##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006
 OR
 o
    
    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-Smith Operating Trust
 (Exact name of Registrant as Specified in Its Charter)
 MARYLAND(State or other jurisdiction of 
incorporation or organization)
    
    90-0042860(IRS employer
identification no.)
 9200 E. Panorama Circle, Suite 400
Englewood, Colorado 80112  (Address of principal executive office)  (303) 708-5959  (Registrants telephone number, including area code)
 
 þ o
 o þ
 þ o
 o
  þ o o
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   DOCUMENTS INCORPORATED BY REFERENCE




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Table of Contents
 Item
    
    Description
    
    PagePART IGlossary
    
    31
    
    Business
    
    6The Company
    
    62006 Accomplishments
    
    7Investment Strategy
    
    8Customer-focused Operations
    
    9Conservative Balance Sheet Management
    
    11Management
    
    12Biographies of Senior Officers of the OperatingTrust
    
    12Employees
    
    13Insurance
    
    13Competition
    
    13Available Information and Code of Ethics
    
    141A.
    
    Risk Factors
    
    141B.
    
    Unresolved Staff Comments
    
    182.
    
    Properties
    
    18United States Geographic Distribution, excluding Ameriton
    
    18Real Estate Portfolio
    
    183.
    
    Legal Proceedings
    
    204.
    
    Submission of Matters to a Vote of Security Holders
    
    20PART II5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    216.
    
    Selected Financial Data
    
    217.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    23Results of Operations
    
    23Liquidity and Capital Resources
    
    32Litigation and Contingencies
    
    33Critical Accounting Policies
    
    34Off Balance Sheet Arrangements
    
    36Contractual Commitments
    
    36New Accounting Pronouncements
    
    367A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    378.
    
    Financial Statements and Supplementary Data
    
    399.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    399A.
    
    Controls and Procedures
    
    40Managements Report on Internal Control Over Financial Reporting
    
    409B.
    
    Other Information
    
    40PART III10.
    
    Directors, Executive Officers and Corporate Governance
    
    4111.
    
    Executive Compensation
    
    4112.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    4113.
    
    Certain Relationships and Related Transactions and Director Independence
    
    4214.
    
    Principal Accounting Fees and Services
    
    42PART IV15.
    
    Exhibits, Financial Statement Schedules
    
    43IndentureFirst Supplemental IndentureSecond Supplemental IndentureThird Supplemental IndentureComputation of Ratios of Earnings to Fixed ChargesComputation of Ratios of Earnings to Combined Fixed Charges and Preferred Share DividendsConsent of Independent Registered Public Accounting FirmSubsidiariesCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




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GLOSSARY
  Abbreviation, Acronym or Defined Term
    
    Definition/DescriptionA-1 Common Unitholders
    
    Holders of A-1 Common Units.A-1 Common Units
    
    Operating Trust class A-1 common units, par value $0.01 per
unit, together with any class B-1 Common Units, which are
redeemable for cash or, at the option of Archstone-Smith,
Common Shares. A-1 Common Units are the common units of the
Operating Trust not held by Archstone-Smith and represent a
minority interest of approximately 11.8% in the Operating
Trust at December 31, 2006.A-2 Common Units
    
    Operating Trust class A-2 common units of beneficial
interest, par value $0.01 per unit. Archstone-Smith is the
sole holder of A-2 Common Units, which represent
approximately an 88.2% interest in the Operating Trust at
December 31, 2006.ADA
    
    Americans with Disabilities Act, as amended.Ameriton
    
    AMERITON Properties Incorporated, which is a taxable REIT
subsidiary that 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,
2006.Archstone-Smith.
    
    Archstone-Smith Trust sole holder of the A-2 Common Units and
sole trustee.B Common Units
    
    Operating Trust class B common units of beneficial interest,
par value $0.01 per unit, which are issued to persons who
contribute property to the Operating Trust. B Common Units
convert automatically to A-1 Common Units immediately
following the distribution of income for the quarter in which
the property was contributed.Board
    
    Collectively, refers to Archstone-Smiths Board of Trustees
or to Archstone-Smith, our sole trustee, unless the context
otherwise requires..CES
    
    Consolidated Engineering Services, Inc. was a taxable REIT
subsidiary of Archstone-Smith in the business of delivering mission critical
facilities management services for corporate, government and
institutional customers. CES was sold to a third party in
December 2002 for $178 million.Common Share(s)
    
    Archstone-Smith common shares of beneficial interest, par
value $0.01 per share.Common Units
    
    The A-1 Common Units and the A-2 Common Units.Common Unitholders
    
    Holders of Common UnitsConvertible Debt
    
    $575 million exchangeable senior unsecured notes that are
exchangeable into Common Shares.Convertible Preferred Units
    
    Collectively, the Series A, H, J, K and L Preferred Units.Declaration of Trust.
    
    The Operating Trusts Amended and Restated Declaration of
Trust, as filed with the State of Maryland on May 31, 2006,
as amended and supplemented.DEU
    
    Dividend Equivalent Unit; an amount credited to the account
of holders of certain options and RSUs under
Archstone-Smiths long-term incentive plan.Distributions
    
    Refers to dividends paid by Archstone on either Archstone
common or preferred shares of beneficial interest paid prior
to the UPREIT reorganization and Smith Merger. Subsequent to
the Smith Merger, refers to distributions paid on Operating
Trust Common Units of Preferred Units.DeWAG
    
    DeWAG Deutsche WohnAnlage GmbH.DRIP
    
    Dividend Reinvestment and Share
Purchase Plan.FASB
    
    Financial Accounting Standards Board.FHA
    
    Fair Housing Act, as amended.GAAP
    
    Generally accepted accounting principles in the United StatesHigh-Rise
    
    Those communities with five or more above-ground floors.Independent Trustees
    
    Members of the Board meeting the NYSE definition of
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Abbreviation, Acronym or Defined Term
    
    Definition/DescriptionIndependent Director.In Planning
    
    Represents parcels of land owned or Under Control, which are
in the development planning process, upon which construction
of apartments is expected to commence subsequent to the
completion of the entitlement and building permit processes.International
    
    Refers to our operational and investment activities in
Europe. Our investments to date have been limited to Germany.IRR
    
    On a sold community, IRR refers to the unleveraged internal
rate of return calculated by Archstone-Smith, considering the
initial purchase price and all capital invested in the
community, the timing and amounts of net operating income
during the period owned and the net sales proceeds from the
sale. The IRR
calculations include property management overhead and
internal disposition costs but not depreciation or
allocations for corporate general and administrative
expenses, interest expenses, income tax expenses (if any) or
other indirect operating expenses. Therefore, an IRR
calculation is not a substitute for net income as a measure
of our performance. Management believes that IRRs are an
important indicator of the value created during the ownership
period. Historical IRRs are not necessarily indicative of
IRRs that will be produced in the future. Our methodology
for calculating IRRs may not be consistent with the
methodology used by other companies.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, the Operating Trusts long-term unsecured
senior notes payable and unsecured tax-exempt bonds.NAREIT
    
    National Association of Real Estate Investment Trusts.Net Operating Income or NOI
    
    Represents rental revenues less rental expenses and real
estate taxes. We rely on NOI for purposes of making decisions
about resource allocations and assessing segment performance.
We also believe NOI is a valuable means of comparing
period-to-period property performance.  NOI is a non-GAAP financial
measure. See a reconciliation
of NOI to Earnings from Operations in this Annual Report in
Item 7  Managements Discussion and Analysis of Financial
Condition and Results of Operations  Property-level
operating results.NYSE
    
    New York Stock Exchange.Oakwood or Oakwood Worldwide
    
    The terms used in reference to a group of partnerships
coordinated by a common sponsor who contributed a group of
apartment communities to the Operating Trust in 2005.Oakwood Master Leases
    
    Refers to thirteen communities acquired from Oakwood and one
community we previously owned and operated that were leased
in their entirety to an affiliate of Oakwood Worldwide under
master lease agreements with seven year terms, subject to
Oakwoods right to terminate individual leases under certain
circumstances after the one year anniversary of the
acquisition.Operating Trust
    
    Archstone-Smith Operating TrustPreferred Units or Perpetual Preferred Units
    
    The Series I Preferred Units.REIT
    
    Real estate investment trust. This term is also used to
refer to consolidated subsidiaries of Archstone-Smith, but
excluding taxable and International subsidiaries unless the
context indicates otherwise.Restricted Share Unit or RSU
    
    A unit representing an interest in one Common Share, subject
to certain vesting provisions, granted to an associate
through our long-term incentive plan.Same-Store
    
    Term used to refer to a group of operating communities in the
United States that had attained Stabilization and were fully
operating during the entire time two periods are being
compared. Excludes communities which were not eligible for
inclusion due to (i) recent acquisition or development, (ii)
major redevelopment, or (iii) a significant number of
non-operational units (fires, floods, etc.). Also excludes
Ameriton properties, due to their short-term
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Abbreviation, Acronym or Defined Term
    
    Definition/Descriptionholding periods,
and International properties.Series A Preferred Units
    
    Operating Trust Series A Cumulative Preferred Units of
Beneficial Interest, par value $0.01 per unit, which were
redeemed in full in November 2003.Series C Preferred Units
    
    Operating Trust Series C Cumulative Perpetual Preferred Units
of Beneficial Interest, par value $0.01 per unit, which were
redeemed in full in August 2002.Series D Preferred Units
    
    Operating Trust D Cumulative Perpetual Preferred Units of
Beneficial Interest, par value $0.01 per unit, which were
redeemed in full in August 2004.Series E Perpetual Preferred Units
    
    8.375% Cumulative Perpetual Preferred Units, par value $0.01,
which were redeemed in full in February 2005.Series F Perpetual Preferred Units
    
    8.125% Cumulative Perpetual Preferred Units, par value $0.01,
which were redeemed in full in September 2004.Series G Perpetual Preferred Units
    
    8.625% Cumulative Perpetual Preferred Units, par value $0.01,
which were redeemed in full in March 2005.Series H Preferred Units
    
    Operating Trust Series H Cumulative Convertible Perpetual
Preferred Units of Beneficial Interest, par value $0.01 per
unit, which were converted into Common Units in full in May
2003.Series I Preferred Units
    
    Operating Trust Series I Cumulative Perpetual Preferred Units
of Beneficial Interest, par value $100,000 per unit
redeemable in February 2028.Series J Preferred Units
    
    Operating Trust Series J Cumulative Convertible Perpetual
Preferred Units of Beneficial Interest, par value $0.01 per
unit, which were converted into Common Units in full in July
2002.Series K Preferred Units
    
    Operating Trust Series K Cumulative Convertible Perpetual
Preferred Units of Beneficial Interest, par value $0.01 per
unit, which were converted into Common Units in September
2004.Series L Preferred Units
    
    Operating Trust Series L Cumulative Convertible Perpetual
Preferred Units of Beneficial Interest, par value $0.01 per
unit, which were converted into Common Units in December
2004.Series M Preferred Unit
    
    Operating Trust Series M Preferred Unit of Beneficial
Interest, par value $0.01 per unit.Series N-1 Preferred Units
    
    Operating Trust Series N-1 Convertible Redeemable Preferred
Units of Beneficial Interest, par value $0.01 per unit.Series N-2 Preferred Units
    
    Operating Trust Series N-2 Convertible Redeemable Preferred
Units of Beneficial Interest, par value $0.01 per unit.SMC
    
    Smith Management Construction, Inc. was a taxable REIT
subsidiary of Archstone-Smith in the business of providing
construction management and building maintenance services.
SMC was sold to members of its senior management in February
2003.Smith Merger
    
    The series of transactions in October 2001 whereby
Archstone-Smith merged with Smith Residential, and Archstone
Communities Trust (now, the Operating Trust) merged with
Smith Partnership.Smith Partnership
    
    Charles E. Smith Residential Realty L.P.Smith Residential
    
    Charles E. Smith Residential Realty, Inc.SFAS
    
    Statement of Financial Accounting Standards.Stabilized or Stabilization
    
    The classification assigned to an apartment community that
has achieved 93% occupancy, and for which development, new
management and new marketing programs (or development and
marketing in the case of a newly developed community) have
been completed.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.Trustees
    
    Members of the Board of Trustees of Archstone-Smith.Under Control
    
    A term used to identify land parcels which the Operating
Trust does not own, yet has an exclusive right through
contingent contract or letter of intent during a
contractually agreed upon time period to acquire the land,
subject to satisfaction of contingencies during the due
diligence and entitlement processes.Unitholders
    
    The holders of the A-1 Common Units and the A-2 Common Units.UPREIT
    
    Umbrella Partnership Real Estate Investment Trust.
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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.
 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 develop, acquire or dispose of
apartment communities. Capital and credit market conditions, which affect our cost of capital, also
influence operating results. See Risk Factors in Item 1 of this Annual Report for a complete
discussion of the various risk factors that could affect our future performance.
 
 PART I
 Item 1.
 
 Business
   Washington, D.C. metropolitan area
    
    
    34.6
    %Southern California
    
    
    25.8New York City metropolitan area
    
    
    12.5San Francisco Bay Area, California
    
    
    11.5Boston, Massachusetts
    
    
    5.0Seattle, Washington
    
    
    4.2Southeast Florida
    
    
    2.2Chicago, Illinois
    
    
    2.0Total
    
    
    97.8
    %
 
 The Company
  
    
    Acquiring, developing, redeveloping and operating apartments in our core markets,
which are characterized by: protected locations with limited land for new housing
construction, expensive single-family home prices, and a strong, diversified economic
base with significant employment growth potential;
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
    
    Generating long-term sustainable growth in operating cash flow;
    
    Increasing our Common Unit Distribution, as we have done for the last 16 consecutive years;
    
    Recruiting, training and retaining people who we believe are the best and brightest in the apartment business;
    
    Building the dominant operating platform in the apartment industry, to produce an
operating franchise that we believe is more efficient, more profitable and difficult to
replicate. We invest in technology to improve our operations and customer service
delivery, strengthen our brand position and solidify our reputation for operational
leadership; and
    
    Managing our invested capital through the selective sale of apartment communities
with slower growth prospects and redeploying the proceeds to fund investments with
higher anticipated growth prospects and value creation, in many of the most desirable
neighborhoods in the our core markets.
 
 2006 Accomplishments
 
    
    We produced Same-Store revenue growth of 6.5% and NOI growth of 7.5% for the full year of 2006.
    
    We reported Same-Store NOI outperformed our peer average by 1,002 basis points for
the period from January 1, 2001 through December 31, 2006. (1)
    
    We dramatically increased our presence in New York City through the acquisition of
five high-rise apartment communities, totaling $845.1 million and 1,382 units, and are
now the largest public owner of apartments in Manhattan. At year-end 2006, our committed
Total Expected Investment in the New York City metropolitan area, including joint
venture developments, totaled $2.0 billion.
    
    We made significant incremental investments in the San Francisco Bay Area, which now
represents almost 12% of our portfolio, acquiring five communities, totaling $655.9
million and 1,978 units.
    
    We achieved our 12-year-long goal of repositioning of our portfolio from undesirable,
commodity markets, into many of the most desirable neighborhoods in our core markets. As
of December 31, 2006, our portfolio was 97.8% in our core markets.
    
    In May 2006, we completed our second acquisition in Europe with the purchase of a
657-unit portfolio concentrated in Berlin, Germany, for $50.5 million. In July 2006, we
completed the acquisition of DeWAG, a German company that specializes in the
acquisition, long-term ownership and re-sale or privatization of attractive
residential properties in the major metropolitan areas of Southern and Western Germany.
At acquisition, the real estate portfolio consisted of approximately 6,400 units valued
at $646.3 million.
    
    In July 2006, we completed a successful $575 million convertible debt offering. This
offering was used to repay outstanding balances under our revolving credit facility and
certain other indebtedness, to make additional investments and for general corporate
purposes.
    
    On July 12, 2006, Fitch Ratings upgraded our credit rating to A- from BBB+.
    
    We increased our 2007 annualized Common Unit distribution level 4.0% to $1.81, or
$0.4525 per quarter. This marks our 16th consecutive annual Common Unit
distribution increase and a total increase of 183% since 1991. Our first quarter 2007
Common Unit distribution was paid in February 2007, representing our 126th
consecutive quarterly payment.
    
    Forbes magazine ranked Archstone-Smith at 954 on the Forbes 2000 List for 2006, the
magazines comprehensive ranking of the worlds largest corporations.
    
    Archstone-Smith was named Property Management Company of the Year by the National
Association of Home Builders.
 
 (1)
    
    NOI performance is defined as cumulative same-store NOI growth for the period
presented, relative to the average Same-Store NOI growth for our peer companies, which are
Avalon Bay Communities; BRE Properties, Inc.; Camden Property Trust; Equity Residential;
Essex Property Trust, Inc.; Post Properties, Inc.; and United Dominion Realty. Each
companys cumulative same-store NOI growth is 7




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calculated from 2001 through 2006. Results
for 2001 through 2006 are per Green Street Advisors Apartment REITS: 4Q01 Review, 4Q03
Review,
February 06 Update and February 07 Update, except for Archstone-Smith figures, which
are actual reported results. 
 Investment Strategy
 Capital recycling program
  Focus on core markets
     Developments
   Ameriton
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International
   
 Customer-focused Operations
  Powerful brands
 TM
  9




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Investing in technology
 Web-based property management system.
 Revenue management
  Resident websites
 Online
Lease
  Internet marketing and lead management.
 Investing in our associates
  Associate engagement
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Incentive-Based compensation
 Developing our leaders
 
 Conservative Balance Sheet Management
     % of Total MarketYear
    
    Total
    
    
    Capitalization(1)2007
    
    $
    491.1
    
    
    
    2.3
    %2008
    
    
    546.8
    
    
    
    2.6
    %2009
    
    
    481.5
    
    
    
    2.3
    %2010
    
    
    404.5
    
    
    
    1.9
    %2011
    
    
    843.6
    
    
    
    4.0
    %Thereafter and debt discount
    
    
    3,364.4
    
    
    
    16.0
    %Total
    
    $
    6,131.9
    
    
    
    29.1
    %
 
 (1)
    
    Total market capitalization as of December 31, 2006, represents the market capitalization
based on the closing share price on the last trading day of the period
for Archstone-Smith publicly traded
securities, units and the liquidation value for private securities as well as the book value
of total debt. Consistent distribution growth
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Management
  Officers of the Operating Trust
  Name
    
    TitleR. Scot Sellers*
    
    Chairman and Chief Executive OfficerJ. Lindsay Freeman*
    
    Chief Operating OfficerCharles E. Mueller, Jr*
    
    Chief Financial OfficerCaroline Brower*
    
    General Counsel and SecretaryAlfred G. Neely*
    
    Chief Development Officer and President  Charles E. Smith Residential DivisionMark A. Schumacher*
    
    Chief Accounting OfficerDaniel E. Amedro
    
    Chief Information OfficerJack R.
Callison
    
    Executive Vice President 
East OperationsDana K. Hamilton
    
    Managing Director  EuropeGerald R.
Morgan
    
    Senior Vice President 
National Operations
 
 *
    
    Executive Officers 
 Biographies of Senior Officers
 R. Scot Sellers  50
 J. Lindsay Freeman  61
 Charles E. Mueller, Jr.  43 
 Caroline Brower  58
 Alfred G. Neely  61
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Mark A. Schumacher  4
 Daniel E. Amedro  50 Spirit,
 Jack
R. Callison  36
 Dana K. Hamilton  38
 Gerald R. Morgan  43
 
 Employees
  
 Insurance
  
 Competition
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Available Information and Code of Ethics
 http://www.archstonesmith.com.
 
