##### 









SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549




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FORM 10-Q

|     |  |                                                                                                
|---- |  | -----------------------------------------------------------------------------------------------
|[X]  |  | QUARTERLY REPORT PURSUANT TO SECTION
    13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934
|     |  | For the quarterly period ended June 30, 2002                                                   
|     |  | OR                                                                                             
|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   
|     |  | For the transition period
    from                to                                           

Commission file number 0-22411



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SUMMIT PROPERTIES PARTNERSHIP, L.P.

(Exact name of registrant as specified in its
charter)


|                                                                                                               |  |                                                   
|-------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------
|Delaware(State or other jurisdiction of
    incorporation or organization)                                     |  | 56-1857809(I.R.S. Employer
    Identification No.)
|                                                                                                              
|309 E. Morehead Street
    Suite 200
    Charlotte, North Carolina(Address of principal executive
    offices) |  | 28202(Zip code)                                   

(704) 334-3000

(Registrants telephone number, including
area code)


N/ A

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


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



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##### 



SUMMIT PROPERTIES PARTNERSHIP, L.P.

INDEX


|        |  |                                                                                                               |  |          |    | 
|------- |  | ------------------------------------------------------------------------------------------------------------- |  | -------- | -- | 
|        |  |                                                                                                               |  | Page No.
|        |  |                                                                                                               |  |         
|PART I  |  | Financial Information                                                                                         |  |          |    | 
|Item 1  |  | Financial Statements                                                                                          |  |          |    | 
|        |  | Consolidated Balance Sheets as of June 30,
    2002 and December 31, 2001 (Unaudited)                         |  |          | 3  | 
|        |  | Consolidated Statements of Earnings for the three
    and six months ended June 30, 2002 and 2001 (Unaudited) |  |          | 4  | 
|        |  | Consolidated Statement of Partners Equity
    for the six months ended June 30, 2002 (Unaudited)             |  |          | 6  | 
|        |  | Consolidated Statements of Cash Flows for the six
    months ended June 30, 2002 and 2001 (Unaudited)         |  |          | 7  | 
|        |  | Notes to Consolidated Financial Statements
    (Unaudited)                                                    |  |          | 8  | 
|Item 2  |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations                     |  |          | 17 | 
|Item 3  |  | Quantitative and Qualitative Disclosures about
    Market Risk                                                |  |          | 33 | 
|PART II |  | Other Information                                                                                             |  |          |    | 
|Item 2  |  | Changes in Securities                                                                                         |  |          | 34 | 
|Item 6  |  | Exhibits and Reports on Form 8-K                                                                              |  |          | 34 | 
|        |  | Signatures                                                                                                    |  |          | 36 | 

2



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##### 



PART I.     FINANCIAL
INFORMATION

ITEM I.     FINANCIAL
STATEMENTS

SUMMIT PROPERTIES PARTNERSHIP, L.P.

CONSOLIDATED BALANCE SHEETS


(Dollars in thousands, except unit
data)


(Unaudited)


|                                                                            |                                                                                                |                                                                               |                        |                                                    |         |         |           |          |         |         |           | 
|--------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ---------------------- | -------------------------------------------------- | ------- | ------- | --------- | -------- | ------- | ------- | --------- | 
|                                                                            |                                                                                                | June 30,                                                                      |                        | December 31,                                      
|                                                                            |                                                                                                | 2002                                                                          |                        | 2001                                              
|                                                                            |                                                                                                |                                                                               |                        |                                                   
|ASSETS                                                                      |                                                                                                |                                                                               |                        |                                                    |         |         |           |         
|Real estate assets:                                                         |                                                                                                |                                                                               |                        |                                                    |         |         |           |         
|                                                                            | Land and land improvements                                                                     |                                                                               | $                      | 175,271                                            |         |         | $         | 174,808  |        
|                                                                            | Buildings and improvements                                                                     |                                                                               |                        | 962,959                                            |         |         |           | 970,850  |        
|                                                                            | Furniture, fixtures and equipment                                                              |                                                                               |                        | 74,587                                             |         |         |           | 74,236   |        
|                                                                            |                                                                                                |                                                                               |                        |                                                    |         |         |           |         
|                                                                            |                                                                                                |                                                                               |                        | Real estate assets before accumulated depreciation |         |         | 1,212,817 |          |         |         | 1,219,894 | 
|                                                                            | Less: accumulated depreciation                                                                 |                                                                               |                        | (161,264                                           | )       |         |           | (148,653 | )      
|                                                                            |                                                                                                |                                                                               |                        |                                                    |         |         |           |         
|                                                                            |                                                                                                |                                                                               |                        | Operating real estate assets                       |         |         | 1,051,553 |          |         |         | 1,071,241 | 
|Construction in progress                                                    |                                                                                                |                                                                               | 197,820                |                                                    |         |         | 142,354   |         
|                                                                            |                                                                                                |                                                                               |                        |                                                    |         |         |           |         
|                                                                            |                                                                                                |                                                                               |                        | Net real estate assets                             |         |         | 1,249,373 |          |         |         | 1,213,595 | 
|Net real estate assets  assets held
    for sale                           |                                                                                                |                                                                               | 8,834                  |                                                    |         |         | 39,848    |         
|Cash and cash equivalents                                                   |                                                                                                |                                                                               | 2,127                  |                                                    |         |         | 1,814     |         
|Restricted cash                                                             |                                                                                                |                                                                               | 22,027                 |                                                    |         |         | 21,215    |         
|Investments in Summit Management Company and real
    estate joint ventures |                                                                                                |                                                                               | 9,659                  |                                                    |         |         | 3,159     |         
|Deferred financing costs, net                                               |                                                                                                |                                                                               | 6,265                  |                                                    |         |         | 6,925     |         
|Other assets                                                                |                                                                                                |                                                                               | 7,911                  |                                                    |         |         | 10,692    |         
|Other assets  assets held for sale                                         |                                                                                                |                                                                               | 549                    |                                                    |         |         | 688       |         
|                                                                            |                                                                                                |                                                                               |                        |                                                    |         |         |           |         
|Total assets                                                                |                                                                                                | $                                                                             | 1,306,745              |                                                    |         | $       | 1,297,936 |         
|                                                                            |                                                                                                |                                                                               |                        |                                                    |         |         |           |         
|LIABILITIES AND PARTNERS
    EQUITY                                        |                                                                                                |                                                                               |                        |                                                    |         |         |           |         
|Liabilities:                                                                |                                                                                                |                                                                               |                        |                                                    |         |         |           |         
|                                                                            | Notes payable                                                                                  |                                                                               | $                      | 723,448                                            |         |         | $         | 707,937  |        
|                                                                            | Note payable  assets held for sale                                                            |                                                                               |                        | 11,288                                             |         |         |           | 11,408   |        
|                                                                            | Accounts payable and accrued expenses                                                          |                                                                               |                        | 18,423                                             |         |         |           | 21,539   |        
|                                                                            | Distributions payable                                                                          |                                                                               |                        | 17,800                                             |         |         |           | 14,156   |        
|                                                                            | Accrued interest payable                                                                       |                                                                               |                        | 6,980                                              |         |         |           | 7,000    |        
|                                                                            | Security deposits and prepaid rents                                                            |                                                                               |                        | 2,865                                              |         |         |           | 3,224    |        
|                                                                            | Other liabilities  assets held for sale                                                       |                                                                               |                        | 87                                                 |         |         |           | 825      |        
|                                                                            |                                                                                                |                                                                               |                        |                                                    |         |         |           |         
|                                                                            |                                                                                                |                                                                               |                        | Total liabilities                                  |         |         | 780,891   |          |         |         | 766,089   | 
|                                                                            |                                                                                                |                                                                               |                        |                                                    |         |         |           |         
|Partners common and preferred equity:                                      |                                                                                                |                                                                               |                        |                                                    |         |         |           |         
|                                                                            | Series B preferred units 
    3,400,000 issued and outstanding                                |                                                                               |                        | 82,713                                             |         |         |           | 82,713   |        
|                                                                            | Series C preferred units 
    2,200,000 issued and outstanding                                |                                                                               |                        | 53,547                                             |         |         |           | 53,547   |        
|                                                                            | Partnership common units issued and outstanding
    30,958,655 in 2002 and 30,608,345 and 2001 |                                                                               |                        |                                                    |         |         |           |          |        
|                                                                            |                                                                                                | General partner  outstanding 309,587
    in 2002 and 306,083 in 2001         |                        |                                                    | 4,628   |         |           |          | 4,687   |        
|                                                                            |                                                                                                | Limited partners  outstanding
    30,649,068 in 2002 and 30,302,262 in 2001. |                        |                                                    | 384,966 |         |           |          | 390,900 |        
|                                                                            |                                                                                                |                                                                               |                        |                                                    |         |         |           |         
|                                                                            |                                                                                                |                                                                               | Total partners equity |                                                    |         | 525,854 |           |          |         | 531,847 |          
|                                                                            |                                                                                                |                                                                               |                        |                                                    |         |         |           |         
|Total liabilities and partners common and
    preferred equity             |                                                                                                | $                                                                             | 1,306,745              |                                                    |         | $       | 1,297,936 |         
|                                                                            |                                                                                                |                                                                               |                        |                                                    |         |         |           |         

See notes to consolidated financial statements.

3



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##### 



SUMMIT PROPERTIES PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF EARNINGS


(Dollars in thousands, except per unit
data)


(Unaudited)


|                                                                                                    |                                                            |                                  |                                                   |                           |       |        |        |        |       |        |        |        |        |        |        |        |        |        | 
|--------------------------------------------------------------------------------------------------- | ---------------------------------------------------------- | -------------------------------- | ------------------------------------------------- | ------------------------- | ----- | ------ | ------ | ------ | ----- | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | 
|                                                                                                    |                                                            |                                  |                                                   |                          
|                                                                                                    |                                                            | Three Months Ended June 30,      |                                                   | Six Months Ended June 30,
|                                                                                                    |                                                            |                                  |                                                   |                          
|                                                                                                    |                                                            | 2002                             |                                                   | 2001                      |       | 2002   |        | 2001  
|                                                                                                    |                                                            |                                  |                                                   |                           |       |        |        |       
|Revenues:                                                                                           |                                                            |                                  |                                                   |                           |       |        |        |        |       |        |        |        |        |        |        |       
|                                                                                                    | Rental                                                     |                                  | $                                                 | 39,944                    |       |        | $      | 43,963 |       |        | $      | 80,099 |        |        | $      | 86,827 |       
|                                                                                                    | Other property income                                      |                                  |                                                   | 2,915                     |       |        |        | 3,327  |       |        |        | 5,904  |        |        |        | 6,552  |       
|                                                                                                    | Interest                                                   |                                  |                                                   | 655                       |       |        |        | 506    |       |        |        | 1,161  |        |        |        | 1,265  |       
|                                                                                                    | Other income                                               |                                  |                                                   | 28                        |       |        |        | 509    |       |        |        | 160    |        |        |        | 691    |       
|                                                                                                    | Gain (loss) and interest income on compensation
    plans  |                                  |                                                   | 46                        |       |        |        | (156   | )     |        |        | 224    |        |        |        | (185   | )     
|                                                                                                    |                                                            |                                  |                                                   |                           |       |        |        |        |       |        |        |        |        |        |        |       
|                                                                                                    |                                                            |                                  | Total revenues                                    |                           |       | 43,588 |        |        |       | 48,149 |        |        |        | 87,548 |        |        |        | 95,150 | 
|                                                                                                    |                                                            |                                  |                                                   |                           |       |        |        |        |       |        |        |        |        |        |        |       
|Expenses:                                                                                           |                                                            |                                  |                                                   |                           |       |        |        |        |       |        |        |        |        |        |        |       
|                                                                                                    | Property operating and maintenance:                        |                                  |                                                   |                           |       |        |        |        |       |        |        |        |        |        |        |        |       
|                                                                                                    |                                                            | Personnel                        |                                                   |                           | 3,147 |        |        |        | 3,206 |        |        |        | 6,471  |        |        |        | 6,435  |       
|                                                                                                    |                                                            | Advertising and promotion        |                                                   |                           | 722   |        |        |        | 619   |        |        |        | 1,338  |        |        |        | 1,223  |       
|                                                                                                    |                                                            | Utilities                        |                                                   |                           | 1,948 |        |        |        | 2,106 |        |        |        | 3,983  |        |        |        | 4,283  |       
|                                                                                                    |                                                            | Building repairs and maintenance |                                                   |                           | 1,984 |        |        |        | 2,026 |        |        |        | 3,804  |        |        |        | 3,878  |       
|                                                                                                    |                                                            | Real estate taxes and insurance  |                                                   |                           | 5,344 |        |        |        | 5,097 |        |        |        | 10,549 |        |        |        | 10,260 |       
|                                                                                                    |                                                            | Depreciation                     |                                                   |                           | 9,436 |        |        |        | 9,675 |        |        |        | 18,839 |        |        |        | 18,790 |       
|                                                                                                    |                                                            | Property supervision             |                                                   |                           | 1,269 |        |        |        | 1,411 |        |        |        | 2,516  |        |        |        | 2,793  |       
|                                                                                                    |                                                            | Other operating expenses         |                                                   |                           | 648   |        |        |        | 769   |        |        |        | 1,324  |        |        |        | 1,453  |       
|                                                                                                    |                                                            |                                  |                                                   |                           |       |        |        |        |       |        |        |        |        |        |        |       
|                                                                                                    |                                                            |                                  | Total property operating and maintenance expenses |                           |       | 24,498 |        |        |       | 24,909 |        |        |        | 48,824 |        |        |        | 49,115 | 
|                                                                                                    | Interest                                                   |                                  |                                                   | 9,069                     |       |        |        | 10,039 |       |        |        | 18,059 |        |        |        | 19,877 |       
|                                                                                                    | Amortization                                               |                                  |                                                   | 311                       |       |        |        | 362    |       |        |        | 623    |        |        |        | 702    |       
|                                                                                                    | General and administrative                                 |                                  |                                                   | 1,388                     |       |        |        | 1,295  |       |        |        | 3,147  |        |        |        | 2,528  |       
|                                                                                                    | Liability adjustment and expense on compensation
    plans |                                  |                                                   | 46                        |       |        |        | (156   | )     |        |        | 224    |        |        |        | (185   | )     
|                                                                                                    |                                                            |                                  |                                                   |                           |       |        |        |        |       |        |        |        |        |        |        |       
|                                                                                                    |                                                            |                                  | Total expenses                                    |                           |       | 35,312 |        |        |       | 36,449 |        |        |        | 70,877 |        |        |        | 72,037 | 
|                                                                                                    | Income (loss) on equity investments:                       |                                  |                                                   |                           |       |        |        |        |       |        |        |        |        |        |        |        |       
|                                                                                                    |                                                            | Summit Management Company        |                                                   |                           | 270   |        |        |        | 134   |        |        |        | 291    |        |        |        | 485    |       
|                                                                                                    |                                                            | Real estate joint ventures       |                                                   |                           | (41   | )      |        |        | (122  | )      |        |        | 23     |        |        |        | (39    | )     
|                                                                                                    |                                                            |                                  |                                                   |                           |       |        |        |        |       |        |        |        |        |        |        |       
|                                                                                                    |                                                            |                                  | Total income on equity investments                |                           |       | 229    |        |        |       | 12     |        |        |        | 314    |        |        |        | 446    | 
|                                                                                                    |                                                            |                                  |                                                   |                           |       |        |        |        |       |        |        |        |        |        |        |       
|Income from continuing operations before gain on
    sale of real estate assets and impairment loss |                                                            |                                  | 8,505                                             |                           |       |        | 11,712 |        |       |        | 16,985 |        |        |        | 23,559 |       
|                                                                                                    | Gain on sale of real estate assets                         |                                  |                                                   | 13,843                    |       |        |        | 10,782 |       |        |        | 13,843 |        |        |        | 10,782 |       
|                                                                                                    | Impairment loss on investments in technology
    companies |                                  |                                                   |                          |       |        |        | (1,217 | )     |        |        |       |        |        |        | (1,217 | )     
|                                                                                                    |                                                            |                                  |                                                   |                           |       |        |        |        |       |        |        |        |        |        |        |       
|Income from continuing operations                                                                   |                                                            |                                  | 22,348                                            |                           |       |        | 21,277 |        |       |        | 30,828 |        |        |        | 33,124 |       
|                                                                                                    | Income from discontinued operations                        |                                  |                                                   | 552                       |       |        |        | 703    |       |        |        | 1,207  |        |        |        | 1,343  |       
|                                                                                                    | Loss from disposition of discontinued operations           |                                  |                                                   | (4,209                    | )     |        |        |       |       |        |        | (4,209 | )      |        |        |       |       
|                                                                                                    |                                                            |                                  |                                                   |                           |       |        |        |        |       |        |        |        |        |        |        |       
|                                                                                                    | (Loss) income from discontinued operations                 |                                  |                                                   | (3,657                    | )     |        |        | 703    |       |        |        | (3,002 | )      |        |        | 1,343  |       
|                                                                                                    |                                                            |                                  |                                                   |                           |       |        |        |        |       |        |        |        |        |        |        |       
|Net income                                                                                          |                                                            |                                  | 18,691                                            |                           |       |        | 21,980 |        |       |        | 27,826 |        |        |        | 34,467 |       
|Distributions to Series B preferred
    unitholders                                                 |                                                            |                                  | (1,902                                            | )                         |       |        | (1,902 | )      |       |        | (3,804 | )      |        |        | (3,804 | )     
|Distributions to Series C preferred
    unitholders                                                 |                                                            |                                  | (1,203                                            | )                         |       |        | (1,203 | )      |       |        | (2,406 | )      |        |        | (2,406 | )     
|                                                                                                    |                                                            |                                  |                                                   |                           |       |        |        |        |       |        |        |        |        |        |        |       

4



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##### 



SUMMIT PROPERTIES PARTNERSHIP, L.P.


