##### 









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 September 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
    September 30, 2002 and December 31, 2001 (Unaudited)                              |  |          | 3  | 
|        |  | Consolidated Statements of Earnings for the three
    and nine months ended September 30, 2002 and 2001
    (Unaudited) |  |          | 4  | 
|        |  | Consolidated Statement of Partners Equity
    for the nine months ended September 30, 2002 (Unaudited)                 |  |          | 6  | 
|        |  | Consolidated Statements of Cash Flows for the
    nine months ended September 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                               |  |          | 19 | 
|Item 3  |  | Quantitative and Qualitative Disclosures about
    Market Risk                                                          |  |          | 36 | 
|Item 4  |  | Controls and Procedures                                                                                                 |  |          | 37 | 
|PART II |  | Other Information                                                                                                       |  |          |    | 
|Item 2  |  | Changes in Securities                                                                                                   |  |          | 38 | 
|Item 6  |  | Exhibits and Reports on Form 8-K                                                                                        |  |          | 38 | 
|        |  | Signatures                                                                                                              |  |          | 39 | 

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 per unit
data)


(Unaudited)


|                                                                            |                                                                               |                                                              |                        |                                                    |         |         |           |          |         |         |           | 
|--------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ------------------------------------------------------------ | ---------------------- | -------------------------------------------------- | ------- | ------- | --------- | -------- | ------- | ------- | --------- | 
|                                                                            |                                                                               | September 30,                                                |                        | December 31,                                      
|                                                                            |                                                                               | 2002                                                         |                        | 2001                                              
|                                                                            |                                                                               |                                                              |                        |                                                   
|ASSETS                                                                      |                                                                               |                                                              |                        |                                                    |         |         |           |         
|Real estate assets:                                                         |                                                                               |                                                              |                        |                                                    |         |         |           |         
|                                                                            | Land and land improvements                                                    |                                                              | $                      | 176,787                                            |         |         | $         | 173,872  |        
|                                                                            | Buildings and improvements                                                    |                                                              |                        | 969,706                                            |         |         |           | 962,181  |        
|                                                                            | Furniture, fixtures and equipment                                             |                                                              |                        | 75,932                                             |         |         |           | 73,766   |        
|                                                                            |                                                                               |                                                              |                        |                                                    |         |         |           |         
|                                                                            |                                                                               |                                                              |                        | Real estate assets before accumulated depreciation |         |         | 1,222,425 |          |         |         | 1,209,819 | 
|                                                                            | Less: accumulated depreciation                                                |                                                              |                        | (169,532                                           | )       |         |           | (147,120 | )      
|                                                                            |                                                                               |                                                              |                        |                                                    |         |         |           |         
|                                                                            |                                                                               |                                                              |                        | Operating real estate assets                       |         |         | 1,052,893 |          |         |         | 1,062,699 | 
|Net real estate assets  assets held
    for sale                           |                                                                               |                                                              |                       |                                                    |         |         | 48,389    |         
|                                                                            | Construction in progress                                                      |                                                              |                        | 234,797                                            |         |         |           | 142,354  |        
|                                                                            |                                                                               |                                                              |                        |                                                    |         |         |           |         
|                                                                            |                                                                               |                                                              |                        | Net real estate assets                             |         |         | 1,287,690 |          |         |         | 1,253,442 | 
|Cash and cash equivalents                                                   |                                                                               |                                                              | 2,353                  |                                                    |         |         | 1,814     |         
|Restricted cash                                                             |                                                                               |                                                              | 7,033                  |                                                    |         |         | 21,211    |         
|Investments in Summit Management Company and real
    estate joint ventures |                                                                               |                                                              | 3,852                  |                                                    |         |         | 3,159     |         
|Deferred financing costs, net                                               |                                                                               |                                                              | 6,242                  |                                                    |         |         | 6,925     |         
|Other assets                                                                |                                                                               |                                                              | 14,026                 |                                                    |         |         | 10,147    |         
|Other assets  assets held for sale                                         |                                                                               |                                                              |                       |                                                    |         |         | 698       |         
|                                                                            |                                                                               |                                                              |                        |                                                    |         |         |           |         
|Total assets                                                                |                                                                               | $                                                            | 1,321,196              |                                                    |         | $       | 1,297,936 |         
|                                                                            |                                                                               |                                                              |                        |                                                    |         |         |           |         
|LIABILITIES AND PARTNERS
    EQUITY                                        |                                                                               |                                                              |                        |                                                    |         |         |           |         
|Liabilities:                                                                |                                                                               |                                                              |                        |                                                    |         |         |           |         
|                                                                            | Notes payable                                                                 |                                                              | $                      | 732,591                                            |         |         | $         | 707,937  |        
|                                                                            | Note payable  assets held for sale                                           |                                                              |                        |                                                   |         |         |           | 11,408   |        
|                                                                            | Accounts payable and accrued expenses                                         |                                                              |                        | 23,182                                             |         |         |           | 21,525   |        
|                                                                            | Distributions payable                                                         |                                                              |                        | 14,785                                             |         |         |           | 14,156   |        
|                                                                            | Accrued interest payable                                                      |                                                              |                        | 5,972                                              |         |         |           | 7,000    |        
|                                                                            | Security deposits and prepaid rents                                           |                                                              |                        | 2,714                                              |         |         |           | 3,213    |        
|                                                                            | Other liabilities  assets held for sale                                      |                                                              |                        |                                                   |         |         |           | 850      |        
|                                                                            |                                                                               |                                                              |                        |                                                    |         |         |           |         
|                                                                            |                                                                               |                                                              |                        | Total liabilities                                  |         |         | 779,244   |          |         |         | 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
    31,132,476 and 30,608,345 |                                                              |                        |                                                    |         |         |           |          |        
|                                                                            |                                                                               | General partner  outstanding 311,325
    and 306,083        |                        |                                                    | 4,787   |         |           |          | 4,687   |        
|                                                                            |                                                                               | Limited partners  outstanding
    30,821,151 and 30,302,262 |                        |                                                    | 400,905 |         |           |          | 390,900 |        
|                                                                            |                                                                               |                                                              |                        |                                                    |         |         |           |         
|                                                                            |                                                                               |                                                              | Total partners equity |                                                    |         | 541,952 |           |          |         | 531,847 |          
|                                                                            |                                                                               |                                                              |                        |                                                    |         |         |           |         
|Total liabilities and partners common and
    preferred equity             |                                                                               | $                                                            | 1,321,196              |                                                    |         | $       | 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                      |                                                   | Nine Months Ended
|                                                                                                    |                                                            | September 30,                           |                                                   | September 30,    
|                                                                                                    |                                                            |                                         |                                                   |                  
|                                                                                                    |                                                            | 2002                                    |                                                   | 2001              |        | 2002   |        | 2001  
|                                                                                                    |                                                            |                                         |                                                   |                   |        |        |        |       
|Revenues:                                                                                           |                                                            |                                         |                                                   |                   |        |        |        |        |       |        |        |         |        |         |        |        
