---

Same store communities:

|            |  |             |    |           |  |           |        |             |  |           |       |           |  |           |      |   |  |  |      |    |  |   |       |         |  |  |      |  
|----------- |  | ----------- | -- | --------- |  | --------- | ------ | ----------- |  | --------- | ----- | --------- |  | --------- | ---- | - |  |  | ---- | -- |  | - | ----- | ------- |  |  | ---- | -
|            |  |             |    |           |  | Number of |        |             |  |           |       |           |  |           |      |   |  |  |      |    |  |   |       | Percent
|            |  | Number of   |    | Apartment |  | Percent   |        | Occupancy   |  | Change in |       | Change in |  | Change in
|Market      |  | Communities |    | Homes     |  | of Total  |        | During 2000 |  | Occupancy |       | Revenues  |  | Revenues 
|            |  |             |    |           |  |           |        |             |  |           |       |           |  |          
|Houston     |  |             | 18 |           |  |           | 6,046  |             |  |           | 30.4  | %         |  |           | 95.6 | % |  |  | 1.4  | %  |  | $ | 424   |         |  |  | 0.8  | %
|           
|           
|           
|           
|Atlanta     |  |             | 18 |           |  |           | 5,378  |             |  |           | 27.1  | %         |  |           | 95.0 | % |  |  | 0.0  | %  |  |   | 1,915 |         |  |  | 3.8  | %
|           
|           
|           
|           
|So. Florida |  |             | 14 |           |  |           | 3,948  |             |  |           | 19.9  | %         |  |           | 95.2 | % |  |  | (0.9 | )% |  |   | 992   |         |  |  | 2.5  | %
|           
|           
|           
|           
|Dallas      |  |             | 8  |           |  |           | 1,959  |             |  |           | 9.9   | %         |  |           | 95.0 | % |  |  | 1.6  | %  |  |   | 345   |         |  |  | 1.7  | %
|           
|           
|           
|           
|Austin      |  |             | 6  |           |  |           | 1,517  |             |  |           | 7.6   | %         |  |           | 97.0 | % |  |  | 3.7  | %  |  |   | 2,140 |         |  |  | 11.7 | %
|           
|           
|           
|           
|Nashville   |  |             | 2  |           |  |           | 548    |             |  |           | 2.8   | %         |  |           | 94.2 | % |  |  | 1.7  | %  |  |   | 109   |         |  |  | 2.9  | %
|           
|           
|           
|           
|Memphis     |  |             | 1  |           |  |           | 464    |             |  |           | 2.3   | %         |  |           | 94.8 | % |  |  | 2.0  | %  |  |   | 168   |         |  |  | 4.8  | %
|            |  |             |    |           |  |           |        |             |  |           |       |           |  |           |      |   |  |  |      |    |  |   |       |         |  |  |      |  
|Total       |  |             | 67 |           |  |           | 19,860 |             |  |           | 100.0 | %         |  |           | 95.4 | % |  |  | 0.8  | %  |  | $ | 6,093 | (a)     |  |  | 3.2  | %
|            |  |             |    |           |  |           |        |             |  |           |       |           |  |           |      |   |  |  |      |    |  |   |       |         |  |  |      |  



|(a) |  | This table excludes The Commons at Little Lake Bryan I, a community
comprising 280 apartment homes that is leased to a single user group
pursuant to a triple net master lease. Revenues for The Commons at
Little Lake Bryan I increased $12, or 0.5%, in 2000 compared to 1999 and
occupancy was 100% for both 2000 and 1999.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Communities stabilized during 2000, but not 1999:

|            |  |             |   |           |  |           |       |             |  |           |       |   |  |  |      |   |  |   |       | 
|----------- |  | ----------- | - | --------- |  | --------- | ----- | ----------- |  | --------- | ----- | - |  |  | ---- | - |  | - | ----- | 
|            |  |             |   |           |  | Number of
|            |  | Number of   |   | Apartment |  | Percent   |       | Occupancy   |  | Change in
|Market      |  | Communities |   | Homes     |  | of Total  |       | During 2000 |  | Revenues 
|            |  |             |   |           |  |           |       |             |  |          
|Atlanta     |  |             | 1 |           |  |           | 386   |             |  |           | 34.4  | % |  |  | 95.9 | % |  | $ | 368   | 
|           
|           
|           
|           
|Houston     |  |             | 1 |           |  |           | 256   |             |  |           | 22.8  | % |  |  | 94.8 | % |  |   | 213   | 
|           
|           
|           
|           
|So. Florida |  |             | 1 |           |  |           | 249   |             |  |           | 22.2  | % |  |  | 94.1 | % |  |   | 134   | 
|           
|           
|           
|           
|Orlando     |  |             | 1 |           |  |           | 231   |             |  |           | 20.6  | % |  |  | 89.9 | % |  |   | 445   | 
|            |  |             |   |           |  |           |       |             |  |           |       |   |  |  |      |   |  |   |       | 
|Total       |  |             | 4 |           |  |           | 1,122 |             |  |           | 100.0 | % |  |  | 93.7 | % |  | $ | 1,160 | 
|            |  |             |   |           |  |           |       |             |  |           |       |   |  |  |      |   |  |   |       | 

Development and lease-up communities:

|           |  |             |   |           |  |           |     |             |  |           |       |   |  |  |      |   |  |   |     | 
|---------- |  | ----------- | - | --------- |  | --------- | --- | ----------- |  | --------- | ----- | - |  |  | ---- | - |  | - | --- | 
|           |  |             |   |           |  | Number of
|           |  | Number of   |   | Apartment |  | Percent   |     | Occupancy   |  | Change in
|Market     |  | Communities |   | Homes     |  | of Total  |     | During 2000 |  | Revenues 
|           |  |             |   |           |  |           |     |             |  |          
|Orlando(a) |  |             | 2 |           |  |           | 763 |             |  |           | 81.2  | % |  |  | 17.2 | % |  | $ | 850 | 
|          
|          
|          
|          
|Dallas     |  |             | 1 |           |  |           | 177 |             |  |           | 18.8  | % |  |  | 8.9  | % |  |   | 141 | 
|           |  |             |   |           |  |           |     |             |  |           |       |   |  |  |      |   |  |   |     | 
|Total      |  |             | 3 |           |  |           | 940 |             |  |           | 100.0 | % |  |  | 14.9 | % |  | $ | 991 | 
|           |  |             |   |           |  |           |     |             |  |           |       |   |  |  |      |   |  |   |     | 



|(a) |  | One of these communities is leased to a single user group pursuant to
a triple net master lease.
|--- |  | ------------------------------------------------------------------------------------------------

Other revenues increased $517, or 4.4%, from $11,787 to $12,304 due
primarily to an increase in interest income of $355.

Property operating and maintenance expense (exclusive of depreciation and
amortization) decreased $3,245, or 4.1%, from $78,689 to $75,444 due primarily
to the sale of seven apartment communities during the second half of 2000 and
six apartment communities during the second half of 1999. This decrease is
offset by a $1,090, or 1.7% increase in property operating and maintenance
expense for same store communities. The same store increase represents
increased payroll costs, maintenance and property taxes offset by reduced
marketing costs.

28



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Data)

---

Real estate asset depreciation and amortization expense decreased $1,709,
or 3.8%, from $45,538 to $43,829 due primarily to the sale of seven apartment
communities during the second half of 2000 and six apartment communities during
the second half of 1999.

Property management expense for owned communities and third party
properties on a combined basis increased $1,114, or 12.5%, from $8,893 to
$10,007 due primarily to (1) increased staffing and equipment support costs
related to our strategic initiatives for enhanced management information
systems, (2) increased staffing costs related to regional maintenance and other
positions added to enhance the support infrastructure necessary to provide our
residents with high quality service and (3) inflationary increases in expenses.
We allocate property management expenses to both owned communities and third
party properties based on the proportionate share of total apartment homes
managed.

Interest expense and credit enhancement fees increased $1,280, or 2.9%,
from $44,259 to $45,539 due to higher interest rates and an increase in
operating debt associated with the development of additional communities as
well as the acquisition of an apartment community in Austin. This increase has
been offset in part by the sale of apartment communities in 2000 and 1999, the
proceeds of which were partially used to reduce outstanding indebtedness.

General and administrative expense increased $1,358, or 23.4%, from $5,796
to $7,154 due primarily to (1) an increase in long-term compensation expense,
(2) internal acquisition costs related to the acquisition of an apartment
community in Austin, (3) an increase in abandoned real estate pursuit costs,
(4) costs associated with a new marketing and branding campaign and (5)
inflationary increases in expenses.

Gain on sale of real estate assets of $29,467 in 2000 relates to the sale
of an apartment community located in Dallas comprising 126 apartment homes, an
apartment community located in Houston comprising 228 apartment homes, two
apartment communities located in San Antonio comprising 544 apartment homes,
two apartment communities located in Nashville comprising 618 apartment homes,
one apartment community located in Memphis comprising 500 apartment homes, and
a parcel of land adjacent to an existing apartment community located in
Atlanta.

Gain on sale of real estate assets of $8,864 in 1999 relates to the sale
of three apartment communities located in Atlanta comprising 676 apartment
homes, two apartment communities located in Memphis comprising 490 apartment
homes, one apartment community located in Houston comprising 412 apartment
homes, and an outparcel of land from an existing development community located
in Dallas.

29



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Data)

---

Results of Operations

Comparison of operating results for the year ended December 31, 1999 to the year ended December 31, 1998

Our net income is generated primarily from the operation of our apartment
communities. For purposes of evaluating comparative operating performance, we
categorize our operating communities based on the period each community reaches
stabilized occupancy. A community is considered to have achieved stabilized
occupancy on the earlier to occur of (1) attainment of 93% physical occupancy
or (2) one year after completion of construction. The operating performance
for all of our apartment communities combined for the years ended December 31,
1999 and 1998 is summarized as follows:

|                                                                                    |  |                          |         |      |  |        |         |        |  |   |        |   |  |  |       |   
|----------------------------------------------------------------------------------- |  | ------------------------ | ------- | ---- |  | ------ | ------- | ------ |  | - | ------ | - |  |  | ----- | --
|                                                                                    |  | Years Ended December 31,
|                                                                                    |  |                         
|                                                                                    |  |                          |         |      |  |        |         |        |  | $ |        | %
|                                                                                    |  | 1999                     |         | 1998 |  | Change |         | Change
|                                                                                    |  |                          |         |      |  |        |         |       
|Rental and other property revenues:                                                
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Same store communities(1)                                                           |  | $                        | 151,175 |      |  | $      | 148,245 |        |  | $ | 2,930  |   |  |  | 2.0   | % 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Communities stabilized during 1999 but not 1998(2)                                  |  |                          | 9,023   |      |  |        | 6,767   |        |  |   | 2,256  |   |  |  | 33.3  | % 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Development and lease-up communities(3)                                             |  |                          | 8,712   |      |  |        | 3,060   |        |  |   | 5,652  |   |  |  | 184.7 | % 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Acquired communities(4)                                                             |  |                          | 55,387  |      |  |        | 38,069  |        |  |   | 17,318 |   |  |  | 45.5  | % 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Sold communities(5)                                                                 |  |                          | 9,513   |      |  |        | 13,139  |        |  |   | (3,626 | ) |  |  | (27.6 | )%
|                                                                                    |  |                          |         |      |  |        |         |        |  |   |        |   |  |  |       |   
|Total property revenues                                                             |  | $                        | 233,810 |      |  | $      | 209,280 |        |  | $ | 24,530 |   |  |  | 11.7  | % 
|                                                                                    |  |                          |         |      |  |        |         |        |  |   |        |   |  |  |       |   
|Property operating and maintenance expenses                                        
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|(exclusive of real estate depreciation and amortization):                          
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Same store communities(1)                                                           |  | $                        | 50,103  |      |  | $      | 49,321  |        |  | $ | 782    |   |  |  | 1.6   | % 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Communities stabilized during 1999 but not 1998(2)                                  |  |                          | 2,176   |      |  |        | 1,527   |        |  |   | 649    |   |  |  | 42.5  | % 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Development and lease-up communities(3)                                             |  |                          | 2,882   |      |  |        | 592     |        |  |   | 2,290  |   |  |  | 386.8 | % 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Acquired communities(4)                                                             |  |                          | 19,451  |      |  |        | 13,386  |        |  |   | 6,065  |   |  |  | 45.3  | % 
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Sold communities(5)                                                                 |  |                          | 4,077   |      |  |        | 5,676   |        |  |   | (1,599 | ) |  |  | (28.2 | )%
|                                                                                    |  |                          |         |      |  |        |         |        |  |   |        |   |  |  |       |   
|Total specified expenses                                                            |  | $                        | 78,689  |      |  | $      | 70,502  |        |  | $ | 8,187  |   |  |  | 11.6  | % 
|                                                                                    |  |                          |         |      |  |        |         |        |  |   |        |   |  |  |       |   
|Revenues in excess of specified expenses                                            |  | $                        | 155,121 |      |  | $      | 138,778 |        |  | $ | 16,343 |   |  |  | 11.8  | % 
|                                                                                    |  |                          |         |      |  |        |         |        |  |   |        |   |  |  |       |   
|Revenues in excess of specified expenses as a percentage of total
property revenues |  |                          | 66.3    | %    |  |        | 66.3    | %      |  |   |       |   |  |  | 0.0   | % 
|                                                                                    |  |                          |         |      |  |        |         |        |  |   |        |   |  |  |       |   



|(1) |  | Communities which were owned and fully stabilized throughout both 1999 and
1998.                        
|--- |  | --------------------------------------------------------------------------------------------------------
|   
|(2) |  | Communities which were completed and fully stabilized during 1999 but
not 1998.                         
|   
|(3) |  | Communities in the development/lease-up phase which were not fully
stabilized during all or any of 1999.
|   
|(4) |  | Communities which were acquired or in renovation subsequent to January 1,
1998.                         
|   
|(5) |  | Communities which were sold subsequent to January 1, 1998.                                              

Total property revenues increased $24,530, or 11.7%, from $209,280 to
$233,810 due primarily to increases in the number of apartment homes resulting
from the acquisition and development of additional communities and increases in
rental rates on same store communities throughout both periods. This increase
in property revenues has been offset in part by the sale of six apartment
communities in 1999. Additional information regarding the increases in total
property revenues for three of the five community categories presented in the
preceding table follows:

30



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Data)

---

Same store communities:

|            |  |             |    |           |  |           |        |             |  |           |       |           |  |           |      |   |  |  |      |    |  |   |       |         |  |  |      |   
|----------- |  | ----------- | -- | --------- |  | --------- | ------ | ----------- |  | --------- | ----- | --------- |  | --------- | ---- | - |  |  | ---- | -- |  | - | ----- | ------- |  |  | ---- | --
|            |  |             |    |           |  | Number of |        |             |  |           |       |           |  |           |      |   |  |  |      |    |  |   |       | Percent
|            |  | Number of   |    | Apartment |  | Percent   |        | Occupancy   |  | Change in |       | Change in |  | Change in
|Market      |  | Communities |    | Homes     |  | of Total  |        | During 1999 |  | Occupancy |       | Revenues  |  | Revenues 
|            |  |             |    |           |  |           |        |             |  |           |       |           |  |          
|Atlanta     |  |             | 18 |           |  |           | 5,378  |             |  |           | 33.5  | %         |  |           | 95.0 | % |  |  | (0.6 | )% |  | $ | 2,145 |         |  |  | 4.4  | % 
|           
|           
|           
|           
|Houston     |  |             | 14 |           |  |           | 5,221  |             |  |           | 32.6  | %         |  |           | 94.5 | % |  |  | (0.3 | )% |  |   | 62    |         |  |  | 0.1  | % 
|           
|           
|           
|           
|Dallas      |  |             | 9  |           |  |           | 2,085  |             |  |           | 13.0  | %         |  |           | 93.2 | % |  |  | (0.8 | )% |  |   | 364   |         |  |  | 1.7  | % 
|           
|           
|           
|           
|Nashville   |  |             | 4  |           |  |           | 1,166  |             |  |           | 7.3   | %         |  |           | 92.1 | % |  |  | (2.3 | )% |  |   | (132  | )       |  |  | (1.5 | )%
|           
|           
|           
|           
|Memphis     |  |             | 2  |           |  |           | 964    |             |  |           | 6.0   | %         |  |           | 93.4 | % |  |  | (1.5 | )% |  |   | 119   |         |  |  | 1.7  | % 
|           
|           
|           
|           
|Austin      |  |             | 3  |           |  |           | 680    |             |  |           | 4.2   | %         |  |           | 94.6 | % |  |  | 0.8  | %  |  |   | 475   |         |  |  | 6.4  | % 
|           
|           
|           
|           
|San Antonio |  |             | 2  |           |  |           | 544    |             |  |           | 3.4   | %         |  |           | 88.4 | % |  |  | (4.1 | )% |  |   | (103  | )       |  |  | (2.2 | )%
|            |  |             |    |           |  |           |        |             |  |           |       |           |  |           |      |   |  |  |      |    |  |   |       |         |  |  |      |   
|Total       |  |             | 52 |           |  |           | 16,038 |             |  |           | 100.0 | %         |  |           | 94.1 | % |  |  | (0.7 | )% |  | $ | 2,930 | (a)     |  |  | 2.0  | % 
|            |  |             |    |           |  |           |        |             |  |           |       |           |  |           |      |   |  |  |      |    |  |   |       |         |  |  |      |   

Communities stabilized during 1999, but not 1998:

|        |  |             |   |           |  |           |     |             |  |           |       |   |  |  |       |   |  |   |       | 
|------- |  | ----------- | - | --------- |  | --------- | --- | ----------- |  | --------- | ----- | - |  |  | ----- | - |  | - | ----- | 
|        |  |             |   |           |  | Number of
|        |  | Number of   |   | Apartment |  | Percent   |     | Occupancy   |  | Change in
|Market  |  | Communities |   | Homes     |  | of Total  |     | During 1999 |  | Revenues 
|        |  |             |   |           |  |           |     |             |  |          
|Austin  |  |             | 2 |           |  |           | 529 |             |  |           | 65.4  | % |  |  | 92.2  | % |  | $ | 1,514 | 
|       
|       
|       
|       
|Orlando |  |             | 1 |           |  |           | 280 |             |  |           | 34.6  | % |  |  | 100.0 | % |  |   | 742   | 
|       
|       
|       
|       
|        |  |             |   |           |  |           |     |             |  |           |       |   |  |  |       |   |  |   |       | 
|Total   |  |             | 3 |           |  |           | 809 |             |  |           | 100.0 | % |  |  | 94.2  | % |  | $ | 2,256 | 
|        |  |             |   |           |  |           |     |             |  |           |       |   |  |  |       |   |  |   |       | 

Development and lease-up communities:

|        |  |             |   |           |  |           |     |             |  |           |       |   |  |  |      |   |  |   |       | 
|------- |  | ----------- | - | --------- |  | --------- | --- | ----------- |  | --------- | ----- | - |  |  | ---- | - |  | - | ----- | 
|        |  |             |   |           |  | Number of
|        |  | Number of   |   | Apartment |  | Percent   |     | Occupancy   |  | Change in
|Market  |  | Communities |   | Homes     |  | of Total  |     | During 1999 |  | Revenues 
|        |  |             |   |           |  |           |     |             |  |          
|Atlanta |  |             | 1 |           |  |           | 386 |             |  |           | 44.2  | % |  |  | 89.0 | % |  | $ | 2,441 | 
|       
|       
|       
|       
|Houston |  |             | 1 |           |  |           | 256 |             |  |           | 29.3  | % |  |  | 89.3 | % |  |   | 1,368 | 
|       
|       
|       
|       
|Orlando |  |             | 1 |           |  |           | 231 |             |  |           | 26.5  | % |  |  | 79.1 | % |  |   | 1,843 | 
|        |  |             |   |           |  |           |     |             |  |           |       |   |  |  |      |   |  |   |       | 
|Total   |  |             | 3 |           |  |           | 873 |             |  |           | 100.0 | % |  |  | 85.7 | % |  | $ | 5,652 | 
|        |  |             |   |           |  |           |     |             |  |           |       |   |  |  |      |   |  |   |       | 

Other revenues increased $3,667, or 45.2%, from $8,120 to $11,787 due
primarily to (1) an increase in property management revenues of $421, or 9.3%,
from $4,533 to $4,954, resulting from a net increase in properties managed for
third parties, primarily as a result of the South Florida acquisition, and (2)
net development revenues of $2,929 in 1999, primarily related to the Gables
Residential Apartment Portfolio JV.

Property operating and maintenance expense (exclusive of depreciation and
amortization) increased $8,187, or 11.6%, from $70,502 to $78,689 due to an
increase in apartment homes resulting from the acquisition and development of
additional communities and an increase in property operating and maintenance
expense for same store communities of 1.6%. This increase has been offset in
part by the sale of six apartment communities in 1999. The same store increase
in operating expenses represents increased payroll costs, property taxes and
maintenance costs, offset in part by reduced utilities, marketing and
landscaping expenses.

Real estate asset depreciation and amortization expense increased $5,451,
or 13.6%, from $40,087 to $45,538 due primarily to the acquisition and
development of additional communities. This increase in real estate
depreciation and amortization expense is partially offset by the sale of six
apartment communities in 1999.