CONSOLIDATED STATEMENTS OF
EARNINGS  (Continued)


(Dollars in thousands, except per unit
data)


(Unaudited)


|                                                                         |                                                                         |                             |        |                           |   |      |        |            |   |   |        |            |   |   |        |            |  
|------------------------------------------------------------------------ | ----------------------------------------------------------------------- | --------------------------- | ------ | ------------------------- | - | ---- | ------ | ---------- | - | - | ------ | ---------- | - | - | ------ | ---------- | -
|                                                                         |                                                                         |                             |        |                          
|                                                                         |                                                                         | Three Months Ended June 30, |        | Six Months Ended June 30,
|                                                                         |                                                                         |                             |        |                          
|                                                                         |                                                                         | 2002                        |        | 2001                      |   | 2002 |        | 2001      
|                                                                         |                                                                         |                             |        |                           |   |      |        |           
|Income available to common unitholders                                   |                                                                         |                             | 15,586 |                           |   |      | 18,875 |            |   |   | 21,616 |            |   |   | 28,257 |           
|Income available to common unitholders allocated
    to general partner  |                                                                         |                             | (156   | )                         |   |      | (189   | )          |   |   | (216   | )          |   |   | (283   | )         
|                                                                         |                                                                         |                             |        |                           |   |      |        |            |   |   |        |            |   |   |        |           
|Income available to common unitholders allocated
    to limited partners |                                                                         | $                           | 15,430 |                           |   | $    | 18,686 |            |   | $ | 21,400 |            |   | $ | 27,974 |           
|                                                                         |                                                                         |                             |        |                           |   |      |        |            |   |   |        |            |   |   |        |           
|Per unit data:                                                           |                                                                         |                             |        |                           |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Income from continuing operations 
    basic                           |                             | $      | 0.72                      |   |      | $      | 0.68       |   |   | $      | 1.00       |   |   | $      | 1.07       |  
|                                                                         |                                                                         |                             |        |                           |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Income from continuing operations 
    diluted                         |                             | $      | 0.72                      |   |      | $      | 0.68       |   |   | $      | 0.99       |   |   | $      | 1.06       |  
|                                                                         |                                                                         |                             |        |                           |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | (Loss) income from discontinued
    operations  basic and diluted      |                             | $      | (0.12                     | ) |      | $      | 0.02       |   |   | $      | (0.10      | ) |   | $      | 0.04       |  
|                                                                         |                                                                         |                             |        |                           |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Distributions to Series B preferred
    unitholders  basic and diluted |                             | $      | (0.06                     | ) |      | $      | (0.06      | ) |   | $      | (0.12      | ) |   | $      | (0.12      | )
|                                                                         |                                                                         |                             |        |                           |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Distributions to Series C preferred
    unitholders  basic and diluted |                             | $      | (0.04                     | ) |      | $      | (0.04      | ) |   | $      | (0.08      | ) |   | $      | (0.08      | )
|                                                                         |                                                                         |                             |        |                           |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Income available to common
    unitholders  basic                      |                             | $      | 0.50                      |   |      | $      | 0.61       |   |   | $      | 0.70       |   |   | $      | 0.91       |  
|                                                                         |                                                                         |                             |        |                           |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Income available to common
    unitholders  diluted                    |                             | $      | 0.50                      |   |      | $      | 0.60       |   |   | $      | 0.70       |   |   | $      | 0.90       |  
|                                                                         |                                                                         |                             |        |                           |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Distributions declared                                                  |                             | $      | 0.48                      |   |      | $      | 0.46       |   |   | $      | 0.95       |   |   | $      | 0.93       |  
|                                                                         |                                                                         |                             |        |                           |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Weighted average units  basic                                          |                             |        | 30,888,338                |   |      |        | 31,099,292 |   |   |        | 30,785,909 |   |   |        | 31,050,037 |  
|                                                                         |                                                                         |                             |        |                           |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Weighted average units  diluted                                        |                             |        | 31,163,943                |   |      |        | 31,421,901 |   |   |        | 31,046,617 |   |   |        | 31,355,825 |  
|                                                                         |                                                                         |                             |        |                           |   |      |        |            |   |   |        |            |   |   |        |           

See notes to consolidated financial statements.

5



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##### 



SUMMIT PROPERTIES PARTNERSHIP, L.P.

CONSOLIDATED STATEMENT OF PARTNERS
EQUITY


(Dollars in thousands)


(Unaudited)


|                           |                                                    |                                                                  |        |           |   |         |        |          |   |       |       |      |    |   |         |         |       |   |         |         |       |  
|-------------------------- | -------------------------------------------------- | ---------------------------------------------------------------- | ------ | --------- | - | ------- | ------ | -------- | - | ----- | ----- | ---- | -- | - | ------- | ------- | ----- | - | ------- | ------- | ----- | -
|                           |                                                    | Series B                                                         |        | Series C  |   |         |        |          |   |      
|                           |                                                    | Preferred                                                        |        | Preferred |   | General |        | Limited  |   |      
|                           |                                                    | Units                                                            |        | Units     |   | Partner |        | Partners |   | Total
|                           |                                                    |                                                                  |        |           |   |         |        |          |   |      
|Balance, December 31, 2001 |                                                    | $                                                                | 82,713 |           |   | $       | 53,547 |          |   | $     | 4,687 |      |    | $ | 390,900 |         |       | $ | 531,847 |        
|                           | Distributions to common unitholders                |                                                                  |        |          |   |         |        |         |   |       |       | (293 | )  |   |         | (28,994 | )     |   |         | (29,287 | )    
|                           | Contributions from Summit Properties related to:   |                                                                  |        |           |   |         |        |          |   |       |       |      |    |   |         |         |       |   |         |         |      
|                           |                                                    | Proceeds from dividend reinvestment and stock
    purchase plans |        |           |  |         |        |          |  |       |       |      | 59 |   |         |         | 5,795 |   |         |         | 5,854 |  
|                           |                                                    | Exercise of stock options                                        |        |           |  |         |        |          |  |       |       |      | 17 |   |         |         | 1,668 |   |         |         | 1,685 |  
|                           |                                                    | Amortization of restricted stock grants                          |        |           |  |         |        |          |  |       |       |      | 6  |   |         |         | 630   |   |         |         | 636   |  
|                           |                                                    | Netdown of restricted stock grants                               |        |           |  |         |        |          |  |       |       |      | (3 | ) |         |         | (323  | ) |         |         | (326  | )
|                           | Issuance of notes receivable to Summit employees   |                                                                  |        |          |   |         |        |         |   |       |       | (72  | )  |   |         | (7,170  | )     |   |         | (7,242  | )    
|                           | Repayments of notes receivable to Summit employees |                                                                  |        |          |   |         |        |         |   |       |       | 11   |    |   |         | 1,060   |       |   |         | 1,071   |      
|                           | Distributions to preferred unitholders             |                                                                  |        |          |   |         |        |         |   |       |       | (62  | )  |   |         | (6,148  | )     |   |         | (6,210  | )    
|                           | Net income                                         |                                                                  |        |          |   |         |        |         |   |       |       | 278  |    |   |         | 27,548  |       |   |         | 27,826  |      
|                           |                                                    |                                                                  |        |           |   |         |        |          |   |       |       |      |    |   |         |         |       |   |         |        
|Balance, June 30, 2002     |                                                    | $                                                                | 82,713 |           |   | $       | 53,547 |          |   | $     | 4,628 |      |    | $ | 384,966 |         |       | $ | 525,854 |        
|                           |                                                    |                                                                  |        |           |   |         |        |          |   |       |       |      |    |   |         |         |       |   |         |        

See notes to consolidated financial statements.

6



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##### 



SUMMIT PROPERTIES PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Dollars in thousands)


(Unaudited)


|                                                                                      |                                                                                                    |                                       |                                           |         |         |        |        |         |         |        | 
|------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | ------------------------------------- | ----------------------------------------- | ------- | ------- | ------ | ------ | ------- | ------- | ------ | 
|                                                                                      |                                                                                                    |                                      
|                                                                                      |                                                                                                    | Six Months Ended                     
|                                                                                      |                                                                                                    | June 30,                             
|                                                                                      |                                                                                                    |                                      
|                                                                                      |                                                                                                    | 2002                                  |                                           | 2001   
|                                                                                      |                                                                                                    |                                       |                                           |        
|Cash flows from operating activities:                                                 |                                                                                                    |                                       |                                           |         |         |        |        |        
|Net income                                                                            |                                                                                                    | $                                     | 27,826                                    |         |         | $      | 34,467 |        
|Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                                                    |                                       |                                           |         |         |        |        |        
|                                                                                      | Income on equity method investments                                                                |                                       |                                           | (314    | )       |        |        | (446    | )      
|                                                                                      | Net gain on sale of real estate assets                                                             |                                       |                                           | (9,634  | )       |        |        | (10,782 | )      
|                                                                                      | Impairment loss on investments in technology
    companies                                         |                                       |                                           |        |         |        |        | 1,217   |        
|                                                                                      | Depreciation and amortization                                                                      |                                       |                                           | 20,768  |         |        |        | 20,959  |        
|                                                                                      | (Increase) decrease in restricted cash                                                             |                                       |                                           | (559    | )       |        |        | 207     |        
|                                                                                      | Increase in other assets                                                                           |                                       |                                           | (1,965  | )       |        |        | (1,241  | )      
|                                                                                      | (Decrease) increase in accrued interest payable                                                    |                                       |                                           | (31     | )       |        |        | 320     |        
|                                                                                      | Increase (decrease) in accounts payable and
    accrued expenses                                   |                                       |                                           | 1,464   |         |        |        | (1,854  | )      
|                                                                                      | (Decrease) increase in security deposits and
    prepaid rents                                     |                                       |                                           | (431    | )       |        |        | 65      |        
|                                                                                      |                                                                                                    |                                       |                                           |         |         |        |        |        
|                                                                                      |                                                                                                    |                                       | Net cash provided by operating activities |         |         | 37,124 |        |         |         | 42,912 | 
|                                                                                      |                                                                                                    |                                       |                                           |         |         |        |        |        
|Cash flows from investing activities:                                                 |                                                                                                    |                                       |                                           |         |         |        |        |        
|                                                                                      | Construction of real estate assets and land
    acquisitions                                       |                                       |                                           | (57,702 | )       |        |        | (53,744 | )      
|                                                                                      | Proceeds from sale of real estate assets                                                           |                                       |                                           | 48,444  |         |        |        | 57,385  |        
|                                                                                      | Capitalized interest                                                                               |                                       |                                           | (4,963  | )       |        |        | (6,363  | )      
|                                                                                      | Investment in real estate joint ventures                                                           |                                       |                                           | (6,878  | )       |        |        | (4,075  | )      
|                                                                                      | Distribution from real estate joint venture                                                        |                                       |                                           | 737     |         |        |        |        |        
|                                                                                      | Contribution from historic tax venture partner                                                     |                                       |                                           | 200     |         |        |        |        |        
|                                                                                      | Recurring capital expenditures                                                                     |                                       |                                           | (1,911  | )       |        |        | (2,563  | )      
|                                                                                      | Non-recurring capital expenditures                                                                 |                                       |                                           | (633    | )       |        |        | (2,049  | )      
|                                                                                      | Corporate and other additions and improvements                                                     |                                       |                                           | (404    | )       |        |        | (1,650  | )      
|                                                                                      | Decrease in notes receivable                                                                       |                                       |                                           | 55      |         |        |        | 28      |        
|                                                                                      |                                                                                                    |                                       |                                           |         |         |        |        |        
|                                                                                      |                                                                                                    | Net cash used in investing activities |                                           |         | (23,055 | )      |        |         | (13,031 | )     
|                                                                                      |                                                                                                    |                                       |                                           |         |         |        |        |        
|Cash flows from financing activities:                                                 |                                                                                                    |                                       |                                           |         |         |        |        |        
|                                                                                      | Net borrowings (repayments) on line of credit                                                      |                                       |                                           | 18,500  |         |        |        | (55,000 | )      
|                                                                                      | Proceeds from issuance of medium-term notes                                                        |                                       |                                           |        |         |        |        | 60,000  |        
|                                                                                      | Repayments of mortgage debt                                                                        |                                       |                                           | (2,822  | )       |        |        | (2,737  | )      
|                                                                                      | Repayments of tax exempt bonds                                                                     |                                       |                                           | (340    | )       |        |        | (560    | )      
|                                                                                      | Increase in deferred financing costs                                                               |                                       |                                           | (63     | )       |        |        | (525    | )      
|                                                                                      | Proceeds from termination of interest rate swap                                                    |                                       |                                           | 1,510   |         |        |        |        |        
|                                                                                      | Distributions to common unitholders                                                                |                                       |                                           | (25,693 | )       |        |        | (28,027 | )      
|                                                                                      | Distributions to Series B preferred
    unitholders                                                |                                       |                                           | (3,804  | )       |        |        | (3,804  | )      
|                                                                                      | Distributions to Series C preferred
    unitholders                                                |                                       |                                           | (2,406  | )       |        |        | (2,406  | )      
|                                                                                      | Issuance of employee notes receivable and related
    accrued interest                             |                                       |                                           | (7,242  | )       |        |        | (2,212  | )      
|                                                                                      | Repayments of employee notes receivable and
    related interest                                   |                                       |                                           | 1,071   |         |        |        | 815     |        
|                                                                                      | Contributions from Summit Properties related to:                                                   |                                       |                                           |         |         |        |        |         |        
|                                                                                      | Net proceeds from dividend reinvestment and stock
    purchase plans and exercise of stock options |                                       |                                           | 7,533   |         |        |        | 3,931   |        
|                                                                                      |                                                                                                    |                                       |                                           |         |         |        |        |        
|                                                                                      |                                                                                                    | Net cash used in financing activities |                                           |         | (13,756 | )      |        |         | (30,525 | )     
|                                                                                      |                                                                                                    |                                       |                                           |         |         |        |        |        
|Net increase (decrease) in cash and cash
    equivalents                              |                                                                                                    |                                       | 313                                       |         |         |        | (644   | )      
|Cash and cash equivalents, beginning of year                                          |                                                                                                    |                                       | 1,814                                     |         |         |        | 3,148  |        
|                                                                                      |                                                                                                    |                                       |                                           |         |         |        |        |        
|Cash and cash equivalents, end of period                                              |                                                                                                    | $                                     | 2,127                                     |         |         | $      | 2,504  |        
|                                                                                      |                                                                                                    |                                       |                                           |         |         |        |        |        
|Supplemental disclosure of cash flow
    information                                 |                                                                                                    |                                       |                                           |         |         |        |        |        
|                                                                                      | Cash paid for interest, net of capitalized
    interest                                            |                                       | $                                         | 18,228  |         |        | $      | 19,837  |        
|                                                                                      |                                                                                                    |                                       |                                           |         |         |        |        |        

See notes to consolidated financial statements.

7



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##### 



SUMMIT PROPERTIES PARTNERSHIP, L.P.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)





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

1. BASIS OF PRESENTATION

We have prepared the accompanying unaudited
financial statements in accordance with accounting principles
generally accepted in the United States of America
(GAAP) for interim financial information and in
conformity with the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete
financial statements. We have included all material adjustments
(consisting only of normal recurring adjustments) necessary for
a fair presentation. The results of operations for the six
months ended June 30, 2002 are not necessarily indicative
of the results that may be expected for the full year. You
should read our December 31, 2001 audited financial
statements and notes included in our Annual Report on
Form 10-K in conjunction with these interim statements.

We conduct the business of operating, developing
and acquiring Class A luxury apartment
communities for Summit, which is a self-administered and
self-managed real estate investment trust (REIT). As
of June 30, 2002, Summit held 88.5% of our outstanding
partnership interests, consisting of a 1% general partner
interest and an 87.5% limited partner interest. We are obligated
to redeem each common unit of limited partnership interest at
the request of the holder for cash equal to the fair market
value of one share of Summits common stock, except that we
may elect to have Summit acquire each common unit presented for
redemption for one share of its common stock. With each
redemption of outstanding common units for common stock,
Summits percentage ownership interest in the Operating
Partnership will increase. In addition, whenever Summit issues
shares of common stock, Summit will contribute any resulting
proceeds to us and we will issue an equivalent number of common
units to Summit.

Distributions to holders of common units are made
to enable distributions to be made to Summit stockholders under
Summits dividend policy. Federal income tax laws require
Summit, as a REIT, to distribute 90% of its ordinary taxable
income. We make distributions to Summit to enable it to satisfy
this requirement.

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

Recently Adopted Accounting
Pronouncements On
June 29, 2001, the Financial Accounting Standards Board
approved SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 142 requires that upon adoption,
amortization of goodwill will cease and instead, the carrying
value of goodwill will be evaluated for impairment on an annual
basis. Identifiable intangible assets will continue to be
amortized over their useful lives and reviewed for impairment in
accordance with SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. We adopted
SFAS No. 142 on January 1, 2002 and its adoption had
no effect on our financial position and results of operations.

The Financial Accounting Standards Board has
approved SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144
supersedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of and amends Accounting Principles Board Opinion
(APB) No. 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of a

8



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##### 



SUMMIT PROPERTIES PARTNERSHIP, L.P.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)  (Continued)




Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions. Along
with establishing a single accounting model, based on the
framework established in SFAS No. 121, for long-lived
assets to be disposed of by sale, this standard retains the
basic provisions of APB No. 30 for the presentation of
discontinued operations in the income statement but broadens
that presentation to include a component of an entity. We
adopted SFAS No. 144 on January 1, 2002 and its
adoption did not have a material impact on our financial
position and results of operations for the three and six months
ended June 30, 2002. SFAS No. 144 requires operating
results of communities we consider held for sale, as well as
those sold, to be included in discontinued operations in our
statements of operations prospectively from the date of adoption.