|                                                                                                    | Rental                                                     |                                         | $                                                 | 39,193            |        |        | $      | 43,358 |       |        | $      | 118,708 |        |         | $      | 129,554 |       
|                                                                                                    | Other property income                                      |                                         |                                                   | 2,839             |        |        |        | 3,385  |       |        |        | 8,720   |        |         |        | 9,904   |       
|                                                                                                    | Interest                                                   |                                         |                                                   | 535               |        |        |        | 458    |       |        |        | 1,651   |        |         |        | 1,723   |       
|                                                                                                    | Other income                                               |                                         |                                                   | 206               |        |        |        | 130    |       |        |        | 411     |        |         |        | 820     |       
|                                                                                                    | (Loss) gain and interest income on compensation
    plans  |                                         |                                                   | (156              | )      |        |        | 72     |       |        |        | 69      |        |         |        | (113    | )     
|                                                                                                    |                                                            |                                         |                                                   |                   |        |        |        |        |       |        |        |         |        |         |        |        
|                                                                                                    |                                                            |                                         | Total revenues                                    |                   |        | 42,617 |        |        |       | 47,403 |        |         |        | 129,559 |        |         |        | 141,888 | 
|                                                                                                    |                                                            |                                         |                                                   |                   |        |        |        |        |       |        |        |         |        |         |        |        
|Expenses:                                                                                           |                                                            |                                         |                                                   |                   |        |        |        |        |       |        |        |         |        |         |        |        
|                                                                                                    | Property operating and maintenance:                        |                                         |                                                   |                   |        |        |        |        |       |        |        |         |        |         |        |         |       
|                                                                                                    |                                                            | Personnel                               |                                                   |                   | 3,381  |        |        |        | 3,337 |        |        |         | 9,784  |         |        |         | 9,720  |        
|                                                                                                    |                                                            | Advertising and promotion               |                                                   |                   | 736    |        |        |        | 449   |        |        |         | 2,067  |         |        |         | 1,660  |        
|                                                                                                    |                                                            | Utilities                               |                                                   |                   | 2,143  |        |        |        | 2,263 |        |        |         | 6,092  |         |        |         | 6,515  |        
|                                                                                                    |                                                            | Building repairs and maintenance        |                                                   |                   | 2,191  |        |        |        | 2,108 |        |        |         | 5,962  |         |        |         | 5,959  |        
|                                                                                                    |                                                            | Real estate taxes and insurance         |                                                   |                   | 5,449  |        |        |        | 4,842 |        |        |         | 15,940 |         |        |         | 15,044 |        
|                                                                                                    |                                                            | Depreciation                            |                                                   |                   | 9,942  |        |        |        | 9,404 |        |        |         | 28,642 |         |        |         | 28,029 |        
|                                                                                                    |                                                            | Property supervision                    |                                                   |                   | 1,248  |        |        |        | 1,359 |        |        |         | 3,746  |         |        |         | 4,134  |        
|                                                                                                    |                                                            | Other operating expenses                |                                                   |                   | 693    |        |        |        | 829   |        |        |         | 2,003  |         |        |         | 2,270  |        
|                                                                                                    |                                                            |                                         |                                                   |                   |        |        |        |        |       |        |        |         |        |         |        |        
|                                                                                                    |                                                            |                                         | Total property operating and maintenance expenses |                   |        | 25,783 |        |        |       | 24,591 |        |         |        | 74,236  |        |         |        | 73,331  | 
|                                                                                                    | Interest                                                   |                                         |                                                   | 8,364             |        |        |        | 9,825  |       |        |        | 26,422  |        |         |        | 29,702  |       
|                                                                                                    | Amortization                                               |                                         |                                                   | 312               |        |        |        | 385    |       |        |        | 935     |        |         |        | 1,087   |       
|                                                                                                    | General and administrative                                 |                                         |                                                   | 1,020             |        |        |        | 1,800  |       |        |        | 4,165   |        |         |        | 4,328   |       
|                                                                                                    | Liability adjustment and expense on compensation
    plans |                                         |                                                   | (156              | )      |        |        | 72     |       |        |        | 69      |        |         |        | (113    | )     
|                                                                                                    |                                                            |                                         |                                                   |                   |        |        |        |        |       |        |        |         |        |         |        |        
|                                                                                                    |                                                            |                                         | Total expenses                                    |                   |        | 35,323 |        |        |       | 36,673 |        |         |        | 105,827 |        |         |        | 108,335 | 
|                                                                                                    | Income (loss) on equity investments:                       |                                         |                                                   |                   |        |        |        |        |       |        |        |         |        |         |        |         |       
|                                                                                                    |                                                            | Summit Management Company               |                                                   |                   | 91     |        |        |        | (89   | )      |        |         | 381    |         |        |         | 396    |        
|                                                                                                    |                                                            | Real estate joint ventures              |                                                   |                   | (76    | )      |        |        |      |        |        |         | (53    | )       |        |         | (39    | )      
|                                                                                                    |                                                            |                                         |                                                   |                   |        |        |        |        |       |        |        |         |        |         |        |        
|                                                                                                    |                                                            |                                         | Total income (loss) on equity investments         |                   |        | 15     |        |        |       | (89    | )      |         |        | 328     |        |         |        | 357     | 
|                                                                                                    |                                                            |                                         |                                                   |                   |        |        |        |        |       |        |        |         |        |         |        |        
|Income from continuing operations before gain on
    sale of real estate assets and impairment loss |                                                            |                                         | 7,309                                             |                   |        |        | 10,641 |        |       |        | 24,060 |         |        |         | 33,910 |        
|                                                                                                    | Gain on sale of real estate assets                         |                                         |                                                   |                  |        |        |        | 2,788  |       |        |        | 13,839  |        |         |        | 13,570  |       
|                                                                                                    | Gain on sale of real estate assets 
    joint ventures    |                                         |                                                   | 5,423             |        |        |        | 271    |       |        |        | 5,423   |        |         |        | 271     |       
|                                                                                                    | Impairment loss on investments in technology
    companies |                                         |                                                   |                  |        |        |        |       |       |        |        |        |        |         |        | (1,217  | )     
|                                                                                                    |                                                            |                                         |                                                   |                   |        |        |        |        |       |        |        |         |        |         |        |        
|Income from continuing operations                                                                   |                                                            |                                         | 12,732                                            |                   |        |        | 13,700 |        |       |        | 43,322 |         |        |         | 46,534 |        
|                                                                                                    |                                                            |                                         |                                                   |                   |        |        |        |        |       |        |        |         |        |         |        |        
|                                                                                                    | Income from discontinued operations                        |                                         |                                                   | 391               |        |        |        | 788    |       |        |        | 1,834   |        |         |        | 2,420   |       
|                                                                                                    | Net gain from disposition of discontinued
    operations   |                                         |                                                   | 16,900            |        |        |        |       |       |        |        | 12,691  |        |         |        |        |       
|                                                                                                    |                                                            |                                         |                                                   |                   |        |        |        |        |       |        |        |         |        |         |        |        
|                                                                                                    |                                                            | Net income from discontinued operations |                                                   |                   | 17,291 |        |        |        | 788   |        |        |         | 14,525 |         |        |         | 2,420  |        
|                                                                                                    |                                                            |                                         |                                                   |                   |        |        |        |        |       |        |        |         |        |         |        |        
|Net income                                                                                          |                                                            |                                         | 30,023                                            |                   |        |        | 14,488 |        |       |        | 57,847 |         |        |         | 48,954 |        
|Distributions to Series B preferred
    unitholders                                                 |                                                            |                                         | (1,902                                            | )                 |        |        | (1,902 | )      |       |        | (5,706 | )       |        |         | (5,706 | )      
|Distributions to Series C preferred
    unitholders                                                 |                                                            |                                         | (1,203                                            | )                 |        |        | (1,203 | )      |       |        | (3,609 | )       |        |         | (3,609 | )      
|                                                                                                    |                                                            |                                         |                                                   |                   |        |        |        |        |       |        |        |         |        |         |        |        