31



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Data)

---

Property management expense for owned communities and third party
properties on a combined basis increased $916, or 11.5%, from $7,977 to $8,893
due primarily to (1) a net increase of 3,000 apartment homes managed from
38,000 in 1998 to 41,000 in 1999, resulting primarily from the South Florida
acquisition, (2) increased staffing and support related to our strategic
initiatives for enhanced management information systems, and (3) inflationary
increases in expenses. We allocate property management expenses to both owned
communities and third party properties based on the proportionate share of
total apartment homes and units managed.

Interest expense and credit enhancement fees increased $4,285, or 10.7%,
from $39,974 to $44,259 due to an increase in operating debt associated with
the acquisition and development of additional communities, including the debt
assumed in connection with the South Florida and Greystone acquisitions. These
increases in interest expense have been offset in part as a result of the
equity offerings and property sales consummated between periods, the proceeds
of which have been partially used to reduce indebtedness.

General and administrative expense decreased $446, or 7.2%, from $6,242 to
$5,796 due primarily to a decrease in abandoned real estate pursuit costs and
internal acquisition costs incurred in 1998 related to acquisitions. This
decrease has been offset in part by (1) compensation and other costs for new
positions associated with the South Florida acquisition and (2) increased
compensation costs.

Severance costs of $2,800 in 1999 represent charges associated with
organizational changes resulting from management succession directives,
including the resignation of the former chairman and chief executive officer
effective January 1, 2000 and the resignation of the former chief operating
officer effective May 21, 1999.

Gain on sale of real estate assets of $8,864 in 1999 relates to the sale
of three apartment communities located in Atlanta comprising 676 apartment
homes, two apartment communities located in Memphis comprising 490 apartment
homes, one apartment community located in Houston comprising 412 apartment
homes, and an outparcel of land from an existing development community located
in Dallas.

Liquidity and Capital Resources

We had $105,189 of net cash provided by operating activities for the year
ended December 31, 2000 compared to $105,029 for the year ended December 31,
1999. The $160 increase between years is due to a change in restricted cash
between periods of $384 and a change in other assets between periods of $5,290.
This increase is offset by (1) a decrease of $647 in income (a) before
certain non-cash or non-operating items, including depreciation, amortization,
equity in income of joint ventures, minority interest of unitholders in
Operating Partnership, gain on sale of real estate assets, and long-term
compensation expense and (b) after operating distributions received from joint
ventures and (2) a change in other liabilities between periods of $4,867.

We had $19,567 of net cash provided by investing activities for the year
ended December 31, 2000 compared to $80,928 for the year ended December 31,
1999. During the year ended December 31, 2000, we received cash of $142.0
million in connection with the sale of apartment communities. We deposited
$30.2 million of the cash received in connection with the sale of these
apartment communities into an escrow account to fund development and
acquisition activities, of which $8.5 million remains in escrow at December 31,
2000. During the year ended December 31, 2000, we expended $90.4 million
related to development expenditures, including related land acquisitions, $3.0
million related to our investment in joint ventures, $10.9 million related to
recurring, non-revenue enhancing capital expenditures for operating apartment
communities, and $9.6 million related to non-recurring, renovation/revenue
enhancing capital expenditures. During the year ended December 31, 1999, we
received cash of (1) $65.1 million in connection with our contribution of
interests in certain development communities to the Gables Residential
Apartment Portfolio JV and (2) $96.7 million in connection with the sale of
real estate assets. During the year ended December 31, 1999, we expended $56.5
million related to development expenditures, including related land
acquisitions, $6.7 million related to our investment in joint ventures, $10.0
million related to recurring, non-revenue enhancing capital expenditures for
operating apartment communities, and $7.7 million related to non-recurring,
renovation/revenue enhancing capital expenditures.

32



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MANAGEMENTS DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Data)

---

We had $128,467 of net cash used in financing activities for the year
ended December 31, 2000 compared to $185,048 for the year ended December 31,
1999. During the year ended December 31, 2000, we had payments for dividends
and distributions totaling $80.4 million, payments for treasury share purchases
and Unit redemptions in connection with our common equity repurchase program
totaling $47.3 million, net repayments of borrowings of $3.7 million and
payments of deferred financing costs and principal escrow deposits totaling
$1.8 million. These payments were offset in part by proceeds from the exercise
of share options of $4.7 million. During the year ended December 31, 1999, we
had net repayments of borrowings of $57.3 million, net payments of dividends
and distributions totaling $73.1 million, and payments for treasury share
purchases and Unit redemptions totaling $54.8 million.

We have elected to be taxed as a REIT under the Code. For the tax year
ending December 31, 2000, a REIT must distribute at least 95% of its ordinary
taxable income. As a result of recently enacted tax legislation, effective for
tax years beginning after December 31, 2000, the distribution requirement has
been reduced from 95% to 90% of a REITs ordinary taxable income. Provided we
maintain our qualification as a REIT, we generally will not be subject to
federal income tax on distributed net income.

The recently enacted tax legislation also alters the requirements for
qualification as a REIT. In particular, the new legislation generally
liberalizes, from the perspective of our historic operations, the asset
diversification requirements applicable to REITs. Effective for tax years
beginning after December 31, 2000, a REIT may own the securities of a taxable
REIT subsidiary without limitation on the REITs voting control over the
subsidiary, provided that not more than 20% of the value of the REITs total
assets is represented by securities of one or more taxable REIT subsidiaries.
A taxable REIT subsidiary would include a corporation in which we directly or
indirectly own stock and which has elected to be treated as a taxable REIT
subsidiary.

As of December 31, 2000, we had total indebtedness of $765,927, cash and
cash equivalents of $4,252, and principal escrow deposits reflected in
restricted cash of $3,540. Our indebtedness has an average of 4.7 years to
maturity at December 31, 2000. On February 22, 2001, we issued $150.0 million
of senior unsecured notes which bear interest at 7.25%, were priced to yield
7.29%, and mature in February 2006. The net proceeds of $148.5 million were
used to reduce borrowings under our unsecured credit facilities and repay our
$40 million term loan. The aggregate maturities of notes payable at December
31, 2000 (on both a historical basis and a pro forma basis to give effect to
the issuance of the notes and the application of the net proceeds therefrom, as
if such events had occurred on December 31, 2000) are as follows:

| |                     |   |            |         |           |   |         |         | 
| | ------------------- | - | ---------- | ------- | --------- | - | ------- | ------- | 
| |                     |   | Historical |         | Pro Forma
| |                     |   |            |         |          
| | 2001                |   | $          | 97,024  |           |   | $       | 18,529  | 
|
|
|
|
| | 2002                |   |            | 86,072  |           |   |         | 86,072  | 
|
|
|
|
| | 2003                |   |            | 122,467 |           |   |         | 52,467  | 
|
|
|
|
| | 2004                |   |            | 79,556  |           |   |         | 79,556  | 
|
|
|
|
| | 2005                |   |            | 113,074 |           |   |         | 113,074 | 
|
|
|
|
| | 2006 and thereafter |   |            | 267,734 |           |   |         | 417,734 | 
| |                     |   |            |         |           |   |         |         | 
| |                     | $ | 765,927    |         |           | $ | 767,432 |        
| |                     |   |            |         |           |   |         |         | 

The maturities in 2001 include $15 million of senior unsecured notes which
mature in October 2001.

Dividends through the fourth quarter of 2000 have been paid from cash
provided by operating activities. We anticipate that dividends will continue to
be paid on a quarterly basis from cash provided by operating activities.

We have met and expect to continue to meet our short-term liquidity
requirements generally through net cash provided by operations. Our net cash
provided by operations has been adequate and we believe that it will continue
to be adequate to meet both operating requirements and payment of dividends in
accordance with REIT requirements. The budgeted expenditures for improvements
and renovations to our communities, in addition to monthly principal
amortization payments, are also expected to be funded from net cash provided by
operations. We anticipate that construction and development activities as well
as land purchases will be initially funded primarily through borrowings under
our credit facilities described below.

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MANAGEMENTS DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Data)

---

We expect to meet certain of our long-term liquidity requirements such as
scheduled debt maturities, repayment of short-term financing of construction
and development activities and possible property acquisitions through long-term
secured and unsecured borrowings, the issuance of debt securities or equity
securities, private equity investments in the form of joint ventures, or
through the disposition of assets which, in our evaluation, may no longer meet
our investment requirements.

$225 Million Credit Facility

We have a $225 million unsecured revolving credit facility provided by a
consortium of banks. The facility currently has a maturity date of May 2003
with a one-year extension option. Borrowings under the facility currently bear
interest at our option of LIBOR plus 0.95% or prime minus 0.25%. Such
scheduled interest rates may be adjusted up or down based on changes in our
senior unsecured credit ratings. We may also enter into competitive bid loans
with participating banks for up to $112.5 million at rates below the scheduled
rates. In addition, we pay an annual facility fee equal to 0.15% of the $225
million commitment. Availability under the facility is based on the value of
our unencumbered real estate assets as compared to the amount of our unsecured
indebtedness. As of December 31, 2000, we had $70 million in borrowings
outstanding under the facility and, therefore, had $155 million of remaining
capacity on the $225 million commitment.

$50 Million Borrowing Facility

At December 31, 1999, we had a $25 million unsecured borrowing facility
with a bank. In connection with the extension of the April 2000 maturity date
to April 2001, the availability under the facility was increased to $50
million. The interest rate and maturity date related to each draw on this
facility is agreed to by both parties prior to each draw. At December 31,
2000, we had $38.2 million in borrowings outstanding under this facility.

$25 Million Credit Facility

We have a $25 million unsecured revolving credit facility with a bank that
currently bears interest at LIBOR plus 0.95%. The facility currently has a
maturity date of October 2001 with unlimited one-year extension options. We
had $0.4 million in borrowings outstanding under this facility at December 31,
2000.

Restrictive Covenants

Certain of our debt agreements contain customary representations,
covenants and events of default, including covenants which restrict the ability
of the Operating Partnership to make distributions in excess of stated amounts,
which in turn restricts our discretion to declare and pay dividends. In
general, during any fiscal year the Operating Partnership may only distribute
up to 95% of its consolidated income available for distribution (as defined in
the related agreement) exclusive of distributions of capital gains for such
year. The applicable debt agreements contain exceptions to these limitations
to allow the Operating Partnership to make any distributions necessary to allow
us to maintain our status as a REIT. We do not anticipate that this provision
will adversely effect the ability of the Operating Partnership to make
distributions or our ability to declare dividends, as currently anticipated.

Inflation

Substantially all leases at our communities are for a term of one year or
less, which may enable us to seek increased rents upon renewal of existing
leases or commencement of new leases in times of rising prices. The short-term
nature of these leases generally serves to lessen the impact of cost increases
arising from inflation.

Certain Factors Affecting Future Operating Results

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. The words believe, expect,
anticipate, intend, estimate, assume and other similar expressions
which are predictions of or indicate future events and trends and which do not
relate solely to historical matters identify forward-looking statements. These
statements include, among other things, statements regarding our intent,
belief or expectations with respect to the following: (1) the declaration or
payment of distributions, (2) potential developments or acquisitions or
dispositions of properties, assets or other entities, (3)

34



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Data)

---

our policies regarding investments, indebtedness, acquisitions, dispositions,
financings, conflicts of interest and other matters, (4) our qualification as a
REIT under the Code, (5) the real estate markets in which we operate, (6) in
general, the availability of debt and equity financing, interest rates and
general economic conditions, and (7) trends affecting our financial condition
or results of operations.

Reliance should not be placed on forward-looking statements because they
involve known and unknown risks, uncertainties and other factors which are, in
some cases, beyond our control and may cause our actual results, performance or
achievements to differ materially from anticipated future results, performance
or achievements expressed or implied by such forward-looking statements. In
addition to the factors discussed under the Risk Factors section in Item 1,
some of the factors that might cause such a difference include, but are not
limited to, the following: (1) we may abandon or fail to secure development
opportunities, (2) construction costs of a community may exceed original
estimates, (3) construction and lease-up may not be completed on schedule,
resulting in increased debt service expense and construction costs and reduced
rental revenues, (4) occupancy rates and market rents may be adversely affected
by local economic and market conditions which are beyond our control, (5)
financing may not be available or may not be available on favorable terms, (6)
our cash flow may be insufficient to meet required payments of principal and
interest, and (7) existing indebtedness may mature in an unfavorable credit
environment, preventing such indebtedness from being refinanced or, if
financed, causing such refinancing to occur on terms that are not as favorable
as the terms of existing indebtedness. While forward-looking statements
reflect our good faith beliefs, they are not guarantees of future performance.
We disclaim any obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.

Recent Accounting Pronouncements

See Note 4 to Consolidated Financial Statements.

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MANAGEMENTS DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Data)

---

SUPPLEMENTAL DISCUSSION  Funds From Operations and Adjusted Funds From Operations

We consider funds from operations (FFO) to be a useful performance
measure of the operating performance of an equity REIT because, together with
net income and cash flows, FFO provides investors with an additional basis to
evaluate the ability of a REIT to incur and service debt and to fund
distributions and capital expenditures. We believe that in order to facilitate
a clear understanding of our operating results, FFO should be examined in
conjunction with net income as presented in the financial statements and data
included elsewhere in this report. We compute FFO in accordance with standards
established by the National Association of Real Estate Investment Trusts
(NAREIT). Effective January 1, 2000, NAREIT amended its definition of FFO to
include in FFO all non-recurring items, except those defined as extraordinary
items under GAAP and gains and losses from sales of depreciable operating
property. We are using the amended definition of FFO in reporting our results
for all periods on or after January 1, 2000. In addition, we have restated FFO
reported for prior periods. FFO as defined by NAREIT represents net income
(loss) determined in accordance with GAAP, excluding extraordinary items as
defined under GAAP and gains or losses from sales of depreciable operating
property, plus certain non-cash items such as real estate depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures. FFO presented herein is not necessarily comparable to FFO presented
by other real estate companies due to the fact that not all real estate
companies use the same definition. However, our FFO is comparable to the FFO
of real estate companies that use the amended NAREIT definition. Adjusted
funds from operations (AFFO) is defined as FFO less recurring, non-revenue
enhancing capital expenditures. FFO and AFFO should not be considered
alternatives to net income as indicators of our operating performance or as
alternatives to cash flows as measures of liquidity. FFO does not measure
whether cash flow is sufficient to fund all of our cash needs, including
principal amortization, capital expenditures, and distributions to shareholders
and unitholders. Additionally, FFO does not represent cash flows from
operating, investing or financing activities as defined by GAAP. Reference is
made to Managements Discussion and Analysis of Financial Condition and
Results of Operations  Liquidity and Capital Resources for a discussion of
our cash needs and cash flows. A reconciliation of FFO and AFFO follows:

|                                                                    |                                 |                                  |                            |                    |       |                          |        |        |       |        |        | 
|------------------------------------------------------------------- | ------------------------------- | -------------------------------- | -------------------------- | ------------------ | ----- | ------------------------ | ------ | ------ | ----- | ------ | ------ | 
|                                                                    |                                 |                                  |                            |                    |       | Years ended December 31,
|                                                                    |                                 |                                  |                            |                    |       |                         
|                                                                    |                                 |                                  |                            |                    |       | 2000                     |        | 1999  
|                                                                    |                                 |                                  |                            |                    |       |                          |        |       
|Net income available to common shareholders                         |                                 | $                                | 57,579                     |                    |       | $                        | 42,601 |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Minority interest of common unitholders in Operating Partnership    |                                 |                                  | 16,359                     |                    |       |                          | 10,348 |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Gain on sale of previously depreciated operating real estate assets |                                 |                                  | (28,622                    | )                  |       |                          | (9,116 | )     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Real estate asset depreciation:                                    
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Wholly-owned real estate assets |                                  |                            | 43,829             |       |                          |        | 45,538 |      
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                 | Joint venture real estate assets |                            |                    | 1,460 |                          |        |        | 404   |       
|                                                                    |                                 |                                  |                            |                    |       |                          |        |       
|                                                                    |                                 |                                  |                            | Total depreciation |       |                          | 45,289 |        |       |        | 45,942 | 
|                                                                    |                                 |                                  |                            |                    |       |                          |        |       
|Funds from operations  basic                                       |                                 | $                                | 90,605                     |                    |       | $                        | 89,775 |       
|                                                                    |                                 |                                  |                            |                    |       |                          |        |       
|Amortization of discount on long-term liability(a)                  |                                 |                                  |                           |                    |       |                          | 686    |       
|                                                                    |                                 |                                  |                            |                    |       |                          |        |       
|Funds from operations  diluted                                     |                                 | $                                | 90,605                     |                    |       | $                        | 90,461 |       
|                                                                    |                                 |                                  |                            |                    |       |                          |        |       
|Recurring, non-revenue enhancing capital expenditures:             
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                 | Carpet                           |                            | $                  | 4,565 |                          |        | $      | 4,299 |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                 | Roofing                          |                            |                    | 38    |                          |        |        | 25    |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                 | Exterior painting                |                            |                    |      |                          |        |        | 172   |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                 | Appliances                       |                            |                    | 547   |                          |        |        | 460   |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                 | Other additions and improvements |                            |                    | 5,760 |                          |        |        | 5,081 |       
|                                                                    |                                 |                                  |                            |                    |       |                          |        |       
|                                                                    |                                 |                                  | Total capital expenditures |                    | $     | 10,910                   |        |        | $     | 10,037 |       
|                                                                    |                                 |                                  |                            |                    |       |                          |        |       
|Adjusted funds from operations  diluted                            |                                 | $                                | 79,695                     |                    |       | $                        | 80,424 |       
|                                                                    |                                 |                                  |                            |                    |       |                          |        |       
|Average common shares and Units outstanding  basic                 |                                 |                                  | 30,365                     |                    |       |                          | 32,277 |       
|                                                                    |                                 |                                  |                            |                    |       |                          |        |       
|Average common shares and Units outstanding  diluted(a)            |                                 |                                  | 30,439                     |                    |       |                          | 32,796 |       
|                                                                    |                                 |                                  |                            |                    |       |                          |        |       



|(a) |  | This obligation was settled with Units on January 1, 2000. For the year
ended December 31, 1999, such Units are excluded from basic shares and
Units outstanding, but are included in the calculation of diluted shares
and Units outstanding.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

36



---



##### Table of Contents









MANAGEMENTS DISCUSSION AND ANALYSIS
(Amounts in Thousands, Except Property and Per Share Data)

---

|         |  |                                                           
|-------- |  | ----------------------------------------------------------
|ITEM 7A. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

The following table provides information about our derivative financial
instruments 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 notes thereto. For debt obligations, the
table presents principal cash flows and related weighted-average interest rates
in effect at December 31, 2000 by expected maturity dates. The
weighted-average interest rates presented in this table are inclusive of credit
enhancement fees. For interest rate protection agreements, the table presents
the notional amounts and related weighted-average pay rates by fiscal year of
maturity. There have been no substantial changes in our market risk profile
from the preceding year and the assumptions are consistent with prior year
assumptions.