 Item 1A. Risk Factors
  We have restrictions on the sale of certain properties.
   We depend on our key personnel.
  Debt financing could adversely affect our performance.
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We may not have access to equity capital.
  We could be subject to acts of terrorism.
  We are subject to risks inherent in ownership of real estate.
  We are subject to risks inherent in real estate development.
  Real estate investments are relatively illiquid and we may not be able to recover our
investments.
  Compliance with laws and regulatory requirements may be costly.
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Costs associated with moisture infiltration and resulting mold remediation may be costly.
  Changes in laws may result in increased cost.
  Archstone-Smiths failure to qualify as a REIT would have adverse consequences.
  We intend to qualify as a partnership, but we cannot guarantee that we will qualify.
  We are subject to losses that may not be covered by insurance.
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We have a concentration of investments in certain markets.
  Our business is subject to extensive competition.
  Ownership of properties located outside of the United States subjects us to foreign currency
risks which may adversely impact our ability to make distributions.
   Acquisition and ownership of foreign properties involve risks greater than those faced by us
in the United States.
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Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
 
 United States Geographic Distribution, excluding Ameriton
  Washington, D.C. metropolitan area
    
    
    34.6
    %Southern California
    
    
    25.8New York City metropolitan area
    
    
    12.5San Francisco Bay Area, California
    
    
    11.5Boston, Massachusetts
    
    
    5.0Seattle, Washington
    
    
    4.2Southeast Florida
    
    
    2.2Chicago, Illinois
    
    
    2.0Total
    
    
    97.8
    %
  Total Portfolio(1)2006
    
    2005
    
    2004Core MarketsWashington, D.C. metropolitan area
    
    
    34.6
    %
    
    
    36.6
    %
    
    
    39.4
    %Southern California
    
    
    25.8
    
    
    
    24.9
    
    
    
    18.9New York City metropolitan area
    
    
    12.5
    
    
    
    6.8
    
    
    
    4.9San Francisco Bay Area, California
    
    
    11.5
    
    
    
    8.2
    
    
    
    8.2Boston, Massachusetts
    
    
    5.0
    
    
    
    4.7
    
    
    
    4.7Seattle, Washington
    
    
    4.2
    
    
    
    3.9
    
    
    
    3.1Southeast Florida
    
    
    2.2
    
    
    
    4.0
    
    
    
    4.7Chicago, Illinois
    
    
    2.0
    
    
    
    4.3
    
    
    
    6.1Total Core Markets
    
    
    97.8
    %
    
    
    93.4
    %
    
    
    90.0
    %Non-Core Markets(2)Houston, Texas
    
    
    
    
    
    
    1.3
    %
    
    
    1.5
    %Denver, Colorado
    
    
    
    
    
    
    1.1
    
    
    
    1.9Atlanta, Georgia
    
    
    
    
    
    
    
    
    
    
    2.3Raleigh, North Carolina
    
    
    
    
    
    
    
    
    
    
    1.1Other
    
    
    2.2
    
    
    
    4.2
    
    
    
    3.2Total Non-Core Markets
    
    
    2.2
    %
    
    
    6.6
    %
    
    
    10.0
    %Total All Markets
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 
 (1)
    
    Based on NOI for the fourth quarter of each calendar year, excluding NOI from
communities disposed of during the period. See Item 7 under the caption Property-level
operating resultsfor a discussion on why we believe NOI is a meaningful measure and a
reconciliation of NOI to Earnings from Operations.(2)
    
    Markets that represent 1.0% or less of NOI in any year are included in Other for that
year. 
 Real Estate Portfolio
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OperatingNumber of
    
    
    Number of
    
    
    Trust
    
    
    PercentageCommunities
    
    
    Units
    
    
    Investment
    
    
    Leased(1)OPERATING APARTMENT COMMUNITIES:Garden Communities:Boston, Massachusetts(2)
    
    
    9
    
    
    
    2,044
    
    
    $
    474,586
    
    
    
    86.9
    %Dallas, Texas
    
    
    1
    
    
    
    514
    
    
    
    48,177
    
    
    
    96.1
    %Denver, Colorado
    
    
    1
    
    
    
    156
    
    
    
    10,549
    
    
    
    92.9
    %El Paso, Texas
    
    
    1
    
    
    
    379
    
    
    
    14,198
    
    
    
    92.9
    %Houston, Texas
    
    
    1
    
    
    
    616
    
    
    
    36,937
    
    
    
    97.7
    %Inland Empire, California
    
    
    3
    
    
    
    1,298
    
    
    
    84,475
    
    
    
    96.3
    %Los Angeles County, California
    
    
    20
    
    
    
    7,483
    
    
    
    1,454,616
    
    
    
    92.1
    %New York City metropolitan area
    
    
    1
    
    
    
    396
    
    
    
    89,118
    
    
    
    97.5
    %Orange County, California
    
    
    8
    
    
    
    2,063
    
    
    
    267,381
    
    
    
    96.3
    %Orlando, Florida
    
    
    1
    
    
    
    312
    
    
    
    22,100
    
    
    
    95.2
    %Phoenix, Arizona
    
    
    2
    
    
    
    742
    
    
    
    28,760
    
    
    
    94.1
    %San Diego, California
    
    
    8
    
    
    
    2,803
    
    
    
    358,793
    
    
    
    96.7
    %San Francisco Bay Area, California
    
    
    20
    
    
    
    7,419
    
    
    
    1,351,578
    
    
    
    93.9
    %Seattle, Washington
    
    
    9
    
    
    
    3,408
    
    
    
    308,999
    
    
    
    95.1
    %Southeast Florida
    
    
    5
    
    
    
    1,924
    
    
    
    232,675
    
    
    
    95.4
    %Stamford, Connecticut
    
    
    1
    
    
    
    160
    
    
    
    36,568
    
    
    
    95.6
    %Ventura County, California
    
    
    4
    
    
    
    1,018
    
    
    
    159,212
    
    
    
    96.1
    %Washington, D.C. metropolitan area
    
    
    17
    
    
    
    8,152
    
    
    
    1,111,173
    
    
    
    94.2
    %Garden Community Subtotal/Average
    
    
    112
    
    
    
    40,887
    
    
    $
    6,089,895
    
    
    
    94.2
    %High-Rise Properties:Boston, Massachusetts(2)
    
    
    5
    
    
    
    1,207
    
    
    $
    376,289
    
    
    
    72.6
    %Chicago, Illinois
    
    
    2
    
    
    
    1,113
    
    
    
    234,813
    
    
    
    95.2
    %Los Angeles County, California(3)
    
    
    3
    
    
    
    1,073
    
    
    
    238,151
    
    
    
    91.0
    %Minneapolis, Minnesota
    
    
    1
    
    
    
    250
    
    
    
    27,107
    
    
    
    95.6
    %New York City metropolitan area
    
    
    10
    
    
    
    2,929
    
    
    
    1,566,026
    
    
    
    96.9
    %Philadelphia, Pennsylvania
    
    
    1
    
    
    
    80
    
    
    
    19,035
    
    
    
    N/ASan Diego, California
    
    
    1
    
    
    
    387
    
    
    
    44,358
    
    
    
    93.5
    %San Francisco Bay Area, California
    
    
    2
    
    
    
    853
    
    
    
    268,575
    
    
    
    95.4
    %Seattle, Washington
    
    
    2
    
    
    
    338
    
    
    
    62,422
    
    
    
    N/AWashington, D.C. metropolitan area
    
    
    35
    
    
    
    11,722
    
    
    
    2,252,196
    
    
    
    95.4
    %High-Rise Subtotal/Average
    
    
    62
    
    
    
    19,952
    
    
    $
    5,088,972
    
    
    
    94.0
    %FHA/ADA Settlement Capital Accrual
    
    
    
    
    
    
    
    
    
    $
    29,185
    
    
    
    N/AOperating Apartment Communities Subtotal/Average
    
    
    174
    
    
    
    60,839
    
    
    $
    11,208,052
    
    
    
    94.1
    %APARTMENT COMMUNITIES UNDER CONSTRUCTION:Garden Communities:Los Angeles County, California
    
    
    2
    
    
    
    655
    
    
    
    172,783
    
    
    
    N/AOrange County, California
    
    
    1
    
    
    
    884
    
    
    
    60,161
    
    
    
    N/ASan Francisco Bay Area, California
    
    
    1
    
    
    
    185
    
    
    
    61,695
    
    
    
    N/AGarden Community Subtotal/Average
    
    
    4
    
    
    
    1,724
    
    
    $
    294,639High-Rise Properties:Boston, Massachusetts
    
    
    1
    
    
    
    426
    
    
    $
    112,242
    
    
    
    N/AApartment Communities Under Construction Subtotal/Average
    
    
    5
    
    
    
    2,150
    
    
    $
    406,881
    
    
    
    N/AAPARTMENT COMMUNITIES IN PLANNING:(4)Garden Communities:Boston, Massachusetts
    
    
    1
    
    
    
    420
    
    
    
    Washington, D.C. metropolitan area
    
    
    1
    
    
    
    357
    
    
    
    High-Rise Communities:Boston, Massachusetts
    
    
    1
    
    
    
    341
    
    
    $
    16,774Washington, D.C. metropolitan area
    
    
    2
    
    
    
    723
    
    
    
    58,764Total Apartment Communities In Planning (4) Subtotal/Average
    
    
    5
    
    
    
    1,841
    
    
    $
    75,538Total REIT Communities
    
    
    184
    
    
    
    64,830
    
    
    $
    11,690,471AMERITON PORTFOLIO:Operating Apartment Communities
    
    
    5
    
    
    
    1,474
    
    
    $
    174,983Apartment Communities Under Construction and In Planning (4)
    
    
    20
    
    
    
    6,670
    
    
    
    308,448Other Real Estate Assets
    
    
    
    
    
    
    
    
    
    
    102,093Subtotal/Average
    
    
    25
    
    
    
    8,144
    
    
    
    585,524INTERNATIONAL PORTFOLIO:German Operating Apartment Communities
    
    
    119
    
    
    
    8,334
    
    
    
    851,593OTHER REAL ESTATE ASSETS(5)
    
    
    
    
    
    
    
    
    
    $
    60,052Total Real Estate Owned at December 31, 2006
    
    
    328
    
    
    
    81,308
    
    
    $
    13,187,640
  19




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##### Table of Contents



(1)
    
    Represents the percentage leased as of December 31, 2006. 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, 2006. The N/A for the Seattle and
Philadelphia markets in the High-Rise operating community section indicates that the markets
are entirely comprised of Oakwood Master Lease communities. Oakwood Master Leased communities
have been excluded from the Percentage Leased calculation for other markets that have both
Oakwood Master Leased communities and communities with traditional resident leases. A N/A
indicates markets with communities under construction where Lease-Up has not yet commenced.(2)
    
    Lower average occupancy is due to the inclusion of certain recently completed development
communities which are in Lease-Up and therefore not yet Stabilized.(3)
    
    Includes a 623-unit community which recently completed redevelopment and whose occupancy was
85.9% as of December 31, 2006.(4)
    
    As of December 31, 2006, we had two investments representing $7.1 million or 777 units and
one investment representing $0.5 million or 176 units classified as In Planning and Under
Control for Archstone-Smith and Ameriton, respectively. Our actual investment in these communities is
reflected in the Other assets caption of our Balance Sheet.(5)
    
    Includes land that is not In Planning and other real estate assets. 
 Item 3. Legal Proceedings
     
 Item 4. Submission of Matters to a Vote of Security Holders
  20




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##### Table of Contents



PART II
 
 Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
  2006
    
    
    2005Per Common Unit(1):Ordinary income
    
    $
    1.31
    
    
    $
    1.12Capital gains
    
    
    0.43
    
    
    
    0.61Total
    
    $
    1.74
    
    
    $
    1.73
  2006
    
    
    2005Per Series I Preferred Unit(1):Ordinary income
    
    $
    5,778
    
    
    $
    4,959Capital gains
    
    
    1,882
    
    
    
    2,701Total
    
    $
    7,660
    
    
    $
    7,660
 
 (1)
    
    The Series I Preferred Units have a par value of $100,000 unit.   
 Item 6. Selected Financial Data
  Years ended December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002Operations Summary(1):Total revenues(2)
    
    $
    1,133,586
    
    
    $
    833,633
    
    
    $
    661,478
    
    
    $
    594,374
    
    
    $
    567,842Property operating expenses (rental expenses and real estate taxes)
    
    
    343,342
    
    
    
    252,382
    
    
    
    210,747
    
    
    
    180,658
    
    
    
    181,794Net Operating Income(3)
    
    
    712,834
    
    
    
    525,221
    
    
    
    431,523
    
    
    
    394,382
    
    
    
    376,586Depreciation on real estate investments
    
    
    261,438
    
    
    
    187,771
    
    
    
    150,470
    
    
    
    119,776
    
    
    
    109,074Interest expense
    
    
    245,895
    
    
    
    164,035
    
    
    
    125,108
    
    
    
    107,791
    
    
    
    107,978General and administrative expense
    
    
    68,188
    
    
    
    58,604
    
    
    
    55,479
    
    
    
    49,838
    
    
    
    45,710Earnings from operations
    
    
    201,008
    
    
    
    121,609
    
    
    
    106,111
    
    
    
    100,658
    
    
    
    106,188Gains on dispositions of depreciated real estate, net(4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,950Income from unconsolidated entities
    
    
    36,316
    
    
    
    22,432
    
    
    
    17,902
    
    
    
    5,745
    
    
    
    53,602Net earnings from discontinued operations(5)
    
    
    595,413
    
    
    
    528,656
    
    
    
    459,988
    
    
    
    387,788
    
    
    
    166,200Preferred Unit distributions
    
    
    3,829
    
    
    
    4,572
    
    
    
    16,254
    
    
    
    26,153
    
    
    
    34,309Net earnings attributable to Common Units(3): Basic
    
    
    831,246
    
    
    
    696,932
    
    
    
    596,369
    
    
    
    468,038
    
    
    
    322,416 Diluted
    
    
    842,385
    
    
    
    696,932
    
    
    
    600,124
    
    
    
    480,910
    
    
    
    322,416Common Unit distributions
    
    
    432,592
    
    
    
    397,466
    
    
    
    603,553
    
    
    
    277,035
    
    
    
    347,971Per Unit Data:Net earnings attributable to Common Units: Basic
    
    $
    3.35
    
    
    $
    3.01
    
    
    $
    2.71
    
    
    $
    2.20
    
    
    $
    1.59
 21




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##### Table of Contents



Years ended December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002 Diluted
    
    
    3.33
    
    
    
    3.00
    
    
    
    2.69
    
    
    
    2.18
    
    
    
    1.58Common Unit cash distributions paid(6)
    
    
    1.74
    
    
    
    1.73
    
    
    
    2.72
    
    
    
    1.71
    
    
    
    1.70Cash distributions paid per unit:Series A Preferred Unit(7)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.11
    
    
    
    2.29Series C Preferred Unit(8)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.38Series D Preferred Unit(9)
    
    
    
    
    
    
    
    
    
    
    1.31
    
    
    
    2.19
    
    
    
    2.19Series E Preferred Unit(10)
    
    
    
    
    
    
    2.09
    
    
    
    2.09
    
    
    
    2.09
    
    
    
    .70Series F Preferred Unit(10)
    
    
    
    
    
    
    
    
    
    
    1.50
    
    
    
    2.03
    
    
    
    .68Series G Preferred Unit(10)
    
    
    
    
    
    
    2.16
    
    
    
    2.16
    
    
    
    2.16
    
    
    
    .72Series H, J, K, and L Preferred Units(10)(11)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.38
    
    
    
    3.36Series I Preferred Unit(10)(11)
    
    
    7,660.00
    
    
    
    7,660.00
    
    
    
    7,660.00
    
    
    
    7,660.00
    
    
    
    7,660.00Weighted average Common Units outstanding: Basic
    
    
    248,314
    
    
    
    231,642
    
    
    
    220,053
    
    
    
    212,288
    
    
    
    202,781 Diluted
    
    
    253,308
    
    
    
    232,608
    
    
    
    223,187
    
    
    
    220,758
    
    
    
    203,804
 
 (1)
    
    Net earnings from discontinued operations have been reclassified to reflect communities
classified as discontinued operations as of December 31, 2006 for all years presented.(2)
    
    Annual revenues and other income, inclusive of discontinued operations, for 2006, 2005,
2004, 2003 and 2002 were $1.3 billion, $1.1 billion, $1.0 billion, $1.0 billion and $1.0
billion, respectively.(3)
    
    Defined as rental revenues less rental expenses and real estate taxes. We believe that
net earnings attributable to Common Units and NOI are the most relevant measures of our
operating performance and allow investors to evaluate our business against our industry
peers and against all publicly traded companies as a whole. We rely on NOI for purposes of
making decisions about resource allocations and assessing segment performance. We also
believe NOI is a valuable means of comparing period-to-period property performance. See
Item 7 of this Annual Report under Results of Operationsfor a reconciliation of NOI to
Earnings from Operations, and to obtain the required information to recalculate NOI from
continuing operations.(4)
    
    Gains on the disposition of real estate investments classified as held for sale after
January 1, 2002 are included in discontinued operations.(5)
    
    Represents property-specific components of net earnings and gains/losses on the
disposition of real estate classified as held for sale subsequent to January 1, 2002.(6)
    
    Includes a $1.00 per unit special distribution issued to our Common Unitholders in
December 2004.(7)
    
    The Series A Preferred Units were called for redemption during October 2003; of the 2.9
million Preferred Units outstanding, 2.8 million were converted to Common Units and the
remaining were redeemed.(8)
    
    All of the outstanding Series C Preferred Units were redeemed at liquidation value plus
accrued distributions in August 2002.(9)
    
    All of the outstanding Series D Preferred Units were redeemed at liquidation value plus
accrued distributions in August 2004.(10)
    
    The Series L Preferred Units were converted into Common Units during December 2004 and
the distribution paid during 2004 prior to conversion was $3.40 per unit. In September
2004, the Series K Preferred Units were converted into Common Units and the distribution
paid during 2004 prior to conversion was $2.55 per unit. The Series H Preferred Units were
converted into Common Units during May 2003 and the distribution paid during 2003 prior to
conversion was $1.27 per unit. In July 2002, Series J Preferred Units were converted into
Common Units. During the fourth quarter 2001, we paid approximately $5.8 million of
distributions on the Series H, I, J, K and L Preferred Shares that were declared by Smith
Residential prior to the Smith Merger.(11)
    
    Series I Preferred Units have a par value of $100,000 per unit. 22




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##### Table of Contents



Years Ended December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002Financial Position:Real estate owned, at cost
    
    $
    12,858,507
    
    
    $
    11,031,917
    
    
    $
    8,972,860
    
    
    $
    8,891,418
    
    
    $
    9,229,398Real estate held for sale(1)
    
    
    329,133
    
    
    
    327,347
    
    
    
    249,178
    
    
    
    107,762
    
    
    
    68,337Investments in and advances to unconsolidated entities
    
    
    235,323
    
    
    
    132,728
    
    
    
    111,481
    
    
    
    86,367
    
    
    
    116,594Total assets
    
    
    13,259,127
    
    
    
    11,462,095
    
    
    
    9,061,280
    
    
    
    8,916,591
    
    
    
    9,091,647Unsecured credit facilities
    
    
    84,723
    
    
    
    394,578
    
    
    
    19,000
    
    
    
    103,790
    
    
    
    365,578Long-Term Unsecured Debt
    
    
    3,355,699
    
    
    
    2,540,036
    
    
    
    2,094,358
    
    
    
    1,866,861
    
    
    
    1,771,724Mortgages Payable
    
    
    2,776,234
    
    
    
    2,393,652
    
    
    
    2,031,505
    
    
    
    1,960,827
    
    
    
    2,330,533Total liabilities
    
    
    6,956,789
    
    
    
    5,693,305
    
    
    
    4,469,994
    
    
    
    4,179,488
    
    
    
    4,699,920Other Common Unitholders interest (at redemption value)
    
    
    1,718,017
    
    
    
    1,420,491
    
    
    
    885,400
    
    
    
    707,924
    
    
    
    579,598Perpetual Preferred Units
    
    
    50,000
    
    
    
    50,000
    
    
    
    69,522
    
    
    
    210,120
    
    
    
    355,221Total unitholders equity
    
    
    4,584,321
    
    
    
    4,348,299
    
    
    
    3,703,826
    
    
    
    4,017,669
    
    
    
    3,799,141Number of Common Units outstanding
    
    
    249,661
    
    
    
    246,324
    
    
    
    222,694
    
    
    
    220,063
    
    
    
    205,328
 Years Ended December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002Other Data:Net cash flows provided by (used in):Operating activities
    
    $
    537,428
    
    
    $
    414,019
    
    
    $
    399,897
    
    
    $
    343,696
    
    
    $
    392,043Investing activities
    
    
    (506,264
    )
    
    
    (964,621
    )
    
    
    528,253
    
    
    
    428,166
    
    
    
    (137,401
    )Financing activities
    
    
    3,853
    
    
    
    360,985
    
    
    
    (730,125
    )
    
    
    (779,478
    )
    
    
    (248,823
    )
 
 (1)
    
    Previous years have been restated to include assets that were classified as held
for sale as of December 31, 2006. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 
 Results of Operations
 Executive Summary
   23




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##### Table of Contents



United States Geographic Distribution  1995 vs. 2006(1)
 
 
 (1)

    
    Allocation is based on the relative NOI in core versus non-core markets for the three
months ended December 31, 1994 for the 1995 geographic distribution and the three-months
ended December 31, 2006 for the 2006 geographic distribution. Core markets are defined as
the Washington D.C. metropolitan area; Southern California; the New York City metropolitan
area; the San Francisco Bay Area in California; Boston,
Massachusetts; Seattle, Washington;
Southeast Florida and Chicago, Illinois. Non-core is defined as all other markets in the
United States.  Diluted
Earnings Per Unit
 
 24




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##### Table of Contents




    
    Our Same-Store NOI has increased 11.0% in 2006 as compared to 2004. We believe the
improvement in our Same-Store performance has resulted from a number of factors, including
strengthening market fundamentals as well as benefits from the significant investments we
have made in people and operating systems.
    