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 |        | Nine Months Ended
|                                                                         |                                                                         | September 30,      |        | September 30,    
|                                                                         |                                                                         |                    |        |                  
|                                                                         |                                                                         | 2002               |        | 2001              |   | 2002 |        | 2001      
|                                                                         |                                                                         |                    |        |                   |   |      |        |           
|Income available to common unitholders                                   |                                                                         |                    | 26,918 |                   |   |      | 11,383 |            |   |   | 48,532 |            |   |   | 39,639 |           
|Income available to common unitholders allocated
    to general partner  |                                                                         |                    | (269   | )                 |   |      | (114   | )          |   |   | (485   | )          |   |   | (396   | )         
|                                                                         |                                                                         |                    |        |                   |   |      |        |            |   |   |        |            |   |   |        |           
|Income available to common unitholders allocated
    to limited partners |                                                                         | $                  | 26,649 |                   |   | $    | 11,269 |            |   | $ | 48,047 |            |   | $ | 39,243 |           
|                                                                         |                                                                         |                    |        |                   |   |      |        |            |   |   |        |            |   |   |        |           
|Per unit data:                                                           |                                                                         |                    |        |                   |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Income from continuing operations 
    basic                           |                    | $      | 0.41              |   |      | $      | 0.45       |   |   | $      | 1.40       |   |   | $      | 1.51       |  
|                                                                         |                                                                         |                    |        |                   |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Income from continuing operations 
    diluted                         |                    | $      | 0.41              |   |      | $      | 0.44       |   |   | $      | 1.39       |   |   | $      | 1.49       |  
|                                                                         |                                                                         |                    |        |                   |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Net income from discontinued
    operations  basic                     |                    | $      | 0.56              |   |      | $      | 0.03       |   |   | $      | 0.47       |   |   | $      | 0.08       |  
|                                                                         |                                                                         |                    |        |                   |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Net income from discontinued
    operations  diluted                   |                    | $      | 0.55              |   |      | $      | 0.03       |   |   | $      | 0.47       |   |   | $      | 0.08       |  
|                                                                         |                                                                         |                    |        |                   |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Distributions to Series B preferred
    unitholders  basic and diluted |                    | $      | (0.06             | ) |      | $      | (0.06      | ) |   | $      | (0.18      | ) |   | $      | (0.18      | )
|                                                                         |                                                                         |                    |        |                   |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Distributions to Series C preferred
    unitholders  basic and diluted |                    | $      | (0.04             | ) |      | $      | (0.04      | ) |   | $      | (0.12      | ) |   | $      | (0.12      | )
|                                                                         |                                                                         |                    |        |                   |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Income available to common
    unitholders  basic                      |                    | $      | 0.87              |   |      | $      | 0.37       |   |   | $      | 1.57       |   |   | $      | 1.28       |  
|                                                                         |                                                                         |                    |        |                   |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Income available to common
    unitholders  diluted                    |                    | $      | 0.86              |   |      | $      | 0.37       |   |   | $      | 1.56       |   |   | $      | 1.27       |  
|                                                                         |                                                                         |                    |        |                   |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Distributions declared                                                  |                    | $      | 0.48              |   |      | $      | 0.46       |   |   | $      | 1.43       |   |   | $      | 1.39       |  
|                                                                         |                                                                         |                    |        |                   |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Weighted average units  basic                                          |                    |        | 31,047,380        |   |      |        | 30,502,457 |   |   |        | 30,873,231 |   |   |        | 30,868,393 |  
|                                                                         |                                                                         |                    |        |                   |   |      |        |            |   |   |        |            |   |   |        |           
|                                                                         | Weighted average units  diluted                                        |                    |        | 31,178,281        |   |      |        | 30,879,316 |   |   |        | 31,097,274 |   |   |        | 31,191,185 |  
|                                                                         |                                                                         |                    |        |                   |   |      |        |            |   |   |        |            |   |   |        |           

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              |                                                 |        |          |   |         |        |         |   |       |       | (442 | )  |   |         | (43,638 | )     |   |         | (44,080 | )    
|                            | Contributions from Summit Properties related to: |                                                 |        |           |   |         |        |          |   |       |       |      |    |   |         |         |       |   |         |         |      
|                            |                                                  | Proceeds from dividend and stock purchase plans |        |           |  |         |        |          |  |       |       |      | 91 |   |         |         | 9,023 |   |         |         | 9,114 |  
|                            |                                                  | Exercise of stock options                       |        |           |  |         |        |          |  |       |       |      | 19 |   |         |         | 1,849 |   |         |         | 1,868 |  
|                            |                                                  | Amortization of restricted stock grants         |        |           |  |         |        |          |  |       |       |      | 6  |   |         |         | 575   |   |         |         | 581   |  
|                            |                                                  | Issuance of restricted stock grants             |        |           |  |         |        |          |  |       |       |      |   |   |         |         | 22    |   |         |         | 22    |  
|                            |                                                  | Netdown of restricted stock grants              |        |           |  |         |        |          |  |       |       |      | (3 | ) |         |         | (323  | ) |         |         | (326  | )
|                            | Issuance of employee notes receivable            |                                                 |        |          |   |         |        |         |   |       |       | (75  | )  |   |         | (7,447  | )     |   |         | (7,522  | )    
|                            | Repayments of employee notes receivable          |                                                 |        |          |   |         |        |         |   |       |       | 19   |    |   |         | 1,897   |       |   |         | 1,916   |      
|                            | Distributions to preferred unitholders           |                                                 |        |          |   |         |        |         |   |       |       | (93  | )  |   |         | (9,222  | )     |   |         | (9,315  | )    
|                            | Net income                                       |                                                 |        |          |   |         |        |         |   |       |       | 578  |    |   |         | 57,269  |       |   |         | 57,847  |      
|                            |                                                  |                                                 |        |           |   |         |        |          |   |       |       |      |    |   |         |         |       |   |         |        
|Balance, September 30, 2002 |                                                  | $                                               | 82,713 |           |   | $       | 53,547 |          |   | $     | 4,787 |      |    | $ | 400,905 |         |       | $ | 541,952 |        
|                            |                                                  |                                                 |        |           |   |         |        |          |   |       |       |      |    |   |         |         |       |   |         |        

See notes to consolidated financial statements.