Expected Year of Maturity

|                           |  |      |        |      |  |      |        |      |  |      |         |            |  |       |        |            |  |       |         |   |  |   |         |   |  |      |         |      |  |      |         |   |  |   |         |   |  |  |  |  |  |  |  | 
|-------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------- | ---------- |  | ----- | ------ | ---------- |  | ----- | ------- | - |  | - | ------- | - |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | - |  |  |  |  |  |  |  | 
|                           |  |      |        |      |  |      |        |      |  |      |         |            |  |       |        |            |  |       |         |   |  |   |         |   |  | 2000 |         | 2000 |  | 1999
|                           |  | 2001 |        | 2002 |  | 2003 |        | 2004 |  | 2005 |         | Thereafter |  | Total |        | Fair
Value |  | Total
|                           |  |      |        |      |  |      |        |      |  |      |         |            |  |       |        |            |  |      
|Debt:                     
|                          
|                          
|                          
|                          
|Conventional fixed rate    |  | $    | 18,227 |      |  | $    | 85,882 |      |  | $    | 2,757   |            |  | $     | 21,151 |            |  | $     | 102,759 |   |  | $ | 141,514 |   |  | $    | 372,290 |      |  | $    | 357,682 |   |  | $ | 406,002 |  
|                          
|                          
|                          
|                          
|Average interest rate      |  |      | 6.83   | %    |  |      | 8.28   | %    |  |      | 7.79    | %          |  |       | 7.22   | %          |  |       | 6.83    | % |  |   | 7.93    | % |  |      | 7.61    | %    |  |      | 6.93    | % |  |   | 7.50    | %
|                          
|                          
|                          
|                          
|Tax-exempt fixed rate      |  | $    | 180    |      |  | $    | 190    |      |  | $    | 205     |            |  | $     | 58,405 |            |  | $     | 230     |   |  | $ | 21,080  |   |  | $    | 80,290  |      |  | $    | 78,486  |   |  | $ | 90,545  |  
|                          
|                          
|                          
|                          
|Average interest rate      |  |      | 7.63   | %    |  |      | 7.63   | %    |  |      | 7.63    | %          |  |       | 6.26   | %          |  |       | 7.63    | % |  |   | 6.67    | % |  |      | 6.38    | %    |  |      | 5.24    | % |  |   | 6.31    | %
|                          
|                          
|                          
|                          
|Tax-exempt variable rate   |  |      |       |      |  |      |       |      |  | $    | 44,930  |            |  |       |       |            |  | $     | 10,085  |   |  | $ | 105,140 |   |  | $    | 160,155 |      |  | $    | 160,155 |   |  | $ | 150,070 |  
|                          
|                          
|                          
|                          
|Average interest rate      |  |      |       |      |  |      |       |      |  |      | 5.90    | %          |  |       |       |            |  |       | 5.75    | % |  |   | 5.61    | % |  |      | 5.70    | %    |  |      | 5.70    | % |  |   | 6.35    | %
|                          
|                          
|                          
|                          
|Credit facilities          |  | $    | 38,617 |      |  |      |       |      |  | $    | 70,000  |            |  |       |       |            |  |       |        |   |  |   |        |   |  | $    | 108,617 |      |  | $    | 108,617 |   |  | $ | 68,868  |  
|                          
|                          
|                          
|                          
|Average interest rate      |  |      | 7.32   | %    |  |      |       |      |  |      | 7.28    | %          |  |       |       |            |  |       |        |   |  |   |        |   |  |      | 7.29    | %    |  |      | 7.29    | % |  |   | 6.44    | %
|                          
|                          
|                          
|                          
|Variable-rate loans        |  | $    | 40,000 |      |  |      |       |      |  | $    | 4,575   |            |  |       |       |            |  |       |        |   |  |   |        |   |  | $    | 44,575  |      |  | $    | 44,575  |   |  | $ | 40,000  |  
|                          
|                          
|                          
|                          
|Average interest rate      |  |      | 7.42   | %    |  |      |       |      |  |      | 7.88    | %          |  |       |        |            |  |       |        |   |  |   |        |   |  |      | 7.46    | %    |  |      | 7.46    | % |  |   | 8.25    | %
|                          
|                          
|                          
|                          
|Total debt                 |  | $    | 97,024 |      |  | $    | 86,072 |      |  | $    | 122,467 |            |  | $     | 79,556 |            |  | $     | 113,074 |   |  | $ | 267,734 |   |  | $    | 765,927 |      |  | $    | 749,515 |   |  | $ | 755,485 |  
|                          
|                          
|                          
|                          
|Average interest rate      |  |      | 7.27   | %    |  |      | 8.28   | %    |  |      | 6.81    | %          |  |       | 6.51   | %          |  |       | 6.74    | % |  |   | 6.92    | % |  |      | 7.03    | %    |  |      | 6.57    | % |  |   | 7.07    | %
|                          
|                          
|                          
|                          
|Interest Rate Swaps:      
|                          
|                          
|                          
|                          
|Pay fixed/Receive variable |  |      |       |      |  |      |       |      |  |      |        |            |  |       |       |            |  |       |        |   |  |   |        |   |  |      |        |      |  |      |        |   |  | $ | 65,000  |  
|                          
|                          
|                          
|                          
|Average pay rate           |  |      |       |      |  |      |       |      |  |      |        |            |  |       |       |            |  |       |        |   |  |   |        |   |  |      |        |      |  |      |        |   |  |   | 5.16    | %
|                          
|                          
|                          
|                          
|Receive rate               |  |      |       |      |  |      |       |      |  |      |        |            |  |       |       |            |  |       |        |   |  |   |        |   |  |      |        |      |  |      |        |   |  |   | LIBOR   |  

The estimated fair value of
our debt at December 31, 2000 was based on a discounted cash
flow analysis using current borrowing rates for debt with similar
terms and remaining maturities.

The estimated fair value of
our debt at December 31, 1999 approximated its carrying value
based upon the then effective borrowing rates for debt with similar
terms and remaining maturities. The fair value of our interest rate
swaps was $460 at December 31, 1999.

37



---



##### Table of Contents









|        |  |                                            
|------- |  | -------------------------------------------
|ITEM 8. |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data are listed under Item 14(a) and
filed as part of this report on the pages indicated.







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

Not applicable.

PART III







|         |  |                                                   
|-------- |  | --------------------------------------------------
|ITEM 10. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information concerning the Directors and Executive Officers of the
Registrant required by Item 10 shall be included in the Proxy Statement to be
filed relating to the 2001 Annual Meeting of the Registrants Shareholders and
is incorporated herein by reference.







|         |  |                       
|-------- |  | ----------------------
|ITEM 11. |  | EXECUTIVE COMPENSATION

The information concerning Executive Compensation required by Item 11 shall be
included in the Proxy Statement to be filed relating to the 2001 Annual Meeting
of the Registrants Shareholders and is incorporated herein by reference.







|         |  |                                                               
|-------- |  | --------------------------------------------------------------
|ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information concerning Security Ownership of Certain Beneficial Owners and
Management required by Item 12 shall be included in the Proxy Statement to be
filed relating to the 2001 Annual Meeting of the Registrants Shareholders and
is incorporated herein by reference.







|         |  |                                               
|-------- |  | ----------------------------------------------
|ITEM 13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information concerning Certain Relationships and Related Transactions
required by Item 13 shall be included in the Proxy Statement to be filed
relating to the 2001 Annual Meeting of the Registrants Shareholders and is
incorporated herein by reference.

PART IV







|         |  |                                                                    
|-------- |  | -------------------------------------------------------------------
|ITEM 14. |  | EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULE AND REPORTS ON FORM 8-K

14(a)(1) and (2) Financial Statements and Schedule

The financial statements and schedule listed below are filed as part of this
annual report on the pages indicated.

|                                                                                                     |  |  |    | 
|---------------------------------------------------------------------------------------------------- |  |  | -- | 
|Report of Independent Public Accountants                                                             |  |  | 43 | 
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Consolidated Balance Sheets as of December 31, 2000 and December 31, 1999                            |  |  | 44 | 
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998           |  |  | 45 | 
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Consolidated Statements of Shareholders Equity for the years ended December 31, 2000, 1999 and 1998 |  |  | 46 | 
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998           |  |  | 47 | 
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Notes to Consolidated Financial Statements                                                           |  |  | 48 | 
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Schedule III  Real Estate Investments and Accumulated Depreciation as of December 31, 2000          |  |  | 64 | 

38



---



##### Table of Contents



|         |  |         
|-------- |  | --------
|14(a)(3) |  | Exhibits

Certain of the exhibits required by Item 601 of Regulation S-K have been filed
with previous reports by the Registrant, referred to herein as Gables, or the
Operating Partnership (File No. 000-22683) and are incorporated herein by
reference to the filing in the corresponding numbered footnote.

|            |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |  |  | 
|----------- |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit No. |  |     |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|            |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|3.1(i)(a)   |  | --- |  | Gables Amended and Restated Declaration of Trust(1)                                                                                                                                                                                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|3.1(i)(b)   |  | --- |  | Articles of Amendment to Gables Amended and Restated Declaration of Trust(2)                                                                                                                                                                                                                                                                                                                                                                                                              
|           
|           
|           
|           
|3.1(i)(c)   |  | --- |  | Articles Supplementary to Gables Amended and Restated Declaration of Trust creating the
8.30% Series A Cumulative Redeemable Preferred Shares(3)                                                                                                                                                                                                                                                                                                                                          
|           
|           
|           
|           
|3.1(i)(d)   |  | --- |  | Articles Supplementary to Gables Amended and Restated
Declaration of Trust creating the 5.00% Series Z Cumulative Redeemable
Preferred Shares(2)                                                                                                                                                                                                                                                                                                                                          
|           
|           
|           
|           
|3.1(i)(e)   |  | --- |  | Articles Supplementary to Gables Amended and Restated Declaration of Trust creating the
8.625%Series B Cumulative Redeemable Preferred Shares(4)                                                                                                                                                                                                                                                                                                                                          
|           
|           
|           
|           
|3.1(ii)(a)  |  | --- |  | Gables Second Amended and Restated Bylaws, as amended(5)                                                                                                                                                                                                                                                                                                                                                                                                                                  
|           
|           
|           
|           
|4.1         |  | --- |  | Indenture, dated as of March 23, 1998, between the Operating Partnership and First Union National
Bank(6)                                                                                                                                                                                                                                                                                                                                                                                  
|           
|           
|           
|           
|4.2         |  | --- |  | Supplemental Indenture No. 1, dated March 23, 1998, between the
Operating Partnership and First Union National Bank(6)                                                                                                                                                                                                                                                                                                                                                                     
|           
|           
|           
|           
|4.3         |  | --- |  | The Operating Partnership 6.80% Senior Note due 2005(6)                                                                                                                                                                                                                                                                                                                                                                                                                                    
|           
|           
|           
|           
|4.4         |  | --- |  | Supplemental Indenture No. 2, dated September 30, 1998 between the
Operating Partnership and First Union National Bank(7)                                                                                                                                                                                                                                                                                                                                                                  
|           
|           
|           
|           
|4.5         |  | --- |  | The Operating Partnership 6.55% Senior Note due 2000(7)                                                                                                                                                                                                                                                                                                                                                                                                                                    
|           
|           
|           
|           
|4.6         |  | --- |  | Supplemental Indenture No. 3, dated October 8, 1998, between the
Operating Partnership and First Union National Bank(8)                                                                                                                                                                                                                                                                                                                                                                    
|           
|           
|           
|           
|4.7         |  | --- |  | The Operating Partnership 6.60% Senior Note due 2001(8)                                                                                                                                                                                                                                                                                                                                                                                                                                    
|           
|           
|           
|           
|4.8         |  | --- |  | Supplemental Indenture No. 4 dated February 22, 2001 between the
Operating Partnership and First Union Bank(9)                                                                                                                                                                                                                                                                                                                                                                             
|           
|           
|           
|           
|4.9         |  | --- |  | The Operating Partnership 7.25% Senior Notes due 2006(9)                                                                                                                                                                                                                                                                                                                                                                                                                                   
|           
|           
|           
|           
|10.1        |  | --- |  | Fourth Amended and Restated Agreement of Limited Partnership of
Operating Partnership(4)                                                                                                                                                                                                                                                                                                                                                                                                   
|           
|           
|           
|           
|10.2        |  | --- |  | Registration Rights and Lock-Up Agreement by and among Gables and
the persons named therein(10)                                                                                                                                                                                                                                                                                                                                                                                            
|           
|           
|           
|           
|10.3        |  | --- |  | Articles of Incorporation of Gables Residential Services, Inc. (formerly known as Central
Apartment Management, Inc.)(10)                                                                                                                                                                                                                                                                                                                                                                  
|           
|           
|           
|           
|10.4        |  | --- |  | Bylaws of Gables Residential Services, Inc. (formerly known as
Central Apartment Management, Inc.)(10)                                                                                                                                                                                                                                                                                                                                                                                     
|           
|           
|           
|           
|10.5*       |  | --- |  | Articles of Amendment of Gables Residential Services, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                 
|           
|           
|           
|           
|10.6*       |  | --- |  | Articles of Merger of Gables Residential Services, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                    
|           
|           
|           
|           
|10.7        |  | --- |  | Articles of Incorporation of Gables GP, Inc.(10)                                                                                                                                                                                                                                                                                                                                                                                                                                           
|           
|           
|           
|           
|10.8        |  | --- |  | Bylaws of Gables GP, Inc.(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|           
|           
|           
|           
|10.9        |  | --- |  | Fourth Amended and Restated 1994 Share Option and Incentive Plan(11)                                                                                                                                                                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.10       |  | --- |  | Form of Employment Agreement as signed by Gables and each of
Chris D. Wheeler (Chairman of the Board of Trustees, President and Chief
Executive Officer; base salary of $338,000), C. Jordan Clark (Senior Vice
President and Chief Investment Officer; base salary of $260,000), Michael M.
Hefley (Senior Vice President and Chief Operating Officer; base salary of
$234,000), and Marvin R. Banks, Jr. (Senior Vice President and Chief Financial
Officer; base salary of $234,000)(11)
|           
|           
|           
|           
|10.11       |  | --- |  | Form of Restricted Share Award Agreement as signed by Gables and
each of Chris D. Wheeler (8,999 shares), Michael M. Hefley (5,999 shares), C.
Jordan Clark (5,999 shares), Marvin R. Banks, Jr. (5,999 shares), Catherine K.
Cabell (1,500 shares), Gregory W. Iglehart (1,400 shares), Dawn H. Severt
(3,599 shares), and Stephen G. Sweet (1,400 shares).(12)                                                                                                                           
|           
|           
|           
|           
|10.12       |  | --- |  | Severance Agreement between Gables and William M. Hammond dated
February 10, 1998(13)                                                                                                                                                                                                                                                                                                                                                                                                      
|           
|           
|           
|           
|10.13       |  | --- |  | Separation Agreement between Gables and John T. Rippel dated July 1, 1999(14)                                                                                                                                                                                                                                                                                                                                                                                                              
|           
|           
|           
|           
|10.14       |  | --- |  | Separation Agreement between Gables and Marcus E. Bromley dated January 31, 2000(5)                                                                                                                                                                                                                                                                                                                                                                                                        
|           
|           
|           
|           
|10.15       |  | --- |  | Form of Indemnification Agreement as signed by Gables and each of Chris D. Wheeler, C. Jordan Clark , Michael M.
Hefley, Marvin R. Banks, Jr., Marcus E. Bromley, David M. Holland, Lauralee E. Martin, John W. McIntyre, Mike E.
Miles, and James D. Motta(10)                                                                                                                                                                                                                            
|           
|           
|           
|           
|10.16       |  | --- |  | Interest rate protection agreement (notional amount of
$44,530,000) between the Operating Partnership and NationsBank of North
Carolina, N.A. dated January 25, 1994(15)                                                                                                                                                                                                                                                                                                                   

39



---



##### Table of Contents



|            |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|----------- |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  |     |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|            |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.17       |  | --- |  | Interest rate protection agreement (notional amount of $44,530,000)
between the Operating Partnership and First Union National Bank of
Georgia, dated August 21, 1996(16)                                                                                                                                                                                                                                                                                                                              
|           
|           
|           
|           
|10.18       |  | --- |  | Interest rate protection agreement (notional amount of $25,000,000)
between the Operating Partnership and First Union National Bank of
Georgia, dated as of May 23, 1997(17)                                                                                                                                                                                                                                                                                                                           
|           
|           
|           
|           
|10.19       |  | --- |  | Forward Treasury Lock Agreement (notional amount of $75,000,000)
between the Operating Partnership and J.P. Morgan Securities, Inc. dated as of
September 22, 1997 and amended on December 17, 1997 and February 11, 1998(13)                                                                                                                                                                                                                                                                          
|           
|           
|           
|           
|10.20       |  | --- |  | Forward Treasury Lock Agreement (notional amount of $25,000,000) between the
Operating Partnership and J.P. Morgan Securities, Inc. dated
as of December 17, 1997 and amended on February 11, 1998(13)                                                                                                                                                                                                                                                                                                 
|           
|           
|           
|           
|10.21       |  | --- |  | Forward Treasury Lock Agreement (notional amount of $50,000,000)
between the Operating Partnership and J.P. Morgan Securities Inc., dated as of September 22,
1997 and amended on May 28, 1998, July 24, 1998, August 19, 1998 and September 30, 1998(18)                                                                                                                                                                                                                                              
|           
|           
|           
|           
|10.22       |  | --- |  | Interest Rate Swap Agreement (notional amount of $40,000,000) between the Operating
Partnership and Morgan Guaranty Trust Company of New York, dated as of September 28,
1998(18)                                                                                                                                                                                                                                                                                                                      
|           
|           
|           
|           
|10.23       |  | --- |  | Loan Agreement, Conversion and Note Agreement, Security Deed
Note and Deed of Trust Notes between Teachers Insurance and Annuity Association
of America (lender) and the Operating Partnership and Gables-Tennessee
Properties (collectively, the borrower) for a $130,689,000 loan, dated December
29, 1995(19)                                                                                                                                                                                     
|           
|           
|           
|           
|10.24       |  | --- |  | First Amendment to Conversion and Note Agreement effective
December 30, 1996 between the Operating Partnership, Gables-Tennessee
Properties, Gables and Teachers Insurance and Annuity Association of America(17)                                                                                                                                                                                                                                                                                      
|           
|           
|           
|           
|10.25       |  | --- |  | Second Amendment to Conversion and Note Agreement effective
August 13, 1997 between the Operating Partnership, Gables-Tennessee Properties,
Gables and Teachers Insurance and Annuity Association of America (17)                                                                                                                                                                                                                                                                                      
|           
|           
|           
|           
|10.26       |  | --- |  | Unsecured Note No. 1 for $86,346,000 dated August 13, 1997
between the Operating Partnership, Gables-Tennessee Properties and Teachers
Insurance and Annuity Association of America(17)                                                                                                                                                                                                                                                                                                                
|           
|           
|           
|           
|10.27       |  | --- |  | Unsecured Note No. 2 for $29,681,000 dated August 13, 1997
between the Operating Partnership, Gables-Tennessee Properties and Teachers
Insurance and Annuity Association of America(17)                                                                                                                                                                                                                                                                                                                
|           
|           
|           
|           
|10.28       |  | --- |  | $225,000,000 Amended and Restated Credit Agreement dated as of
May 13, 1998 by and among the Operating Partnership (as Borrower) and Wachovia
Bank, N.A., First Union National Bank, Chase Bank of Texas, National
Association, PNC Bank, National Association, Guaranty Federal Bank, F.S.B.,
AmSouth Bank of Alabama and Commerzbank AG, Atlanta Agency (collectively, as
lenders) and Wachovia Bank, N.A. (as Agent)(2)                                                                             
|           
|           
|           
|           
|10.29       |  | --- |  | First Amendment to $225,000,000 Amended and Restated Credit Agreement dated as of May 13, 1998 by and among the
Operating Partnership (as Borrower) and Wachovia Bank, N.A., First Union National Bank, Chase Bank of Texas,
National Association, PNC Bank, National Association, Guaranty Federal Bank, F.S.B., AmSouth Bank of Alabama
and Commerzbank AG, Atlanta agency (collectively, as lenders) and Wachovia Bank, N.A. (as agent) dated June 14,
1999.(20)                                    
|           
|           
|           
|           
|10.30       |  | --- |  | Second Amendment to $225,000,000 Amended and Restated Credit Agreement dated as of May 13, 1998 by and among the
Operating Partnership and Gables-Tennessee Properties (as Borrowers) and Wachovia Bank, N.A., First Union
National Bank, Chase Bank of Texas, National Association, PNC Bank, National Association, Guaranty Federal Bank,
F.S.B., AmSouth Bank of Alabama and Commerzbank AG, Atlanta agency (collectively, as lenders) and Wachovia
Bank, N.A. (as agent) dated November 23, 1999(5)
|           
|           
|           
|           
|10.31       |  | --- |  | Second Amended and Restated $225,000,000 Revolving Credit Facility dated as of August 14, 2000, by and among
Gables Realty Limited Partnership and Gables-Tennessee Properties, LLC (as the Borrowers) and Wachovia Bank,
N.A., First Union National Bank, The Chase Manhattan Bank, AmSouth Bank, PNC Bank, National Association,
SouthTrust Bank, and Bank of America, N.A. (collectively, as Lenders) and Wachovia Bank, N.A. (as agent)(21)                                                        
|           
|           
|           
|           
|10.32       |  | --- |  | Promissory Note dated November 29, 1994 for a $53,000,000 mortgage loan from the
Northwestern Mutual Life Insurance Company to the Operating Partnership(15)                                                                                                                                                                                                                                                                                                                                           
|           
|           
|           
|           
|10.33       |  | --- |  | Contribution Agreement with an effective date of March 16, 1998
between Gables, the Operating Partnership and specified representatives of Trammell Crow Residential
(TCR) executed in connection with Gables April 1, 1998 acquisition of the
properties and operations of South Florida(22)                                                                                                                                                                                                       

40



---



##### Table of Contents



|            |  |     |  |                                                                  
|----------- |  | --- |  | -----------------------------------------------------------------
|Exhibit No. |  |     |  | Description                                                      
|            |  |     |  |                                                                  
|10.34       |  | --- |  | Amendment No. 1 to Contribution Agreement dated April 1, 1998(23)
|           
|           
|           
|           
|21.1*       |  | --- |  | Schedule of Gables Subsidiaries                                 
|           
|           
|           
|           
|23.1*       |  | --- |  | Consent of Arthur Andersen LLP                                   



---

|*    |  | Filed herewith                                                                                    
|---- |  | --------------------------------------------------------------------------------------------------
|    
|    
|    
|    
|(1)  |  | Gables Registration Statement on Form S-11, as amended (File No.
33-70570).                      
|    
|    
|    
|    
|(2)  |  | Gables Quarterly Report on Form 10-Q for the quarter ended June 30, 1998
(File No. 1-12590).     
|    
|    
|    
|    
|(3)  |  | Gables Current Report on Form 8-K dated July 24, 1997 (File No.
1-12590).                        
|    
|    
|    
|    
|(4)  |  | Gables Current Report on Form 8-K dated November 12, 1998 (File No.
1-12590).                    
|    
|    
|    
|    
|(5)  |  | Gables Annual Report on Form 10-K for the fiscal year ended December 31,
1999 (File No. 0-22683).
|    
|    
|    
|    
|(6)  |  | The Operating Partnerships Current Report on Form 8-K dated March 23,
1998 (File No. 0-22683).   
|    
|    
|    
|    
|(7)  |  | The Operating Partnerships Current Report on Form 8-K dated October 5,
1998 (File No. 0-22683).  
|    
|    
|    
|    
|(8)  |  | The Operating Partnerships Current Report on Form 8-K dated October 8,
1998 (File No. 0-22683).  
|    
|    
|    
|    
|(9)  |  | The Operating Partnerships Current Report on Form 8-K dated February 22,
2001 (File No. 1-12590).
|    
|    
|    
|    
|(10) |  | Gables Annual Report on Form 10-K for the fiscal year ended December 31,
1993 (File No. 1-12590).
|    
|    
|    
|    
|(11) |  | Gables Annual Report on Form 10-K for the fiscal year ended December 31,
1998 (File No. 1-12590).
|    
|    
|    
|    
|(12) |  | Gables Registration Statement on Form S-8 (File No. 333-56334).                                  
|    
|    
|    
|    
|(13) |  | Gables Annual Report on Form 10-K for the fiscal year ended December 31,
1997 (File No. 1-12590).
|    
|    
|    
|    
|(14) |  | Gables Quarterly Report on Form 10-Q for the quarter ended September 30,
1999 (File No. 1-12590).
|    
|    
|    
|    
|(15) |  | Gables Annual Report on Form 10-K for the fiscal year ended December 31,
1994 (File No. 1-12590).
|    
|    
|    
|    
|(16) |  | Gables Annual Report on Form 10-K for the fiscal year ended December 31,
1996 (File No. 1-12590).
|    
|    
|    
|    
|(17) |  | Gables Quarterly Report on Form 10-Q for the quarter ended September 30,
1997 (File No. 1-12590).
|    
|    
|    
|    
|(18) |  | Gables Quarterly Report on Form 10-Q for the quarter ended September 30,
1998 (File No. 1-12590).
|    
|    
|    
|    
|(19) |  | Gables Annual Report on Form 10-K for the fiscal year ended December
31, 1995 (File No. 1-12590).
|    
|    
|    
|    
|(20) |  | Gables Quarterly Report on Form 10-Q for the quarter ended June 30, 1999
(File No. 1-12590).     
|    
|    
|    
|    
|(21) |  | Gables Quarterly Report on Form 10-Q for the quarter ended September 30,
2000 (File No. 1-12590).
|    
|    
|    
|    
|(22) |  | Gables Current Report on Form 8-K dated March 16, 1998 (File No.
1-12590).                       
|    
|    
|    
|    
|(23) |  | Gables Current Report on Form 8-K dated April 1, 1998, as amended
(File No. 1-12590).            