    The significant disposition volume resulting from the portfolio repositioning strategy
mentioned above, resulted in REIT GAAP gains, net of disposition costs, of $546.3 million,
$446.7 million and $372.2 million in 2006, 2005 and 2004, respectively. These gains have
been a major driver of our earnings per share growth.
    
    Utilizing the REITs development, acquisition and operating expertise, Ameriton has
identified under-managed operating communities, as well as development and redevelopment
opportunities with a short-term ownership horizon of one to two years that have produced
GAAP gains, net of dispositions costs, of $51.2 million, $75.2 million and $65.1 million in
2006, 2005 and 2004, respectively. The timing and amount of Ameritons contributions to
our earnings will fluctuate from year to year and depend primarily on its ability to
identify profitable investment opportunities, timing of completion of investments in its
development pipeline and real estate market values.
    
    During 2006, we recognized a net loss of $13.1 million ($6.4 million excluding
depreciation) as a result of building our International platform and our expansion efforts
in Germany.
    
    We recognized $77.4 million, $56.0 million and $19.2 million in other income during
2006, 2005 and 2004, respectively, related primarily to non-recurring insurance-related
reimbursement, gains from land sales (including Ameriton land sales) and interest income.
    
    We recognized $275.8 million, $217.6 million and $208.8 million in interest expense,
including discontinued operations, during 2006, 2005 and 2004, respectively. The year over
year increases were due primarily to financing related to the growth in our real estate
portfolio and higher average interest rates.
    
    We recognized $37.5 million, $72.2 million and $29.3 million in other expense, including
discontinued operations, during 2006, 2005 and 2004, respectively, related primarily to
Ameriton income taxes, debt extinguishment costs and loss contingencies. Most of the
costs in other expense are event-driven and will not necessarily reoccur each year.
    
    We recognized $2.3 million and $28.8 million in other non-operating income during 2006
and 2005, respectively, related primarily to gains from the sale of our Rent.com
investment.
 25




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##### Table of Contents



Reconciliation of Quantitative Summary to Consolidated Statements of Earnings
  2006
    
    
    2005
    
    
    2004Continuing
    
    
    Discontinued
    
    
    
    
    
    
    Continuing
    
    
    Discontinued
    
    
    
    
    
    
    Continuing
    
    
    DiscontinuedOperations
    
    
    Operations
    
    
    Total
    
    
    Operations
    
    
    Operations
    
    
    Total
    
    
    Operations
    
    
    Operations
    
    
    TotalRental revenue
    
    $
    1,056,176
    
    
    $
    139,457
    
    
    $
    1,195,633
    
    
    $
    777,603
    
    
    $
    239,806
    
    
    $
    1,017,409
    
    
    $
    642,270
    
    
    $
    325,784
    
    
    $
    968,054Other income
    
    
    77,410
    
    
    
    
    
    
    
    77,410
    
    
    
    56,030
    
    
    
    
    
    
    
    56,030
    
    
    
    19,208
    
    
    
    
    
    
    
    19,208Property operating expenses (rental
expenses and real estate taxes)
    
    
    (343,342
    )
    
    
    (61,022
    )
    
    
    (404,364
    )
    
    
    (252,382
    )
    
    
    (105,587
    )
    
    
    (357,969
    )
    
    
    (210,747
    )
    
    
    (143,341
    )
    
    
    (354,088
    )Depreciation on real estate investments
    
    
    (261,438
    )
    
    
    (26,858
    )
    
    
    (288,296
    )
    
    
    (187,771
    )
    
    
    (51,017
    )
    
    
    (238,788
    )
    
    
    (150,470
    )
    
    
    (69,519
    )
    
    
    (219,989
    )Interest expense
    
    
    (245,895
    )
    
    
    (29,931
    )
    
    
    (275,826
    )
    
    
    (164,035
    )
    
    
    (53,533
    )
    
    
    (217,568
    )
    
    
    (125,108
    )
    
    
    (83,644
    )
    
    
    (208,752
    )General and administrative expenses
    
    
    (68,188
    )
    
    
    
    
    
    
    (68,188
    )
    
    
    (58,604
    )
    
    
    
    
    
    
    (58,604
    )
    
    
    (55,479
    )
    
    
    
    
    
    
    (55,479
    )Other expense
    
    
    (13,715
    )
    
    
    (23,805
    )
    
    
    (37,520
    )
    
    
    (49,232
    )
    
    
    (22,947
    )
    
    
    (72,179
    )
    
    
    (13,563
    )
    
    
    (15,739
    )
    
    
    (29,302
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    460
    
    
    
    
    
    
    
    460Income from unconsolidated entities
    
    
    36,316
    
    
    
    
    
    
    
    36,316
    
    
    
    22,432
    
    
    
    
    
    
    
    22,432
    
    
    
    17,902
    
    
    
    
    
    
    
    17,902Other non-operating income
    
    
    2,338
    
    
    
    
    
    
    
    2,338
    
    
    
    28,807
    
    
    
    
    
    
    
    28,807
    
    
    
    28,162
    
    
    
    
    
    
    
    28,162Gains, net of disposition costs
    
    
    
    
    
    
    597,572
    
    
    
    597,572
    
    
    
    
    
    
    
    521,934
    
    
    
    521,934
    
    
    
    
    
    
    
    446,447
    
    
    
    446,447Net earnings
    
    $
    239,662
    
    
    $
    595,413
    
    
    $
    835,075
    
    
    $
    172,848
    
    
    $
    528,656
    
    
    $
    701,504
    
    
    $
    152,635
    
    
    $
    459,988
    
    
    $
    612,623
 Quantitative Summary
 including
 26




---



##### Table of Contents



2006 vs. 2005
    
    
    2005 vs. 2004Increase /
    
    
    Increase /2006
    
    
    2005
    
    
    2004
    
    
    (Decrease)
    
    
    (Decrease)Rental revenues:Same-Store (1)
    
    $
    637,079
    
    
    $
    600,358
    
    
    $
    579,358
    
    
    $
    36,721
    
    
    $
    21,000Non Same-Store
    
    
    491,668
    
    
    
    375,712
    
    
    
    348,668
    
    
    
    115,956
    
    
    
    27,044Ameriton
    
    
    20,869
    
    
    
    33,986
    
    
    
    36,752
    
    
    
    (13,117
    )
    
    
    (2,766
    )International
    
    
    34,920
    
    
    
    
    
    
    
    
    
    
    
    34,920
    
    
    
    Non-multifamily
    
    
    11,097
    
    
    
    7,353
    
    
    
    3,276
    
    
    
    3,744
    
    
    
    4,077Total revenues
    
    
    1,195,633
    
    
    
    1,017,409
    
    
    
    968,054
    
    
    
    178,224
    
    
    
    49,355Property operating expenses (rental expenses and real estate taxes):Same-Store (1)
    
    
    201,158
    
    
    
    193,906
    
    
    
    186,512
    
    
    
    7,252
    
    
    
    7,394Non Same-Store
    
    
    173,108
    
    
    
    145,033
    
    
    
    148,224
    
    
    
    28,075
    
    
    
    (3,191
    )Ameriton
    
    
    10,619
    
    
    
    17,038
    
    
    
    18,884
    
    
    
    (6,419
    )
    
    
    (1,846
    )International
    
    
    16,225
    
    
    
    
    
    
    
    
    
    
    
    16,225
    
    
    
    Non-multifamily
    
    
    3,254
    
    
    
    1,992
    
    
    
    468
    
    
    
    1,262
    
    
    
    1,524Total operating expenses
    
    
    404,364
    
    
    
    357,969
    
    
    
    354,088
    
    
    
    46,395
    
    
    
    3,881Net Operating Income (rental revenues less property operating
expenses)
    
    
    791,269
    
    
    
    659,440
    
    
    
    613,966
    
    
    
    131,829
    
    
    
    45,474Margin (NOI/rental revenues):
    
    
    66.2
    %
    
    
    64.8
    %
    
    
    63.4
    %
    
    
    1.4
    %
    
    
    1.4
    %Average occupancy during period: (2)
    
    
    93.9
    %
    
    
    94.6
    %
    
    
    94.8
    %
    
    
    (0.7
    %)
    
    
    (0.2
    %)Other income
    
    
    77,410
    
    
    
    56,030
    
    
    
    19,208
    
    
    
    21,380
    
    
    
    36,822Depreciation of real estate investments
    
    
    288,296
    
    
    
    238,788
    
    
    
    219,989
    
    
    
    49,508
    
    
    
    18,799Interest expense
    
    
    327,634
    
    
    
    256,679
    
    
    
    232,324
    
    
    
    70,955
    
    
    
    24,355Capitalized interest
    
    
    51,808
    
    
    
    39,111
    
    
    
    23,572
    
    
    
    12,697
    
    
    
    15,539Net interest expense
    
    
    275,826
    
    
    
    217,568
    
    
    
    208,752
    
    
    
    58,258
    
    
    
    8,816General and administrative expenses
    
    
    68,188
    
    
    
    58,604
    
    
    
    55,479
    
    
    
    9,584
    
    
    
    3,125Other expense
    
    
    37,520
    
    
    
    72,179
    
    
    
    29,302
    
    
    
    (34,659
    )
    
    
    42,877Earnings from continuing and discontinued operations
    
    
    198,849
    
    
    
    128,331
    
    
    
    119,652
    
    
    
    70,518
    
    
    
    8,679Minority interest
    
    
    
    
    
    
    
    
    
    
    460
    
    
    
    
    
    
    
    (460
    )Equity in earnings from unconsolidated entities
    
    
    36,316
    
    
    
    22,432
    
    
    
    17,902
    
    
    
    13,884
    
    
    
    4,530Other non-operating income Gains on disposition of real estate
investments, net of disposition costs:
    
    
    2,338
    
    
    
    28,807
    
    
    
    28,162
    
    
    
    (26,469
    )
    
    
    645Taxable subsidiaries
    
    
    51,245
    
    
    
    75,248
    
    
    
    74,230
    
    
    
    (24,003
    )
    
    
    1,018REIT
    
    
    546,327
    
    
    
    446,686
    
    
    
    372,217
    
    
    
    99,641
    
    
    
    74,469Net earnings
    
    $
    835,075
    
    
    $
    701,504
    
    
    $
    612,623
    
    
    $
    133,571
    
    
    $
    88,881
 
 (1)
    
    Reflects revenues and operating expenses for Same-Store communities that were owned on
December 31, 2006 and fully operating during all three years in the comparison period.(2)
    
    Does not include occupancy associated with properties owned by Ameriton, operated under
the Oakwood Master Leases or International. 
 27




---



##### Table of Contents



Property-level operating results  2006 compared to 2005
  Same-Store Analysis
  Same-Store
    
    Same-StoreRevenue
    
    Expense
    
    Same-StoreGrowth
    
    Growth
    
    NOI GrowthGarden
    
    
    6.6
    %
    
    
    6.2
    %
    
    
    6.7
    %High-Rise
    
    
    6.5
    %
    
    
    1.9
    %
    
    
    8.8
    %Total
    
    
    6.5
    %
    
    
    4.4
    %
    
    
    7.5
    %
  Non Same-Store and Other Analysis
  Ameriton
  International
  Non Multi-family
  28




---



##### Table of Contents

\

Property-level operating results  2005 compared to 2004
 Same-Store Analysis
  Same-Store
    
    Same-StoreRevenue
    
    Expense
    
    Same-StoreGrowth
    
    Growth
    
    NOI GrowthGarden
    
    
    3.6
    %
    
    
    3.5
    %
    
    
    3.6
    %High-Rise
    
    
    3.9
    %
    
    
    4.8
    %
    
    
    3.4
    %Total
    
    
    3.7
    %
    
    
    4.1
    %
    
    
    3.6
    %
  Non Same-Store and Other Analysis
  Ameriton
  Non Multi-family
  Other Income
   29




---



##### Table of Contents



Depreciation Expense
  Interest Expense
   General and Administrative Expenses
   Other Expenses
   Equity in Income from Unconsolidated Entities
   30




---



##### Table of Contents



Other Non-Operating Income
   Gains on real estate dispositions
  Discontinued Operations Analysis
  Years Ended December 31,2006
    
    
    2005
    
    
    2004Rental revenue
    
    $
    139,457
    
    
    $
    239,806
    
    
    $
    325,784Rental expenses
    
    
    (44,043
    )
    
    
    (74,715
    )
    
    
    (104,023
    )Real estate taxes
    
    
    (16,979
    )
    
    
    (30,872
    )
    
    
    (39,318
    )Depreciation on real estate investments
    
    
    (26,858
    )
    
    
    (51,017
    )
    
    
    (69,519
    )Interest expense(1)
    
    
    (29,931
    )
    
    
    (53,533
    )
    
    
    (83,644
    )Income taxes from taxable REIT subsidiaries
    
    
    (9,972
    )
    
    
    (15,600
    )
    
    
    (13,975
    )Provision for possible loss on real estate investment
    
    
    (4,328
    )
    
    
    (1,500
    )
    
    
    Debt extinguishment costs related to dispositions
    
    
    (9,505
    )
    
    
    (5,847
    )
    
    
    (1,764
    )Gains on disposition of real estate investments, net of disposition costs:Taxable subsidiaries
    
    
    51,245
    
    
    
    75,248
    
    
    
    62,629REIT
    
    
    546,327
    
    
    
    446,686
    
    
    
    383,818Total discontinued operations
    
    $
    595,413
    
    
    $
    528,656
    
    
    $
    459,988Number of communities sold during period
    
    
    42
    
    
    
    35
    
    
    
    30Number of communities classified as held for sale
    
    
    9
    
    
    
    9
    
    
    
    6
 
 (1)
    
    The portion of interest expense included in discontinued operations that is allocated to
properties based on the companys leverage ratio was $20.9 million, $40.3 million and $62.2
million for 2006, 2005 and 2004, respectively.  31




---



##### Table of Contents



Preferred Unit Distribution Analysis
  
 Liquidity and Capital Resources
  Scheduled Debt Maturities and Interest Payment Requirements
     Unitholder Distribution Requirements
  Per
Unit
    
    
    TotalCommon Unit distributions(1):Common Units
    
    $
    1.81
    
    
    $
    398,466A-1 Common Unit distributions
    
    
    1.81
    
    
    
    53,421M Preferred Unit
    
    
    476.03
    
    
    
    N-1 Preferred Units
    
    
    20.96
    
    
    
    6N-2 Preferred Units
    
    
    8.98
    
    
    
    6Series I
Preferred Unit distributions(2)
    
    
    7,660.00
    
    
    
    3,830Total dividend/distribution requirements
    
    
    
    
    
    $
    455,729
 
 (1)
    
    Future distributions on Common Units are contingent upon approval by our Board of Trustees(2)
    
    Series I Preferred Units have a par value of $100,000 per unit. 32




---



##### Table of Contents



Planned Investments
  Planned InvestmentsDiscretionary
    
    
    CommittedCommunities under redevelopment
    
    $
    1,812
    
    
    $
    3,082Communities under construction
    
    
    
    
    
    
    619,441Communities In Planning and Owned
    
    
    1,196,121
    
    
    
    Communities In Planning and Under Control
    
    
    406,336
    
    
    
    Community acquisitions under contract
    
    
    146,766
    
    
    
    FHA/ADA Settlement Capital Accrual
    
    
    
    
    
    
    29,185Total
    
    $
    1,751,035
    
    
    $
    651,708
   Funding Sources
 .
 
 Litigation and Contingencies
    33




---



##### Table of Contents



Critical Accounting Policies
  Internal Cost Capitalization
   Valuation of Real Estate
 Accounting for Impairment or Disposal of
Long-Lived Assets,
   34




---



##### Table of Contents



Capital Expenditures and Depreciable Lives
    Pursuit Costs
   Consolidation vs. Equity Method of Accounting for Ventures
 Consolidation of Variable Interest Entities Determining Whether a General Partner, or the
General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited
Partners Have Certain Rights
  35




---



##### Table of Contents



Off Balance Sheet Arrangements
 Investments in and Advances to
Unconsolidated Entities
  
 Contractual Commitments
  2008
    
    
    2010
    
    
    20122007
    
    
    and 2009
    
    
    and 2011
    
    
    thru 2096
    
    
    TotalScheduled long-term debt maturities
    
    $
    491.1
    
    
    $
    1,028.3
    
    
    $
    1,248.1
    
    
    $
    3,364.4
    
    
    $
    6,131.9Unsecured credit facilities(1)
    
    
    
    
    
    
    
    
    
    
    84.7
    
    
    
    
    
    
    
    84.7Term loan  International
    
    
    235.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    235.8Interest on indebtedness
    
    
    335.3
    
    
    
    590.7
    
    
    
    481.7
    
    
    
    188.2
    
    
    
    1,595.9Development and redevelopment expenditures
    
    
    307.9
    
    
    
    314.6
    
    
    
    
    
    
    
    
    
    
    
    622.5Performance bonds and guarantees
    
    
    26.9
    
    
    
    11.5
    
    
    
    
    
    
    
    1.2
    
    
    
    39.6FHA/ADA Settlement(2)
    
    
    14.6
    
    
    
    14.6
    
    
    
    
    
    
    
    
    
    
    
    29.2Lease commitments and other(3)
    
    
    86.0
    
    
    
    17.7
    
    
    
    19.2
    
    
    
    217.8
    
    
    
    340.7Total
    
    $
    1,497.6
    
    
    $
    1,977.4
    
    
    $
    1,833.7
    
    
    $
    3,771.6
    
    
    $
    9,080.3
 
 (1)
    
    The $600 million unsecured facility matures December 2010, with a one-year extension option
available at our discretion.(2)
    
    Represents the estimated capital spending associated with the FHA and ADA settlement
assuming the remainder will be spent evenly over the next two years. Certain communities
impacted by the settlement may be sold, which could impact the ultimate timing and amounts
spent.(3)
    
    Includes letters of credit and lease commitments relating principally to ground lease
payments as of December 31, 2006. 
 New Accounting Pronouncements
 Determining Whether a
General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights
 Determining the
Variability to Be Considered in Applying FASB Interpretation No. 46(R). Consolidation
of Variable Interest Entities.
 36




---



##### Table of Contents



Accounting for Uncertainty in
Income Taxes  An Interpretation of FASB Statement No. 109.
   