6



---



##### 



SUMMIT PROPERTIES PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Dollars in thousands)


(Unaudited)


|                                                                                      |                                                                                                    |                                           |        |         |         |   |        |         |         |  
|------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | ----------------------------------------- | ------ | ------- | ------- | - | ------ | ------- | ------- | -
|                                                                                      |                                                                                                    |                                          
|                                                                                      |                                                                                                    | Nine Months Ended                        
|                                                                                      |                                                                                                    | September 30,                            
|                                                                                      |                                                                                                    |                                          
|                                                                                      |                                                                                                    | 2002                                      |        | 2001   
|                                                                                      |                                                                                                    |                                           |        |        
|Cash flows from operating activities:                                                 |                                                                                                    |                                           |        |         |         |   |        |        
|Net income                                                                            |                                                                                                    | $                                         | 57,847 |         |         | $ | 48,954 |        
|Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                                                    |                                           |        |         |         |   |        |        
|                                                                                      | Income on equity method investments                                                                |                                           |        | (328    | )       |   |        | (357    | )      
|                                                                                      | Gain on sale of real estate assets                                                                 |                                           |        | (26,530 | )       |   |        | (13,570 | )      
|                                                                                      | Gain on sale of real estate assets 
    joint ventures                                            |                                           |        | (5,423  | )       |   |        | (271    | )      
|                                                                                      | Impairment loss on investments in technology
    investments                                       |                                           |        |        |         |   |        | 1,217   |        
|                                                                                      | Depreciation and amortization                                                                      |                                           |        | 30,708  |         |   |        | 31,562  |        
|                                                                                      | Increase in restricted cash                                                                        |                                           |        | (941    | )       |   |        | (266    | )      
|                                                                                      | Increase in other assets                                                                           |                                           |        | (3,478  | )       |   |        | (3,495  | )      
|                                                                                      | Decrease in accrued interest payable                                                               |                                           |        | (1,061  | )       |   |        | (1,414  | )      
|                                                                                      | Increase in accounts payable and accrued expenses                                                  |                                           |        | 2,792   |         |   |        | 9,015   |        
|                                                                                      | Decrease in security deposits and prepaid rents                                                    |                                           |        | (628    | )       |   |        | (86     | )      
|                                                                                      |                                                                                                    |                                           |        |         |         |   |        |        
|                                                                                      |                                                                                                    | Net cash provided by operating activities |        |         | 52,958  |   |        |         | 71,289  |  
|                                                                                      |                                                                                                    |                                           |        |         |         |   |        |        
|Cash flows from investing activities:                                                 |                                                                                                    |                                           |        |         |         |   |        |        
|                                                                                      | Construction of real estate assets and land
    acquisitions                                       |                                           |        | (90,574 | )       |   |        | (85,760 | )      
|                                                                                      | Acquisition of real estate assets                                                                  |                                           |        | (17,866 | )       |   |        |        |        
|                                                                                      | Proceeds from sale of real estate assets                                                           |                                           |        | 87,695  |         |   |        | 72,950  |        
|                                                                                      | Capitalized interest                                                                               |                                           |        | (7,680  | )       |   |        | (9,053  | )      
|                                                                                      | Investment in real estate joint ventures                                                           |                                           |        | (6,915  | )       |   |        | (4,075  | )      
|                                                                                      | Distribution from real estate joint ventures                                                       |                                           |        | 936     |         |   |        | 449     |        
|                                                                                      | Proceeds from sale of real estate
    assets  joint ventures                                      |                                           |        | 11,202  |         |   |        | 762     |        
|                                                                                      | Contribution from historic tax venture partner                                                     |                                           |        | 600     |         |   |        |        |        
|                                                                                      | Recurring capital expenditures                                                                     |                                           |        | (3,159  | )       |   |        | (3,736  | )      
|                                                                                      | Non-recurring capital expenditures                                                                 |                                           |        | (1,056  | )       |   |        | (2,881  | )      
|                                                                                      | Corporate and other asset additions and office
    tenant improvements                             |                                           |        | (477    | )       |   |        | (1,566  | )      
|                                                                                      | Decrease in notes receivable                                                                       |                                           |        | 63      |         |   |        | 8       |        
|                                                                                      |                                                                                                    |                                           |        |         |         |   |        |        
|                                                                                      |                                                                                                    | Net cash used in investing activities     |        |         | (27,231 | ) |        |         | (32,902 | )
|                                                                                      |                                                                                                    |                                           |        |         |         |   |        |        
|Cash flows from financing activities:                                                 |                                                                                                    |                                           |        |         |         |   |        |        
|                                                                                      | Net borrowings (repayments) on line of credit                                                      |                                           |        | 62,500  |         |   |        | (16,500 | )      
|                                                                                      | Proceeds from issuance of unsecured medium-term
    notes                                          |                                           |        |        |         |   |        | 60,000  |        
|                                                                                      | Repayments of unsecured medium-term notes                                                          |                                           |        | (25,000 | )       |   |        | (30,000 | )      
|                                                                                      | Repayments of unsecured notes                                                                      |                                           |        | (16,000 | )       |   |        |        |        
|                                                                                      | Proceeds from issuance of mortgage note                                                            |                                           |        | 6,900   |         |   |        |        |        
|                                                                                      | Repayments of mortgage debt                                                                        |                                           |        | (6,614  | )       |   |        | (4,061  | )      
|                                                                                      | Repayments of tax exempt bonds                                                                     |                                           |        | (340    | )       |   |        | (620    | )      
|                                                                                      | Payment of deferred financing costs                                                                |                                           |        | (393    | )       |   |        | (1,104  | )      
|                                                                                      | Proceeds from termination of interest rate swap                                                    |                                           |        | 1,510   |         |   |        |        |        
|                                                                                      | Distributions to common unitholders                                                                |                                           |        | (43,507 | )       |   |        | (42,123 | )      
|                                                                                      | Distributions to Series B preferred
    unitholders                                                |                                           |        | (5,706  | )       |   |        | (5,706  | )      
|                                                                                      | Distributions to Series C preferred
    unitholders                                                |                                           |        | (3,609  | )       |   |        | (3,609  | )      
|                                                                                      | Issuance of employee notes receivable                                                              |                                           |        | (7,522  | )       |   |        | (3,093  | )      
|                                                                                      | Repayments of employee notes receivable                                                            |                                           |        | 1,916   |         |   |        | 1,334   |        
|                                                                                      | Contributions from Summit Properties related to:                                                   |                                           |        |         |         |   |        |         |        
|                                                                                      | Net proceeds from dividend reinvestment and stock
    purchase plans and exercise of stock options |                                           |        | 10,677  |         |   |        | 6,600   |        
|                                                                                      |                                                                                                    |                                           |        |         |         |   |        |        
|                                                                                      |                                                                                                    | Net cash used in financing activities     |        |         | (25,188 | ) |        |         | (38,882 | )
|                                                                                      |                                                                                                    |                                           |        |         |         |   |        |        
|Net increase (decrease) in cash and cash
    equivalents                              |                                                                                                    |                                           | 539    |         |         |   | (495   | )      
|Cash and cash equivalents, beginning of year                                          |                                                                                                    |                                           | 1,814  |         |         |   | 3,148  |        
|                                                                                      |                                                                                                    |                                           |        |         |         |   |        |        
|Cash and cash equivalents, end of period                                              |                                                                                                    | $                                         | 2,353  |         |         | $ | 2,653  |        
|                                                                                      |                                                                                                    |                                           |        |         |         |   |        |        
|Supplemental disclosure of cash flow
    information                                 |                                                                                                    |                                           |        |         |         |   |        |        
|                                                                                      | Cash paid for interest, net of capitalized
    interest                                            |                                           | $      | 27,560  |         |   | $      | 31,503  |        
|                                                                                      |                                                                                                    |                                           |        |         |         |   |        |        

See notes to consolidated financial statements.