The Registrants Proxy Statement is to be filed with the Securities and
Exchange Commission not later than 120 days after December 31, 2000 (the end of
the fiscal year covered by this Annual Report on Form 10-K).

14(b) Reports on Form 8-K

None.

14(c) Exhibits

See Item 14(a)(3) above.

41



---



##### Table of Contents



SIGNATURES

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

| |  |  |                          |  |  |                                      
| |  |  | ------------------------ |  |  | -------------------------------------
| |  |  | GABLES RESIDENTIAL TRUST
|
|
|
| |  |  | By                       |  |  | /s/ Chris D. Wheeler                 
| |  |  |                          |  |  |                                      
| |  |  |                          |  |  | Chris D. Wheeler                     
|
|
|
|
| |  |  |                          |  |  | Chairman of the Board of Trustees,   
|
|
|
|
| |  |  |                          |  |  | President and Chief Executive Officer
|
|
|
|
| |  |  |                          |  |  | March 16, 2001                       

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

|                                              |  |                                                                                                        |  |               
|--------------------------------------------- |  | ------------------------------------------------------------------------------------------------------ |  | --------------
|Signatures                                    |  | Title                                                                                                  |  | Date          
|                                              |  |                                                                                                        |  |               
|/s/ Chris D. Wheeler
Chris D. Wheeler         |  | Chairman of the Board of Trustees,
President and Chief Executive Officer
(Principal Executive Officer) |  | March 16, 2001
|                                             
|/s/ Marvin R. Banks, Jr.
Marvin R. Banks, Jr. |  | Senior Vice President and Chief
Financial Officer (Principal Financial Officer)                        |  | March 16, 2001
|                                             
|/s/ Dawn H. Severt
Dawn H. Severt             |  | Vice President and Chief Accounting
Officer (Principal Accounting Officer)                             |  | March 16, 2001
|                                             
|/s/ Marcus E. Bromley
Marcus E. Bromley       |  | Trustee                                                                                                |  | March 16, 2001
|                                             
|/s/ C. Jordan Clark
C. Jordan Clark           |  | Senior Vice President, Chief Investment Officer
and Trustee                                            |  | March 16, 2001
|                                             
|/s/ David M. Holland
David M. Holland         |  | Trustee                                                                                                |  | March 16, 2001
|                                             
|/s/ Lauralee E. Martin
Lauralee E. Martin     |  | Trustee                                                                                                |  | March 16, 2001
|                                             
|/s/ John W. McIntyre
John W. McIntyre         |  | Trustee                                                                                                |  | March 16, 2001
|                                             
|/s/  Mike E. Miles
Mike E. Miles              |  | Trustee                                                                                                |  | March 16, 2001
|                                             
|/s/  James D. Motta
James D. Motta            |  | Trustee                                                                                                |  | March 16, 2001

42



---



##### Table of Contents



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Gables Residential Trust:

We have audited the accompanying consolidated balance sheets of Gables
Residential Trust and subsidiaries as of December 31, 2000 and 1999 and the
related consolidated statements of operations, shareholders equity and cash
flows for each of the three years in the period ended December 31, 2000. These
financial statements and schedule are the responsibility of the management of
Gables Residential Trust. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Gables
Residential Trust and subsidiaries as of December 31, 2000 and 1999 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements is presented for purposes of complying with the Securities
and Exchange Commissions rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP

Atlanta, Georgia
March 9, 2001

43



---



##### Table of Contents



GABLES RESIDENTIAL TRUST
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands, Except Per Share Data)

|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   |                                                    |         |              |           |              |         |           |           | 
|-------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | -------------------------------------------------- | ------- | ------------ | --------- | ------------ | ------- | --------- | --------- | 
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   |                                                    |         | December 31, |           | December 31,
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   |                                                    |         | 2000         |           | 1999        
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   |                                                    |         |              |           |             
|ASSETS:                                                                                                                   
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Real estate assets:                                                                                                       
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           |                                                                                                                                                                                                                                                                                   | Land                              |                                                    | $       | 209,470      |           |              | $       | 220,298   |          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           |                                                                                                                                                                                                                                                                                   | Buildings                         |                                                    |         | 1,106,900    |           |              |         | 1,177,628 |          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           |                                                                                                                                                                                                                                                                                   | Furniture, fixtures and equipment |                                                    |         | 93,578       |           |              |         | 91,835    |          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           |                                                                                                                                                                                                                                                                                   | Construction in progress          |                                                    |         | 122,947      |           |              |         | 37,984    |          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           |                                                                                                                                                                                                                                                                                   | Investment in joint ventures      |                                                    |         | 24,626       |           |              |         | 23,471    |          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           |                                                                                                                                                                                                                                                                                   | Land held for future development  |                                                    |         | 30,323       |           |              |         | 38,168    |          
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   |                                                    |         |              |           |              |        
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   | Real estate assets before accumulated depreciation |         |              | 1,587,844 |              |         |           | 1,589,384 | 
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           |                                                                                                                                                                                                                                                                                   | Less: accumulated depreciation    |                                                    |         | (195,946     | )         |              |         | (172,247  | )        
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   |                                                    |         |              |           |              |        
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   | Net real estate assets                             |         |              | 1,391,898 |              |         |           | 1,417,137 | 
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Cash and cash equivalents                                                                                                  |                                                                                                                                                                                                                                                                                   |                                   | 4,252                                              |         |              |           | 7,963        |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Restricted cash                                                                                                            |                                                                                                                                                                                                                                                                                   |                                   | 17,902                                             |         |              |           | 8,871        |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Deferred financing costs, net of accumulated amortization of $4,341
and $3,563 at December 31, 2000 and 1999, respectively |                                                                                                                                                                                                                                                                                   |                                   | 3,981                                              |         |              |           | 4,007        |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Other assets, net                                                                                                          |                                                                                                                                                                                                                                                                                   |                                   | 34,987                                             |         |              |           | 33,386       |        
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   |                                                    |         |              |           |              |        
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   | Total assets                                       |         | $            | 1,453,020 |              |         | $         | 1,471,364 | 
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   |                                                    |         |              |           |              |        
|LIABILITIES AND SHAREHOLDERS EQUITY:                                                                                     
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Notes payable                                                                                                              |                                                                                                                                                                                                                                                                                   | $                                 | 765,927                                            |         |              | $         | 755,485      |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Accrued interest payable                                                                                                   |                                                                                                                                                                                                                                                                                   |                                   | 5,140                                              |         |              |           | 5,949        |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Preferred dividends payable                                                                                                |                                                                                                                                                                                                                                                                                   |                                   | 995                                                |         |              |           | 770          |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Real estate taxes payable                                                                                                  |                                                                                                                                                                                                                                                                                   |                                   | 15,650                                             |         |              |           | 16,824       |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Accounts payable and accrued expenses  construction                                                                       |                                                                                                                                                                                                                                                                                   |                                   | 10,082                                             |         |              |           | 5,555        |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Accounts payable and accrued expenses  operating                                                                          |                                                                                                                                                                                                                                                                                   |                                   | 11,825                                             |         |              |           | 11,240       |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Security deposits                                                                                                          |                                                                                                                                                                                                                                                                                   |                                   | 4,312                                              |         |              |           | 4,395        |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Other liability, net                                                                                                       |                                                                                                                                                                                                                                                                                   |                                   |                                                   |         |              |           | 10,693       |        
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   |                                                    |         |              |           |              |        
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   | Total liabilities                                  |         |              | 813,931   |              |         |           | 810,911   | 
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   |                                                    |         |              |           |              |         |           |           | 
|Minority interest of common unitholders in Operating Partnership                                                           |                                                                                                                                                                                                                                                                                   |                                   | 104,993                                            |         |              |           | 98,994       |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Minority interest of Series B preferred unitholders in Operating Partnership                                               |                                                                                                                                                                                                                                                                                   |                                   | 50,192                                             |         |              |           | 50,192       |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Series Z Preferred Shares at $25.00 liquidation preference,
180 shares issued and outstanding                              |                                                                                                                                                                                                                                                                                   |                                   | 4,500                                              |         |              |           | 4,500        |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   |                                                    |         |              |           |              |         |           |           | 
|Commitments and contingencies                                                                                             
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   |                                                    |         |              |           |              |         |           |           | 
|Shareholders equity:                                                                                                     
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Excess shares, $0.01 par value, 51,000 shares authorized                                                                                                                                                                                                                          |                                   |                                                    |        |              |           |              |        |          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Preferred shares, $0.01 par value, 20,000 shares authorized,
Series A Preferred Shares at $25.00 liquidation preference,
4,600 shares issued and outstanding; Series Z Preferred
Shares and Series B Preferred Units, exchangeable into
Series B Preferred Shares, reported above |                                   |                                                    | 115,000 |              |           |              | 115,000 |          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Common shares, $0.01 par value, 100,000 shares authorized,
27,106 and 26,801 shares issued at December 31, 2000 and
1999, respectively                                                                                                                                            |                                   |                                                    | 271     |              |           |              | 268     |          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Additional paid-in capital                                                                                                                                                                                                                                                        |                                   |                                                    | 455,202 |              |           |              | 443,094 |          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Treasury shares at cost, 3,980 and 2,131 common shares at
December 31, 2000 and 1999, respectively                                                                                                                                                                                |                                   |                                                    | (95,283 | )            |           |              | (50,058 | )        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Deferred long-term compensation                                                                                                                                                                                                                                                   |                                   |                                                    | (1,456  | )            |           |              | (1,537  | )        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Accumulated earnings                                                                                                                                                                                                                                                              |                                   |                                                    | 5,670   |              |           |              |        |          
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   |                                                    |         |              |           |              |        
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   | Total shareholders equity                         |         |              | 479,404   |              |         |           | 506,767   | 
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   |                                                    |         |              |           |              |        
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   | Total liabilities and shareholders equity         |         | $            | 1,453,020 |              |         | $         | 1,471,364 | 
|                                                                                                                           |                                                                                                                                                                                                                                                                                   |                                   |                                                    |         |              |           |              |        

The accompanying notes are an integral part of these consolidated balance sheets.

44



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##### Table of Contents



GABLES RESIDENTIAL TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)

|                                                                               |                         |   |                          |         |      |   |         |         |  |   |         |         | 
|------------------------------------------------------------------------------ | ----------------------- | - | ------------------------ | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                                                                               |                         |   | Years ended December 31,
|                                                                               |                         |   |                         
|                                                                               |                         |   | 2000                     |         | 1999 |   | 1998   
|                                                                               |                         |   |                          |         |      |   |        
|Revenues:                                                                     
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Rental revenues                                                                |                         | $ | 217,384                  |         |      | $ | 221,689 |         |  | $ | 199,292 |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Other property revenues                                                        |                         |   | 12,405                   |         |      |   | 12,121  |         |  |   | 9,988   |        
|                                                                               |                         |   |                          |         |      |   |         |         |  |   |         |        
|                                                                               | Total property revenues |   |                          | 229,789 |      |   |         | 233,810 |  |   |         | 209,280 | 
|                                                                               |                         |   |                          |         |      |   |         |         |  |   |         |        
|Property management revenues                                                   |                         |   | 5,172                    |         |      |   | 4,954   |         |  |   | 4,533   |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Development revenues, net                                                      |                         |   | 2,883                    |         |      |   | 2,929   |         |  |   |        |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Equity in income of joint ventures                                             |                         |   | 399                      |         |      |   | 478     |         |  |   | 359     |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Interest income                                                                |                         |   | 1,029                    |         |      |   | 674     |         |  |   | 417     |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Other                                                                          |                         |   | 2,821                    |         |      |   | 2,752   |         |  |   | 2,811   |        
|                                                                               |                         |   |                          |         |      |   |         |         |  |   |         |        
|                                                                               | Total other revenues    |   |                          | 12,304  |      |   |         | 11,787  |  |   |         | 8,120   | 
|                                                                               |                         |   |                          |         |      |   |         |         |  |   |         |        
|                                                                               | Total revenues          |   |                          | 242,093 |      |   |         | 245,597 |  |   |         | 217,400 | 
|                                                                               |                         |   |                          |         |      |   |         |         |  |   |         |        
|Expenses:                                                                     
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Property operating and maintenance
(exclusive of items shown separately below) |                         |   | 75,444                   |         |      |   | 78,689  |         |  |   | 70,502  |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Real estate asset depreciation and amortization                                |                         |   | 43,829                   |         |      |   | 45,538  |         |  |   | 40,087  |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Property management  owned                                                    |                         |   | 5,800                    |         |      |   | 5,187   |         |  |   | 4,758   |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Property management  third party                                              |                         |   | 4,207                    |         |      |   | 3,706   |         |  |   | 3,219   |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Interest expense and credit enhancement fees                                   |                         |   | 45,539                   |         |      |   | 44,259  |         |  |   | 39,974  |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Amortization of deferred financing costs                                       |                         |   | 895                      |         |      |   | 919     |         |  |   | 984     |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|General and administrative                                                     |                         |   | 7,154                    |         |      |   | 5,796   |         |  |   | 6,242   |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Severance costs                                                                |                         |   |                         |         |      |   | 2,800   |         |  |   |        |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Corporate asset depreciation and amortization                                  |                         |   | 671                      |         |      |   | 535     |         |  |   | 563     |        
|                                                                               |                         |   |                          |         |      |   |         |         |  |   |         |        
|                                                                               | Total expenses          |   |                          | 183,539 |      |   |         | 187,429 |  |   |         | 166,329 | 
|                                                                               |                         |   |                          |         |      |   |         |         |  |   |         |        
|Gain on sale of real estate assets                                             |                         |   | 29,467                   |         |      |   | 8,864   |         |  |   |        |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Loss on treasury locks                                                         |                         |   |                         |         |      |   |        |         |  |   | (5,637  | )      
|                                                                               |                         |   |                          |         |      |   |         |         |  |   |         |        
|Income before minority interest                                                |                         |   | 88,021                   |         |      |   | 67,032  |         |  |   | 45,434  |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Minority interest of common unitholders in Operating Partnership               |                         |   | (16,359                  | )       |      |   | (10,348 | )       |  |   | (7,142  | )      
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Minority interest of preferred unitholders in Operating Partnership            |                         |   | (4,312                   | )       |      |   | (4,312  | )       |  |   | (587    | )      
|                                                                               |                         |   |                          |         |      |   |         |         |  |   |         |        
|Net income                                                                     |                         |   | 67,350                   |         |      |   | 52,372  |         |  |   | 37,705  |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Dividends to preferred shareholders                                            |                         |   | (9,771                   | )       |      |   | (9,771  | )       |  |   | (9,665  | )      
|                                                                               |                         |   |                          |         |      |   |         |         |  |   |         |        
|Net income available to common shareholders                                    |                         | $ | 57,579                   |         |      | $ | 42,601  |         |  | $ | 28,040  |        
|                                                                               |                         |   |                          |         |      |   |         |         |  |   |         |        
|Weighted average number of common shares outstanding  basic                   |                         |   | 23,694                   |         |      |   | 25,991  |         |  |   | 24,118  |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Weighted average number of common shares outstanding  diluted                 |                         |   | 30,439                   |         |      |   | 32,796  |         |  |   | 30,340  |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Per Common Share Information:                                                 
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Net income  basic                                                             |                         | $ | 2.43                     |         |      | $ | 1.64    |         |  | $ | 1.16    |        
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Net income  diluted                                                           |                         | $ | 2.43                     |         |      | $ | 1.64    |         |  | $ | 1.16    |        