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Stock Investments
  Interest Rate Hedging Activities
    37




---



##### Table of Contents



Carrying andNotional
    
    Maturity
    
    EstimatedAmount
    
    Date Range
    
    Fair ValueCash flow hedges:Interest rate caps
    
    $
    486,354
    
    
    
    2007-2013
    
    
    $
    809Interest rate swaps
    
    
    367,054
    
    
    
    2007-2014
    
    
    
    7,080Total cash flow hedges
    
    $
    853,408
    
    
    
    2007-2014
    
    
    $
    7,889Fair value hedges:Interest rate swaps
    
    $
    75,055
    
    
    
    2008
    
    
    $
    1,185Total rate of return swaps
    
    
    36,346
    
    
    
    2007
    
    
    
    (1,447
    )Total fair value hedges
    
    $
    111,401
    
    
    
    2007-2008
    
    
    $
    (262
    )Total hedges
    
    $
    964,809
    
    
    
    2007-2014
    
    
    $
    7,627
 Foreign Currency Hedging Activities
 
 Energy Contract Hedging Activities
  Equity Securities Hedging Activities
  Interest Rate Sensitive Liabilities
   38




---



##### Table of Contents



EstimatedTotal
    
    Fair2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    Thereafter
    
    Balance
    
    Value(1)Interest rate sensitive liabilities:Unsecured credit facilities:
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    84,723
    
    
    $
    
    
    
    $
    
    
    
    $
    84,723
    
    
    $
    84,723Average nominal interest rate(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.5
    %
    
    
    
    
    
    
    
    
    
    
    5.5
    %
    
    
    Term loan  International:
    
    $
    235,771
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    235,771
    
    
    $
    235,771Average nominal interest rate(2)
    
    
    4.1
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.1
    %
    
    
    Long-Term Unsecured Debt:Fixed rate
    
    $
    386,250
    
    
    $
    312,822
    
    
    $
    81,250
    
    
    $
    263,750
    
    
    $
    625,000
    
    
    $
    1,610,332
    
    
    $
    3,279,404
    
    
    $
    3,360,607Average nominal interest rate(2)
    
    
    5.4
    %
    
    
    4.0
    %
    
    
    7.6
    %
    
    
    6.0
    %
    
    
    4.5
    %
    
    
    5.7
    %
    
    
    5.4
    %
    
    
    Variable rate(3)
    
    $
    
    
    
    $
    21,468
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    54,827
    
    
    $
    76,295
    
    
    $
    76,295Average nominal interest rate(2)
    
    
    
    
    
    
    3.9
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.0
    %
    
    
    4.0
    %
    
    
    Mortgages payable:Fixed rate debt
    
    $
    77,690
    
    
    $
    196,637
    
    
    $
    392,102
    
    
    $
    131,931
    
    
    $
    174,143
    
    
    $
    820,480
    
    
    $
    1,792,983
    
    
    $
    1,818,091Average nominal interest rate(2)
    
    
    5.8
    %
    
    
    5.7
    %
    
    
    6.0
    %
    
    
    6.0
    %
    
    
    6.1
    %
    
    
    6.0
    %
    
    
    6.0
    %
    
    
    Variable rate debt
    
    $
    27,235
    
    
    $
    15,859
    
    
    $
    8,132
    
    
    $
    8,813
    
    
    $
    44,446
    
    
    $
    878,766
    
    
    $
    983,251
    
    
    $
    983,251Average nominal interest rate(2)
    
    
    5.1
    %
    
    
    2.4
    %
    
    
    5.1
    %
    
    
    5.1
    %
    
    
    4.6
    %
    
    
    4.9
    %
    
    
    4.8
    %
    
    
    
 
 (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)
    
    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 as of December 31,
2006. The weighted average effective interest rate on the unsecured credit facilities,
Long-Term Unsecured Debt and mortgages payable was 5.9%, 5.6% and 5.4, respectively, as of
December 31, 2006.(3)
    
    Represents unsecured tax-exempt bonds. 
 Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  39




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##### Table of Contents



Item 9A. Controls and Procedures
  
 Managements Report on Internal Control Over Financial Reporting
    /s/ R. Scot SellersR. Scot SellersChairman of the Board, Chief Executive Officer and Trustee (principal executive officer)/s/ Charles E. Mueller, Jr.Charles E. Mueller, Jr.Chief Financial Officer (principal financial officer)
 
 Item 9B. Other Information
  40




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##### Table of Contents



Part III
 
 Item 10. Directors, Executive Officers and Corporate Governance
   
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  Number of A-1
    
    Percentage ofCommon Units
    
    AllBeneficially
    
    A-1 CommonName of Beneficial Owner
    
    Owned
    
    UnitsRobert P. Kogod
    
    
    1,647,094
    (1)
    
    
    6.04
    %R. Scot Sellers
    
    
    
    
    
    
    Robert H. Smith
    
    
    1,732,801
    (1)
    
    
    6.35
    %Caroline Brower
    
    
    
    
    
    
    J. Lindsay Freeman
    
    
    
    
    
    
    Charles E. Mueller, Jr.
    
    
    
    
    
    
    Alfred G. Neely
    
    
    
    
    
    
    All Operating Trust executive officers as a group
(6 persons)
    
    
    1,925,127
    (1)
    
    
    7.06
    %
 
 (1)
    
    Includes for each of Messrs. Smith and Kogod beneficial ownership of Class A-1 Common
Units as follows: Mr. Smith, 1,732,801 and Mr. Kogod, 1,647,094. Mr. Smith has shared
voting and shared dispositive power with respect to 1,543,665 of such Class A-1 Common
Units. Of the 1,543,665 Class A-1 Common Units for which Mr. Smith shares voting power and
dispositive power, 88,887 are owned by Mr. Smiths spouse and 1,454,768 are owned by CESM,
Inc., of which Mr. Smith is a director, secretary and treasurer. Mr. Kogod has shared
voting and shared 41




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##### Table of Contents



dispositive power with respect to 1,523,510 of such Class A-1 Common Units. Of the
1,523,510 Class A-1 Common Units for which Mr. Kogod shares voting power and dispositive
power, 68,742 are owned by Mr. Kogods spouse and 1,454,768 are owned by CESM, Inc., of
which Mr. Kogod is a director and the president. The Class A-1 Common Units that are owned
by CESM, Inc. are reported twice, once as beneficially owned by Mr. Smith and again as
beneficially owned by Mr. Kogod. 
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accounting Fees and Services
  2006
    
    
    2005Audit Fees(1)
    
    $
    1,459,722
    
    
    $
    1,363,205Audit-Related Fees(2)
    
    
    202,421
    
    
    
    331,400Tax Fees(3)
    
    
    93,508
    
    
    
    111,693All Other Fees(4)
    
    
    
    
    
    
    TOTAL
    
    $
    1,755,651
    
    
    $
    1,806,298
 
 (1)
    
    Audit Fees are the aggregate fees billed by KPMG LLP for professional services
rendered for the audit of Archstone-Smiths annual financial statements for the years ended
December 31, 2006 and December 31, 2005 and the reviews of the financial statements
included in Archstone-Smiths quarterly reports on Form 10-Q during 2006 and 2005. These
fees include fees billed in connection with KPMG LLPs analysis of the effectiveness of our
internal controls. Audit Fees for 2006 also includes amounts billed relating to our
international operations, which totaled $96,622. In addition, Audit Fees includes
amounts billed for registration statements filed and related comfort letters and consents
amounting to $96,300 and $147,205 in 2006 and 2005, respectively.(2)
    
    Audit-related fees include fees billed for assurance and related services that are
reasonably related to the performance of the audit and not included in the audit fees
described above, including audits of joint ventures and unconsolidated and consolidated
subsidiaries and in 2005, $178,200 for Rule 3-14 audits.(3)
    
    Tax Fees are fees billed by KPMG LLP in either 2006 or 2005 for tax services,
including tax compliance, tax advice or tax planning.(4)
    
    All Other Fees are fees billed by KPMG LLP in 2006 or 2005 that are not included in
the above classifications. Pre-Approval Process
  42




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Part IV
 
 Item 15. Exhibits, Financial Statement Schedules
             43




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##### Table of Contents



INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
 PageReports of Independent Registered Public Accounting Firm
    
    
    46Consolidated Balance Sheets as of December 31, 2006 and 2005
    
    
    47Consolidated Statements of Earnings for the years ended December 31,
2006, 2005 and 2004
    
    
    48Consolidated Statements of Unitholders Equity, Other Common
Unitholders Interest and Comprehensive Income (Loss) for the years
ended December 31, 2006, 2005 and 2004
    
    
    49Consolidated Statements of Cash Flows for the years ended December
31, 2006, 2005 and 2004
    
    
    50Notes to Consolidated Financial Statements
    
    
    51Report of Independent Registered Public Accounting Firm on
Supplementary Information
    
    
    82Schedule III  Real Estate and Accumulated Depreciation as of
December 31, 2006
    
    
    83Schedule IV  Mortgage Loans on Real Estate as of December 31, 2006
    
    
    85Signatures
    
    
    86Index to Exhibits
    
    
    87
 44




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    .
  
 45




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
 .
    . .
  .
 
 46




---



##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST
 
 CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data)
 December 31,2006
    
    
    2005ASSETSReal estate
    
    $
    12,858,507
    
    
    $
    11,031,917Real estate  held for sale
    
    
    329,133
    
    
    
    327,347Less accumulated depreciation
    
    
    957,146
    
    
    
    836,69312,230,494
    
    
    
    10,522,571Investments in and advances to unconsolidated entities
    
    
    235,323
    
    
    
    132,728Net real estate investments
    
    
    12,465,817
    
    
    
    10,655,299Cash and cash equivalents
    
    
    48,655
    
    
    
    13,638Restricted cash in tax-deferred exchange escrow
    
    
    319,312
    
    
    
    495,274Other assets
    
    
    425,343
    
    
    
    297,884Total assets
    
    $
    13,259,127
    
    
    $
    11,462,095LIABILITIES AND UNITHOLDERS EQUITYLiabilities:Unsecured credit facilities
    
    $
    84,723
    
    
    $
    394,578Term Loan  International
    
    
    235,771
    
    
    
    Long-Term Unsecured Debt
    
    
    3,339,462
    
    
    
    2,523,639Long-Term Unsecured Debt  held for sale
    
    
    16,237
    
    
    
    16,397Mortgages payable
    
    
    2,743,081
    
    
    
    2,360,181Mortgages payable  held for sale
    
    
    33,153
    
    
    
    33,471Accounts payable
    
    
    71,967
    
    
    
    53,366Accrued
interest
    
    
    67,135
    
    
    
    50,991Accrued expenses and other liabilities
    
    
    365,260
    
    
    
    260,682Total liabilities
    
    
    6,956,789
    
    
    
    5,693,305Minority interest
    
    
    
    
    
    
    Other common unitholders interest, at redemption
value (A-1 Common Units: 29,514,128 in 2006 and
33,910,022 in 2005)
    
    
    1,718,017
    
    
    
    1,420,491Unitholders equity:Perpetual Preferred Units
    
    
    50,000
    
    
    
    50,000Common unitholders equity (A-2 Common Units:
220,147,167 units in 2006 and 212,413,939 units in
2005)
    
    
    4,530,801
    
    
    
    4,300,019Accumulated
other comprehensive income (loss)
    
    
    3,520
    
    
    
    (1,720
    )Total unitholders equity
    
    
    4,584,321
    
    
    
    4,348,299Total liabilities and unitholders equity
    
    $
    13,259,127
    
    
    $
    11,462,095
  47




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST
 
 CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per unit amounts)
 Years Ending December 31,2006
    
    
    2005
    
    
    2004Revenues:Rental revenues
    
    $
    1,056,176
    
    
    $
    777,603
    
    
    $
    642,270Other income
    
    
    77,410
    
    
    
    56,030
    
    
    
    19,2081,133,586
    
    
    
    833,633
    
    
    
    661,478Expenses:Rental expenses
    
    
    248,837
    
    
    
    182,546
    
    
    
    155,350Real estate taxes
    
    
    94,505
    
    
    
    69,836
    
    
    
    55,397Depreciation on real estate investments
    
    
    261,438
    
    
    
    187,771
    
    
    
    150,470Interest expense
    
    
    245,895
    
    
    
    164,035
    
    
    
    125,108General and administrative expenses
    
    
    68,188
    
    
    
    58,604
    
    
    
    55,479Other expenses
    
    
    13,715
    
    
    
    49,232
    
    
    
    13,563932,578
    
    
    
    712,024
    
    
    
    555,367Earnings from operations
    
    
    201,008
    
    
    
    121,609
    
    
    
    106,111Minority interest
    
    
    
    
    
    
    
    
    
    
    460Income from unconsolidated entities
    
    
    36,316
    
    
    
    22,432
    
    
    
    17,902Other non-operating income
    
    
    2,338
    
    
    
    28,807
    
    
    
    28,162Net earnings before discontinued operations
    
    
    239,662
    
    
    
    172,848
    
    
    
    152,635Net earnings from discontinued operations
    
    
    595,413
    
    
    
    528,656
    
    
    
    459,988Net earnings
    
    
    835,075
    
    
    
    701,504
    
    
    
    612,623Preferred Unit Distributions
    
    
    (3,829
    )
    
    
    (4,572
    )
    
    
    (16,254
    )Net earnings attributable to Common Units  Basic
    
    
    831,246
    
    
    
    696,932
    
    
    
    596,369Interest on Convertible Debt
    
    
    11,139
    
    
    
    
    
    
    
    Dividends on Convertible Preferred Units
    
    
    
    
    
    
    
    
    
    
    3,755Net earnings attributable to Common Units  Diluted
    
    $
    842,385
    
    
    $
    696,932
    
    
    
    600,124Weighted
average Common Units outstanding:Basic
    
    
    248,314
    
    
    
    231,642
    
    
    
    220,053Diluted
    
    
    253,308
    
    
    
    232,608
    
    
    
    223,187Net earnings
per Common Units  Basic:Net earnings before discontinued operations
    
    $
    0.95
    
    
    $
    0.73
    
    
    $
    0.62Discontinued operations, net
    
    
    2.40
    
    
    
    2.28
    
    
    
    2.09Net earnings
    
    $
    3.35
    
    
    $
    3.01
    
    
    $
    2.71Net earnings
per Common Unit  Diluted:Net earnings before discontinued operations
    
    $
    0.95
    
    
    $
    0.73
    
    
    $
    0.61Discontinued operations, net
    
    
    2.38
    
    
    
    2.27
    
    
    
    2.08Net earnings
    
    $
    3.33
    
    
    $
    3.00
    
    
    $
    2.69Distributions
paid per Common Unit
    
    $
    1.74
    
    
    $
    1.73
    
    
    $
    2.72
  48




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST
 
 CONSOLIDATED STATEMENTS OF UNITHOLDERS EQUITY, OTHER COMMON
UNITHOLDERS INTEREST AND COMPREHENSIVE INCOME (LOSS)
Years Ended December 31, 2006, 2005 and 2004
(In thousands)
 Convertible
    
    
    PerpetualPreferred
    
    
    Preferred
    
    
    
    
    
    
    AccumulatedUnits at
    
    
    Units at
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    OtherAggregate
    
    
    Aggregate
    
    
    Common
    
    
    Comprehensive
    
    
    Total
    
    
    CommonLiquidation
    
    
    Liquidation
    
    
    Unitholders
    
    
    Earnings
    
    
    Unitholders
    
    
    UnitholdersPreference
    
    
    Preference
    
    
    Equity
    
    
    (Loss)
    
    
    Equity
    
    
    Interest
    
    
    TotalBalances at December 31, 2003
    
    
    50,000
    
    
    
    160,120
    
    
    
    3,793,314
    
    
    
    14,235
    
    
    
    4,017,669
    
    
    
    707,924
    
    
    
    4,725,593Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    542,342
    
    
    
    
    
    
    
    542,342
    
    
    
    70,281
    
    
    
    612,623Change in fair value of cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,750
    
    
    
    3,750
    
    
    
    
    
    
    
    3,750Change in fair value of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,410
    )
    
    
    (22,410
    )
    
    
    
    
    
    
    (22,410
    )Comprehensive income attributable to Common
Units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    593,963Preferred Unit distribution
    
    
    
    
    
    
    
    
    
    
    (16,254
    )
    
    
    
    
    
    
    (16,254
    )
    
    
    1,726
    
    
    
    (14,528
    )Common Unit distributions
    
    
    
    
    
    
    
    
    
    
    (539,116
    )
    
    
    
    
    
    
    (539,116
    )
    
    
    (64,437
    )
    
    
    (603,553
    )A-1 Common Units converted into A-2 Common
Units
    
    
    
    
    
    
    
    
    
    
    47,949
    
    
    
    
    
    
    
    47,949
    
    
    
    (47,949
    )
    
    
    A-2 Common Unit repurchases
    
    
    
    
    
    
    
    
    
    
    (95,668
    )
    
    
    
    
    
    
    (95,668
    )
    
    
    
    
    
    
    (95,668
    )Conversion of Preferred Units into Common
Units
    
    
    (50,000
    )
    
    
    
    
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Preferred Unit repurchases
    
    
    
    
    
    
    (90,598
    )
    
    
    
    
    
    
    
    
    
    
    (90,598
    )
    
    
    
    
    
    
    (90,598
    )Exercise of Options
    
    
    
    
    
    
    
    
    
    
    61,467
    
    
    
    
    
    
    
    61,467
    
    
    
    
    
    
    
    61,467Issuance of A-1 Common Units in exchange for
real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,788
    
    
    
    10,788Issuance of A-2 Common Units in exchange for
real estate
    
    
    
    
    
    
    
    
    
    
    4,502
    
    
    
    
    
    
    
    4,502
    
    
    
    
    
    
    
    4,502Adjustment to redemption value
    
    
    
    
    
    
    
    
    
    
    (207,067
    )
    
    
    
    
    
    
    (207,067
    )
    
    
    207,067
    
    
    
    Other, net
    
    
    
    
    
    
    
    
    
    
    (2,740
    )
    
    
    
    
    
    
    (2,740
    )
    
    
    
    
    