7



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##### 



SUMMIT PROPERTIES INC.



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
consolidated 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 nine
months ended September 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 primarily Class A luxury apartment
communities for Summit, which is a self-administered and
self-managed real estate investment trust (REIT). As
of September 30, 2002, Summit held 88.6% of our outstanding
common units, consisting of a 1% general partner interest and an
87.6% 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 In June
2001, the Financial Accounting Standards Board
(FASB) approved Statement of Financial Accounting
Standards (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 or results of operations.

In August 2001, the FASB issued SFAS
No. 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)

8



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##### 



SUMMIT PROPERTIES INC.


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




No. 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. Along with
establishing a single accounting model, based on the framework
established in SFAS No. 121, for long-lived assets to be
disposed of by sale, this standard retains the basic provisions
of APB No. 30 for the presentation of discontinued
operations in the income statement but broadens that
presentation to include a component of an entity. We adopted
SFAS No. 144 on January 1, 2002 and its adoption did
not have a material impact on our financial position or results
of operations for the three and nine months ended
September 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
consolidated statements of earnings prospectively from the date
of adoption.

In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64, and
Amendment of FASB Statement No. 13, and Technical
Corrections. This statement requires gains and losses from
the extinguishment of debt to be classified as extraordinary
only if they meet the criteria for extraordinary treatment set
forth in APB No. 30. The statement also amends SFAS
No. 13, Accounting For Leases, to require that
certain lease modifications that have economic effects similar
to sale-leaseback transactions be accounted for in the same
manner as such transactions. Finally, the statement makes
certain technical corrections, which the FASB deemed to be
non-substantive, to a number of existing accounting
pronouncements. The rescission of SFAS Nos. 4, 44 and 64 is
effective in 2003. The amendments to SFAS No. 13 are
effective for transactions occurring after May 15, 2002,
and all other provisions of the statement are effective for
financial statements issued on or after May 15, 2002. The
effect of adopting SFAS No. 145 for those items already
effective did not have a material impact on our financial
position or results of operations.

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-based compensation outstanding. There were 130,901 and
224,042 units added to basic weighted average units outstanding
for the three and nine months ended September 30, 2002.
There were 376,859 and 322,792 units added to basic weighted
average units outstanding for the three and nine months ended
September 30, 2001. Dilution caused by this stock-based
compensation decreased income available to common unitholders
per unit by $0.01 for the three and nine months ended
September 30, 2002, had no effect on income available to
common unitholders per unit for the three months ended September
30, 2001 and decreased net income per share by $0.01 for the
nine months ended September 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 (loss) on
equity investments: Real estate joint ventures in our
consolidated statements of earnings.

9



---



##### 



SUMMIT PROPERTIES INC.


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




The following are condensed balance sheets as of
September 30, 2002 and December 31, 2001 and
statements of earnings for the nine months ended
September 30, 2002 and 2001 for Station Hill. The balance
sheets and statements of earnings 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). Included in the statement of earnings information
below for the nine months ended September 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.

|                          |                                         |                |        |              |  |   |        |        | 
|------------------------- | --------------------------------------- | -------------- | ------ | ------------ |  | - | ------ | ------ | 
|                          |                                         |               
|                          |                                         | Balance Sheets
|                          |                                         |               
|                          |                                         | September 30,  |        | December 31,
|                          |                                         | 2002           |        | 2001        
|                          |                                         |                |        |             
|Real estate assets, net   |                                         | $              | 72,822 |              |  | $ | 74,261 |       
|Cash and cash equivalents |                                         |                | 816    |              |  |   | 901    |       
|Other assets              |                                         |                | 333    |              |  |   | 283    |       
|                          |                                         |                |        |              |  |   |        |       
|                          | Total assets                            |                | $      | 73,971       |  |   | $      | 75,445 | 
|                          |                                         |                |        |              |  |   |        |       
|Mortgages payable         |                                         | $              | 58,937 |              |  | $ | 59,536 |       
|Other liabilities         |                                         |                | 1,218  |              |  |   | 575    |       
|Partners capital         |                                         |                | 13,816 |              |  |   | 15,334 |       
|                          |                                         |                |        |              |  |   |        |       
|                          | Total liabilities and partners capital |                | $      | 73,971       |  |   | $      | 75,445 | 
|                          |                                         |                |        |              |  |   |        |       

|                                                            |                               |                        |       |       |       |   |       |       |       | 
|----------------------------------------------------------- | ----------------------------- | ---------------------- | ----- | ----- | ----- | - | ----- | ----- | ----- | 
|                                                            |                               |                       
|                                                            |                               | Statements of Earnings
|                                                            |                               |                       
|                                                            |                               |                       
|                                                            |                               | Nine Months Ended     
|                                                            |                               | September 30,         
|                                                            |                               |                       
|                                                            |                               | 2002                   |       | 2001 
|                                                            |                               |                        |       |      
|Revenues                                                    |                               | $                      | 7,517 |       |       | $ | 9,235 |      
|Expenses:                                                   |                               |                        |       |       |       |   |       |      
|                                                            | Property operating            |                        |       | 2,838 |       |   |       | 3,253 |      
|                                                            | Interest                      |                        |       | 2,975 |       |   |       | 3,339 |      
|                                                            | Depreciation and amortization |                        |       | 2,222 |       |   |       | 2,357 |      
|                                                            |                               |                        |       |       |       |   |       |      
|                                                            |                               | Total expenses         |       |       | 8,035 |   |       |       | 8,949 | 
|                                                            |                               |                        |       |       |       |   |       |      
|(Loss) income before gain on sale of real estate
    assets |                               |                        | (518  | )     |       |   | 286   |      
|Gain on sale of real estate assets                          |                               |                        |      |       |       |   | 1,082 |      
|                                                            |                               |                        |       |       |       |   |       |      
|Net (loss) income                                           |                               | $                      | (518  | )     |       | $ | 1,368 |      
|                                                            |                               |                        |       |       |       |   |       |      

We formerly owned a 50% interest in a joint
venture which developed and operated an apartment community
located in Atlanta, Georgia known as The Heights at Cheshire
Bridge. This joint venture was accounted for under the equity
method of accounting and its operating results are presented in
Income (loss) on equity investments: Real estate
joint ventures in our consolidated statements of earnings.
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. On September 27, 2002, the joint venture sold The
Heights at Cheshire Bridge to an unrelated third party and the
joint venture was dissolved. We received a preferred return on
our capital contribution in the amount of 9% per year compounded
annually through the sale date. We were entitled to 50% of the
income based on our equity interest, after all preferred return
payments were made.

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-

10



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##### 



SUMMIT PROPERTIES INC.


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




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 that 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
required to fund such cost overruns, up to $5.0 million. This
loan would accrue interest at the rate of eleven percent (11%)
per year. Subsequent to September 30, 2002, we received
formal notice from the lender that there are, in fact, cost
overruns which we will be responsible for funding through the
limited liability company. The total amount of the overruns has
not yet been determined. 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
of 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 a major financial services institution (the
investor member) 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. 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
September 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 the investor
member 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 the investor member 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 of such previously invested funds. In
such an event, we would expect to replace this equity investment
with funds from other financing sources. This joint venture is
consolidated into our financial statements.

