<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549
                                   FORM 10-K
(Mark One)

[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
                                       OR
[_]  Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934
     For the transition period from             to               .

                        Commission File Number 1-10272
                          ARCHSTONE COMMUNITIES TRUST
            (Exact Name of Registrant as Specified in Its Charter)

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

                     7670 South Chester Street, Suite 100
                           Englewood, Colorado 80112
             (Address of principal executive offices and zip code)

                                (303) 708-5959
             (Registrant's telephone number, including area code)

       Securities registered pursuant to Section 12(b) of the Act:  None

<TABLE>
<CAPTION>
                                                                                  Name of each exchange on
                          Title of each class                                         which registered
                          -------------------                                     ------------------------
<S>                                                                             <C>
          Common Shares of Beneficial Interest, par value $1.00 per share         New York Stock Exchange
          Cumulative Convertible Series A Preferred Shares of
             Beneficial Interest, par value $1.00 per share                       New York Stock Exchange
          Series B Cumulative Redeemable Preferred Shares of
             Beneficial Interest, par value $1.00 per share                       New York Stock Exchange
          Series C Cumulative Redeemable Preferred Shares of
             Beneficial Interest, par value $1.00 per share                       New York Stock Exchange
          Series D Cumulative Redeemable Preferred Shares of
             Beneficial Interest, par value $1.00 per share                       New York Stock Exchange
          Preferred Share Purchase Rights                                         New York Stock Exchange
</TABLE>

       Securities registered pursuant to Section 12(g) of the Act:  None

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

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

     Based on the closing price of the registrant's Common Shares on February
28, 2001, the aggregate market value of the voting common equity held by non-
affiliates of the registrant was approximately $2,936,240,000.

     At February 28, 2001, there were approximately 120,642,000 of the
registrant's Common Shares outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant's definitive proxy statement for the 2001 annual
meeting of its shareholders are incorporated by reference in Part III of this
report.

================================================================================
<PAGE>

                               Table of Contents

<TABLE>
<CAPTION>
Item                                              Description                                    Page
----                                              -----------                                    ----
<S>                                                                                              <C>
                                                PART I
        Glossary...............................................................................    1
 1.     Business...............................................................................    3
            Archstone Communities Trust........................................................    3
            Trustees and Officers of Archstone.................................................    7
            Employees..........................................................................   10
            Insurance..........................................................................   10
            Risk Factors.......................................................................   11
 2.     Properties.............................................................................   14
            Geographic Distribution............................................................   14
            Real Estate Portfolio..............................................................   15
 3.     Legal Proceedings......................................................................   17
 4.     Submission of Matters to a Vote of Security Holders....................................   17

                                                PART II

 5.     Market for the Registrant's Common Equity and Related Stockholder Matters..............   17
 6.     Selected Financial Data................................................................   19
 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations..   20
            Results of Operations..............................................................   21
            Liquidity and Capital Resources....................................................   23
7A.     Quantitative and Qualitative Disclosures About Market Risk.............................   27
 8.     Financial Statements and Supplementary Data............................................   28
 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...   28

                                               PART III

10.     Trustees and Executive Officers of the Registrant......................................   28
11.     Executive Compensation.................................................................   28
12.     Security Ownership of Certain Beneficial Owners and Management.........................   28
13.     Certain Relationships and Related Transactions.........................................   28

                                                PART IV

14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K........................   28
</TABLE>

<PAGE>

                                    GLOSSARY

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

<TABLE>
<CAPTION>
       Abbreviation, Acronym or Defined Term                                Definition/Description
---------------------------------------------------     ---------------------------------------------------------------
<S>                                                     <C>
Ameriton...........................................     Ameriton Properties Incorporated, a Maryland corporation,
                                                        which engages in the opportunistic acquisition, development
                                                        and eventual disposition of real estate with a shorter-term
                                                        investment horizon.

Annual Report......................................     This Annual Report on Form 10-K filed with the Securities and
                                                        Exchange Commission for the fiscal year ended December 31,
                                                        2000.

APB................................................     Accounting Principles Board.

Archstone..........................................     Archstone Communities Trust.  Unless indicated otherwise,
                                                        financial information and references throughout this document
                                                        are labeled, "Archstone" for periods before and after the
                                                        Atlantic Merger (when the name of the company was changed).

Atlantic Merger....................................     In July 1998, Security Capital Atlantic Incorporated was
                                                        merged with and into Security Capital Pacific Trust.  The
                                                        combined company has continued its existence under the name
                                                        Archstone Communities Trust and is traded on the NYSE under
                                                        the symbol "ASN."

Board..............................................     Archstone's Board of Trustees.

Common Share(s)....................................     Archstone common shares of beneficial interest par value $1.00
                                                        per share.

FIIB...............................................     First Islamic Investment Bank, E.C., a corporation organized
                                                        under the laws of the State of Bahrain.

Funds From Operations..............................     Net earnings computed in accordance with GAAP, excluding real
                                                        estate depreciation, gains (or losses) on dispositions of
                                                        depreciated real estate, provisions for possible losses on
                                                        depreciated real estate and items defined as "extraordinary"
                                                        under GAAP.  Funds From Operations has been an industry-wide
                                                        standard used to measure operating performance of a REIT since
                                                        its adoption by NAREIT in 1991.  Funds From Operations should
                                                        not be considered as an alternative to net earnings or any
                                                        other GAAP measurement of performance or as an alternative to
                                                        cash flow from operating, investing or financing activities as
                                                        a measure of liquidity.  The Funds From Operations measure
                                                        presented by Archstone, while consistent with NAREIT's
                                                        definition, will not be comparable to similarly titled
                                                        measures of other REITs that do not compute Funds From
                                                        Operations in a manner consistent with Archstone.

GAAP...............................................     Accounting principles generally accepted in the United States
                                                        of America.

Homestead..........................................     Homestead Village Incorporated, which is an owner, operator
                                                        and developer of extended-stay lodging facilities throughout
                                                        the United States.

In Planning........................................     Parcels of land owned or Under Control upon which construction
                                                        of apartments is expected to commence within 36 months.
</TABLE>

                                       1
<PAGE>

<TABLE>
<CAPTION>
Abbreviation, Acronym or Defined Term                                       Definition/Description
---------------------------------------------------     ---------------------------------------------------------------
<S>                                                     <C>
Lease-Up...........................................     The phase during which newly constructed apartment units are
                                                        being leased for the first time, but prior to the community
                                                        becoming Stabilized.

LIBOR..............................................     London Interbank Offered Rate.

Long-Term Unsecured Debt...........................     Collectively, Archstone's long-term unsecured senior notes
                                                        payable and tax-exempt unsecured bonds.

NAREIT.............................................     National Association of Real Estate Investment Trusts.

Net Operating Income...............................     Represents the difference between rental revenues and the sum
                                                        of rental expenses and real estate taxes.

Outside Trustees...................................     Independent members of Archstone's Board of Trustees.

Preferred Shares...................................     Collectively, the Series A Convertible Preferred Shares,
                                                        Series B Preferred Shares, Series C Preferred Shares and
                                                        Series D Preferred Shares.

REIT...............................................     Real estate investment trust.

Same-Store.........................................     The term used to refer to the group of operating communities
                                                        that were fully operating during the entire time relating to
                                                        two periods being compared.

Security Capital...................................     Security Capital Group Incorporated.

Series A Convertible Preferred Shares..............     Archstone Series A Cumulative Convertible Preferred Shares of
                                                        Beneficial Interest, par value $1.00 per share.

Series B Preferred Shares..........................     Archstone Series B Cumulative Redeemable Preferred Shares of
                                                        Beneficial Interest par value $1.00 per share.  These shares
                                                        are not convertible.

Series C Preferred Shares..........................     Archstone Series C Cumulative Redeemable Preferred Shares of
                                                        Beneficial Interest, par value $1.00 per share.  These shares
                                                        are not convertible.

Series D Preferred Shares..........................     Archstone Series D Cumulative Redeemable Preferred Shares of
                                                        Beneficial Interest, par value $1.00 per share.  These shares
                                                        are not convertible.

SFAS...............................................     Statement of Financial Accounting Standards.

Stabilized.........................................     The classification assigned to an apartment community that has
                                                        achieved 93% occupancy at market rents, and for which the
                                                        redevelopment, new management and new marketing programs (or
                                                        development and marketing in the case of a newly developed
                                                        community) have been completed.  The stabilization process
                                                        takes up to 12 months except for major redevelopments, which
                                                        could take longer.

Total Expected Investment..........................     For development communities, represents the total expected
                                                        investment at completion; for operating communities,
                                                        represents the total expected investment plus planned capital
                                                        expenditures.

Under Control......................................     Land parcels which Archstone does not own, yet has an
                                                        exclusive right (through contingent contract or letter of
                                                        intent) during a contractually agreed upon time period to
                                                        acquire for the future development of apartment communities,
                                                        subject to approval of contingencies during the due diligence
                                                        process. There can be no assurance that any such land will be
                                                        acquired.
</TABLE>

                                       2
<PAGE>

                                    PART I


Item 1.  Business

Archstone Communities Trust

     Archstone Communities Trust (NYSE: ASN) is a leading real estate operating
company focused on the operation, development, redevelopment, acquisition and
long-term ownership of apartment communities in protected markets throughout the
United States.  As of December 31, 2000, our portfolio comprised 229 communities
representing 70,685 units, including 8,176 units in our development pipeline, in
markets that represent 31 of the nation's 50 largest metropolitan markets.

Our principal focus is to maximize shareholder value by:

 .    Owning apartment communities in markets with limited land for new apartment
     construction, strong employment growth and expensive single-family homes;

 .    Generating long-term sustainable growth in cash flow from operations;

 .    Creating significant incremental value through the development of new
     apartment communities;

 .    Disposing of assets that no longer meet our investment objectives in an
     effort to maximize long-term value creation, and redeploying that capital
     into investments in protected markets; and

 .    Leveraging technology and innovation to strengthen our brand position and
     reputation for operational leadership.

     As of December 31, 2000, investments in our largest markets (including
operating communities and communities under construction and In Planning) were
as follows:

<TABLE>
<CAPTION>
                                                                                 Total Expected
                                                                                 Investment at
                                                                                  December 31,
                                                                                      2000                Percentage of
                                  Market                                         (In millions)           Total Portfolio
          --------------------------------------------------------------       --------------------      ---------------
          <S>                                                                  <C>                       <C>
          Southern California...........................................                   $1,086.4           18.5%
          San Francisco Bay area........................................                      680.3           11.6
          Greater Washington, D.C. metropolitan area....................                      492.7            8.4
          Seattle.......................................................                      321.4            5.5
          Atlanta.......................................................                      318.2            5.4
          Denver........................................................                      305.1            5.2
          Boston........................................................                      273.9            4.7
          Southeast Florida.............................................                      260.1            4.4
</TABLE>

2000 Accomplishments

     Operations and Investments

 .    Archstone achieved record Same-Store revenue growth of 6.7% over the prior
year. Our California markets--where approximately $1.8 billion, or 30%, of our
capital is invested--produced Same-Store revenue growth in excess of 10.6%. The
greater Washington, D.C. metropolitan area--where $492.7 million, or 8.4%, of
our capital is invested--produced Same-Store revenue growth of 12.9%.

 .    Net Operating Income for our Same-Store communities increased 7.7% over
1999, driven principally by Same-Store Net Operating Income growth of 18.1% in
the greater Washington, D.C. metropolitan area, 13.4% in California and 5.7% in
Atlanta.

 .    As of December 31, 2000, we had $475.2 million of communities under
construction in some of the nation's most desirable markets, including the
greater New York City metropolitan area, the San Francisco Bay area, San Diego
and the greater Washington, D.C. metropolitan area.

                                      3
<PAGE>

 .    Twenty-two development communities achieved Stabilization in markets that
include Boston, the greater Washington, D.C. metropolitan area, San Diego,
Denver and Seattle, representing a Total Expected Investment of $648.3 million
and adding a total of 7,094 units to Archstone's operating portfolio. These
communities exceeded budgeted Lease-Up absorption levels by an average of 15.7%
at rental rates 7.4% ahead of budget.

 .    We dramatically strengthened our overall presence in protected markets. For
example, in the greater Northeast we now have more than $476.5 million in
investments, representing 11 communities, totaling 2,893 units, either
operating, under construction or In Planning at year-end 2000.

 .    We completed the disposition of $793.2 million of communities in non-core
markets. Proceeds were redeployed into acquisitions and development communities
in protected markets, and were also used to repurchase our outstanding Common
Shares.

 Strategic Operating Initiatives

 .    In conjunction with Manugistics, Inc. (NASDAQ: MANU), a global leader in
pricing and revenue management products and services, we developed Lease Rent
Optimizer(TM) (LRO), the first revenue management tool created for the apartment
industry. LRO is currently being piloted at communities in Denver, Atlanta and
Austin, and enables us to more precisely forecast and analyze market demand and
availability to optimize pricing for our apartments, thereby maximizing
revenues. LRO is expected to be rolled out portfolio-wide by the end of 2001,
and is expected to positively impact Archstone's revenue growth beginning in
2002.

 .    We are developing Online Lease (OLL), an Internet-based application that
allows prospective Archstone residents to view an apartment, check real-time
pricing and availability, obtain credit approval, submit a deposit and complete
a lease transaction, all online. OLL is currently in beta testing at several
Archstone communities in Denver, with full portfolio implementation expected by
year-end 2001. OLL will interface with Lease Rent Optimizer(TM) to ensure that
optimal pricing is achieved on every lease executed.

 Financial

 .    On November 22, 2000, we filed a Form S-3 with the SEC relating to the
registration of all of the Common Shares owned at that time by Security Capital.
On February 28, 2001, Security Capital sold 29.5 million Common Shares under
this registration statement in an underwritten offering at a price of $23.30 per
share ($22.08 per share after underwriting discounts). Concurrent with this
sale, Archstone repurchased 2.3 million Common Shares from Security Capital at
$22.08 per share, which is the same net price per share received by Security
Capital in the offering. The repurchase of shares was funded using proceeds from
borrowings under our unsecured credit facilities. We expect to repay these
borrowings with proceeds from dispositions. As a result of these transactions,
Security Capital liquidated its entire investment in Archstone's Common Shares
and is no longer entitled to Board representation or any other special rights
previously associated with its investment. Both of Security Capital's designees
to the Board, C. Ronald Blankenship and John T. Kelley III, resigned concurrent
with the closing of the transactions.

 .    In July 2000, we completed a transaction to repurchase approximately 17.5
million of our Common Shares held by Security Capital (NYSE: SCZ) in exchange
for Homestead mortgage notes with a face amount of $221.3 million and cash of
$178.7 million. After giving effect to this transaction and the February 2001
repurchase transaction noted above, we have repurchased a total of $555 million
of Common Shares since February 1999, representing 25.9 million total shares
(18.1% of our outstanding Common Shares) at an average price of $21.45 per
share. See Note 4 of Archstone's audited financial statements in this Annual
Report for additional information on this transaction.

 .    In December 2000, we closed a $580 million unsecured revolving line of
credit, replacing our previous line, which was scheduled to mature in 2001. We
retained our attractive pricing level of 65 basis points over LIBOR on the new
line. The three-year facility was oversubscribed by a syndicate of 16 banks and
matures in December 2003, with an option in our favor for a one-year extension.

 .    We paid dividends of $1.54 per Common Share, a 4.1% increase over Common
Share dividends paid in 1999. The dividend declared in the fourth quarter of
2000 and paid on February 28, 2001 marks the company's 100th consecutive
quarter of Common Share dividend payments. We also announced our anticipated
2001 dividend level of $1.64 per share, a 6.5% increase over the 2000 level.
Including the announced increase, our annual dividend per share has increased
156% since 1991.

                                       4
<PAGE>

Investment Strategy

     We use our extensive research to identify investment opportunities we
believe will produce total returns in excess of our long-term cost of capital.
We believe our long-term cost of equity capital is 13% - 14%, which, when
combined with current long-term debt rates, gives us a weighted average long-
term cost of capital of approximately 10.5% - 11%. We only make an investment
when we believe the anticipated total return, which includes the initial
expected yield plus expected long-term value creation through continued growth
in Net Operating Income, is projected to exceed our long-term cost of capital.

     To maximize the return on our invested capital, we utilize a sophisticated
capital allocation strategy. Examples of this include redeploying disposition
proceeds into investments in protected markets and the repurchase of our
outstanding Common Shares. We believe that by executing this sophisticated
capital allocation strategy and intelligently managing our capital with a focus
on long-term growth rather than short-term accretion, we will solidify our
position as a company with long-term investments concentrated in markets and
sub-markets with strong economic fundamentals and significant supply
constraints.

     We focus our investment activities on markets characterized by: (i) high
barriers to entry against new supply; (ii) expensive single-family home prices;
and (iii) strong economic fundamentals.

     Barriers to entry exist in protected markets where there is a very limited
amount of land zoned for apartment development and where local municipalities
are reluctant to zone additional land for apartment communities.  Examples of
protected markets include the greater Washington, D.C. metropolitan area, Los
Angeles, San Diego, the San Francisco Bay area, Seattle, Chicago, Boston, and
the greater New York City metropolitan area--all markets where we continue to
establish a long-term strategic presence.  We believe that the consistent growth
in demand and limited competition typical of protected markets maximizes our
ability to produce sustainable long-term cash flow growth.

     Our disciplined investment strategy is executed through four internal
capabilities: (i) development; (ii) dispositions and capital redeployment; (iii)
acquisitions; and (iv) redevelopment.

     1.   Development.  We place considerable emphasis on the value created
through the development of new apartment communities. At December 31, 2000, we
had $475.2 million of development communities under construction, with 62.8%, or
$298.5 million, of this amount already funded. In 2000, we completed $550.5
million of new development communities, representing 5,422 units, in markets
that include the greater Washington D.C. metropolitan area, Boston, San Diego
and the San Francisco Bay area.

     In 2000, 22 development communities achieved Stabilization in markets that
include Boston, the greater Washington, D.C. metropolitan area, San Diego,
Denver and Seattle, representing a Total Expected Investment of $648.3 million
and adding a total of 7,094 units to our operating portfolio.  These communities
exceeded budgeted Lease-Up absorption levels by an average of 15.7% at rental
rates 7.4% ahead of budget.

     We believe that our locally-based development infrastructure creates a
significant competitive advantage for Archstone, allowing us to identify and
complete very attractive investment opportunities in protected markets.  As
such, we expect our development capability to continue to be a key contributor
to growth and to create significant value as communities are completed and
stabilized at attractive yields during the next several years.

     2.   Dispositions and Capital Redeployment. We continue to pursue favorable
opportunities to dispose of assets that no longer meet our long-term investment
criteria, and redeploy the proceeds into new investments with more attractive
long-term growth prospects. We have disposed of more than $2.4 billion of assets
since the inception of our capital redeployment program in January 1996,
generating aggregate gains of $309.8 million and producing an average annual
unleveraged rate of return during the holding period of approximately 13%.

     During 2000, we disposed of $793.2 million of communities in non-core
markets, and completely exited Birmingham, El Paso, Tucson and Jacksonville.
Since 1996, we have exited a total of 14 non-core markets and significantly
reduced our presence in Atlanta, Las Vegas, San Antonio, Dallas, Houston and
Phoenix.

     Our disposition proceeds were primarily redeployed into investments in
high-growth, supply-constrained metropolitan markets with strong economies--
including the San Francisco Bay area, Southern California, the greater
Washington, D.C. metropolitan area and the greater Northeast--allowing us to
further concentrate our portfolio in these protected markets. From January 1,
1998 through December 31, 2000, our aggregate dispositions have exceeded
acquisitions by $720.6 million.

                                       5
<PAGE>

     3.   Acquisitions.  Since 1992, we have completed more than $3.1 billion in
acquisitions. In 2000, we acquired $360.5 million of operating communities,
representing a total of 2,640 units, which were funded principally with
disposition proceeds through tax-deferred exchanges. We focus our acquisition
activity on assets in highly desirable residential locations with minimal
competition and strong, long-term growth prospects. Our locally-based
acquisition infrastructure often allows us to identify attractive opportunities
before they are made available to the general market.

     4.   Redevelopment.  Our redevelopment strategy is to reposition well-
located assets through the intelligent deployment of capital into renovations
including upgrades to interiors, exteriors, leasing offices, landscaping and
amenities. In addition, we have invested in revenue-enhancing capital
expenditures such as building garages/carports and additional storage
facilities, and also expense-reducing expenditures such as water sub-metering
systems and xeriscaping.

Customer-focused Operations

      We are dedicated to maximizing our communities' performance by providing
our customers with a high-quality living environment and a unique service
offering backed by unconditional guarantees in a consistent manner across our
national portfolio. We actively pursue the ongoing development of innovative
ideas, best practices from other industries and programs and services designed
to enhance the customer experience. Building relationships between Archstone and
our customers is the foundation of the Archstone brand--which we believe
improves our potential for long-term cash-flow growth.

      To enhance profitability and improve our customer relationships, we have
focused on the following initiatives:

      . We launched Lease Rent Optimizer(TM), the industry's first revenue
        management software program that will allow us to better analyze and
        forecast customer demand to optimize pricing for our apartments.

      . We are developing Online Lease, an Internet-based application that will
        allow prospective residents to fully transact a lease online--another
        industry first.

      . We were the first company in the apartment industry to launch
        SafeRent(SM) Applicant Screening, an Internet-based credit scoring model
        that approves customer applications in less than 30 seconds-a dramatic
        improvement compared to the industry standard of 24 to 48 hours, which
        improved customer satisfaction. In 2000, we achieved $500,000 in
        estimated annual savings and substantially improved the accuracy and
        efficiency of our resident screening practices by using this technology.

      . We implemented the Archstone Seal of Service(SM) guarantees which
        emulate successful customer service programs from industries with
        prominent brands to create customer loyalty and trust while establishing
        the service benchmark for the apartment industry. This program features
        five unconditional service guarantees, which have contributed positively
        to the company's customer-focused operations. For example, through the
        Archstone Relocation Guarantee, the company transferred approximately
        2,600 residents to other Archstone communities throughout the country in
        2000--representing a 13% increase over 1999, allowing the company to
        retain an estimated $23.5 million in rental revenues

      . We launched three web-enabled accounting products--ArchPay, ArchPlan and
        ArchCard--that significantly reduce paper flow and enhance internal cost
        control. ArchPay is a web-enabled accounts payable system that automates
        vendor payment and provides properties across Archstone's national
        portfolio with immediate access to cost and budget detail. ArchPay is
        expected to produce annual savings of $500,000. ArchPlan is our web-
        enabled budget and forecasting tool that allows application of global
        assumptions, automated consolidation and mass-change capabilities to
        facilitate financial communication and review. ArchCard is a web-enabled
        purchase card (P-Card) reporting system that lowers accounts payable
        processing costs, while reducing paper flow and labor expense.

      . We continue to be an industry leader in generating Net Operating Income
        from our operating communities through utility reimbursements,
        telecommunications and other customer services. Utility reimbursements
        were $177 per unit in 2000--an increase of 33% over 1999 and
        telecommunications and cable revenues were $48 per unit in 2000, a 34%
        increase over 1999.

                                       6
<PAGE>

Conservative Balance Sheet Management

     We are committed to preserving our strong balance sheet in order to enhance
financial flexibility.  Our investment-grade debt ratings from Standard & Poor's
(BBB+), Moody's Investors Service (Baa1) and Fitch, Inc. (A-) are indicative of
our solid financial position.  It should be noted that a rating is not a
recommendation to buy, sell or hold securities and may be revised or withdrawn
at any time.

     One of Archstone's primary financial objectives is to structure our balance
sheet in order to have access to capital when others in the industry do not.  We
believe that careful balance sheet management will allow us to take advantage of
compelling investment opportunities that are more likely to emerge in a capital-
constrained environment.

     During 2000, we financed our investment activity primarily through
internally-generated cash flow from operations and asset dispositions. We are
focused on ensuring that we do not face liquidity issues in any given quarter or
year. In December 2000, we closed a $580 million unsecured revolving line of
credit, replacing our previous line, which was scheduled to mature in 2001. We
retained our attractive pricing level of 65 basis points over LIBOR on the new
line. The three-year facility, which was oversubscribed by a syndicate of 16
banks, matures in December 2003 and includes an option in our favor for a one-
year extension.

     In addition, we have a $100 million short-term, unsecured borrowing
agreement that enhances our cash management flexibility. We had a total of
$386.3 million of undrawn capacity on our short-term credit facilities as of
February 28, 2001.

     Our long-term debt is structured to create a relatively level principal
maturity schedule, without significant repayment obligations in any year. We
have only $80.9 million of long-term debt maturing in 2001 and $104.2 million
maturing in 2002. In addition, we have $3.4 billion of unencumbered assets and a
significant equity base, with a total equity market capitalization of $3.6
billion as of December 31, 2000.

Management Depth and Succession Planning

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

Trustees and Officers of Archstone

     In July 1998, the name of the company was changed to Archstone Communities
Trust. References throughout this section are labeled "Archstone" for the post-
merger period as a result of this name change. Pre-merger periods will be
referenced as follows: (i) as "Archstone" for individuals who were associated
with Security Capital Pacific Trust and/or its management companies and (ii) as
"Atlantic" for individuals who were associated with Security Capital Atlantic
Incorporated and/or its management companies. See Note 9 of Archstone's audited
financial statements in this Annual Report for additional information on the
Atlantic Merger.

 Trustees of Archstone

     James A. Cardwell-69-Trustee of Archstone since May 1980; Chief Executive
Officer of Petro Stopping Centers, L.P. (operation of full-service truck
stopping centers) and its predecessor since 1975; and Director of El Paso
Electric Company.

     Ned S. Holmes-56-Trustee of Archstone since July 1998; Director of Atlantic
from May 1994 to July 1998; President and Chief Executive Officer of Laing
Properties, Inc. since May 1990; Chairman and President of Parkway
Investments/Texas Inc., a Houston-based real estate investment and development
company which specializes in residential (apartment and townhouse), commercial
(office and warehouse) and subdivision projects since April 1984; Director of
Heritage Bank and Commercial Bancshares, Inc.; Chairman of P&O Ports North
America, Inc., Chairman Emeritus of the Port Commission of the Port of Houston
Authority; Director of the Institute of International Education and the Houston
International Protocol Alliance; and a Director of Greater Houston Partnership.

                                       7
<PAGE>

     James H. Polk, III-58-Trustee of Archstone since January 1976; Managing
Director, SING LTD. Co. (operation and ownership of self-storage facilities)
since January 1998; Partner, Rust Capital Group, Austin, Texas (venture capital
investments) since June 2000; Managing Director of Security Capital Markets
Group Incorporated from August 1992 to June 1997 and President from March 1997
to June 1997; affiliated with Archstone from January 1976 to June 1997 in
various capacities, including Trustee, President and Chief Executive Officer;
past President and Trustee of the National Association of Real Estate Investment
Trusts, Inc.; Director, M.D. Anderson Hospital, Houston, Texas.

     John M. Richman-73-Trustee of Archstone since July 1998; Director of
Atlantic from September 1996 to July 1998; Counsel to the law firm of Wachtell,
Lipton, Rosen & Katz from January 1990 to October 1996 and from April 1997 to
present; former Chairman and CEO of Kraft Foods; Director, Evanston Northwestern
Healthcare, Chicago Council on Foreign Relations and Lyric Opera of Chicago;
Life Trustee of the Chicago Symphony Orchestra and Northwestern University;
retired Director of R.R. Donnelley & Sons Company and served as Acting Chairman
and Chief Executive Officer of that company from October 1996 to April 1997;
retired Director of BankAmerica Corporation, Bank of America National Trust and
Savings Association; and USX Corporation.