Per Unit
Data Basic earnings
per unit is computed based upon the weighted average number of
units outstanding during the respective period. The difference
between basic and diluted weighted
average units is the dilutive effect of Summits stock
options outstanding. There were 275,605 and 260,708 units added
to basic weighted average units outstanding for the three and
six months ended June 30, 2002. There were 322,609 and
305,708 units added to basic weighted average units outstanding
for the three and six months ended June 30, 2001. Dilution
caused by these options had no effect on income available to
common unitholders per unit for the three and six months ended
June 30, 2002 and decreased income available to common
unitholders per unit by $0.01 for the three and six months ended
June 30, 2001.

2. REAL ESTATE JOINT VENTURES

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

The following are condensed balance sheets as of
June 30, 2002 and December 31, 2001 and income
statements for the six months ended June 30, 2002 and 2001
for Station Hill. Included in the income statement information
below for the six months ended June 30, 2001 are the
results of a community formerly known as Summit Station (230
apartment homes), which was sold by Station Hill on
August 1, 2001.

9



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##### 



SUMMIT PROPERTIES PARTNERSHIP, L.P.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)  (Continued)




The balance sheets and income statements set
forth below reflect the financial position and operations of
Station Hill in its entirety, not just our interest in the joint
venture (in thousands).

|                          |                                         |                |        |              |  |   |        |        | 
|------------------------- | --------------------------------------- | -------------- | ------ | ------------ |  | - | ------ | ------ | 
|                          |                                         |               
|                          |                                         | Balance Sheets
|                          |                                         |               
|                          |                                         | June 30,       |        | December 31,
|                          |                                         | 2002           |        | 2001        
|                          |                                         |                |        |             
|Real estate assets, net   |                                         | $              | 73,220 |              |  | $ | 74,261 |       
|Cash and cash equivalents |                                         |                | 941    |              |  |   | 901    |       
|Other assets              |                                         |                | 405    |              |  |   | 283    |       
|                          |                                         |                |        |              |  |   |        |       
|                          | Total assets                            |                | $      | 74,566       |  |   | $      | 75,445 | 
|                          |                                         |                |        |              |  |   |        |       
|Mortgages payable         |                                         | $              | 59,140 |              |  | $ | 59,536 |       
|Other liabilities         |                                         |                | 1,027  |              |  |   | 575    |       
|Partners capital         |                                         |                | 14,399 |              |  |   | 15,334 |       
|                          |                                         |                |        |              |  |   |        |       
|                          | Total liabilities and partners capital |                | $      | 74,566       |  |   | $      | 75,445 | 
|                          |                                         |                |        |              |  |   |        |       

|                  |                               |                           |       |       |       |   |       |       |       | 
|----------------- | ----------------------------- | ------------------------- | ----- | ----- | ----- | - | ----- | ----- | ----- | 
|                  |                               |                          
|                  |                               | Income Statements        
|                  |                               |                          
|                  |                               |                          
|                  |                               | Six Months Ended June 30,
|                  |                               |                          
|                  |                               | 2002                      |       | 2001 
|                  |                               |                           |       |      
|Revenues          |                               | $                         | 5,116 |       |       | $ | 6,399 |      
|Expenses:         |                               |                           |       |       |       |   |       |      
|                  | Property operating            |                           |       | 1,854 |       |   |       | 2,212 |      
|                  | Interest                      |                           |       | 1,987 |       |   |       | 2,292 |      
|                  | Depreciation and amortization |                           |       | 1,471 |       |   |       | 1,615 |      
|                  |                               |                           |       |       |       |   |       |      
|                  |                               | Total expenses            |       |       | 5,312 |   |       |       | 6,119 | 
|                  |                               |                           |       |       |       |   |       |      
|Net (loss) income |                               | $                         | (196  | )     |       | $ | 280   |      
|                  |                               |                           |       |       |       |   |       |      

We formerly owned a 49% interest in a joint
venture, which developed and operates an apartment community
located in Atlanta, Georgia known as Summit Cheshire Bridge. On
June 1, 2002, we purchased an additional 1% interest for
$100 and, therefore, our ownership interest is now 50%. This
joint venture is accounted for under the equity method of
accounting and its operating results are presented in
Income on equity investments: Real estate joint
ventures in our consolidated statements of earnings. The
construction costs were funded primarily through a construction
loan to the joint venture from an unrelated third party equal to
100% of the construction costs. We had the right to purchase our
joint venture partners interest in the joint venture, but
decided subsequent to December 31, 2001 not to exercise
this option which expired on January 17, 2002. Due to our
decision not to purchase our joint venture partners
interest, we were required to make a capital contribution of
$6.8 million, which represented 25% of the joint ventures
total construction loan amount. We made our contribution on
February 15, 2002. This contribution did not change our
equity interest in the joint venture. We will receive a
preferred return in the amount of 9% per year compounded
annually until our $6.8 million capital contribution has
been returned as a result of a sale, refinancing or other
capital transaction. We are entitled to 50% of the income and
cash flow based on our equity interest, after all preferred
return payments have been made. The balance sheet and income
statement information for the joint venture is not material to
our consolidated financial statements taken as a whole.

On May 25, 2001, we contributed
$4.2 million for a 29.78% interest in a joint venture named
SZF, LLC, which owns substantially all of the interests in a
limited liability company that is developing, through a
third-party contractor, an apartment community in Miami,
Florida. The community will consist of 323 apartment homes and
17,795 square feet of office/retail space. The construction
costs are being funded through the equity which the joint
venture contributed to the limited liability company and by a
loan to that company from an unrelated third party. In the event
that construction costs exceed the construction loan amount, we
have agreed to lend to the joint venture, which will in turn
advance to the limited liability company, the amount

10



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##### 



SUMMIT PROPERTIES PARTNERSHIP, L.P.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)  (Continued)




required to fund such cost overruns. This loan
would accrue interest at the rate of eleven percent (11.0%) per
year. Upon completion of construction, which is expected to
occur during 2004, the joint venture will pay, or refinance, the
construction loan. In the event the limited liability company
defaults on the construction loan, we have the right, under
certain circumstances, to cure the defaults, keep the
construction loan in place and complete construction of the
community. The joint venture has also acquired an adjacent piece
of land. We are serving as the managing member of the joint
venture, and Summit Management Company will be the property
management company for the project after construction is
completed. This project is accounted for on the equity method of
accounting. The balance sheet and income statement information
for SZF, LLC is not material to our consolidated financial
statements taken as a whole.

On April 1, 2002, we entered into a joint
venture with Banc of America Historic Ventures, LLC to redevelop
Summit Grand Parc in Washington, D.C., formerly the United Mine
Workers Building, in a manner to permit the use of federal
rehabilitation income tax credits. Banc of America Historic
Ventures, LLC, as the investor member, will contribute
approximately $2.2 million in equity to fund a portion of
the total estimated costs for the project and will receive a
preferred return on this capital investment and an annual asset
management fee. As of June 30, 2002, the investor member
had contributed $200,000. The investor members interest in
the joint venture is subject to put/call rights during the sixth
and seventh years after Summit Grand Parc is placed in service.
There are some contingencies remaining (such as final completion
of the redevelopment and final certification of the historic
renovations by the National Park Service) before Banc of America
Historic Ventures, LLC is obligated to fund the balance of its
investment in the joint venture. If these contingencies are not
met by the agreed upon deadlines, then Banc of America Historic
Ventures, LLC will be released from its obligations to fund its
remaining investment and would be entitled to a refund of any
funds previously invested as well as an agreed upon return on
such previously invested funds. In such an event, we would
replace this equity investment with funds from other financing
sources. This joint venture is consolidated into our financial
statements.

3. COMMUNITY DISPOSITIONS AND ASSETS HELD
FOR SALE

On June 28, 2002, we sold an apartment
community formerly known as Summit New Albany (428 apartment
homes) located in Columbus, Ohio for $27.0 million as part
of our strategy to exit our non-core markets. The disposition of
Summit New Albany completed our exit of the Columbus, Ohio
market and resulted in the recognition of a loss on sale of
$4.2 million. The net proceeds of $26.4 million were used
to reduce amounts outstanding under our unsecured credit
facility. The revenues and property operating income from this
community represented 2.2% and 2.0% of total revenues and total
property operating income for the six months ended June 30,
2002.

On April 11, 2002, we sold an apartment
community formerly known as Summit Breckenridge (300 apartment
homes) located in Richmond, Virginia for $22.8 million. The
disposition of Summit Breckenridge completed our exit of the
Richmond, Virginia market and resulted in the recognition of a
gain on sale of $13.8 million. Net proceeds of
$22.5 million were placed into escrow in accordance with
like-kind exchange rules and regulations and are being used to
fund development activities. Summit Breckenridge was
appropriately classified as held for sale prior to the adoption
of SFAS No. 144 and, therefore, we have continued to
reflect its operations in income from continuing operations as
required by APB No. 30.

On June 27, 2001, we sold two apartment
communities, both located in Charlotte, North Carolina, formerly
known as Summit Arbors and Summit Radbourne (an aggregate of 345
apartment homes) for $26.3 million. The disposition of
these communities resulted in the recognition of an aggregate
gain on sale of $8.4 million. The purchaser of these two
communities assumed $8.5 million in mortgages and exchanged
741,148 common units valued at $17.6 million as
consideration in the transaction.

11



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##### 



SUMMIT PROPERTIES PARTNERSHIP, L.P.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)  (Continued)




On June 1, 2001, we sold an apartment
community located in West Palm Beach, Florida, formerly known as
Summit Palm Lake (304 apartment homes) for $20.0 million. The
disposition of Summit Palm Lake resulted in the recognition of a
gain on sale of $2.4 million. The net proceeds of
$19.4 million were used to reduce amounts outstanding under
our unsecured credit facility.

We had one community, with a net book value of
$8.8 million, under contract for sale as of June 30,
2002 as part of our strategy to exit our non-core markets. The
revenues and property operating income from this community
represented 1.5% of both total revenues and total property
operating income for the six months ended June 30, 2002.
Proceeds from the sale of this community are expected to be used
to fund future development and acquisition activities. The sale
of this community is expected to occur during the third quarter
of 2002 and is subject to customary closing conditions. We
cannot be certain that this community or other communities that
we market for sale will be sold in a timely manner, on favorable
terms or at all.

In accordance with SFAS No. 144, net income
and gain (loss) on disposition of real estate for
communities considered held for sale after December 31,
2001 are reflected in our statements of operations as
Discontinued operations for all periods presented.
In addition, we have determined to separately reflect the assets
and liabilities of communities held for sale or sold in the
current period as Net real estate assets 
assets held for sale, Other assets 
assets held for sale, Note payable 
assets held for sale, and Other
liabilities  held for sale in the balance sheet
for all periods presented. Below is a summary of discontinued
operations for Summit New Albany and the community considered
held for sale as of June 30, 2002:

|                                                                                              |                        |                    |        |                  |  |      |       |       |  |   |        |       |  |   |       |       | 
|--------------------------------------------------------------------------------------------- | ---------------------- | ------------------ | ------ | ---------------- |  | ---- | ----- | ----- |  | - | ------ | ----- |  | - | ----- | ----- | 
|                                                                                              |                        |                    |        |                 
|                                                                                              |                        | Three Months Ended |        | Six Months Ended
|                                                                                              |                        | June 30,           |        | June 30,        
|                                                                                              |                        |                    |        |                 
|                                                                                              |                        | 2002               |        | 2001             |  | 2002 |       | 2001 
|                                                                                              |                        |                    |        |                  |  |      |       |      
|Property revenues:                                                                            |                        |                    |        |                  |  |      |       |       |  |   |        |       |  |   |       |      
|                                                                                              | Rental revenues        |                    | $      | 1,542            |  |      | $     | 1,749 |  |   | $      | 3,183 |  |   | $     | 3,425 | 
|                                                                                              | Other property revenue |                    |        | 88               |  |      |       | 111   |  |   |        | 170   |  |   |       | 212   | 
|                                                                                              |                        |                    |        |                  |  |      |       |       |  |   |        |       |  |   |       |      
|Total property revenues                                                                       |                        |                    | 1,630  |                  |  |      | 1,860 |       |  |   | 3,353  |       |  |   | 3,637 |      
|Property operating and maintenance expense                                                    |                        |                    | 636    |                  |  |      | 643   |       |  |   | 1,270  |       |  |   | 1,283 |      
|Depreciation                                                                                  |                        |                    | 365    |                  |  |      | 364   |       |  |   | 731    |       |  |   | 725   |      
|Interest and amortization                                                                     |                        |                    | 77     |                  |  |      | 150   |       |  |   | 145    |       |  |   | 286   |      
|                                                                                              |                        |                    |        |                  |  |      |       |       |  |   |        |       |  |   |       |      
|Income from discontinued operations before loss
    on disposition of discontinued operations |                        |                    | 552    |                  |  |      | 703   |       |  |   | 1,207  |       |  |   | 1,343 |      
|Loss on disposition of discontinued operations                                                |                        |                    | (4,209 | )                |  |      |      |       |  |   | (4,209 | )     |  |   |      |      
|                                                                                              |                        |                    |        |                  |  |      |       |       |  |   |        |       |  |   |       |      
|(Loss) income from discontinued operations                                                    |                        | $                  | (3,657 | )                |  | $    | 703   |       |  | $ | (3,002 | )     |  | $ | 1,343 |      
|                                                                                              |                        |                    |        |                  |  |      |       |       |  |   |        |       |  |   |       |      

4. NOTES PAYABLE

We have a syndicated unsecured line of credit in
the amount of $225.0 million which matures on
September 26, 2004. The credit facility provides funds for
new development, acquisitions and general working capital
purposes. Loans under the credit facility bear interest at LIBOR
plus 100 basis points. The spread component of the aggregate
interest rate will change in the event of an upgrade or
downgrade of our unsecured credit rating of BBB- by Standard
& Poors Rating Services and Baa3 by Moodys
Investors Service. Amounts are borrowed for thirty, sixty or
ninety day increments at the appropriate interest rates for such
time period. Therefore, amounts are borrowed and repaid within
those thirty, sixty or ninety day periods. The credit facility
is repayable monthly on an interest only basis with principal
due at maturity of each thirty, sixty or ninety day increment.
As of June 30, 2002, the outstanding balance of the credit
facility was $112.5 million, leaving $112.5 million of
remaining availability on the $225.0 million commitment.

12



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##### 



SUMMIT PROPERTIES PARTNERSHIP, L.P.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)  (Continued)




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

On April 20, 2000, we commenced a program
for the sale of up to $250.0 million aggregate principal
amount of medium-term notes due nine months or more from the
date of issuance. We had medium-term notes (MTN)
with an aggregate principal amount of $112.0 million
outstanding in connection with the MTN program as of
June 30, 2002.

On May 29, 1998, we established a program
for the sale of up to $95.0 million aggregate principal
amount of medium-term notes due nine months or more from the
date of issuance. We had medium-term notes with an aggregate
principal amount of $25.0 million outstanding in connection
with this MTN program as of June 30, 2002. As a result of
the commencement of the $250.0 million MTN program, we
cannot issue any additional notes under the $95.0 million
MTN program.

5. DERIVATIVE FINANCIAL
INSTRUMENTS

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

On June 13, 2002, we terminated an interest
rate swap with a $30.0 million notional amount. Under
SFAS No. 133, as a result of the termination, we
de-designated the $30.0 million swap as a fair value hedge
against certain fixed rate debt. We will amortize as a reduction
of interest expense $1.5 million, which represents the
difference between the par value and carrying amount of the
fixed-rate debt obligation, over the remaining term of the debt
obligation, which matures on December 15, 2003.

On June 14, 2002, we entered into an
interest rate swap with a notional amount of $50.0 million,
relating to $50.0 million of 7.20% fixed rate notes issued
under our MTN program. Under the interest rate swap agreement,
through the maturity date of August 15, 2007, (a) we
have agreed to pay to the counterparty the interest on a
$50.0 million notional amount at a floating interest rate
of three-month LIBOR plus 241.75 basis points, and (b) the
counterparty has agreed to pay to us the interest on the same
notional amount at the fixed rate of the underlying debt
obligation. The floating rate as of June 30, 2002 was
4.29%. The fair value of the interest rate swap was an asset of
$371,000 as of June 30, 2002. The swap has been designated
as a fair value hedge of the underlying fixed rate debt
obligation and has been recorded in Other assets in
the accompanying balance sheets. We assume no ineffectiveness as
the interest rate swap meets the short-cut method conditions
required under FAS 133 for fair value hedges of debt
instruments. Accordingly, no gains or losses were recorded in
income relative to our underlying debt and interest rate swap.

6. RESTRICTED STOCK

During the six months ended June 30, 2002,
Summit granted 442 shares of its restricted stock valued at
$10,000 to employees under its 1994 Stock Option and Incentive
Plan. During the six months ended June 30, 2001, Summit
granted 21,018 shares of restricted stock valued at $516,000
under this plan. The value of the restricted shares has been
recorded as unamortized restricted stock compensation and is
shown as a separate

13



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SUMMIT PROPERTIES PARTNERSHIP, L.P.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)  (Continued)




component of partners equity in the
accompanying balance sheets. Unearned compensation related to
these restricted stock grants is being amortized to expense over
the vesting periods which range from three to five years.

During the six months ended June 30, 2001,
Summit granted 94,818 shares of restricted stock valued at
$2.4 million pursuant to its Performance Stock Award Plan.
One half of these shares vested on January 2, 2001, the
date of grant, with the remaining shares vesting in two equal
annual installments beginning on January 1, 2002. The value
of the shares has been recorded as unamortized restricted stock
compensation and is shown as a separate component of
partners equity on the accompanying balance sheets.

During the six months ended June 30, 2002,
employees surrendered 15,954 restricted shares valued at
$326,000 to satisfy the income tax liability related to the
vesting of restricted stock.