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

45



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##### Table of Contents



GABLES RESIDENTIAL TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(Amounts in Thousands, Except Per Share Data)

|                           |                                                                          |           |             |   |        |   |         |    |            |   |              |         |           |   |          |         |             |   |        |      |   |   |        |         |   |   |         |         |   |  |  |  | 
|-------------------------- | ------------------------------------------------------------------------ | --------- | ----------- | - | ------ | - | ------- | -- | ---------- | - | ------------ | ------- | --------- | - | -------- | ------- | ----------- | - | ------ | ---- | - | - | ------ | ------- | - | - | ------- | ------- | - |  |  |  | 
|                           |                                                                          | Preferred
|                           |                                                                          |           | Shares at   |   |        |   |         |    | Additional |   |              |         |           |   | Deferred |         | Accumulated
|                           |                                                                          |           | Liquidation |   | Common |   | Paid-in |    | Treasury   |   | Long-Term    |         | Earnings 
|                           |                                                                          |           | Preference  |   | Shares |   | Capital |    | Shares     |   | Compensation |         | (Deficit) |   | Total   
|                           |                                                                          |           |             |   |        |   |         |    |            |   |              |         |           |   |         
|Balance, December 31, 1997 |                                                                          | $         | 115,000     |   |        | $ | 220     |    |            | $ | 339,009      |         |           | $ |         |         |             | $ | (594   | )    |   | $ | (2,197 | )       |   | $ | 451,438 |        
|                          
|                          
|                          
|                          
|                           | Proceeds of 3,311 share offering,
net of $1,861 issuance costs           |           |             |  |        |   |         | 33 |            |   |              | 87,497  |           |   |          |        |             |   |        |     |   |   |        |        |   |   |         | 87,530  |  
|                          
|                          
|                          
|                          
|                           | Proceeds from exercise of share options                                  |           |             |  |        |   |         | 2  |            |   |              | 3,705   |           |   |          |        |             |   |        |     |   |   |        |        |   |   |         | 3,707   |  
|                          
|                          
|                          
|                          
|                           | Proceeds from Share Builder Plan                                         |           |             |  |        |   |         | 2  |            |   |              | 3,547   |           |   |          |        |             |   |        |     |   |   |        |        |   |   |         | 3,549   |  
|                          
|                          
|                          
|                          
|                           | Issuance of shares for trustee compensation                              |           |             |  |        |   |         |   |            |   |              | 40      |           |   |          |        |             |   |        |     |   |   |        |        |   |   |         | 40      |  
|                          
|                          
|                          
|                          
|                           | Issuance of share grants, net of forfeitures                             |           |             |  |        |   |         |   |            |   |              | 1,560   |           |   |          |        |             |   |        |     |   |   |        |        |   |   |         | 1,560   |  
|                          
|                          
|                          
|                          
|                           | Deferred long-term compensation, net                                     |           |             |  |        |   |         |   |            |   |              |        |           |   |          |        |             |   |        | (218 | ) |   |        |        |   |   |         | (218    | )
|                          
|                          
|                          
|                          
|                           | Adjustment for minority interest of
unitholders in Operating Partnership |           |             |  |        |   |         | 6  |            |   |              | 30,648  |           |   |          |        |             |   |        |     |   |   |        |        |   |   |         | 30,654  |  
|                          
|                          
|                          
|                          
|                           | Net income available to common shareholders                              |           |             |  |        |   |         |   |            |   |              |        |           |   |          |        |             |   |        |     |   |   |        | 28,040  |   |   |         | 28,040  |  
|                          
|                          
|                          
|                          
|                           | Dividends declared ($2.02 per share)                                     |           |             |  |        |   |         |   |            |   |              | (24,494 | )         |   |          |        |             |   |        |     |   |   |        | (25,843 | ) |   |         | (50,337 | )
|                           |                                                                          |           |             |   |        |   |         |    |            |   |              |         |           |   |          |         |             |   |        |      |   |   |        |         |   |   |         |         |   |  | 
|Balance, December 31, 1998 |                                                                          |           | 115,000     |   |        |   | 263     |    |            |   | 441,512      |         |           |   |         |         |             |   | (812   | )    |   |   |       |         |   |   | 555,963 |        
|                          
|                          
|                          
|                          
|                           | Purchase of treasury shares                                              |           |             |  |        |   |         |   |            |   |              |        |           |   |          | (50,058 | )           |   |        |     |   |   |        |        |   |   |         | (50,058 | )
|                          
|                          
|                          
|                          
|                           | Proceeds from exercise of share options                                  |           |             |  |        |   |         | 1  |            |   |              | 1,231   |           |   |          |        |             |   |        |     |   |   |        |        |   |   |         | 1,232   |  
|                          
|                          
|                          
|                          
|                           | Proceeds from Share Builder Plan                                         |           |             |  |        |   |         | 3  |            |   |              | 7,647   |           |   |          |        |             |   |        |     |   |   |        |        |   |   |         | 7,650   |  
|                          
|                          
|                          
|                          
|                           | Issuance of shares for trustee compensation                              |           |             |  |        |   |         |   |            |   |              | 72      |           |   |          |        |             |   |        |     |   |   |        |        |   |   |         | 72      |  
|                          
|                          
|                          
|                          
|                           | Issuance of share grants, net of forfeitures                             |           |             |  |        |   |         | 1  |            |   |              | 2,408   |           |   |          |        |             |   |        |     |   |   |        |        |   |   |         | 2,409   |  
|                          
|                          
|                          
|                          
|                           | Deferred long-term compensation, net                                     |           |             |  |        |   |         |   |            |   |              |        |           |   |          |        |             |   |        | (725 | ) |   |        |        |   |   |         | (725    | )
|                          
|                          
|                          
|                          
|                           | Adjustment for minority interest of
unitholders in Operating Partnership |           |             |  |        |   |         |   |            |   |              | 1,418   |           |   |          |        |             |   |        |     |   |   |        |        |   |   |         | 1,418   |  
|                          
|                          
|                          
|                          
|                           | Net income available to common shareholders                              |           |             |  |        |   |         |   |            |   |              |        |           |   |          |        |             |   |        |     |   |   |        | 42,601  |   |   |         | 42,601  |  
|                          
|                          
|                          
|                          
|                           | Dividends declared ($2.08 per share)                                     |           |             |  |        |   |         |   |            |   |              | (11,194 | )         |   |          |        |             |   |        |     |   |   |        | (42,601 | ) |   |         | (53,795 | )
|                           |                                                                          |           |             |   |        |   |         |    |            |   |              |         |           |   |          |         |             |   |        |      |   |   |        |         |   |   |         |         |   |  | 
|Balance, December 31, 1999 |                                                                          |           | 115,000     |   |        |   | 268     |    |            |   | 443,094      |         |           |   | (50,058  | )       |             |   | (1,537 | )    |   |   |       |         |   |   | 506,767 |        
|                          
|                          
|                          
|                          
|                           | Purchase of treasury shares                                              |           |             |  |        |   |         |   |            |   |              |        |           |   |          | (45,225 | )           |   |        |     |   |   |        |        |   |   |         | (45,225 | )
|                          
|                          
|                          
|                          
|                           | Proceeds from exercise of share options                                  |           |             |  |        |   |         | 2  |            |   |              | 4,697   |           |   |          |        |             |   |        |     |   |   |        |        |   |   |         | 4,699   |  
|                          
|                          
|                          
|                          
|                           | Issuance of shares for trustee compensation                              |           |             |  |        |   |         |   |            |   |              | 58      |           |   |          |        |             |   |        |     |   |   |        |        |   |   |         | 58      |  
|                          
|                          
|                          
|                          
|                           | Issuance of share grants, net of forfeitures                             |           |             |  |        |   |         | 1  |            |   |              | 2,148   |           |   |          |        |             |   |        |     |   |   |        |        |   |   |         | 2,149   |  
|                          
|                          
|                          
|                          
|                           | Deferred long-term compensation, net                                     |           |             |  |        |   |         |   |            |   |              |        |           |   |          |        |             |   |        | 81   |   |   |        |        |   |   |         | 81      |  
|                          
|                          
|                          
|                          
|                           | Adjustment for minority interest of
unitholders in Operating Partnership |           |             |  |        |   |         |   |            |   |              | 5,205   |           |   |          |        |             |   |        |     |   |   |        |        |   |   |         | 5,205   |  
|                          
|                          
|                          
|                          
|                           | Net income available to common shareholders                              |           |             |  |        |   |         |   |            |   |              |        |           |   |          |        |             |   |        |     |   |   |        | 57,579  |   |   |         | 57,579  |  
|                          
|                          
|                          
|                          
|                           | Dividends declared ($2.20 per share)                                     |           |             |  |        |   |         |   |            |   |              |        |           |   |          |        |             |   |        |     |   |   |        | (51,909 | ) |   |         | (51,909 | )
|                           |                                                                          |           |             |   |        |   |         |    |            |   |              |         |           |   |          |         |             |   |        |      |   |   |        |         |   |   |         |         |   |  | 
|Balance, December 31, 2000 |                                                                          | $         | 115,000     |   |        | $ | 271     |    |            | $ | 455,202      |         |           | $ | (95,283  | )       |             | $ | (1,456 | )    |   | $ | 5,670  |         |   | $ | 479,404 |        
|                           |                                                                          |           |             |   |        |   |         |    |            |   |              |         |           |   |          |         |             |   |        |      |   |   |        |         |   |   |         |         |   |  | 

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

46



---



##### Table of Contents



GABLES RESIDENTIAL TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands, Except Per Share Data)

|                                                                                  |                                                           |                                                     |                                           |         |                          |         |          |        |          |         |          |        |          |        | 
|--------------------------------------------------------------------------------- | --------------------------------------------------------- | --------------------------------------------------- | ----------------------------------------- | ------- | ------------------------ | ------- | -------- | ------ | -------- | ------- | -------- | ------ | -------- | ------ | 
|                                                                                  |                                                           |                                                     |                                           |         | Years Ended December 31,
|                                                                                  |                                                           |                                                     |                                           |         |                         
|                                                                                  |                                                           |                                                     |                                           |         | 2000                     |         | 1999     |        | 1998    
|                                                                                  |                                                           |                                                     |                                           |         |                          |         |          |        |         
|CASH FLOWS FROM OPERATING ACTIVITIES:                                            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net income                                                                        |                                                           | $                                                   | 67,350                                    |         |                          | $       | 52,372   |        |          | $       | 37,705   |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Adjustments to reconcile net income to net cash provided
by operating activities:
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Depreciation and amortization                             |                                                     |                                           | 45,395  |                          |         |          | 46,992 |          |         |          | 41,634 |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Equity in income of joint ventures                        |                                                     |                                           | (399    | )                        |         |          | (478   | )        |         |          | (359   | )       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Minority interest of unitholders in Operating Partnership |                                                     |                                           | 20,671  |                          |         |          | 14,660 |          |         |          | 7,729  |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Gain on sale of real estate assets                        |                                                     |                                           | (29,467 | )                        |         |          | (8,864 | )        |         |          |       |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Long-term compensation expense                            |                                                     |                                           | 1,128   |                          |         |          | 1,040  |          |         |          | 1,072  |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Loss on treasury locks                                    |                                                     |                                           |        |                          |         |          |       |          |         |          | 5,637  |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Amortization of discount on long-term liability           |                                                     |                                           |        |                          |         |          | 686    |          |         |          | 576    |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Operating distributions received from joint ventures      |                                                     |                                           | 1,432   |                          |         |          | 349    |          |         |          | 408    |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Change in operating assets and liabilities:              
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                           | Restricted cash                                     |                                           |         | 227                      |         |          |        | (157     | )       |          |        | (2,822   | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                           | Other assets                                        |                                           |         | (80                      | )       |          |        | (5,370   | )       |          |        | (12,220  | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                           | Other liabilities, net                              |                                           |         | (1,068                   | )       |          |        | 3,799    |         |          |        | 11,195   |       
|                                                                                  |                                                           |                                                     |                                           |         |                          |         |          |        |          |         |          |       
|                                                                                  |                                                           |                                                     | Net cash provided by operating activities |         |                          | 105,189 |          |        |          | 105,029 |          |        |          | 90,555 | 
|                                                                                  |                                                           |                                                     |                                           |         |                          |         |          |        |          |         |          |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                                            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Acquisition and construction of real estate assets                                |                                                           |                                                     | (110,852                                  | )       |                          |         | (74,171  | )      |          |         | (358,263 | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Restricted cash held in escrow                                                    |                                                           |                                                     | (8,526                                    | )       |                          |         |         |        |          |         |         |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Long-term land lease payments                                                     |                                                           |                                                     |                                          |         |                          |         |         |        |          |         | (1,000   | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net proceeds from sale of real estate assets                                      |                                                           |                                                     | 141,952                                   |         |                          |         | 96,712   |        |          |         |         |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Investment in joint ventures                                                      |                                                           |                                                     | (3,007                                    | )       |                          |         | (6,734   | )      |          |         |         |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Proceeds from contribution of real estate assets to joint venture                 |                                                           |                                                     |                                          |         |                          |         | 65,121   |        |          |         |         |       
|                                                                                  |                                                           |                                                     |                                           |         |                          |         |          |        |          |         |          |       
|                                                                                  |                                                           | Net cash provided by (used in) investing activities |                                           |         | 19,567                   |         |          |        | 80,928   |         |          |        | (359,263 | )     
|                                                                                  |                                                           |                                                     |                                           |         |                          |         |          |        |          |         |          |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                                            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Proceeds from common share offerings, net of issuance costs                       |                                                           |                                                     |                                          |         |                          |         |         |        |          |         | 87,530   |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Proceeds from preferred Unit offering, net of issuance costs                      |                                                           |                                                     |                                          |         |                          |         |         |        |          |         | 48,673   |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Proceeds from the exercise of share options                                       |                                                           |                                                     | 4,699                                     |         |                          |         | 1,232    |        |          |         | 3,707    |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Share Builder Plan contributions                                                  |                                                           |                                                     |                                          |         |                          |         | 7,650    |        |          |         | 3,549    |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Treasury share purchases and Unit redemptions                                     |                                                           |                                                     | (47,281                                   | )       |                          |         | (54,767  | )      |          |         |         |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Payments of deferred financing costs                                              |                                                           |                                                     | (1,065                                    | )       |                          |         | (422     | )      |          |         | (1,713   | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Treasury lock settlement payments                                                 |                                                           |                                                     |                                          |         |                          |         |         |        |          |         | (6,723   | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Notes payable proceeds                                                            |                                                           |                                                     | 146,825                                   |         |                          |         | 44,802   |        |          |         | 538,522  |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Notes payable repayments                                                          |                                                           |                                                     | (150,507                                  | )       |                          |         | (102,105 | )      |          |         | (328,000 | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Principal escrow deposits                                                         |                                                           |                                                     | (732                                      | )       |                          |         | (697     | )      |          |         | (697     | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Preferred dividends paid                                                          |                                                           |                                                     | (9,546                                    | )       |                          |         | (9,546   | )      |          |         | (9,544   | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Preferred distributions paid                                                      |                                                           |                                                     | (4,312                                    | )       |                          |         | (4,312   | )      |          |         | (395     | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Common dividends paid ($2.20, $2.08 and $2.02 per share, respectively)            |                                                           |                                                     | (51,909                                   | )       |                          |         | (53,795  | )      |          |         | (50,337  | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Common distributions paid ($2.20, $2.08 and $2.02 per share, respectively)        |                                                           |                                                     | (14,639                                   | )       |                          |         | (13,088  | )      |          |         | (11,989  | )     
|                                                                                  |                                                           |                                                     |                                           |         |                          |         |          |        |          |         |          |       
|                                                                                  |                                                           | Net cash (used in) provided by financing activities |                                           |         | (128,467                 | )       |          |        | (185,048 | )       |          |        | 272,583  |       
|                                                                                  |                                                           |                                                     |                                           |         |                          |         |          |        |          |         |          |       
|Net change in cash and cash equivalents                                           |                                                           |                                                     | (3,711                                    | )       |                          |         | 909      |        |          |         | 3,875    |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Cash and cash equivalents, beginning of period                                    |                                                           |                                                     | 7,963                                     |         |                          |         | 7,054    |        |          |         | 3,179    |       
|                                                                                  |                                                           |                                                     |                                           |         |                          |         |          |        |          |         |          |       
|Cash and cash equivalents, end of period                                          |                                                           | $                                                   | 4,252                                     |         |                          | $       | 7,963    |        |          | $       | 7,054    |       
|                                                                                  |                                                           |                                                     |                                           |         |                          |         |          |        |          |         |          |       
|Supplemental disclosure of cash flow information:                                
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                           | Cash paid for interest                              |                                           | $       | 53,334                   |         |          | $      | 50,257   |         |          | $      | 43,210   |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                           | Interest capitalized                                |                                           |         | 8,858                    |         |          |        | 7,725    |         |          |        | 8,737    |       
|                                                                                  |                                                           |                                                     |                                           |         |                          |         |          |        |          |         |          |       
|                                                                                  |                                                           | Cash paid for interest, net of amounts capitalized  |                                           | $       | 44,476                   |         |          | $      | 42,532   |         |          | $      | 34,473   |       
|                                                                                  |                                                           |                                                     |                                           |         |                          |         |          |        |          |         |          |       

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

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

---

Unless the context otherwise requires, all references to we, our or
us in this report refer collectively to Gables Residential Trust (Gables),
a Maryland real estate investment trust (REIT), and its subsidiaries,
including Gables Realty Limited Partnership, a Delaware limited partnership,
considered as a single enterprise. Gables GP, Inc., a wholly-owned subsidiary
of Gables Residential Trust, is the sole general partner of Gables Realty
Limited Partnership.

1. ORGANIZATION AND FORMATION

We are a REIT formed in 1993 under Maryland law to continue and expand the
operations of our privately owned predecessor organization. We completed our
initial public offering on January 26, 1994.

We are a fully integrated real estate company engaged in the multifamily
apartment community management, development, construction, acquisition and
disposition businesses. We also provide related brokerage and corporate rental
housing services. Substantially all of these businesses are conducted through
Gables Realty Limited Partnership (the Operating Partnership). We control
the Operating Partnership through Gables GP, Inc. (Gables GP), a wholly-owned
subsidiary and the sole general partner of the Operating Partnership. This
structure is commonly referred to as an umbrella partnership REIT or UPREIT.
At December 31, 2000, we were a 77.6% economic owner of the common equity of
the Operating Partnership. Prior to March 31, 2000, our third party management
businesses were conducted through two subsidiaries of the Operating
Partnership, Central Apartment Management, Inc. and East Apartment Management,
Inc. Effective March 31, 2000, Central Apartment Management, Inc. changed its
name to Gables Residential Services, Inc., and East Apartment Management, Inc.
was merged into Gables Residential Services.

Our limited partnership and indirect general partnership interests in the
Operating Partnership entitle us to share in cash distributions from, and in
the profits and losses of, the Operating Partnership in proportion to our
ownership interest therein and entitles us to vote on all matters requiring a
vote of the limited partners. Generally, the other limited partners of the
Operating Partnership are persons who contributed their direct or indirect
interests in certain properties to the Operating Partnership primarily in
connection with the IPO and the 1998 acquisition of the properties and
operations of Trammell Crow Residential South Florida (South Florida). The
Operating Partnership is obligated to redeem each common unit of limited
partnership interest (Unit) held by a person other than us at the request of
the holder for an amount equal to the fair market value of one of our common
shares at the time of such redemption, provided that we, at our option, may
elect to acquire each Unit presented for redemption for one common share or
cash. With each redemption, our percentage ownership interest in the Operating
Partnership will increase. In addition, whenever we issue common shares or
preferred shares, we are obligated to contribute any net proceeds to the
Operating Partnership and the Operating Partnership is obligated to issue an
equivalent number of common or preferred units, as applicable, to us.

As of December 31, 2000, we owned 73 stabilized multifamily apartment
communities comprising 21,422 apartment homes, an indirect 25% interest in two
stabilized apartment communities comprising 663 apartment homes, an indirect
20% interest in five stabilized apartment communities comprising 1,571
apartment homes, and an indirect 9% interest in three stabilized apartment
communities comprising 1,118 apartment homes. We also owned seven multifamily
apartment communities under development or in lease-up at December 31, 2000
that are expected to comprise 1,819 apartment homes upon completion and an
indirect 20% interest in three apartment communities under development or in
lease-up at December 31, 2000 that are expected to comprise 900 apartment homes
upon completion. In addition, as of December 31, 2000, we owned parcels of
land on which we intend to develop four apartment communities that we currently
expect will comprise an estimated 1,125 apartment homes. We also have rights
to acquire additional parcels of land on which we believe we could develop
communities. Any future development is subject to permits and other
governmental approvals, as well as our ongoing business review, and may not be
undertaken or completed.

2. COMMON AND PREFERRED EQUITY ACTIVITY

Secondary Common Share Offerings

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

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

---

Preferred Share Offerings

On July 24, 1997, we issued 4,600 shares of 8.30% Series A Cumulative
Redeemable Preferred Shares (liquidation preference $25.00 per share). The net
proceeds from this offering of $111.0 million were used to reduce outstanding
indebtedness under interim financing vehicles. The Series A Preferred Shares
may be redeemed at $25.00 per share plus accrued and unpaid dividends on or
after July 24, 2002. The Series A Preferred Shares have no stated maturity,
sinking fund, or mandatory redemption and are not convertible into any other
Gables securities.

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

Issuances of Common Operating Partnership Units

Since the IPO, the Operating Partnership has issued a total of 4,421 Units
in connection with the South Florida acquisition, the acquisition of other
operating apartment communities, and the acquisition of a parcel of land for
future development. The 4,421 Units issued include 470 Units valued at $10.4
million that were issued on January 1, 2000 related to a deferred portion of
the South Florida acquisition purchase price.

Issuance of Preferred Operating Partnership Units

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

Common Equity Repurchase Program

We have a common equity repurchase program pursuant to which we are
currently authorized to purchase up to $150 million of our outstanding common
shares or Units. We have repurchased shares from time to time in open market
and privately negotiated transactions, depending on market prices and other
conditions, using proceeds from sales of selected assets. Units have also been
repurchased for cash upon their presentation for redemption by unitholders. As
of December 31, 2000, we had repurchased 3,980 common shares and 287 Units for
a total of $102,048.

Shelf Registration Statement

We have an effective shelf registration statement on file with the
Securities and Exchange Commission (SEC) providing $500 million of
equity capacity and $300 million of debt capacity. We believe it is
prudent to maintain shelf registration capacity in order to
facilitate future capital raising activities. To date, there have
been no issuances under this shelf registration statement other than
the issuance of $150 million of senior unsecured notes in February,
2001.

3. PORTFOLIO AND OTHER FINANCING ACTIVITY

Community Dispositions (exclusive of joint venture transactions)

During 2000, we sold an apartment community located in Dallas comprising
126 apartment homes, an apartment community located in Houston comprising 228
apartment homes, two apartment communities located in San Antonio comprising
544 apartment homes, and a parcel of land adjacent to an existing apartment
community located in Atlanta. The net proceeds from these sales totaled $81
million, $30 million of which was deposited into an escrow account and is being
used to fund development and acquisition activities. The balance of the net
proceeds was used to paydown

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

---

outstanding borrowings under interim financing vehicles and purchase common
shares and Units under our common equity repurchase program. The total gain
from these sales was $20.4 million, of which $19.6 million was recognized in
2000. The remaining gain of $0.8 million was deferred at December 31, 2000 and
will be recognized when earned using the percentage of completion method
because we serve as the developer and general contractor for the purchaser of
the land parcel and have a commitment to construct an apartment community on
the parcel of land sold.

During 1999, we sold three apartment communities located in Atlanta
comprising 676 apartment homes, two apartment communities located in Memphis
comprising 490 apartment homes, an apartment community located in Houston
comprising 412 apartment homes, and an outparcel of land from an existing
development community located in Dallas. The net proceeds from these sales
totaled $96.7 million and were used to pay down outstanding borrowings under
interim financing vehicles and purchase common shares and Units under our
common equity repurchase program. The total gain from these sales was $8.9
million.