    
    (2,740
    )Balances at December 31, 2004
    
    $
    3⁄4
    
    
    $
    69,522
    
    
    $
    3,638,729
    
    
    $
    (4,425
    )
    
    $
    3,703,826
    
    
    $
    885,400
    
    
    $
    4,589,226Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    616,172
    
    
    
    
    
    
    
    616,172
    
    
    
    85,332
    
    
    
    701,504Change in fair value of cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,211
    
    
    
    4,211
    
    
    
    
    
    
    
    4,211Change in fair value of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,214
    )
    
    
    (1,214
    )
    
    
    
    
    
    
    (1,214
    )Foreign currency exchange translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (292
    )
    
    
    (292
    )
    
    
    
    
    
    
    (292
    )Comprehensive income attributable to Common
Units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    704,209Preferred Unit distribution
    
    
    
    
    
    
    
    
    
    
    (4,572
    )
    
    
    
    
    
    
    (4,572
    )
    
    
    
    
    
    
    (4,572
    )Common Unit distributions
    
    
    
    
    
    
    
    
    
    
    (353,623
    )
    
    
    
    
    
    
    (353,623
    )
    
    
    (43,843
    )
    
    
    (397,466
    )A-1 Common Units converted into A-2 Common
Units
    
    
    
    
    
    
    
    
    
    
    8,415
    
    
    
    
    
    
    
    8,415
    
    
    
    (8,415
    )
    
    
    A-2 Common Unit repurchases
    
    
    
    
    
    
    
    
    
    
    (56,495
    )
    
    
    
    
    
    
    (56,495
    )
    
    
    
    
    
    
    (56,495
    )Preferred Unit repurchases
    
    
    
    
    
    
    (19,522
    )
    
    
    
    
    
    
    
    
    
    
    (19,522
    )
    
    
    
    
    
    
    (19,522
    )Exercise of Options
    
    
    
    
    
    
    
    
    
    
    41,566
    
    
    
    
    
    
    
    41,566
    
    
    
    
    
    
    
    41,566Issuance of A-1 Common Units under
Compensation Plans
    
    
    
    
    
    
    
    
    
    
    14,670
    
    
    
    
    
    
    
    14,670
    
    
    
    
    
    
    
    14,670Issuance of A-1 Common Units in exchange for
real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    408,292
    
    
    
    408,292Issuance of A-2 Common Units
    
    
    
    
    
    
    
    
    
    
    491,398
    
    
    
    
    
    
    
    491,398
    
    
    
    
    
    
    
    491,398Adjustment to redemption value
    
    
    
    
    
    
    
    
    
    
    (93,725
    )
    
    
    
    
    
    
    (93,725
    )
    
    
    93,725
    
    
    
    Other, net
    
    
    
    
    
    
    
    
    
    
    (2,516
    )
    
    
    
    
    
    
    (2,516
    )
    
    
    
    
    
    
    (2,516
    )Balances at December 31, 2005
    
    $
    3⁄4
    
    
    $
    50,000
    
    
    $
    4,300,019
    
    
    $
    (1,720
    )
    
    $
    4,348,299
    
    
    $
    1,420,491
    
    
    $
    5,768,790Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    727,434
    
    
    
    
    
    
    
    727,434
    
    
    
    107,641
    
    
    
    835,075Change in fair value of cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,058
    
    
    
    1,058
    
    
    
    
    
    
    
    1,058Change in fair value of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,638
    
    
    
    1,638
    
    
    
    
    
    
    
    1,638Foreign currency exchange translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,544
    
    
    
    2,544
    
    
    
    
    
    
    
    2,544Comprehensive income attributable to Common
Units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    840,315Preferred Unit distribution
    
    
    
    
    
    
    
    
    
    
    (3,829
    )
    
    
    
    
    
    
    (3,829
    )
    
    
    
    
    
    
    (3,829
    )Common Unit distributions
    
    
    
    
    
    
    
    
    
    
    (377,513
    )
    
    
    
    
    
    
    (377,513
    )
    
    
    (55,079
    )
    
    
    (432,592
    )A-1 Common Units converted into A-2 Common
Units
    
    
    
    
    
    
    
    
    
    
    143,404
    
    
    
    
    
    
    
    143,404
    
    
    
    (143,404
    )
    
    
    Issuance of Common Units under Dividend
Reinvestment Plan
    
    
    
    
    
    
    
    
    
    
    27,100
    
    
    
    
    
    
    
    27,100
    
    
    
    
    
    
    
    27,100Exercise of Options
    
    
    
    
    
    
    
    
    
    
    27,716
    
    
    
    
    
    
    
    27,716
    
    
    
    
    
    
    
    27,716Issuance of A-1 Common Units in exchange for
real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,401
    
    
    
    81,401Accrual of equity-classified awards under
Compensation Plans
    
    
    
    
    
    
    
    
    
    
    10,681
    
    
    
    
    
    
    
    10,681
    
    
    
    
    
    
    
    10,681Adjustment to redemption value
    
    
    
    
    
    
    
    
    
    
    (306,967
    )
    
    
    
    
    
    
    (306,967
    )
    
    
    306,967
    
    
    
    Other, net
    
    
    
    
    
    
    
    
    
    
    (17,244
    )
    
    
    
    
    
    
    (17,244
    )
    
    
    
    
    
    
    (17,244
    )Balances at December 31, 2006
    
    $
    3⁄4
    
    
    $
    50,000
    
    
    $
    4,530,801
    
    
    $
    3,520
    
    
    $
    4,584,321
    
    
    $
    1,718,017
    
    
    $
    6,302,338
  49




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Years Ended December 31,2006
    
    
    2005
    
    
    2004Operating activities:Net earnings
    
    $
    835,075
    
    
    $
    701,504
    
    
    $
    612,623Adjustments to reconcile net earnings to net cash flow provided by
operating activities:Depreciation and amortization
    
    
    302,495
    
    
    
    252,174
    
    
    
    232,990Gains on dispositions of depreciated real estate
    
    
    (602,915
    )
    
    
    (524,684
    )
    
    
    (451,816
    )Gains on sale of marketable equity securities
    
    
    (1,673
    )
    
    
    (27,948
    )
    
    
    (28,162
    )Provisions for possible loss on investments
    
    
    4,328
    
    
    
    9,803
    
    
    
    3⁄4Minority
interest
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (460
    )Equity in earnings from unconsolidated entities
    
    
    (6,118
    )
    
    
    6,605
    
    
    
    6,233Interest accrued on Mezzanine loans
    
    
    (9,781
    )
    
    
    (5,224
    )
    
    
    3⁄4Change in other assets
    
    
    (14,786
    )
    
    
    7,132
    
    
    
    526Change in accounts payable, accrued expenses and other liabilities
    
    
    49,067
    
    
    
    7,663
    
    
    
    32,113Other, net
    
    
    (18,264
    )
    
    
    (13,006
    )
    
    
    (4,150
    )Net cash flow provided by operating activities
    
    
    537,428
    
    
    
    414,019
    
    
    
    399,897Investing activities:Real estate investments, net
    
    
    (2,216,598
    )
    
    
    (2,016,573
    )
    
    
    (1,423,549
    )Purchase of DeWAG net of cash acquired of $20,364
    
    
    (252,428
    )
    
    
    3⁄4
    
    
    
    3⁄4Change in investments in unconsolidated entities, net
    
    
    (76,366
    )
    
    
    (10,991
    )
    
    
    (21,662
    )Proceeds from dispositions
    
    
    1,888,341
    
    
    
    1,538,839
    
    
    
    1,821,641Change in restricted cash
    
    
    175,962
    
    
    
    (375,179
    )
    
    
    60,825Change in notes receivable, net
    
    
    (82,414
    )
    
    
    (98,909
    )
    
    
    (6,077
    )Proceeds from notes receivable
    
    
    46,081
    
    
    
    36,654
    
    
    
    3⁄4Other, net
    
    
    11,158
    
    
    
    (38,462
    )
    
    
    97,075Net cash flow provided by (used in) investing activities
    
    
    (506,264
    )
    
    
    (964,621
    )
    
    
    528,253Financing activities:Proceeds from Long-Term Unsecured Debt
    
    
    859,385
    
    
    
    695,724
    
    
    
    297,052Payments on Long-Term Unsecured Debt
    
    
    (51,250
    )
    
    
    (251,250
    )
    
    
    (72,950
    )Principal repayment of mortgages payable, including prepayment penalties
    
    
    (324,700
    )
    
    
    (500,963
    )
    
    
    (159,558
    )Regularly scheduled principal payments on mortgages payable
    
    
    (12,949
    )
    
    
    (15,067
    )
    
    
    (11,512
    )Proceeds from Term Loan   International
    
    
    272,792
    
    
    
    3⁄4
    
    
    
    3⁄4Principal repayments on Term Loan  International
    
    
    (37,021
    )
    
    
    3⁄4
    
    
    
    3⁄4Proceeds from mortgage notes payable
    
    
    
    
    
    
    33,807
    
    
    
    51,656Proceeds from (payments on) unsecured credit facilities, net
    
    
    (309,855
    )
    
    
    375,578
    
    
    
    (84,790
    )Proceeds from issuance of A-2 Common Units, net
    
    
    3⁄4
    
    
    
    491,398
    
    
    
    3⁄4Proceeds from Common Units issued under DRIP and employee stock options
    
    
    57,773
    
    
    
    41,566
    
    
    
    61,467Repurchase of Common Units and Preferred Units
    
    
    
    
    
    
    (56,495
    )
    
    
    (146,954
    )Repurchase of Series E and F Perpetual Preferred Units
    
    
    
    
    
    
    (19,522
    )
    
    
    (42,712
    )Cash distributions paid on Common Units
    
    
    (432,592
    )
    
    
    (417,267
    )
    
    
    (603,553
    )Cash distributions paid on Preferred Units
    
    
    (3,829
    )
    
    
    (4,572
    )
    
    
    (14,527
    )Other, net
    
    
    (13,901
    )
    
    
    (11,952
    )
    
    
    (3,744
    )Net cash flow provided by (used in) financing activities
    
    
    3,853
    
    
    
    360,985
    
    
    
    (730,125
    )Net change in cash and cash equivalents
    
    
    35,017
    
    
    
    (189,617
    )
    
    
    198,025Cash and cash equivalents at beginning of period
    
    
    13,638
    
    
    
    203,255
    
    
    
    5,230Cash and cash equivalents at end of period
    
    $
    48,655
    
    
    $
    13,638
    
    
    $
    203,255
   50




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006, 2005 and 2004
(The glossary included in this Annual Report is hereby incorporated by reference)
 (1) Description of Business and Summary of Significant Accounting Policies
 Business
  Principles of Consolidation
  Use of Estimates
  Discontinued Operations
 Accounting for Impairment or Disposal of
Long-Lived Assets,
 Cash and Cash Equivalents
  51




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Restricted Cash in Tax-Deferred Exchange and Bond Escrow
  Marketable Securities and Other Investments
  Real Estate and Depreciation
      Building and related land improvements
    
    15-40 yearsFurniture, fixtures, equipment and other
    
    3-10 yearsIntangible value of retail and commercial lease agreements
    
    1-20 yearsIntangible value of residential lease agreements
    
    6-48 months
 52




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Interest
   Cost of Raising Capital
  Moisture Infiltration and Mold Remediation Costs
  Intangibles
   WeightedGross Carrying
    
    Accumulated
    
    Average Useful LifeAmount
    
    Amortization
    
    (in years)In-place leases
    
    $
    64,127
    
    
    $
    49,933
    
    
    
    2Above-market leases
    
    
    936
    
    
    
    141
    
    
    
    7Total intangible assets
    
    $
    65,063
    
    
    $
    50,074Below-market leases
    
    $
    17,921
    
    
    $
    1,794
    
    
    
    6Total intangible liabilities
    
    $
    17,921
    
    
    $
    1,794
 53




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Estimated net amortization for the year ended2007
    
    $
    5,8682008
    
    $
    4402009
    
    $
    (133
    )2010
    
    $
    (353
    )2011
    
    $
    (313
    )
  Insurance Recoveries
  Derivative Financial Instruments
 Amendment of
Statement 133 on Derivative Instruments and Hedging Activities
 Revenue and Gain Recognition
   Rental Expenses
  Legal Fees
  54




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Foreign Currency Translation
  Stock-Based Compensation
 Share-Based Payment
 Income Taxes
   Comprehensive Income
 Derivative Financial Instruments
  NetUnrealized
    
    
    
    
    
    
    
    
    
    
    AccumulatedGains on
    
    
    
    
    
    
    Foreign
    
    
    OtherMarketable
    
    
    Cash Flow
    
    
    Currency
    
    
    ComprehensiveSecurities
    
    
    Hedges
    
    
    Translation
    
    
    Income/(Loss)Balance at December 31, 2003
    
    $
    23,808
    
    
    $
    (9,573
    )
    
    $
    
    
    
    $
    14,235Change in fair value of hedges
    
    
    
    
    
    
    3,750
    
    
    
    
    
    
    
    3,750Change in fair value of marketable securities
    
    
    1,372
    
    
    
    
    
    
    
    
    
    
    
    1,372Reclassification adjustments for realized net gains
    
    
    (23,782
    )
    
    
    
    
    
    
    
    
    
    
    (23,782
    )Balance at December 31, 2004
    
    $
    1,398
    
    
    $
    (5,823
    )
    
    $
    
    
    
    $
    (4,425
    )Change in fair value of hedges
    
    
    
    
    
    
    4,211
    
    
    
    
    
    
    
    4,211Change in fair value of marketable securities
    
    
    865
    
    
    
    
    
    
    
    
    
    
    
    865Reclassification adjustments for realized net gains
    
    
    (2,079
    )
    
    
    
    
    
    
    
    
    
    
    (2,079
    )Foreign currency exchange translation
    
    
    
    
    
    
    
    
    
    
    (292
    )
    
    
    (292
    )Balance at December 31, 2005
    
    $
    184
    
    
    $
    (1,612
    )
    
    $
    (292
    )
    
    $
    (1,720
    )Change in fair value of hedges
    
    
    
    
    
    
    1,058
    
    
    
    
    
    
    
    1,058Change in fair value of marketable securities
    
    
    1,638
    
    
    
    
    
    
    
    
    
    
    
    1,638Foreign currency exchange translation
    
    
    
    
    
    
    
    
    
    
    2,544
    
    
    
    2,544Balance at December 31, 2006
    
    $
    1,822
    
    
    $
    (554
    )
    
    $
    2,252
    
    
    $
    3,520
 55




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Per Unit Data
  Years Ended December 31,2006
    
    
    2005
    
    
    2004Reconciliation of numerator between basic and
diluted net earnings per Common Unit(1):Net earnings attributable to Common Units  Basic
    
    $
    831,246
    
    
    $
    696,932
    
    
    $
    596,369Interest on Convertible Debt
    
    
    11,139
    
    
    
    
    
    
    
    Distributions on Convertible Preferred Units
    
    
    
    
    
    
    
    
    
    
    3,755Net earnings attributable to Common Units  Diluted
    
    $
    842,385
    
    
    $
    696,932
    
    
    $
    600,124Reconciliation of denominator between basic and diluted
net earnings per Common Unit(1):Weighted average number of Common Units outstanding 
Basic
    
    
    248,314
    
    
    
    231,642
    
    
    
    220,053Assumed conversion of Convertible Debt into Common
Units
    
    
    4,210
    
    
    
    
    
    
    
    Assumed conversion of Preferred Units into Common Units
    
    
    
    
    
    
    
    
    
    
    2,182Incremental options
    
    
    784
    
    
    
    966
    
    
    
    952Weighted average number of Common Units outstanding 
Diluted
    
    
    253,308
    
    
    
    232,608
    
    
    
    223,187
 
 (1)
    
    Excludes the impact of potentially dilutive equity securities during
periods in which they are anti-dilutive. Market Concentration Risk
  Preferred Unit Redemptions
 The Effect on the Calculation of Earnings per Share for the
Redemption or Induced Conversion of Preferred Stock
 Reclassifications
  New Accounting Pronouncements
 Determining Whether a
General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights
 56




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Determining the
Variability to Be Considered in Applying FASB Interpretation No. 46(R). Consolidation
of Variable Interest Entities.
 Accounting for Uncertainty in
Income Taxes  An Interpretation of FASB Statement No. 109.
 Financial Statements  Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements.
  (2) Real Estate
 Investments in Real Estate
  December 31, 2006
    
    
    December 31, 2005Investment
    
    
    Units(1)
    
    
    Investment
    
    
    Units(1)REIT Apartment Communities:Operating communities
    
    $
    11,208,052
    
    
    
    60,839
    
    
    $
    9,966,915
    
    
    
    66,487Communities under construction
    
    
    406,881
    
    
    
    2,150
    
    
    
    575,631
    
    
    
    2,754Development communities In Planning(2)
    
    
    75,538
    
    
    
    1,841
    
    
    
    24,365
    
    
    
    585Total REIT apartment communities
    
    
    11,690,471
    
    
    
    64,830
    
    
    
    10,566,911
    
    
    
    69,826Ameriton(2)
    
    
    585,524
    
    
    
    8,144
    
    
    
    692,269
    
    
    
    7,489International
    
    
    851,593
    
    
    
    8,334
    
    
    
    44,457
    
    
    
    822Other real estate assets(3)
    
    
    60,052
    
    
    
    
    
    
    
    55,627
    
    
    
    Total real estate
    
    $
    13,187,640
    
    
    
    81,308
    
    
    $
    11,359,264
    
    
    
    78,137
 
 (1)
    
    Unit information is based on managements estimates and has not been audited by our
Independent Registered Public Accounting Firm. 57




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (2)
    
    Includes development communities In Planning  Owned and In Planning  Under Control. Our
investment as of December 31, 2006 and December 31, 2005 for development communities In
Planning  Under Control was $7.6 million and $145,000, respectively, and is reflected in the
Other assets caption of our Consolidated Balance Sheets.(3)
    
    Includes land that is not In Planning and other real estate assets.
 Capital Expenditures
      Years Ended December 31,2006
    
    
    2005Balance at January 1
    
    $
    11,359,264
    
    
    $
    9,221,038Acquisition-related expenditures
    
    
    2,530,459
    
    
    
    2,671,112Redevelopment expenditures
    
    
    57,414
    
    
    
    106,264Recurring capital expenditures
    
    
    46,354
    
    
    
    48,311Development expenditures, excluding initial acquisition costs
    
    
    388,502
    
    
    
    324,740Acquisition and improvement of land for development
    
    
    209,916
    
    
    
    81,340Dispositions
    
    
    (1,403,858
    )
    
    
    (1,175,834
    )Provision for possible loss on investment
    
    
    (4,328
    )
    
    
    (1,500
    )Change in estimated hurricane retirements
    
    
    4,496
    
    
    
    Other
    
    
    7,987
    
    
    
    (8,303
    )Net apartment community activity
    
    
    1,836,942
    
    
    
    2,046,130Change in other real estate assets
    
    
    (8,566
    )
    
    
    92,096Balance at December 31
    
    $
    13,187,640
    
    
    $
    11,359,264
  (3) DeWAG Acquisition
  58




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Real estate
    
    $
    646,285Other assets
    
    
    67,722Intangible assets
    
    
    30,958Goodwill
    
    
    34,490Total assets
    
    $
    779,455Mortgages payable
    
    $
    407,933Other liabilities
    
    
    10,759Deferred tax liability
    
    
    69,327Intangible liabilities
    
    
    20,514Total liabilities
    
    
    508,533Net assets acquired
    
    $
    270,922
  WeightedGross
    
    
    
    
    