On July 24, 2002, we entered into a joint
venture with a major financial services institution (the
investor member) to redevelop Summit Roosevelt in
Washington, D.C., formerly the Hadleigh apartment hotel, in a
manner to permit the use of federal rehabilitation income tax
credits. The investor member will contribute approximately $6.6
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
September 30, 2002, the investor member had contributed
$400,000. The investor members interest in the joint
venture is subject to put/call rights during the sixth and
seventh years after Summit Roosevelt 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 the investor
member 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 the investor member 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 of such previously invested funds. In
such an event, we would expect to replace this equity investment
with funds from other financing sources. This joint venture is
consolidated into our financial statements.

11



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SUMMIT PROPERTIES INC.


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




3. COMMUNITY ACQUISITIONS AND
DISPOSITIONS

On September 27, 2002, we sold an apartment
community formerly known as Summit Mayfaire (144 apartment
homes) located in Raleigh, North Carolina for $10.8 million
as part of our strategy to sell communities which we believe
have below-average growth prospects and inefficient numbers of
apartment homes. The disposition of Summit Mayfaire resulted in
the recognition of a gain on sale of $2.1 million. The net
proceeds of $10.5 million were used to reduce amounts
outstanding under our unsecured credit facility. The revenues
and property operating income from this community represented
0.7% and 0.6% of total revenues and total property operating
income for the nine months ended September 30, 2002.

On August 15, 2002, we sold an apartment
community formerly known as Summit Pike Creek
(264 apartment homes) located in Newark, Delaware for
$25.1 million as part of our strategy to exit our non-core
markets. The disposition of Summit Pike Creek completed our exit
of the Delaware market and resulted in the recognition of a gain
on sale of $14.8 million. The net proceeds of
$13.3 million were placed into escrow in accordance with
like-kind exchange rules and regulations and are being used to
fund development and acquisition activities. The revenues and
property operating income from this community represented 1.2%
and 1.3% of total revenues and total property operating income
for the nine months ended September 30, 2002.

On July 1, 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. The
following summary of selected unaudited pro forma results of
operations presents information as if the purchase of Summit San
Raphael had occurred at the beginning of each period presented.
The pro forma information is provided for informational purposes
only and is not indicative of results that would have occurred
or which may occur in the future (in thousands, except per unit
amounts):

|                                                 |         |                    |        |                   |  |      |        |      |  |   |         |      |  |   |         |      | 
|------------------------------------------------ | ------- | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------- | ---- |  | - | ------- | ---- | 
|                                                 |         |                    |        |                  
|                                                 |         | Three Months Ended |        | Nine Months Ended
|                                                 |         | September 30,      |        | September 30,    
|                                                 |         |                    |        |                  
|                                                 |         | 2002               |        | 2001              |  | 2002 |        | 2001
|                                                 |         |                    |        |                   |  |      |        |     
|Total revenues                                   |         | $                  | 42,617 |                   |  | $    | 48,003 |      |  | $ | 130,733 |      |  | $ | 143,709 |     
|Income from continuing operations                |         |                    | 12,732 |                   |  |      | 13,897 |      |  |   | 43,551  |      |  |   | 47,185  |     
|Income available to common unitholders           |         |                    | 26,918 |                   |  |      | 11,580 |      |  |   | 48,761  |      |  |   | 40,290  |     
|Income from continuing operations per unit:      |         |                    |        |                   |  |      |        |      |  |   |         |      |  |   |         |     
|                                                 | Basic   |                    | $      | 0.41              |  |      | $      | 0.46 |  |   | $       | 1.41 |  |   | $       | 1.53 | 
|                                                 | Diluted |                    |        | 0.41              |  |      |        | 0.45 |  |   |         | 1.40 |  |   |         | 1.51 | 
|Income available to common unitholders per unit: |         |                    |        |                   |  |      |        |      |  |   |         |      |  |   |         |     
|                                                 | Basic   |                    |        | 0.87              |  |      |        | 0.38 |  |   |         | 1.58 |  |   |         | 1.31 | 
|                                                 | Diluted |                    |        | 0.86              |  |      |        | 0.38 |  |   |         | 1.57 |  |   |         | 1.29 | 

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 1.5% of both
total revenues and total property operating income for the nine
months ended September 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. The
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

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SUMMIT PROPERTIES INC.


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




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.

During the nine months ended September 30,
2001, we sold four apartment communities and one parcel of land
for an aggregate sales price of $62.5 million. The four
communities sold were the former Summit Palm Lake
(304 apartment homes) located in West Palm Beach, Florida,
Summit Arbors and Summit Radbourne (an aggregate of
345 apartment homes) both located in Charlotte, North
Carolina and Summit Lofts (200 apartment homes) located in
Palm Harbour, Florida. The parcel of land was located in
Richmond, Virginia. The disposition of these four communities
and parcel of land resulted in the recognition of a net gain on
sale of $13.9 million.

In accordance with SFAS No. 144, net income
and gain (loss) on disposition of real estate for communities
sold or considered held for sale after December 31, 2001
are reflected in our consolidated statements of earnings as
discontinued operations for all periods presented
and those communities sold or considered held for sale prior to
December 31, 2001 remain in continuing
operations. There were no assets considered held for sale
as of September 30, 2002. Subsequent to September 30,
2002, we executed separate contracts for the sale of two
communities. See Footnote 14, Subsequent Events.

Below is a summary of discontinued operations for
Summit New Albany, Summit Pike Creek and Summit Mayfaire as of
September 30, 2002 (in thousands):

|                                                                                                  |                        |               |        |               |  |      |       |       |  |   |        |       |  |   |       |       | 
|------------------------------------------------------------------------------------------------- | ---------------------- | ------------- | ------ | ------------- |  | ---- | ----- | ----- |  | - | ------ | ----- |  | - | ----- | ----- | 
|                                                                                                  |                        |               |        |              
|                                                                                                  |                        | Three Months  |        | Nine Months  
|                                                                                                  |                        | Ended         |        | Ended        
|                                                                                                  |                        | September 30, |        | September 30,
|                                                                                                  |                        |               |        |              
|                                                                                                  |                        | 2002          |        | 2001          |  | 2002 |       | 2001 
|                                                                                                  |                        |               |        |               |  |      |       |      
|Property revenues:                                                                                |                        |               |        |               |  |      |       |       |  |   |        |       |  |   |       |      
|                                                                                                  | Rental revenues        |               | $      | 565           |  |      | $     | 2,018 |  |   | $      | 4,331 |  |   | $     | 6,074 | 
|                                                                                                  | Other property revenue |               |        | 20            |  |      |       | 105   |  |   |        | 213   |  |   |       | 350   | 
|                                                                                                  |                        |               |        |               |  |      |       |       |  |   |        |       |  |   |       |      
|Total property revenues                                                                           |                        |               | 585    |               |  |      | 2,123 |       |  |   | 4,544  |       |  |   | 6,424 |      
|Property operating and maintenance expense                                                        |                        |               | 151    |               |  |      | 777   |       |  |   | 1,653  |       |  |   | 2,268 |      
|Depreciation                                                                                      |                        |               | 14     |               |  |      | 447   |       |  |   | 883    |       |  |   | 1,339 |      
|Interest and amortization                                                                         |                        |               | 29     |               |  |      | 111   |       |  |   | 174    |       |  |   | 397   |      
|                                                                                                  |                        |               |        |               |  |      |       |       |  |   |        |       |  |   |       |      
|Income from discontinued operations before net
    gain on disposition of discontinued operations |                        |               | 391    |               |  |      | 788   |       |  |   | 1,834  |       |  |   | 2,420 |      
|Net gain on disposition of discontinued operations                                                |                        |               | 16,900 |               |  |      |      |       |  |   | 12,691 |       |  |   |      |      
|                                                                                                  |                        |               |        |               |  |      |       |       |  |   |        |       |  |   |       |      
|Net Income from discontinued operations                                                           |                        | $             | 17,291 |               |  | $    | 788   |       |  | $ | 14,525 |       |  | $ | 2,420 |      
|                                                                                                  |                        |               |        |               |  |      |       |       |  |   |        |       |  |   |       |      

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 September 30, 2002, the outstanding balance of the
credit facility was $156.5 million, leaving
$68.5 million of remaining availability on the $225.0
million commitment.