     John C. Schweitzer-56-Trustee of Archstone since April 1976; Director of
Homestead since April 1997; Director of Regency Realty Corporation since March
1999; Trustee of Pacific Retail Trust from June 1997 to February 1999;
President, Westgate Corporation (real estate and investments) since 1976;
Managing Partner, Campbell Capital Ltd. (real estate and investments) since
1976; Trustee of Texas Christian University; Director of Chase Bank of Texas-
Austin and KLRU Public Television, Austin, Texas.

     R. Scot Sellers-44-Trustee of Archstone since July 1998; Chairman and Chief
Executive Officer of Archstone since December 1998, where he has overall
responsibility for Archstone's strategic direction, investments and operations;
Co-Chairman and Chief Investment Officer of Archstone from July 1998 to December
1998; President and Chief Executive Officer of Archstone from June 1997 to July
1998; from September 1994 to June 1997, Managing Director of Archstone, where he
had overall responsibility for Archstone's investment strategy and
implementation; Senior Vice President of Archstone from May 1994 to September
1994; from April 1993 to May 1994, Senior Vice President of Security Capital,
where he was responsible for portfolio acquisitions from institutional sources.
Mr. Sellers is a member of the Board of Governors of NAREIT and is also a member
of the Executive Committee of the Board of Directors of the National Multi
Housing Council.

 Senior Officers of Archstone

     Our senior officers are:

<TABLE>
<CAPTION>
Name                               Title
----                               -----
<S>                                <C>
R. Scot Sellers...............     Chairman and Chief Executive Officer
Charles E. Mueller, Jr........     Chief Financial Officer
Richard A. Banks..............     Managing Director - West Region
J. Lindsay Freeman............     Managing Director - East Region
Richard W. Dickason...........     Senior Vice President - Northeast Investments
Daniel E. Amedro..............     Chief Information Officer
Dana K. Hamilton..............     Senior Vice President - National Operations
Caroline Brower...............     Senior Vice President - General Counsel and
                                   Secretary
William Kell..................     Senior Vice President - Controller
</TABLE>

 Biographies of Senior Officers

     R. Scot Sellers-44-See "Trustees of Archstone" above.

     Charles E. Mueller, Jr.-37-Chief Financial Officer of Archstone since
December 1998, where he is responsible for corporate finance,
accounting/reporting and investor relations; Vice President of Archstone from
September 1996 to December 1998; prior thereto, he was with Security Capital
Markets Group, where he provided financial services to Security Capital and its
affiliates.

                                       8
<PAGE>

     Richard A. Banks-53-Managing Director of Archstone since December 1997,
where he is responsible for investments and operations in the West Region;
Senior Vice President of Archstone from August 1997 to December 1997; from
January 1995 to August 1997, President and Chief Executive Officer of Lincoln
Residential Services, where he was responsible for all aspects of leading a full
service property management company of approximately 40,000 apartment units in
the western United States; from July 1993 to January 1995, Vice President of
Lincoln Property Company, Irvine, California, with responsibility for overall
management for the region.

     J. Lindsay Freeman-55-Managing Director of Archstone since July 1998, where
he is responsible for investments and operations in the East Region; Managing
Director of Atlantic from December 1997 to July 1998; Senior Vice President of
Atlantic from May 1994 to November 1997; previously, Senior Vice President and
Operating Partner of Lincoln Property Company in Atlanta, Georgia, where he was
responsible for acquisitions, financing, construction and management of
apartment communities within the Atlantic region and oversaw operations of
16,000 apartment units.

     Richard W. Dickason-44-Senior Vice President of Archstone since October
1997, where he has overall responsibility for investment activities in the
northeastern United States; Vice President of Archstone from December 1993 to
October 1997. Prior thereto, Partner and Vice President of Lincoln Property
Company N.C., Inc., where he was responsible for the acquisition, development,
construction and management of a 4,000 unit multifamily residential portfolio in
California.

     Daniel E. Amedro-44-Chief Information Officer of Archstone since March 1998
and Senior Vice President since January 1999. From September 1996 to March 1998,
Vice President of Information Services for American Medical Response, the
largest private ambulance operation in the United States; Vice President of
Information Services for Hyatt Hotels and Resorts from March 1981 to September
1996, where he was responsible for all strategic information systems including,
Spirit, Hyatt's worldwide reservation system, which supported over 50,000 users
and was recognized as the leading reservations system in the hospitality
industry.

     Dana K. Hamilton-32-Senior Vice President of Archstone since December 1998
where she is responsible for corporate services, including human resources,
training and development, marketing and corporate communications and new
business development. Vice President from December 1996 to December 1998,
responsible for new product development and revenue enhancement through
portfolio-wide initiatives. Prior thereto she focused on national operations.

     Caroline Brower-52-Senior Vice President, General Counsel and Secretary of
Archstone since September 1999, where she provides legal and corporate
governance services. Ms. Brower was Executive Director and Senior Vice President
of Ameriton from September 1998 to September 1999. Prior thereto, Ms. Brower was
a partner of Mayer, Brown & Platt, where she practiced transaction and real
estate law.

     William Kell-44-Senior Vice President and Controller of Archstone since
July 1998, where he is responsible for accounting and financial reporting;
Senior Vice President and Controller of Atlantic from December 1997 to July
1998; Vice President and Controller of Atlantic from January 1996 to December
1997; from June 1991 to December 1995, Vice President and Controller of
Archstone, where he had overall responsibility for accounting and financial
reporting.

                                       9
<PAGE>

Employees

     Archstone currently employs approximately 2,000 individuals, of which
approximately 1,600 are focused on the site-level operation of our apartment
communities. The balance are professionals who manage corporate and regional
operations, including our investment program, property operations, financial
reporting and other support functions. We consider our relationship with
employees to be good. Archstone's employees are not represented by a collective
bargaining agreement.

Insurance

     Archstone carries comprehensive general liability coverage on our owned
communities, with limits of liability customary within the industry to insure
against liability claims and related defense costs. Similarly, we are insured
against the risk of direct physical damage in amounts necessary to reimburse the
company on a replacement cost basis for costs incurred to repair or rebuild each
property, including loss of rental income during the reconstruction period.
Archstone's blanket property policy for all operating and development
communities includes coverage for the perils of flood and earthquake shock. The
earthquake deductible is 5% of the insurance value of the communities affected
subject to a minimum of $250,000 and a maximum of $10 million.

                                      10
<PAGE>

Risk Factors

     The following factors could affect our future financial performance:

 We depend on our key personnel

     Our success depends on our ability to attract and retain the services of
executive officers, senior officers and company managers.  There is substantial
competition for qualified personnel in the real estate industry and the loss of
several of our key personnel could have an adverse effect on us.

 Debt financing could adversely affect our performance

     We are subject to risks associated with debt financing and preferred
equity. These risks include the risks that we will not have sufficient cash flow
from operations to meet required payments of principal and interest or to pay
distributions on our securities at expected rates, that we will be unable to
refinance current or future indebtedness, that the terms of any refinancing will
not be as favorable as the terms of existing indebtedness, and that we will be
unable to make necessary investments in new business initiatives due to lack of
available funds. Increases in interest rates could increase interest expense,
which would adversely affect net earnings and cash available for payment of
obligations. If we are unable to make required payments on indebtedness that is
secured by a mortgage on our property, the asset may be transferred to the
mortgagee with a consequent loss of income and value to us.

     Additionally, our debt agreements contain customary covenants which, among
other things, restrict our ability to incur additional indebtedness and, in
certain instances, restrict our ability to engage in material asset sales,
mergers, consolidations and acquisitions. These debt agreements also require us
to maintain various financial ratios. Failure to comply with these covenants
could result in a requirement to repay the indebtedness prior to its maturity,
which could have an adverse effect on our operations and ability to make
distributions to shareholders.

     Some of our debt instruments bear interest at variable rates. Increases in
interest rates would increase our interest expense under these instruments and
would increase the cost of refinancing these instruments and issuing new debt.
As a result, higher interest rates would adversely affect cash flow and our
ability to service our indebtedness.

     As of December 31, 2000, we had $2.5 billion in total debt outstanding, of
which $875.8 million was secured by real estate assets and $495.8 million was
subject to variable interest rates, including $193.7 million outstanding on our
short-term credit facilities.

 We may not have access to equity capital

     Since mid-1998 and continuing into 2001, the real estate industry has
experienced a reduced supply of favorably-priced public equity capital, which
has generally decreased the level of new investment activity by publicly-traded
real estate companies.  A prolonged period in which real estate operating
companies cannot effectively access the public equity markets may result in
heavier reliance on alternative financing sources to undertake new investment
activities.

 We are subject to risks inherent in ownership of real estate

     Real estate cash flows and values are affected by a number of factors,
including changes in the general economic climate, local, regional or national
conditions (such as an oversupply of communities or a reduction in rental demand
in a specific area), the quality and philosophy of management, competition from
other available properties and the ability to provide adequate property
maintenance and insurance and to control operating costs. Real estate cash flows
and values are also affected by such factors as government regulations,
including zoning, usage and tax laws, interest rate levels, the availability of
financing, property tax rates, utility expenses, potential liability under
environmental and other laws and changes in environmental and other laws.
Although we seek to minimize these risks through our market research and
property management capabilities, they cannot be totally eliminated.

                                      11
<PAGE>

 We are subject to risks inherent in real estate development

     We have developed or commenced development on a substantial number of
apartment communities and expect to develop additional apartment communities in
the future. Real estate development involves risks in addition to those involved
in the ownership and operation of established communities, including the risks
that financing, if needed, may not be available on favorable terms, construction
may not be completed on schedule, contractors may default, estimates of the
costs of developing apartment communities may prove to be inaccurate and
communities may not be leased or rented on profitable terms or in the time frame
anticipated. Timely construction may be affected by local weather conditions,
local or national strikes and local or national shortages in materials, building
supplies or energy and fuel for equipment. These risks may cause the development
project to fail to perform as expected.

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

     Equity real estate investments are relatively illiquid, which may tend to
limit our ability to react promptly to changes in economic or other market
conditions. Our ability to dispose of assets in the future will depend on
prevailing economic and market conditions.

 We may suffer losses on our technology investments

     We have several investments in technology-related companies, including
investments in BroadbandNOW!, SafeRent, Inc. and Manugistics Group, Inc.
(NASDAQ: MANU), which represented an aggregate investment of $13 million at
December 31, 2000. The largest single investment is $7 million in BroadbandNOW!.
The broader technology sector, including the sectors in which our investees
operate, is currently suffering from a decreased supply of capital and depressed
market valuation. The inability of these companies to raise capital at a
satisfactory price in the near term could impair their ability to fund immediate
obligations, including working capital requirements, and could result in the
failure of those companies. In the event that our investments in technology
companies are deemed to be partially or fully impaired, the resulting write-down
of our investment would have a negative impact on our net earnings and could
adversely affect the price of our Common Shares.

 We are subject to the Americans with Disabilities Act

     Our communities must comply with Title III of the Americans with
Disabilities Act to the extent that such communities are or contain "public
accommodations" and/or "commercial facilities" as defined by the Act. The Act
does not consider apartment communities to be public accommodations or
commercial facilities, except for portions of such facilities which are open to
the public, such as the leasing office. Noncompliance could result in imposition
of fines or an award of damages to private litigants. We believe our communities
comply with all present requirements under the Act and applicable state laws.

 Compliance with environmental regulations may be costly

     We must comply with certain environmental and health and safety laws and
regulations related to the ownership, operation, development and acquisition of
apartments. Under those laws and regulations, we may be liable for, among other
things, the costs of removal or remediation of certain hazardous substances,
including asbestos-related liability. Those laws and regulations often impose
liability without regard to fault.

     As part of our due diligence procedures, we have conducted Phase I
environmental assessments on each of our communities prior to acquisition;
however, we cannot give any assurance that those assessments have revealed all
potential liabilities.  We are not aware of any environmental condition on any
of our real estate investments which is likely to have a material adverse effect
on our financial position or results of operations; however, we cannot give any
assurance that any such condition does not exist or may not arise in the future.

 Changes in laws may result in increased cost

     We may not be able to pass on increased costs resulting from increases in
real estate taxes, income taxes or other governmental requirements directly to
our residents. Substantial increases in rents, as a result of those increased
costs, may affect the ability of a resident to pay rent, causing increased
vacancy. Changes in laws increasing potential liability for environmental
conditions or increasing the restrictions on discharges or other environmental
conditions may result in significant unanticipated expenditures.

                                      12
<PAGE>

 Our failure to qualify as a REIT would have adverse consequences to our
shareholders

     We believe that we have qualified for taxation as a REIT under the Internal
Revenue Code and plan to continue to meet the requirements for taxation as a
REIT. We cannot, however, guarantee that we have qualified or will continue to
qualify in the future as a REIT. We cannot give any assurance that new
legislation, regulations, administrative interpretations or court decisions will
not significantly change the requirements relating to our qualification. If we
fail to qualify as a REIT, we would be subject to federal income tax at regular
corporate rates. Also, unless the Internal Revenue Service granted us relief, we
would remain disqualified as a REIT for four years following the year in which
we failed to qualify. In the event that we failed to qualify as a real estate
investment trust, we would be required to pay significant income taxes and would
have less money available for our operations and distributions to shareholders.
This would likely have a significant adverse effect on the value of our
securities.

     In order to maintain our qualification as a REIT under the Internal Revenue
Code, our declaration of trust limits the ownership of our shares by any person
or group of related persons to 9.8%, unless special approval is granted by the
Board.

 We are subject to losses that may not be covered by insurance

     There are certain types of losses (such as from war) which may be
uninsurable or not economically insurable. Additionally, many of our communities
in California are located in the general vicinity of active earthquake fault
lines. Although we maintain insurance to cover most reasonably likely risks,
including earthquakes, if an uninsured loss or a loss in excess of insured
limits occurs, we could lose both our invested capital in, and anticipated
profits from, one or more communities. We would also be required to continue to
repay mortgage indebtedness or other obligations related to such communities.
Any such loss could materially adversely affect our business, financial
condition and results of operations.

 We have a concentration of investments in certain markets

     As shown in "Item 2. Geographic Distribution", approximately 18.5% of our
apartment communities which are operating, under construction or In Planning
were in Southern California as of December 31, 2000. Southern California is the
geographic area comprised of the Los Angeles, Inland Empire, Orange County, San
Diego and Ventura County markets. Additionally, approximately 11.6% of our
apartment communities which are operating, under construction or In Planning
were in the San Francisco Bay area of California. We are, therefore, subject to
increased exposure (positive or negative) to economic and other competitive
factors specific to protected markets within these geographic areas.

 Our business is subject to extensive competition

     There are numerous commercial developers, real estate companies and other
owners of real estate that we compete with in seeking land for development,
apartment communities for acquisition and disposition and residents for
apartment communities. All of our apartment communities are located in developed
areas that include other apartment communities. The number of competitive
apartment communities in a particular area could have a material adverse effect
on our ability to lease units and on the rents charged. In addition, single-
family homes and other residential properties provide housing alternatives to
residents and potential residents of our apartment communities.

                                      13
<PAGE>

Item 2.  Properties

Geographic Distribution

     Archstone's apartment communities are located in markets that include 31 of
the nation's 50 largest metropolitan markets. The following table summarizes the
geographic distribution of our apartment communities at December 31, based on
Total Expected Investment:

<TABLE>
<CAPTION>
                                                                                                              Operating
                                                                        Total Portfolio(1)                   Communities
                                                         ----------------------------------------------     -------------
                                                             2000             1999             1998              2000
                                                         ------------    -------------    -------------     -------------
<S>                                                      <C>             <C>              <C>              <C>
East Region:
  Atlanta, Georgia...................................        5.41%            7.27%            8.34%             6.74%
  Austin, Texas......................................        1.83             2.55             2.19              1.61
  Boston, Massachusetts..............................        4.65             1.88             0.35              5.18
  Charlotte, North Carolina..........................        2.02             2.89             3.86              1.85
  Chicago, Illinois..................................        1.80             1.50                -              2.25
  Dallas, Texas......................................        1.66             1.70             1.94              2.07
  Denver, Colorado...................................        5.18             3.67             2.96              4.23
  Houston, Texas.....................................        2.13             2.50             2.71              2.65
  Minneapolis, Minnesota.............................        0.96             0.96             0.23              1.18
  Nashville, Tennessee...............................        1.08             1.54             1.75              1.34
  Greater New York City metropolitan area............        3.44             1.34             0.46                 -
  Orlando, Florida...................................        1.14             1.12             1.31              1.42
  Raleigh, North Carolina............................        4.01             4.20             5.21              5.00
  Richmond, Virginia.................................        1.17             2.28             2.69              1.23
  San Antonio, Texas.................................        1.35             2.25             2.25              1.69
  Southeast Florida..................................        4.42             5.12             5.23              4.65
  Greater Washington, D.C. metropolitan area.........        8.37             7.02             5.41              6.70
  West Coast Florida.................................        1.45             1.72             1.85              1.80
  Other..............................................        0.42             1.94             4.53              0.52
                                                         ------------    -------------    -------------    --------------
     East Region Total...............................       52.49            53.45            53.27             52.11
                                                         ------------    -------------    -------------    --------------
West Region:
  Albuquerque, New Mexico............................        1.80             2.05             2.31              2.24
  Las Vegas, Nevada..................................        1.19             1.47             1.43              1.49
  Phoenix, Arizona...................................        3.93             5.60             5.84              4.39
  Portland, Oregon...................................        1.74             1.72             2.10              2.18
  Salt Lake City, Utah...............................        2.48             3.03             3.84              3.09
  San Francisco Bay area, California.................       11.56             9.49             9.76             12.24
  Seattle Washington.................................        5.46             5.80             6.44              6.56
  Southern California................................       18.46            16.20            13.84             14.59
  Other..............................................        0.89             1.19             1.17              1.11
                                                         ------------    -------------    -------------    --------------
     West Region Total...............................       47.51            46.55            46.73             47.89
                                                         ------------    -------------    -------------    --------------
       Total All Markets.............................      100.00%          100.00%          100.00%           100.00%
                                                         ============    =============    =============    ==============
</TABLE>

(1)  Includes operating communities and communities under construction and In
     Planning.

                                      14
<PAGE>

Real Estate Portfolio

     The information in the following table is as of December 31, 2000 (dollar
amounts in thousands). Additional information on the company's real estate
portfolio is contained in "Schedule III, Real Estate and Accumulated
Depreciation," and in Archstone's audited financial statements contained in this
Annual Report.

<TABLE>
<CAPTION>
                                                                                           Total
                                                   Number of     Number     Archstone     Expected    Percentage
                                                  Communities   of Units    Investment   Investment   Leased(1)
                                                  -----------   ---------   ----------   ----------   ----------
<S>                                               <C>           <C>         <C>          <C>          <C>
OPERATING APARTMENT COMMUNITIES:
East Region:
  Atlanta, Georgia.............................       14           4,595    $  313,868   $  318,216      98.00%
  Austin, Texas................................        5           1,574        75,198       75,933      97.97
  Boston, Massachusetts........................        7           1,595       237,477      244,393      99.50
  Charlotte, North Carolina....................        5           1,240        86,944       87,467      95.56
  Chicago, Illinois............................        4           1,119       104,365      106,067      95.62
  Dallas, Texas................................        6           1,616        96,970       97,558      96.78
  Denver, Colorado.............................       11           3,075       197,817      199,563      97.63
  Houston, Texas...............................        5           2,436       124,452      125,314      95.94
  Minneapolis, Minnesota.......................        3             718        54,770       56,015      96.52
  Nashville, Tennessee.........................        4           1,185        62,991       63,416      94.18
  Orlando, Florida.............................        4             984        65,856       66,879      96.14
  Raleigh, North Carolina......................       12           3,378       234,057      236,029      97.10
  Richmond, Virginia...........................        2             712        57,949       58,007      97.05
  San Antonio, Texas...........................        7           1,757        76,922       79,648      95.33
  Southeast Florida............................       11           3,071       215,753      219,234      98.50
  Greater Washington, D.C. metropolitan area...       11           3,346       305,186      316,199      98.55
  West Coast Florida...........................        7           1,405        82,683       85,093      97.01
  Other........................................        2             410        24,584       24,651      97.32
                                                  -----------   ---------   ----------   ----------   ----------
     East Region Subtotal/Average..............      120          34,216    $2,417,842   $2,459,682      97.25%
                                                  -----------   ---------   ----------   ----------   ----------
West Region:
  Albuquerque, New Mexico......................        7           2,063    $  104,095   $  105,822      95.06%
  Las Vegas, Nevada............................        2           1,304        69,696       70,294      93.63
  Phoenix, Arizona.............................        8           3,740       204,993      207,408      96.47
  Portland, Oregon.............................        6           1,597       101,304      102,666      97.75
  Salt Lake City, Utah.........................        9           2,458       145,886      146,064      97.27
  San Francisco Bay area, California...........       13           4,730       569,834      577,840      94.08
  Seattle, Washington..........................       10           3,762       302,786      309,397      95.91
  Southern California..........................       25           7,907       682,744      688,426      96.75
  Other........................................        2             732        52,095       52,160      95.49
                                                  -----------   ---------   ----------   ----------   ----------
     West Region Subtotal/Average..............       82          28,293    $2,233,433   $2,260,077      95.96%
                                                  -----------   ---------   ----------   ----------   ----------
       Operating Apartment
          Communities Subtotal/Average.........      202          62,509    $4,651,275   $4,719,759      96.66%
                                                  -----------   ---------   ----------   ----------   ----------
</TABLE>

                                      15
<PAGE>

<TABLE>
<CAPTION>
                                                                                                   Total
                                                      Number of      Number      Archstone        Expected        Percentage
                                                     Communities    of Units    Investment      Investment        Leased (1)
                                                     -----------    --------    ----------      ----------        ----------
<S>                                                  <C>            <C>          <C>            <C>               <C>
APARTMENT COMMUNITIES UNDER
CONSTRUCTION (4):
East Region:
  Austin, Texas.................................           1            448     $   31,405      $   31,669           85.49%
  Charlotte, North Carolina.....................           1            404         28,051          31,398           73.27
  Greater New York City metropolitan area.......           1            160         11,629          30,773             N/A
  Richmond, Virginia............................           1            144          5,637          11,021             N/A
  Southeast Florida.............................           1            408         28,009          30,722           60.29
  Greater Washington, D.C metropolitan area.....           1            531         12,700          65,141             N/A
                                                     -----------    --------    ----------      ----------       ----------
     East Region Subtotal/Average...............           6          2,095     $  117,431      $  200,724           44.15%
                                                     -----------    --------    ----------      ----------       ----------
West Region:
  Phoenix, Arizona..............................           1            336     $   18,010      $   23,680           23.21%
  San Francisco Bay area, California............           1            412         57,255          69,581           10.44
  Southern California...........................           3          1,264        105,823         181,185           18.51
                                                     -----------    --------    ----------      ----------       ----------
     West Region Subtotal/Average...............           5          2,012     $  181,088      $  274,446           17.64%
                                                     -----------    --------    ----------      ----------       ----------
        Apartment Communities Under
           Construction Subtotal/Average........          11          4,107     $  298,519      $  475,170           31.17%
                                                     -----------    --------    ----------      ----------       ==========

APARTMENT COMMUNITIES IN
PLANNING AND OWNED:
  East Region...................................           5          1,216     $   30,472      $  191,389
  West Region...................................           3            686         45,190         149,785
                                                     -----------    --------    ----------      ----------
        Apartment Communities In
           Planning and Owned
           Subtotal/Average.....................           8          1,902     $   75,662      $  341,174
                                                     -----------    --------    ----------      ----------
             Total Apartment Communities
               Owned at December 31, 2000                221         68,518     $5,025,456      $5,536,103
                                                     -----------    --------    ----------      ----------

OTHER REAL ESTATE ASSETS (2)....................                          -     $   10,584               -
                                                                    --------    ----------      ----------
HOTEL ASSET.....................................                          -     $   22,870      $   22,870
                                                                    --------    ----------      ----------
             Total Real Estate
               Owned at December 31, 2000.......                     68,518     $5,058,910      $5,558,973
                                                                    ========    ==========      ==========

APARTMENT COMMUNITIES IN PLANNING AND UNDER                         Expected      Total
CONTROL(3):                                                          Number      Expected
                                                                    of Units    Investment
                                                                   ---------    ----------
  East Region...................................                     1,458       $236,973
  West Region...................................                       709        111,897
                                                                     -----       --------
             Total Apartment Communities
               In Planning and Under Control....                     2,167       $348,870
                                                                     =====       ========
</TABLE>

(1)  Represents percentage leased as of December 31, 2000.  For communities in
     Lease-Up, the percentage leased is based on leased units divided by total
     number of units in the community (completed and under construction) as of
     December 31, 2000.  A "N/A" indicates markets with communities under
     construction where Lease-Up has not yet commenced.
(2)  Includes land that is not In Planning and a non-multifamily property held
     for sale.
(3)  As of December 31, 2000, our actual investment in communities In Planning
     and Under Control was $5.9 million, which is reflected in the "Other
     assets" caption of Archstone's Balance Sheet.
(4)  See Exhibit 99.1 in this Annual Report for more detailed information on
     apartment communities under construction.

                                      16

<PAGE>

Item 3. Legal Proceedings

     Archstone is a party to various claims and routine litigation arising in
the ordinary course of business. We do not believe that the results of any such
claims and litigation, individually or in the aggregate, will have a material
adverse effect on Archstone's business, financial position or results of
operations.

Item 4. Submission of Matters to a Vote of Security Holders

     Not applicable.

                                    PART II

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

     The Common Shares are listed on the NYSE under the symbol "ASN." The
following table sets forth the high and low sales prices of the Common Shares,
as reported on the NYSE Composite Tape, and cash distributions per Common Share
for the periods indicated:

<TABLE>
<CAPTION>
                                                           High       Low       Cash Distributions
                                                         -------    -------     ------------------
     <S>                                                   <C>          <C>      <C>
     1999:
        First Quarter..................................  $20.938    $19.188           $0.370
        Second Quarter.................................   23.500     19.625            0.370
        Third Quarter..................................   22.313     19.313            0.370
        Fourth Quarter.................................   21.688     18.938            0.370
     2000:
        First Quarter..................................  $20.625    $19.250           $0.385
        Second Quarter.................................   24.188     19.813            0.385
        Third Quarter..................................   26.438     21.250            0.385
        Fourth Quarter.................................   26.563     21.875            0.385
     2001:
        First Quarter (through February 28, 2001)......  $26.250    $23.000           $0.410
</TABLE>

     As of February 28, 2000, Archstone had approximately 120,642,000 Common
Shares outstanding, approximately 3,200 record holders of Common Shares and
approximately 18,900 beneficial holders of Common Shares.

     To qualify as a REIT, we are required to make annual shareholder
distributions of 90% (95% for taxable years ending prior to January 1, 2001) of
our taxable income. The payment of distributions is also subject to the
discretion of the Board and is dependent upon our strategy, financial condition
and operating results. Our long-term objective is to increase annual
distributions per Common Share while maximizing the amount of internally
generated cash flow from operations to fund future investment opportunities.