CMS Tennessee Multifamily Joint Venture

On December 28, 2000, we sold 91% of our interests in three apartment
communities comprising 1,118 apartment homes to a joint venture with CMS
Companies. Two of these communities are located in Nashville and the third is
located in Memphis. We currently have a 1% general partner interest and an 8%
limited partner interest in this venture. In addition, we serve as the
property manager. We received net proceeds of approximately $61 million in
connection with this sale and we recognized a gain of approximately $9.9
million. The net proceeds were used to repay a fixed-rate note payable with an
outstanding principal balance of $18.6 million that encumbered one of the
assets and to reduce borrowings under our interim financing vehicles.

Gables Residential Apartment Portfolio Joint Venture

On March 26, 1999, we entered into a joint venture in which our economic
ownership interest is currently 20%. The business purpose of the joint venture
is to develop, own and operate eight multifamily apartment communities, located
in four of our markets. We serve as the managing member of the venture and
have responsibility for all day-to-day operating matters. We also serve as the
property manager, developer and general contractor for construction activities.
On March 26, 1999, we contributed our interest in seven of the development
communities to the joint venture in return for (1) cash of $60.3 million and
(2) an initial capital account in the joint venture of $15.2 million. On
December 2, 1999, we contributed our interest in the eighth development
community to the joint venture in return for (1) cash of $4.8 million and (2)
an increase in the initial capital account in the joint venture of $1.2
million. As of the respective contribution dates, we (1) had commenced
construction of four of the communities, (2) owned the land for the future
development of three of the communities, and (3) owned the acquisition right
for the land for the future development of one of the communities. The capital
budget for the development of the eight communities is $238 million and is
being funded with 50% equity and 50% debt. The equity component is being funded
80% by the venture partner and 20% by us. Our portion of the equity was funded
through contributions of cash and property. As of December 31, 2000, we had
funded our total equity commitment of $23.8 million to the joint venture. At
December 31, 2000, construction was complete with respect to six of the eight
communities and five of the six completed communities had reached a stabilized
occupancy level.

Community Acquisition

During the third quarter of 2000, we acquired an apartment community
located in Austin comprising 160 apartment homes. In consideration for such
community, we paid $5.7 million in cash and assumed a $14.1 million secured
fixed-rate note.

Portfolio Acquisitions

On April 1, 1998, we acquired the properties and operations of South
Florida, which consisted of fifteen multifamily apartment communities
containing a total of 4,197 apartment homes, and all of South Floridas
residential construction and development and third party management activities.
In consideration for those properties and operations, we (1) paid $155.0
million in cash, (2) assumed $135.9 million of tax-exempt debt, and (3) issued
2,348 Units valued at $64.9 million. In addition, on January 1, 2000, we
issued 470 Units valued at $10.4 million and paid cash of $0.3 million related
to a

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

---

deferred portion of the purchase price. The acquisition increased the size of
our portfolio under management on April 1, 1998 from 28,000 to 40,000 apartment
homes.

The South Florida acquisition was accounted for under the purchase method
of accounting in accordance with Accounting Principles Board Opinion No. 16.
Accordingly, assets acquired and liabilities assumed were recorded at their
estimated fair values. The accompanying consolidated statements of operations
include the operating results of South Florida since April 1, 1998, the closing
date of the acquisition. The following unaudited pro forma information for the
year ended December 31, 1998 has been prepared assuming the South Florida
acquisition had been consummated on January 1, 1998. The unaudited pro forma
information (1) includes the historical operating results of the properties and
operations acquired and (2) does not purport to be indicative of the results
which actually would have been obtained had the South Florida acquisition been
consummated on January 1, 1998 or which may be attained in future periods.

|                                            |                      |   |                          |      |          |   |             |      |  |   |         |      | 
|------------------------------------------- | -------------------- | - | ------------------------ | ---- | -------- | - | ----------- | ---- |  | - | ------- | ---- | 
|                                            |                      |   | Years Ended December 31,
|                                            |                      |   |                         
|                                            |                      |   | 2000                     |      | 1999     |   | 1998       
|                                            |                      |   |                          |      |          |   |            
|                                            |                      |   | (Actual)                 |      | (Actual) |   | (Pro Forma)
|Total revenues                              |                      | $ | 242,093                  |      |          | $ | 245,597     |      |  | $ | 227,428 |     
|                                           
|                                           
|                                           
|                                           
|Net income available to common shareholders |                      |   | 57,579                   |      |          |   | 42,601      |      |  |   | 26,948  |     
|                                           
|                                           
|                                           
|                                           
|Per common share information:              
|                                           
|                                           
|                                           
|                                           
|                                            | Net income  basic   |   | $                        | 2.43 |          |   | $           | 1.64 |  |   | $       | 1.12 | 
|                                           
|                                           
|                                           
|                                           
|                                            | Net income  diluted |   |                          | 2.43 |          |   |             | 1.64 |  |   |         | 1.12 | 

In April 1998, we acquired four multifamily apartment communities
comprising a total of 913 apartment homes located in Houston, Texas
(Greystone). In connection with that acquisition, we assumed $31.0 million
of indebtedness at fair value and issued 665 Units valued at $18.0 million.
In addition, in December 1999, we issued 34 Units valued at $0.9 million
related to a deferred portion of the purchase price that was contingent upon
2000 economic performance.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

We are a fully-integrated real estate company engaged in the multifamily
apartment community management, development, construction, acquisition and
disposition businesses. We also provide related brokerage and corporate rental
housing services. Our operating performance relies predominantly on net
operating income from the multifamily apartment communities we own which are
located in major markets in Texas, Georgia, Florida and Tennessee.

Basis of Presentation

The accompanying consolidated financial statements include the
consolidated accounts of Gables and its subsidiaries, including the Operating
Partnership and Gables Residential Services. We consolidate the financial
statements of all entities in which we have a controlling financial interest,
as that term is defined under United States generally accepted accounting
principles (GAAP), through either majority voting interest or contractual
agreements. All significant intercompany accounts and transactions have been
eliminated in consolidation. The consolidated financial statements have been
adjusted for the minority interest of unitholders in the Operating Partnership.
Because Units, if presented for redemption, can be exchanged for Gables common
shares on a one-for-one basis, minority interest of common unitholders in the
Operating Partnership is calculated based on the weighted average of common
shares and Units outstanding during the applicable period.

Reclassifications

Certain amounts in the 1999 financial statements have been reclassified to
conform to the 2000 presentation.

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

---

Use of Estimates

The preparation of financial statements in conformity with GAAP requires
us to make estimates and assumptions that affect the reported amount of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.

Real Estate Assets and Depreciation

Real estate assets are stated at the lower of depreciated cost or fair
value, if deemed impaired. The cost of buildings and improvements includes
interest, property taxes, insurance and allocated development overhead incurred
during the construction period. Ordinary repairs and maintenance are expensed
as incurred; major replacements and betterments are capitalized and depreciated
over their useful lives. Depreciation is computed on a straight-line basis
over the useful lives of the real estate assets with buildings and improvements
depreciated over 19-40 years and furniture, fixtures and equipment depreciated
over 5-10 years. We periodically evaluate our real estate assets to determine
if there has been any impairment in the carrying value of the assets in
accordance with SFAS 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed of. SFAS 121 requires impairment
losses to be recorded on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets carrying amounts. At
December 31, 2000, we did not own any real estate assets that meet the
impairment criteria of SFAS No. 121.

Investment in Joint Ventures

Our 25% interest in Arbors of Harbortown JV and Metropolitan Apartments
JV, 20% interest in Gables Residential Apartment Portfolio JV, and 9% interest
in CMS Tennessee Multifamily JV are accounted for using the equity method of
accounting.

Revenue Recognition

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

Property management: We provide property management services for
properties in which we do not own a controlling interest. Income is recognized
when earned.

Development and construction services: We provide development and
construction services for properties in which we do not own a controlling
interest. Income is recognized when earned on a percentage of completion
basis.

Cash and Cash Equivalents

For purposes of the statements of cash flows, all investments purchased
with an original maturity of three months or less are considered to be cash
equivalents.

Restricted Cash

Restricted cash is primarily comprised of residential security deposits,
tax escrow funds, repairs and maintenance reserve funds and principal escrow
bond funds. In addition, we deposited $30.2 million of sales proceeds into an
escrow account to fund development and acquisition activities. At December 31,
2000, we had $8.5 million of sales proceeds remaining in this escrow account
which is included in restricted cash in the accompanying balance sheet.

Deferred Financing Costs and Amortization

Deferred financing costs include fees and costs incurred to obtain
financing and are capitalized and amortized over the terms of the related notes
payable.

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

---

Interest Rate Protection Agreements

In the ordinary course of business, we are exposed to interest rate risks.
We periodically seek input from third party consultants regarding market
interest rate and credit risk in order to evaluate its interest rate exposure.
In certain situations, we may utilize derivative financial instruments in the
form of rate caps, rate swaps or rate locks to hedge interest rate exposure by
modifying the interest rate characteristics of related balance sheet
instruments and prospective financing transactions. We do not utilize such
instruments for trading or speculative purposes. Derivatives used as hedges
must be effective at reducing the risk associated with the exposure being
hedged, correlate in nominal amount, rate, and term with the balance sheet
instrument being hedged, and be designated as a hedge at the inception of the
derivative contract.

Lump sum payments made or received at the inception or settlement of
derivative instruments designated as hedges are capitalized and amortized as an
adjustment to interest expense over the life of the associated balance sheet
instrument. Monthly amounts paid or received under rate cap and rate swap
hedge agreements are recognized as adjustments to interest expense as incurred.
In the event that circumstances arise that indicate that an existing
derivative instrument no longer meets the hedge criteria described above, the
derivative is marked to market in the statement of operations.

In anticipation of a projected seven-year debt offering, we entered into
two forward treasury lock agreements in late 1997. The timing and amount of
the projected debt offering was modified several times as a result of
unanticipated capital transactions, including the South Florida acquisition.
The treasury lock agreements were extended to align with the projected timing
of the debt offering. The treasury lock agreement in place in September 1998
was terminated due to certain economic conditions affecting the unsecured debt
market. For the year ended December 31, 1998, we recognized mark to market
losses totaling $5,637 upon the expiration of the original and extended terms
of the treasury lock agreements since the required hedge criteria no longer
existed at those dates.

Property Management Expenses

We manage owned properties as well as properties owned by third parties
for which we provide services for a fee. Property management expenses have been
allocated between owned and third party properties in the accompanying
statements of operations based on the proportionate number of owned and third
party apartment homes managed by us during the applicable periods.

Income Taxes

We have elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended. For the tax year ended December 31, 2000, a REIT must
distribute at least 95% of its ordinary taxable income to its shareholders and
satisfy certain other requirements. As a result of recently enacted tax
legislation, effective for tax years beginning after December 31, 2000, the
distribution requirement has been reduced from 95% to 90% of a REITs ordinary
taxable income. Provided we maintain our qualification as a REIT, we generally
will not be subject to federal income tax on distributed net income.
Accordingly, no provision has been made for federal income taxes in the
accompanying consolidated financial statements for the years ended December 31,
2000, 1999 and 1998. We provide management and other services through Gables
Residential Services. The taxable income of this subsidiary, if any, is subject
to tax at regular corporate rates. The tax attributes of this subsidiary are
immaterial to the accompanying consolidated financial statements.

Recent Accounting Pronouncements

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

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

---

extent, type and effectiveness of our hedging activities. SFAS No. 133 could
increase volatility in net income and other comprehensive income. We had no
derivative instruments at December 31, 2000.

The SEC issued Staff Accounting Bulletin No. 101 (SAB 101), Revenue
Recognition, which provides guidance on the recognition, presentation, and
disclosure of revenue in financial statements. SAB 101 was required to be
implemented in the fourth quarter of 2000. The adoption of SAB 101 did not
have a significant effect on our results of operations or our financial
position.

5. NOTES PAYABLE

Notes payable consist of the following:

|                                                |  |   |              |  |      |   |         |  | 
|----------------------------------------------- |  | - | ------------ |  | ---- | - | ------- |  | 
|                                                |  |   | December 31,
|                                                |  |   |             
|                                                |  |   | 2000         |  | 1999
|                                                |  |   |              |  |     
|Tax-exempt variable-rate notes payable          |  | $ | 160,155      |  |      | $ | 150,070 | 
|                                               
|                                               
|                                               
|                                               
|Secured conventional fixed-rate notes payable   |  |   | 141,100      |  |      |   | 123,641 | 
|                                               
|                                               
|                                               
|                                               
|Unsecured conventional fixed-rate notes payable |  |   | 116,190      |  |      |   | 117,361 | 
|                                               
|                                               
|                                               
|                                               
|Unsecured senior notes                          |  |   | 115,000      |  |      |   | 165,000 | 
|                                               
|                                               
|                                               
|                                               
|Unsecured variable-rate credit facilities       |  |   | 108,617      |  |      |   | 68,868  | 
|                                               
|                                               
|                                               
|                                               
|Tax-exempt fixed-rate notes payable             |  |   | 80,290       |  |      |   | 90,545  | 
|                                               
|                                               
|                                               
|                                               
|Unsecured variable-rate term loan               |  |   | 40,000       |  |      |   | 40,000  | 
|                                               
|                                               
|                                               
|                                               
|Secured variable-rate loan                      |  |   | 4,575        |  |      |   |        | 
|                                                |  |   |              |  |      |   |         | 
|Total notes payable                             |  | $ | 765,927      |  |      | $ | 755,485 | 
|                                                |  |   |              |  |      |   |         | 

Tax-Exempt Variable-Rate Notes Payable Totaling $44,930

At December 31, 2000 and 1999, the variable-rate mortgage notes payable
securing tax-exempt bonds totaling $44,930 were comprised of four loans, each
of which is collateralized by an apartment community included in real estate
assets. These bonds bear interest at variable rates of interest, adjusted
weekly based upon a negotiated rate. The interest rates in effect at December
31, 2000 and 1999 were 4.9% and 5.5%, respectively. Tax-exempt variable rates
are, and historically have been, significantly higher at year-end than during
the year. Effective interest rates were 4.2%, 3.3% and 3.5% for the years
ended December 31, 2000, 1999 and 1998, respectively. The bonds are currently
enhanced by four letters of credit provided by a letter of credit facility
entered into in October 1997. The fee for the letters of credit under this
facility is 0.95% per annum. The letter of credit facility has an initial term
of five years with unlimited one-year extension options. We have exercised the
first of our one-year extension options resulting in a maturity date for the
facility of October 2003. Three of the underlying bond issues mature in
December 2007 and the fourth matures in August 2024.

Tax-Exempt Variable-Rate Notes Payable Totaling $115,225 and $105,140, respectively

On April 1, 1998, we assumed five variable-rate bond issues totaling
$105,140 in connection with the South Florida acquisition. On August 15, 2000,
we refunded a $10,085 bond issue that we assumed in connection with the South
Florida acquisition from a fixed rate of 4.75% to a variable rate. At December
31, 2000 and 1999, the interest rates on these variable-rate bonds ranged from
4.50% to 4.75% (weighted average of 4.63%) and 4.75% to 5.70% (weighted average
of 5.31%), respectively. Tax-exempt variable rates are, and historically have
been, significantly higher at year-end than during the year. Effective interest rates averaged 4.2% and 3.3% for the years
ended December 31, 2000 and 1999 and 3.6% for the period April 1, 1998 to
December 31, 1998. These bond issues are enhanced by letters of credit
provided by a letter of credit facility entered into on April 1, 1998 (the
South Florida Enhancement Facility). The fee for the letters of credit is
1.0% per annum. The South Florida Enhancement Facility has an initial term of
10 years with three five-year extension options and is collateralized by (1)
each apartment community induced for tax-exempt financing for which a letter of
credit is issued and outstanding and (2) two additional communities. The
maturity dates of the underlying bond issues range from December 2005 to
September 2008.

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

---

Secured Conventional Fixed-Rate Notes Payable

At December 31, 1999, the fixed-rate notes payable totaling $123,641 were
comprised of nine loans collateralized by eleven apartment communities included
in real estate assets. The interest rates on these notes payable ranged from
6.75% to 8.77% (weighted average of 7.80%) and the maturity dates ranged from
December 2000 to December 2015.

In January 2000, we prepaid one of the fixed-rate notes payable scheduled
to mature in December 2000 which had a balance of $3,583 at December 31, 1999
and bore interest at a rate of 8.16%. In December 2000 we prepaid one of the
fixed-rate notes payable scheduled to mature in May 2003 which had a balance of
$18,868 at December 31, 1999 and bore interest at a rate of 7.50%. This
prepayment was made in connection with the contribution of the asset that
served as collateral for this loan to the CMS Tennessee Multifamily JV.

In September 2000, we assumed a $14,124 loan in connection with the
acquisition of an apartment community in Austin. This loan bears interest at a
rate of 7.38% and matures in May 2009. In November 2000, we closed a $27,500
loan secured by two apartment communities which bears interest at a rate of
7.42% and matures in June 2006.

At December 31, 2000, the fixed-rate notes payable were comprised of nine
loans collateralized by twelve apartment communities included in real estate
assets. At December 31, 2000, the interest rates on these notes payable range
from 6.75% to 8.77% (weighted average of 7.71%) and the maturity dates range
from February 2004 to December 2015. Principal amortization payments are
required for eight of the nine loans based on amortization schedules ranging
from 25 to 30 years.

Unsecured Conventional Fixed-Rate Notes Payable

At December 31, 2000 and 1999, the unsecured fixed-rate notes payable were
comprised of four loans. The interest rates on these notes payable range from
5.25% to 8.62% (weighted average of 8.32%) and the maturity dates range from
December 2002 to November 2018. Principal amortization payments are required
based on amortization schedules ranging from 20 to 30 years.

Unsecured Senior Notes

In March 1998, we issued $100,000 of senior unsecured notes which bear
interest at 6.80%, were priced to yield 6.84%, and mature in March 2005. In
October 1998, we issued (1) $50,000 of senior unsecured notes that matured in
October 2000 which bore interest at 6.55% and were priced to yield 6.59% and
(2) $15,000 of senior unsecured notes which bear interest at 6.60%, were priced
at par, and mature in October 2001. We repaid the $50,000 notes at maturity.

$225 Million Credit Facility

We have a $225 million unsecured revolving credit facility that is
provided by a consortium of banks. The facility currently has a maturity date
of May 2003 with one one-year extension option. Borrowings under the facility
currently bear interest at our option of LIBOR plus 0.95% or prime minus 0.25%.
Such scheduled interest rates may be adjusted up or down based on changes in
our senior unsecured credit ratings. We may also enter into competitive bid
loans with participating banks for up to $112.5 million at rates below the
scheduled rates. In addition, there is an annual facility fee equal to 0.15%
of the $225 million commitment. Our availability under the facility is based
on the value of our unencumbered real estate assets as compared to the amount
of our unsecured indebtedness. As of December 31, 2000, we had $70,000 in
borrowings outstanding under the facility and, therefore, had $155,000 of
remaining capacity on the $225 million commitment. As of December 31, 1999, we
had $44,000 in borrowings outstanding under the facility.

$50 Million Borrowing Facility

At December 31, 1999, we had a $25 million unsecured borrowing facility
with a bank. In connection with the extension of the April 2000 maturity date
to April 2001, the availability under the facility was increased to $50
million. The interest rate and maturity date related to each draw on this
facility is agreed to by both parties prior to each draw. We expect the
facility to be renewed for an additional one-year term at maturity. At
December 31, 2000 and 1999, we had

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

---

$38,194 and $24,868, respectively, in borrowings outstanding under this
facility at an interest rate of 7.3% and 6.0%, respectively.

$25 Million Credit Facility

We have a $25 million unsecured revolving credit facility with a bank that
currently bears interest at LIBOR plus 0.95%. We expect to exercise one of our
unlimited one-year extension options prior to the facilitys current maturity
in October 2001. We had $423 and $0 in borrowings outstanding under this
facility at December 31, 2000 or 1999, respectively.

Tax-Exempt Fixed-Rate Notes Payable

At December 31, 2000 and 1999, the tax-exempt fixed-rate indebtedness was
comprised of four and five loans, respectively. One loan outstanding at
December 31, 2000 and 1999 has a principal balance of $48,365 and is
collateralized by three communities induced for tax-exempt financing and three
additional communities. Principal amortization payments based on a 30-year
amortization schedule are required on a monthly basis. These payments are
retained in an escrow account and are not applied to reduce the outstanding
principal balance of the loan. Principal payments through December 31, 2000
and 1999 are included in restricted cash in the accompanying balance sheets.
The note payable bears interest at 6.38% and matures in August 2004. The three
underlying tax-exempt bond issues mature in August 2024. The second loan, with
an outstanding principal balance of $11,300 and $11,470 as of December 31, 2000
and 1999, respectively, represents a tax-exempt bond financing secured by one
apartment community. The bond issue, which has a maturity of January 2025, was
credit enhanced for an annual fee of 0.60% and bears interest at 7.03%.
Monthly escrow payments are required each year based on the annual principal
payment due to the bondholders.