    AverageCarrying
    
    Accumulated
    
    Useful LifeAmount
    
    Amortization
    
    (in years)Non-compete agreements
    
    
    19,672
    
    
    $
    (2,459
    )
    
    
    4In-place leases
    
    
    12,765
    
    
    
    (1,596
    )
    
    
    4Total intangible assets
    
    
    32,437
    
    
    $
    (4,055
    )Below-market leases
    
    
    21,496
    
    
    $
    (2,687
    )
    
    
    4Total intangible liabilities
    
    
    21,496
    
    
    $
    (2,687
    )
 Estimated net amortization for the year ended2007
    
    $
    2,7352008
    
    $
    2,7352009
    
    $
    2,7352010
    
    
    1,368
 59




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Balance July 1, 2006
    
    $
    34,490Change in foreign currency translation
    
    
    960Balance December 31, 2006
    
    $
    35,450
  (4) Oakwood Asset Acquisition
   (5) Discontinued Operations
   60




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Years Ended December 31,2006
    
    
    2005
    
    
    2004Rental revenue
    
    $
    139,457
    
    
    $
    239,806
    
    
    $
    325,784Rental expenses
    
    
    (44,043
    )
    
    
    (74,715
    )
    
    
    (104,023
    )Real estate taxes
    
    
    (16,979
    )
    
    
    (30,872
    )
    
    
    (39,318
    )Depreciation on real estate investments
    
    
    (26,858
    )
    
    
    (51,017
    )
    
    
    (69,519
    )Interest expense(1)
    
    
    (29,931
    )
    
    
    (53,533
    )
    
    
    (83,644
    )Income taxes from taxable REIT subsidiaries
    
    
    (9,972
    )
    
    
    (15,600
    )
    
    
    (13,975
    )Provision for possible loss on real estate investment
    
    
    (4,328
    )
    
    
    (1,500
    )
    
    
    Debt extinguishment costs related to dispositions
    
    
    (9,505
    )
    
    
    (5,847
    )
    
    
    (1,764
    )Gain from the disposition of REIT real estate investments,
net
    
    
    548,187
    
    
    
    448,358
    
    
    
    386,792Internal Disposition Costs  REIT transactions (2)
    
    
    (1,860
    )
    
    
    (1,672
    )
    
    
    (2,974
    )Gain from the dispositions of taxable REIT subsidiary real
estate investments, net
    
    
    54,728
    
    
    
    76,326
    
    
    
    65,024Internal Disposition Costs  Taxable REIT subsidiary
transactions (2)
    
    
    (3,483
    )
    
    
    (1,078
    )
    
    
    (2,395
    )Total discontinued operations
    
    $
    595,413
    
    
    $
    528,656
    
    
    $
    459,988
 
 (1)
    
    The portion of interest expense included in discontinued operations that is allocated to
properties based on the companys leverage ratio was $20.9 million, $40.2 million and $62.2
million for 2006, 2005 and 2004, respectively.(1)
    
    Represents the direct and incremental compensation and related costs associated with the
employees dedicated to our significant disposition activity.  Accounting for the Impairment or Disposal of Long-Lived
Assets
 (6) Investments in and Advances to Unconsolidated Entities
 Real Estate Joint Ventures
 Accounting for Investments in Real Estate Ventures,
 61




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Summary Financial Information
  2006
    
    
    2005Assets:Real estate
    
    $
    1,530,659
    
    
    $
    1,142,921Other assets
    
    
    213,569
    
    
    
    244,557Total assets
    
    $
    1,744,228
    
    
    $
    1,387,478Liabilities and owners equity:Inter-company debt payable to the Operating Trust
    
    $
    1,519
    
    
    $
    2,324Mortgages payable(1)
    
    
    1,063,451
    
    
    
    894,300Other liabilities
    
    
    126,048
    
    
    
    120,898Total liabilities
    
    
    1,191,018
    
    
    
    1,017,522Owners equity
    
    
    553,210
    
    
    
    369,956Total liabilities and owners equity
    
    $
    1,744,228
    
    
    $
    1,387,478
 
 (1)
    
    The Operating Trust guarantees $292.0 million of the outstanding debt balance as of
December 31, 2006 and is committed to guarantee another $16.9 million upon funding of
additional debt.  2006
    
    
    2005
    
    
    2004Operating Trust Joint Ventures
Revenues
    
    $
    132,671
    
    
    $
    128,844
    
    
    $
    140,390Net Earnings(1)
    
    
    69,341
    
    
    
    57,141
    
    
    
    29,559Ameriton Joint Ventures
Revenues
    
    $
    340
    
    
    $
    4,080
    
    
    $
    5,950Net Earnings(2)
    
    
    17,790
    
    
    
    12,507
    
    
    
    (713
    )Total
Revenues
    
    $
    133,011
    
    
    $
    132,924
    
    
    $
    146,340Net Earnings
    
    $
    87,131
    
    
    $
    69,648
    
    
    $
    28,846
 
 (1)
    
    Includes gains associated with the disposition of REIT Joint Venture assets of $68.4
million, $31.6 million and $32.4 million during 2006, 2005 and 2004, respectively.(2)
    
    Includes Ameritons share of pre-tax gains associated with the disposition of real
estate joint venture assets. These gains totaled $19.8 million, $14.2 million and $7.0
million during 2006, 2005 and 2004, respectively.   62




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ARCHSTONE-SMITH OPERATING TRUST   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  (7) Mortgage and Other Notes Receivable
  Years EndedDecember 31,2006
    
    2005Balance at January 1
    
    $
    74,396
    
    
    $
    8,729Funding of additional notes
    
    
    85,165
    
    
    
    97,096Accrued interest
    
    
    9,781
    
    
    
    5,224Repayments and sales of notes
    
    
    (46,081
    )
    
    
    (36,653
    )Balance at December 31
    
    $
    123,261
    
    
    $
    74,396
  (8) Borrowings
 Unsecured Credit Facilities
   Years EndedDecember 31,2006
    
    2005Total unsecured revolving credit facility
    
    $
    600,000
    
    
    $
    600,000Borrowings outstanding at December 31
    
    $
    80,000
    
    
    $
    360,000Outstanding letters of credit under this facility
    
    $
    14,880
    
    
    $
    37,813Weighted average daily borrowings
    
    $
    100,474
    
    
    $
    183,434Maximum borrowings outstanding during the period
    
    $
    360,000
    
    
    $
    580,000Weighted average daily nominal interest rate
    
    
    5.0
    %
    
    
    4.0
    %Weighted average daily effective interest rate
    
    
    6.3
    %
    
    
    4.3
    %
  63




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ARCHSTONE-SMITH OPERATING TRUST   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Term Loan  International
  Long-Term Unsecured Debt
    Balance at
    
    
    Balance at
    
    
    AverageEffective
    
    
    December 31,
    
    
    December 31,
    
    
    Remaining LifeType of Debt
    
    Coupon Rate(1)
    
    
    Interest Rate(2)
    
    
    2006
    
    
    2005
    
    
    (Years)Long-term unsecured
senior notes
    
    
    5.4
    %
    
    
    5.6
    %
    
    $
    3,279,404
    
    
    $
    2,462,964
    
    
    
    5.23Unsecured
tax-exempt bonds
    
    
    4.0
    %
    
    
    4.2
    %
    
    
    76,295
    
    
    
    77,072
    
    
    
    16.60Total/average
    
    
    5.4
    %
    
    
    5.6
    %
    
    $
    3,355,699
    
    
    $
    2,540,036
    
    
    
    5.54
 
 (1)
    
    Represents a fixed rate for the long-term unsecured notes and a variable rate for the
unsecured tax-exempt bonds.(2)
    
    Includes the effect of fair value hedges, loan cost amortization and other ongoing fees and
expenses, where applicable.  64




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ARCHSTONE-SMITH OPERATING TRUST   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Mortgages Payable
 Scheduled Debt
Maturities).
 Outstanding Balance at(1)Effective InterestDecember 31, 2006
    
    
    December 31, 2005
    
    
    Rate(2)Secured floating rate debt:Tax-exempt debt
    
    $
    935,536
    
    
    $
    839,318
    
    
    
    4.9
    %Conventional mortgages
    
    
    167,020
    
    
    
    54,455
    
    
    
    4.6
    %Total Floating
    
    
    1,102,556
    
    
    
    893,773
    
    
    
    4.9
    %Secured fixed rate debt:Tax-exempt debt
    
    
    3,086
    
    
    
    
    
    
    
    6.4
    %Conventional mortgages
    
    
    1,651,650
    
    
    
    1,480,170
    
    
    
    5.8
    %Other secured debt
    
    
    18,942
    
    
    
    19,709
    
    
    
    3.2
    %Total Fixed
    
    
    1,673,678
    
    
    
    1,499,879
    
    
    
    5.8
    %Total debt outstanding at end of period
    
    $
    2,776,234
    
    
    $
    2,393,652
    
    
    
    5.4
    %
 
 (1)
    
    Includes the unamortized fair market value adjustment associated with assumption of fixed
rate mortgages in connection with real estate acquisitions. The unamortized balance
aggregated $43.9 million and $63.5 million at December 31, 2006 and 2005 respectively, and is
being amortized into interest expense over the life of the underlying debt.(2)
    
    Includes the effect of fair value hedges, credit enhancement fees, the amortization of fair
market value purchase adjustment, and other related costs, where applicable. 65




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  2006
    
    
    2005Balance at January 1
    
    $
    2,393,652
    
    
    $
    2,031,505Proceeds from mortgage notes payable
    
    
    
    
    
    
    33,152Mortgage assumptions related to property acquisitions
    
    
    728,484
    
    
    
    864,155Proceeds from construction loans
    
    
    
    
    
    
    655Regularly scheduled principal amortization
    
    
    (12,949
    )
    
    
    (15,067
    )Prepayments, final maturities and other
    
    
    (332,953
    )
    
    
    (520,748
    )Balance at December 31
    
    $
    2,776,234
    
    
    $
    2,393,652
 Scheduled Debt Maturities
  Long Term Unsecured Debt
    
    
    Mortgages PayableRegularly
    
    
    
    
    
    
    RegularlyScheduled
    
    
    Final
    
    
    Scheduled
    
    
    FinalPrincipal
    
    
    Maturities
    
    
    Principal
    
    
    MaturitiesAmortization
    
    
    and Other
    
    
    Amortization
    
    
    and Other
    
    
    Total2007
    
    $
    31,250
    
    
    $
    355,000
    
    
    $
    18,992
    
    
    $
    85,933
    
    
    $
    491,1752008
    
    
    31,250
    
    
    
    303,040
    
    
    
    19,387
    
    
    
    193,109
    
    
    
    546,7862009
    
    
    51,250
    
    
    
    30,000
    
    
    
    19,138
    
    
    
    381,096
    
    
    
    481,4842010
    
    
    43,750
    
    
    
    220,000
    
    
    
    17,984
    
    
    
    122,760
    
    
    
    404,4942011
    
    
    50,000
    
    
    
    575,000
    
    
    
    19,208
    
    
    
    199,381
    
    
    
    843,589Thereafter and debt discount(1)
    
    
    252,500
    
    
    
    1,412,659
    
    
    
    499,365
    
    
    
    1,199,881
    
    
    
    3,364,405Total
    
    $
    460,000
    
    
    $
    2,895,699
    
    
    $
    594,074
    
    
    $
    2,182,160
    
    
    $
    6,131,933
 
 (1)
    
    The average annual principal payments due from 2012 to 2040
are $116.4 million per year. Other
  (9) Distributions to Unitholders
  66




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ARCHSTONE-SMITH OPERATING TRUST   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  2006
    
    2005
    
    2004Common Units and A-1 Units(1)
    
    $
    1.74
    
    
    $
    1.73
    
    
    $
    2.72Series D Preferred Units(2)
    
    
    
    
    
    
    
    
    
    
    1.31Series E Preferred Units(3)
    
    
    
    
    
    
    0.20
    
    
    
    2.09Series F Preferred Units(3)
    
    
    
    
    
    
    
    
    
    
    1.50Series G Preferred Units(3)
    
    
    
    
    
    
    0.37
    
    
    
    2.16Series I Preferred Units(4)
    
    
    7,660.00
    
    
    
    7,660.00
    
    
    
    7,660.00Series K Preferred Units(5)
    
    
    
    
    
    
    
    
    
    
    2.55Series L Preferred Units(6)
    
    
    
    
    
    
    
    
    
    
    3.40Series M Preferred Units
    
    
    457.62
    
    
    
    364.74
    
    
    
    Series N-1 Preferred Units
    
    
    5.04
    
    
    
    3.54
    
    
    
    Series N-2 Preferred Units
    
    
    2.16
    
    
    
    1.52
    
    
    
    
 
 (1)
    
    Includes a $1.00 per unit special distribution issued to our Common Unitholders in December
2004.(2)
    
    The Series D Preferred Units were redeemed in August 2004.(3)
    
    The company redeemed the Series F Preferred Units in September 2004, 520,000 and 400,000 of
the Series E Preferred Units in August 2004 and November 2004. The remaining 200 Series E
Preferred Units were redeemed in February 2005. The Series G Preferred Units were redeemed in
March 2005.(4)
    
    The Series I Preferred Units have a par value of $100,000.(5)
    
    The Series K Preferred Units were converted into Common Units in September 2004.(6)
    
    The Series L Preferred Units were converted to Common Units in December 2004. (10) Unitholders Equity
 A-1 Common Units
  Note 4.
 Units of Beneficial Interest
  67




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Preferred Unit Redemption and Conversions
  Common Unit Repurchase and Issuances
   Preferred Units
  AnnualRedemption
    
    Liquidation
    
    Distribution Rate
    
    December 31,Description
    
    Date(1)
    
    Value
    
    Per Unit
    
    2006
    
    2005Series I Preferred Units;
500 units issued and
outstanding at December
31, 2006 and 2005,
respectively(1)
    
    
    02/01/28
    
    
    
    100,000
    
    
    
    7,660
    
    
    $
    50,000
    
    
    $
    50,000Series M Preferred Unit; 1
unit issued and
outstanding at December
31, 2006 and 2005,
respectively
    
    
    N/A
    
    
    
    10,000
    
    
    
    458
    
    
    $
    10
    
    
    $
    10Series N-1 Preferred Unit;
300 units issued and
outstanding at December
31, 2006 and 2005,
respectively
    
    
    N/A
    
    
    
    416.67
    
    
    
    20.16
    
    
    $
    120
    
    
    $
    125Series N-2 Preferred Unit;
700 units issued and
outstanding at December
31, 2006 and 2005,
respectively
    
    
    N/A
    
    
    
    178.57
    
    
    
    8.64
    
    
    $
    120
    
    
    $
    125
 
 (1)
    
    Series I Preferred Units may be redeemed for cash at our option, in whole or in part,
at a redemption price equal to the liquidation price per unit, plus accrued and unpaid
distributions, if any, on or after the redemption date indicated.   68




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Dividend Reinvestment and Share Purchase Plan
  Series M Preferred Unit
  Series N-1 and N-2 Preferred Units
  (11) Benefit Plans and Implementation of SFAS 123R
 Share-Based Payment. Accounting for Stock-Based Compensation, Accounting for Stock Issued to Employees.
   69




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ARCHSTONE-SMITH OPERATING TRUST   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   70




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Option Awards
    
    RSU AwardsWeighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    Average GrantOptions
    
    Exercise Price
    
    Units
    
    PriceBalance, December 31, 2005
    
    
    2,702,026
    
    
    $
    24.94
    
    
    
    948,735
    
    
    $
    27.77Granted
    
    
    426,977
    
    
    
    45.61
    
    
    
    310,855
    
    
    
    45.85Exercised/Settled
    
    
    1,249,089
    
    
    
    23.96
    
    
    
    296,215
    
    
    
    33.23Forfeited
    
    
    48,559
    
    
    
    35.86
    
    
    
    16,760
    
    
    
    34.31Expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2006
    
    
    1,831,355
    
    
    $
    30.14
    
    
    
    946,615
    
    
    $
    31.82
 Options
   Restricted Share Units
   71




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Special Long Term Incentive Plan
  Summary
  Dividend Equivalent Units
    401( k ) Plan and Nonqualified Deferred Compensation Plan
  Deferral of Fees by Non-Employee Trustees
  72




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   (12) Financial Instruments and Hedging Activities
 Fair Value of Financial Instruments
  Balance at December 31, 2006
    
    Balance at December 31, 2005Carrying
    
    Estimated
    
    Carrying
    
    EstimatedAmounts
    
    Fair Value
    
    Amounts
    
    Fair ValueMarketable
equity securities
    
    $
    6,600
    
    
    $
    6,600
    
    
    $
    4,648
    
    
    $
    4,648Borrowings:Unsecured credit facilities
    
    $
    84,723
    
    
    $
    84,723
    
    
    $
    394,578
    
    
    $
    394,578Term Loan  International
    
    
    235,771
    
    
    
    235,771
    
    
    
    
    
    
    
    Long-Term Unsecured Debt
    
    
    3,355,699
    
    
    
    3,436,902
    
    
    
    2,540,036
    
    
    
    2,623,056Mortgages payable
    
    
    2,776,234
    
    
    
    2,801,342
    
    
    
    2,393,652
    
    
    
    2,393,389Interest rate contracts:Interest rate swaps
    
    $
    6,818
    
    
    $
    6,818
    
    
    $
    3,618
    
    
    $
    3,618Interest rate caps
    
    
    809
    
    
    
    809
    
    
    
    339
    
    
    
    339Forward contracts:Forward sale agreement
    
    $
    (313
    )
    
    $
    (313
    )
    
    
    
    
    
    
    Foreign currency forward
    
    
    (1,172
    )
    
    
    (1,172
    )
    
    
    (15
    )
    
    
    (15
    )Energy contracts:Electricity contracts
    
    $
    (8
    )
    
    $
    (8
    )
    
    $
    (26
    )
    
    $
    (26
    )Natural gas contracts
    
    
    (1,047
    )
    
    
    (1,047
    )
    
    
    
    
    
    
    Fuel oil contracts
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )
  Interest Rate Hedging Activities
 
 73




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
      Carrying andNotional
    
    Maturity
    
    EstimatedAmount
    
    Date Range
    
    Fair ValueCash flow hedges:Interest rate caps
    
    $
    486,354
    
    
    
    2007-2013
    
    
    $
    809Interest rate swaps
    
    
    367,054
    
    
    
    2007-2014
    
    
    
    7,080Total cash flow hedges
    
    $
    853,408
    
    
    
    2007-2014
    
    
    $
    7,889Fair value hedges:Interest rate swaps
    
    $
    75,055
    
    
    
    2008
    
    
    $
    1,185Total rate of return swaps
    
    
    36,346
    
    
    
    2007
    
    
    
    (1,447
    )Total fair value hedges
    
    $
    111,401
    
    
    
    2007-2008
    
    
    $
    (262
    )Total hedges
    
    $
    964,809
    
    
    
    2007-2014
    
    
    $
    7,627
 Foreign Currency Hedging Activities
 
 Energy Contract Hedging Activities
  74




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Equity Securities Hedging Activities
  (13) Selected Quarterly Financial Data (Unaudited)
  Three Months Ended3-31(1)
    
    
    6-30(1)
    
    
    9-30(1)
    
    
    12-31(1)2006:Total revenues
    
    $
    252,412
    
    
    $
    265,145
    
    
    $
    305,313
    
    
    $
    310,716Earnings from operations
    
    
    41,219
    
    
    
    47,159
    
    
    
    58,584
    
    
    
    54,046Income from unconsolidated entities
    
    
    18,878
    
    
    