     We announce the following year's projected annual distribution level after
the Board's annual budget review and approval in December of each year. At its
December 2000 Board meeting, the Board announced an anticipated increase in the
annual distribution level from $1.54 to $1.64 per Common Share and declared the
first quarter 2001 distribution of $0.41 per Common Share. Archstone paid its
100th consecutive quarterly Common Share dividend on February 28, 2001, to
shareholders of record on February 14, 2001.

     We are restricted from declaring or paying any distribution with respect to
our Common Shares unless all cumulative distributions with respect to the
Preferred Shares have been paid and sufficient funds have been set aside for
Preferred Share distributions that have been declared. All of our declared
distributions have been paid on schedule.

                                      17
<PAGE>

     For federal income tax purposes, distributions may consist of ordinary
income, capital gains, non-taxable return of capital or a combination thereof.
Distributions that exceed our current and accumulated earnings and profits
constitute a return of capital rather than a dividend and reduce the
shareholder's basis in the Common Shares. To the extent that a distribution
exceeds both current and accumulated earnings and profits and the shareholder's
basis in the Common Shares, it will generally be treated as a gain from the sale
or exchange of that shareholder's Common Shares. We notify our shareholders
annually of the taxability of distributions paid during the preceding year. The
following table summarizes the taxability of cash distributions paid on the
Common Shares in 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                  2000                  1999                  1998
                                                            ---------------       ---------------       ---------------
           <S>                                              <C>                   <C>                   <C>
           Per Common Share:
             Ordinary income.........................       $          1.05       $          1.26       $          1.29
             Capital gains...........................                  0.49                  0.10                  0.10
             Return of capital.......................                     -                  0.12                     -
                                                            ---------------       ---------------       ---------------
                Total................................       $          1.54       $          1.48       $          1.39
                                                            ===============       ===============       ===============
</TABLE>

     For federal income tax purposes, the following summaries reflect the
taxability of dividends paid on the Series A, Series B, Series C and Series D
Preferred Shares, respectively:

<TABLE>
<CAPTION>
                                                                 2000                  1999                  1998
                                                            ---------------       ---------------       ---------------
           <S>                                              <C>                   <C>                   <C>
           Per Series A Convertible Preferred Share:
             Ordinary income.........................       $          1.41       $          1.83       $          1.72
             Capital gains...........................                  0.66                  0.16                  0.15
                                                            ---------------       ---------------       ---------------
                Total................................       $          2.07       $          1.99       $          1.87
                                                            ===============       ===============       ===============
           Per Series B Preferred Share:
             Ordinary income.........................       $          1.53       $          2.07       $          2.07
             Capital gains...........................                  0.72                  0.18                  0.18
                                                            ---------------       ---------------       ---------------
                Total................................       $          2.25       $          2.25       $          2.25
                                                            ===============       ===============       ===============

<CAPTION>
                                                                  2000                  1999                 1998(1)
                                                            ---------------       ---------------       ---------------
           <S>                                              <C>                   <C>                   <C>
           Per Series C Preferred Share:
             Ordinary income.........................       $          1.47       $          1.99       $          0.99
             Capital gains...........................                  0.69                  0.17                  0.09
                                                            ---------------       ---------------       ---------------
                Total................................       $          2.16       $          2.16       $          1.08
                                                            ===============       ===============       ===============
</TABLE>

          (1)  Represents dividends paid by Archstone in 1998 subsequent to the
               Atlantic Merger.

<TABLE>
<CAPTION>
                                                                                      Date of
                                                                                    Issuance to
                                                                 2000                12/31/99
                                                            ---------------       ---------------
          <S>                                               <C>                   <C>
          Per Series D Preferred Share:
             Ordinary income.........................       $          1.49       $          0.81
             Capital gains...........................                  0.70                  0.07
                                                            ---------------       ---------------
                Total................................       $          2.19       $          0.88
                                                            ===============       ===============
</TABLE>

  Our tax return for the year ended December 31, 2000 has not been filed, and
the taxability information for 2000 is based upon the best available data we
have.  Archstone's tax returns for prior years have not been examined by the
Internal Revenue Service and, therefore, the taxability of the dividends may be
subject to change.

                                      18
<PAGE>

Item 6. Selected Financial Data

     The following table provides selected financial data relating to
Archstone's historical financial condition and results of operations as of and
for each of the years ending December 31, 1996 to 2000. This data is qualified
in its entirety by, and should be read in conjunction with, "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes that have been
included or incorporated by reference in this Annual Report (in thousands,
except per share data).

<TABLE>
<CAPTION>
                                                                                     Year Ended December 31,
                                                        -------------------------------------------------------------------------
                                                            2000           1999           1998             1997           1996
                                                        -----------   -------------    ----------       ----------     ----------
<S>                                                     <C>           <C>              <C>              <C>            <C>
Operations Summary:
Total revenues........................................   $  723,234      $  667,022    $  513,645       $  355,662     $  326,246
Property operating expenses...........................      225,608         217,527       173,760          123,051        128,122
Net Operating Income..................................      462,936         420,281       310,779          212,009        193,924
Interest expense......................................      145,173         121,494        83,350           61,153         35,288
General and administrative expense....................       23,157          22,156        16,092           18,350         23,268
Nonrecurring expenses (1).............................            -               -         2,193           71,707              -
Earnings from operations (1)..........................      176,466         169,339       134,571           24,686         94,089
Gains on dispositions of depreciated real estate, net.       93,071          62,093        65,531           48,232         37,492
Preferred Share cash dividends paid...................       25,340          23,733        20,938           19,384         24,167
Net earnings attributable to Common Shares:
   - Basic............................................      236,045         204,526       177,022           53,534        106,544
   - Diluted..........................................      244,625         204,526       186,999           53,534        121,261
Common Share cash distributions paid..................   $  201,257      $  208,018    $  165,190       $  105,547     $   90,728
Per Share Data:
Net earnings attributable to Common Shares:
     Basic (1)........................................   $     1.79      $     1.46    $     1.49       $     0.65     $     1.46
     Diluted (1)......................................         1.78            1.46          1.49             0.65           1.44
Common Share cash distributions paid..................         1.54            1.48          1.39             1.30           1.24
Series A Convertible Preferred Share cash
 dividends paid.......................................         2.07            1.99          1.87             1.75           1.75
Series B Preferred Share cash dividends paid..........         2.25            2.25          2.25             2.25           2.25
Series C Preferred Share cash dividends paid..........         2.16            2.16          1.08                -              -
Series D Preferred Share cash dividends paid..........   $     2.19      $     0.88    $        -       $        -     $        -
Weighted average Common Shares outstanding - Basic....      131,874         139,801       118,592           81,870         73,057
Weighted average Common Shares outstanding - Diluted..      137,730         139,829       125,825           81,908         84,340

<CAPTION>
                                                                                     December 31,
                                                        -------------------------------------------------------------------------
                                                            2000           1999           1998             1997           1996
                                                        -----------   -------------    ----------       ----------     ----------
<S>                                                     <C>           <C>              <C>              <C>            <C>
Financial Position:
Real estate owned, at cost............................   $5,058,910      $5,086,486    $4,771,315       $2,567,599     $2,133,207
Investments in and advances to unconsolidated real
 estate entities......................................      229,012         130,845        98,486           37,320         20,156
Mortgage notes receivable, net........................          124         210,357       211,967          285,238        189,829
Total assets..........................................    5,019,697       5,302,437     5,059,898        2,805,686      2,282,432
Unsecured credit facilities...........................      193,719         493,536       264,651          231,500        110,200
Long-Term Unsecured Debt..............................    1,401,262       1,276,572     1,231,167          630,000        580,000
Mortgages payable.....................................      875,804         694,948       676,613          265,652        217,188
Total liabilities.....................................    2,674,754       2,679,628     2,410,114        1,265,250      1,014,924
Redeemable preferred shares...........................      286,856         297,635       272,515          240,210        267,374
Shareholders' equity..................................   $2,251,606      $2,567,506    $2,628,325       $1,540,436     $1,267,508
Number of Common Shares outstanding...................      122,838         139,008       143,313           92,634         75,511
</TABLE>


(1)  Non-recurring expenses in 1998 include $1.1 million in transaction
     integration costs associated with the Atlantic Merger and $1.1 million
     associated with the introduction of Archstone's national branding strategy.
     Both are included within the "other expense" category in Archstone's
     Statement of Earnings for 1998. In 1997, the non-recurring expense
     represents the impact of a one-time, non-cash charge of $71.7 million
     associated with the costs incurred in acquiring Archstone's REIT and
     property management companies from Security Capital.

                                       19
<PAGE>

<TABLE>
<CAPTION>
                                                                                     Year Ended December 31,
                                                        -------------------------------------------------------------------------
                                                            2000           1999           1998             1997           1996
                                                        -----------   -------------    ----------       ----------     ----------
<S>                                                     <C>           <C>              <C>              <C>            <C>
Other Data:
Cash Flows:
Net cash provided by operating activities.....          $  322,320       $  296,010    $  231,153       $  159,724     $  143,939
Net cash provided by (used in) investing
 activities...................................             105,563         (223,914)     (318,764)        (403,112)      (360,935)
Net cash provided by (used in) financing
 activities...................................          $ (428,878)      $  (72,143)   $   92,803       $  242,672     $  195,720

Computation of Funds From Operations(1)(2):
Net earnings attributable to Common Shares
 - Basic......................................          $  236,045       $  204,526    $  177,022       $   53,534     $  106,544
Add (Deduct):
Depreciation on real estate investments.......             143,694          132,437        96,337           52,893         44,887
Provision for possible loss on depreciated
 real estate..................................               5,200              450           282            1,500              -
Gains on dispositions of depreciated real
 estate, net..................................             (93,071)         (62,793)      (65,531)         (48,232)       (37,492)
Extraordinary items-loss on early
 extinguishment of debt.......................                 911            1,113         1,497                -            739
Other, net....................................               2,544              610          (462)            (650)           (73)
                                                        ----------       ----------    ----------       ----------     ----------
Funds From Operations attributable to Common
 Shares - Basic...............................             295,323          276,343       209,145           59,045        114,605
Series A Convertible Preferred Share dividends               7,254            8,206         9,332                -         14,717
Minority interest.............................               1,326            1,118           645                -              -
                                                        ----------       ----------    ----------       ----------     ----------
Funds From Operations attributable to Common
 Shares - Diluted.............................          $  303,903       $  285,667    $  219,122       $   59,045     $  129,322
                                                        ==========       ==========    ==========       ==========     ==========
Weighted average Common Shares outstanding
 - Diluted....................................             137,730          146,087       125,825           81,908         84,340
                                                        ==========       ==========    ==========       ==========     ==========
</TABLE>

  (1)    Funds From Operations has been an industry-wide standard used to
         measure operating performance of a REIT since its adoption by NAREIT in
         1991. In October 1999, NAREIT revised the definition of Funds From
         Operations. We have restated the amounts for 1996 to 1999 to reflect
         NAREIT's revised definition. Funds From Operations should not be
         considered as an alternative to net earnings or any other GAAP
         measurement of performance or as an alternative to cash flow from
         operating, investing or financing activities as a measure of liquidity.
         The Funds From Operations measure presented by Archstone, while
         consistent with NAREIT's definition, will not be comparable to
         similarly titled measures of other REITs that do not compute Funds
         From Operations in a manner consistent with Archstone.

  (2)    Funds From Operations in 1997 includes the impact of a one-time, non-
         cash charge of $71.7 million associated with the costs incurred in
         acquiring Archstone's REIT and property management companies from
         Security Capital. The Funds From Operations amount reflected for 1996
         is presented on a historical basis and therefore does not reflect the
         full year impact of the October 1996 homestead spin-out transaction
         discussed in Note 4 of Archstone's audited financial statements
         contained in this Annual Report.

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

     The following information should be read in conjunction with Archstone's
audited financial statements and the related notes contained in this Annual
Report.

Forward-Looking Statements

     Certain statements in this Annual Report that are not historical facts are
"forward-looking statements" as that term is defined under the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
based on our current expectations, beliefs, assumptions, estimates and
projections about the industry and markets in which we operate. Words such as
"expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates"
and variations of such words and similar expressions are intended to identify
such forward-looking statements. Information concerning expected investment
balances, expected funding sources, planned investments, forecasted dates and
revenue and expense growth assumptions are examples of forward-looking
statements. These statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions, which are difficult to
predict and many of which are beyond our control. Therefore, actual outcomes and
results may differ materially from what is expressed, forecasted or implied in
such forward-looking statements. We undertake no obligation to update publicly
any forward-looking statements, whether as a result of new information, future
events or otherwise, except as required by applicable law.

                                       20

<PAGE>

     Our operating results depend primarily on income from apartment
communities, which is substantially influenced by supply and demand for
apartment units, operating expense levels, property level operations and the
pace and price at which we can develop, acquire or dispose of apartment
communities. Capital and credit market conditions, which affect our cost of
capital, also influence operating results. See "Item 1. Business" for a more
complete discussion of risk factors that could impact our future financial
performance.

Results of Operations

 Overview

     Our basic net earnings attributable to Common Shares increased 15.4% in
2000 as compared to 1999 and 15.5% in 1999 as compared to 1998. These year-over-
year increases were primarily attributable to:

     (i)    strong performances from our operating communities;
     (ii)   the redeployment of capital into protected markets with attractive
            long-term fundamentals;
     (iii)  a 49.9% increase in gains on dispositions of depreciated real estate
            in 2000 over 1999; and
     (iv)   the Atlantic Merger in July 1998. See Note 9 of Archstone's audited
            financial statements in this Annual Report for additional
            information on the Atlantic Merger.

 Apartment Community Operations

     At December 31, 2000, investments in apartment communities comprised over
99% of our total real estate portfolio, based on Total Expected Investment. The
following table summarizes the overall performance of our apartment communities
during 2000, 1999 and 1998 (in thousands, except for units and percentages):

<TABLE>
<CAPTION>
                                                                         2000                1999                1998
                                                                   --------------      --------------      --------------
          <S>                                                      <C>                 <C>                 <C>
          Rental revenues.....................................     $      684,438      $      634,028      $      478,144
          Property operating expenses:
            Rental expenses...................................            166,800             165,103             132,359
            Real estate taxes.................................             58,796              52,410              40,476
                                                                   --------------      --------------      --------------
              Total property operating expenses...............            225,596             217,513             172,835
                                                                   --------------      --------------      --------------
          Net Operating Income................................     $      458,842      $      416,515      $      305,309
                                                                   --------------      --------------      --------------
          Average number of operating units...................             65,784              68,991              55,276
                                                                   ==============      ==============      ==============
          Operating margin (Net Operating
          Income/rental revenues).............................               67.0%               65.7%               63.9%
                                                                   ==============      ==============      ==============
          Average occupancy percentage........................               96.1%               94.9%               95.0%
                                                                   ==============      ==============      ==============
</TABLE>

     The following table reflects revenue, expense and Net Operating Income
growth for Same-Store communities that were fully operating during each
respective comparison period:

<TABLE>
<CAPTION>
                               Same-Store    Same-Store       Same-Store Net        Number
                                Revenue        Expense       Operating Income         of
                                 Growth        Growth             Growth        Operating Units
                               -----------   -----------     ---------------    ----------------
<S>                            <C>           <C>             <C>                <C>
2000.....................        6.65%          4.58%            7.68%                40,592
1999.....................        3.60%         (1.21%)           6.21%                39,645
1998.....................        3.56%          0.28%            5.60%                41,844
</TABLE>

                                       21
<PAGE>

     Net Operating Income from our total portfolio has increased in each of the
last three years primarily due to an increase in rental revenues from our
operating communities and the successful Lease-Up of development communities as
they are completed. The execution of our capital redeployment program continues
to improve operating margins as a result of higher rental rates and improved
revenue growth as capital is redeployed into our protected markets which
typically achieve higher and more consistent growth in Net Operating Income.
Rental expense growth has been controlled by operating efficiencies and
increasing levels of utility expense reimbursements from customers, which has
also contributed to improvement in operating margins.

     We anticipate that our strong operating margins will be maintained by
strong revenue growth from newly developed operating communities and the ongoing
execution of our capital redeployment strategy. Expense growth could be higher
as a result of rising insurance, payroll and utility costs. During 2001, we will
continue to focus our energies on enhancing customer relationships by
implementing new programs and initiatives that improve our service and product
offering. We believe these efforts will continue to strengthen Archstone's brand
image and ensure consistently high levels of customer satisfaction, which we
believe will improve resident retention and overall profitability. To achieve
these objectives, we plan to:

 .    Launch Lease Rent Optimizer(TM), the industry's first revenue management
     software program, that will allow us to better analyze and forecast
     customer demand to optimize pricing for our apartments;
 .    Implement Online Lease, an Internet-based application that will allow
     prospective residents to fully transact a lease online - another industry
     first;
 .    Utilize our Internet-based credit scoring model to facilitate instantaneous
     approval of customer credit applications; and
 .    Continue to build on the strength of Archstone's five unconditional Seal of
     Service(SM) guarantees.

  Income From Unconsolidated Real Estate Entities

     Income from unconsolidated real estate entities has increased from 1999 to
2000 as a result of our investment during June and July 2000 in two joint
ventures which own 11 apartment communities and increasing income from our
investment in Ameriton, a corporation whose focus is acquiring and developing
properties for sale to third parties. See Note 3 of Archstone's audited
financial statements in this Annual Report for additional information on income
from unconsolidated real estate entities.

  Other Income

     The increase in other income from 1999 to 2000 resulted primarily from a
$3.3 million gain in March 2000 from the sale of Spectrum Apartment Locators, a
wholly-owned start-up company we acquired in January 1998, and a $9.3 million
gain in July 2000 associated with the exchange of Homestead mortgage notes for
Common Shares held by Security Capital. These increases were partially offset by
a $9.0 million decrease in interest income related to the Homestead mortgage
notes, which we no longer own. During 1999 and 1998, other income was primarily
influenced by interest income on the Homestead mortgage notes of $23.6 million
and $22.9 million, respectively.

  Depreciation Expense

     The increase in depreciation expense in 1999 and 2000 is primarily
influenced by: (i) an increase in the number of operating communities due to the
Atlantic Merger in July 1998; and (ii) an increase in the cost basis of
operating communities resulting from our active development and capital
redeployment programs. Depreciation expense is expected to decrease in 2001
primarily as a result of the high disposition volume in 2000.

  Interest Expense

     The increase in interest expense in 1999 and 2000 is primarily
attributable to higher outstanding debt balances and higher effective interest
rates on our debt. These higher borrowing costs were partially offset by the
capitalization of interest. The level of capitalized interest decreased $7.6
million in 2000 as compared to 1999 as a result of lower levels of communities
undergoing active construction.

                                       22
<PAGE>

  General and Administrative Expenses

     The slight increase in general and administrative expenses in 2000 compared
to 1999 related primarily to higher information technology related costs and
higher expenses associated with Archstone's long-term incentive plan. We expect
higher general and administrative costs in 2001 as a result of these same
factors. The increase from 1998 to 1999 resulted primarily from the incremental
costs associated with operating the company after the Atlantic Merger, which
occurred in July 1998.

     General and administrative costs also include a portion of the fees paid to
Security Capital for certain services provided under an administrative service
agreement. These fees have steadily declined since the inception of the
agreement in September 1997 as functions related to information technology,
human resources, payroll, investor relations, legal and tax have been
internalized. We expect these fees to continue to decrease as we explore further
opportunities to internalize services. Once a service has been internalized, we
incur the direct costs of performing the function, which offsets expense
reductions related to fees we otherwise would have paid under the agreement.

  Other Expenses

     The increase in other expenses in 2000 as compared to 1999 resulted
primarily from a $2.8 million write-off of the net unamortized balance of the
conversion feature associated with the Homestead mortgage notes, which we no
longer own. The higher expense level in 1998 as compared to 1999 was primarily
due to approximately $2.2 million in costs incurred in 1998 related to merger
integration and the implementation of the Archstone national branding strategy.

  Minority Interest

     Minority interest increased in 1999 and 2000 primarily as a result of the
issuance of perpetual preferred units during those years.

  Impact of Disposition Activities

     Archstone has recognized gains of $93.1 million, $62.1 million and $65.5
million on the disposition of depreciated real estate in 2000, 1999 and 1998,
respectively. These gains have resulted from our active capital redeployment
program, which involves the disposition of operating communities in non-core
markets with less attractive growth prospects to fund investments in protected
markets.

     During the last three years full recovery of certain real estate
investments or mortgage notes was doubtful. As a result, a provision for
possible loss of $5.2 million, $2.0 million and $4.7 million were recorded to
reduce these assets to their estimated fair value in 2000, 1999 and 1998,
respectively.

  Preferred Share Dividends

     The higher level of Preferred Share dividends in each year during the
period from 1998 to 2000 is primarily attributable to the issuance of Series C
Preferred Shares in July 1998 and issuance of Series D Preferred Shares in
August 1999. The increases were partially offset by lower dividends on Series A
Convertible Preferred Shares resulting from periodic conversions by shareholders
into Common Shares, which more than offset the annual increase in the dividend
rate.

Liquidity and Capital Resources

  Financial Flexibility

     We are committed to maintaining a strong balance sheet and preserving our
financial flexibility, which we believe enhances our ability to capitalize on
attractive investment opportunities as they become available. We believe
Archstone's liquidity and financial condition are sufficient to meet all of our
cash flow needs during 2001.

                                       23
<PAGE>

  Operating Activities

     Our net cash flow provided by operating activities increased by $26.3
million (8.9%) in 2000 as compared to 1999 and $64.9 million (28.1%) in 1999 as
compared to 1998. These increases are due primarily to higher Net Operating
Income from apartment communities, including those resulting from the Atlantic
Merger in July 1998, partially offset by higher interest costs. See Results of
Operations for a more complete discussion of the factors impacting our operating
performance. See Archstone's Statement of Cash Flows in this Annual Report for
more detailed information.

  Investing and Financing Activities

     During 2000, 1999 and 1998, we invested an average of $709.5 million per
year primarily in the development of new communities and the acquisition of
existing operating communities. During 2000 and 1999 we also repurchased a total
of $506.2 million of our Common Shares including 17.5 million Common Shares
repurchased from Security Capital in July 2000 in exchange for Homestead
mortgage notes with a face amount of $221.3 million and cash of $178.7 million.
See Note 4 of Archstone's audited financial statements in this Annual Report for
additional information on this transaction. Smaller investments were made during
this three-year period in Ameriton, joint ventures with FIIB, stock in
technology companies and other strategic investments. These investments were
financed primarily through use of disposition proceeds, which averaged $581.5
million per year during the three-year period, cash flow from operating
activities and debt. Note that most of our acquisition and disposition
transactions are structured as tax-deferred exchanges. When we fund an
investment using debt, we typically borrow under our unsecured credit
facilities, which are then repaid from other long-term financing sources. See
Archstone's Statement of Cash Flows in this Annual Report for more detailed
information.

     Other significant financing activity included the payment of $233.8
million, $233.8 million and $186.8 million in Common and Preferred Shares and
minority interest dividends/distributions in 2000, 1999 and 1998, respectively.
The level of distributions in 2000 was comparable to 1999 because stock
repurchases in 1999 and 2000 offset the increases in dividends per Common Shares
and dividends on Preferred Shares issued in 1999 and 1998.

     Our most significant non-cash investing and financing activities during the
three-year period ended December 31, 2000 included: (i) the Atlantic Merger in
1998; (ii) the exchange of Homestead mortgage notes for Archstone Common Shares
in 2000; and (iii) the assumption of mortgages payable upon the purchase of
apartment communities during 2000, 1999 and 1998. See Note 15 of Archstone's
audited financial statements in this Annual Report for additional information on
non-cash investing and financing activities.

  Scheduled Debt Maturities and Interest Payment Requirements

     To mitigate liquidity issues and refinancing risk, our long-term debt is
structured to create a relatively level principal maturity schedule, without
significant repayment obligations in any year. Archstone has only $80.9 million
of long-term debt maturing during 2001 and $104.2 million maturing in 2002. See
Note 5 of Archstone's audited financial statements in this Annual Report for
additional information on scheduled debt maturities.

     In December 2000, we closed a $580 million unsecured line of credit,
replacing our previous line, which was scheduled to mature in 2001. We retained
our attractive pricing level of 65 basis points over LIBOR on the new line. The
three-year facility matures in December 2003 and includes an option in our favor
for a one-year extension. We also have a short-term unsecured borrowing
agreement with The Chase Manhattan Bank, which provides for maximum borrowings
of $100 million.

     We currently have $680 million in total borrowing capacity under our
unsecured credit facilities, with $293.7 million outstanding and an available
balance of $386.3 million at February 28, 2001.

     Our unsecured credit facilities, Long-Term Unsecured Debt and mortgages
payable had effective interest rates of 7.45%, 7.54% and 6.63%, respectively, as
of December 31, 2000. These rates give effect to interest rate swaps and caps,
as applicable.

     We were in compliance with all financial covenants pertaining to our debt
instruments at December 31, 2000.

                                       24
<PAGE>

 Shareholder Dividend/Distribution Requirements

   Based on anticipated distribution levels for 2001 and the number of shares
and units outstanding as of December 31, 2000, we anticipate that we will pay
the following annual dividends/distributions in 2001 (in thousands, except per
share amounts):

<TABLE>
<CAPTION>
                                                                              Per Share           Total
                                                                           ---------------     -----------
<S>                                                                        <C>                 <C>
Common Share distributions................................................           $1.64     $   201,454
Series A Convertible Preferred Share dividends............................            2.21           7,303
Series B Preferred Share dividends........................................            2.25           9,420
Series C Preferred Share dividends........................................            2.16           4,289
Series D Preferred Share dividends........................................            2.19           4,359
Series E perpetual preferred limited partnership unit distributions.......            2.09           3,350
Series F perpetual preferred limited partnership unit distributions.......            2.03           1,625
Series G perpetual preferred limited partnership unit distributions.......            2.16           1,294
Other distributions on minority interests.................................            1.64           1,556
                                                                                               -----------
Total dividend/distribution requirements..................................                     $   234,650
                                                                                               ===========
</TABLE>

 Share Repurchase Transaction

   In February 2001, we repurchased 2.3 million of our Common Shares from
Security Capital for $50 million at a price of $22.08 per share. The repurchase
transaction was funded through borrowings under our unsecured credit facilities,
which we expect to repay with proceeds from dispositions. See Note 16 of
Archstone's audited financial statements in this Annual Report for additional
information on this share repurchase transaction and the concurrent sale of
other Common Shares by Security Capital.

 Planned Investments

   Following is a summary of unfunded planned investments as of December 31,
2000 (dollar amounts in thousands). The amounts labeled "Discretionary"
represent future investments that we plan to make, although there is not a
contractual commitment to do so. The amounts labeled "Committed" represent the
approximate amount that we are contractually committed to fund.

<TABLE>
<CAPTION>
                                                                                   Planned Investments
                                                            ---------      ----------------------------------
                                                              Units          Discretionary        Committed
                                                            ---------      -----------------    -------------
<S>                                                         <C>            <C>                  <C>
Communities under construction.......................           4,107      $               -    $     176,652
Communities In Planning and owned....................           1,902                265,512                -
Communities In Planning and Under Control............           2,167                342,956                -
                                                            ---------      -----------------    -------------
     Total...........................................           8,176      $         608,468    $     176,652
                                                            =========      =================    =============
</TABLE>

   In addition to the planned investments noted above, we expect to make smaller
capital investments relating to planned expenditures on recently acquired
communities as well as redevelopment and recurring expenditures to improve and
maintain our more established operating communities.