On April 1, 1998, we assumed three bond issues totaling $30,710 in
connection with the South Florida acquisition. One of these bond issues for
$10,085 was refunded on August 15, 2000 from a fixed rate of 4.75% to a
variable rate. The second bond issue bears interest at 4.75% and is enhanced
by a letter of credit provided by the South Florida Enhancement Facility
previously described. The third bond issue, which initially bore interest at
5.75%, was refunded in May 1999 to a fixed rate of 4.65% and is now enhanced by the South Florida Enhancement
Facility. The maturity dates of the two fixed-rate bond issues at December 31,
2000 range from February 2004 to April 2009. The bonds do not require
principal amortization payments.

Unsecured Variable-Rate Term Loan

At December 31, 2000 and 1999, we had a $40,000 unsecured variable-rate
term loan which bears interest at our option of LIBOR plus 0.80% or prime minus
0.25%. This loan matures in November 2001.

Unsecured Senior Note Issuance in February 2001 and Maturities

On February 22, 2001, we issued $150.0 million of senior unsecured notes
which bear interest at 7.25%, were priced to yield 7.29%, and mature in
February 2006. The net proceeds of $148.5 million were used to reduce
borrowings under our unsecured credit facilities and repay our $40 million term
loan. The aggregate maturities of notes payable at December 31, 2000 (on both
a historical basis and a pro forma basis to give effect to the issuance of the
notes and the application of the net proceeds therefrom, as if such events had
occurred on December 31, 2000) are as follows:

| |                     |   |            |         |           |   |         |         | 
| | ------------------- | - | ---------- | ------- | --------- | - | ------- | ------- | 
| |                     |   | Historical |         | Pro Forma
| |                     |   |            |         |          
| | 2001                |   | $          | 97,024  |           |   | $       | 18,529  | 
|
|
|
|
| | 2002                |   |            | 86,072  |           |   |         | 86,072  | 
|
|
|
|
| | 2003                |   |            | 122,467 |           |   |         | 52,467  | 
|
|
|
|
| | 2004                |   |            | 79,556  |           |   |         | 79,556  | 
|
|
|
|
| | 2005                |   |            | 113,074 |           |   |         | 113,074 | 
|
|
|
|
| | 2006 and thereafter |   |            | 267,734 |           |   |         | 417,734 | 
| |                     |   |            |         |           |   |         |         | 
| |                     | $ | 765,927    |         |           | $ | 767,432 |        
| |                     |   |            |         |           |   |         |         | 

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

---

Restrictive Covenants

Certain of our debt agreements contain customary representations,
covenants and events of default, including covenants which restrict the ability
of the Operating Partnership to make distributions in excess of stated amounts,
which in turn restricts our discretion to declare and pay dividends. In
general, during any fiscal year the Operating Partnership may only distribute
up to 95% of its consolidated income available for distribution (as defined in
the related agreement) exclusive of distributions of capital gains for such
year. The applicable debt agreements contain exceptions to these limitations
to allow the Operating Partnership to make any distributions necessary to allow
us to maintain our status as a REIT. We do not anticipate that this provision
will adversely effect the ability of the Operating Partnership to make
distributions or our ability to declare dividends as currently anticipated.

The tax-exempt bonds contain certain covenants which require a certain
percentage of the apartments in such communities be rented to individuals based
upon income levels specified by U.S. government programs, as defined.

Joint Venture Indebtedness

The Arbors of Harbortown apartment community secures a $16.4 million
tax-exempt bond obligation, which is recourse to us up to $1.0 million, bears
interest at a variable low-floater rate, has a maturity date of April 2013, and
is payable in monthly installments of interest only. The recourse amount is
fully cash-collateralized and held by the Arbors of Harbortown JV. The credit
enhancement for the bond obligation expires in May 2001.

The Metropolitan Uptown apartment community secures a conventional
fixed-rate loan with $18.5 million outstanding at December 31, 2000, 25% of
which has been guaranteed by us. The loan has a maturity date of December
31, 2002 and bears interest at a rate of 7.18%.

Each of the eight development communities owned by the Gables Residential
Apartment Portfolio JV is secured by a construction loan with committed funding
equal to 50% of the total budgeted development costs. The construction loans
have an initial maturity of March 25, 2002 with two one-year extension options.
As of December 31, 2000, there was an aggregate $111.1 million of indebtedness
outstanding under these construction loans which currently bear interest at
spreads over LIBOR ranging from 1.45% to 1.65%.

Each of the three apartment communities owned by the CMS Tennessee
Multifamily JV is secured by a conventional fixed-rate loan with a
maturity of January 2011. As of December 31, 2000, there was an
aggregate $52.1 million of indebtedness outstanding under these
loans which bears interest at a rate of 7.22%.

Pledged Assets

The aggregate net book value at December 31, 2000 of real estate assets
pledged as collateral for indebtedness was $492,091.

6. COMMITMENTS AND CONTINGENCIES

Office Leases

We are party to office operating leases with various terms. Future minimum
lease payments and rent expense for such leases are not material.

Contingencies

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

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

---

7. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Disclosure about the estimated fair value of financial instruments is
based on pertinent information available to us as of December 31, 2000. Such
amounts have not been comprehensively revalued for purposes of these financial
statements since that date and current estimates of fair value may differ
significantly from the amounts presented herein.

Cash Equivalents

We estimate that the fair value of cash equivalents approximates carrying
value due to the relatively short maturity of these instruments.

Notes Payable

The estimated fair value of our notes payable at December 31, 2000 is
$749,515 and is based on a discounted cash flow analysis using current
borrowing rates for notes payable with similar terms and remaining
maturities.

8. EARNINGS PER SHARE

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

|                                                                        |                                                                       |   |                          |       |      |   |        |       |  |   |        |       |  |  |  |  |  |  |  |  | 
|----------------------------------------------------------------------- | --------------------------------------------------------------------- | - | ------------------------ | ----- | ---- | - | ------ | ----- |  | - | ------ | ----- |  |  |  |  |  |  |  |  | 
|                                                                        |                                                                       |   | Years Ended December 31,
|                                                                        |                                                                       |   |                         
|                                                                        |                                                                       |   | 2000                     |       | 1999 |   | 1998  
|                                                                        |                                                                       |   |                          |       |      |   |       
|Basic and diluted income available to
common shareholders (numerator): 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net income  basic                                                      |                                                                       | $ | 57,579                   |       |      | $ | 42,601 |       |  | $ | 28,040 |      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Amortization of discount on long-term liability
settled in January 2000 |                                                                       |   |                         |       |      |   | 686    |       |  |   |       |      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Minority interest of common unitholders
in Operating Partnership        |                                                                       |   | 16,359                   |       |      |   | 10,348 |       |  |   | 7,142  |      
|                                                                        |                                                                       |   |                          |       |      |   |        |       |  |   |        |      
|Net income  diluted                                                    |                                                                       | $ | 73,938                   |       |      | $ | 53,635 |       |  | $ | 35,182 |      
|                                                                        |                                                                       |   |                          |       |      |   |        |       |  |   |        |      
|Common shares (denominator):                                           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Average shares outstanding  basic                                      |                                                                       |   | 23,694                   |       |      |   | 25,991 |       |  |   | 24,118 |      
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Incremental shares from assumed conversions of:                        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Stock options                                                         |   |                          | 70    |      |   |        | 41    |  |   |        | 128   | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Units issuable upon settlement of long-term
liability in January 2000 |   |                          |      |      |   |        | 470   |  |   |        |      | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Outstanding common Units                                              |   |                          | 6,671 |      |   |        | 6,286 |  |   |        | 6,094 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Other                                                                 |   |                          | 4     |      |   |        | 8     |  |   |        |      | 
|                                                                        |                                                                       |   |                          |       |      |   |        |       |  |   |        |      
|Average shares outstanding  diluted                                    |                                                                       |   | 30,439                   |       |      |   | 32,796 |       |  |   | 30,340 |      
|                                                                        |                                                                       |   |                          |       |      |   |        |       |  |   |        |      

For the year ended December 31, 1998, 506 Units issuable upon settlement
of long-term liability were not included in diluted earnings per share because
the effect was anti-dilutive.

Options to purchase 1,130 and 1,557 shares were outstanding at December
31, 2000 and 1999, respectively, but were not included in the computation of
diluted earnings per share because the effect was anti-dilutive.

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

---

9. SEGMENT REPORTING

We adopted SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information, during 1998. SFAS No. 131 established standards for
reporting financial and descriptive information about operating segments in
annual financial statements. Operating segments are defined as components of
an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Our chief operating decision
maker is our senior management group.

We own, operate and develop multifamily apartment communities in major
markets located in Texas, Georgia, Florida and Tennessee. These apartment
communities generate rental revenue and other income through the leasing of
apartment homes to a diverse base of residents. We evaluate the performance of
each of our apartment communities on an individual basis. However, because
each of the apartment communities has similar economic characteristics,
residents, and products and services, they have been aggregated into one
reportable segment. This segment comprises 95%, 95% and 96% of our total
revenues for the years ended December 31, 2000, 1999 and 1998, respectively.

The primary financial measure for our reportable business segment is net
operating income (NOI), which represents total property revenues less
property operating and maintenance expenses (as reflected in the accompanying
statements of operations). Accordingly, NOI excludes certain expenses included
in the determination of net income. Current year NOI is compared to prior year
NOI and current year budgeted NOI as a measure of financial performance. The
NOI yield or return on total capitalized costs is an additional measure of
financial performance. NOI from apartment communities totaled $154,345,
$155,121, and $138,778 for the years ended December 31, 2000, 1999 and 1998,
respectively. All other segment measurements are disclosed in our consolidated
financial statements.

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

10. PROFIT SHARING PLAN

Eligible employees may participate in a profit sharing plan pursuant to
Section 401(k) of the Internal Revenue Code. Under the plan, employees may
defer a portion of their salary on a pre-tax basis. We also have the
discretion to make matching contributions, currently equal to 50% of an
employees first 4% salary deferral contribution. Expenses under this plan for
the years ended December 31, 2000, 1999 and 1998 were not material.

During January 1996, we added the Gables Residential Trust Stock Fund as
an investment option for the plan. The fund is comprised of Gables common
shares. In connection with the addition of this fund to the plan, 100 common
shares were registered for issuance under the plan. The plan trustee will
purchase Gables common shares for the fund at the direction of the plan
investment committee, either on the open market or directly from us.

11. DIVIDENDS AND SHARE BUILDER PLAN

We have declared and paid dividends to common shareholders for the years ended
December 31, 2000, 1999 and 1998 as follows:

|     |  |           |       |           |  |                           |      |         |  |  |      |   |  |  |      |  
|---- |  | --------- | ----- | --------- |  | ------------------------- | ---- | ------- |  |  | ---- | - |  |  | ---- | -
|     |  |           |       |           |  | Shareholder Tax Treatment
|     |  |           |       |           |  |                          
|     |  | Per Share |       | Return of |  | Ordinary                  |      | Capital
|Year |  | Dividends |       | Capital   |  | Income                    |      | Gain   
|     |  |           |       |           |  |                           |      |        
|2000 |  | $         | 2.195 |           |  |                           | 4.0  | %       |  |  | 78.7 | % |  |  | 17.3 | %
|    
|    
|    
|    
|1999 |  | $         | 2.080 |           |  |                           | 18.1 | %       |  |  | 75.9 | % |  |  | 6.0  | %
|    
|    
|    
|    
|1998 |  | $         | 2.020 |           |  |                           | 32.4 | %       |  |  | 67.6 | % |  |  | 0.0  | %

59



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

---

In January 1995, we adopted a dividend reinvestment and share purchase
program pursuant to which shareholders could elect to reinvest dividends in
additional common shares at a 2% discount to the then current market price of
common shares and purchase additional common shares for cash (up to $20 per
quarter) at 100% of the then current market price (the Share Builder Plan).

As of December 31, 1999, we had issued all of the 500 shares registered
for issuance under the Share Builder Plan. Given our current capital market
strategy to repurchase shares under our common equity repurchase program, we
have resolved not to establish a new Share Builder Plan at this time.
Accordingly, effective with the first quarter dividend payable on March 31,
2000, shareholders no longer had a dividend reinvestment option available.

12. 1994 SHARE OPTION AND INCENTIVE PLAN AND OTHER SHARE GRANTS

We adopted the 1994 Share Option and Incentive Plan to provide incentives
to officers, employees and non-employee trustees. The plan provides for the
grant of options to purchase a specified number of common shares or the grant
of restricted or unrestricted common shares . The total number of shares
reserved for issuance under the plan, as amended, is the greater of 2,953
shares or 9% of the total number of outstanding common shares and Units. At
December 31, 2000, the number of shares reserved for issuance was 2,953. The
number of common shares which may be issued as restricted or unrestricted
shares is equal to 50% of the number of shares available for issuance under the
plan at such time.

To date, options have been granted with an exercise price equal to the
fair value of Gables common shares on the dates the options were granted. The
options granted are generally exercisable in installments over three years,
beginning one year after the date of grant. At December 31, 2000, 1,794 common
shares are subject to outstanding options granted to Gables officers,
employees and trustees. These outstanding options have exercise prices ranging
from $19.125 to $27.625 and a weighted average remaining contractual life of
7.0 years at December 31, 2000.

A summary of the options activity for the years ended December 31, 2000,
1999 and 1998 is as follows:

|                                 |  |        |       |       |  |          |       |       |  |        |       |          |  |   |       |  |  |          |       |   |  |   |       | 
|-------------------------------- |  | ------ | ----- | ----- |  | -------- | ----- | ----- |  | ------ | ----- | -------- |  | - | ----- |  |  | -------- | ----- | - |  | - | ----- | 
|                                 |  | 2000   |       | 1999  |  | 1998    
|                                 |  |        |       |       |  |         
|                                 |  |        |       |       |  | Weighted |       |       |  |        |       | Weighted |  |   |       |  |  | Weighted
|                                 |  |        |       |       |  | Average  |       |       |  |        |       | Average  |  |   |       |  |  | Average 
|                                 |  |        |       |       |  | Exercise |       |       |  |        |       | Exercise |  |   |       |  |  | Exercise
|                                 |  | Shares |       | Price |  | Shares   |       | Price |  | Shares |       | Price   
|                                 |  |        |       |       |  |          |       |       |  |        |       |         
|Outstanding at
beginning of year |  |        | 2,051 |       |  | $        | 25.29 |       |  |        | 2,022 |          |  | $ | 25.39 |  |  |          | 937   |   |  | $ | 22.59 | 
|                                
|                                
|                                
|                                
|Granted                          |  |        | 20    |       |  |          | 24.50 |       |  |        | 210   |          |  |   | 23.88 |  |  |          | 1,305 |   |  |   | 27.01 | 
|                                
|                                
|                                
|                                
|Forfeited                        |  |        | (71   | )     |  |          | 26.45 |       |  |        | (125  | )        |  |   | 26.08 |  |  |          | (56   | ) |  |   | 25.63 | 
|                                
|                                
|                                
|                                
|Exercised                        |  |        | (206  | )     |  |          | 22.77 |       |  |        | (56   | )        |  |   | 21.96 |  |  |          | (164  | ) |  |   | 22.18 | 
|                                 |  |        |       |       |  |          |       |       |  |        |       |          |  |   |       |  |  |          |       |   |  |   |       | 
|Outstanding at
end of year       |  |        | 1,794 |       |  | $        | 25.52 |       |  |        | 2,051 |          |  | $ | 25.29 |  |  |          | 2,022 |   |  | $ | 25.39 | 
|                                 |  |        |       |       |  |          |       |       |  |        |       |          |  |   |       |  |  |          |       |   |  |   |       | 
|Exercisable at
end of year       |  |        | 1,129 |       |  | $        | 25.10 |       |  |        | 926   |          |  | $ | 24.06 |  |  |          | 608   |   |  | $ | 22.48 | 
|                                 |  |        |       |       |  |          |       |       |  |        |       |          |  |   |       |  |  |          |       |   |  |   |       | 

We account for stock options issued under the plan in accordance with APB
Opinion No. 25 Accounting for Stock Issued to Employees under which no
compensation cost has been recognized since all options have been granted with
an exercise price equal to the fair value of Gables common shares on the date
of grant. Had compensation cost for these plans been determined consistent
with Statement of Financial Accounting Standards No. 123 (SFAS 123) Accounting
for Stock-Based Compensation, our net income and earnings per share would have
been reduced to the following pro forma amounts:

60



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##### Table of Contents



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

---

|                                             |  |             |  |      |        |      |  |      |        |  |  |   |        | 
|-------------------------------------------- |  | ----------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                             |  |             |  | 2000 |        | 1999 |  | 1998
|                                             |  |             |  |      |        |      |  |     
|Net income available to
common shareholders: |  | As Reported |  | $    | 57,579 |      |  | $    | 42,601 |  |  | $ | 28,040 | 
|                                            
|                                            
|                                            
|                                            
|                                             |  | Pro Forma   |  |      | 56,943 |      |  |      | 41,906 |  |  |   | 27,607 | 
|                                            
|                                            
|                                            
|                                            
|Basic earnings per share:                    |  | As Reported |  | $    | 2.43   |      |  | $    | 1.64   |  |  | $ | 1.16   | 
|                                            
|                                            
|                                            
|                                            
|                                             |  | Pro Forma   |  |      | 2.40   |      |  |      | 1.61   |  |  |   | 1.14   | 
|                                            
|                                            
|                                            
|                                            
|Diluted earnings per share:                  |  | As Reported |  | $    | 2.43   |      |  | $    | 1.64   |  |  | $ | 1.16   | 
|                                            
|                                            
|                                            
|                                            
|                                             |  | Pro Forma   |  |      | 2.40   |      |  |      | 1.61   |  |  |   | 1.14   | 

Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.

The weighted average fair value of options granted is $2.62, $2.36 and
$1.92 for 2000, 1999 and 1998, respectively. The fair value of each option
grant as of the date of grant has been estimated using the Black-Scholes option
pricing model with the following weighted-average assumptions for grants in
2000, 1999 and 1998, respectively: risk free interest rates of 6.71%, 5.69% and
4.84%; expected lives of 5.83, 6.86 and 6.39; dividend yields of 9.27%, 8.88%
and 7.55%, and expected volatility of 25%, 25% and 18%.

We have made the following grants of restricted shares and unrestricted shares:

|      |  |              |    |            |  |           |    |                                      |  |   |         |  |  |                                                   
|----- |  | ------------ | -- | ---------- |  | --------- | -- | ------------------------------------ |  | - | ------- |  |  | --------------------------------------------------
|      |  | Unrestricted |    | Restricted |  | Per Share
|Grant |  | Shares       |    | Shares     |  | Grant    
|Date  |  | Granted      |    | Granted    |  | Value     |    | Vesting Period for Restricted Shares
|      |  |              |    |            |  |           |    |                                     
|2-97  |  |              | 23 |            |  |           | 46 |                                      |  | $ | 25.8750 |  |  | Two equal annual installments, beginning 1-1-98   
|     
|     
|     
|     
|2-98  |  |              | 13 |            |  |           | 40 |                                      |  |   | 26.6875 |  |  | Three equal annual installments, beginning 1-1-99 
|     
|     
|     
|     
|4-98  |  |              | 3  |            |  |           | 9  |                                      |  |   | 27.0625 |  |  | Three equal annual installments, beginning 4-1-99 
|     
|     
|     
|     
|2-99  |  |              | 11 |            |  |           | 34 |                                      |  |   | 23.2500 |  |  | Three equal annual installments, beginning 1-1-00 
|     
|     
|     
|     
|2-99  |  |              | 5  |            |  |           | 9  |                                      |  |   | 23.2500 |  |  | Two equal annual installments, beginning 1-1-00   
|     
|     
|     
|     
|4-99  |  |              | 9  |            |  |           | 19 |                                      |  |   | 21.9375 |  |  | Two equal annual installments, beginning 4-1-00   
|     
|     
|     
|     
|11-99 |  |              | 2  |            |  |           | 16 |                                      |  |   | 24.6250 |  |  | One installment, on 12-1-02                       
|     
|     
|     
|     
|1-00  |  |              | 12 |            |  |           | 36 |                                      |  |   | 22.6250 |  |  | Three equal annual installments, beginning 1-1-01 
|     
|     
|     
|     
|3-00  |  |              | 6  |            |  |           | 20 |                                      |  |   | 21.8750 |  |  | Three equal annual installments, beginning 1-1-01 
|     
|     
|     
|     
|3-00  |  |              | 3  |            |  |           | 5  |                                      |  |   | 21.8750 |  |  | Two equal annual installments, beginning 1-1-01   
|     
|     
|     
|     
|10-00 |  |              | 2  |            |  |           | 13 |                                      |  |   | 25.8125 |  |  | One installment, on 12-1-03                       
|     
|     
|     
|     
|2-01  |  |              | 12 |            |  |           | 36 |                                      |  |   | 27.3000 |  |  | Three equal annual installments, beginning 1-01-02
|     
|     
|     
|     
|2-01  |  |              | 1  |            |  |           | 2  |                                      |  |   | 27.3000 |  |  | Two equal annual installments, beginning 1-01-02  

All of the share grants have been made under the plan with the exception
of the February 2001 grants which were satisfied with shares acquired by us
pursuant to our common equity repurchase program.

The value of the unrestricted shares granted is accrued as long-term
compensation expense in the year the related service was provided. Upon
issuance of the share grants, the value of the shares issued is recorded to the
additional paid-in capital component of shareholders equity and the value of
the restricted shares is recorded to the deferred long-term compensation
component of shareholders equity. Such deferred compensation is amortized
ratably over the term of the vesting period.