7. SUPPLEMENTAL CASH FLOW
INFORMATION

Non-cash investing and financing activities for
the six months ended June 30, 2002 and 2001 were as follows:



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A. | We accrued distributions payable in the amounts
    of $17.8 million as of June 30, 2002 and
    $14.1 million as of June 30, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | B. | Summit issued 442 shares of restricted stock
    valued at $10,000 during the six months ended June 30, 2002
    under its 1994 Stock Option and Incentive Plan. Summit issued
    21,018 shares of restricted stock valued at $516,000 during the
    six months ended June 30, 2001 under this plan. Summit
    issued 94,818 shares of restricted stock valued at
    $2.4 million during the six months ended June 30, 2001
    in connection with its Performance Stock Award Plan. There were
    no issuances of restricted stock in connection with this plan
    during the six months ended June 30, 2002. During the six
    months ended June 30, 2002, employees surrendered 15,954
    restricted shares valued at $326,000 to satisfy the income tax
    liability related to the vesting of restricted stock.
|
| | C. | Summit issued 2,842 shares of common stock in
    exchange for 2,842 common units of limited partnership interest
    valued at $62,000 during the six months ended June 30,
    2002. Summit issued 4,012 shares of common stock in exchange for
    4,012 common units valued at $96,000 during the six months ended
    June 30, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | D. | We issued 66,376 common units at a price of
    $28.625 per unit during the six months ended June 30, 2001
    in connection with the purchase of a building and a parcel of
    land.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | E. | As partial consideration for the purchase of the
    former Summit Radbourne and Summit Arbors communities on
    June 27, 2001, the purchaser assumed mortgages with an
    aggregate balance of $8.5 million at the date of sale, and
    exchanged 741,148 common units valued at $17.6 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

8. COMMITMENTS AND
CONTINGENCIES

The estimated cost to complete the six
development projects currently under construction was
$102.1 million as of June 30, 2002. Anticipated
construction completion dates of the projects range from the
fourth quarter of 2002 to the third quarter of 2005.

On January 19, 2000, we entered into a real
estate purchase agreement with a third-party real estate
developer. Under the terms of the agreement, we have agreed to
purchase upon completion a Class A mixed-use
community, which will be called Summit Brickell, and is located
in Miami, Florida. We will purchase Summit Brickell upon the
earlier of one year after construction completion or the
achievement of 80% occupancy. We may extend this closing
obligation for six months after the initial purchase period. We
expect to close on the purchase of Summit Brickell during late
2002 or in 2003. The final purchase price will be determined
based on budgeted construction costs plus a bonus to the
developer based on the capitalized income of the property at

14



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##### 



SUMMIT PROPERTIES PARTNERSHIP, L.P.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)  (Continued)




the time of purchase. In the event there are net
cost savings during construction, a portion of such savings will
be used to reduce the purchase price and a portion will be paid
as an incentive to the developer pursuant to an agreed upon
formula. In the event there are net cost overruns during
construction, the developer will be responsible for funding such
change order overruns unless those overruns result from design
change orders which we request; such overruns will be added to
the purchase price. The purchase price is expected to range from
$50.5 million to $60.0 million. The purchase of Summit
Brickell is subject to customary closing conditions. We have
issued a letter of credit in the amount of $13.0 million,
which serves as a credit enhancement to the developers
construction loan. In the event that any amount under the letter
of credit is drawn upon, we shall be treated as having issued a
loan to the developer in the amount of such draw. Any such loan
will accrue interest at a rate of eighteen percent (18%) per
year.

Summit has employment agreements with two of its
former executive officers, both of whom resigned from such
executive positions, but who remain as employees and have agreed
to provide various services to Summit from time to time over the
next ten years. Each employment agreement requires that Summit
pay to the former officers a base salary aggregating up to
$2.1 million over the period from July 1, 2001 to
December 31, 2011 ($200,000 on an annual basis). Either
party can terminate the employment agreements, effective 20
business days after written notice is given. The full base
salary amount due shall be payable through 2011 whether or not
the agreements are terminated earlier in accordance with their
terms.

9. BUSINESS SEGMENTS

We develop, operate and acquire
Class A luxury apartment communities primarily
in markets with high growth potential. All of our communities
target middle to upper income, prestige-conscious residents who
expect outstanding service and the latest in apartment design
technology, as well as convenience. Our communities provide
amenities including swimming pools, clubhouses, exercise rooms
and Peak Services. Peak Services include, but are
not limited to, Same Day Maintenance Service and Emergency
Maintenance available 24 hours a day, business services, package
acceptance and delivery, a video library and loaner living
accessories. All of our communities market themselves through
media advertising. Due to the similarities of our communities
and their similar economic characteristics as exhibited through
similar long-term financial performance, our communities have
been aggregated into one reportable segment as allowed in
accordance with SFAS No. 131.

10. PREFERRED UNITS

As of June 30, 2002, we had outstanding
3.4 million preferred units of limited partnership interest
designated as 8.95% Series B Cumulative Redeemable
Perpetual Preferred Units. These preferred units are redeemable
on or after April 29, 2004 for cash at a redemption price
equal to the holders capital account, or at Summits
option, shares of its 8.95% Series B Cumulative Redeemable
Perpetual Preferred Stock, or a combination of cash and shares
of Summits 8.95% Series B Cumulative Redeemable
Perpetual Preferred Stock. Holders of the Series B
preferred units have the right to exchange these preferred units
for shares of Summits Series B preferred stock on a
one-for-one basis, subject to adjustment: (a) on or after
April 29, 2009, (b) if full quarterly distributions
are not made for six quarters, or (c) upon the occurrence
of specified events related to our treatment or the treatment of
the preferred units for federal income tax purposes. The
Series B preferred units have no stated maturity, are not
subject to any sinking fund or mandatory redemption, and are not
convertible into any other securities of Summit or the Operating
Partnership. Distributions on the Series B preferred units
are cumulative from the date of original issuance and are
payable quarterly at the rate of 8.95% per year of the $25.00
original capital contribution. We accrued distributions to the
holders of the Series B preferred units in the aggregate
amount of $3.8 million during each of the six month periods
ended June 30, 2002 and 2001.

15



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##### 



SUMMIT PROPERTIES PARTNERSHIP, L.P.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)  (Continued)




As of June 30, 2002, we had outstanding
2.2 million preferred units of limited partnership interest
designated as 8.75% Series C Cumulative Redeemable
Perpetual Preferred Units. The preferred units are redeemable on
or after September 3, 2004 for cash at a redemption price
equal to the holders capital account. Holders of the
Series C preferred units have the right to exchange these
preferred units for shares of Summits Series C
preferred stock on a one-for-one basis, subject to adjustment:
(a) on or after September 3, 2009, (b) if full
quarterly distributions are not made for six quarters,
(c) upon the occurrence of specified events related to our
treatment or the treatment of the preferred units for federal
income tax purposes, or (d) if the holdings in the
Operating Partnership of the Series C unitholder exceed 18%
of the total profits of or capital interest in the Operating
Partnership for a taxable year. The Series C preferred
units have no stated maturity, are not subject to any sinking
fund or mandatory redemption, and are not convertible into any
other securities of Summit or the Operating Partnership.
Distributions on the Series C preferred units are
cumulative from the date of original issuance and are payable
quarterly at the rate of 8.75% per year of the $25.00 original
capital contribution. We accrued distributions to the holder of
the Series C preferred units in the aggregate amount of
$2.4 million during each of the six month periods ended
June 30, 2002 and 2001.

11. COMMON STOCK REPURCHASE
PROGRAM

On March 12, 2000, Summits Board of
Directors authorized a common stock repurchase program pursuant
to which Summit was authorized to purchase up to an aggregate of
$25.0 million of currently issued and outstanding shares of
its common stock. During 2001, Summits Board of Directors
increased the size of this common stock repurchase program to
$56.0 million. All repurchases have been, and will be, made
on the open market at prevailing prices or in privately
negotiated transactions. This authority may be exercised from
time to time and in such amounts as market conditions warrant.
Summit did not repurchase any shares of its common stock during
the six months ended June 30, 2002 or 2001. As of
June 30, 2002, Summit had repurchased 288,200 shares of
common stock valued at $5.7 million under its repurchase
program.

12. EMPLOYEE LOAN PROGRAM

Summits Board of Directors believes that
ownership of its common stock by its executive officers and
certain other qualified employees aligns the interests of these
officers and employees with the interests of Summits
stockholders. To this end, Summits Board of Directors
approved, and we instituted, a loan program under which Summit
lends amounts to certain of its executive officers and other
qualified employees to (a) finance the purchase of
Summits common stock on the open market at then-current
market prices, (b) finance the payment of the exercise
price of one or more stock options to purchase shares of
Summits common stock, or (c) finance the annual tax
liability or other expenses of an executive officer related to
the vesting of shares of common stock which constitute a portion
of a restricted stock award granted to the executive officer.
Summit has amended the terms of the loan program from time to
time since its inception in 1997. The relevant officer or
employee has executed a promissory note and security agreement
related to each loan extended. Each outstanding note bears
interest at a rate established on the date of the note, is full
recourse to the officers and employees and is collateralized by
the shares of Summits common stock which are the subject
of the loans. During the second quarter of 2002, Summit issued
$6.7 million of loans to six (6) executive officers.
Summit had loans receivable in the net amount of
$20.6 million as of June 30, 2002 and
$14.5 million as of December 31, 2001. As a result of
recent legislation, Summit is no longer permitted to make loans
to its executive officers.

13. SUBSEQUENT EVENT

Subsequent to June 30, 2002, we acquired a
stabilized, luxury apartment community in the Galleria
sub-market of Dallas, Texas for cash in the amount of
$17.7 million. The community, now known as Summit San
Raphael, has 222 apartment homes and was constructed in
1999.

16



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##### 





|         |                                                                                          
|-------- | -----------------------------------------------------------------------------------------
|ITEM  2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

FORWARD-LOOKING STATEMENTS

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



|  |                                                                                                  
|- | -------------------------------------------------------------------------------------------------
| | the future operating performance of stabilized
    communities, including estimated growth rates;
| 
| | expected national and regional economic and real
    estate market conditions;                   
| 
| | the proposed development, acquisition or
    disposition of communities;                         
| 
| | anticipated construction commencement and
    completion dates and lease-up dates; and           
| 
| | estimated development costs.                                                                     

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



|  |                                                                                                                                                                                                                                                                                                                                                                                           
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | economic conditions generally and the real estate
    market specifically, including changes in occupancy rates,
    market rents, rental rate concessions, job growth, household
    formation and population growth, the continuing deceleration of
    economic conditions in our markets, and the failure of national
    and local economic conditions to rebound in a timely manner;
| 
| | uncertainties associated with our development
    activities, including the failure to obtain zoning and other
    approvals, actual costs exceeding our budgets and increases in
    construction costs;                                                                                                                                                                                 
| 
| | the failure of acquisitions to yield expected
    results;                                                                                                                                                                                                                                                                                                                                
| 
| | the failure to sell communities marketed for
    sale, including properties currently under contract for sale
    which are subject to customary closing conditions, or to sell
    these communities in a timely manner or on favorable terms;                                                                                                                                           
| 
| | construction delays due to the unavailability of
    materials, weather conditions or other delays;                                                                                                                                                                                                                                                                                       
| 
| | potential environmental liabilities and related
    property damages, cost of investigation and remediation, and
    liability to third parties;                                                                                                                                                                                                                                          
| 
| | competition, which could limit our ability to
    secure attractive investment opportunities, lease apartment
    homes or increase or maintain rents;                                                                                                                                                                                                                                    
| 
| | supply and demand for apartment communities in
    our current and proposed market areas, especially our core
    markets described below;                                                                                                                                                                                                                                                
| 
| | availability and cost of financing and access to
    cost-effective capital;                                                                                                                                                                                                                                                                                                              
| 
| | the inability to refinance existing indebtedness
    or to refinance existing indebtedness on favorable terms;                                                                                                                                                                                                                                                                            

17



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##### 





|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | changes in interest rates;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| 
| | legislative and regulatory changes, including
    changes to laws governing the taxation of real estate investment
    trusts (REITs);                                                                                                                                                                                                                                                                                                                                                                                                                                        
| 
| | changes in accounting principles generally
    accepted in the United States of America (GAAP); and                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| 
| | those factors discussed below and in the sections
    entitled Results of Operations for the Three and Six
    Months Ended June 30, 2002 and 2001 on page 19 of
    this report, Operating Performance of Our Fully Stabilized
    Communities beginning on page 22 of this report,
    Operating Performance of Our Communities in Lease-up
    beginning on page 23 of this report, Factors Affecting the
    Performance of Our Development Communities beginning on
    page 30 of this report and Environmental Matters
    beginning on page 31 of this report.

You should consider these risks and uncertainties
in evaluating forward-looking statements and you should not
place undue reliance on forward-looking statements. These
forward-looking statements represent our estimates and
assumptions only as of the date of this report. We do not
undertake to update these forward-looking statements. You should
read the following discussion in conjunction with our unaudited
consolidated financial statements and notes, which accompany
this report, and our audited financial statements for the year
ended December 31, 2001 and the related notes included in
our annual report on Form 10-K.

We conduct the business of operating, developing
and acquiring Class A luxury apartment
communities for Summit, which is a self-administered and
self-managed real estate investment trust (REIT). As
of June 30, 2002, Summit held 88.5% of our outstanding
partnership interests, consisting of a 1% general partner
interest and an 87.5% limited partner interest. We are obligated
to redeem each common unit of limited partnership interest at
the request of the holder for cash equal to the fair market
value of one share of Summits common stock, except that we
may elect to have Summit acquire each common unit presented for
redemption for one share of its common stock. With each
redemption of outstanding common units for common stock,
Summits percentage ownership interest in the Operating
Partnership will increase. In addition, whenever Summit issues
shares of common stock, Summit will contribute any resulting
proceeds to us and we will issue an equivalent number of common
units to Summit.

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

CRITICAL ACCOUNTING POLICIES

We prepare our financial statements in accordance
with GAAP. A summary of our significant accounting policies is
disclosed in Note 3 to our consolidated financial
statements which are included in our annual report on
Form 10-K for the year ended December 31, 2001. The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates. As an owner, operator and developer
of apartment communities, our critical accounting policies are
related to rental revenue recognition, cost capitalization and
asset impairment evaluation.

We lease our residential properties under
operating leases with terms of generally one year or less.
Rental revenue is recognized on the accrual method of accounting
as earned, which is not materially different from revenue
recognition on a straight-line basis. We lease our office and
retail space under operating leases with terms ranging from two
to ten years. Rental revenue for office and retail space is
recognized on a straight-line basis over the lives of the
respective leases.

18



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##### 



Expenditures directly related to the acquisition,
development and improvement of real estate assets are
capitalized at cost as land, buildings and improvements.
Improvements are categorized as either non-recurring or
recurring capitalized expenditures. Non-recurring capitalized
expenditures primarily consist of the cost of improvements such
as new garages, water submeters, gated security access and
improvements made in conjunction with major renovations of
apartment homes. Excluding major rehabilitations, recurring
capitalized expenditures consist primarily of floor coverings,
furniture, appliances and equipment, and exterior paint and
carpentry. Repairs and maintenance, such as landscaping
maintenance, interior painting and cleaning and supplies used in
such activities, are expensed as incurred and we do not accrue
for such costs in advance.

We capitalize interest, the cost of our
development efforts directly related to apartment construction,
and certain operational costs for communities under construction
and in lease-up. Interest costs are capitalized in accordance
with Statement of Financial Accounting Standard
(SFAS) No. 34 based on the ratio of those units
available for rental to the total number of units in the
community and depreciated over the lives of the constructed
assets. We capitalize the cost of our development department
efforts to projects currently under construction, currently at a
rate of 3.0% of such construction assets. Such costs are then
depreciated over the lives of the constructed assets upon their
completion. We treat each unit in an apartment community
separately for capitalization and expense recognition purposes.
This results in a proration of interest and operational costs in
a development community between costs that are capitalized or
expensed. As units become available for their intended use, we
cease capitalization of interest and operational costs on those
units based on the ratio of those available for rental to the
total number of units in the community.

We record our real estate assets at cost less
accumulated depreciation and, if there are indications that
impairment exists, adjust the carrying value of those assets in
accordance with SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. Assets to be
disposed of are recorded at the lower of carrying amount or fair
value less cost to sell.

HISTORICAL RESULTS OF OPERATIONS

Our net income is generated primarily from
operations of our apartment communities. The changes in
operating results from period to period reflect changes in
existing community performance and changes in the number of
apartment homes due to development, acquisition or disposition
of communities. Where appropriate, comparisons are made on a
fully stabilized communities, acquisition
communities, stabilized development
communities, communities in lease-up and
disposition communities basis in order to adjust for
changes in the number of apartment homes.

A community that we have acquired is deemed
fully stabilized when we have owned it for one year
or more as of the beginning of the current year. A community
that we have developed is deemed fully stabilized
when stabilized for at least one year as of the beginning of the
current year. A community is deemed to be a stabilized
development community when stabilized as of the beginning
of the current year but not the entire prior year. We consider a
community to be stabilized when it has attained a
physical occupancy level of at least 93%. A community in
lease-up is defined as one that has commenced rental
operations but was not stabilized as of the beginning of the
current year. A communitys average physical occupancy is
defined as the number of apartment homes occupied divided by the
total number of apartment homes contained in the community,
expressed as a percentage. Average physical occupancy has been
calculated using the average of the occupancy that existed on
Sunday during each week of the period. Average monthly rental
revenue presented represents the average monthly net rental
revenue per occupied apartment home. Our methodology for
calculating average physical occupancy and average monthly
rental revenue may differ from the methodology used by other
apartment companies and, accordingly, may not be comparable to
other apartment companies.



| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Results of Operations for the Three and Six
    Months Ended June 30, 2002 and 2001

Income from continuing operations before gain on
sale of real estate assets and impairment loss decreased to
$17.0 million for the six months ended June 30, 2002
from $23.6 million for the six months ended June 30,

19



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##### 



2001 and to $8.5 million for the three
months ended June 30, 2002 from $11.7 million for the
three months ended June 30, 2001. The decrease is primarily
due to a reduction in property operating income from continued
operations of $7.0 million for the six-month period and
$4.3 million for the three-month period from our portfolio
of communities. Property operating income is defined as rental
and other property revenues less property operating and
maintenance expense.