   We anticipate completion of most of the communities that are currently under
construction and the planned operating community improvements during the
remainder of 2001 and 2002 and expect to start construction on approximately
$300-$400 million, based on Total Expected Investment, of communities that are
currently In Planning during 2001.  No assurances can be given that communities
Archstone does not currently own will be acquired or that planned developments
will actually occur.  In addition, actual costs incurred could be greater or
less than our current estimates.

                                       25
<PAGE>

 Funding Sources

   We anticipate financing our planned investment and operating needs primarily
with cash flow from operating activities, disposition proceeds derived from our
capital redeployment program and borrowings under our unsecured credit
facilities, prior to arranging long-term financing.  Consistent with Archstone's
performance in 2000, we anticipate that net cash flow from operating activities
during 2001 will be sufficient to fund anticipated dividend/distribution
requirements and scheduled debt principal payments.  To fund planned investment
activities, we had $386.3 million in available capacity on Archstone's unsecured
credit facilities at February 28, 2001.  In addition, we expect to complete the
disposition of additional operating communities during 2001.

   We currently have $577.2 million in shelf-registered securities, which can be
issued in the form of Long-Term Unsecured Debt, Preferred Shares or Common
Shares on an as-needed basis, subject to our ability to effect offerings on
satisfactory terms based on prevailing market conditions.

 Other Contingencies and Hedging Activities

   Archstone is a party to various claims and routine litigation arising in the
ordinary course of business.  When considering the company's insurance coverage
and other aspects of our risk management program, we do not believe that the
results of any such claims and litigation, individually or in the aggregate,
will have a material adverse effect on our business, financial position or
results of operations.

   Our involvement with derivative financial instruments is limited and we do
not use them for trading or other speculative purposes. We occasionally utilize
derivative financial instruments to lower our overall borrowing costs. See Note
11 of Archstone's audited financial statements in this Annual Report for
additional information on derivative financial instruments currently in use.

 Funds From Operations

   Funds From Operations has been a supplemental industry-wide standard used to
measure operating performance of a REIT since its adoption by NAREIT in 1991.
In October 1999, NAREIT revised the definition of Funds From Operations.  The
changes involved bringing the calculation of Funds From Operations into closer
alignment with GAAP net income.  The revised measure generally calls for
adjustments to net income for gains (losses) from sales of depreciated real
estate, provisions for possible losses on depreciated real estate and items
defined as "extraordinary" under GAAP.

   Funds From Operations should not be considered as an alternative to net
earnings or any other GAAP measurement of performance or as an alternative to
cash flow from operating, investing or financing activities as a measure of
liquidity.  The Funds From Operations measure we have presented, while
consistent with NAREIT's definition, will not be comparable to similarly titled
measures of other REITs that do not compute Funds From Operations in the same
manner.  Funds From Operations is not intended to represent cash available to
shareholders.  Anticipated cash dividends to shareholders are summarized in
"Shareholder Dividend/Distribution Requirements".

   Our Funds From Operations is calculated as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                                   -------------------------------------------------
                                                                       2000               1999               1998
                                                                   -----------        -----------        -----------
<S>                                                                <C>                <C>                <C>
Net earnings attributable to Common Shares - Basic...............  $   236,045        $   204,526        $   177,022
Add (Deduct):
  Depreciation on real estate investments........................      143,694            132,437             96,337
  Provision for possible loss on depreciated real estate.........        5,200                450                282
  Gain on disposition of depreciated real estate, net............      (93,071)           (62,793)           (65,531)
  Extraordinary items............................................          911              1,113              1,497
  Other, net.....................................................        2,544                610               (462)
                                                                   -----------        -----------        -----------
Funds From Operations attributable to Common Shares - Basic......  $   295,323        $   276,343        $   209,145
                                                                   -----------        -----------        -----------
  Series A Convertible Preferred Share dividends.................        7,254              8,206              9,332
  Minority interest..............................................        1,326              1,118                645
                                                                   -----------        -----------        -----------
Funds From Operations attributable to Common Shares - Diluted....  $   303,903        $   285,667        $   219,122
                                                                   ===========        ===========        ===========
Weighted average Common Shares outstanding - Diluted.............      137,730            146,087            125,825
                                                                   ===========        ===========        ===========
</TABLE>

                                       26
<PAGE>

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

   Archstone is exposed to interest rate changes associated with our unsecured
credit facilities and other variable rate debt. Our involvement with derivative
financial instruments is limited and we do not use them for trading or other
speculative purposes.  We occasionally utilize derivative financial instruments
to lower our overall borrowing costs.   As of December 31, 2000 all derivatives
in use were designated as hedges of existing debt instruments.  See Note 11 of
Archstone's audited financial statements in this Annual Report for additional
information.

   The table below provides information about Archstone's financial instruments
that are sensitive to changes in interest rates, including the estimated fair
values for each interest rate sensitive asset or liability, as of December 31,
2000.  As the table incorporates only those exposures that existed as of
December 31, 2000, it does not consider those exposures or positions, which
could arise after that date.  Moreover, because there were no firm commitments
to actually sell these instruments at fair value as of December 31, 2000, the
information presented therein is merely an estimate and has limited predictive
value.  As a result, Archstone's ultimate realized gain or loss with respect to
interest rate fluctuations will depend on the exposures that arise during future
periods, hedging strategies and prevailing interest rates at the time.  The
interest rates shown below give effect to interest rate caps and swaps, where
applicable:

<TABLE>
<CAPTION>
                                                              Expected Maturity/Principal Repayment Schedule at
                                                                                December 31,
                                                  -------------------------------------------------------------------------
                                                     2001        2002        2003       2004            2005     Thereafter
                                                  ---------   ---------   ---------   ---------      ---------   ----------
<S>                                               <C>         <C>         <C>           <C>          <C>         <C>
Interest rate sensitive liabilities:
 Unsecured credit facilities.....................   $43,719   $     -     $      -    $150,000(2)    $      -    $      -
    Average nominal interest rate(3).............      7.02%     7.02%        7.02%       7.02%             -           -

 Long-Term Unsecured Debt:
  Fixed rate.....................................   $70,010   $97,810     $171,560    $ 51,560       $251,560    $683,047
    Average nominal interest rate(3).............      7.50%     7.55%        7.60%       7.64%          7.57%       7.50%

  Variable rate(4)...............................   $     -   $     -     $      -    $      -       $      -    $ 75,715
    Average nominal interest rate(3).............      4.73%     4.73%        4.73%       4.73%          4.73%       4.73%

 Mortgages payable:
  Fixed rate debt(5).............................   $ 8,509   $ 3,853     $ 18,760    $  4,206       $ 32,164    $463,537
    Average nominal interest rate(3).............      7.26%     7.26%        7.26%       7.25%          7.25%       7.24%

  Variable rate debt.............................   $ 2,350   $ 2,537     $  2,740    $ 39,311       $  3,209    $294,628
    Average nominal interest rate(3).............      5.06%     5.06%        5.07%       5.09%          5.12%       5.12%

<CAPTION>
                                                                   Estimated
                                                       Total          Fair
                                                      Balance       Value(1)
                                                    -----------   -----------
<S>                                                 <C>            <C>
Interest rate sensitive liabilities:
  Unsecured credit facilities....................   $  193,719     $  193,719
     Average nominal interest rate(3)............            -              -

  Long-Term Unsecured Debt:
   Fixed rate....................................   $1,325,547     $1,316,501
     Average nominal interest rate(3)............            -              -

   Variable rate(4)..............................   $   75,715     $   75,715
     Average nominal interest rate(3)............            -              -

  Mortgages payable:
   Fixed rate debt(5)............................   $  531,029     $  547,958
     Average nominal interest rate(3)............            -              -

   Variable rate debt............................   $  344,775     $  344,775
     Average nominal interest rate(3)............            -              -
</TABLE>

(1)  The estimated fair value for each of the liabilities listed was
     calculated by discounting the actual principal payment stream at
     prevailing interest rates (obtained from third party financial
     institutions) currently available on debt instruments with similar terms
     and features.
(2)  Archstone's $580 million unsecured credit facility matures in December
     2003 and includes an option in our favor for a one-year extension.
(3)  Reflects the weighted average nominal interest rate on the liabilities
     outstanding during each period, giving effect to principal payments and
     final maturities during each period, if any. The nominal rates for
     variable rate mortgages payable have been held constant during each
     period presented based on the actual variable rates at December 31, 2000.
     The weighted average effective interest rate on the unsecured credit
     facilities, Long-Term Unsecured Debt and mortgages payable was 7.45%,
     7.54% and 6.63%, respectively.
(4)  Represents tax-exempt unsecured bonds.
(5)  The fixed rate mortgages payable balance includes $288.5 million of
     Fannie Mae secured debt.

   We have several investments in technology-related companies, including
investments in BroadbandNOW!, SafeRent, Inc. and Manugistics Group, Inc.
(NASDAQ: MANU), which represented an aggregate investment of $13 million at
December 31, 2000.  The largest single investment is $7 million in
BroadbandNOW!.  The broader technology sector, including the sectors in which
our investees operate, is currently suffering from a decreased supply of capital
and depressed market valuation.  The inability of these companies to raise
capital at a satisfactory price in the near term could impair their ability to
fund immediate obligations, including working capital requirements, and could
result in the failure of those companies.  In the event that our investments in
technology companies are deemed to be partially or fully impaired, the resulting
write-down of our investment would have a negative impact on our net earnings
and could adversely affect the price of our Common Shares.

                                       27
<PAGE>

Item 8.  Financial Statements and Supplementary Data

   Archstone's Balance Sheets as of December 31, 2000 and 1999, and its
Statements of Earnings, Shareholders' Equity and Cash Flows for each of the
years in the three-year period ended December 31, 2000 and Schedule III - Real
Estate and Accumulated Depreciation, together with the reports of KPMG LLP,
independent auditors, are included under Item 14 of this report and are
incorporated herein by reference.  Selected quarterly financial data is
presented in Note 12 of Archstone's audited financial statements in this Annual
Report.

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

   Not applicable.

                                   PART III

Item 10. Trustees and Executive Officers of the Registrant

   For information regarding Archstone's Trustees and senior officers, see "Item
1. Business - Trustees and Officers of Archstone." The other information
required by this Item 10 is incorporated herein by reference to the description
under the captions "Election of Trustees" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in Archstone's definitive proxy statement for
its annual meeting of shareholders ("2001 Proxy Statement").

Item 11. Executive Compensation

   Incorporated herein by reference to the description under the captions
"Election of Trustees" and "Executive Compensation" in the 2001 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management

   Incorporated herein by reference to the description under the captions
"Principal Shareholders" and "Election of Trustees" in the 2001 Proxy Statement.

Item 13. Certain Relationships and Related Transactions

   Incorporated herein by reference to the description under the caption
"Certain Relationships and Transactions" in the 2001 Proxy Statement.

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

   The following documents are filed as a part of this report:

     (a)  Financial Statements and Schedule:

          1.   Financial Statements

                 See Index to Financial Statements and Schedule on page 30 of
               this report, which is incorporated herein by reference.

          2.   Financial Statement Schedule:

                 See Schedule III on page 59 of this report, which is
               incorporated herein by reference.

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

          3.   Exhibits.

                 See Index to Exhibits on page 69 of this report, which is
               incorporated herein by reference.

                                       28
<PAGE>

     (b)  Reports on Form 8-K
          None

     (c)  Exhibits:

          The Exhibits required by Item 601 of Regulation S-K are listed in the
     Index to Exhibits on page 69 of this Annual Report, which is incorporated
     herein by reference.

                                       29
<PAGE>

                  Index to Financial Statements and Schedule

<TABLE>
<CAPTION>
                                                                                                Page
                                                                                                ----
<S>                                                                                             <C>
Archstone Communities Trust
   Independent Auditors' Report...............................................................    31
   Balance Sheets as of December 31, 2000 and 1999............................................    32
   Statements of Earnings for the years ended December 31, 2000, 1999 and 1998................    33
   Statements of Shareholders' Equity for the years ended December 31, 2000, 1999 and 1998....    34
   Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998..............    35
   Notes to Financial Statements..............................................................    36
   Independent Auditors' Report on Financial Statement Schedule...............................    58
   Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2000............    59
   Index to Exhibits..........................................................................    69
</TABLE>

                                       30
<PAGE>

                          Independent Auditors' Report

The Board of Trustees and Shareholders
Archstone Communities Trust:

   We have audited the accompanying balance sheets of Archstone Communities
Trust as of December 31, 2000 and 1999, and the related statements of earnings,
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 2000. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

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

                                    KPMG LLP


Chicago, Illinois
January 30, 2001,
except as to Note 16,
which is as of February 28, 2001

                                       31
<PAGE>

                          Archstone Communities Trust

                                Balance Sheets

                       (In thousands, except share data)

<TABLE>
<CAPTION>

                                                                                           December 31,         December 31,
                                       ASSETS                                                  2000                1999
                                       ------                                           -----------------    ----------------
<S>                                                                                     <C>                  <C>
Real estate..........................................................................    $      5,058,910     $     5,086,486
Less accumulated depreciation........................................................             375,672             300,658
                                                                                        -----------------    ----------------
                                                                                                4,683,238           4,785,828
Investments in and advances to unconsolidated real estate entities...................             229,012             130,845
Mortgage notes receivable, net.......................................................                 124             210,357
                                                                                        -----------------    ----------------
  Net investments....................................................................           4,912,374           5,127,030
Cash and cash equivalents............................................................               9,077              10,072
Restricted cash in tax-deferred exchange escrow......................................               3,274              68,729
Other assets.........................................................................              94,972              96,606
                                                                                        -----------------    ----------------
  Total assets.......................................................................    $      5,019,697     $     5,302,437
                                                                                        =================    ================

                          LIABILITIES AND SHAREHOLDERS' EQUITY
                          ------------------------------------
Liabilities:
 Unsecured credit facilities.........................................................    $        193,719     $       493,536
 Long-Term Unsecured Debt............................................................           1,401,262           1,276,572
 Mortgages payable...................................................................             875,804             694,948
 Dividends payable...................................................................              50,330              53,518
 Accounts payable....................................................................              24,029              26,677
 Accrued expenses....................................................................              86,334              74,462
 Other liabilities...................................................................              43,276              59,915
                                                                                        -----------------    ----------------
  Total liabilities..................................................................           2,674,754           2,679,628
                                                                                        -----------------    ----------------

Minority interest:
 Perpetual preferred units...........................................................              73,187              41,996
 Convertible operating partnership units.............................................              20,150              13,307
                                                                                        -----------------    ----------------
  Total minority interest............................................................              93,337              55,303
                                                                                        -----------------    ----------------

Shareholders' equity:
 Series A Convertible Preferred Shares (3,306,035 shares in 2000 and 3,705,390 in                  82,651              92,635
  1999, liquidation preference of $25 per share).....................................
 Series B Preferred Shares (4,186,800 shares in 2000 and 4,200,000 shares in 1999,                104,670             105,000
  liquidation preference of $25 per share)...........................................
 Series C Preferred Shares (1,989,200 shares in 2000 and 2,000,000 shares in 1999,                 49,730              50,000
  liquidation preference of $25 per share)...........................................
 Series D Preferred Shares (1,992,200 shares in 2000 and 2,000,000 shares in 1999,                 49,805              50,000
  liquidation preference of $25 per share)...........................................
 Common Shares (122,838,167 shares in 2000 and 139,008,353 in 1999)..................             122,838             139,008
 Additional paid-in capital..........................................................           1,949,270           2,291,026
 Unrealized holding gain.............................................................               2,817                 394
 Employee share purchase notes.......................................................              (6,764)            (19,170)
 Distributions in excess of net earnings.............................................            (103,411)           (141,387)
                                                                                        -----------------    ----------------
  Total shareholders' equity.........................................................           2,251,606           2,567,506
                                                                                        -----------------    ----------------
  Total liabilities and shareholders' equity.........................................    $      5,019,697     $     5,302,437
                                                                                        =================    ================
</TABLE>

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

                                       32
<PAGE>

                          Archstone Communities Trust

                            Statements of Earnings

                   (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                      Years Ended December 31,
                                                                        -----------------------------------------------------
Revenues:                                                                     2000               1999               1998
                                                                        ---------------    ---------------    ---------------
<S>                                                                     <C>                <C>                <C>
  Rental revenues...................................................     $      688,544     $      637,808     $      484,539
  Income from unconsolidated real estate entities...................              2,575              2,118                  -
  Other income......................................................             32,115             27,096             29,106
                                                                        ---------------    ---------------    ---------------
                                                                                723,234            667,022            513,645
                                                                        ---------------    ---------------    ---------------
Expenses:
  Rental expenses...................................................            164,391            163,110            130,558
  Rental expenses paid to affiliate.................................              2,409              1,996              2,521
  Real estate taxes.................................................             58,808             52,421             40,681
  Depreciation on real estate investments...........................            143,694            132,437             96,337
  Interest expense..................................................            145,173            121,494             83,350
  General and administrative expenses...............................             22,434             20,521             13,978
  General and administrative expenses paid to affiliate.............                723              1,635              2,114
  Provision for possible loss on investments........................              5,200              2,000              4,700
  Other expenses....................................................              3,936              2,069              4,835
                                                                        ---------------    ---------------    ---------------
                                                                                546,768            497,683            379,074
                                                                        ---------------    ---------------    ---------------
Earnings from operations............................................            176,466            169,339            134,571
  Less: minority interest - perpetual  preferred units..............              5,915                942                  -
        minority interest - convertible operating partnership units.              1,326              1,118                645
  Plus: gains on dispositions of depreciated real estate, net.......             93,071             62,093             65,531
                                                                        ---------------    ---------------    ---------------
Earnings before extraordinary items.................................            262,296            229,372            199,457
  Less: extraordinary items - loss on early extinguishment of debt..                911              1,113              1,497
                                                                        ---------------    ---------------    ---------------
Net earnings........................................................            261,385            228,259            197,960
  Less: Preferred Share dividends...................................             25,340             23,733             20,938
                                                                        ---------------    ---------------    ---------------
Net earnings attributable to Common Shares - Basic..................     $      236,045     $      204,526     $      177,022
                                                                        ===============    ===============    ===============

Weighted average Common Shares outstanding - Basic..................            131,874            139,801            118,592
                                                                        ---------------    ---------------    ---------------
Weighted average Common Shares outstanding - Diluted................            137,730            139,829            125,825
                                                                        ---------------    ---------------    ---------------
Earnings before extraordinary items per Common Share:
       Basic........................................................     $         1.80     $         1.47     $         1.51
                                                                         ==============    ===============    ===============
       Diluted......................................................     $         1.78     $         1.47     $         1.50
                                                                        ===============    ===============    ===============
Net earnings per Common Share:
       Basic........................................................     $         1.79     $         1.46     $         1.49
                                                                        ===============    ===============    ===============
       Diluted......................................................     $         1.78     $         1.46     $         1.49
                                                                        ===============    ===============    ===============
Distributions paid per Common Share.................................     $         1.54     $         1.48     $         1.39
                                                                        ===============    ===============    ===============
</TABLE>

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

                                       33
<PAGE>

                           Archstone Communities Trust

                       Statements of Shareholders' Equity

                  Years ended December 31, 2000, 1999 and 1998
                                 (In thousands)

<TABLE>
<CAPTION>
                                          Series A
                                         Convertible   Series B      Series C     Series D
                                          Preferred    Preferred     Preferred    Preferred
                                          Shares at    Shares at     Shares at    Shares at
                                          Aggregate    Aggregate     Aggregate    Aggregate    Common     Additional
                                         Liquidation  Liquidation   Liquidation  Liquidation  Shares at    Paid-in
                                         Preference   Preference    Preference   Preference   Par Value    Capital
                                         ---------------------------------------------------------------------------
<S>                                      <C>          <C>           <C>          <C>         <C>          <C>
Balances at December 31, 1997..........  $   135,210  $  105,000    $       -    $        -  $    92,634  $1,268,741
 Comprehensive income:
  Net Earnings.........................            -           -            -             -            -           -
  Preferred Share dividends paid.......            -           -            -             -            -           -
  Other comprehensive income...........            -           -            -             -            -           -

 Comprehensive income attributable
  to Common Shares.....................            -           -            -             -            -           -

 Common Share distributions............            -           -            -             -            -           -
 Atlantic Merger.......................            -           -       50,000             -       47,752   1,049,728
 Issuance of shares, net of expenses...            -           -            -             -        2,050      41,959
 Other, net............................      (17,695)          -            -             -          877      16,086
                                         ---------------------------------------------------------------------------

Balances at December 31, 1998..........      117,515     105,000       50,000             -      143,313   2,376,514
 Comprehensive income:
  Net Earnings.........................            -           -            -             -            -           -
  Preferred Share dividends paid.......            -           -            -             -            -           -
  Other comprehensive income...........            -           -            -             -            -           -

 Comprehensive income attributable
  to Common Shares.....................            -           -            -             -            -           -

 Common Share distributions............            -           -            -             -            -           -
 Repurchase of shares, net of expenses.         (750)          -            -             -       (6,098)   (114,733)
 Issuance of shares, net of expenses...            -           -            -        50,000            -      (1,740)
 Other, net............................      (24,130)          -            -             -        1,793      30,985
                                         ---------------------------------------------------------------------------

Balances at December 31, 1999..........       92,635     105,000       50,000        50,000      139,008   2,291,026
 Comprehensive income:
  Net Earnings.........................            -           -            -             -            -           -
  Preferred Share dividends paid.......            -           -            -             -            -           -
  Other comprehensive income...........            -           -            -             -            -           -

 Comprehensive income attributable
  to Common Shares.....................            -           -            -             -            -           -

 Common Share distributions............            -           -            -             -            -           -
 Repurchase of shares, net of expenses.            -        (330)        (270)         (195)     (17,479)   (366,268)
 Other, net............................       (9,984)          -            -             -        1,309      24,512
                                         ---------------------------------------------------------------------------

Balances at December 31, 2000..........  $    82,651  $  104,670    $  49,730    $   49,805  $   122,838  $1,949,270
                                         ===========================================================================

<CAPTION>
                                                          Employee     Distributions
                                         Unrealized        Share         in Excess
                                          Holding         Purchase        of Net
                                         Gain (Loss)       Notes         Earnings        Total
                                         --------------------------------------------------------
                                         <C>            <C>            <C>            <C>
Balances at December 31, 1997..........  $    83,794    $   (17,238)   $  (127,705)   $ 1,540,436
 Comprehensive income:
  Net Earnings.........................            -              -        197,960        197,960
  Preferred Share dividends paid.......            -              -        (20,938)       (20,938)
  Other comprehensive income...........      (83,794)             -              -        (83,794)
                                                                                      -----------
 Comprehensive income attributable
  to Common Shares.....................            -              -              -         93,228
                                                                                      -----------
 Common Share distributions............            -              -       (187,059)      (187,059)
 Atlantic Merger.......................            -        (11,338)             -      1,136,142
 Issuance of shares, net of expenses...            -              -              -         44,009
 Other, net............................            -          2,301              -          1,569
                                         --------------------------------------------------------

Balances at December 31, 1998..........            -        (26,275)      (137,742)     2,628,325
 Comprehensive income:
  Net Earnings.........................            -              -        228,259        228,259
  Preferred Share dividends paid.......            -              -        (23,733)       (23,733)
  Other comprehensive income...........          394              -              -            394
                                                                                      -----------
 Comprehensive income attributable
  to Common Shares.....................            -              -              -        204,920
                                                                                      -----------
 Common Share distributions............            -              -       (208,173)      (208,173)
 Repurchase of shares, net of expenses.            -              -              -       (121,581)
 Issuance of shares, net of expenses...            -              -              -         48,260
 Other, net............................            -          7,105              2         15,755
                                         --------------------------------------------------------

Balances at December 31, 1999..........          394        (19,170)      (141,387)     2,567,506
 Comprehensive income:
  Net Earnings.........................            -              -        261,385        261,385
  Preferred Share dividends paid.......            -              -        (25,340)       (25,340)
  Other comprehensive income...........        2,423              -              -          2,423
                                                                                      -----------
 Comprehensive income attributable
  to Common Shares.....................            -              -              -        238,468
                                                                                      -----------
 Common Share distributions............            -              -       (198,069)      (198,069)
 Repurchase of shares, net of expenses.            -              -              -       (384,542)
 Other, net............................            -         12,406              -         28,243
                                         --------------------------------------------------------

Balances at December 31, 2000..........  $     2,817    $    (6,764)   $  (103,411)   $ 2,251,606
                                         ========================================================
</TABLE>

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

                                       34
<PAGE>

                          Archstone Communities Trust

                           Statements of Cash Flows
                                (In thousands)

<TABLE>
<CAPTION>
                                                                                             Years Ended December 31,
                                                                                      -------------------------------------
                                                                                        2000           1999          1998
                                                                                      ---------     ---------     ---------
<S>                                                                                   <C>           <C>           <C>
Operating activities:
   Net earnings...................................................................    $ 261,385     $ 228,259     $ 197,960
   Adjustments to reconcile net earnings to net cash flow provided by operating
      activities:
       Depreciation and amortization..............................................      145,571       133,817        96,908
       Gains on dispositions of depreciated real estate, net......................      (93,071)      (62,093)      (65,531)
       Gain on exchange of Homestead mortgage notes, net of writedown.............       (6,560)            -             -
       Provision for possible loss on investments.................................        5,200         2,000         4,700
       Extraordinary item.........................................................          911         1,113         1,497
       Minority interest..........................................................        7,241         2,060           645
   Change in accounts payable, accrued expenses and other liabilities.............        6,277       (16,581)        6,527
   Other, net.....................................................................       (4,634)        7,435       (11,553)
                                                                                      ---------     ---------     ---------
       Net cash flow provided by operating activities.............................      322,320       296,010       231,153
                                                                                      ---------     ---------     ---------
Investing activities:
   Real estate investments........................................................     (671,148)     (769,076)     (688,151)
   Change in investments in and advances to unconsolidated real estate entities...      (68,995)      (32,729)            -
   Proceeds from dispositions, net of closing costs...............................      770,679       572,741       401,031
   Cash acquired in Atlantic Merger...............................................            -             -        79,359
   Change in tax-deferred exchange escrow.........................................       65,455        22,145       (90,874)
   Change in pursuit costs and earnest money deposits.............................       14,798        (9,376)       (5,438)
   Funding of convertible mortgage notes receivable...............................            -             -       (11,895)
   Other, net.....................................................................       (5,226)       (7,619)       (2,796)
                                                                                      ---------     ---------     ---------
       Net cash flow provided by (used in) investing activities...................      105,563      (223,914)     (318,764)
                                                                                      ---------     ---------     ---------

Financing activities:
   Proceeds from (payments on) unsecured long-term debt...........................      125,000       (30,000)      447,200
   Debt issuance costs............................................................      (10,372)       (6,304)      (14,281)
   Proceeds from secured debt.....................................................      156,527        36,206       268,450
   Proceeds from  tax-exempt bond refinancing.....................................            -        16,000             -
   Principal prepayments of mortgages payable.....................................      (41,658)      (57,574)     (107,009)
   Regularly scheduled  principal payments on mortgages payable...................       (4,833)       (5,391)       (4,316)
   Proceeds from (repayments on) unsecured credit facilities, net.................     (299,817)      228,885      (356,621)
   Repurchase of Common and Preferred Shares......................................     (179,461)     (121,581)            -
   Proceeds from issuance of Common Shares, net...................................            -             -        44,009
   Proceeds from issuance of Preferred Shares and perpetual preferred units.......       31,215        90,229             -
   Cash dividends paid on Common Shares...........................................     (201,257)     (208,018)     (165,190)
   Cash dividends paid on Preferred Shares........................................      (25,340)      (23,733)      (20,938)
   Cash dividends paid to minority interests......................................       (7,241)       (2,060)         (645)
   Proceeds from dividend reinvestment and repayment of share purchase loans, net.       18,646         7,251           470
   Other, net.....................................................................        9,713         3,947         1,674
                                                                                      ---------     ---------     ---------
       Net cash flow provided by (used in) financing activities...................     (428,878)      (72,143)       92,803
                                                                                      ---------     ---------     ---------
Net change in cash and cash equivalents...........................................         (995)          (47)        5,192
Cash and cash equivalents at beginning of period..................................       10,072        10,119         4,927
                                                                                      ---------     ---------     ---------
Cash and cash equivalents at end of period........................................    $   9,077     $  10,072     $  10,119
                                                                                      =========     =========     =========
</TABLE>

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

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

                                       35
<PAGE>

                          Archstone Communities Trust

                         Notes to Financial Statements

                       December 31, 2000, 1999 and 1998

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

  Business

     Archstone is an equity REIT organized in 1963 under the laws of the State
of Maryland. We are focused on the operation, development, redevelopment,
acquisition and long-term ownership of apartment communities in protected
markets throughout the United States characterized by: (i) limited new supply;
(ii) expensive single-family home prices; and (iii) strong economic
fundamentals.