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SUMMIT PROPERTIES INC.


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 September 27, 2002, we entered into an
amendment to the credit agreement related to our unsecured line
of credit which modified certain definitions and financial
covenants that we are required to meet at the end of each
quarter.

On April 20, 2000, we commenced a program
for the sale of up to $250.0 million aggregate principal amount
of medium-term notes (MTN) 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 September 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 September 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.

During the three months ended September 30,
2002, we refinanced a fixed rate conventional mortgage with a
$2.4 million balance at the time of the refinancing. The new
variable rate mortgage loan has a principal balance of
$6.9 million and is payable monthly on an interest only
basis with principal due at maturity. This mortgage bears
interest at a rate of LIBOR plus 170 basis points (3.51% as of
September 30, 2002). The principal balance and any unpaid
interest are due on August 1, 2005; however, there are two
one-year extension options.

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 No. 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 No. 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 September 30, 2002 was
4.1675%. The fair value of the interest rate swap was an asset
of $3.7 million as of September 30, 2002. The swap has been
designated

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SUMMIT PROPERTIES INC.


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




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 SFAS No. 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 nine months ended September 30,
2002, Summit granted 1,773 shares of restricted stock valued at
$35,000 to employees under its 1994 Stock Option and Incentive
Plan. During the nine months ended September 30, 2001,
Summit granted 11,804 shares (net of 12,202 forfeited shares for
terminated employees) of restricted stock valued at $375,000
(net of $234,000 in forfeited shares for terminated employees)
under this plan. The value of the restricted shares has been
recorded as unamortized restricted stock compensation and is
being amortized to expense over the vesting periods, which range
from three to five years.

During the nine months ended September 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. There were no
issuances of restricted stock in connection with this plan
during the nine months ended September 30, 2002. Unearned
compensation related to these restricted stock grants is being
amortized to expense over the vesting periods.

During the nine months ended September 30,
2002, certain Summit employees surrendered 17,143 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 nine months ended September 30, 2002 and 2001 were as
follows:



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A. | We accrued distributions payable in the amounts
    of $14.8 million as of September 30, 2002 and $14.1 million
    as of September 30, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | B. | Summit issued 1,773 shares of restricted stock
    valued at $35,000 during the nine months ended
    September 30, 2002 under its 1994 Stock Option and
    Incentive Plan. Summit issued 11,804 shares (net of 12,202
    forfeited shares for terminated employees) of restricted stock
    valued at $375,000 (net of $234,000 in forfeited shares for
    terminated employees) during the nine months ended
    September 30, 2001 under this plan. Summit issued 94,818
    shares of restricted stock valued at $2.4 million during
    the nine months ended September 30, 2001 in connection with
    its Performance Stock Award Plan. There were no issuances of
    restricted stock in connection with this plan during the nine
    months ended September 30, 2002. During the nine months
    ended September 30, 2002, certain Summit employees
    surrendered 17,143 restricted shares valued at $326,000 to
    satisfy the income tax liability related to the vesting of
    restricted stock.
|
| | C. | Summit issued 13,658 shares of common stock in
    exchange for 13,658 common units of limited partnership interest
    in the Operating Partnership valued at $285,000 during the nine
    months ended September 30, 2002. Summit issued 145,907 shares of
    common stock in exchange for 145,907 common units valued at $3.9
    million during the nine months ended September 30, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | D. | We issued 66,376 common units at a price of
    $28.625 per unit during the nine months ended September 30,
    2001 in connection with the purchase of a building and a parcel
    of land.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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SUMMIT PROPERTIES INC.


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






| |    |                                                                                                                                                                                                          
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | E. | As partial consideration for the purchase of the
    former Summit Pike Creek community on August 15, 2002, the
    purchaser assumed a tax-exempt bond balance of $11.3 million at
    the date of sale.



| |    |                                                                                                                                                                                                                                                                                                    
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | F. | 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 seven
development projects currently under construction was
$100.3 million as of September 30, 2002. Anticipated
construction completion dates of the projects range from the
fourth quarter of 2002 to the third quarter of 2005.

In January 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 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 change order 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
will serve as a credit enhancement to the developers
construction loan. In the event that any amount under the letter
of credit is drawn upon, 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 through
December 31, 2011. 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). Each
employment agreement also requires that Summit provide
participation in its life insurance plan, office space,
information systems support and administrative support for the
remainder of each officers life, and participation in its
health and dental insurance plans until the last to die of the
officer or such officers spouse. 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 primarily
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 such as swimming pools, clubhouses, exercise rooms and
Peak Services. Peak Services may 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

16



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SUMMIT PROPERTIES INC.


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




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, Disclosures about Segments of an Enterprise
and Related Information.

10. PREFERRED UNITS

As of September 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 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, whether or not consecutive, 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 made distributions to the holders of the Series B
preferred units in the aggregate amount of $5.7 million during
each of the nine month periods ended September 30, 2002 and 2001.

As of September 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, whether
or not consecutive, (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 made distributions to the
holder of the Series C preferred units in the aggregate
amount of $3.6 million during each of the nine month periods
ended September 30, 2002 and 2001.

11. COMMON STOCK REPURCHASE
PROGRAM

Summit has a common stock repurchase program,
approved by its Board of Directors, pursuant to which Summit is
authorized to purchase up to $56.0 million of currently issued
and outstanding shares of its common stock. 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 nine months ended September 30,
2002 or 2001. As of September 30, 2002, Summit had
repurchased 288,200 shares of common stock valued at $5.7
million under its repurchase program.

17



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SUMMIT PROPERTIES INC.


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




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 Summit instituted, a loan program. As a result of
recent legislation, Summit is no longer permitted to make loans
to its executive officers and, therefore, new issuances under
the loan program have been terminated. Under the terms of the
loan program, Summit lent 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. 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 three months ended June 30, 2002, Summit issued
$6.7 million of loans to six of its executive officers. If the
market price of Summits common stock falls materially
below the price at which the shares of stock were purchased, the
proceeds of the sale of the common stock may not be sufficient
to repay the loan. The closing market price of our common stock
was $19.40 per share on September 30, 2002. This common
stock price is below the price at which all loans were issued
and, therefore, the proceeds from the shares which serve as
collateral for the loans would not be sufficient to repay the
loans in full. As of September 30, 2002, Summit had loans
receivable in the net amount of $20.1 million which were
collateralized by 936,000 shares of its common stock valued at
$18.1 million. However, since the loans are full recourse,
Summit has the right to collect any additional amount owed
directly from the officer or employee to the extent such officer
or employee is able to pay such amount. Summit had loans
receivable in the net amount of $14.5 million as of
December 31, 2001.