13. SEVERANCE COSTS

During 1999, we incurred severance costs associated with organizational
changes resulting from management succession directives, including the
resignation of the former chairman and chief executive officer effective
January 1, 2000 and the resignation of the former chief operating officer effective May 21,
1999. The following is a summary of the activity that occurred during 1999 and
2000 with respect to severance costs:

61



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

---

|                                             |  |   |        |     
|-------------------------------------------- |  | - | ------ | ----
|Severance costs accrued at December 31, 1998 |  | $ |       |     
|                                            
|                                            
|                                            
|                                            
|Severance costs expensed in 1999             |  |   | 2,800  |     
|                                            
|                                            
|                                            
|                                            
|Severance costs paid in 1999                 |  |   | (1,440 | )(a)
|                                             |  |   |        |     
|Severance costs accrued at December 31, 1999 |  |   | 1,360  | (b) 
|                                            
|                                            
|                                            
|                                            
|Severance costs paid in 2000                 |  |   | (1,360 | )(a)
|                                             |  |   |        |     
|Severance costs accrued at December 31, 2000 |  | $ |       |     
|                                             |  |   |        |     



|(a) |  | Severance costs paid in 1999 and 2000 include $214 and $336,
respectively, of deferred compensation related to the accelerated vesting
of restricted shares unvested at the effective date of separation.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | The severance costs accrued at December 31, 1999 relate to the
resignation of the former chairman and chief executive officer and were
paid in 2000.                                                     

14. RELATED PARTY TRANSACTIONS

We provide management services to the joint ventures in which we have an
ownership interest and management fees recognized for such services were $886,
$347, and $225 for the years ended December 31, 2000, 1999, and 1998,
respectively. We also provide development and construction services to the
Gables Residential Apartment Portfolio JV and have recognized net development
revenues of $699 and $2,495 for the years ended December 31, 2000 and 1999,
respectively.

During the third quarter of 2000, we acquired an apartment community
located in Austin comprising 160 apartment homes from a partnership in which
our Chairman, President and Chief Executive Officer held a 15% limited
partnership interest. In consideration for such community, we paid $5.7
million in cash and assumed a $14.1 million secured fixed-rate note. The
purchase price and other terms of this transaction were negotiated at arms
length between us and representatives of the seller.

15. QUARTERLY FINANCIAL INFORMATION (Unaudited)

Quarterly financial information for the years ended December 31, 2000 and 1999
is as follows:

|                                            |  |                              |        |         |  |         |        |         |  |   |        |  |  |   |        | 
|------------------------------------------- |  | ---------------------------- | ------ | ------- |  | ------- | ------ | ------- |  | - | ------ |  |  | - | ------ | 
|                                            |  | Year Ended December 31, 2000
|                                            |  |                             
|                                            |  | First                        |        | Second  |  | Third   |        | Fourth 
|                                            |  | Quarter                      |        | Quarter |  | Quarter |        | Quarter
|                                            |  |                              |        |         |  |         |        |        
|Total revenues                              |  | $                            | 60,526 |         |  | $       | 60,633 |         |  | $ | 60,257 |  |  | $ | 60,677 | 
|                                           
|                                           
|                                           
|                                           
|Gain on sale of real estate assets          |  |                              |       |         |  |         |       |         |  |   | 19,310 |  |  |   | 10,157 | 
|                                           
|                                           
|                                           
|                                           
|Net income                                  |  |                              | 11,479 |         |  |         | 11,324 |         |  |   | 25,642 |  |  |   | 18,905 | 
|                                           
|                                           
|                                           
|                                           
|Net income available to common shareholders |  |                              | 9,036  |         |  |         | 8,882  |         |  |   | 23,199 |  |  |   | 16,462 | 
|                                           
|                                           
|                                           
|                                           
|Net income per common share  basic(a)      |  |                              | 0.37   |         |  |         | 0.37   |         |  |   | 1.00   |  |  |   | 0.71   | 
|                                           
|                                           
|                                           
|                                           
|Net income per common share  diluted(a)    |  |                              | 0.37   |         |  |         | 0.37   |         |  |   | 1.00   |  |  |   | 0.71   | 

62



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

---

|                                            |  |                              |        |         |  |         |        |         |  |   |        |  |  |   |        |  
|------------------------------------------- |  | ---------------------------- | ------ | ------- |  | ------- | ------ | ------- |  | - | ------ |  |  | - | ------ | -
|                                            |  | Year Ended December 31, 1999
|                                            |  |                             
|                                            |  | First                        |        | Second  |  | Third   |        | Fourth 
|                                            |  | Quarter                      |        | Quarter |  | Quarter |        | Quarter
|                                            |  |                              |        |         |  |         |        |        
|Total revenues                              |  | $                            | 60,641 |         |  | $       | 61,240 |         |  | $ | 62,860 |  |  | $ | 60,856 |  
|                                           
|                                           
|                                           
|                                           
|Gain on sale of real estate assets          |  |                              | 666    |         |  |         |       |         |  |   | 4,019  |  |  |   | 4,179  |  
|                                           
|                                           
|                                           
|                                           
|Severance costs                             |  |                              | (2,000 | )       |  |         |       |         |  |   |       |  |  |   | (800   | )
|                                           
|                                           
|                                           
|                                           
|Net income                                  |  |                              | 9,658  |         |  |         | 11,303 |         |  |   | 15,267 |  |  |   | 16,144 |  
|                                           
|                                           
|                                           
|                                           
|Net income available to common shareholders |  |                              | 7,215  |         |  |         | 8,861  |         |  |   | 12,825 |  |  |   | 13,700 |  
|                                           
|                                           
|                                           
|                                           
|Net income per common share  basic         |  |                              | 0.27   |         |  |         | 0.34   |         |  |   | 0.49   |  |  |   | 0.54   |  
|                                           
|                                           
|                                           
|                                           
|Net income per common share  diluted       |  |                              | 0.27   |         |  |         | 0.34   |         |  |   | 0.49   |  |  |   | 0.54   |  



|(a) |  | The total of the four quarterly amounts for net income per share does not
equal the net income per share for the year ended December 31, 2000. The
difference results from the use of a weighted average to compute the
number of shares outstanding for each quarter and for the year.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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##### Table of Contents



Schedule III

Gables Residential Trust
Real Estate Investments and Accumulated Depreciation as of December 31, 2000 (Dollars in Thousands)

|                                                           |                   |              |         |         |         |              |         |                |               |            |             |              |                            |        |         |               |         |          |          |          |                       |             |           |              |           |        |           |         |           |        |         |        |         |             |             |             |  |      |             |             |  |  | 
|---------------------------------------------------------- | ----------------- | ------------ | ------- | ------- | ------- | ------------ | ------- | -------------- | ------------- | ---------- | ----------- | ------------ | -------------------------- | ------ | ------- | ------------- | ------- | -------- | -------- | -------- | --------------------- | ----------- | --------- | ------------ | --------- | ------ | --------- | ------- | --------- | ------ | ------- | ------ | ------- | ----------- | ----------- | ----------- |  | ---- | ----------- | ----------- |  |  | 
|                                                           |                   |              |         |         |         |              |         |                |               |            |             |              |                            |        |         |               |         |          |          |          | Gross Amount at Which
|                                                           |                   |              |         |         |         |              |         |                | Initial Costs |            | Costs       |              | Carried at Close of Period |        |         |               |         |          | Year    
|                                                           |                   |              |         |         |         |              |         |                |               |            | Capitalized |              |                            |        |         |               |         |          | Original
|Property Type                                              |                   | Related      |         |         |         |              |         | Buildings and  |               | Subsequent |             |              |                            |        |         | Buildings and |         |          |          |          |                       | Accumulated |           | Construction |           | Year  
|and Location                                               |                   | Encumbrances |         | Land    |         | Improvements |         | To Acquisition |               | Land       |             | Improvements |                            | Total  |         | Depreciation  |         | Complete |          | Acquired
|                                                           |                   |              |         |         |         |              |         |                |               |            |             |              |                            |        |         |               |         |          |          |         
|                                                           |                   |              |         |         |         |              |         |                |               |            |             |              |                            |        |         |               |         |          |          |          |                       |             |           |              |           |        |           |         |           |        |         |        | (1)     |             |             |             |  |      | (2)        
|Completed Apartment Communities:                          
|                                                           | Boca Raton, FL    | $            | 135,850 |         |         | $            | 56,079  |                |               | $          | 302,171     |              |                            | $      | 12,111  |               |         | $        | 56,079   |          |                       | $           | 314,282   |              |           | $      | 370,361   |         |           | $      | 27,674  |        |         |             | 1984 - 1998 |             |  |      | 1998        |            
|                                                           | Atlanta, GA       |              |         | 100,687 |         |              |         | 62,033         |               |            |             | 86,145       |                            |        |         | 197,008       |         |          |          | 62,265   |                       |             |           | 282,921      |           |        |           | 345,186 |           |        |         | 56,111 |         |             |             | 1945 - 1998 |  |      |             | 1983 - 1997 | 
|                                                           | Houston, TX       |              |         | 80,402  |         |              |         | 52,729         |               |            |             | 161,241      |                            |        |         | 130,947       |         |          |          | 53,871   |                       |             |           | 291,046      |           |        |           | 344,917 |           |        |         | 57,278 |         |             |             | 1981 - 1998 |  |      |             | 1987 - 1998 | 
|                                                           | Austin, TX        |              |         | 14,090  |         |              |         | 12,388         |               |            |             | 49,878       |                            |        |         | 62,185        |         |          |          | 12,388   |                       |             |           | 112,063      |           |        |           | 124,451 |           |        |         | 12,131 |         |             |             | 1992 - 1998 |  |      |             | 1992 - 2000 | 
|                                                           | Dallas, TX        |              |         | 14,199  |         |              |         | 15,250         |               |            |             | 46,050       |                            |        |         | 55,661        |         |          |          | 15,251   |                       |             |           | 101,710      |           |        |           | 116,961 |           |        |         | 17,234 |         |             |             | 1985 - 1996 |  |      |             | 1993 - 1997 | 
|                                                           | Orlando/Tampa, FL |             |         |         |         | 5,712        |         |                |               |           |             |              |                            | 46,160 |         |               |         | 5,750    |          |          |                       | 46,122      |           |              |           | 51,872 |           |         |           | 3,535  |         |        |         | 1998 - 1999 |             |             |  | 1996 |            
|                                                           | Memphis, TN       |              |         | 10,167  |         |              |         | 1,865          |               |            |             |             |                            |        |         | 26,182        |         |          |          | 1,865    |                       |             |           | 26,182       |           |        |           | 28,047  |           |        |         | 9,761  |         |             |             | 1986        |  |      |             | 1985        | 
|                                                           | Nashville, TN     |              |         | 26,150  |         |              |         | 2,001          |               |            |             |             |                            |        |         | 26,152        |         |          |          | 2,001    |                       |             |           | 26,152       |           |        |           | 28,153  |           |        |         | 12,111 |         |             |             | 1987 - 1988 |  |      |             | 1985        | 
|                                                           |                   |              |         |         |         |              |         |                |               |            |             |              |                            |        |         |               |         |          |          |          |                       |             |           |              |           |        |           |         |           |        |         |        |         |             |             |             |  |      |            
|                                                           |                   | Total        |         | $       | 381,545 |              |         | $              | 208,057       |            |             | $            | 645,485                    |        |         | $             | 556,406 |          |          | $        | 209,470               |             |           | $            | 1,200,478 |        |           | $       | 1,409,948 |        |         | $      | 195,835 |            
|                                                           |                   |              |         |         |         |              |         |                |               |            |             |              |                            |        |         |               |         |          |          |          |                       |             |           |              |           |        |           |         |           |        |         |        |         |             |             |             |  |      |             |            
|Apartment Communities Under Construction
or In Lease Up:  
|                                                           | Orlando/Tampa, FL | $            |        |         |         | $            | 12,359  |                |               | $          |            |              |                            | $      | 58,433  |               |         | $        | 12,359   |          |                       | $           | 58,433    |              |           | $      | 70,792    |         |           | $      | 11      |        |         |             | n/a         |             |  |      | 1998 - 2000 |            
|                                                           | Dallas, TX        |              |        |         |         |              | 10,561  |                |               |            |            |              |                            |        | 22,331  |               |         |          | 10,561   |          |                       |             | 22,331    |              |           |        | 32,892    |         |           |        | 100     |        |         |             | n/a         |             |  |      | 1997        |            
|                                                           | Atlanta, GA       |              |        |         |         |              | 2,880   |                |               |            |            |              |                            |        | 10,199  |               |         |          | 2,880    |          |                       |             | 10,199    |              |           |        | 13,079    |         |           |        |        |        |         |             | n/a         |             |  |      | 1998        |            
|                                                           | Houston, TX       |              |        |         |         |              | 4,062   |                |               |            |            |              |                            |        | 2,122   |               |         |          | 4,062    |          |                       |             | 2,122     |              |           |        | 6,184     |         |           |        |        |        |         |             | n/a         |             |  |      | 1998        |            
|                                                           |                   | Total        |         | $       |        |              |         | $              | 29,862        |            |             | $            |                           |        |         | $             | 93,085  |          |          | $        | 29,862                |             |           | $            | 93,085    |        |           | $       | 122,947   |        |         | $      | 111     |            
|                                                           |                   |              |         |         |         |              |         |                |               |            |             |              |                            |        |         |               |         |          |          |          |                       |             |           |              |           |        |           |         |           |        |         |        |         |             |             |             |  |      |            
|Land Held for Future Development of Apartment Communities:
|                                                           | Dallas, TX        |              | $       |        |         |              | $       | 12,015         |               |            | $           |             |                            |        | $       |              |         |          | $        | 12,015   |                       |             | $         |             |           |        | $         | 12,015  |           |        | $       |       |         |             |             | n/a         |  |      |             | 1994 - 1999 | 
|                                                           | Boca Raton, FL    |              |        |         |         |              | 6,373   |                |               |            |            |              |                            |        |        |               |         |          | 6,373    |          |                       |             |          |              |           |        | 6,373     |         |           |        |        |        |         |             | n/a         |             |  |      | 2000        |            
|                                                           | Atlanta, GA       |              |         |        |         |              |         | 6,348          |               |            |             |             |                            |        |         |              |         |          |          | 6,348    |                       |             |           |             |           |        |           | 6,348   |           |        |         |       |         |             |             | n/a         |  |      |             | 1997 - 1998 | 
|                                                           | Houston, TX       |              |         |        |         |              |         | 3,789          |               |            |             |             |                            |        |         |              |         |          |          | 3,789    |                       |             |           |             |           |        |           | 3,789   |           |        |         |       |         |             |             | n/a         |  |      |             | 1998        | 
|                                                           | San Antonio, TX   |              |        |         |         |              | 1,192   |                |               |            |            |              |                            |        |        |               |         |          | 1,192    |          |                       |             |          |              |           |        | 1,192     |         |           |        |        |        |         |             | n/a         |             |  |      | 1994        |            
|                                                           | Memphis, TN       |              |         |        |         |              |         | 606            |               |            |             |             |                            |        |         |              |         |          |          | 606      |                       |             |           |             |           |        |           | 606     |           |        |         |       |         |             |             | n/a         |  |      |             | 1996        | 
|                                                           |                   | Total        |         |         | $       |             |         |                | $             | 30,323     |             |              | $                          |       |         |               | $       |         |          |          | $                     | 30,323      |           |              | $         |       |           |         | $         | 30,323 |         |        | $       |            |            
|                                                           |                   |              |         |         |         |              |         |                |               |            |             |              |                            |        |         |               |         |          |          |          |                       |             |           |              |           |        |           |         |           |        |         |        |         |             |             |             |  |      |             |            
|Grand Totals                                               |                   | $            | 381,545 |         |         | $            | 268,242 |                |               | $          | 645,485     |              |                            | $      | 649,491 |               |         | $        | 269,655  |          |                       | $           | 1,293,563 |              |           | $      | 1,563,218 | (3)     |           | $      | 195,946 |       
|                                                           |                   |              |         |         |         |              |         |                |               |            |             |              |                            |        |         |               |         |          |          |          |                       |             |           |              |           |        |           |         |           |        |         |        |         |             |             |             |  |      |             |            



|(1) |  | Depreciation of apartment communities is calculated on a straight-line basis
over an estimated useful life ranging from 19 to 40 years for buildings and
improvements and an estimated useful life ranging from 5 to 10 years for
furniture, fixtures, and equipment.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The year acquired represents the year we acquired a completed community or the
year we acquired the land for the development of an apartment community.                                                                                                              
|   
|(3) |  | Excludes our investment in joint ventures totaling $24,626.                                                                                                                                                                                                          

Schedule III

Gables Residential Trust
Real Estate Investments and Accumulated Depreciation as of December 31, 2000 (Dollars in Thousands)

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

|                                                                  |                                                                 |                                                                                                                |                 |        |                          |         |           |        |        |        |           |         |        |         | 
|----------------------------------------------------------------- | --------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | --------------- | ------ | ------------------------ | ------- | --------- | ------ | ------ | ------ | --------- | ------- | ------ | ------- | 
|                                                                  |                                                                 |                                                                                                                |                 |        | Years ended December 31,
|                                                                  |                                                                 |                                                                                                                |                 |        |                         
|                                                                  |                                                                 |                                                                                                                |                 |        | 2000                     |         | 1999      |        | 1998  
|                                                                  |                                                                 |                                                                                                                |                 |        |                          |         |           |        |       
|Real estate investments:                                         
|Balance, beginning of year                                        |                                                                 | $                                                                                                              | 1,565,913       |        |                          | $       | 1,681,961 |        |        | $      | 1,056,228 |        
|Additions:                                                       
|                                                                  | Acquisitions, including renovation expenditures                 |                                                                                                                |                 | 27,245 |                          |         |           | 7,660  |        |        |           | 462,237 |       
|                                                                  | Development costs incurred, including related land acquisitions |                                                                                                                |                 | 90,149 |                          |         |           | 41,829 |        |        |           | 155,541 |       
|                                                                  | Capital expenditures for completed communities                  |                                                                                                                |                 | 10,910 |                          |         |           | 10,037 |        |        |           | 7,955   |       
|                                                                  |                                                                 |                                                                                                                |                 |        |                          |         |           |        |        |        |           |        
|                                                                  |                                                                 |                                                                                                                | Total additions |        |                          | 128,304 |           |        |        | 59,526 |           |         |        | 625,733 | 
|Contribution to Gables Residential Apartment Portfolio JV         |                                                                 |                                                                                                                |                |        |                          |         | (76,280   | )      |        |        |          |        
|Sales                                                             |                                                                 |                                                                                                                | (130,999        | )      |                          |         | (99,294   | )      |        |        |          |        
|                                                                  |                                                                 |                                                                                                                |                 |        |                          |         |           |        |        |        |           |        
|Balance, end of year (1)                                          |                                                                 | $                                                                                                              | 1,563,218       |        |                          | $       | 1,565,913 |        |        | $      | 1,681,961 |        
|                                                                  |                                                                 |                                                                                                                |                 |        |                          |         |           |        |        |        |           |        
|Accumulated depreciation:                                        
|Balance, beginning of year                                        |                                                                 | $                                                                                                              | 172,247         |        |                          | $       | 138,239   |        |        | $      | 98,236    |        
|Depreciation                                                      |                                                                 |                                                                                                                | 43,745          |        |                          |         | 45,454    |        |        |        | 40,003    |        
|Sales                                                             |                                                                 |                                                                                                                | (20,046         | )      |                          |         | (11,446   | )      |        |        |          |        
|                                                                  |                                                                 |                                                                                                                |                 |        |                          |         |           |        |        |        |           |        
|Balance, end of year                                              |                                                                 | $                                                                                                              | 195,946         |        |                          | $       | 172,247   |        |        | $      | 138,239   |        
|                                                                  |                                                                 |                                                                                                                |                 |        |                          |         |           |        |        |        |           |        
|Reconciliation of depreciation above to statements of operations:
|Depreciation in rollforward of accumulated depreciation above     |                                                                 | $                                                                                                              | 43,745          |        |                          | $       | 45,454    |        |        | $      | 40,003    |        
|Amortization of prepaid land lease payments (2)                   |                                                                 |                                                                                                                | 84              |        |                          |         | 84        |        |        |        | 84        |        
|                                                                  |                                                                 |                                                                                                                |                 |        |                          |         |           |        |        |        |           |        
|                                                                  |                                                                 | Real estate asset depreciation and amortization expense reflected
in the accompanying statements of operations |                 | $      | 43,829                   |         |           | $      | 45,538 |        |           | $       | 40,087 |        
|                                                                  |                                                                 |                                                                                                                |                 |        |                          |         |           |        |        |        |           |        



|(1) |  | Excludes our investment in joint ventures totaling $24,626, $23,471, and $161 for
the years ended December 31, 2000, 1999, and 1998, respectively.                                                                                                                
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | We have leased two parcels of land pursuant to long-term land lease agreements which
required the lease payments to be made upfront. The prepaid lease payments, net of
accumulated amortization, are included in other assets in the accompanying balance
sheets.

64