  Principles of Consolidation

     The accounts of Archstone and its controlled subsidiaries are consolidated
in the accompanying financial statements. All significant intercompany accounts
and transactions have been eliminated in consolidation. We use the equity method
to account for investments when we do not control but have the ability to
exercise significant influence over the operating and financial policies of the
investee. For an investee accounted for under the equity method, our share of
net earnings or losses of the investee is reflected in income as earned and
dividends are credited against the investment as received.

  Use of estimates

     The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect amounts reported in the
financial statements and the related notes. Actual results could differ from
those estimates. Estimates and assumptions are reviewed periodically and the
effects of revisions are reflected in the period they are determined to be
necessary.

  Cash and Cash Equivalents

     Cash and cash equivalents consist of cash on hand, demand deposits with
financial institutions and short-term, highly liquid investments with original
maturities of three months or less.

  Restricted Cash in Tax-Deferred Exchange Escrow

     Represents disposition proceeds which have been set aside and designated to
fund future tax deferred exchanges of qualifying real estate investments.

  Real Estate and Depreciation

     Real estate, other than properties held for sale, is carried at cost. Long-
lived assets designated as being held for sale are reported at the lower of
their carrying amount or estimated fair value less cost to sell, and thereafter
are no longer depreciated. We review long-lived assets to be held and used for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. This review involves
comparing an investment's book value to its estimated future cash flows, on an
undiscounted basis.

     We capitalize direct and certain related indirect costs associated with the
successful acquisition, development or improvement of real estate. Capitalized
costs associated with unsuccessful acquisition or development pursuits are
expensed at the time the pursuit is abandoned.

                                       36
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

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

          Buildings and related land improvements....... 20-40 years
          Furniture, fixtures, equipment and other......  5-10 years

  Interest

     During 2000, 1999 and 1998, the total interest paid in cash on all
outstanding debt, was $157.7 million, $148.0 million and $96.4 million,
respectively.

     We capitalize interest incurred during the construction period as part of
the cost of apartment communities under development. Interest capitalized during
2000, 1999 and 1998 aggregated $24.3 million, $31.9 million and $29.9 million,
respectively.

  Cost of Raising Capital

     Costs incurred in connection with the issuance of equity securities are
deducted from shareholders' equity.  Costs incurred in connection with the
issuance or renewal of debt are capitalized as other assets and are amortized
into interest expense over the term of the related loan or the renewal period.
The balance of any unamortized loan costs associated with old debt is expensed
upon replacement with new debt.  Amortization of loan costs included in interest
expense for 2000, 1999 and 1998 was $5.0 million, $4.8 million and $3.3 million,
respectively.

  Interest Rate Contracts

     We occasionally utilize derivative financial instruments to lower our
overall borrowing costs and designate these financial instruments as hedges of
specific liabilities or anticipated transactions. The costs associated with
entering into these agreements, as well as the related gains or losses on such
agreements, are deferred and are amortized into interest expense over the term
of the underlying debt. See Note 11 for additional information.

  Revenue and Gain Recognition

     We generally lease our apartment units under operating leases with terms of
one-year or less.  Rental revenue is recognized according to the terms of the
underlying leases which approximates the revenue which would be recognized if
spread evenly over the lease term.

     Gains on sales of real estate are recorded when the recognition criteria
set forth by GAAP have been met.

  Rental Expenses

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

  Federal Income Taxes

     We have made an election to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended, and we believe we qualify as a REIT and have made all
required distributions of our taxable income. Accordingly, no provision has been
made for federal income taxes in the accompanying financial statements.

                                       37
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

  Comprehensive Income

     Comprehensive income, which is defined as net earnings and all other non-
owner changes in equity, is displayed in the accompanying Statements of
Shareholders' Equity. The amounts reflected as "other comprehensive income" in
2000 and 1999 reflect unrealized holding gains and losses on the change in
market values for various available-for-sale investments.

  Per Share Data

     Following is a reconciliation of basic earnings per share to diluted
earnings per share for the periods indicated (in thousands):

<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                                   --------------------------------------
                                                                                      2000          1999          1998
                                                                                   ----------    ----------    ----------
<S>                                                                                <C>           <C>           <C>
Reconciliation of numerator between basic and diluted net earnings per Common Share (1):

Net earnings attributable to Common Shares - Basic..............................   $  236,045    $  204,526    $  177,022
   Dividends on  Series A Convertible Preferred Shares..........................        7,254             -         9,332
   Minority interest - convertible operating partnership units..................        1,326             -           645
                                                                                   ----------    ----------    ----------
Net earnings attributable to Common Shares - Diluted............................   $  244,625    $  204,526    $  186,999
                                                                                   ==========    ==========    ==========
Reconciliation of denominator between basic and diluted net earnings per Common Share (1):

Weighted average number of Common Shares outstanding - Basic....................      131,874       139,801       118,592
   Assumed conversion of Series A Convertible Preferred Shares into
      Common Shares.............................................................        4,721             -         6,765
   Minority interest - convertible operating partnership units..................          876             -           458
   Incremental options and warrants.............................................          259            28            10
                                                                                   ----------    ----------    ----------
Weighted average number of Common Shares outstanding - Diluted..................      137,730       139,829       125,825
                                                                                   ==========    ==========    ==========
</TABLE>

(1)  Excludes the impact of potentially dilutive equity securities during the
     periods in which they are anti-dilutive.

  Reclassifications

     Certain of the 1999 and 1998 amounts have been reclassified to conform to
the 2000 presentation.

                                       38
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

(2)  Real Estate

  Investments in Real Estate

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

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                          --------------------------------------------------------------
                                                                      2000                              1999
                                                          ----------------------------      ----------------------------
                                                           Investment         Units          Investment         Units
                                                          ------------     -----------      ------------     -----------
<S>                                                       <C>              <C>              <C>              <C>
Apartment communities:
  Operating communities................................    $ 4,651,275          62,509       $ 4,444,289          68,255
  Communities under construction (1)...................        298,519           4,107           563,020           7,830
  Development communities In Planning (1)
     Owned.............................................         75,662           1,902            45,481           2,096
     Under Control (2).................................              -           2,167                 -           2,375
                                                          ------------     -----------      ------------     -----------
       Total development communities In Planning.......         75,662           4,069            45,481           4,471
                                                          ------------     -----------      ------------     -----------
     Total apartment communities.......................      5,025,456          70,685         5,052,790          80,556
                                                          ------------     ===========      ------------     ===========
Other real estate assets...............................         10,584                            10,826
Hotel asset............................................         22,870                            22,870
                                                          ------------                      ------------
         Total real estate.............................    $ 5,058,910                       $ 5,086,486
                                                          ============                      ============
</TABLE>

(1)  Unit information is based on management's estimates and has not been
     audited or reviewed by Archstone's independent auditors.
(2)  Archstone's investment as of December 31, 2000 and 1999 for developments
     Under Control was $5.9 million and $5.3 million, respectively, and is
     reflected in the "Other assets" caption of Archstone's Balance Sheets.

  Capital Expenditures

     In conjunction with the underwriting of each acquisition of an operating
community, we prepare acquisition budgets that encompass the incremental capital
needed to achieve our investment objectives.  These expenditures, combined with
the initial purchase price and related closing costs, are capitalized and
classified as "acquisition-related" capital expenditures, as incurred.

     As part of our operating strategy, we periodically evaluate each
community's physical condition relative to established business objectives and
the community's competitive position in its market. In conducting these
evaluations, we consider our return on investment in relation to our long-term
cost of capital as well as our research and analysis of competitive market
factors. Based on these factors, we make decisions on needed capital
expenditures, which are classified as either "redevelopment" or "recurring".

     The redevelopment category includes: (i) redevelopment initiatives, which
are intended to reposition the community in the marketplace and include items
such as significant upgrades to the interiors, exteriors, landscaping and
amenities; (ii) revenue-enhancing expenditures, which include investments that
are expected to produce incremental community revenues, such as building
garages, carports and storage facilities or gating a community; and (iii)
expense-reducing expenditures, which include items such as water submetering
systems and xeriscaping that reduce future operating costs.

     Recurring capital expenditures consist of significant expenditures for
items having a useful life in excess of one-year, which are incurred to maintain
a community's long-term physical condition at a level commensurate with our
stringent operating standards. Examples of recurring capital expenditures
include roof replacements, parking lot resurfacing and exterior painting.

                                       39
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

     Repairs, maintenance and make-ready expenditures (including the replacement
of carpets, appliances and other interior items) are expensed as incurred, to
the extent they are not incremental first year deferred maintenance costs needed
to reposition an asset. Make-ready expenditures are costs incurred in preparing
a vacant apartment unit for the next resident.

     The change in investments in real estate at cost, consisted of the
following (in thousands):

<TABLE>
<CAPTION>
                                                                            Year Ended December 31,
                                                                -------------------------------------------------
                                                                    2000               1999              1998
                                                                -----------        -----------        -----------
<S>                                                             <C>                <C>                <C>
Balance at January 1.........................................   $ 5,086,486        $ 4,771,315        $ 2,567,599
                                                                -----------        -----------        -----------
Apartment communities:
  Real estate assets acquired in the Atlantic Merger.........             -                  -          1,823,727
  Acquisition-related expenditures...........................       372,539            401,392            268,465
  Redevelopment expenditures.................................        37,547             72,517             56,321
  Recurring capital expenditures.............................        13,937             13,022              9,461
  Development expenditures, excluding land acquisitions......       228,819            334,049            346,629
  Acquisition and improvement of land for development........        68,308             43,417             45,739
  Dispositions...............................................      (743,287)          (542,554)          (342,066)
  Provision for possible loss on investments.................        (5,200)              (450)                 -
                                                                -----------        -----------        -----------
Net apartment community activity.............................       (27,337)           321,393          2,208,276
                                                                -----------        -----------        -----------


Other:
       Change in other real estate assets....................          (239)            (4,672)            (3,860)
       Provision for possible loss on investments............             -             (1,550)              (700)
                                                                -----------        -----------        -----------
Net other activity...........................................          (239)            (6,222)            (4,560)
                                                                -----------        -----------        -----------
Balance at December 31.......................................   $ 5,058,910        $ 5,086,486        $ 4,771,315
                                                                ===========        ===========        ===========
</TABLE>

     At December 31, 2000, we had unfunded contractual commitments related to
real estate investment activities aggregating approximately $182.6 million of
which $176.7 million related to communities under construction.

     We were committed to the sale of seven apartment communities and certain
other real estate assets having an aggregate carrying value of $107.7 million as
of December 31, 2000. Each property's carrying value is less than or equal to
its estimated fair market value, net of estimated costs to sell. The property-
level earnings, after mortgage interest and depreciation, from communities held
for disposition at December 31, 2000, which are included in Archstone's earnings
from operations for 2000, 1999 and 1998, were $5.6 million, $5.3 million and
$5.5 million, respectively.

                                       40
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

(3)  Investments in and Advances to Unconsolidated Real Estate Entities

     We have investments in entities that we account for using the equity
method. The most significant of these investments are discussed below.

     Ameriton is a corporation whose business is acquiring and developing
properties to sell to third parties. Archstone owns all Class B non-voting
common shares, which entitles us to 95% of the net operating cash flow of
Ameriton.  Our investments in and advances to Ameriton at December 31, 2000 and
December 31, 1999 were $209.3 million and $130.8 million, respectively.

     In June and July of 2000, we formed two joint ventures with FIIB.  The
ventures were formed through our contribution of a total of 11 apartment
communities with an estimated aggregate fair value of approximately $237.0
million.  FIIB contributed a total of $66.7 million of cash for an 80% ownership
interest in each of the ventures.  The ventures also obtained an aggregate of
$153.7 million in mortgage loans from Freddie Mac secured by the 11 communities.
We maintained a 20% ownership interest in each of the ventures valued at
approximately $16.7 million and received cash distributions totaling $220.4
million.  For financial reporting purposes, we accounted for the transactions as
a partial disposition of the communities, which resulted in recognition of an
aggregate net gain of $13.3 million.  We only recognized 80% of the total gain,
due to the 20% continuing ownership interest in the joint ventures.  The
ventures have a five-year life with flexible liquidation terms to ensure an
orderly disposition of the communities, based on prevailing market conditions.
We receive management fees for managing the communities and the ventures.

(4)  Mortgage Notes Receivable

     In October 1996, we contributed 54 extended-stay-lodging assets to
Homestead in exchange for common stock and convertible mortgage notes. The
common stock was distributed to our shareholders in November 1996. In total, we
received $221.3 million (face amount) of convertible mortgage notes in exchange
for development financing provided to Homestead from 1996 through 1998,
including the notes received in exchange for the initial contribution of
properties.

     During the three months ended March 31, 2000, we determined that for
various reasons, including the then proposed transaction that eliminated the
publicly traded common shares of Homestead, the conversion feature associated
with our Homestead mortgage notes had no continuing economic value. Therefore, a
write-off of the net unamortized balance of the conversion feature, aggregating
$2.8 million, was recorded. The remaining balances associated with the
convertible mortgage notes were not affected.

     In July 2000, we completed a transaction to repurchase approximately 17.5
million of our Common Shares held by Security Capital in exchange for Homestead
mortgage notes with a face amount of $221.3 million and cash of $178.7 million.
The Homestead mortgage notes and related balances had a net book value of $195.7
million on the date of the transaction.  We recognized a gain of $9.3 million
related to this transaction in the third quarter of 2000.

(5)  Borrowings

  Unsecured Credit Facilities

     In December 2000, we closed a $580 million unsecured revolving line of
credit facility, which replaced our previous line that was scheduled to mature
in 2001. The $0.9 million in unamortized loan costs related to the prior line
were expensed as an extraordinary item in 2000.

                                       41
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

     The $580 million unsecured revolving credit facility is provided by a group
of financial institutions led by The Chase Manhattan Bank. The $580 million
unsecured credit facility matures in December 2003 and provides us with a one-
year extension option. The unsecured credit facility bears interest at the
greater of prime or the federal funds rate plus 0.50%, or at our option, LIBOR
(6.75% at December 31, 2000 and an average of 6.41% for the year ended December
31, 2000) plus 0.65%. The spread over LIBOR can vary from LIBOR plus 0.50% to
LIBOR plus 1.25% based upon the rating of our Long-Term Unsecured Debt. Under a
competitive bid option contained in the credit agreement, we may be able to
borrow up to $290 million at a lower interest rate spread over LIBOR, depending
on market conditions. Under the agreement, we pay a facility fee, which can vary
from 0.125% to 0.200% of the commitment, (current facility fee is 0.15%) based
upon the rating of our Long-Term Unsecured Debt. Archstone paid facility fees on
unsecured credit facilities of $1.1 million, $1.1 million and $0.8 million in
2000, 1999 and 1998, respectively.

     The following table summarizes our unsecured credit facility borrowings (in
thousands, except for percentages):

<TABLE>
<CAPTION>
                                                                 Year Ended December 31,
                                                                 -----------------------
                                                                   2000          1999
                                                                 ---------     ---------
          <S>                                                    <C>           <C>
          Total unsecured credit facility.....................   $ 580,000     $ 750,000
          Borrowings outstanding at December 31...............     150,000       485,000
          Weighted average daily borrowings...................     305,016       387,082
          Maximum borrowings outstanding during the period....   $ 618,000     $ 485,000
          Weighted average daily nominal interest rate........        7.01%         5.98%
          Weighted average daily effective interest rate......        7.45%         6.37%
</TABLE>

     We also have a short-term unsecured borrowing agreement with The Chase
Manhattan  Bank, which provides for maximum borrowings of $100 million.  The
agreement bears interest at an overnight rate that ranged from 6.25% to 7.63%
during 2000.  At December 31, 2000 and 1999, there were $43.7 million and $8.5
million of borrowings outstanding under this agreement, respectively.

  Long-Term Unsecured Debt

     A summary of our Long-Term Unsecured Debt outstanding at December 31, 2000
and 1999 follows (dollar amounts in thousands):

<TABLE>
<CAPTION>
                                                           Effective       Balance at      Balance at        Average
                                             Coupon        Interest       December 31,    December 31,      Remaining
             Type of Debt                   Rate (1)       Rate (2)           2000            1999         Life (Years)
----------------------------------------   -----------    -----------    -------------   --------------   -------------
<S>                                        <C>            <C>            <C>             <C>              <C>
Long-term unsecured senior notes........      7.48%          7.68%       $   1,325,547   $    1,200,857        6.9
Unsecured tax-exempt bonds..............      4.79%          5.14%              75,715           75,715        7.4
                                           -----------    -----------    -------------   --------------   -------------
  Total/average.........................      7.34%          7.54%       $   1,401,262   $    1,276,572        7.0
                                           ===========    ===========    =============   ==============   =============
</TABLE>

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

                                       42
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

     The $1.3 billion of long-term unsecured senior notes generally have semi-
annual interest payments and either amortizing annual principal payments or
balloon payments due at maturity. The unsecured tax-exempt bonds require semi-
annual interest payments and are due upon maturity in 2008 (see - Scheduled Debt
Maturities).  The notes are generally redeemable at our option, in whole or in
part, and the unsecured tax-exempt bonds are generally redeemable upon sale of
the related property.  The redemption price is generally equal to the sum of the
principal amount of the notes being redeemed plus accrued interest through the
redemption date plus a standard make-whole premium, if any.

  Mortgages Payable

     Archstone's mortgages payable generally feature either monthly interest and
principal payments or monthly interest only payments with balloon payments due
at maturity (see - Scheduled Debt Maturities).  A summary of mortgages payable
outstanding at December 31, 2000 follows (dollar amounts in thousands):

<TABLE>
<CAPTION>
                                        Effective Interest   Principal Balance at December 31,
Type of Mortgage                             Rate (1)              2000             1999
--------------------------------------  ------------------   ---------------   ---------------
<S>                                     <C>                  <C>               <C>
Fannie Mae (2)........................        6.96%          $       406,989   $       304,365
Conventional fixed rate...............        7.76%                  200,694           110,776
Tax-exempt fixed rate.................        7.30%                   17,676            56,576
Tax-exempt floating rate..............        5.10%                  226,325           192,847
Other.................................        5.65%                   24,120            30,384
                                        ------------------   ---------------   ---------------
  Total/average mortgage debt.........        6.63%          $       875,804   $       694,948
                                        ==================   ===============   ===============
</TABLE>

(1)  Includes the effect of interest rate hedges, credit enhancement fees, other
     bond-related costs and loan cost amortization, where applicable, as of
     December 31, 2000.
(2)  Represents a long-term secured debt agreement with Fannie Mae.  The Fannie
     Mae secured debt matures January 2006, although Archstone has the option to
     extend the term of any portion of the debt for up to an additional 30-year
     period at any time, subject to Fannie Mae's approval.

     The changes in mortgages payable during 2000 and 1999 consisted of the
following (in thousands):

<TABLE>
<CAPTION>
                                                          2000          1999
                                                       ----------    ----------
<S>                                                    <C>           <C>
Balances at January 1...............................   $  694,948    $  676,613
  Notes assumed or originated.......................      227,536       141,613
  Bond refinancing..................................       (2,420)      (59,715)
  Regularly scheduled principal amortization........       (4,833)       (5,391)
  Prepayments, final maturities and other...........      (39,427)      (58,172)
                                                       ----------    ----------
Balances at December 31.............................   $  875,804    $  694,948
                                                       ==========    ==========
</TABLE>

                                       43
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

  Scheduled Debt Maturities

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

<TABLE>
<CAPTION>
                                                                      Mortgages Payable
                                                         ---------------------------------------
                                                               Regularly
                                         Long-Term             Scheduled            Final
                                         Unsecured             Principal          Maturities
                                            Debt             Amortization          and Other             Total
                                    -------------------  -------------------  ------------------  ------------------
     <S>                            <C>                  <C>                  <C>                 <C>
     2001......................      $           70,010   $            5,738   $           5,121   $          80,869
     2002......................                  97,810                6,288                 102             104,200
     2003......................                 171,560                6,656              14,843             193,059
     2004......................                  51,560                7,069              36,448              95,077
     2005......................                 251,560                7,355              28,018             286,933
     Thereafter................                 758,762              110,264             647,902           1,516,928
                                    -------------------  -------------------  ------------------  ------------------
          Total................      $        1,401,262   $          143,370   $         732,434   $       2,277,066
                                    ===================  ===================  ==================  ==================
</TABLE>

    The average annual principal payments due from 2006 to 2020 are $99.1
million per year.

    The $580 million unsecured credit facility matures in December 2003 and has
a one-year extension option.

  Other

    Archstone's debt instruments generally contain certain covenants common to
the type of facility or borrowing, including financial covenants establishing
minimum debt service coverage ratios and maximum leverage ratios. We were in
compliance with all financial covenants pertaining to our debt instruments at
December 31, 2000.

    See Note 11 for a summary of derivative financial instruments used in
connection with our debt instruments.

(6) Distributions to Shareholders

    To maintain our status as a REIT, we are generally required to distribute at
least 90% of our taxable income (95% for taxable years ending prior to January
1, 2001).  The payment of distributions is subject to the discretion of the
Board and is dependent upon our strategy, financial condition and operating
results.  At its December 2000 Board meeting, the Board announced an anticipated
increase in the annual distribution level from $1.54 to $1.64 per Common Share.

    The following table summarizes the cash dividends paid per share on Common
Shares and Preferred Shares in 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                   2000                 1999                 1998
                                                              ---------------     ----------------     ----------------
          <S>                                                 <C>                 <C>                  <C>
          Common Shares.....................................   $         1.54      $          1.48      $          1.39
          Series A Convertible Preferred Shares.............   $         2.07      $          1.99      $          1.87
          Series B Preferred Shares.........................   $         2.25      $          2.25      $          2.25
          Series C Preferred Shares (1).....................   $         2.16      $          2.16      $          1.08
          Series D Preferred Shares (2).....................   $         2.19      $          0.88      $             -
</TABLE>

(1)  In 1998, represents dividends paid subsequent to the Atlantic Merger.
(2)  Shares were issued in August 1999.  The annualized dividend level is
     $2.1875 per share.

                                       44
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

(7) Minority Interest

  Perpetual Preferred Units

    At various dates, consolidated subsidiaries of Archstone have issued
perpetual preferred units to limited partnerships in exchange for cash. The
total net proceeds of $31.2 million in 2000 and $42.0 million in 1999 from the
issuance of these units were used to repay borrowings under our unsecured credit
facilities. All perpetual preferred units issued to date have a liquidation
preference of $25 per unit and are paid a fixed cumulative quarterly
distribution each quarter. We have the option to redeem the units at par on
dates ranging from 2004 to 2005. Unless redeemed, the units are convertible into
a specified series of non-convertible preferred shares after certain dates.
Following is a summary of outstanding perpetual preferred units as of December
31, 2000:

<TABLE>
<CAPTION>
                                                                                       Annual
                                                                   Total            Distribution
                                                                Liquidation             Rate               Convertible
        Effective Issuance Date                 Units           Preference           (Per unit)            on or After
----------------------------------------   --------------   -----------------   ------------------   ------------------------
<S>                                        <C>              <C>                 <C>                  <C>
  Series E........  August 13, 1999               520,000    $     13 million    $          2.0938     August 13, 2009
  Series E........  November 19, 1999             400,000          10 million               2.0938     November 19, 1999
  Series E........  February 4, 2000              680,000          17 million               2.0938     August 13, 2009
                                           --------------   -----------------   ------------------
                                                1,600,000    $     40 million    $          2.0938
  Series F........  September 27, 1999            800,000          20 million               2.0313     September 27, 2009
  Series G........  March 3, 2000                 600,000          15 million               2.1563     March 3, 2010
                                           --------------   -----------------   ------------------
                                                3,000,000    $     75 million    $          2.0896
                                           ==============   =================   ==================
</TABLE>

  Convertible Operating Partnership Units

    As of December 31, 2000, 1999 and 1998, there were 949,000, 598,000 and
913,000 convertible partnership units outstanding that had been issued by
consolidated subsidiaries of Archstone in exchange for real estate assets.  The
units are convertible into Common Shares on a one-for-one basis and are
generally entitled to distributions in amounts equal to those distributed on
Common Shares.

  General

    All of the units are reflected as minority interest in the accompanying
Balance Sheets.  The income allocated to these minority interests, which is
generally equal to the amount of unit distributions, is reflected as minority
interest expense in the accompanying Statements of Earnings.

(8) Shareholders' Equity

  Shares of Beneficial Interest

    Archstone's declaration of trust authorizes us to issue up to 250,000,000
shares of beneficial interest, $1.00 par value per share, consisting of Common
Shares, preferred shares and such other shares of beneficial interest as the
Board may create and authorize from time to time.  The Board may classify or
reclassify any unissued shares from time to time by setting or changing the
preferences, conversion rights, voting powers, restrictions, limitations as to
distributions, qualifications of terms or conditions of redemption.

                                       45
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

  Preferred Shares

      The Series A Convertible Preferred Shares issued in November 1993 have a
liquidation preference of $25 per share for an aggregate liquidation preference
at December 31, 2000 of $82.7 million.  Holders of the Series A Convertible
Preferred Shares are entitled only to limited voting rights under certain
conditions.  Each Series A Convertible Preferred Share is convertible, in whole
or in part at the option of the holder at any time, into 1.3469 Common Shares.
During 2000, 1999 and 1998, approximately 399,000, 965,000 and 708,000 of Series
A Convertible Preferred Shares were converted into approximately 538,000,
1,300,000 and 953,000 Common Shares, respectively.  This activity is included in
"Other, net" in the accompanying Statements of Shareholders' Equity.