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

We have experienced weakening fundamentals,
primarily a decline in the demand for apartment homes, in all of
our markets during the past year and the six months ended
June 30, 2002. This weakness has been due to the downturn
in the national economy as well as declining economic conditions
in our core markets. Local demand for apartment homes has
declined due to lower job growth, a primary driver of apartment
demand, which has led to lower rental rates and higher
concessions. Additionally, the favorable interest rate
environment has produced record home sales which, when combined
with the slowing economy, has depleted the number of prospective
residents. In addition, the favorable interest rate environment
has provided the opportunity for developers to continue to add
to the supply of apartments in our core markets. Although the
current economic environment is unpredictable, we expect these
trends to continue through the end of 2002.

In Washington, D.C., our largest market, the
majority of our fully stabilized pool is located in Northern
Virginia. This market has been particularly impacted by the
depressed telecom sector, the slow down in information
technology spending and the related consulting businesses.
Property revenues from fully stabilized communities in the
Washington, D.C. market declined 6.3% and 3.8% for the three and
six months ended June 30, 2002 when compared to the same
periods in 2001 principally due to a 364% increase in
concessions per unit per month coupled with average physical
occupancy decreases of 2.1% and 1.1% for the three and six
months ended June 30, 2002 when compared to the same
periods in 2001.

Atlanta has been affected by large job losses and
increasing supply of competitive apartment homes. Property
revenues from fully stabilized communities in Atlanta decreased
by 3.5% and 2.7% for the three and six months ended
June 30, 2002 when compared to the same periods in 2001,
primarily due to a 127% increase in concessions per unit per
month.

Property revenues from fully stabilized
communities in South Florida grew 1.2% and 1.0% for the three
and six months ended June 30, 2002 when compared to the
same periods of 2001. These increases are due to an economy in
this market which has not been negatively impacted at the same
levels as the national economy.

20



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##### 



Operating Performance of Our Portfolio of
Communities

The operating performance of our communities for
the three and six months ended June 30, 2002 and 2001 is
summarized below (dollars in thousands). The information in the
tables that follow include the community held for sale as a
fully stabilized community and not as a community sold, as it
had not been sold as of June 30, 2002.

|                                                 |                                    |                             |        |                           |  |          |        |        |  |      |       |          |   |   |        |        |  |   |        |        |  |  |       |       |  
|------------------------------------------------ | ---------------------------------- | --------------------------- | ------ | ------------------------- |  | -------- | ------ | ------ |  | ---- | ----- | -------- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | ----- | ----- | -
|                                                 |                                    |                             |        |                          
|                                                 |                                    | Three Months Ended June 30, |        | Six Months Ended June 30,
|                                                 |                                    |                             |        |                          
|                                                 |                                    | 2002                        |        | 2001                      |  | % Change |        | 2002   |  | 2001 |       | % Change
|                                                 |                                    |                             |        |                           |  |          |        |        |  |      |       |         
|Property revenues:                               |                                    |                             |        |                           |  |          |        |        |  |      |       |          |   |   |        |        |  |   |        |        |  |  |       |      
|                                                 | Fully stabilized communities       |                             | $      | 36,909                    |  |          | $      | 38,621 |  |      |       | -4.4     | % |   | $      | 74,300 |  |   | $      | 76,634 |  |  |       | -3.0  | %
|                                                 | Stabilized development communities |                             |        | 2,776                     |  |          |        | 2,629  |  |      |       | 5.6      | % |   |        | 5,441  |  |   |        | 4,940  |  |  |       | 10.1  | %
|                                                 | Communities in lease-up            |                             |        | 3,753                     |  |          |        | 1,555  |  |      |       | 141.4    | % |   |        | 6,814  |  |   |        | 2,718  |  |  |       | 150.7 | %
|                                                 | Communities sold                   |                             |        | 1,051                     |  |          |        | 6,339  |  |      |       | -83.4    | % |   |        | 2,800  |  |   |        | 12,713 |  |  |       | -78.0 | %
|                                                 |                                    |                             |        |                           |  |          |        |        |  |      |       |          |   |   |        |        |  |   |        |        |  |  |       |      
|Total property revenues                          |                                    |                             | 44,489 |                           |  |          | 49,144 |        |  |      | -9.5  | %        |   |   | 89,355 |        |  |   | 97,005 |        |  |  | -7.9  | %    
|                                                 |                                    |                             |        |                           |  |          |        |        |  |      |       |          |   |   |        |        |  |   |        |        |  |  |       |      
|Property operating and maintenance expense:      |                                    |                             |        |                           |  |          |        |        |  |      |       |          |   |   |        |        |  |   |        |        |  |  |       |      
|                                                 | Fully stabilized communities       |                             |        | 12,800                    |  |          |        | 12,326 |  |      |       | 3.8      | % |   |        | 25,484 |  |   |        | 24,619 |  |  |       | 3.5   | %
|                                                 | Stabilized development communities |                             |        | 900                       |  |          |        | 823    |  |      |       | 9.4      | % |   |        | 1,789  |  |   |        | 1,573  |  |  |       | 13.7  | %
|                                                 | Communities in lease-up            |                             |        | 1,514                     |  |          |        | 597    |  |      |       | 153.6    | % |   |        | 2,844  |  |   |        | 1,076  |  |  |       | 164.3 | %
|                                                 | Communities sold                   |                             |        | 484                       |  |          |        | 2,124  |  |      |       | -77.3    | % |   |        | 1,139  |  |   |        | 4,327  |  |  |       | -73.8 | %
|                                                 |                                    |                             |        |                           |  |          |        |        |  |      |       |          |   |   |        |        |  |   |        |        |  |  |       |      
|Total property operating and maintenance expense |                                    |                             | 15,698 |                           |  |          | 15,870 |        |  |      | -1.1  | %        |   |   | 31,256 |        |  |   | 31,595 |        |  |  | -1.1  | %    
|                                                 |                                    |                             |        |                           |  |          |        |        |  |      |       |          |   |   |        |        |  |   |        |        |  |  |       |      
|                                                 | Fully stabilized communities       |                             |        | 24,109                    |  |          |        | 26,295 |  |      |       | -8.3     | % |   |        | 48,816 |  |   |        | 52,015 |  |  |       | -6.2  | %
|                                                 | Stabilized development communities |                             |        | 1,876                     |  |          |        | 1,806  |  |      |       | 3.9      | % |   |        | 3,652  |  |   |        | 3,367  |  |  |       | 8.5   | %
|                                                 | Communities in lease-up            |                             |        | 2,239                     |  |          |        | 958    |  |      |       | 133.7    | % |   |        | 3,970  |  |   |        | 1,642  |  |  |       | 141.8 | %
|                                                 | Communities sold                   |                             |        | 567                       |  |          |        | 4,215  |  |      |       | -86.5    | % |   |        | 1,661  |  |   |        | 8,386  |  |  |       | -80.2 | %
|                                                 |                                    |                             |        |                           |  |          |        |        |  |      |       |          |   |   |        |        |  |   |        |        |  |  |       |      
|Total property operating income                  |                                    | $                           | 28,791 |                           |  | $        | 33,274 |        |  |      | -13.5 | %        |   | $ | 58,099 |        |  | $ | 65,410 |        |  |  | -11.2 | %    
|                                                 |                                    |                             |        |                           |  |          |        |        |  |      |       |          |   |   |        |        |  |   |        |        |  |  |       |      

A summary of our apartment homes (excluding joint
ventures) for the six months ended June 30, 2002 and 2001
is as follows:

|                                                               |  |      |        |      |  |  |        |  
|-------------------------------------------------------------- |  | ---- | ------ | ---- |  |  | ------ | -
|                                                               |  | 2002 |        | 2001
|                                                               |  |      |        |     
|Apartment homes at January 1 of the year                       |  |      | 16,739 |      |  |  | 18,928 |  
|Developments which began rental operations during
    the year |  |      | 761    |      |  |  |       |  
|Sale of apartment homes                                        |  |      | (728   | )    |  |  | (649   | )
|                                                               |  |      |        |      |  |  |        |  
|Apartment homes at June 30 of the year                         |  |      | 16,772 |      |  |  | 18,279 |  
|                                                               |  |      |        |      |  |  |        |  

21



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##### 



Operating Performance of Our Fully Stabilized
Communities

The operating performance of our communities
stabilized prior to January 1, 2001 is summarized below
(dollars in thousands except average monthly rental revenue):

|                                                 |                                  |                             |        |                           |  |          |        |        |  |      |      |          |   |   |        |        |  |   |        |        |  |  |      |      |  
|------------------------------------------------ | -------------------------------- | --------------------------- | ------ | ------------------------- |  | -------- | ------ | ------ |  | ---- | ---- | -------- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | ---- | ---- | -
|                                                 |                                  |                             |        |                          
|                                                 |                                  | Three Months Ended June 30, |        | Six Months Ended June 30,
|                                                 |                                  |                             |        |                          
|                                                 |                                  | 2002                        |        | 2001                      |  | % Change |        | 2002   |  | 2001 |      | % Change
|                                                 |                                  |                             |        |                           |  |          |        |        |  |      |      |         
|Property revenues:                               |                                  |                             |        |                           |  |          |        |        |  |      |      |          |   |   |        |        |  |   |        |        |  |  |      |     
|                                                 | Rental                           |                             | $      | 34,375                    |  |          | $      | 35,944 |  |      |      | -4.4     | % |   | $      | 69,191 |  |   | $      | 71,469 |  |  |      | -3.2 | %
|                                                 | Other                            |                             |        | 2,534                     |  |          |        | 2,677  |  |      |      | -5.3     | % |   |        | 5,109  |  |   |        | 5,165  |  |  |      | -1.1 | %
|                                                 |                                  |                             |        |                           |  |          |        |        |  |      |      |          |   |   |        |        |  |   |        |        |  |  |      |     
|Total property revenues                          |                                  |                             | 36,909 |                           |  |          | 38,621 |        |  |      | -4.4 | %        |   |   | 74,300 |        |  |   | 76,634 |        |  |  | -3.0 | %   
|                                                 |                                  |                             |        |                           |  |          |        |        |  |      |      |          |   |   |        |        |  |   |        |        |  |  |      |     
|Property operating and maintenance expense:      |                                  |                             |        |                           |  |          |        |        |  |      |      |          |   |   |        |        |  |   |        |        |  |  |      |     
|                                                 | Personnel                        |                             |        | 2,660                     |  |          |        | 2,537  |  |      |      | 4.8      | % |   |        | 5,495  |  |   |        | 5,122  |  |  |      | 7.3  | %
|                                                 | Advertising and promotion        |                             |        | 536                       |  |          |        | 416    |  |      |      | 28.8     | % |   |        | 985    |  |   |        | 829    |  |  |      | 18.8 | %
|                                                 | Utilities                        |                             |        | 1,591                     |  |          |        | 1,648  |  |      |      | -3.5     | % |   |        | 3,248  |  |   |        | 3,350  |  |  |      | -3.0 | %
|                                                 | Building repairs and maintenance |                             |        | 1,722                     |  |          |        | 1,705  |  |      |      | -1.0     | % |   |        | 3,290  |  |   |        | 3,272  |  |  |      | -0.6 | %
|                                                 | Real estate taxes and insurance  |                             |        | 4,722                     |  |          |        | 4,330  |  |      |      | 9.1      | % |   |        | 9,313  |  |   |        | 8,745  |  |  |      | 6.5  | %
|                                                 | Property supervision             |                             |        | 1,039                     |  |          |        | 1,078  |  |      |      | -3.6     | % |   |        | 2,081  |  |   |        | 2,142  |  |  |      | -2.8 | %
|                                                 | Other operating expense          |                             |        | 530                       |  |          |        | 612    |  |      |      | -13.4    | % |   |        | 1,072  |  |   |        | 1,159  |  |  |      | -7.5 | %
|                                                 |                                  |                             |        |                           |  |          |        |        |  |      |      |          |   |   |        |        |  |   |        |        |  |  |      |     
|Total property operating and maintenance expense |                                  |                             | 12,800 |                           |  |          | 12,326 |        |  |      | 3.8  | %        |   |   | 25,484 |        |  |   | 24,619 |        |  |  | 3.5  | %   
|                                                 |                                  |                             |        |                           |  |          |        |        |  |      |      |          |   |   |        |        |  |   |        |        |  |  |      |     
|Property operating income                        |                                  | $                           | 24,109 |                           |  | $        | 26,295 |        |  |      | -8.3 | %        |   | $ | 48,816 |        |  | $ | 52,015 |        |  |  | -6.2 | %   
|                                                 |                                  |                             |        |                           |  |          |        |        |  |      |      |          |   |   |        |        |  |   |        |        |  |  |      |     
|Average physical occupancy                       |                                  |                             | 93.3   | %                         |  |          | 93.5   | %      |  |      | -0.2 | %        |   |   | 93.5   | %      |  |   | 93.5   | %      |  |  | 0.0  | %   
|                                                 |                                  |                             |        |                           |  |          |        |        |  |      |      |          |   |   |        |        |  |   |        |        |  |  |      |     
|Average monthly rental revenue                   |                                  | $                           | 909    |                           |  | $        | 947    |        |  |      | -4.0 | %        |   | $ | 914    |        |  | $ | 946    |        |  |  | -3.4 | %   
|                                                 |                                  |                             |        |                           |  |          |        |        |  |      |      |          |   |   |        |        |  |   |        |        |  |  |      |     
|Number of apartment homes                        |                                  |                             | 13,731 |                           |  |          | 13,731 |        |  |      |      |          |   |   | 13,731 |        |  |   | 13,731 |        |  |  |      |     
|                                                 |                                  |                             |        |                           |  |          |        |        |  |      |      |          |   |   |        |        |  |   |        |        |  |  |      |     
|Number of apartment communities                  |                                  |                             | 46     |                           |  |          | 46     |        |  |      |      |          |   |   | 46     |        |  |   | 46     |        |  |  |      |     
|                                                 |                                  |                             |        |                           |  |          |        |        |  |      |      |          |   |   |        |        |  |   |        |        |  |  |      |     

For the three- and six-month periods, property
revenues declined due to weakening fundamentals in our markets
primarily driven by (a) a decline in job growth,
(b) residents leaving our communities to purchase homes in
the low interest rate environment and (c) new supply of
apartment homes added to our core markets by builders benefiting
from low interest rates. The current level of concessions
offered to residents in our markets during the quarter ranged
from one to three months of free rent and we expect significant
concessions to continue in our core markets through the end of
2002 and into 2003. The increase in advertising costs for the
three- and six-month periods are primarily due to an increase in
fees paid to locator companies for assistance in referring
residents to our communities. As a percentage of total property
revenue, total property operating and maintenance expenses
increased to 34.3% for the six months ended June 30, 2002
from 32.1% for the six months ended June 30, 2001. We
expect that property operating income for our fully stabilized
pool of communities may continue to decline for the remainder of
2002 and into 2003 based on what we believe to be reasonable
assumptions as to future economic conditions and the quantity of
competitive supply expected in our markets. However, there can
be no assurance that actual results will not differ from this
assumption, especially due to the unpredictable nature of the
current economy.

22



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##### 



Operating Performance of Our Stabilized
Development Communities

Summit Lenox and Summit Russett are considered
stabilized development communities as of June 30, 2002.
Summit Lenox is an existing community which underwent major
renovations during 1999 and 2000. Its operating results are
included in results of stabilized development communities as it
reached stabilization after renovation subsequent to
January 1, 2001.

The operating performance of these two
communities for the three and six months ended June 30,
2002 and 2001 is summarized below (dollars in thousands except
average monthly rental revenue):

|                                           |        |                |       |                  |  |      |       |       |  |   |       |       |  |   |       |       | 
|------------------------------------------ | ------ | -------------- | ----- | ---------------- |  | ---- | ----- | ----- |  | - | ----- | ----- |  | - | ----- | ----- | 
|                                           |        |                |       |                 
|                                           |        | Three Months   |       | Six Months Ended
|                                           |        | Ended June 30, |       | June 30,        
|                                           |        |                |       |                 
|                                           |        | 2002           |       | 2001             |  | 2002 |       | 2001 
|                                           |        |                |       |                  |  |      |       |      
|Property revenues:                         |        |                |       |                  |  |      |       |       |  |   |       |       |  |   |       |      
|                                           | Rental |                | $     | 2,589            |  |      | $     | 2,410 |  |   | $     | 5,062 |  |   | $     | 4,531 | 
|                                           | Other  |                |       | 187              |  |      |       | 219   |  |   |       | 379   |  |   |       | 409   | 
|                                           |        |                |       |                  |  |      |       |       |  |   |       |       |  |   |       |      
|Total property revenues                    |        |                | 2,776 |                  |  |      | 2,629 |       |  |   | 5,441 |       |  |   | 4,940 |      
|Property operating and maintenance expense |        |                | 900   |                  |  |      | 823   |       |  |   | 1,789 |       |  |   | 1,573 |      
|                                           |        |                |       |                  |  |      |       |       |  |   |       |       |  |   |       |      
|Property operating income                  |        | $              | 1,876 |                  |  | $    | 1,806 |       |  | $ | 3,652 |       |  | $ | 3,367 |      
|                                           |        |                |       |                  |  |      |       |       |  |   |       |       |  |   |       |      
|Average physical occupancy                 |        |                | 95.2  | %                |  |      | 87.8  | %     |  |   | 93.7  | %     |  |   | 84.8  | %    
|                                           |        |                |       |                  |  |      |       |       |  |   |       |       |  |   |       |      
|Average monthly rental revenue             |        | $              | 1,067 |                  |  | $    | 1,078 |       |  | $ | 1,067 |       |  | $ | 1,076 |      
|                                           |        |                |       |                  |  |      |       |       |  |   |       |       |  |   |       |      
|Number of apartment homes                  |        |                | 857   |                  |  |      | 857   |       |  |   | 857   |       |  |   | 857   |      
|                                           |        |                |       |                  |  |      |       |       |  |   |       |       |  |   |       |      

The unleveraged yield on those communities
considered stabilized development communities in 2002, defined
as annualized property operating income as a percentage of total
development cost, was 9.3% for the six months ended
June 30, 2002.