    10,518
    
    
    
    2,088
    
    
    
    4,832Other non-operating income
    
    
    176
    
    
    
    243
    
    
    
    1,718
    
    
    
    201Plus net earnings from
discontinued operations
    
    
    83,619
    
    
    
    134,834
    
    
    
    87,721
    
    
    
    289,239Less Preferred Unit distributions
    
    
    958
    
    
    
    957
    
    
    
    957
    
    
    
    957Net earnings attributable to
Common Units  Basic
    
    $
    142,934
    
    
    $
    191,797
    
    
    $
    149,154
    
    
    $
    347,361Net earnings
per Common Unit(2):
Basic
    
    $
    0.58
    
    
    $
    0.77
    
    
    $
    0.60
    
    
    $
    1.39Diluted
    
    $
    0.58
    
    
    $
    0.77
    
    
    $
    0.60
    
    
    $
    1.362005:Total revenues
    
    $
    177,902
    
    
    $
    184,889
    
    
    $
    231,778
    
    
    $
    239,064Earnings from operations
    
    
    2,122
    
    
    
    25,998
    
    
    
    53,342
    
    
    
    40,147Income from unconsolidated entities
    
    
    11,117
    
    
    
    5,794
    
    
    
    1,839
    
    
    
    3,682Other non-operating income
    
    
    24,005
    
    
    
    4,778
    
    
    
    72
    
    
    
    (48
    )Plus net earnings from
discontinued operations
    
    
    36,598
    
    
    
    25,764
    
    
    
    132,810
    
    
    
    333,484Less Preferred Unit distributions
    
    
    1,698
    
    
    
    958
    
    
    
    958
    
    
    
    958Net earnings attributable to
Common Units  Basic(2)
    
    $
    72,144
    
    
    $
    61,376
    
    
    $
    187,105
    
    
    $
    376,307Net earnings
per Common Unit(2):
Basic
    
    $
    0.32
    
    
    $
    0.28
    
    
    $
    0.80
    
    
    $
    1.53Diluted
    
    $
    0.32
    
    
    $
    0.27
    
    
    $
    0.80
    
    
    $
    1.52
 
 (1)
    
    Net earnings from discontinued operations have been reclassified for all periods
presented.(2)
    
    Due to the independent calculations of quarterly and annual earnings per unit and rounding,
the sum of the quarterly per unit amounts may not equal the year-to-date totals. 75




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (14) Segment Data
   Years Ended December 31,2006
    
    2005
    
    2004Reportable apartment communities segment rental revenues:Same-Store:Garden communities
    
    $
    363,677
    
    
    $
    343,476
    
    
    $
    331,746High-Rise properties
    
    
    254,549
    
    
    
    239,549
    
    
    
    231,000Non Same-Store:Garden communities
    
    
    210,830
    
    
    
    93,320
    
    
    
    39,512High-Rise properties
    
    
    174,147
    
    
    
    88,447
    
    
    
    33,534Ameriton(1)
    
    
    6,956
    
    
    
    5,458
    
    
    
    3,202Other non-reportable operating segment revenues
    
    
    46,017
    
    
    
    7,353
    
    
    
    3,276Total segment and consolidated rental revenues
    
    $
    1,056,176
    
    
    $
    777,603
    
    
    $
    642,270
 Years Ended December 31,2006
    
    2005
    
    2004Reportable apartment communities segment NOI:Same-Store:Garden communities
    
    $
    251,293
    
    
    $
    236,606
    
    
    $
    228,084High-Rise properties
    
    
    172,547
    
    
    
    158,660
    
    
    
    154,002Non Same-Store:Garden communities
    
    
    142,153
    
    
    
    63,178
    
    
    
    22,739High-Rise properties
    
    
    117,146
    
    
    
    59,425
    
    
    
    22,623Ameriton(1)
    
    
    3,158
    
    
    
    1,990
    
    
    
    1,266Other non-reportable operating segment NOI
    
    
    26,537
    
    
    
    5,362
    
    
    
    2,809Total segment and consolidated NOI
    
    
    712,834
    
    
    
    525,221
    
    
    
    431,523Reconciling items:Other income
    
    
    77,410
    
    
    
    56,030
    
    
    
    19,208Depreciation on real estate investments
    
    
    (261,438
    )
    
    
    (187,771
    )
    
    
    (150,470
    )Interest expense
    
    
    (245,895
    )
    
    
    (164,035
    )
    
    
    (125,108
    )General and administrative expenses
    
    
    (68,188
    )
    
    
    (58,604
    )
    
    
    (55,479
    )Other expenses
    
    
    (13,715
    )
    
    
    (49,232
    )
    
    
    (13,563
    )Consolidated earnings from operations
    
    $
    201,008
    
    
    $
    121,609
    
    
    $
    106,111
 76




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ARCHSTONE-SMITH OPERATING TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 
 (1)
    
    While rental revenue and NOI are the primary measures we use to evaluate the
performance of our assets, management also utilizes gains from the disposition of real
estate when evaluating the performance of Ameriton as its primary focus is the
opportunistic acquisition, development and eventual disposition of real estate with a short
term investment horizon. During 2006, 2005 and 2004, pre-tax gains, net of internal
disposition costs, from the disposition of Ameriton depreciated real estate were $51.2
million, $75.2 million and $65.1 million, respectively. These gains are classified within
discontinued operations. Ameriton assets are excluded from our Same-Store population as
they are acquired or developed to achieve short-term opportunistic gains, and therefore,
the average holding period is typically much shorter than the holding period of assets
operated by the REIT. Year Ended December 31,2006
    
    
    2005Reportable operating communities segment assets:Same-Store:Garden communities
    
    $
    2,594,681
    
    
    $
    2,632,382High-Rise properties
    
    
    2,508,155
    
    
    
    2,539,302Non Same-Store:Garden communities
    
    
    2,950,252
    
    
    
    2,829,915High-Rise properties
    
    
    2,388,235
    
    
    
    1,457,841Ameriton
    
    
    434,282
    
    
    
    557,684FHA/ADA
settlement capital accrual
    
    
    29,185
    
    
    
    47,198International
    
    
    843,003
    
    
    
    Other non-reportable operating segment assets
    
    
    153,568
    
    
    
    130,902Total segment assets
    
    
    11,901,361
    
    
    
    10,195,224Real estate held for sale, net
    
    
    329,133
    
    
    
    327,347Total segment assets
    
    
    12,230,494
    
    
    
    10,522,571Reconciling items:Investment in and advances to unconsolidated entities
    
    
    235,323
    
    
    
    132,728Cash and cash equivalents
    
    
    48,655
    
    
    
    13,638Restricted cash in tax-deferred exchange escrow
    
    
    319,312
    
    
    
    495,274Other assets
    
    
    425,343
    
    
    
    297,884Consolidated total assets
    
    $
    13,259,127
    
    
    $
    11,462,095
  (15) Income Taxes
   77




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ARCHSTONE-SMITH OPERATING TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  For the Year Ended December 31,2006
    
    
    2005
    
    
    2004(estimated)GAAP net earnings
    
    $
    835,075
    
    
    $
    701,504
    
    
    $
    612,623Book to tax differences:Depreciation and amortization(1)
    
    
    41,771
    
    
    
    14,927
    
    
    
    12,165Gain or loss from capital transactions
    
    
    (451,673
    )
    
    
    (303,550
    )
    
    
    (67,889
    )Deferred compensation and other reserves
    
    
    (649
    )
    
    
    8,846
    
    
    
    3,177Other, net
    
    
    (20,292
    )
    
    
    (33,665
    )
    
    
    (8,111
    )Taxable income, including capital gains
    
    $
    404,232
    
    
    $
    388,062
    
    
    $
    551,965
 
 (1)
    
    We use accelerated depreciable lives for tax purposes. This results in higher
depreciation expense on newly acquired assets for tax purposes relative to GAAP. This is
offset by the Smith Merger in 2001 and the Oakwood transaction in 2005 as GAAP depreciation
expense for the related assets is based on fair value and tax depreciation is based on a
lower historical tax basis.  For the Year Ended December 31,2006
    
    
    2005
    
    
    2004(estimated)Distributions to Archstone-Smith Trust
    
    $
    379,087
    
    
    $
    353,572
    
    
    $
    545,586Distributions to unitholders
    
    
    54,798
    
    
    
    44,472
    
    
    
    68,311Total Distributions
    
    $
    433,885
    
    
    $
    398,044
    
    
    $
    613,897
  For the Year Ended December 31,2006
    
    
    2005
    
    
    2004Ordinary income
    
    
    75
    %
    
    
    65
    %
    
    
    46
    %Capital gains(1)
    
    
    25
    %
    
    
    35
    %
    
    
    54
    %100
    %
    
    
    100
    %
    
    
    100
    %
 
 (1)
    
    Includes 11.4%, 34.3% and 22.8% of unrecaptured Section 1250 gains in 2006, 2005, and 2004,
respectively.  For the Year Ended December 31,2006
    
    
    2005
    
    
    2004Income tax expense (benefit)Current
    
    $
    14,825
    
    
    $
    21,854
    
    
    $
    20,119Deferred
    
    
    3,208
    
    
    
    (2,255
    )
    
    
    (1,314
    )Total expense
    
    $
    18,033
    
    
    $
    19,599
    
    
    $
    18,805
 78




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ARCHSTONE-SMITH OPERATING TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  For the Year Ended December 31,2006
    
    
    2005
    
    
    2004Computed expected tax expense
    
    $
    19,018
    
    
    $
    19,039
    
    
    $
    17,801Increase
(decrease) in income taxes
resulting from state taxes
and other
    
    
    (985
    )
    
    
    560
    
    
    
    1,004Income tax expense
    
    $
    18,033
    
    
    $
    19,599
    
    
    $
    18,805
  Years Ended December 31,2006
    
    2005Deferred tax assets:Deferred compensation
    
    $
    712
    
    
    $
    3,775Reserves
    
    
    560
    
    
    
    421Real estate, principally due to depreciation
    
    
    1,211
    
    
    
    1,310Other
    
    
    75
    
    
    
    928Deferred tax assets
    
    
    2,558
    
    
    
    6,434Deferred tax liabilities:Real estate, principally due to depreciation
    
    
    
    
    
    
    Income from unconsolidated entities
    
    
    2,603
    
    
    
    3,271Deferred tax liabilities
    
    
    2,603
    
    
    
    3,271Net deferred tax asset (liability)
    
    $
    (45
    )
    
    $
    3,163
 International Income Taxes
  (16) Commitments and Contingencies
 Commitments
   2007
    
    $
    3,7672008
    
    
    3,8162009
    
    
    3,8682010
    
    
    3,8862011
    
    
    3,926Thereafter (2012-2077)
    
    $
    215,623Total
    
    $
    234,886
 .
 79




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ARCHSTONE-SMITH OPERATING TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Guarantees and Indemnifications
   Litigation and Contingencies
     80




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ARCHSTONE-SMITH OPERATING TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (17) Supplemental Cash Flow Information
  
    
    Issued $81.4 million, $408.0 million and $10.8 million of A-1 Common Units as
partial consideration for properties acquired during 2006, 2005 and 2004,
respectively;
    
    Issued $250,000 of Series N-1 and N-2 Preferred Units ($125,000 each) as partial
consideration for real estate during 2005;
    
    Converted $143.4 million, $8.4 million and $47.9 million A-1 Common Units to A-2
Common Units during 2006, 2005 and 2004, respectively;
    
    Assumed mortgage debt of $728.5 million, $864.2 million and $113.6 million during
2006, 2005 and 2004, respectively, in connection with the acquisition of apartment
communities;
    
    Recorded a $47.2 million accrual for anticipated capital spending to bring
properties named in the FHA and ADA settlement into compliance in 2005;
    
    See Notes 3 and 4 for further discussion regarding the non-cash financing
components of the DeWAG and Oakwood acquisitions.
 (18) Related Party Transactions
     81




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Report of Independent Registered Public Accounting Firm
      
 82




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##### Table of Contents



ARCHSTONE-SMITH
OPERATING TRUST
 SCHEDULE III
 REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2006
(Dollar amounts in thousands)
 Initial Cost to
    
    
    
    
    
    
    Gross Amount at WhichArchstone-Smith
Operating Trust
    
    
    Costs
    
    
    Carried at Year EndCapitalizedEncum-
    
    
    
    
    
    
    Buildings &
    
    
    Subsequent to
    
    
    
    
    
    
    Buildings &
    
    
    
    
    
    
    Accumulated
    
    
    Construction
    
    
    YearUnits
    
    
    brances
    
    
    Land
    
    
    Improvements
    
    
    Acquisition
    
    
    Land
    
    
    Improvements
    
    
    Totals
    
    
    Depreciation
    
    
    Year(1)
    
    
    AcquiredApartment Communities:Garden Communities:Atlanta, Georgia
    
    
    1,006
    
    
    
    
    
    
    
    24,440
    
    
    
    
    
    
    
    59,772
    
    
    
    24,780
    
    
    
    59,432
    
    
    
    84,212
    
    
    
    (15
    )
    
    Under Construction
    
    
    
    2001Austin, Texas
    
    
    444
    
    
    
    
    
    
    
    4
    
    
    
    1,158
    
    
    
    33,091
    
    
    
    4,830
    
    
    
    29,423
    
    
    
    34,253
    
    
    
    (4,712
    )
    
    
    2001
    
    
    
    2001Boston, Massachusetts
    
    
    2,044
    
    
    
    129,612
    
    
    
    66,944
    
    
    
    327,909
    
    
    
    79,733
    
    
    
    75,204
    
    
    
    399,382
    
    
    
    474,586
    
    
    
    (42,224
    )
    
    
    1898-2006
    
    
    
    1999-2006Dallas, Texas
    
    
    514
    
    
    
    33,280
    
    
    
    8,912
    
    
    
    38,550
    
    
    
    715
    
    
    
    8,927
    
    
    
    39,250
    
    
    
    48,177
    
    
    
    (1,585
    )
    
    
    1998
    
    
    
    2005Denver, Colorado
    
    
    156
    
    
    
    
    
    
    
    1,030
    
    
    
    4,596
    
    
    
    4,923
    
    
    
    1,523
    
    
    
    9,026
    
    
    
    10,549
    
    
    
    (3,157
    )
    
    
    1981
    
    
    
    1992El Paso, Texas
    
    
    379
    
    
    
    11,685
    
    
    
    1,307
    
    
    
    11,802
    
    
    
    1,089
    
    
    
    1,337
    
    
    
    12,861
    
    
    
    14,198
    
    
    
    (503
    )
    
    
    1974
    
    
    
    2005Greater NYC metropolitan area
    
    
    396
    
    
    
    78,000
    
    
    
    23,211
    
    
    
    4,058
    
    
    
    61,849
    
    
    
    23,182
    
    
    
    65,936
    
    
    
    89,118
    
    
    
    (3,914
    )
    
    
    2006
    
    
    
    2006Houston, Texas
    
    
    1,036
    
    
    
    
    
    
    
    18,965
    
    
    
    24,307
    
    
    
    12,300
    
    
    
    19,181
    
    
    
    36,391
    
    
    
    55,572
    
    
    
    (9,764
    )
    
    
    1996
    
    
    
    1998Inland Empire, California
    
    
    1,298
    
    
    
    
    
    
    
    10,436
    
    
    
    59,147
    
    
    
    14,892
    
    
    
    12,180
    
    
    
    72,295
    
    
    
    84,475
    
    
    
    (21,149
    )
    
    
    1985-1990
    
    
    
    1995-1997Los Angeles, California
    
    
    8,138
    
    
    
    254,461
    
    
    
    504,186
    
    
    
    785,620
    
    
    
    337,594
    
    
    
    507,439
    
    
    
    1,119,961
    
    
    
    1,627,400
    
    
    
    (76,734
    )
    
    
    1969-2006
    
    
    
    1998-2006Orange County, California
    
    
    2,947
    
    
    
    
    
    
    
    79,497
    
    
    
    121,417
    
    
    
    126,627
    
    
    
    89,548
    
    
    
    237,993
    
    
    
    327,541
    
    
    
    (40,393
    )
    
    
    1986-2002
    
    
    
    1996-2005Orlando, Florida
    
    
    312
    
    
    
    
    
    
    
    3,110
    
    
    
    17,620
    
    
    
    1,370
    
    
    
    3,748
    
    
    
    18,352
    
    
    
    22,100
    
    
    
    (6,298
    )
    
    
    1988
    
    
    
    1998Phoenix, Arizona
    
    
    1,403
    
    
    
    23,770
    
    
    
    26,363
    
    
    
    45,809
    
    
    
    19,347
    
    
    
    26,529
    
    
    
    64,990
    
    
    
    91,519
    
    
    
    (949
    )
    
    
    1978-1999
    
    
    
    2005-2006San Diego, California
    
    
    2,968
    
    
    
    33,376
    
    
    
    84,916
    
    
    
    108,480
    
    
    
    185,750
    
    
    
    91,277
    
    
    
    287,869
    
    
    
    379,146
    
    
    
    (50,957
    )
    
    
    1973-2005
    
    
    
    1996-2006San Francisco Bay Area, California
    
    
    7,604
    
    
    
    249,521
    
    
    
    413,676
    
    
    
    724,210
    
    
    
    275,421
    
    
    
    420,165
    
    
    
    993,142
    
    
    
    1,413,307
    
    
    
    (115,542
    )
    
    
    1909-2004
    
    
    
    1995-2006Seattle, Washington
    
    
    3,408
    
    
    
    25,709
    
    
    
    67,521
    
    
    
    144,561
    
    
    
    96,917
    
    
    
    74,510
    
    
    
    234,489
    
    
    
    308,999
    
    
    
    (56,169
    )
    
    
    1976-2003
    
    
    
    1997-2005Southeast Florida
    
    
    2,282
    
    
    
    
    
    
    
    69,856
    
    
    
    197,603
    
    
    
    8,269
    
    
    
    74,678
    
    
    
    201,050
    
    
    
    275,728
    
    
    
    (20,219
    )
    
    
    1990-2003
    
    
    
    1998-2005Stamford, Connecticut
    
    
    160
    
    
    
    
    
    
    
    5,775
    
    
    
    1,225
    
    
    
    29,568
    
    
    
    6,320
    
    
    
    30,248
    
    
    
    36,568
    
    
    
    (3,595
    )
    
    
    2002
    
    
    
    2002Ventura County, California
    
    
    1,018
    
    
    
    
    
    
    
    40,210
    
    
    
    72,232
    
    
    
    46,770
    
    
    
    40,780
    
    
    
    118,432
    
    
    
    159,212
    
    
    
    (13,759
    )
    
    
    1985-2005
    
    
    
    1997-2005Washington, D.C. metropolitan area
    
    
    9,048
    
    
    
    258,925
    
    
    
    289,655
    
    
    
    660,646
    
    
    
    236,150
    
    
    
    300,484
    
    
    
    885,967
    
    
    
    1,186,451
    
    
    
    (113,308
    )
    
    
    1967-2003
    
    
    
    1999-2006Garden Communities Total
    
    
    46,561
    
    
    
    1,098,339
    
    
    
    1,740,014
    
    
    
    3,350,950
    
    
    
    1,632,147
    
    
    
    1,806,622
    
    
    
    4,916,489
    
    
    
    6,723,111
    
    
    
    (584,946
    )High-Rise Properties:Boston, Massachusetts
    
    
    1,633
    
    
    
    27,505
    
    
    
    67,518
    
    
    
    172,030
    
    
    
    248,983
    
    
    
    78,088
    
    
    
    410,443
    
    
    