      Distributions on the Series A Convertible Preferred Shares are payable in
an amount per share equal to the greater of $1.75 per annum or the annualized
quarterly distribution rate on the Common Shares multiplied by the 1.3469
conversion factor. Based on our anticipated 2001 Common Share dividend level,
the annualized dividend on the Series A Convertible Preferred Shares will be
$2.209. The Series A Convertible Preferred Shares are redeemable at our option
after November 30, 2003.

      A summary of Archstone's Series B, Series C and Series D Preferred Shares
outstanding at December 31, 2000 follows:

<TABLE>
<CAPTION>
                                                         Liquidation           Total
                                         Shares          Preference         Liquidation          Dividend           Redeemable
   Perpetual Preferred Shares         Outstanding        (Per share)         Preference        (Per share)        on or After (1)
--------------------------------   ----------------  ------------------  -----------------  ----------------  --------------------
<S>                                <C>               <C>                 <C>                <C>               <C>
Series B........................      4.2 million      $          25.00    $ 104.7 million    $       2.2500    May 24, 2000
Series C........................      2.0 million                 25.00       49.7 million            2.1563    August 20, 2002
Series D........................      2.0 million                 25.00       49.8 million            2.1875    August 6, 2004
                                   ----------------  ------------------  -----------------  ----------------
                                      8.2 million      $          25.00    $ 204.2 million    $       2.2120
                                   ================  ==================  =================  ================
</TABLE>

(1)   We may redeem the shares for cash, in whole or in part, at a redemption
      price of $25 per share plus any accrued but unpaid distributions, if any,
      to the redemption date. The redemption price (other than the portion
      thereof consisting of accrued and unpaid distributions) is payable solely
      out of the sale proceeds of other shares of Archstone, which may include
      other series of preferred shares.

      The holders of the Preferred Shares do not have preemptive rights over the
holders of Common Shares.  The Preferred Shares have no stated maturity and are
not subject to any sinking fund and we are not obligated to redeem or retire the
shares.  Holders of the Preferred Shares are entitled to receive, when and as
declared by the Board, out of funds legally available for the payment of
distributions, cumulative preferential cash distributions.  The Series B, Series
C and Series D Preferred Shares are not convertible into any other Archstone
securities.

      All Preferred Share distributions are cumulative from the date of original
issue and are payable quarterly in arrears on the last day of each March, June,
September and December.  All dividends due and payable on Preferred Shares have
been accrued and paid as of the end of each fiscal year.  All series of
Preferred Shares rank on a parity as to distributions and liquidation proceeds.

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

                                       46
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

  Dividend Reinvestment and Share Purchase Plan

    We established the Dividend Reinvestment and Share Purchase Plan in December
1997 to increase ownership in the company by private investors.  Under the plan,
holders of Common Shares have the ability to automatically reinvest their cash
dividends to purchase additional Common Shares at a two percent discount from
market rates, based on the average of the high and low sales price of a Common
Share on the day of the purchase.  Additionally, existing and prospective
investors have the ability to tender cash payments that will be applied towards
the purchase of Common Shares.  The amount purchased by an individual is limited
to a maximum of $5,000 per month, with any investments above the limitation
requiring company approval.  We have not granted approval for any purchases
above the $5,000 threshold since inception of the plan.  In January 1998, we
filed a registration statement with the SEC registering the offering of
2,000,000 Common Shares, which may be issued pursuant to the terms of the plan.
As of December 31, 2000 Archstone had 1,138,827 Common Shares left to issue
under this plan.

  Ownership Restrictions and Significant Shareholder

    Our governing documents restrict beneficial ownership of our outstanding
shares by a single person, or persons acting as a group, to 9.8% of the Common
Shares and 25% of each series of Preferred Shares.  The purpose of these
provisions is to assist in protecting and preserving our REIT status and to
protect the interests of shareholders in takeover transactions by preventing the
acquisition of a substantial block of shares without first negotiating with the
Board.  For us to qualify as a REIT under the Internal Revenue Code of 1986, as
amended, not more than 50% in value of our outstanding capital shares may be
owned by five or fewer individuals at any time during the last half of our
taxable year.  The provision permits five persons to acquire up to a maximum of
9.8% each of the Common Shares, or an aggregate of 49% of the outstanding Common
Shares.

    Common Shares owned by a person or group of persons in excess of the 9.8%
limit is subject to redemption.  The provision does not apply where a majority
of the Board, in its sole and absolute discretion, waives such limit after
determining that our eligibility to qualify as a REIT for federal income tax
purposes will not be jeopardized or the disqualification as a REIT is
advantageous to shareholders.

    Under an investor agreement executed in 1990, the Board permitted Security
Capital to acquire up to 49% of Archstone's fully converted Common Shares.
Security Capital's ownership of Common Shares is attributed for tax purposes to
its shareholders.  In July 2000, we completed a transaction to repurchase
approximately 17.5 million of our Common Shares held by Security Capital in
exchange for Homestead mortgage notes with a face amount of $221.3 million and
cash of $178.7 million.  In addition, Security Capital sold 5.3 million Common
Shares to other investors during 2000, reducing its investment to 25.8% of our
outstanding Common Shares at December 31, 2000.  See Note 16 for additional
information on Security Capital's liquidation of its remaining investment in
Archstone's Common Shares subsequent to year-end.

                                       47
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

  Purchase Rights

    In 1994, the Board authorized a shareholder distribution of one purchase
right for each Common Share held. Holders of additional Common Shares issued
after this date and prior to the expiration of the purchase rights in July 2004
will be entitled to one purchase right for each additional Common Share.

    Each purchase right entitles the holder under certain circumstances to
purchase from Archstone one one-hundredth of a Participating Preferred Share at
a price of $60 per one one-hundredth of a Participating Preferred Share, subject
to adjustment.  Purchase rights are exercisable when a person or group of
persons acquires beneficial ownership of 20% or more of the fully converted
Common Shares (49% in the case of Security Capital and certain defined
affiliates), or takes formal actions, the intent of which would result in the
beneficial ownership by a person of 25% or more of the outstanding Common Shares
(49% in the case of Security Capital and certain defined affiliates).  Under
certain circumstances, each purchase right entitles the holder to purchase, at
the purchase right's then current exercise price, a number of Common Shares
having a market value of twice the purchase right's exercise price.  The
acquisition of Archstone pursuant to certain transactions or other business
transactions would entitle each holder to purchase, at the purchase right's then
current exercise price, a number of the acquiring company's common shares having
a market value at that time equal to twice the purchase right's exercise price.
The purchase rights will expire in July 2004 and are subject to redemption in
whole, but not in part, at a price of $0.01 per purchase right payable in cash,
shares of Archstone or any other form of consideration determined by the Board.

  Shelf Registration

    In December 1998, we filed a $750 million shelf registration with the SEC to
supplement an existing shelf registration with a balance of $77.2 million.
These securities can be issued in the form of Long-Term Unsecured Debt, Common
Shares or Preferred Shares on an as-needed basis, subject to our ability to
complete offerings on satisfactory terms.  As of December 31, 2000 we had
approximately $577.2 million in shelf-registered securities available for
issuance.

(9) Atlantic Merger

    In July 1998, Security Capital Atlantic Incorporated ("Atlantic"), an
affiliated apartment REIT which operated primarily in the southeast and mid-
Atlantic markets of the United States, was merged with and into Security Capital
Pacific Trust ("Pacific").  Atlantic and Pacific traded on the NYSE under the
symbols "SCA" and "PTR," respectively, prior to the merger.  The combined
company continued its existence under the name Archstone and is traded on the
NYSE under the symbol "ASN."  In accordance with the terms of the Atlantic
Merger, each outstanding Atlantic common share was converted into the right to
receive one Common Share and each outstanding Atlantic Series A preferred share
was converted into the right to receive one comparable share of a new class of
Series C Preferred Shares.  As a result, 47,752,052 Common Shares and 2,000,000
Series C Preferred Shares were issued to Atlantic's shareholders in exchange for
all of the outstanding Atlantic common shares and Atlantic Series A preferred
shares.  In addition, Archstone assumed Atlantic's debt and other liabilities.
The Atlantic Merger added 91 operating apartment communities (24,414 units) and
34 development communities (9,358 units) to the portfolio.  The total purchase
price paid for Atlantic aggregated approximately $1.9 billion.  The transaction
was structured as a tax-free transaction and was accounted for under the
purchase method.

                                       48
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

     The following summarized pro forma unaudited information represents the
combined historical operating results of Pacific and Atlantic with the
appropriate purchase accounting adjustments, assuming the Atlantic Merger had
occurred on January 1, 1998.  The pro forma financial information presented is
not necessarily indicative of what Archstone's actual operating results would
have been had the two companies constituted a single entity during such periods
(in thousands, except per share amounts).

<TABLE>
<CAPTION>
                                                                                                Year Ended
                                                                                             December 31, 1998
                                                                                           --------------------
<S>                                                                                        <C>
Total revenues..........................................................................    $           610,866
                                                                                           ====================
Net earnings attributable to Common Shares before extraordinary items...................    $           201,562
                                                                                           ====================
Net earnings attributable to Common Shares..............................................    $           199,842
                                                                                           ====================
Weighted average Common Shares outstanding:
       Basic............................................................................                141,939
                                                                                           ====================
       Diluted..........................................................................                148,714
                                                                                           ====================
Earnings attributable to Common Shares before extraordinary items per Common Share:
       Basic and Diluted................................................................    $              1.42
                                                                                           ====================
Net earnings attributable to Common Shares per Common Share:
       Basic and Diluted................................................................    $              1.41
                                                                                           ====================
</TABLE>

(10) Benefit Plans

     In September 1997, our Common Shareholders approved the long-term incentive
plan.  To date, there have been four types of awards issued under the plan: (i)
an employee share purchase program with matching options; (ii) share options
with a dividend equivalent unit ("DEU") feature; (iii) share options without a
DEU feature; and (iv) restricted Common Share unit awards with a DEU feature.
No more than 8,650,000 share or option awards in the aggregate may be granted
under the plan and no individual may be awarded more than 500,000 share or
option awards in any one-year period.  As of December 31, 2000 Archstone had
2,106,918 share awards available for future grants.  The plan has a 10-year
term.

   1997 Employee Share Purchase Program with Matching Options

     As of December 31, 2000, there were 333,555 Common Shares outstanding that
had been purchased by certain officers and other employees at prices ranging
from $22.06 to $23.34 per Common Share under the employee share purchase
program. This share purchase program was conducted in 1997 when Archstone became
an internally managed REIT. There have been no employee share purchase programs
initiated since that time. Archstone financed 95% of the total purchase price
through 10-year notes from the participants. The share purchase notes are
recorded as a reduction in shareholders' equity and are included in "Other, net"
on the accompanying Statements of Shareholders' Equity. The notes bear interest
at approximately 6.0% per annum. All dividends on the shares are applied to
interest and principal on the notes, with no cash distributions to employees.
The notes are fully recourse to the participant and are also secured by the
Common Shares purchased. For each Common Share purchased, participants were
granted two options. Each option entitles the participant to purchase one Common
Share at the market price of the underlying share on the date of grant. The
matching share options gradually vest over a five-year period. A reconciliation
of the notes due from employees during 2000 and 1999 are summarized as follows
(in thousands):

<TABLE>
<CAPTION>
                                                                           2000                  1999
                                                                     ----------------      -----------------
               <S>                                                   <C>                   <C>
               Beginning balance.................................    $         19,170      $          26,275
               Repayments upon sale of shares....................             (12,308)                (6,854)
               Regular principal payments........................                 (98)                  (251)
                                                                     ----------------      -----------------
                    Ending balance...............................    $          6,764      $          19,170
                                                                     ================      =================
</TABLE>

     Of the notes outstanding at December 31, 2000, approximately $5.2 million
were due from officers.

                                       49
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

  Dividend Equivalent Units

    Under the long-term incentive plan participants who are awarded share
options or restricted Common Share units may be credited with DEUs with respect
to such rewards. The DEUs credited in relation to share options or restricted
Common Share units are awarded annually each year and vest under substantially
the same terms as the underlying share options or restricted Common Shares.

    DEUs credited in relation to share options generally represent the average
number of share options held at each record date, multiplied by the difference
between the average annual dividend yield on Common Shares and the average
dividend yield for the Standard & Poor's 500 Stock Index.  The average annual
dividend yield for the Standard & Poor's 500 Stock Index is not deducted when
calculating DEUs credited in relation to restricted Common Share units or when
calculating the DEUs earned on previously-earned DEUs.  As of December 31, 2000,
there were a total of 233,721 DEUs outstanding awarded to 123 holders of share
options and restricted Common Share units.  We recognize the value of the DEUs
awarded as compensation expense over the vesting period, net of any previously
recorded DEU expense related to forfeitures. The matching options granted in
connection with the 1997 employee purchase program and all of the options
granted in 2000 did not have a DEU feature.

  Share Options and Trustee Options

    The exercise price of each share option granted is equal to the Common Share
closing price on the date of grant. The share options awarded generally vest at
a rate of 25% per year.

    Additionally, Archstone has authorized 200,000 Common Shares for issuance to
Outside Trustees.  The exercise price of Outside Trustee options is equal to the
average of the highest and lowest market price per share on the date of grant.
All of the options granted prior to 1999 have a five-year term and are
exercisable in whole or in part at any time.  The options issued in 1999 and
2000 have a DEU feature, a 10-year term and vest over a four-year period.

    A summary of all share options outstanding at December 31, 2000 follows:

<TABLE>
<CAPTION>


                                                                  Exercise Prices
                                                      ------------------------------------                         Weighted-Average
                                         Number of                                                                    Remaining
                                          Options            Range             Average        Expiration Date      Contractual Life
                                      --------------  ------------------  ----------------  -------------------  -------------------
<S>                                   <C>             <C>                 <C>               <C>                  <C>
Matching options under the 1997
 employee share purchase program....       1,243,884     $21.19 - $23.34  $          22.18       2007 - 2008          6.75 years
Share options with DEUs.............       1,608,120     $19.00 - $23.75  $          20.63       2007 - 2009          8.03 years
Share options without DEUs..........       1,215,209     $21.88 - $24.63  $          24.60              2010          9.92 years
Outside Trustees....................          86,000     $19.34 - $22.59  $          22.21       2001 - 2010          6.70 years
                                      --------------  ------------------  ----------------
Total...............................       4,153,213     $19.00 - $24.63  $          22.29
                                      ==============  ==================  ================
</TABLE>

                                       50
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

    A summary of the status of our share option plans as of December 31, 2000,
1999 and 1998, and changes during the years ended on those dates is presented
below:

<TABLE>
<CAPTION>
                                                                                 Weighted              Number of
                                                          Number of          Average Exercise           Options
                                                           Options                 Price              Exercisable
                                                      ------------------   --------------------   ------------------
<S>                                                   <C>                  <C>                    <C>
Balance/Average at December 31, 1997.............              1,885,417   $              21.99               38,000
                                                      ------------------   --------------------   ------------------
     Assumed in the Atlantic Merger..............              1,260,138                  22.44
     Granted.....................................              1,582,754                  20.67
     Exercised...................................                 (8,000)                 16.14
     Forfeited...................................               (563,660)                 22.30
                                                      ------------------   --------------------
Balance/Average at December 31, 1998.............              4,156,649   $              21.62               48,000
                                                      ------------------   --------------------   ------------------
     Granted.....................................                923,528                  20.74
     Exercised...................................                (10,000)                 18.83
     Forfeited...................................               (873,763)                 21.87
                                                      ------------------   --------------------
Balance/Average at December 31, 1999                           4,196,414   $              21.36              873,325
                                                      ------------------   --------------------   ------------------
     Granted.....................................              1,259,776                  24.51
     Exercised...................................               (371,333)                 21.49
     Forfeited...................................               (931,644)                 21.40
                                                      ------------------   --------------------
Balance/Average at December 31, 2000.............              4,153,213   $              22.29            1,182,120
                                                      ==================   ====================   ==================
</TABLE>

  Proforma Compensation Expense

    We have adopted SFAS No. 123, Accounting for Stock-Based Compensation, which
allows us to continue to account for our various share option plans under APB
Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), and related
interpretations.  Under APB 25, if the exercise price of the share options
equals the market price of the underlying share on the date of grant, no
compensation expense is recognized.  Accordingly, we did not recognize
compensation expense related to share options, as the exercise price of all
options granted was equal to the market price on the date of grant.  Had
compensation cost for these plans been determined using the option valuation
models prescribed by SFAS No. 123, net earnings attributable to Common Shares
and earnings per Common Share for 2000, 1999 and 1998 would change as follows:

<TABLE>
<CAPTION>
                                                                              2000                1999                1998
                                                                        -----------------   -----------------   -----------------
            <S>                                                         <C>                 <C>                 <C>
            Net earnings attributable to Common Shares
            (in thousands):
                    As reported....................................      $        236,045    $        204,526    $        177,022
                                                                        -----------------   -----------------   -----------------
                    Pro forma......................................      $        235,022    $        203,348    $        175,991
                                                                        =================   =================   =================

            Basic earnings per Common Share:
                    As reported....................................      $           1.79    $           1.46    $           1.49
                                                                        -----------------   -----------------   -----------------
                    Pro forma......................................      $           1.78    $           1.45    $           1.48
                                                                        =================   =================   =================

            Diluted earnings per Common Share:
                    As reported....................................      $           1.78    $           1.46    $           1.49
                                                                        -----------------   -----------------   -----------------
                    Pro forma......................................      $           1.77    $           1.45    $           1.48
                                                                        =================   =================   =================
</TABLE>

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

<TABLE>
<CAPTION>
                                                                   2000             1999              1998
                                                             ---------------   ---------------   --------------
          <S>                                                <C>               <C>               <C>
          Weighted average risk-free interest rate...........          5.43%             6.52%            4.74%
          Weighted average dividend yield....................          6.77%             6.97%            6.43%
          Weighted average volatility........................         23.65%            16.31%           25.44%
          Weighted average expected option life..............     6.25 years        6.27 years       6.74 years
</TABLE>

                                       51
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

     The weighted average fair value of all options granted (excluding Trustee
options) was approximately $3.00, $2.00 and $3.00 per option during 2000, 1999
and 1998, respectively.

  Restricted Common Share Unit Awards

     During 2000, 1999 and 1998 we awarded 131,942, 360,394 and 220,572
restricted Common Share units with a DEU feature to certain employees under the
long-term incentive plan, respectively, of which 92,029 have been forfeited.
Each restricted Common Share unit is subject to certain vesting provisions, and
upon settlement provides the holder with one Common Share. The restricted Common
Share units and related DEU feature generally vest at 20%-50% per year over a
two-to five-year period. We recognize the value of the awards and the related
DEUs as compensation expense over the vesting period.

  401(k) Plan and Nonqualified Savings Plan

     In December 1997, the Board established a 401(k) plan and a nonqualified
savings plan, which both became effective on January 1, 1998.  The plans work
together to provide for matching employer contributions of fifty cents for every
dollar contributed by an employee, up to 6% of the employees' annual
compensation.  The matching employer contributions are made in Common Shares,
which vest based on years of service at a rate of 20% per year.

  Deferred Fee Plan for Non-Employee Trustees

     Each non-employee member of our Board has the opportunity to defer receipt
of all or a portion of the service fees they otherwise would have been paid in
cash. If a participant elects to have their fees deferred, the fees are accrued
based on the amount that would be payable if he had used the cash to purchase
Common Shares on the date the fee was received and reinvested any dividends
received during the deferral period into additional Common Shares. Distributions
can be deferred up to the date the Trustee ceases to serve on the Board and are
payable in Common Shares.

(11) Financial Instruments

  Fair Value of Financial Instruments

     At December 30, 2000 and 1999, our financial instruments included cash and
cash equivalents, restricted cash held in a tax-deferred exchange escrow, stock
investments, receivables, accounts payable, borrowings and interest rate
contracts.

     At December 31, 2000 and 1999, the fair values of cash and cash
equivalents, restricted cash held in a tax-deferred exchange escrow, receivables
and accounts payable approximated their carrying values because of the short-
term nature of these instruments. The estimated fair values of other financial
instruments subject to fair value disclosures and the related carrying amounts
are summarized in the table below. These fair values were determined based on
available market information and valuation methodologies believed to be
appropriate for these purposes. Considerable judgment and a high degree of
subjectivity are involved in developing these estimates and, therefore, are not
necessarily indicative of the actual amounts that we could realize upon
disposition (in thousands):

                                       52
<PAGE>

                          Archstone Communities Trust

                  Notes toc Financial Statements - (Continued)

<TABLE>
<CAPTION>
                                                                  2000                                    1999
                                                 -----------------------------------     ----------------------------------
                                                 Carrying Amounts      Fair  Value       Carrying Amounts      Fair  Value
                                                 ----------------     --------------     -----------------     ------------
<S>                                              <C>                  <C>                <C>                   <C>
Stock Investments...........................     $         16,182     $       16,182     $           7,761     $      7,761
Borrowings:
   Unsecured credit facilities..............     $        193,719     $      193,719     $         493,536     $    493,536
   Long-Term Unsecured Debt.................            1,401,262          1,392,216             1,276,572        1,209,395
   Mortgages payable........................              875,804            892,733               694,948          690,032
Interest Rate Contracts:
   Interest rate swaps......................     $              -     $        6,599     $               -     $     12,791
   Interest rate caps.......................                  715                559                   975            3,027
</TABLE>

 Interest Rate Risk Management

   We are exposed to the impact of interest rate changes and will occasionally
utilize interest rate swaps and interest rate caps as hedges with the objective
of lowering our overall borrowing costs. Our pay-floating swaps effectively
convert medium and long-term tax-exempt bond obligations to BMA Municipal Swap
Index(TM) variable rate instruments. These swap agreements expire in three-to
eight-years. Pay-fixed swaps and interest rate cap agreements effectively
convert floating rate obligations, which are typically indexed to LIBOR, to
fixed rate instruments. The pay-fixed swap agreements expire in one-to six-years
and the interest rate cap agreements expire in one-to five-years.

   The following table reflects changes in the notional or contractual amounts
of our interest rate contracts during 2000 and 1999 (in thousands).  Renewals of
existing positions are not included.


   <TABLE>
   <CAPTION>
                                                            Pay Floating              Pay Fixed                 Interest Rate
                                                               Swaps                    Swaps                        Caps
                                                         -----------------------   ------------------      ---------------------
   <S>                                                   <C>                       <C>                     <C>
   Balance at December 31, 1998                          $                   -     $                -      $                   -
                                                         -----------------------   ------------------      ---------------------
      Additions.....................................                     119,311              205,000                    118,450
                                                         -----------------------   ------------------      ---------------------
   Balance at December 31, 1999.....................     $               119,311   $          205,000      $             118,450
                                                         -----------------------   ------------------      ---------------------
      Additions.....................................                      54,450                    -                     34,508
                                                         -----------------------   ------------------      ---------------------
   Balance at December 31, 2000.....................     $               173,761   $          205,000      $             152,958
                                                         -----------------------   ------------------     -----------------------
</TABLE>

 New Accounting Guidance

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

   For financial reporting purposes, the accounting will vary depending on the
type of hedge and its effectiveness. With respect to a fair value hedge, both
changes in the fair value of the derivative hedging instrument and changes in
the fair value of the hedged item will be recorded in earnings each reporting
period. These amounts should completely offset with no resulting earnings
impact, except for the portion of the hedge that proves to be ineffective,

                                       53
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

if any. In the case of a cash flow hedge, changes in fair value related to the
effective portion of the hedge are accumulated in other comprehensive income and
subsequently reclassified to earnings during the period that the hedged item
impacts earnings. The portion of the cash flow hedge that is ineffective at
offsetting cash flows will be recognized in earnings immediately. The reduction
in fair value on a cash flow hedge, such as an interest rate cap, relating to
the passage of time is recorded in earnings each period.

   Upon adoption of SFAS No. 133/138, we recorded a net transition unrealized
loss of approximately $200,000, related to the cumulative effect of an
accounting change in net earnings, and a net transition unrealized gain of
approximately $3.8 million in accumulated other comprehensive income (equity)
which is expected to reverse over the next two years. The impact to our balance
sheet consisted of an increase to total assets of approximately $6.4 million and
an increase to our debt balances of approximately $2.8 million. In general, the
amount of volatility will vary with the level of derivative activities during
any period. As a matter of policy, we pursue hedging strategies that result in
the least degree of earnings volatility possible under the new accounting
standard.

(12) Selected Quarterly Financial Data (Unaudited)

   Selected quarterly financial data (in thousands, except per share amounts)
for 2000 and 1999 is summarized below. The sum of the quarterly earnings per
Common Share amounts may not equal the annual earnings per Common Share amounts
due primarily to changes in the number of Common Shares outstanding from quarter
to quarter.

<TABLE>
<CAPTION>
                                                                      Three Months Ended                 Year Ended
                                                           3-31        6-30         9-30        12-31       12-31
                                                        ---------   ----------   ----------   ---------   ---------
<S>                                                     <C>         <C>          <C>          <C>         <C>
2000:
  Total revenues.....................................   $ 177,016   $  184,813   $  187,889   $ 173,516   $ 723,234
                                                        ---------   ----------   ----------   ---------   ---------
  Earnings from operations...........................      43,197       46,882       49,971      36,416     176,466
  Gains on dispositions of depreciated real estate,
   net...............................................       4,132       41,869       37,495       9,575      93,071
  Less minority interest:
     Perpetual preferred units.......................       1,214        1,567        1,567       1,567       5,915
     Convertible operating partnership units.........         230          366          365         365       1,326
  Less extraordinary item............................           -            -            -         911         911
  Less Preferred Share dividends.....................       6,431        6,370        6,307       6,232      25,340
                                                        ---------   ----------   ----------   ---------   ---------
  Net earnings attributable to Common Shares - Basic.   $  39,454   $   80,448   $   79,227   $  36,916   $ 236,045
                                                        =========   ==========   ==========   =========   =========
  Net earnings per Common Share:
     Basic...........................................   $    0.28   $     0.58   $     0.62   $    0.30   $    1.79
                                                        =========   ==========   ==========   =========   =========
     Diluted.........................................   $    0.28   $     0.57   $     0.61   $    0.30   $    1.78
                                                        =========   ==========   ==========   =========   =========

1999:
  Total revenues.....................................   $ 161,387   $  163,317   $  168,872   $ 173,446   $ 667,022
                                                        ---------   ----------   ----------   ---------   ---------
  Earnings from operations...........................      39,668       42,753       43,746      43,172     169,339
  Gains on dispositions of depreciated real estate,
   net...............................................       5,319       13,659       27,909      15,206      62,093
  Less minority interest:
     Perpetual preferred units.......................           -            -          164         778         942
     Convertible operating partnership units.........         338          338          221         221       1,118
  Less extraordinary item............................       1,113            -            -           -       1,113
  Less Preferred Share dividends.....................       5,691        5,617        6,036       6,389      23,733
                                                        ---------   ----------   ----------   ---------   ---------
  Net earnings attributable to Common Shares - Basic.   $  37,845   $   50,457   $   65,234   $  50,990   $ 204,526
                                                        =========   ==========   ==========   =========   =========
  Net earnings per Common Share:
     Basic...........................................   $    0.27   $     0.36   $     0.47   $    0.37   $    1.46
                                                        =========   ==========   ==========   =========   =========
     Diluted.........................................   $    0.27   $     0.36   $     0.46   $    0.37   $    1.46
                                                        =========   ==========   ==========   =========   =========
</TABLE>


                                       54
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

(13) Segment Data

     We define each of our apartment communities as individual operating
segments. We have determined that all of our apartment communities have similar
economic characteristics and also meet the other criteria, which permit the
apartment communities to be aggregated into one reportable segment. We rely
primarily on Net Operating Income for purposes of making decisions about
allocating resources and assessing segment performance.