Operating Performance of Our Communities in
Lease-up

A summary of the seven communities in lease-up
during the three and six months ended June 30, 2002 is as
follows (dollars in thousands):

|                                              |  |           |       |           |  |              |         |               |  |           |         |          |  |  |         |  |  |  |       |  |  |  |        | 
|--------------------------------------------- |  | --------- | ----- | --------- |  | ------------ | ------- | ------------- |  | --------- | ------- | -------- |  |  | ------- |  |  |  | ----- |  |  |  | ------ | 
|                                              |  |           |       | Total     |  | Actual/      |         |               |  |           |         | % Leased
|                                              |  | Number of |       | Actual/   |  | Anticipated  |         | Actual/       |  | Q2 2002   |         | as of   
|                                              |  | Apartment |       | Estimated |  | Construction |         | Anticipated   |  | Average   |         | June 30,
|Community                                     |  | Homes     |       | Cost      |  | Completion   |         | Stabilization |  | Occupancy |         | 2002    
|                                              |  |           |       |           |  |              |         |               |  |           |         |         
|Summit Grandview 
    Charlotte, NC (1)      |  |           | 266   |           |  | $            | 51,200  |               |  |           | Q4 2000 |          |  |  | Q4 2001 |  |  |  | 93.4% |  |  |  | 92.5%  | 
|Summit Overlook  Raleigh, NC                 |  |           | 320   |           |  |              | 28,448  |               |  |           | Q3 2001 |          |  |  | Q2 2002 |  |  |  | 83.5% |  |  |  | 95.0%  | 
|Summit Crest  Raleigh, NC                    |  |           | 438   |           |  |              | 32,627  |               |  |           | Q3 2001 |          |  |  | Q2 2002 |  |  |  | 83.2% |  |  |  | 96.1%  | 
|Summit Peachtree City  Atlanta, GA           |  |           | 399   |           |  |              | 33,219  |               |  |           | Q4 2001 |          |  |  | Q3 2002 |  |  |  | 62.3% |  |  |  | 78.4%  | 
|Summit Shiloh II  Atlanta, GA                |  |           | 50    |           |  |              | 4,015   |               |  |           | Q1 2002 |          |  |  | Q2 2002 |  |  |  | 80.5% |  |  |  | 100.0% | 
|Summit Brookwood 
    Atlanta, GA (2)        |  |           | 359   |           |  |              | 41,500  |               |  |           | Q4 2002 |          |  |  | Q2 2003 |  |  |  | 2.6%  |  |  |  | 13.9%  | 
|Summit Valleybrook 
    Philadelphia, PA (2) |  |           | 352   |           |  |              | 37,000  |               |  |           | Q1 2003 |          |  |  | Q3 2003 |  |  |  | 13.1% |  |  |  | 23.6%  | 
|                                              |  |           |       |           |  |              |         |               |  |           |         |          |  |  |         |  |  |  |       |  |  |  |        | 
|                                              |  |           | 2,184 |           |  | $            | 228,009 |               |  |           |         |          |  |  |         |  |  |  |       |  |  |  |        | 
|                                              |  |           |       |           |  |              |         |               |  |           |         |          |  |  |         |  |  |  |       |  |  |  |        | 






|    |                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The apartment homes at Summit Grandview
    stabilized during the fourth quarter of 2001. Stabilization,
    occupancy and percent leased information in the table above
    represents data for the apartment units only. The 75,203 square
    feet of commercial space at Summit Grandview was 76.3% leased
    and 76.3% occupied as of June 30, 2002.
|(2) | The related assets of this property are included
    in the Construction in progress category as of
    June 30, 2002.                                                                                                                                                                                                                                  

23



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##### 



The actual stabilization dates for our
communities in lease-up may be later than anticipated if
economic conditions in the relevant markets continue to decline
or do not recover in a timely manner. The rental rates that we
charge may also be less than expected, and we will need to
continue to offer rent concessions to residents.

The operating performance of our lease-up
communities for the three and six months ended June 30,
2002 and 2001 is summarized below (dollars in thousands):

|                                           |                        |                |       |                  |  |      |       |       |  |   |       |       |  |   |       |       | 
|------------------------------------------ | ---------------------- | -------------- | ----- | ---------------- |  | ---- | ----- | ----- |  | - | ----- | ----- |  | - | ----- | ----- | 
|                                           |                        |                |       |                 
|                                           |                        | Three Months   |       | Six Months Ended
|                                           |                        | Ended June 30, |       | June 30,        
|                                           |                        |                |       |                 
|                                           |                        | 2002           |       | 2001             |  | 2002 |       | 2001 
|                                           |                        |                |       |                  |  |      |       |      
|Property revenues:                         |                        |                |       |                  |  |      |       |       |  |   |       |       |  |   |       |      
|                                           | Rental revenues        |                | $     | 3,543            |  |      | $     | 1,474 |  |   | $     | 6,414 |  |   | $     | 2,455 | 
|                                           | Other property revenue |                |       | 210              |  |      |       | 81    |  |   |       | 400   |  |   |       | 263   | 
|                                           |                        |                |       |                  |  |      |       |       |  |   |       |       |  |   |       |      
|Total property revenues                    |                        |                | 3,753 |                  |  |      | 1,555 |       |  |   | 6,814 |       |  |   | 2,718 |      
|Property operating and maintenance expense |                        |                | 1,514 |                  |  |      | 597   |       |  |   | 2,844 |       |  |   | 1,076 |      
|                                           |                        |                |       |                  |  |      |       |       |  |   |       |       |  |   |       |      
|Property operating income                  |                        | $              | 2,239 |                  |  | $    | 958   |       |  | $ | 3,970 |       |  | $ | 1,642 |      
|                                           |                        |                |       |                  |  |      |       |       |  |   |       |       |  |   |       |      
|Number of apartment homes                  |                        |                | 2,184 |                  |  |      | 2,184 |       |  |   | 2,184 |       |  |   | 2,184 |      
|                                           |                        |                |       |                  |  |      |       |       |  |   |       |       |  |   |       |      

Operating Performance of Our Disposition
Communities

During the six months ended June 30, 2002,
we sold two apartment communities formerly known as Summit
Breckenridge (300 apartment homes) located in Richmond,
Virginia and Summit New Albany (428 apartment homes)
located in Columbus, Ohio. The disposition of these two
communities completed our exit of the Richmond and Columbus
markets. The information in the table below represents operating
results for the three and six months ended June 30, 2002
and 2001 for the former Summit Breckenridge and former Summit
New Albany. The information in the table below also includes
operating results for the three and six months ended
June 30, 2001 for the following communities sold during
2001 (referred to in this report using former community names):
Summit Palm Lake, Summit Arbors, Summit Radbourne, Summit Lofts,
Summit Gateway, Summit Stony Point, Summit Deerfield, Summit
Waterford and Summit Walk (dollars in thousands).

|                                           |                        |                |       |                  |  |      |       |       |  |   |       |       |  |   |        |        | 
|------------------------------------------ | ---------------------- | -------------- | ----- | ---------------- |  | ---- | ----- | ----- |  | - | ----- | ----- |  | - | ------ | ------ | 
|                                           |                        |                |       |                 
|                                           |                        | Three Months   |       | Six Months Ended
|                                           |                        | Ended June 30, |       | June 30,        
|                                           |                        |                |       |                 
|                                           |                        | 2002           |       | 2001             |  | 2002 |       | 2001 
|                                           |                        |                |       |                  |  |      |       |      
|Property revenues:                         |                        |                |       |                  |  |      |       |       |  |   |       |       |  |   |        |       
|                                           | Rental revenues        |                | $     | 979              |  |      | $     | 5,884 |  |   | $     | 2,614 |  |   | $      | 11,797 | 
|                                           | Other property revenue |                |       | 72               |  |      |       | 455   |  |   |       | 186   |  |   |        | 916    | 
|                                           |                        |                |       |                  |  |      |       |       |  |   |       |       |  |   |        |       
|Total property revenues                    |                        |                | 1,051 |                  |  |      | 6,339 |       |  |   | 2,800 |       |  |   | 12,713 |       
|Property operating and maintenance expense |                        |                | 484   |                  |  |      | 2,124 |       |  |   | 1,139 |       |  |   | 4,327  |       
|                                           |                        |                |       |                  |  |      |       |       |  |   |       |       |  |   |        |       
|Property operating income                  |                        | $              | 567   |                  |  | $    | 4,215 |       |  | $ | 1,661 |       |  | $ | 8,386  |       
|                                           |                        |                |       |                  |  |      |       |       |  |   |       |       |  |   |        |       
|Number of apartment homes                  |                        |                | 728   |                  |  |      | 2,917 |       |  |   | 728   |       |  |   | 2,917  |       
|                                           |                        |                |       |                  |  |      |       |       |  |   |       |       |  |   |        |       

Operating Performance of Summit Management
Company

We own 1% of the voting stock and 99% of the
non-voting stock of Summit Management Company (the
Management Company). The remaining 99% of voting
stock and 1% of non-voting stock are held by one of the
Co-Chairmen of Summits Board of Directors. As a result of
this stock ownership, we have a 99% economic interest and the
Co-Chairman has a 1% economic interest in the Management
Company. Because of our ability to exercise significant
influence, the Management Company is accounted for on the equity
method of accounting. The operating performance of the
Management Company and its wholly-owned

24



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##### 



subsidiary, Summit Apartment Builders, Inc., for
the three and six months ended June 30, 2002 and 2001 is
summarized below (in thousands):


|           |                                                           |                             |     |                           |       |          |     |       |       |      |       |          |       |   |     |       |       |   |     |       |       |  |       |       |       |  
|---------- | --------------------------------------------------------- | --------------------------- | --- | ------------------------- | ----- | -------- | --- | ----- | ----- | ---- | ----- | -------- | ----- | - | --- | ----- | ----- | - | --- | ----- | ----- |  | ----- | ----- | ----- | -
|           |                                                           |                             |     |                          
|           |                                                           | Three Months Ended June 30, |     | Six Months Ended June 30,
|           |                                                           |                             |     |                          
|           |                                                           | 2002                        |     | 2001                      |       | % Change |     | 2002  |       | 2001 |       | % Change
|           |                                                           |                             |     |                           |       |          |     |       |       |      |       |         
|Revenues:  |                                                           |                             |     |                           |       |          |     |       |       |      |       |          |       |   |     |       |       |   |     |       |       |  |       |      
|           | Management fees charged to Operating Partnership          |                             | $   | 1,711                     |       |          | $   | 1,656 |       |      |       | 3.3      | %     |   | $   | 3,231 |       |   | $   | 3,592 |       |  |       | -10.1 | %    
|           | Third party management fee revenue                        |                             |     | 253                       |       |          |     | 205   |       |      |       | 23.4     | %     |   |     | 463   |       |   |     | 440   |       |  |       | 5.2   | %    
|           | Construction revenue charged to Operating
    Partnership |                             |     | 564                       |       |          |     | 799   |       |      |       | -29.4    | %     |   |     | 1,066 |       |   |     | 1,554 |       |  |       | -31.4 | %    
|           | Other revenue                                             |                             |     | 66                        |       |          |     | 177   |       |      |       | -62.7    | %     |   |     | 140   |       |   |     | 251   |       |  |       | -44.2 | %    
|           |                                                           |                             |     |                           |       |          |     |       |       |      |       |          |       |   |     |       |       |   |     |       |       |  |       |      
|           |                                                           | Total revenue               |     |                           | 2,594 |          |     |       | 2,837 |      |       |          | -8.6  | % |     |       | 4,900 |   |     |       | 5,837 |  |       |       | -16.1 | %
|           |                                                           |                             |     |                           |       |          |     |       |       |      |       |          |       |   |     |       |       |   |     |       |       |  |       |      
|Expenses:  |                                                           |                             |     |                           |       |          |     |       |       |      |       |          |       |   |     |       |       |   |     |       |       |  |       |      
|           | Operating                                                 |                             |     | 2,099                     |       |          |     | 2,473 |       |      |       | -15.1    | %     |   |     | 4,159 |       |   |     | 4,893 |       |  |       | -15.0 | %    
|           | Depreciation                                              |                             |     | 77                        |       |          |     | 80    |       |      |       | -3.8     | %     |   |     | 154   |       |   |     | 160   |       |  |       | -3.8  | %    
|           | Amortization                                              |                             |     | 73                        |       |          |     | 75    |       |      |       | -2.7     | %     |   |     | 146   |       |   |     | 149   |       |  |       | -2.0  | %    
|           | Interest                                                  |                             |     | 75                        |       |          |     | 75    |       |      |       | 0.0      | %     |   |     | 150   |       |   |     | 150   |       |  |       | 0.0   | %    
|           |                                                           |                             |     |                           |       |          |     |       |       |      |       |          |       |   |     |       |       |   |     |       |       |  |       |      
|           |                                                           | Total expenses              |     |                           | 2,324 |          |     |       | 2,703 |      |       |          | -14.0 | % |     |       | 4,609 |   |     |       | 5,352 |  |       |       | -13.9 | %
|           |                                                           |                             |     |                           |       |          |     |       |       |      |       |          |       |   |     |       |       |   |     |       |       |  |       |      
|Net income |                                                           | $                           | 270 |                           |       | $        | 134 |       |       |      | 101.5 | %        |       | $ | 291 |       |       | $ | 485 |       |       |  | -40.0 | %    
|           |                                                           |                             |     |                           |       |          |     |       |       |      |       |          |       |   |     |       |       |   |     |       |       |  |       |      

The decrease in management fees charged to us for
the six-month period is primarily due to a decrease of fees
earned from communities under development as a result of the
stage of development of such communities during the first half
of 2002 when compared to the first half of 2001, as well as the
absence in 2002 of management fees earned from communities
disposed during 2001. Construction revenue declined for the
three and six months ended June 30, 2002 and 2001 due to a
reduction in our development activity. All of the construction
revenue during the three and six months ended June 30, 2002
and 2001 was from contracts with the Operating Partnership. We
have curtailed, and may continue to curtail, our development
efforts to increase our financial flexibility in the current
economic environment. Operating expenses decreased at the
Management Company primarily due to a reduction in staffing.

Property management revenues included property
management fees from third parties of $253,000 and $463,000 for
the three and six months ended June 30, 2002 and $205,000
and $440,000 for the three and six months ended June 30,
2001. Property management fees from third parties as a
percentage of total property management revenues were 12.9% and
12.5% for the three and six months ended June 30, 2002 and
11.0% and 10.9% for the three and six months ended June 30,
2001.

Other Income and Expenses

Other income decreased by $481,000 and $531,000
to $28,000 and $160,000 for the three and six months ended
June 30, 2002 when compared to the same periods in 2001,
primarily due to a $388,000 fee earned during 2001 in connection
with a community that is being developed by a third party
developer.

Interest expense decreased by $970,000, or 9.7%,
and $1.8 million, or 9.1%, for the three and six months
ended June 30, 2002 compared with the same periods in 2001.
These decreases were primarily due to a decrease of 0.46% in our
average interest rate and a decrease of $14.8 million in
average indebtedness outstanding for the three-month period
ended June 30, 2002 when compared to the same period of
2001 as well as a decrease of 0.43% in our average interest rate
and a decrease of $21.5 million in average indebtedness
outstanding for the six-month period ended June 30, 2002
when compared to the same period in 2001.

General and administrative expenses increased
$93,000 and $619,000, or 7.2% and 24.5%, for the three and six
months ended June 30, 2002 as compared to the same periods
in 2001. The increase for the six-month period was primarily the
result of an increase in compensation costs of $144,000 due to
stock grants which vested during the six months ended
June 30, 2002, an increase in accounting, legal and
professional printing fee accruals in the aggregate amount of
$231,000, as well as an increase in the amount accrued for the
costs of

25



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##### 



executive compensation of $135,000 during the six
months ended June 30, 2002 as compared to the amounts
recorded during the same period in 2001. The executive
compensation accrued during the six months ended June 30,
2002 will be paid only if certain performance objectives are met
for the entire year by us and the executives as defined in the
executive compensation plan which was approved by our Board of
Directors. As a percentage of revenues, general and
administrative expenses were 3.2% and 3.6% for the three and six
months ended June 30, 2002 and 2.7% for each of the same
periods in 2001.


Liquidity and Capital Resources

Liquidity

Our net cash provided by operating activities
decreased to $37.1 million for the six months ended
June 30, 2002 from $42.9 million for the same period
in 2001, primarily due to a $6.6 million decrease in income
from continuing operations before gain on sale of real estate
assets and impairment loss.

Net cash used in investing activities increased
to $23.1 million for the six months ended June 30,
2002 from $13.0 million for the same period in 2001
primarily due to a decrease of $8.9 million in proceeds
received from the sale of communities. Property sale proceeds
from six of nine communities sold during 2001 and one of the two
communities sold during the six months ended June 30, 2002
were placed in escrow in accordance with like-kind exchange
income tax rules and regulations. In addition to cash proceeds
received in connection with the 2002 disposition which was not
placed in escrow in accordance with like-kind exchange income
tax rules and regulations, proceeds from the sale of communities
represent funds expended from these like-kind exchange escrows.
In the event proceeds from these property sales are not fully
invested in qualified like-kind property during the required
time period, a special distribution may be made or company level
tax may be incurred.