    488,531
    
    
    
    (23,298
    )
    
    
    1901-2006
    
    
    
    2001-2006Chicago, Illinois
    
    
    1,113
    
    
    
    36,682
    
    
    
    39,837
    
    
    
    188,925
    
    
    
    6,051
    
    
    
    40,111
    
    
    
    194,702
    
    
    
    234,813
    
    
    
    (23,791
    )
    
    
    1988-1999
    
    
    
    2001-2005Dallas, Texas
    
    
    181
    
    
    
    
    
    
    
    2,323
    
    
    
    
    
    
    
    1,410
    
    
    
    2,323
    
    
    
    1,410
    
    
    
    3,733
    
    
    
    
    
    
    Under Construction
    
    
    
    2004Los Angeles, California
    
    
    1,073
    
    
    
    
    
    
    
    34,402
    
    
    
    139,613
    
    
    
    64,136
    
    
    
    34,697
    
    
    
    203,454
    
    
    
    238,151
    
    
    
    (16,424
    )
    
    
    1934-2004
    
    
    
    2003-2004Minneapolis, Minnesota
    
    
    250
    
    
    
    17,803
    
    
    
    5,002
    
    
    
    21,768
    
    
    
    337
    
    
    
    5,008
    
    
    
    22,099
    
    
    
    27,107
    
    
    
    (915
    )
    
    
    1983
    
    
    
    2005NYC metropolitan area
    
    
    3,028
    
    
    
    462,066
    
    
    
    584,270
    
    
    
    793,256
    
    
    
    218,187
    
    
    
    649,519
    
    
    
    946,194
    
    
    
    1,595,713
    
    
    
    (45,067
    )
    
    
    1870-2003
    
    
    
    2002-2006Philadelphia, Pennsylvania
    
    
    80
    
    
    
    
    
    
    
    2,229
    
    
    
    16,741
    
    
    
    65
    
    
    
    2,231
    
    
    
    16,804
    
    
    
    19,035
    
    
    
    (357
    )
    
    
    1945
    
    
    
    2006San Diego, California
    
    
    387
    
    
    
    
    
    
    
    5,963
    
    
    
    33,789
    
    
    
    4,606
    
    
    
    6,054
    
    
    
    38,304
    
    
    
    44,358
    
    
    
    (10,162
    )
    
    
    1992
    
    
    
    1999San Francisco Bay Area, California
    
    
    853
    
    
    
    
    
    
    
    87,664
    
    
    
    176,474
    
    
    
    4,437
    
    
    
    87,905
    
    
    
    180,670
    
    
    
    268,575
    
    
    
    (4,106
    )
    
    
    1966-1986
    
    
    
    2005-2006Seattle, Washington
    
    
    338
    
    
    
    34,360
    
    
    
    16,279
    
    
    
    46,041
    
    
    
    102
    
    
    
    16,288
    
    
    
    46,134
    
    
    
    62,422
    
    
    
    (1,822
    )
    
    
    1992-1998
    
    
    
    2005Washington, D.C. metropolitan area
    
    
    11,722
    
    
    
    587,896
    
    
    
    582,947
    
    
    
    1,420,478
    
    
    
    248,771
    
    
    
    597,753
    
    
    
    1,654,443
    
    
    
    2,252,196
    
    
    
    (229,124
    )
    
    
    1929-2005
    
    
    
    2001-2006High-Rise Properties Total
    
    
    20,658
    
    
    
    1,166,312
    
    
    
    1,428,434
    
    
    
    3,009,115
    
    
    
    797,085
    
    
    
    1,519,977
    
    
    
    3,714,657
    
    
    
    5,234,634
    
    
    
    (355,066
    )Germany(2)
    
    
    8,334
    
    
    
    499,550
    
    
    
    161,465
    
    
    
    627,144
    
    
    
    62,984
    
    
    
    174,403
    
    
    
    677,190
    
    
    
    851,593
    
    
    
    (8,590
    )
    
    
    1903-2006
    
    
    
    2005-2006FHA/ADA Settlement Capital Accrual
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,185Total Apartment Communities  Operating and
Under Construction
    
    
    75,553
    
    
    
    2,764,201
    
    
    
    3,329,913
    
    
    
    6,987,209
    
    
    
    2,492,216
    
    
    
    3,501,002
    
    
    
    9,308,336
    
    
    
    12,838,523
    
    
    
    (948,602
    )Other:Development communities In Planning and Owned
    
    
    4,802
    
    
    
    8,362
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    216,479Hotel, retail and other assets
    
    
    
    
    
    
    3,671
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132,638
    
    
    
    (8,544
    )Total real estate assets
    
    
    80,355
    
    
    
    2,776,234
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,187,640
    
    
    
    (957,146
    )
 
 (1)
    
    Represents the date that the building structure was originally completed. For phased
developments, it represents the date the earliest phase was constructed.(2)
    
    Our German portfolio is concentrated primarily in the Federal States of North-Rhine
Westphalia, Hesse, Baden-Wurttemburg and Berlin. 83




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SCHEDULE III
  Years Ended December 31,2006
    
    
    2005
    
    
    2004Carrying AmountsBalance at January 1
    
    $
    11,359,264
    
    
    $
    9,221,038
    
    
    $
    8,999,180Apartment communities:Acquisition-related expenditures
    
    
    2,530,459
    
    
    
    2,671,112
    
    
    
    1,080,639Redevelopment expenditures
    
    
    57,414
    
    
    
    106,264
    
    
    
    40,999Recurring capital expenditures
    
    
    46,354
    
    
    
    48,311
    
    
    
    50,147Development expenditures, excluding land
acquisitions
    
    
    388,502
    
    
    
    324,740
    
    
    
    333,782Acquisition and improvement of land for
development
    
    
    209,916
    
    
    
    81,340
    
    
    
    175,470Dispositions
    
    
    (1,403,858
    )
    
    
    (1,175,834
    )
    
    
    (1,460,046
    )Provision for possible loss on investment
    
    
    (4,328
    )
    
    
    (1,500
    )
    
    
    3⁄4Change in estimated hurricane retirements
    
    
    4,496
    
    
    
    3⁄4
    
    
    
    3⁄4Other
    
    
    7,987
    
    
    
    (8,303
    )
    
    
    3⁄4Net apartment community activity
    
    $
    1,836,942
    
    
    $
    2,046,130
    
    
    $
    220,991Other:Change in other real estate assets
    
    
    (8,566
    )
    
    
    92,096
    
    
    
    867Balance at December 31
    
    $
    13,187,640
    
    
    $
    11,359,264
    
    
    $
    9,221,038
 Year s Ended December 31,2006
    
    
    2005
    
    
    2004Accumulated DepreciationBalance at January 1
    
    $
    836,693
    
    
    $
    763,542
    
    
    $
    648,982Depreciation for the year(1)
    
    
    266,589
    
    
    
    220,770
    
    
    
    203,639Accumulated depreciation on real
estate dispositions
    
    
    (146,136
    )
    
    
    (147,619
    )
    
    
    (89,079
    )Balance at December 31
    
    $
    957,146
    
    
    $
    836,693
    
    
    $
    763,542
 
 (1)
    
    Depreciation is net of $21.7 million and $18.0 million for intangible assets related to the
value of leases in place for real estate acquired in 2006 and 2005, respectively. 84




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##### Table of Contents



SCHEDULE IV
 ARCHSTONE-SMITH OPERATING TRUST
MORTGAGE LOANS ON REAL ESTATE
 December 31, 2006
(Dollar amounts in thousands)
 Principalamount ofloanssubject todelinquentPeriodic payment
    
    
    
    
    
    Face amount of
    
    Carrying amount of
    
    principal orDescription
    
    Interest Rate
    
    Final Maturity Date
    
    term
    
    Prior liens
    
    mortgages
    
    mortgages
    
    interestMortgage and Other Notes Receivable:Washington, D.C.
    
    
    18
    %
    
    
    7/17/07
    
    
    
    (1)
    
    
    
    (3)
    
    
    $
    9,235
    
    
    $
    6,955
    
    
    
    Massachusetts
    
    
    18
    %
    
    
    1/01/08
    
    
    
    (1)
    
    
    
    (3)
    
    
    
    7,687
    
    
    
    6,483
    
    
    
    New York
    
    LIBOR + 5%
    
    
    9/30/10
    
    
    
    (1)
    
    
    
    (3)
    
    
    
    25,654
    
    
    
    25,654
    
    
    
    Massachusetts
    
    LIBOR + 7%
    
    
    2/07/11
    
    
    
    (1)
    
    
    
    (3)
    
    
    
    9,268
    
    
    
    8,216
    
    
    
    Washington, D.C.
    
    
    14
    %
    
    
    6/03/09
    
    
    
    (1)
    
    
    
    (3)
    
    
    
    7,524
    
    
    
    4,685
    
    
    
    New York
    
    LIBOR + 7%
    
    
    6/22/09
    
    
    
    (1)
    
    
    
    (3)
    
    
    
    42,070
    
    
    
    26,708
    
    
    
    Maryland
    
    
    7
    %
    
    
    3/24/07
    
    
    
    (1)
    
    
    
    
    
    
    
    44,560
    
    
    
    44,560
    
    
    
    $
    145,998
    
    
    $
    123,261
    
    
    
    
 2006
    
    
    2005Balance at January 1
    
    $
    74,396
    
    
    $
    8,729New Mortgage Loans
    
    
    85,165
    
    
    
    97,096Other(2)
    
    
    9,781
    
    
    
    5,224Collections of Principal
    
    
    (46,081
    )
    
    
    (36,653
    )Balance at December 31
    
    $
    123,261
    
    
    $
    74,396
 
 (1)
    
    Outstanding principal plus accrued and unpaid interest is generally due on the maturity
date unless specified as payable monthly in the loan agreement. Partial prepayment is
required to the extent the borrower receives proceeds from the sale of constructed units in
accordance with contracted terms.(2)
    
    A portion of the accrued interest amount is added to the principal amount on a monthly
basis on the majority of the loans.(3)
    
    Our rights to the underlying collateral in the event of default are subordinate to a primary
mortgage lender. 85




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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST
 
 SIGNATURES
  ARCHSTONE-SMITH OPERATING TRUSTBy:
    
    /s/ R. Scot SellersR. Scot SellersChairman of the Board andChief Executive Officer
  Signature
    
    Title
    
    Date/s/ R. Scot Sellers

R. Scot Sellers
    
    Chairman of the Board, Chief Executive
Officer (principal executive
officer)
    
    March 1, 2007/s/ Charles E. Mueller, Jr.

Charles E. Mueller, Jr.
    
    Chief Financial Officer (principal financial
officer)
    
    March 1, 2007/s/ Mark A. Schumacher

Mark A. Schumacher
    
    Chief Accounting Officer (principal accounting
officer)
    
    March 1, 2007ARCHSTONE-SMITH TRUST
 By:       /s/ R. Scot Sellers

      Chairman and Chief Executive Officer
    
    Trustee
    
    March 1, 2007
 86




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##### Table of Contents



INDEX TO EXHIBITS
  Number
    
    Description3.1
    
    Amended and Restated Declaration of Trust of Archstone-Smith
Operating Trust (incorporated by reference to Exhibit 3.1 to
Archstone-Smith Trusts Current Report of Form 8-K filed with
the SEC on June 2, 2006)3.2
    
    Restated Bylaws of Archstone-Smith Trust (incorporated by
reference to Exhibit 3.2 to the Archstone-Smith Trusts Current
Report on Form 8-K filed with the SEC on June 2, 2006)4.1
    
    Indenture, dated as of February 1, 1994, between
Archstone-Smith Operating Trust (formerly Property Trust of
America) and Morgan Guaranty Trust Company of New York, as
Trustee relating to Archstone-Smith Operating Trusts (formerly
Property Trust of America) unsecured senior debt securities4.2
    
    First Supplemental Indenture, dated February 2, 1994, among
Archstone-Smith Operating Trust (formerly Property Trust of
America), Morgan Guaranty Trust Company of New York and State
Street Bank and Trust Company, as successor Trustee4.3
    
    Second Supplemental Indenture, dated August 2, 2004, between
Archstone-Smith Operating Trust and U.S. Bank National
Association, as successor Trustee4.4
    
    Third Supplemental Indenture, dated July 14, 2006, between
Archstone-Smith Operating Trust and U.S. Bank National
Association, as successor Trustee4.5
    
    Indenture, dated as of August 14, 1997, between Security
Capital Atlantic Incorporated and State Street Bank and Trust
Company, as Trustee (incorporated by reference to Exhibit 4.8
to Security Capital Atlantic Incorporateds Registration
Statement on Form S-11 (File No. 333-30747))4.6
    
    Form of Archstone-Smith Trust common share ownership
certificate (incorporated by reference to Exhibit 3.3 to
Archstone-Smith Trusts Registration Statement on Form S-4
(File No. 333-63734))4.7
    
    Form of Archstone-Smith Trust share certificate for Series I
Preferred Shares (incorporated by reference to Exhibit 3.8 to
Archstone-Smith Trusts Registration Statement on Form S-4
(File No. 333-63734))10.1
    
    Amended and Restated Declaration of Trust of Archstone-Smith
Operating Trust (incorporated by reference to Exhibit 4.1 to
the Archstone-Smith Trusts Current Report on Form 8-K filed
with the SEC on June 2, 2006)10.2
    
    Amended and Restated Bylaws of Archstone-Smith Operating Trust
(incorporated by reference to Exhibit 4.2 to the
Archstone-Smith Trusts Current Report on Form 8-K filed with
the SEC on June 2, 2006)10.3
    
    Articles Supplementary for Series M Preferred Unit of
Beneficial Interest of Archstone-Smith Operating Trust
(incorporated by reference to Exhibit 3.1 to the
Archstone-Smith Trusts Current Report on Form 8-K filed with
the SEC on December 16, 2004)10.4
    
    Articles Supplementary for Series N-1 Preferred Unit of
Beneficial Interest and N-2 Preferred Unit of Beneficial
Interest of Archstone-Smith Operating Trust (incorporated by
reference to Exhibit 3.1 to the Archstone-Smith Operating
Trusts Current Report on Form 8-K filed with the SEC on August
2, 2005)10.5
    
    Amended and Restated Archstone-Smith Trust Equity Plan for
Outside Trustee and all amendments thereto (incorporated by
reference to Exhibits 10.5, 10.6 and 10.7 to Archstone-Smith
Trusts Current Report on Form 8-K filed with the SEC on
December 12, 2006)10.6
    
    Archstone-Smith Trust 2001 Long-Term Incentive Plan and all
amendments thereto (incorporated by reference to Exhibit 10.1,
10.2, 10.3 and 10.4 to Archstone-Smith Trusts Current Report
on Form 8-K filed with the SEC on December 12, 2006)10.7
    
    Archstone-Smith Deferred Compensation Plan (incorporated by
reference to Exhibit 10.5 to Archstone-Smiths Annual Report on
Form 10-K for the year ended December 31, 2001)10.8
    
    Form of Non-Qualified Share Option Agreement for
Archstone-Smith Trust 2001 Long-Term Incentive Plan
(incorporated by reference to Exhibit 10.1 of Archstone-Smith
Trusts Annual Report on Form 10-Q for the Quarter Ended
September 30, 2004)10.9
    
    Form of Restricted Share Unit Agreement for Archstone-Smith
Trust 2001 Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.2 of Archstone-Smith Trusts Annual Report on
Form 10-Q for the Quarter Ended September 30, 2004)10.10
    
    Form of Restricted Share Unit Agreement for Archstone-Smith
Trust Equity Plan for Outside Trustees (incorporated by
reference to Exhibit 10.3 of Archstone-Smith Trusts Annual
Report on Form 10-Q for the Quarter Ended September 30, 2004)




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##### Table of Contents



Number
    
    Description10.11
    
    Form of Indemnification Agreement entered into between Archstone-Smith Trust and each of its
officers and Trustees (incorporated by reference to Exhibit 10.6 to Archstone-Smith Trusts
Annual Report on From 10K for the year ended December 31, 2003)10.12
    
    Form of Change in Control Agreement between Archstone-Smith Trust and certain of its officers
(incorporated by reference to Exhibit 10.7 to Archstone-Smiths Annual Report on Form 10-K for
the year ended December 31, 2002)10.13
    
    Amended and Restated Credit Agreement, dated as of June 21, 2006, by and among Archstone-Smith
Operating Trust, as borrower, and Archstone-Smith Trust as parent, and J.P. Morgan Chase Bank, as
administrative agent,, J.P. Morgan Europe Limited, as administrative agent for foreign
currencies, Bank of America, N.A., and Wells Fargo Bank, N.A., as syndication agents, and
Suntrust Bank and Citicorp North America, Inc. as documentation agents and the various banks
signatory thereto (incorporated by reference to Exhibit 10.2 to Archstone-Smiths Current Report
on Form 8-K filed with the SEC on June 27, 2006)10.14
    
    Guaranty, dated as of June 21,
2006, by Archstone-Smith Trust, as guarantor, for the benefit of J.P. Morgan Chase Bank, as administrative agent, J.P. Morgan Europe Limited, as administrative
agent for foreign currencies, Bank of America, N.A., and Wells Fargo Bank, N.A., as syndication
agents, and Suntrust Bank and Citicorp North America, Inc. as documentation agents and the
various banks signatory thereto (incorporated by reference to Exhibit 10.1 to Archstone-Smiths
Current Report on Form 8-K filed with the SEC on June 27, 2006)10.15
    
    Archstone Dividend Reinvestment and Share Purchase Plan (incorporated by reference to the
prospectus contained in Archstone-Smith Trusts Registration Statement on Form S-3 (No.
333-44639-01))10.16
    
    2006 and 2007 schedule of applicable dates under the Archstone Dividend Reinvestment and Share
Purchase Plan (included by reference to Exhibit 99.1 to Archstone-Smith Trusts current report on
form 8-K filed with the SEC on February 14, 2006)10.17
    
    Shareholders Agreement, dated as of October 31, 2001, by and among Archstone-Smith Trust,
Archstone-Smith Operating Trust, Robert H. Smith and Robert P. Kogod (incorporated by reference
to Exhibit 10.1 to Archstone-Smith Trusts Current Report on Form 8-K filed with the SEC on
November 1, 2001)10.18
    
    Noncompetition Agreement by and among Charles E. Smith Residential Realty, Inc., Charles E. Smith
Residential Realty L.P. and Robert P. Kogod and Robert H. Smith (incorporated by reference to
Exhibit 10.1 of Charles E. Smith Residential Realty, Inc.s Annual Report on Form 10-K for the
year ended December 31, 1994)10.19
    
    Registration Rights and Lock-up Agreement (incorporated by reference to Exhibit 10.2 of Charles
E. Smith Residential Realty, Inc.s Annual Report on Form 10-K for the year ended December 31,
1994)10.20
    
    License Agreement between Charles E. Smith Management, Inc. and Charles E. Smith Residential
Realty, Inc. (incorporated by reference to Exhibit 10.35 of Charles E. Smith Residential Realty,
Inc.s Annual Report on Form 10-K for the year ended December 31, 1994)10.21
    
    License Agreement between Charles E. Smith Management, Inc. and Charles E. Smith Residential
Realty L.P. (incorporated by reference to Exhibit 10.36 of Charles E. Smith Residential Realty,
Inc.s Annual Report on Form 10-K for the year ended December 31, 1994)12.1
    
    Computation of Ratio of Earnings to Fixed Charges12.2
    
    Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Share Dividends15.1
    
    Consent of Independent Registered Public Accounting Firm21
    
    Subsidiaries of Archstone-Smith31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002