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

<TABLE>
<CAPTION>
                                                                                             Year Ended December 31,
                                                                            -------------------------------------------------------
                                                                                  2000                1999               1998
                                                                            ----------------    ---------------    ----------------
       <S>                                                                  <C>                 <C>                <C>
       Reportable apartment communities segment revenues..................  $        684,438    $       634,028    $        478,144
       Other non-reportable operating segment revenues(1).................            38,796             32,994              35,501
                                                                            ----------------    ---------------    ----------------
       Total segment and consolidated revenues............................  $        723,234    $       667,022    $        513,645
                                                                            ================    ===============    ================

                                                                                             Year Ended December 31,
                                                                            -------------------------------------------------------
                                                                                  2000               1999                1998
                                                                            ----------------    ---------------    ----------------

       Reportable apartment communities segment Net Operating Income(2)...  $        458,842    $       416,515    $        305,309
       Other non-reportable operating segment Net Operating Income........             4,094              3,766               5,470
                                                                            ----------------    ---------------    ----------------
           Total segment Net Operating Income.............................           462,936            420,281             310,779
                                                                            ----------------    ---------------    ----------------
       Reconciling items:
           Income from unconsolidated real estate entities................             2,575              2,118                   -
           Other income...................................................            32,115             27,096              29,106
           Depreciation on real estate investments........................          (143,694)          (132,437)            (96,337)
           Interest expense...............................................          (145,173)          (121,494)            (83,350)
           General and administrative expenses............................           (23,157)           (22,156)            (16,092)
           Other expenses.................................................            (9,136)            (4,069)             (9,535)
                                                                            ----------------    ---------------    ----------------
       Consolidated earnings from operations..............................  $        176,466    $       169,339    $        134,571
                                                                            ================    ===============    ================
</TABLE>

                                       55
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Continued)

<TABLE>
<CAPTION>
                                                                            December 31,
                                                               ---------------------------------------
                                                                     2000                   1999
                                                               -----------------     -----------------
     <S>                                                       <C>                   <C>
     Reportable operating communities segment assets.........  $        4,694,938    $       4,819,307
     Other non-reportable operating segment assets(3)........             256,939              371,727
                                                               ------------------    -----------------
       Total segment assets..................................           4,951,877            5,191,034
                                                               ------------------    -----------------

     Reconciling items:
       Cash and cash equivalents.............................                 503                  515
       Restricted cash in tax-deferred exchange escrow.......               3,274               68,729
       Other assets..........................................              64,043               42,159
                                                               ------------------    -----------------

     Consolidated total assets...............................  $        5,019,697    $       5,302,437
                                                               ==================    =================
</TABLE>

(1)  Includes $13.6 million, $23.6 million and $22.9 million of interest income
     on the Homestead mortgage notes in 2000, 1999 and 1998, respectively.
     Income from our unconsolidated real estate entities, interest income on
     cash equivalents and other notes receivable are also included. The year
     ended December 31, 2000 includes a $3.3 million gain in the sale of
     Spectrum Apartment Locators, an apartment locator company acquired in
     January 1998, and a $9.3 million gain on the exchange of Homestead mortgage
     notes for Common Shares held by Security Capital.
(2)  Net Operating Income is defined as rental revenues less rental expenses and
     real estate taxes.
(3)  Includes $229.0 million and $130.8 million of investment in and advances to
     our unconsolidated real estate entities during 2000 and 1999, respectively,
     and various other real estate investments.

     We do not derive any of our consolidated revenues from foreign countries
and do not have any major customers that individually account for 10% or more of
our consolidated revenues.

(14) Commitments and Contingencies

     Archstone is a party to various claims and routine litigation arising in
the ordinary course of business. We do not believe that the results of any of
such claims and litigation, individually or in the aggregate, will have a
material adverse effect on our business, financial position or results of
operations.

     Archstone is subject to environmental regulations related to the ownership,
operation, development and acquisition of real estate. As part of our due
diligence investigation procedures, we conduct Phase I environmental assessments
on each property prior to acquisition. The cost of complying with environmental
regulations was not material to Archstone's results of operations for any of the
years in the three-year period ended December 31, 2000. We are not aware of any
environmental condition on any of our communities, which is likely to have a
material effect on Archstone's financial condition or results of operations.

     See Note 2 for real estate-related commitments.

                                       56
<PAGE>

                          Archstone Communities Trust

                  Notes to Financial Statements - (Concluded)

(15)  Supplemental Cash Flow Information

       Significant non-cash investing and financing activities for the years
ended December 31, 2000, 1999 and 1998 are as follows:

(i)    See Note 9 regarding the Atlantic Merger.
(ii)   We completed a transaction to repurchase approximately 17.5 million of
       our Common Shares held by Security Capital in exchange for Homestead
       mortgage notes with a face amount of $221.3 million and cash of $178.7
       million. On the date of the transaction, the Homestead mortgage notes had
       a net book value of $195.7 million.
(iii)  In connection with the acquisition of apartment communities, we assumed
       mortgage debt of $71.0 million, $105.4 million and $93.7 million
       (excluding mortgage debt assumed in the Atlantic Merger) during the years
       ended December 31, 2000, 1999 and 1998, respectively.
(iv)   Holders of Series A Convertible Preferred Shares converted $10.0 million,
       $24.1 million and $17.7 million of their shares into Common Shares during
       the years ended December 31, 2000, 1999 and 1998, respectively.
(v)    In 2000 we entered into joint venture transactions formed through our
       contribution of apartment communities and land in exchange for cash and
       an ownership interest in each of the ventures with an aggregate carrying
       value of $19.7 million.
(vi)   A consolidated subsidiary acquired a development site in Los Angeles
       County, California in exchange for cash and 351,000 convertible operating
       partnership units valued at approximately $6.8 million during the year
       ended December 31, 2000.
(vii)  We refinanced approximately $54.8 million and $59.7 million in bonds
       during the year ended December 31, 2000 and 1999, respectively.

(16)  Subsequent Event

       On November 22, 2000, we filed a Form S-3 with the SEC relating to the
registration of all of the Common Shares owned at that time by Security Capital.
On February 28, 2001, Security Capital sold 29.5 million Common Shares under
this registration statement in an underwritten offering at a price of $23.30 per
share ($22.08 per share after underwriting discounts). Concurrent with this
sale, Archstone repurchased 2.3 million Common Shares from Security Capital at
$22.08 per share, which is the same net price per share received by Security
Capital in the offering. The repurchase of shares was funded using proceeds from
borrowings under our unsecured credit facilities. We expect to repay these
borrowings with proceeds from dispositions. As a result of these transactions,
Security Capital liquidated its entire investment in Archstone's Common Shares
and is no longer entitled to Board representation or any other special rights
previously associated with its investment. Both of Security Capital's designees
to the Board, C. Ronald Blankenship and John T. Kelley III, resigned concurrent
with the closing of the transactions.
                                 57
<PAGE>

                         Independent Auditors' Report

The Board of Trustees and Shareholders
Archstone Communities Trust:

     Under date of January 30, 2001, except as to Note 16 which is as of
February 28, 2001, we reported on the balance sheets of Archstone Communities
Trust as of December 31, 2000 and 1999, and the related statements of earnings,
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 2000. In connection with our audits of the
aforementioned financial statements, we also audited the related financial
statement schedule. This financial statement schedule is the responsibility of
the company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.

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



                                   KPMG LLP


Chicago, Illinois
January 30, 2001

                                       58
<PAGE>

                                                                    SCHEDULE III

                              Archstone Communities Trust
                        Real Estate and Accumulated Depreciation

                                    December 31, 2000
                              (Dollar amounts in thousands)

<TABLE>
<CAPTION>
                                         Initial Cost                    Gross Amount at Which Carried
                                         to Archstone                         at December 31, 2000
                                     --------------------               --------------------------------
                                                              Costs
                                                           Capitalized                                    Accumu-
                                              Buildings &   Subsequent           Buildings &               lated     Con-
                            Encum-              Improve-        to                 Improve-               Depre-  struction   Year
                    Units   brances    Land      ments     Acquisition    Land      ments       Totals    ciation   Year    Acquired
                    -----  --------  --------  ----------  -----------  --------  ----------  ----------  ------- --------- --------
<S>                <C>     <C>       <C>       <C>         <C>          <C>       <C>         <C>         <C>     <C>       <C>
Apartment
Communities:
Albuquerque, New
Mexico:
 Comanche Wells       179  $      -  $    719  $    4,072   $      850  $    719  $    4,922  $    5,641  $    909   1985     1994
 La Paloma            424         -     4,135           -       20,277     4,135      20,277      24,412     3,778   1996     1993
 Pavilions            240         -     2,182       7,624        6,533     2,182      14,157      16,339     3,526    (a)      (a)
 Telegraph Hill       200         -     1,216       6,889        1,171     1,216       8,060       9,276       959   1986     1996
 Vista Del Sol        168         -     1,105       4,419        1,470     1,105       5,889       6,994     1,153   1987     1993
 Vistas at Seven Bar
  Ranch               572         -     3,541       5,351       21,091     3,541      26,442      29,983     4,282    (b)      (b)
 Wellington Place     280         -     1,881       7,523        2,047     1,881       9,570      11,451     1,723   1981     1993
Atlanta, Georgia:
 Archstone Roswell    664    30,032     6,791      38,484          771     6,791      39,255      46,046     4,445   1988     1998
 Archstone Vinings    200         -     1,787      10,126        1,478     1,787      11,604      13,391     1,141   1978     1998
 Archstone Perimeter
  Center              365    15,729     4,245      24,053          459     4,245      24,512      28,757     2,583   1990     1998
 Cameron Briarcliff   220         -     2,515      14,250          427     2,515      14,677      17,192     1,531   1989     1998
 Archstone North
  Point               264    14,606     2,248      12,740        8,102     2,248      20,842      23,090     1,407   1999     1998
 Archstone State
  Bridge              224         -     2,119      12,010        4,990     2,119      17,000      19,119     1,071   1999     1998
 Cameron Brook        440    18,558     4,050      22,950          532     4,050      23,482      27,532     2,421   1988     1998
 Cameron Dunwoody     238         -     2,747      15,566          278     2,747      15,844      18,591     1,674   1989     1998
 Archstone Gwinnett
  Place               304     9,898     2,389      13,537          350     2,389      13,887      16,276     1,451   1986     1998
 Cameron Pointe       214    12,308     2,725      15,440        1,327     2,725      16,767      19,492     1,686   1987     1998
 Cameron Station      348    14,751     2,880      16,321          704     2,880      17,025      19,905     1,830    (d)     1998
 Cameron Woodlands    644         -     4,901      27,775          622     4,901      28,397      33,298     2,950    (e)     1998
 Trolley Square       270    15,356     2,918      16,534        1,153     2,918      17,687      20,605     1,829   1989     1998
 Winterscreek         200     4,779     1,561       8,846          166     1,561       9,012      10,573       953   1984     1998
Austin, Texas:
 Archstone Hunter's
  Run I & II          400    14,524     2,197           -       18,188     2,197      18,188      20,385     3,006    (f)     1993
 Archstone Monterey
  Ranch I             168         -       424           -        9,622       424       9,622      10,046       615   1999     1993
 Archstone Monterey
  Ranch II            456    17,816     1,151           -       23,895     1,151      23,895      25,046     2,976   1996     1993
 Archstone Monterey
  Ranch III           448         -     1,131           -       30,274     1,131      30,274      31,405       134    (c)     1993
 Archstone Northwest
  Hills               314         -     1,311       7,431        3,736     1,311      11,167      12,478     1,933   1979     1993
 Shadowood            236         -     1,197       4,787        1,259     1,197       6,046       7,243     1,125   1985     1993
Boston,
Massachusetts:
 Archstone
  Burlington          312    36,346     6,721      38,087        1,584     6,721      39,671      46,392     2,449   1989     1999
 Archstone
  Tewksbury I          77     3,022     1,189       6,739          313     1,189       7,052       8,241       403   1995     1999
 Archstone
  Tewksbury II        168         -     3,235         660       17,369     3,235      18,029      21,264       734   2000     1999
 Archstone Bear Hill  324         -    77,230         127          452    77,230         579      77,809     1,713   1999     2000
</TABLE>

                                      59
<PAGE>

                                                                    SCHEDULE III

<TABLE>
<CAPTION>
                                         Initial Cost                    Gross Amount at Which Carried
                                         to Archstone                         at December 31, 2000
                                     --------------------               --------------------------------
                                                              Costs
                                                           Capitalized                                    Accumu-
                                              Buildings &   Subsequent           Buildings &               lated     Con-
                            Encum-              Improve-        to                 Improve-               Depre-  struction   Year
                    Units   brances    Land      ments     Acquisition    Land      ments       Totals    ciation   Year    Acquired
                    -----  --------  --------  ----------  -----------  --------  ----------  ----------  ------- --------- --------
<S>                <C>     <C>       <C>       <C>         <C>          <C>       <C>         <C>         <C>     <C>       <C>
Apartment
Communities:
Boston,
Massachusetts
(continued):
 Archstone Canton     227  $ 15,853  $ 31,662  $      453   $      390  $ 31,662    $    843  $   32,505  $    535   1992     2000
 Northgate Heights    207         -    27,921          51           17    27,921          68      27,989        81   1978     2000
 Stone Ends           280    13,859    23,156          70           52    23,156         122      23,278        67   1975     2000
Charlotte,
North Carolina:
 Archstone Tyvola
  Centre              404         -     3,470       2,461       22,120     3,470      24,581      28,051        97    (c)     1998
 Archstone Matthews   212     8,800     2,034      11,526          222     2,034      11,748      13,782     1,164   1998     1998
 Archstone Eastover   128         -     1,431       8,107        1,276     1,431       9,383      10,814       918   1987     1998
 Archstone North
  Cross               312    15,308     3,573      20,264          366     3,573      20,630      24,203     1,377   1997     1998
 Archstone
  Reafield            324         -     3,009      17,052        1,282     3,009      18,334      21,343     1,865   1987     1998
 Archstone Steele
  Creek               264         -     2,475      14,028          300     2,475      14,328      16,803     1,471   1997     1998
Chicago, Illinois:
 Foxfire              294     8,000     3,137      17,770        2,317     3,137      20,087      23,224     1,438   1988     1999
 Garden Glen          460    33,410     6,844      38,722        2,808     6,844      41,530      48,374     3,097   1987     1999
 Prairie Court (i)    125     7,250     2,071      11,708          343     2,071      12,051      14,122       535   1987     1999
 Arlington Heights    240         -    18,090         111          444    18,090         555      18,645       374   1986     2000
Dallas, Texas:
 Archstone Knoxbridge 334    15,261     4,668      26,453          911     4,668      27,364      32,032     1,620   1994     1998
 Archstone Legacy     244         -     1,532       8,683        2,792     1,532      11,475      13,007     2,043   1985     1993
 Archstone Spring
  Creek               278         -     1,613       9,140        3,360     1,613      12,500      14,113     2,190   1983     1993
 Oaks at Park
  Boulevard, The      216         -     1,386       5,543        3,230     1,386       8,773      10,159     1,381   1986     1993
 Summerstone          192         -     1,028       5,824        2,378     1,028       8,202       9,230     1,426   1983     1993
 Timber Ridge
  I & II              352         -     1,672       5,671       11,085     1,672      16,756      18,428     2,258    (g)      (g)
Denver, Colorado:
 Archstone Dakota
  Ridge               480    25,675     2,108          24       32,530     2,108      32,554      34,662     1,624   1999     1997
 Archstone Red
  Rocks II            172         -       828         529       14,960       828      15,489      16,317        81   2000     1999
 Archstone Red
  Rocks I             408         -     3,128      12,512        6,696     3,128      19,208      22,336     3,439   1984     1993
 Fox Creek I          175         -     1,167       4,669        1,734     1,167       6,403       7,570     1,358   1984     1993
 Fox Creek II         112         -         -           -        8,818         -       8,818       8,818       159   1999     1995
 Legacy Heights       384    17,671     2,049           4       20,542     2,049      20,546      22,595     1,817   1998     1997
 Reflections I & II   416         -     2,396       6,362       14,827     2,396      21,189      23,585     3,447    (h)      (h)
 Archstone Quincy
  Commons             204     8,500     2,416      13,674          766     2,416      14,440      16,856       526   1986     1999
 Silver Cliff         312         -     2,410      13,656        1,708     2,410      15,364      17,774     2,680   1991     1994
 Archstone DTC        156         -     1,030       4,596        3,652     1,030       8,248       9,278     1,396   1981     1992
 Wendemere at the
  Ranch               256    12,545     2,606      14,769          650     2,606      15,419      18,025     1,214   1984     1999
Ft. Lauderdale/West
Palm Beach:
 Archstone at
  Woodbine            408         -     3,803       1,832       22,374     3,803      24,206      28,009       116    (c)     1999
 Archstone Pembroke
  Pines               308         -     2,675      15,159        2,300     2,675      17,459      20,134     1,737   1988     1998
 Archstone Waterview  192         -     1,847      10,464        1,007     1,847      11,471      13,318     1,207   1988     1998
 Cameron at the
  Villages            384         -     3,298      18,686        1,491     3,298      20,177      23,475     2,101   1987     1998
 Cameron Cove         221     8,078     1,648       9,338        1,049     1,648      10,387      12,035     1,061   1986     1998
</TABLE>

                                      60
<PAGE>

                                                                    SCHEDULE III

<TABLE>
<CAPTION>
                                         Initial Cost                    Gross Amount at Which Carried
                                         to Archstone                         at December 31, 2000
                                     --------------------               --------------------------------
                                                              Costs
                                                           Capitalized                                    Accumu-
                                              Buildings &   Subsequent           Buildings &               lated     Con-
                            Encum-              Improve-        to                 Improve-               Depre-  struction   Year
                    Units   brances    Land      ments     Acquisition    Land      ments       Totals    ciation   Year    Acquired
                    -----  --------  --------  ----------  -----------  --------  ----------  ----------  ------- --------- --------
<S>                 <C>    <C>       <C>       <C>         <C>          <C>       <C>         <C>         <C>     <C>       <C>
Apartment
Communities:
Ft. Lauderdale/
West Palm Beach
(continued):
 Cameron Gardens      300  $      -  $  2,803  $   15,882   $    6,094  $  2,803  $   21,976  $   24,779  $  1,236   1999     1998
 Cameron Hidden
  Harbor              200     4,959     1,868      10,587        1,457     1,868      12,044      13,912     1,228   1986     1998
 Cameron Palms        340         -     2,252      12,763       13,941     2,252      26,704      28,956     1,295   1999     1998
 Cameron Park I       196         -     2,129      12,063        2,656     2,129      14,719      16,848     1,051   1999     1998
 Cameron Waterways    300         -     3,678      20,840          501     3,678      21,341      25,019     1,912   1998     1998
 Archstone Island
  Reach               280         -     2,764      15,662        1,308     2,764      16,970      19,734     1,154   1990     1999
 Park Place at
  Turtle Run          350         -     2,598      14,721          223     2,598      14,944      17,542     1,568   1989     1998
Houston, Texas:
 7100 Almeda          348         -     1,713       9,706        2,788     1,713      12,494      14,207     2,090   1984     1994
 Archstone Brompton
  Court               794         -     4,058      22,993        9,529     4,058      32,522      36,580     5,693   1972     1994
 Archstone Medical
  Center I            360    11,715     4,210           -       14,757     4,210      14,757      18,967     2,438   1996     1994
 Archstone Medical
  Center II           318         -     3,368           -       15,935     3,368      15,935      19,303     1,077   1999     1994
 Archstone Memorial
  Heights             616    25,047    12,333           -       23,063    12,333      23,063      35,396     4,091   1996     1996
Indianapolis,
 Indiana:
 Arbor Green          208         -     1,597       9,049         (436)    1,597       8,613      10,210       992   1989     1998
 Archstone River
  Ridge               202         -       461       2,612       11,301       461      13,913      14,374       683   2000     1998
Inland Empire,
 California:
 Crossing, The        296         -     2,227      12,622        2,387     2,227      15,009      17,236     1,918   1989     1996
 Miramonte            290         -     2,357      13,364        1,557     2,357      14,921      17,278     2,036   1989     1995
 Sierra Hills         300    17,706     2,810      15,921        2,187     2,810      18,108      20,918     1,780   1990     1997
 Terracina            736         -     5,780      32,757        3,655     5,780      36,412      42,192     4,550   1988     1996
 Westcourt            515         -     1,909      10,817        4,908     1,909      15,725      17,634     2,212   1986     1996
 Woodsong             262         -     1,846      10,469        1,125     1,846      11,594      13,440     1,363   1985     1996
Las Vegas, Nevada:
 Horizons at
  Piccole Ranch       408         -     3,173      18,048        1,877     3,173      19,925      23,098     3,017   1990     1995
 La Tierra at the
  Lakes               896         -     5,904      33,561        7,133     5,904      40,694      46,598     6,427   1986     1995
Los Angeles,
 California:
 Oakridge             178         -     3,212      18,200        1,752     3,212      19,952      23,164     1,283   1985     1998
 Regency Court        174         -     1,962      11,118        1,297     1,962      12,415      14,377       840   1988     1999
 Studio Colony        450    24,305    58,837         134        3,083    58,837       3,217      62,054     1,110   1987     2000
Minneapolis,
 Minnesota:
 Eden Commons         196     5,900     1,973      11,181          571     1,973      11,752      13,725       663   1987     1998
 Regency Woods        282    14,381     3,591      20,368          779     3,591      21,147      24,738       935   1988     1999
 Willow Creek         240         -     1,976      11,192        3,139     1,976      14,331      16,307       567   1979     1999
Nashville,
 Tennessee:
 Archstone Bellevue   225     4,902     2,235      12,660        1,118     2,235      13,778      16,013       868   1986     1998
 Archstone Briley
  Parkway             360         -     2,471      14,003          645     2,471      14,648      17,119     1,778   1986     1998
 Archstone Brentwood  380         -     2,672      15,143        2,355     2,672      17,498      20,170     1,744   1988     1998
 Archstone
  Shadowbluff         220     5,595     1,422       8,059          207     1,422       8,266       9,688       871   1986     1998
</TABLE>

                                      61
<PAGE>

                                                                    SCHEDULE III

<TABLE>
<CAPTION>
                                         Initial Cost                    Gross Amount at Which Carried
                                         to Archstone                         at December 31, 2000
                                     --------------------               --------------------------------
                                                              Costs
                                                           Capitalized                                    Accumu-
                                              Buildings &   Subsequent           Buildings &               lated     Con-
                            Encum-              Improve-        to                 Improve-               Depre-  struction   Year
                    Units   brances    Land      ments     Acquisition    Land      ments       Totals    ciation   Year    Acquired
                    -----  --------  --------  ----------  -----------  --------  ----------  ----------  ------- --------- --------
<S>                <C>     <C>       <C>       <C>         <C>          <C>       <C>         <C>         <C>     <C>       <C>
Apartment
Communities:
Orange County,
California:
 Las Flores           504  $  7,232  $  8,900  $      264   $   41,473  $  8,900  $   41,737  $   50,637  $  3,063   1999     1996
 Newpointe            160         -     1,403       7,981          866     1,403       8,847      10,250     1,063   1987     1996
 Rivermeadows         152         -     2,082      11,797        1,810     2,082      13,607      15,689     1,378   1986     1997
 Archstone Aliso
  Viejo               241    23,497     4,872           -       22,956     4,872      22,956      27,828     1,321   1998     1996
 Archstone Villa
  Marseilles          192     3,566     1,970      11,162        5,027     1,970      16,189      18,159     1,594   1991     1996
 Windemere            182         -     2,611      14,815          738     2,611      15,553      18,164     1,124   1987     1999
 Archstone San
  Paloma              216     2,311     3,774         117        8,925     3,774       9,042      12,816         -    (n)     1998
Orlando, Florida:
 Archstone Promenade  212         -     2,236      12,671        1,150     2,236      13,821      16,057     1,184   1999     1998
 Cameron Springs      340         -     2,893      16,391        1,102     2,893      17,493      20,386     1,802   1986     1998
 Cameron Wellington
  I & II              312         -     3,110      17,620          530     3,110      18,150      21,260     1,666   1988     1998
 Kingston Village     120         -     1,039       5,887        1,226     1,039       7,113       8,152       698   1982     1998
Phoenix, Arizona:
 Cochise at
  Arrowhead I & II    472         -     3,620           -       27,419     3,620      27,419      31,039     2,070   1999     1995
 Foxfire              188         -     1,055       5,976        1,612     1,055       7,588       8,643     1,286   1985     1994
 Archstone Deer
  Valley Village II   336         -     1,768          76       16,166     1,768      16,242      18,010         3    (c)     1996
 Peaks at Papago
  Park, The           768         -     5,131      23,408       10,741     5,131      34,149      39,280     6,110    (j)      (j)
 Ridge, The           380         -     1,852      10,492        1,583     1,852      12,075      13,927     2,236   1987     1993
 San Marbeya          404    23,380     3,675          93       23,340     3,675      23,433      27,108     1,379   1999     1997
 Archstone Old Town
  Scottsdale          472         -     3,527           -       21,598     3,527      21,598      25,125     4,050   1994     1993
 San Palmera          412         -     3,515           -       23,305     3,515      23,305      26,820     2,950   1997     1995
 Scottsdale Greens    644    23,447     3,489      19,774        9,789     3,489      29,563      33,052     5,654   1980     1994
Portland, Oregon:
 Arbor Heights        348         -     2,669           -       20,816     2,669      20,816      23,485     2,237   1998     1996
 Brighton             233         -     1,675       9,532        2,251     1,675      11,783      13,458     1,373   1985     1996
 Cambridge Crossing   250         -     2,260           -       13,471     2,260      13,471      15,731     1,513   1998     1996
 Hedges Creek         408         -     3,758         162       23,703     3,758      23,865      27,623     1,258   1999     1997
 Preston's Crossing   228         -       851           -       12,337       851      12,337      13,188     1,684   1996     1995
 Timberline           130         -     1,058       5,995          765     1,058       6,760       7,818       866   1990     1996
Raleigh, North Carolina:
 Archstone Olde
  Raleigh             228    11,754     2,732      15,482          494     2,732      15,976      18,708     1,641   1995     1998
 Archstone at
  Preston             388         -       882       4,996       22,468       882      27,464      28,346     1,165   2000     1998
 Archstone
  Southpoint          288         -     1,719       9,741        9,019     1,719      18,760      20,479       904   1999     1998
 Archstone Lynn
  Crest               228         -     2,031      11,508          133     2,031      11,641      13,672     1,480   1997     1998
 Archstone West
  Millbrook           368         -     3,145      17,820        2,197     3,145      20,017      23,162     1,954    (k)     1998
 Archstone
  Ridgewood           228         -     1,694       9,599        1,564     1,694      11,163      12,857     1,050   1985     1998
 Archstone
  Crabtree Valley     268         -     2,575      14,590          406     2,575      14,996      17,571     1,545   1987     1998
 Archstone Olde
  Apex                328         -     2,107      11,940        8,180     2,107      20,120      22,227     1,229   1999     1998
 Archstone
  University Tower    186         -     2,204      12,511          220     2,204      12,731      14,935       857   1997     1998
 Archstone
  Cornerstone         302         -     3,748      21,239          479     3,748      21,718      25,466     2,239   1997     1998
</TABLE>