Net cash used in financing activities decreased
to $13.8 million for the six months ended June 30,
2002 from $30.5 million for the six months ended
June 30, 2001. The decrease in cash used in financing
activities is primarily due to an increase in net borrowings on
our unsecured credit facility of $73.5 million offset by an
absence of proceeds from the issuance of unsecured medium-term
notes of $60.0 million. The proceeds from the credit
facility borrowings were primarily used to fund development
activity given the reduction of community sale proceeds
available for this purpose.

The ratio of earnings to fixed charges was 1.55
for the six months ended June 30, 2002 compared to 1.65 for the
six months ended June 30, 2001. The decrease in the ratio
of earnings to fixed charges is primarily due to a $7.0 million
decrease in property operating income.

Our outstanding indebtedness as of June 30,
2002 totaled $734.7 million. This amount included
$286.7 million of fixed rate conventional mortgages, $21.8
million of variable rate tax-exempt bonds, $308.0 million
of fixed rate unsecured notes, $3.9 million of tax-exempt
fixed rate mortgages, $112.5 million under our unsecured credit
facility, and $1.8 million of fair value adjustments of
hedged debt instruments.

We expect to meet our liquidity requirements over
the next twelve months, including payments of dividends and
distributions as well as recurring capital expenditures relating
to maintaining our existing communities, primarily through our
working capital, net cash provided by operating activities and
borrowings under our unsecured credit facility.

We expect to meet our long-term liquidity
requirements, such as scheduled mortgage debt maturities,
property acquisitions, financing of development activities and
other non-recurring capital improvements, through the issuance
of unsecured notes and equity securities, from undistributed
cash flow, from proceeds received from the disposition of
certain communities and, in connection with the acquisition of
land or improved property, through the issuance of common units.
We believe that we have adequate borrowing capacity and
accessibility to attractive disposition opportunities to fund
our long-term liquidity requirements.

26



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##### 





| |                
| | ---------------
| | Credit Facility

We have a syndicated unsecured line of credit in
the amount of $225.0 million, which matures on
September 26, 2004. The credit facility provides funds for
new development, acquisitions and general working capital
purposes. Loans under the credit facility bear interest at LIBOR
plus 100 basis points. The spread component of the aggregate
interest rate will change in the event of an upgrade or
downgrade of our unsecured credit rating of BBB- by Standard
& Poors Rating Services and Baa3 by Moodys
Investors Service. Amounts are borrowed for thirty, sixty or
ninety day increments at the appropriate interest rates for such
time period. Therefore, amounts are borrowed and repaid within
those thirty, sixty or ninety day periods. The credit facility
is repayable monthly on an interest only basis with principal
due at maturity of each thirty, sixty or ninety day increment.
As of June 30, 2002, the outstanding balance of the credit
facility was $112.5 million, leaving $112.5 million of
remaining availability on the $225.0 million commitment.

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



| |                  
| | -----------------
| | Medium-Term Notes

On April 20, 2000, we commenced a program
for the sale of up to $250.0 million aggregate principal
amount of medium-term notes due nine months or more from the
date of issuance. We had medium-term notes with an aggregate
principal amount of $112.0 million outstanding in
connection with the MTN program as of June 30, 2002.

On May 29, 1998, we established a program
for the sale of up to $95.0 million aggregate principal
amount of medium-term notes due nine months or more from the
date of issuance. We had medium-term notes with an aggregate
principal amount of $25.0 million outstanding in connection
with this MTN program as of June 30, 2002. As a result of
the commencement of the $250.0 million MTN program, we
cannot issue any additional notes under the $95.0 million
MTN program.



| |                                 
| | --------------------------------
| | Derivative Financial Instruments

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

We terminated an interest rate swap with a
$30.0 million notional amount during the six months ended
June 30, 2002. Under SFAS No. 133, as a result of the
termination, we de-designated the $30.0 million swap as a
fair value hedge against certain fixed rate debt. We will
amortize as a yield adjustment $1.5 million, which represents
the difference between the par value and carrying amount of the
fixed-rate debt obligation, over the remaining term of the debt
obligation, which matures on December 15, 2003.

On June 14, 2002, we entered into an
interest rate swap with a notional amount of $50.0 million,
relating to $50.0 million of 7.20% fixed rate notes issued
under our MTN program. Under the interest rate swap agreement,
through the maturity date of August 15, 2007, (a) we
have agreed to pay to the counterparty the interest on a
$50.0 million notional amount at a floating interest rate
of three-month LIBOR plus 241.75 basis points, and (b) the
counterparty has agreed to pay to us the interest on the same
notional amount at the fixed rate of the underlying debt
obligation. The floating rate as of June 30, 2002 was
4.29%. The fair value of the

27



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##### 



interest rate swap was an asset of $371,000 as of
June 30, 2002. The swap has been designated as a fair value
hedge of the underlying fixed rate debt obligation and has been
recorded in Other assets in the accompanying balance
sheets. We assume no ineffectiveness as the interest rate swap
meets the short-cut method conditions required under
FAS 133 for fair value hedges of debt instruments.
Accordingly, no gains or losses were recorded in income relative
to our underlying debt and interest rate swap.




| |                
| | ---------------
| | Preferred Units

As of June 30, 2002, we had outstanding
3.4 million preferred units of limited partnership interest
designated as 8.95% Series B Cumulative Redeemable
Perpetual Preferred Units. These preferred units are redeemable
on or after April 29, 2004 for cash at a redemption price
equal to the holders capital account, or at Summits
option, shares of its 8.95% Series B Cumulative Redeemable
Perpetual Preferred Stock, or a combination of cash and shares
of Summits 8.95% Series B Cumulative Redeemable
Perpetual Preferred Stock. Holders of the Series B
preferred units have the right to exchange these preferred units
for shares of Summits Series B preferred stock on a
one-for-one basis, subject to adjustment: (a) on or after
April 29, 2009, (b) if full quarterly distributions
are not made for six quarters, or (c) upon the occurrence
of specified events related to our treatment or the treatment of
the preferred units for federal income tax purposes. The
Series B preferred units have no stated maturity, are not
subject to any sinking fund or mandatory redemption, and are not
convertible into any other securities of Summit or the Operating
Partnership. Distributions on the Series B preferred units
are cumulative from the date of original issuance and are
payable quarterly at the rate of 8.95% per year of the $25.00
original capital contribution. We accrued distributions to the
holders of the Series B preferred units in the aggregate
amount of $3.8 million during each of the six month periods
ended June 30, 2002 and 2001.

As of June 30, 2002, we had outstanding
2.2 million preferred units of limited partnership interest
designated as 8.75% Series C Cumulative Redeemable
Perpetual Preferred Units. The preferred units are redeemable on
or after September 3, 2004 for cash at a redemption price
equal to the holders capital account. Holders of the
Series C preferred units have the right to exchange these
preferred units for shares of Summits Series C
preferred stock on a one-for-one basis, subject to adjustment:
(a) on or after September 3, 2009, (b) if full
quarterly distributions are not made for six quarters,
(c) upon the occurrence of specified events related to our
treatment or the treatment of the preferred units for federal
income tax purposes, or (d) if the holdings in the
Operating Partnership of the Series C unitholder exceed 18%
of the total profits of or capital interest in the Operating
Partnership for a taxable year. The Series C preferred
units have no stated maturity, are not subject to any sinking
fund or mandatory redemption, and are not convertible into any
other securities of Summit or the Operating Partnership.
Distributions on the Series C preferred units are
cumulative from the date of original issuance and are payable
quarterly at the rate of 8.75% per year of the $25.00 original
capital contribution. We accrued distributions to the holder of
the Series C preferred units in the aggregate amount of
$2.4 million during each of the six month periods ended
June 30, 2002 and 2001.



| |                                
| | -------------------------------
| | Common Stock Repurchase Program

On March 12, 2000, Summits Board of
Directors authorized a common stock repurchase program pursuant
to which Summit was authorized to purchase up to an aggregate of
$25.0 million of currently issued and outstanding shares of
its common stock. During 2001, Summits Board of Directors
increased the size of this common stock repurchase program to
$56.0 million. All repurchases have been, and will be, made
on the open market at prevailing prices or in privately
negotiated transactions. This authority may be exercised from
time to time and in such amounts as market conditions warrant.
Summit did not repurchase any shares of its common stock during
the six months ended June 30, 2002 or 2001. As of
June 30, 2002, Summit had repurchased 288,200 shares of
common stock valued at $5.7 million under its repurchase
program.



| |                      
| | ---------------------
| | Employee Loan Program

Summits Board of Directors believes that
ownership of its common stock by its executive officers and
certain other qualified employees aligns the interests of these
officers and employees with the interests of Summits
stockholders. To this end, Summits Board of Directors
approved, and Summit instituted, a loan program

28



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under which Summit lends amounts to certain of
its executive officers and other qualified employees to
(a) finance the purchase of Summits common stock on
the open market at then-current market prices, (b) finance
the payment of the exercise price of one or more stock options
to purchase shares of Summits common stock, or
(c) finance the annual tax liability or other expenses of
an executive officer related to the vesting of shares of common
stock which constitute a portion of a restricted stock award
granted to the executive officer. Summit has amended the terms
of the loan program from time to time since its inception in
1997. The relevant officer or employee has executed a promissory
note and security agreement related to each loan extended. Each
outstanding note bears interest at a rate established on the
date of the note, is full recourse to the officers and employees
and is collateralized by the shares of Summits common
stock which are the subject of the loans. During the second
quarter of 2002, Summit issued $6.7 million of loans to six
(6) executive officers. Summit had loans receivable in the
net amount of $20.6 million as of June 30, 2002 and
$14.5 million as of December 31, 2001. As a result of
recent legislation, Summit is no longer permitted to make loans
to its executive officers.


Communities Held for Sale

We had one community, with a net book value of
$8.8 million, under contract for sale as of June 30,
2002. The revenues and property operating income from this
community represented 1.5% of total revenues and 1.5% of total
property operating income for the six months ended June 30,
2002. Proceeds from the sale of this community are expected to
be used to fund future development and acquisition activities.
The sale of this community is expected to occur during the third
quarter of 2002 and is subject to customary closing conditions.
We cannot be certain that this community or other communities
that we market for sale will be sold in a timely manner, on
favorable terms or at all.

In accordance with SFAS No. 144, net income
and gain (loss) on disposition of real estate for
communities considered held for sale after December 31,
2001 are reflected in our statements of operations as
Discontinued operations for all periods presented.
Below is a summary of discontinued operations for Summit New
Albany and the community considered held for sale as of
June 30, 2002:

|                                                                                             |                        |                    |        |                  |  |      |       |       |  |   |        |       |  |   |       |       | 
|-------------------------------------------------------------------------------------------- | ---------------------- | ------------------ | ------ | ---------------- |  | ---- | ----- | ----- |  | - | ------ | ----- |  | - | ----- | ----- | 
|                                                                                             |                        |                    |        |                 
|                                                                                             |                        | Three Months Ended |        | Six Months Ended
|                                                                                             |                        | June 30,           |        | June 30,        
|                                                                                             |                        |                    |        |                 
|                                                                                             |                        | 2002               |        | 2001             |  | 2002 |       | 2001 
|                                                                                             |                        |                    |        |                  |  |      |       |      
|Property revenues:                                                                           |                        |                    |        |                  |  |      |       |       |  |   |        |       |  |   |       |      
|                                                                                             | Rental revenues        |                    | $      | 1,542            |  |      | $     | 1,749 |  |   | $      | 3,183 |  |   | $     | 3,425 | 
|                                                                                             | Other property revenue |                    |        | 88               |  |      |       | 111   |  |   |        | 170   |  |   |       | 212   | 
|                                                                                             |                        |                    |        |                  |  |      |       |       |  |   |        |       |  |   |       |      
|Total property revenues                                                                      |                        |                    | 1,630  |                  |  |      | 1,860 |       |  |   | 3,353  |       |  |   | 3,637 |      
|Property operating and maintenance expense                                                   |                        |                    | 636    |                  |  |      | 643   |       |  |   | 1,270  |       |  |   | 1,283 |      
|Depreciation                                                                                 |                        |                    | 365    |                  |  |      | 364   |       |  |   | 731    |       |  |   | 725   |      
|Interest and amortization                                                                    |                        |                    | 77     |                  |  |      | 150   |       |  |   | 145    |       |  |   | 286   |      
|                                                                                             |                        |                    |        |                  |  |      |       |       |  |   |        |       |  |   |       |      
|Income from discontinued operations before loss
    on disposition of discontinued operation |                        |                    | 552    |                  |  |      | 703   |       |  |   | 1,207  |       |  |   | 1,343 |      
|Loss on disposition of discontinued operations                                               |                        |                    | (4,209 | )                |  |      |      |       |  |   | (4,209 | )     |  |   |      |      
|                                                                                             |                        |                    |        |                  |  |      |       |       |  |   |        |       |  |   |       |      
|(Loss) income from discontinued operations                                                   |                        | $                  | (3,657 | )                |  | $    | 703   |       |  | $ | (3,002 | )     |  | $ | 1,343 |      
|                                                                                             |                        |                    |        |                  |  |      |       |       |  |   |        |       |  |   |       |      

29



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Development Activity

Our construction in progress as of June 30,
2002 is summarized as follows (dollars in thousands):

|                                                 |  |           |       |           |  |         |        |           |  |              |         |  |  |   |         |  |  |  |         | 
|------------------------------------------------ |  | --------- | ----- | --------- |  | ------- | ------ | --------- |  | ------------ | ------- |  |  | - | ------- |  |  |  | ------- | 
|                                                 |  |           |       | Total     |  |         |        | Estimated |  | Anticipated 
|                                                 |  | Apartment |       | Estimated |  | Cost To |        | Cost To   |  | Construction
|Community                                        |  | Homes     |       | Costs     |  | Date    |        | Complete  |  | Completion  
|                                                 |  |           |       |           |  |         |        |           |  |             
|Summit Brookwood  Atlanta, GA (1)               |  |           | 359   |           |  | $       | 41,500 |           |  | $            | 33,952  |  |  | $ | 7,548   |  |  |  | Q4 2002 | 
|Summit Grand Parc  Washington, DC (2)           |  |           | 105   |           |  |         | 42,000 |           |  |              | 35,415  |  |  |   | 6,585   |  |  |  | Q4 2002 | 
|Summit Valleybrook  Philadelphia, PA
    (1)    |  |           | 352   |           |  |         | 37,000 |           |  |              | 34,351  |  |  |   | 2,649   |  |  |  | Q1 2003 | 
|Summit Roosevelt  Washington, DC                |  |           | 198   |           |  |         | 49,600 |           |  |              | 30,605  |  |  |   | 18,995  |  |  |  | Q3 2003 | 
|Summit Stockbridge  Atlanta, GA                 |  |           | 304   |           |  |         | 23,600 |           |  |              | 8,306   |  |  |   | 15,294  |  |  |  | Q4 2003 | 
|Summit Las Olas  Ft. Lauderdale, FL             |  |           | 420   |           |  |         | 73,700 |           |  |              | 22,685  |  |  |   | 51,015  |  |  |  | Q3 2005 | 
|Other development and construction
    costs (3) |  |           |      |           |  |         |       |           |  |              | 32,506  |  |  |   |        |  |  |  |         | 
|                                                 |  |           |       |           |  |         |        |           |  |              |         |  |  |   |         |  |  |  |         | 
|                                                 |  |           | 1,738 |           |  | $       | 67,400 |           |  | $            | 197,820 |  |  | $ | 102,086 |  |  |  |         | 
|                                                 |  |           |       |           |  |         |        |           |  |              |         |  |  |   |         |  |  |  |         | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These communities were in lease-up as of
    June 30, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(2) | The estimated cost of Summit Grand Parc has
    increased by 42.9% over the estimated cost disclosed one year
    ago. Summit Grand Parc is an historic renovation of a building
    in downtown Washington, D.C. involving building a new tower
    adjacent to the historic structure. We and our third party
    general contractor underestimated the complexity and cost of
    this unique construction project. Summit Grand Parc was 84%
    complete as of June 30, 2002 and we do not foresee any
    future material increases to the estimated costs.
|(3) | Consists primarily of land held for development
    and other pre-development costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

Estimated costs to complete the development
communities listed above of $102.1 million, as well as our
commitment to purchase Summit Brickell for an estimated price
ranging from $50.5 million to $60.0 million (see
section entitled Commitments and Contingencies
below), represent substantially all of our material commitments
for capital expenditures as of June 30, 2002. We have
curtailed, and may continue to curtail, our development spending
in an effort to increase our financial flexibility in the
current economic environment.



| |                                                                     
| | --------------------------------------------------------------------
| | Factors Affecting the Performance of Our
    Development Communities

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

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

In addition, we are conducting feasibility and
other pre-development work for six communities. We could abandon
the development of any one or more of these potential
communities in the event that we determine that market
conditions do not support development, financing is not
available on favorable terms or at all, we are unable to obtain
necessary permits and authorizations, or due to other
circumstances which may prevent

30



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development. There can be no assurance that, if
we do pursue one or more potential communities, that we will be
able to complete construction within the currently estimated
development budgets or that construction can be started at the
time currently anticipated.


Commitments and Contingencies

The estimated cost to complete the six
development projects currently under construction was
$102.1 million as of June 30, 2002. Anticipated
construction completion dates of the projects range from the
fourth quarter of 2002 to the third quarter of 2005.