                                      62
<PAGE>

                                                                    SCHEDULE III

<TABLE>
<CAPTION>
                                         Initial Cost                    Gross Amount at Which Carried
                                         to Archstone                         at December 31, 2000
                                     --------------------               --------------------------------
                                                              Costs
                                                           Capitalized                                    Accumu-
                                              Buildings &   Subsequent           Buildings &               lated     Con-
                            Encum-              Improve-        to                 Improve-               Depre-  struction   Year
                    Units   brances    Land      ments     Acquisition    Land      ments       Totals    ciation   Year    Acquired
                    -----  --------  --------  ----------  -----------  --------  ----------  ----------  ------- --------- --------
<S>                <C>     <C>       <C>       <C>         <C>          <C>       <C>         <C>         <C>     <C>       <C>
Apartment
Communities:
Raleigh, North
Carolina (continued):
 Archstone Poplar
  Place               230  $      -  $  2,189  $   12,407   $      954  $  2,189  $   13,361  $   15,550  $  1,374   1987     1998
 Archstone North Park 336    14,893     3,136      17,763          185     3,136      17,948      21,084     2,112   1996     1998
Reno, Nevada:
 Enclave I & II, The  408         -     3,485           -       27,168     3,485      27,168      30,653     1,756   1998     1996
 Vista Ridge          324         -     2,002           -       19,439     2,002      19,439      21,441     2,694   1997     1995
 Richmond, Virginia:
 Archstone Swift
  Creek I             288         -       812       4,604       17,907       812      22,511      23,323       838   2000     1998
 Archstone Swift
  Creek II            144         -       869         137        4,631       869       4,768       5,637         -    (n)     1998
 Cameron Crossing
  I & II              424         -     4,968      28,155        1,504     4,968      29,659      34,627     2,952   1998     1998
Salk Lake City, Utah:
 Archstone River Oaks 448         -     5,400         213       29,570     5,400      29,783      35,183     1,580   2000     1997
 Brighton Place       336         -     2,091      11,892        4,704     2,091      16,596      18,687     2,656   1979     1995
 Carrington Place     142     3,287     1,072       6,072          946     1,072       7,018       8,090       636   1986     1997
 Cloverland           186     4,054     1,392       7,886        1,390     1,392       9,276      10,668       846   1985     1997
 Crossroads           240     4,435     1,521       8,619        1,096     1,521       9,715      11,236     1,189   1986     1996
 Fairstone at
  Riverview           492         -     4,636           -       27,501     4,636      27,501      32,137     2,835   1998     1996
 Mountain Shadow      262         -       927       4,730        6,519       927      11,249      12,176     1,440    (l)      (l)
 Raintree             152         -       948       5,373        1,079       948       6,452       7,400       535   1984     1998
 Riverbend            200         -     1,357       7,692        1,261     1,357       8,953      10,310       725   1985     1998
San Antonio, Texas:
 Archstone Huebner
  Oaks                344         -     1,455       8,248        2,172     1,455      10,420      11,875     1,867   1983     1993
 Camino Real          176         -     1,084       4,338        2,784     1,084       7,122       8,206     1,273   1979     1993
 Contour Place        126         -       456       1,829          839       456       2,668       3,124       784   1984     1992
 Crescent, The        306         -     1,145           -       15,660     1,145      15,660      16,805     3,198   1994     1992
 Archstone Medical
  Center              276         -     1,631           -       12,203     1,631      12,203      13,834     2,080   1996     1993
 Archstone The Quarry 224     9,141     1,644           -       10,861     1,644      10,861      12,505     1,867   1995     1993
 Water at Northern
  Hills, The          305         -     1,251       7,105        2,217     1,251       9,322      10,573     1,646   1982     1994
San Diego, California:
 Archstone La Jolla   296         -     4,741      26,866        1,845     4,741      28,711      33,452     3,152   1991     1996
 Archstone Mission
  Valley              736         -    20,893         656       56,074    20,893      56,730      77,623       101    (c)     1998
 Archstone Torrey
  Hills               340         -    10,400         659       32,532    10,400      33,191      43,591     1,521   2000     1997
 Archstone University
  Towne Centre        328    20,900     4,616      26,160        2,819     4,616      28,979      33,595     2,432   1986     1997
 Archstone Del Mar    232    14,655     3,802      21,546        2,842     3,802      24,388      28,190     1,838   1991     1998
 Club Pacifica        264         -     2,141      12,132        1,609     2,141      13,741      15,882     1,734   1987     1996
 Ocean Crest          450         -     3,918      22,207        3,787     3,918      25,994      29,912     2,746    (m)      (m)
 Archstone Seaport
  Village             387         -     5,963      33,789        2,158     5,963      35,947      41,910     2,290   1992     1999
 Archstone Aviara     208         -     2,659      15,066        2,184     2,659      17,250      19,909     1,164   1986     1998
San Francisco
 (Bay Area),
 California:
 Archstone Emerald
  Park                324         -     8,950         170       40,324     8,950      40,494      49,444     1,706   2000     1997
 Archstone Hacienda   540     4,737    18,696         668       57,233    18,696      57,901      76,597     2,217   2000     1997
</TABLE>

                                      63
<PAGE>

                                                                    SCHEDULE III

<TABLE>
<CAPTION>
                                         Initial Cost                    Gross Amount at Which Carried
                                         to Archstone                         at December 31, 2000
                                     --------------------               --------------------------------
                                                              Costs
                                                           Capitalized                                    Accumu-
                                              Buildings &   Subsequent           Buildings &               lated     Con-
                            Encum-              Improve-        to                 Improve-               Depre-  struction   Year
                    Units   brances    Land      ments     Acquisition    Land      ments       Totals    ciation   Year    Acquired
                    -----  --------  --------  ----------  -----------  --------  ----------  ----------  ------- --------- --------
<S>                <C>     <C>       <C>       <C>         <C>          <C>       <C>         <C>         <C>     <C>       <C>
Apartment
Communities:
San Francisco
(Bay Area),
California
(continued):
 Archstone Marina
  Bay                 468  $      -  $  5,952  $   33,728   $    1,345  $  5,952  $   35,073  $   41,025  $  3,613   1991     1997
 Archstone Monterey
  Grove               224         -     4,451          13       22,574     4,451      22,587      27,038     1,105   2000     1997
 Archstone San
  Ramon               496    40,452     7,820      44,311        2,797     7,820      47,108      54,928     4,914   1988     1997
 Archstone Willow
  Glen                412         -    16,140         746       40,369    16,140      41,115      57,255         7    (c)     1998
 Ashton Place         948    44,876     9,782      55,429       33,438     9,782      88,867      98,649     9,099   1970     1996
 Harborside           149         -     3,213      18,210          575     3,213      18,785      21,998     2,000   1989     1996
 Los Padres Village   251         -     4,579      25,946        1,444     4,579      27,390      31,969     2,662   1988     1997
 Redwood Shores       304    21,040     5,608      31,778        2,781     5,608      34,559      40,167     3,891   1986     1996
 Archstone Walnut
  Creek               510         -     5,788      32,802        1,745     5,788      34,547      40,335     4,559   1988     1995
 Archstone Morgan
  Hill                138         -    19,091          45          360    19,091         405      19,496       204   1989     2000
 Archstone Mountain
  View                180         -    33,773          36           21    33,773          57      33,830        97   1965     2000
 Archstone
  Sausalito           198    16,439    34,318          39            -    34,318          39      34,357        33   1978     2000
Seattle, Washington:
 Archstone
  Inglewood Hill      230         -     2,463          68       18,229     2,463      18,297      20,760       922   2000     1997
 Archstone
  Northcreek          524         -     5,750         261       35,703     5,750      35,964      41,714     2,238   2000     1998
 Cambrian, The        422         -     6,231      35,309        2,185     6,231      37,494      43,725     3,614   1991     1997
 Canyon Creek         336    16,436     5,250           -       21,993     5,250      21,993      27,243     2,397   1997     1997
 Canyon Creek II      222     7,698     2,705      15,330        2,263     2,705      17,593      20,298     1,356   1989     1998
 Forestview           192         -     1,681           -       13,936     1,681      13,936      15,617     1,111   1998     1996
 Harbour Pointe       230         -     2,027           -       13,152     2,027      13,152      15,179     1,324   1997     1996
 Newport Crossing     192         -     1,694       9,602          939     1,694      10,541      12,235     1,135   1990     1997
 Redmond Hill East    590         -     4,745      26,711        6,152     4,745      32,863      37,608     4,818   1990     1995
 Redmond Hill West    184     6,196     2,084      11,833        2,401     2,084      14,234      16,318     1,154   1986     1999
 Stonemeadow Farms    280         -     4,370           -       18,200     4,370      18,200      22,570     1,292   1999     1997
 Waterford Place      360         -     4,131      23,407        1,981     4,131      25,388      29,519     2,195   1989     1997
Stamford, New York:
 Stamford             160         -     5,775       1,225        4,629     5,775       5,854      11,629         -    (n)     2000
Tampa/
St. Petersburg,
Florida:
 Archstone Boot
  Ranch               250         -     2,102      11,910        1,070     2,102      12,980      15,082     1,331   1988     1998
 Archstone Rocky
  Creek               264         -       511       2,896       15,726       511      18,622      19,133       878   2000     1998
 Archstone
  Bayshore            328         -     2,035      11,530        2,154     2,035      13,684      15,719     1,314   1984     1998
 Cameron Lakes        207         -     1,570       8,897          950     1,570       9,847      11,417     1,037   1986     1998
 Cameron Palm Habor   168     5,407     1,293       7,325          665     1,293       7,990       9,283       837   1988     1998
 Country Place
  Village I            88         -       777       4,400          910       777       5,310       6,087       507   1982     1998
 Country Place
  Village II          100         -       805       4,563          594       805       5,157       5,962       518   1983     1998
Ventura County,
California:
 Le Cub               370         -     4,958      28,097        2,638     4,958      30,735      35,693     2,968   1987     1997
 Pelican Point        400         -     4,365      24,735        2,493     4,365      27,228      31,593     2,530   1985     1997
 Moorpark             312         -     4,203         641       10,540     4,203      11,181      15,384         -    (n)     1999
</TABLE>

                                      64
<PAGE>

                                                                    SCHEDULE III

<TABLE>
<CAPTION>
                                         Initial Cost                    Gross Amount at Which Carried
                                         to Archstone                         at December 31, 2000
                                     --------------------               --------------------------------
                                                              Costs
                                                           Capitalized                                    Accumu-
                                              Buildings &   Subsequent           Buildings &               lated     Con-
                            Encum-              Improve-        to                 Improve-               Depre-  struction   Year
                    Units   brances    Land      ments     Acquisition    Land      ments       Totals    ciation   Year    Acquired
                    -----  --------  --------  ----------  -----------  --------  ----------  ----------  ------- --------- --------
<S>                <C>     <C>       <C>       <C>         <C>          <C>       <C>         <C>         <C>     <C>       <C>
Apartment
Communities:
Washington, D.C.:
 Archstone
  Bellemeade Farms    316  $ 15,002  $  3,250  $   18,416   $    1,055  $  3,250  $   19,471  $   22,721  $  1,248   1988     1998
 Archstone Fair
  Lakes               282    18,524     3,687      20,893        1,083     3,687      21,976      25,663     1,185   1988     1998
 Archstone
  Governor's Green    338         -     1,836      10,402       23,011     1,836      33,413      35,249     1,236   2000     1998
 Archstone
  Milestone II        132         -     2,009         435        9,206     2,009       9,641      11,650        79   2000     1999
 Archstone
  Kingstowne          358         -     5,429      30,760          856     5,429      31,616      37,045     1,266   1988     1999
 Archstone Kendall
  Ridge               184         -     2,089      11,838          494     2,089      12,332      14,421     1,294   1990     1998
 Archstone
  Milestone I         444         -     5,633      31,920          357     5,633      32,277      37,910     3,495   1997     1998
 Archstone Saybrooke  252         -     3,210      18,190          580     3,210      18,770      21,980     1,944   1990     1998
 Archstone
  Woodlands Park      392         -     6,989         494       25,208     6,989      25,702      32,691       181   2000     1998
 Archstone
  Government Center   404         -     5,704      38,310        1,956     5,704      40,266      45,970     1,452   1989     1999
 Columbia Town
  Center              531         -     5,545       1,071        6,084     5,545       7,155      12,700         -    (n)     2000
 West Springfield
  Terrace             244         -     2,918      16,537          430     2,918      16,967      19,885     1,793   1978     1998
                   ------  --------  --------  ----------  -----------  --------  ----------  ----------  --------

Total Apartment
Communities-
 Operating and
  Under
  Construction     66,616  $875,804  $981,030  $2,360,457  $ 1,608,307  $981,030  $3,968,764  $4,949,794  $371,003
                   ======  ========  ========  ==========  ===========  ========  ==========  ----------  --------

Other:

Development Communites in
 Planning and Owned                                                                               75,662         -

Hotel Asset                                                                                       22,870     4,669

Other Real Estate Assets (o)                                                                      10,584         -
                                                                                              ----------  --------
Total Real Estate Assets                                                                      $5,058,910  $375,672
                                                                                              ==========  ========
</TABLE>

(a) Phase I (118 units) was acquired in 1991 and Phase II (122 units) was
    developed in 1992.
(b) Vistas at Seven Bar Ranch (364 units) was developed in 1996 and Corrales
    Pointe (208 units) was acquired in 1993.
(c) As of December 31, 2000, community was in lease-up.
(d) Phase I (108 units) was constructed in 1981 and Phase II (240 units) was
    constructed in 1983.
(e) Phase I (332 units) was constructed in 1983 and Phase II (312 units) was
    constructed in 1985.
(f) Phase I (240 units) was developed in 1995 and Phase II (160 units) was
    developed in 1996.
(g) Phase I (160 units) was acquired in 1994 and constructed in 1984 and Phase
    II (192 units) was acquired in 1996 and developed in 1998.
(h) Phase I (208 units) was acquired in 1993 and Phase II (208 units) was
    developed in 1996.
(i) Community is owned by Archstone and managed by a third party.
(j) Phase I and II (624 units) were acquired in 1994 and Phase III (144 units)
    was developed in 1996.
(k) Phase I (196 units) was constructed in 1985 and Phase II (172 units) was
    constructed in 1982.
(l) Phase I (174 units) was acquired in 1995 and constructed in 1985 and Phase
    II (88 units) was acquired in 1996 and constructed in 1996.
(m) Camino Pointe (150 units) was constructed in 1985 and acquired in 1998 and
    Ocean Crest (300 units) was constructed in 1993 and acquired in 1996.
(n) As of December 31, 2000, community was under construction.
(o) Includes land that is not In Planning and a non-multifamily property held
    for sale.

                                      65
<PAGE>

                                                                    SCHEDULE III

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

<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                                   -----------------------------------------------------
                     Carrying Amounts                                 2000                 1999                  1998
                     ----------------                              ----------           ----------            ----------
<S>                                                                <C>                  <C>                   <C>
Balance at January 1..........................................     $5,086,486           $4,771,315            $2,567,599
                                                                   ----------           ----------            ----------
Apartment communities:
  Real estate assets acquired in the Atlantic Merger..........              -                    -             1,823,727
  Acquisition-related expenditures............................        372,539              401,392               268,465
  Redevelopment expenditures..................................         37,547               72,517                56,321
  Recurring capital expenditures..............................         13,937               13,022                 9,461
  Development expenditures, excluding land acquisitions.......        228,819              334,049               346,629
  Acquisition and improvement of land for development.........         68,308               43,417                45,739
  Dispositions................................................       (743,287)            (542,554)             (342,066)
  Provision for possible loss on investments..................         (5,200)                (450)                    -
                                                                   ----------           ----------            ----------
Net apartment community activity..............................        (27,337)             321,393             2,208,276
                                                                   ----------           ----------            ----------

Other:
  Change in other real estate assets .........................           (239)              (4,672)               (3,860)
  Provision for possible loss on investments..................              -               (1,550)                 (700)
                                                                   ----------           ----------            ----------
Net other activity............................................           (239)              (6,222)               (4,560)
                                                                   ----------           ----------            ----------
Balance at December 31........................................     $5,058,910           $5,086,486            $4,771,315
                                                                   ==========           ==========            ==========

<CAPTION>
                                                                                         December 31,
                                                                   -----------------------------------------------------
                 Accumulated Depreciation                             2000                 1999                  1998
                 ------------------------                          ----------           ----------            ----------
<S>                                                                <C>                  <C>                   <C>
Balance at January 1..........................................     $  300,658           $  205,795            $  129,718
Depreciation for the year.....................................        143,694              132,437                96,337
Accumulated depreciation on real estate dispositions..........        (68,624)             (37,230)              (20,260)
Other.........................................................            (56)                (344)                    -
                                                                   ----------           ----------            ----------
Balance at December 31........................................     $  375,672           $  300,658            $  205,795
                                                                   ==========           ==========            ==========
</TABLE>

                                       66
<PAGE>

                               Power of Attorney


     KNOW ALL MEN BY THESE PRESENTS, that each of Archstone Communities Trust, a
Maryland real estate investment trust, and the undersigned Trustees and officers
of Archstone Communities Trust, hereby constitutes and appoints, R. Scot
Sellers, Charles E. Mueller, Jr., William Kell and Caroline Brower its or
his/her true and lawful attorneys-in-fact and agents, for it or him/her and in
its or his/her name, place and stead, in any and all capacities, with full power
to act alone, to sign any and all amendments to this report, and to file each
such amendment to this report, with all exhibits thereto, and any and all
documents in connection therewith, with the Securities and Exchange Commission,
hereby granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as it or he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them may
lawfully do or cause to be done by virtue hereof.

                                       67
<PAGE>

                          Archstone Communities Trust
                                  Signatures


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


                                   ARCHSTONE COMMUNITIES TRUST


                                   By: /s/ R. SCOT SELLERS
                                      ---------------------------------------
                                           R. Scot Sellers
                                      Chairman and Chief Executive Officer

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

<TABLE>
<CAPTION>
             Signature                                         Title                                     Date
             ---------                                         -----                                     ----
<S>                                      <C>                                                        <C>
        /s/ R. Scot Sellers              Chairman, Chief Executive Officer                          March 9, 2001
-----------------------------------
          R. Scot Sellers

    /s/ Charles E. Mueller, Jr.          Chief Financial Officer                                    March 9, 2001
-----------------------------------
      Charles E. Mueller, Jr.

          /s/ William Kell               Controller and Senior Vice President                       March 9, 2001
-----------------------------------
            William Kell

       /s/ James A. Cardwell             Trustee                                                    March 9, 2001
-----------------------------------
         James A. Cardwell

         /s/ Ned S. Holmes               Trustee                                                    March 9, 2001
-----------------------------------
           Ned S. Holmes

       /s/ James H. Polk III             Trustee                                                    March 9, 2001
-----------------------------------
         James H. Polk III

        /s/ John M. Richman              Trustee                                                    March 9, 2001
-----------------------------------
          John M. Richman

       /s/ John C. Schweitzer            Trustee                                                    March 9, 2001
-----------------------------------
         John C. Schweitzer
</TABLE>

                                       68
<PAGE>

                               Index to Exhibits

     Certain of the following documents are filed herewith. Certain other of the
following documents have been previously filed with the Securities and Exchange
Commission and, pursuant to Rule 12b-32, are incorporated herein by reference:

 Number                                Description
 ------                                -----------
    3.1   Amended and Restated Declaration of Trust of Archstone (incorporated
          by reference to Exhibit 4.1 to Archstone's Current Report on Form 8-K
          dated July 7, 1998)

    3.2   Second Amended and Restated Bylaws of Archstone (incorporated by
          reference to Exhibit 3.2 to Archstone's Annual Report on Form 10-K for
          the year ended December 31, 1999)

    3.3   Articles Supplementary, dated August 3, 1999, related to the Series D
          Cumulative Redeemable Preferred Shares of Beneficial (incorporated by
          reference to Exhibit 99.2 to Archstone's Current Report on Form 8-K,
          dated August 3, 1999)

    3.4   Articles Supplementary, dated August 13, 1999, related to the Series E
          Cumulative Redeemable Preferred Shares of Beneficial Interest
          (incorporated by reference to exhibit 4.1 to Archstone's Quarterly
          Report on Form 10-Q for the quarter ended September 30, 1999)

    3.5   Certificate of Correction, dated October 12, 1999, to the Articles
          Supplementary, dated August 13, 1999, related to the Series E
          Cumulative Redeemable Preferred Shares of Beneficial Interest
          (incorporated by reference to Exhibit 4.2 to Archstone's Quarterly
          Report on Form 10-Q for the quarter ended September 30, 1999)

    3.6   Articles Supplementary, dated September 27, 1999, related to the
          Series F Cumulative Redeemable Preferred Shares of Beneficial Interest
          (incorporated by reference to Exhibit 4.3 to Archstone's Quarterly
          Report on Form 10-Q for the quarter ended September 30, 1999)

    3.7   Articles Supplementary, dated March 3, 2000, related to the Series G
          Cumulative Redeemable Preferred Shares of Beneficial Interest
          (incorporated by reference to Exhibit 4.1 to Archstone's Quarterly
          Report on Form 10-Q for the quarter ended March 31, 2000)

    3.8   Articles of Amendment of Amended and Restated Declaration of Trust of
          Archstone, dated May 17, 2000 (incorporated by reference to Exhibit
          3.1 to Archstone's Quarterly Report on Form 10-Q for the quarter ended
          June 30, 2000)

    4.1   Indenture, dated as of February 1, 1994, between Archstone and Morgan
          Guaranty Trust Company of New York, as Trustee relating to Archstone's
          unsecured senior debt securities (incorporated by reference to Exhibit
          4.2 to Archstone's Annual Report on Form 10-K for the year ended
          December 31, 1993)

    4.2   First Supplemental Indenture, dated as of February 2, 1994, among
          Archstone, Morgan Guaranty Trust Company of New York and State Street
          Bank and Trust Company, as successor Trustee (incorporated by
          reference to Exhibit 4.3 to Archstone's Annual Report on Form 8-K
          dated July 19, 1994)

    4.3   Rights Agreement, dated as of July 21, 1994, between Archstone and
          Chemical Bank, including Form of Rights Certificate (incorporated by
          reference to Exhibit 4.2 to Archstone's Current Report on Form 8-K
          dated July 19, 1994)

    4.4   First Amendment, dated as of February 8, 1995, to the Rights Agreement
          (incorporated by reference to Exhibit 4.13 to Archstone's Annual
          Report on Form 10-K for the year ended December 31, 1994)

   10.1   1987 Share Option Plan for Outside Trustees, as amended (incorporated
          by reference to Exhibit 10.1 to Archstone's Annual Report on Form 10-K
          for the year ended December 31, 1995)


                                       69
<PAGE>

                        Index to Exhibits - (Continued)


   Number                                Description
   ------                                -----------
     10.2  Amendment to the 1996 Share Option Plan for Outside Trustees
           (incorporated by reference to Exhibit 4.6 to Archstone's Registration
           Statement on Form S-8 (File No. 333-60815))

     10.3  Archstone 1997 Long-Term Incentive Plan (incorporated by reference to
           Annex II to Security Capital Group`s Registration Statement on
           Form S-11 (File No. 333-26267))

     10.4  First Amendment to Archstone 1997 Long-Term Incentive Plan
           (incorporated by reference to Exhibit 4.6 to Archstone's Registration
           Statement on Form S-8 (File No. 333-60847))

     10.5  Form of Indemnification Agreement entered into between Archstone and
           each of its officers and Trustees (incorporated by reference to
           Exhibit 10.5 to Archstone's Registration Statement on Form S-3 (File
           No. 33-43201))

     10.6  Form of Change in Control Agreement between Archstone and certain of
           its officers (incorporated by reference to Exhibit 10.7 to
           Archstone's Annual Report on Form 10-Q for the year ended December
           31, 1999)

     10.7  Third Amended and Restated Investor Agreement, dated as of September
           9, 1997, between Archstone and Security Capital (incorporated by
           reference to Exhibit 10.2 to Security Capital's Quarterly Report on
           Form 10-Q for the quarter ended September 30, 1997)

     10.8  Amendment No. 1 to Third Amended and Restated Investor Agreement
           (incorporated by reference to Exhibit 10.1 to Archstone's Current
           Report on Form 8-K dated July 7, 1998)

     10.9  Credit Agreement dated December 20, 2000 among Archstone Communities
           Trust and The Chase Manhattan Bank, as administrative agent and Wells
           Fargo Bank, N.A., as syndication agent and Bank of America, N.A., as
           documentation agent (incorporated by reference to Exhibit 99.4 to
           Archstone's Current Report on Form 8-K dated February 16, 2001)

    10.10  Master Credit Facility Agreement, dated as of December 1, 1998, by
           and among Archstone and ASN Multifamily Limited Partnership and
           Berkshire Mortgage Finance Limited Partnership (incorporated by
           reference to Exhibit 10.10 to Archstone's Annual Report on Form 10-K
           for the year ended December 31, 1998)

    10.11  Purchase and Sale Agreement, dated as of July 19, 2000, between
           Archstone and Security Capital (incorporated by reference to Security
           Capital's Schedule 13D-A filed on July 24, 2000)

    10.12  Amendment No. 2, dated July 25, 2000, to the Third Amended and
           Restated Investor Agreement by and between Archstone and Security
           Capital (incorporated by reference to Exhibit 10.2 to Archstone's
           Quarterly Report on Form 10-Q for the quarter ended June 30, 2000)

    10.13  Protection of Business Agreement, dated as of October 17, 1996, among
           Security Capital Atlantic Incorporated, Archstone, Security Capital
           and Homestead Village Incorporated (incorporated by Reference to
           Exhibit 10.12 to Archstone's Annual Report on Form 10-K for the year
           ended December 31, 1996)

    10.14  Archstone 1998 Dividend Reinvestment and Share Purchase Plan
           (incorporated by reference to the prospectus contained in Archstone's
           Form S-3 Registration Statement No. 333-44639)

    10.15  Administrative Services Agreement, dated as of January 1, 2000,
           between Archstone and SC Group Incorporated (incorporated by
           reference to Exhibit 10.1 to Archstone's Quarterly Report on Form 10-
           Q for the quarter ended March 31, 2000)

    10.16  Purchase and Sale Agreement, dated as of February 15, 2001, between
           Archstone and Security Capital (incorporated by reference to Exhibit
           99.1 to Archstone's Current Report on Form 8-K dated February 16,
           2001)

    10.17  Amendment No. 3, dated February 15, 2001, to Third Amended and
           Restated Investor Agreement by and between Archstone and Security
           Capital (incorporated by reference to Exhibit 99.2 to Archstone's
           Current Report on Form 8-K dated February 16, 2001)

     12.1  Computation of Ratio of Earnings to Fixed Charges

                                       70
<PAGE>

                        Index to Exhibits - (Continued)


   Number                           Description
   ------                           -----------
     12.2   Computation of Ratio of Earnings to Combined Fixed Charges and
            Preferred Share Dividends

       21   Subsidiaries of Archstone

       22   Consent of KPMG LLP

       23   Power of Attorney (included at page 67)

     99.1   Current Development Activity

     99.2   Long-Term Unsecured Debt

     99.3   Mortgages Payable

                                       71