On January 19, 2000, we entered into a real
estate purchase agreement with a third-party real estate
developer. Under the terms of the agreement, we have agreed to
purchase upon completion a Class A mixed-use
community, which will be called Summit Brickell, and is located
in Miami, Florida. We will purchase Summit Brickell upon the
earlier of one year after construction completion or the
achievement of 80% occupancy. We may extend this closing
obligation for six months after the initial purchase period. We
expect to close on the purchase of Summit Brickell during late
2002 or in 2003. The final purchase price will be determined
based on budgeted construction costs plus a bonus to the
developer based on the capitalized income of the property at the
time of purchase. In the event there are net cost savings during
construction, a portion of such savings will be used to reduce
the purchase price and a portion will be paid as an incentive to
the developer pursuant to an agreed upon formula. In the event
there are net cost overruns during construction, the developer
will be responsible for funding such overruns unless those
overruns result from design change orders which we request; such
overruns will be added to the purchase price. The purchase price
is expected to range from $50.5 million to $60.0 million.
The purchase of Summit Brickell is subject to customary closing
conditions. We have issued a letter of credit in the amount of
$13.0 million, which serves as a credit enhancement to the
developers construction loan. In the event that any amount
under the letter of credit is drawn upon, we shall be treated as
having issued a loan to the developer in the amount of such
draw. Any such loan will accrue interest at a rate of eighteen
percent (18%) per year.

Summit has employment agreements with two of its
former executive officers, both of whom resigned from such
executive positions, but who remain as employees and have agreed
to provide various services to Summit from time to time over the
next ten years. Each employment agreement requires that Summit
pay to the former officers a base salary aggregating up to
$2.1 million over the period from July 1, 2001 to
December 31, 2011 ($200,000 on an annual basis). Either
party can terminate the employment agreements, effective 20
business days after written notice is given. The full base
salary amount due shall be payable through 2011 whether or not
the agreements are terminated earlier in accordance with their
terms.

Environmental Matters

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

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

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ownership, operation, management and development
of our communities and other real properties, we may be
potentially liable for these costs.


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

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

Funds From Operations

We consider Funds From Operations
(FFO) to be an appropriate measure of performance of
an equity REIT. We compute FFO in accordance with standards
established by the National Association of Real Estate
Investment Trusts (NAREIT). FFO, as defined by
NAREIT, represents net income (loss) excluding gains or
losses from sales of property, plus depreciation of real estate
assets, and after adjustments for unconsolidated partnerships
and joint ventures, all determined on a consistent basis in
accordance with GAAP. Funds Available for Distribution
(FAD) is defined as FFO less capital expenditures
funded by operations (recurring capital expenditures). Our
methodology for calculating FFO and FAD may differ from the
methodology for calculating FFO and FAD utilized by other real
estate companies, and accordingly, may not be comparable to
other real estate companies. FFO and FAD do not represent
amounts available for managements discretionary use
because of needed capital expenditures or expansion, debt
service obligations, property acquisitions, development,
dividends and distributions or other commitments and
uncertainties. FFO and FAD should not be considered as
alternatives to net income (determined in accordance with GAAP)
as an indication of our financial performance or to cash flows
from operating activities (determined in accordance with GAAP)
as a measure of our liquidity, nor are they indicative of funds
available to fund our cash needs, including our ability to make
dividend or distribution payments. We believe FFO and FAD are
helpful to investors as measures of our performance because,
along with cash flows from operating activities, financing
activities and investing activities, they provide investors with
an understanding of our ability to incur and service debt and
make capital expenditures.

32



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##### 



FFO and FAD for the three and six months ended
June 30, 2002 and 2001 are calculated as follows (dollars
in thousands):

|                                                 |                                    |                             |            |                           |   |      |            |         |   |   |            |         |   |   |            |         |  
|------------------------------------------------ | ---------------------------------- | --------------------------- | ---------- | ------------------------- | - | ---- | ---------- | ------- | - | - | ---------- | ------- | - | - | ---------- | ------- | -
|                                                 |                                    |                             |            |                          
|                                                 |                                    | Three Months Ended June 30, |            | Six Months Ended June 30,
|                                                 |                                    |                             |            |                          
|                                                 |                                    | 2002                        |            | 2001                      |   | 2002 |            | 2001   
|                                                 |                                    |                             |            |                           |   |      |            |        
|Income available to common unitholders           |                                    | $                           | 15,586     |                           |   | $    | 18,875     |         |   | $ | 21,616     |         |   | $ | 28,257     |        
|Gain on sale of real estate assets               |                                    |                             | (9,634     | )                         |   |      | (10,782    | )       |   |   | (9,634     | )       |   |   | (10,782    | )      
|                                                 |                                    |                             |            |                           |   |      |            |         |   |   |            |         |   |   |            |        
|                                                 | Adjusted net income                |                             |            | 5,952                     |   |      |            | 8,093   |   |   |            | 11,982  |   |   |            | 17,475  |  
|Depreciation:                                    |                                    |                             |            |                           |   |      |            |         |   |   |            |         |   |   |            |        
|                                                 | Real estate assets                 |                             |            | 9,747                     |   |      |            | 9,961   |   |   |            | 19,464  |   |   |            | 19,347  |  
|                                                 | Real estate joint venture          |                             |            | 316                       |   |      |            | 376     |   |   |            | 616     |   |   |            | 574     |  
|                                                 |                                    |                             |            |                           |   |      |            |         |   |   |            |         |   |   |            |        
|Funds from Operations                            |                                    |                             | 16,015     |                           |   |      | 18,430     |         |   |   | 32,062     |         |   |   | 37,396     |        
|                                                 | Recurring capital expenditures (1) |                             |            | (962                      | ) |      |            | (1,599  | ) |   |            | (1,911  | ) |   |            | (2,563  | )
|                                                 |                                    |                             |            |                           |   |      |            |         |   |   |            |         |   |   |            |        
|Funds Available for Distribution                 |                                    | $                           | 15,053     |                           |   | $    | 16,831     |         |   | $ | 30,151     |         |   | $ | 34,833     |        
|                                                 |                                    |                             |            |                           |   |      |            |         |   |   |            |         |   |   |            |        
|Non-recurring capital expenditures (2)           |                                    | $                           | 295        |                           |   | $    | 920        |         |   | $ | 633        |         |   | $ | 2,049      |        
|                                                 |                                    |                             |            |                           |   |      |            |         |   |   |            |         |   |   |            |        
|Cash Flow Provided By (Used In):                 |                                    |                             |            |                           |   |      |            |         |   |   |            |         |   |   |            |        
|                                                 | Operating activities               |                             | $          | 21,387                    |   |      | $          | 24,682  |   |   | $          | 37,124  |   |   | $          | 42,912  |  
|                                                 | Investing activities               |                             |            | 3,317                     |   |      |            | (7,756  | ) |   |            | (23,055 | ) |   |            | (13,031 | )
|                                                 | Financing activities               |                             |            | (24,838                   | ) |      |            | (16,862 | ) |   |            | (13,756 | ) |   |            | (30,525 | )
|Weighted average units outstanding 
    basic   |                                    |                             | 30,888,338 |                           |   |      | 31,099,292 |         |   |   | 30,785,909 |         |   |   | 31,050,037 |        
|                                                 |                                    |                             |            |                           |   |      |            |         |   |   |            |         |   |   |            |        
|Weighted average units outstanding 
    diluted |                                    |                             | 31,163,943 |                           |   |      | 31,421,902 |         |   |   | 31,046,617 |         |   |   | 31,355,825 |        
|                                                 |                                    |                             |            |                           |   |      |            |         |   |   |            |         |   |   |            |        



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Recurring capital expenditures are expected to be
    funded from operations and consist primarily of floor coverings,
    furniture, appliances and equipment and exterior paint and
    carpentry. In contrast, non-recurring capital expenditures, such
    as major improvements, new garages and access gates, are
    expected to be funded by financing activities and, therefore,
    are not included in the calculation of FAD.
|(2) | Non-recurring capital expenditures for the six
    months ended June 30, 2002 and 2001 primarily consist of:
    $531,000 and $542,000 for major renovations in 2002 and 2001;
    $13,000 and $115,000 for access gates and security fences in
    2002 and 2001; $89,000 and $424,000 in other revenue enhancement
    expenditures in 2002 and 2001; and $968,000 of alternative
    landscaping mulch in 2001.                       



|        |                                                               
|------- | --------------------------------------------------------------
|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK

On June 14, 2002, we entered into an
interest rate swap with a notional amount of $50.0 million,
relating to $50.0 million of 7.20% fixed rate notes issued
under our MTN program. Under the interest rate swap agreement,
through the maturity date of August 15, 2007, (a) we
have agreed to pay to the counterparty the interest on a
$50.0 million notional amount at a floating interest rate
of three-month LIBOR plus 241.75 basis points, and (b) the
counterparty has agreed to pay to us the interest on the same
notional amount at the fixed rate of the underlying debt
obligation. The floating rate as of June 30, 2002 was
4.29%. The fair value of the interest rate swap was an asset of
$371,000 as of June 30, 2002. The swap has been designated as a
fair value hedge of the underlying fixed rate debt obligation
and has been recorded in Other assets in the
accompanying balance sheets. We assume no ineffectiveness as the
interest rate swap meets the short-cut method conditions
required under FAS 133 for fair value hedges of debt
instruments. Accordingly, no gains or losses were recorded in
income relative to our underlying debt and interest rate swap.

We terminated an interest rate swap with a
$30.0 million notional amount during the six months ended
June 30, 2002. Under SFAS No. 133, we de-designated
the $30.0 million swap as a fair value hedge against
certain fixed rate debt. As a result of terminating the
$30.0 million swap, we will amortize as a yield adjustment
$1.5 million, which represents the difference between the
par value and carrying amount of the fixed-rate debt obligation,
over the remaining term of the debt obligation, which matures on
December 15, 2003.

There have been no other material changes in our
financial market risk since the filing of our Annual Report on
Form 10-K for the year ended December 31, 2001.

33



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##### 



PART II



ITEM 2. CHANGES IN SECURITIES


During the three months ended June 30, 2002,
we issued common units in private placements in reliance on the
exemption from registration under Section 4(2) of the
Securities Act in the amounts and for the consideration set
forth below:



| |    |                                                                                                                                                                                                                                                                                                                              
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A. | On April 5, 2002, April 9, 2002 and
    May 2, 2002, Summit issued 64,255, 15,945 and 30,000 shares
    of common stock pursuant to the exercise of stock options.
    Summit contributed the proceeds ($1.7 million in the
    aggregate) of these sales to us in consideration of an aggregate
    of 110,200 common units.
|
| | B. | On May 15, 2002, Summit issued an aggregate
    of 132,070 shares of common stock pursuant to its Dividend
    Reinvestment and Stock Purchase Plans. Summit contributed the
    proceeds ($2.9 million) of these option exercises to us in
    consideration of an aggregate of 132,070 common units.                       

In light of the circumstances under which these
common units were issued, management of Summit, in its capacity
as our general partner, believes that we may rely on such
exemption.



ITEM 6. EXHIBITS AND REPORTS ON FORM
8-K


(a) Exhibits

|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | Promissory Note and Security Agreement, dated
    April 30, 2002, evidencing a loan in the amount of
    $1,299,994 to Michael L. Schwarz for the purpose of purchasing
    shares of Summits common stock on the open market at
    then-current market prices (incorporated by reference to
    Exhibit 10.1 to Summits quarterly report on
    Form 10-Q for the quarterly period ended June 30,
    2002, File No. 001-12792).                                                     
|10.2 |  | Promissory Note and Security Agreement, dated
    April 30, 2002, evidencing a loan in the amount of $699,995
    to Gregg D. Adzema for the purpose of purchasing shares of
    Summits common stock on the open market at then-current
    market prices (incorporated by reference to Exhibit 10.2 to
    Summits quarterly report on Form 10-Q for the
    quarterly period ended June 30, 2002, File
    No. 001-12792).                                                          
|10.3 |  | Promissory Note and Security Agreement, dated
    April 30, 2002, evidencing a loan in the amount of
    $2,649,940 to Steven R. LeBlanc for the purpose of purchasing
    shares of Summits common stock on the open market at
    then-current market prices (incorporated by reference to
    Exhibit 10.3 to Summits quarterly report on
    Form 10-Q for the quarterly period ended June 30,
    2002, File No. 001-12792).                                                      
|10.4 |  | Promissory Note and Security Agreement, dated
    April 30, 2002, evidencing a loan in the amount of $699,995
    to Keith L. Downey for the purpose of purchasing shares of
    Summits common stock on the open market at then-current
    market prices (incorporated by reference to Exhibit 10.4 to
    Summits quarterly report on Form 10-Q for the
    quarterly period ended June 30, 2002, File
    No. 001-12792).                                                          
|10.5 |  | Promissory Note and Security Agreement, dated
    April 30, 2002, evidencing a loan in the amount of $699,995
    to Randall M. Ell for the purpose of purchasing shares of
    Summits common stock on the open market at then-current
    market prices (incorporated by reference to Exhibit 10.5 to
    Summits quarterly report on Form 10-Q for the
    quarterly period ended June 30, 2002, File
    No. 001-12792).                                                           
|10.6 |  | Promissory Note and Security Agreement, dated
    June 12, 2002, evidencing a loan in the amount of $699,995
    to Douglas E. Brout for the purpose of purchasing shares of
    Summits common stock on the open market at then-current
    market prices (incorporated by reference to Exhibit 10.6 to
    Summits quarterly report on Form 10-Q for the
    quarterly period ended June 30, 2002, File
    No. 001-12792).                                                          
|10.7 |  | Swap Transaction, dated June 17, 2002,
    between the Operating Partnership and Bank of America N.A.
    (incorporated by reference to Exhibit 10.7 to Summits
    quarterly report on Form 10-Q for the quarterly period
    ended June 30, 2002, File No. 001-12792)                                                                                                                                                                                                                 
|10.8 |  | Second Amendment to Promissory Note and Security
    Agreement dated May 16, 2002 by and between Summit
    Properties Inc. and Michael L. Schwarz related to the Promissory
    Note and Security Agreement dated August 6, 1998 evidencing
    a loan for the purpose of purchasing shares of Summits
    common stock (incorporated by reference to Exhibit 10.8 to
    Summits quarterly report on Form 10-Q for the
    quarterly period ended June 30, 2002, File No. 001-12792).

34



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##### 



|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.9  |  | Second Amendment to Promissory Note and Security
    Agreement dated May 16, 2002 by and between Summit
    Properties Inc. and Michael L. Schwarz related to the Promissory
    Note and Security Agreement dated February 2, 1999
    evidencing a loan for the purpose of purchasing shares of
    Summits common stock (incorporated by reference to
    Exhibit 10.9 to Summits quarterly report on
    Form 10-Q for the quarterly period ended June 30,
    2002, File No. 001-12792). 
|10.10 |  | Second Amendment to Promissory Note and Security
    Agreement dated May 16, 2002 by and between Summit
    Properties Inc. and Michael L. Schwarz related to the Promissory
    Note and Security Agreement dated January 28, 1998
    evidencing a loan for the purpose of purchasing shares of
    Summits common stock (incorporated by reference to
    Exhibit 10.10 to Summits quarterly report on
    Form 10-Q for the quarterly period ended June 30,
    2002, File No. 001-12792).
|10.11 |  | Second Amendment to Promissory Note and Security
    Agreement dated May 16, 2002 by and between Summit
    Properties Inc. and Michael L. Schwarz related to the Promissory
    Note and Security Agreement dated January 30, 1998
    evidencing a loan for the purpose of purchasing shares of
    Summits common stock (incorporated by reference to
    Exhibit 10.11 to Summits quarterly report on
    Form 10-Q for the quarterly period ended June 30,
    2002, File No. 001-12792).
|10.12 |  | Second Amendment to Promissory Note and Security
    Agreement dated May 16, 2002 by and between Summit
    Properties Inc. and Michael L. Schwarz related to the Promissory
    Note and Security Agreement dated July 29, 1998 evidencing
    a loan for the purpose of purchasing shares of Summits
    common stock (incorporated by reference to Exhibit 10.12 to
    Summits quarterly report on Form 10-Q for the
    quarterly period ended June 30, 2002, File No. 001-12792).       
|10.13 |  | Second Amendment to Promissory Note and Security
    Agreement dated May 16, 2002 by and between Summit
    Properties Inc. and Steven R. LeBlanc related to the Promissory
    Note and Security Agreement dated August 5, 1998 evidencing
    a loan for the purpose of purchasing shares of Summits
    common stock (incorporated by reference to Exhibit 10.13 to
    Summits quarterly report on Form 10-Q for the
    quarterly period ended June 30, 2002, File No. 001-12792).       
|10.14 |  | Second Amendment to Promissory Note and Security
    Agreement dated May 16, 2002 by and between Summit
    Properties Inc. and Steven R. LeBlanc related to the Promissory
    Note and Security Agreement dated February 2, 1999
    evidencing a loan for the purpose of purchasing shares of
    Summits common stock (incorporated by reference to
    Exhibit 10.14 to Summits quarterly report on
    Form 10-Q for the quarterly period ended June 30,
    2002, File No. 001-12792). 
|*12.1 |  | Statement Regarding Calculation of Ratio of
    Earnings to Fixed Charges for the six months ended June 30,
    2002.                                                                                                                                                                                                                                                                                                                                                                           



---



|  |               
|- | --------------
|* | Filed herewith

(b) Reports on Form 8-K

We did not file any reports on Form 8-K
during the second quarter of 2002.

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##### 



SIGNATURES

Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.

|                      |  |                                                                                       
|--------------------- |  | --------------------------------------------------------------------------------------
|                      |  | SUMMIT PROPERTIES PARTNERSHIP, L.P.By: Summit Properties Inc., as General
    Partner 
|                     
|August 13, 2002(Date) |  | /s/ STEVEN R. LEBLANCSteven R. LeBlanc,President and Chief Executive Officer          
|                     
|August 13, 2002(Date) |  | /s/ GREGG D. ADZEMAGregg D. AdzemaExecutive Vice President and Chief Financial Officer

36