13. DIVIDEND REINVESTMENT AND STOCK
PURCHASE PLANS

Summit has a non-qualified employee stock
purchase plan (ESPP) as well as a dividend
reinvestment and direct stock purchase plan (DRIP).
Transactions under the ESPP were suspended effective
July 2, 2002. Direct stock purchases under the DRIP were
suspended effective October 31, 2002 and dividend
reinvestment under the DRIP will be suspended effective
November 15, 2002.  The dividend reinvestment and
direct stock purchase plan provided both new investors and
existing shareholders of Summits stock with a method to
purchase shares of common stock and/or the ability for those
shareholders to designate all, a portion or none of the cash
dividends on shares of Summits common stock owned for
reinvestment in more shares of Summits common stock. The
employee stock purchase plan allowed Summits employees to
purchase up to $25,000 per year of Summits common stock at
a discount of 15%.

14. SUBSEQUENT EVENTS

Subsequent to September 30, 2002, we
executed separate contracts for the sale of two communities. The
assets of these two communities were recorded at the lower of
cost or fair value less costs to sell, or $40.5 million in
the aggregate as of September 30, 2002. The revenues and
property operating income of these two communities represented
4.3% and 4.4% of total revenues and property operating income
for the nine months ended September 30, 2002. The sales of
these two communities are subject to customary closing
conditions and are both expected to occur during the three
months ended December 31, 2002.

On November 12, 2002, we sold one of the two
communities to which reference is made above. Summit Stonefield,
located in Yardley, Pennsylvania, was sold for $32.3 million as
part of our strategy to exit our non-core markets. We expect to
record a gain on disposition of Summit Stonefield.

18



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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, may,
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, construction
    material defects and increases in construction costs;                                                                                                                                                  
| 
| | the failure of investments 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;                                                                                                                                                                                                                                                                                                              

19



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##### 





|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the inability to refinance existing indebtedness
    or to refinance existing indebtedness on favorable terms;                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| 
| | changes in interest rates;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| 
| | legislative and regulatory changes, including
    changes to laws governing the taxation of real estate investment
    trusts (REITs);                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| 
| | changes in accounting principles generally
    accepted in the United States of America (GAAP), or
    policies and guidelines applicable to REITs; and                                                                                                                                                                                                                                                                                                                                                                                                                                 
| 
| | those factors discussed below and in the sections
    entitled Results of Operations for the Three and Nine
    Months Ended September 30, 2002 and 2001 on
    page 21 of this report, Operating Performance of Our
    Fully Stabilized Communities beginning on page 23 of
    this report, Operating Performance of Our Communities in
    Lease-up beginning on page 25 of this report,
    Factors Affecting the Performance of Our Development
    Communities beginning on page 33 of this report and
    Environmental Matters beginning on page 34 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 are a real estate operating company that
focuses on the operation, development and acquisition of
primarily 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.

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 renovations of apartment
homes. Excluding 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.

20



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##### 



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, Capitalization of Interest
Cost, 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 Nine
    Months Ended September 30, 2002 and 2001

Income from continuing operations before gain on
sale of real estate assets and impairment loss decreased to
$24.1 million for the nine months ended September 30, 2002
from $33.9 million for the nine months ended September 30,
2001 and to $7.3 million for the three months ended
September 30, 2002 from $10.6 million for the three months
ended September 30, 2001. The decrease is primarily due to
a reduction in property operating income from continued
operations of $12.3 million for the nine-month period and $5.4
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

21



---



##### 



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 and an
increase in the supply of apartment homes, in all of our markets
during the past year and the nine months ended
September 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 and/or more job losses,
primary drivers 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. The favorable interest rate
environment has also 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 into 2003.

Operating Performance of Our Portfolio of
Communities

The operating performance of our communities for
the three and nine months ended September 30, 2002 and 2001
is summarized below (dollars in thousands):

|                                                 |                                    |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |         |  |   |         |         |  |  |       |       |  
|------------------------------------------------ | ---------------------------------- | -------------------------------- | ------ | ------------------------------- |  | -------- | ------ | ------ |  | ---- | ----- | -------- | - | - | ------- | ------- |  | - | ------- | ------- |  |  | ----- | ----- | -
|                                                 |                                    |                                  |        |                                
|                                                 |                                    | Three Months Ended September 30, |        | Nine Months Ended September 30,
|                                                 |                                    |                                  |        |                                
|                                                 |                                    | 2002                             |        | 2001                            |  | % Change |        | 2002   |  | 2001 |       | % Change
|                                                 |                                    |                                  |        |                                 |  |          |        |        |  |      |       |         
|Property revenues:                               |                                    |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |         |  |   |         |         |  |  |       |      
|                                                 | Fully stabilized communities       |                                  | $      | 34,392                          |  |          | $      | 37,478 |  |      |       | -8.2     | % |   | $       | 106,772 |  |   | $       | 112,029 |  |  |       | -4.7  | %
|                                                 | Acquisition communities            |                                  |        | 527                             |  |          |        |       |  |      |       | 100.0    | % |   |         | 527     |  |   |         |        |  |  |       | 100.0 | %
|                                                 | Stabilized development communities |                                  |        | 2,598                           |  |          |        | 2,805  |  |      |       | -7.4     | % |   |         | 8,039   |  |   |         | 7,745   |  |  |       | 3.8   | %
|                                                 | Communities in lease-up            |                                  |        | 4,514                           |  |          |        | 2,791  |  |      |       | 61.7     | % |   |         | 11,328  |  |   |         | 5,509   |  |  |       | 105.6 | %
|                                                 | Communities sold                   |                                  |        | 586                             |  |          |        | 5,793  |  |      |       | -89.9    | % |   |         | 5,306   |  |   |         | 20,601  |  |  |       | -74.2 | %
|                                                 |                                    |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |         |  |   |         |         |  |  |       |      
|Total property revenues                          |                                    |                                  | 42,617 |                                 |  |          | 48,867 |        |  |      | -12.8 | %        |   |   | 131,972 |         |  |   | 145,884 |         |  |  | -9.5  | %    
|                                                 |                                    |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |         |  |   |         |         |  |  |       |      
|Property operating and maintenance expense:      |                                    |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |         |  |   |         |         |  |  |       |      
|                                                 | Fully stabilized communities       |                                  |        | 12,969                          |  |          |        | 12,438 |  |      |       | 4.3      | % |   |         | 37,803  |  |   |         | 36,477  |  |  |       | 3.6   | %
|                                                 | Acquisition communities            |                                  |        | 271                             |  |          |        |       |  |      |       | 100.0    | % |   |         | 271     |  |   |         |        |  |  |       | 100.0 | %
|                                                 | Stabilized development communities |                                  |        | 922                             |  |          |        | 824    |  |      |       | 11.9     | % |   |         | 2,711   |  |   |         | 2,397   |  |  |       | 13.1  | %
|                                                 | Communities in lease-up            |                                  |        | 1,678                           |  |          |        | 752    |  |      |       | 123.1    | % |   |         | 4,522   |  |   |         | 1,828   |  |  |       | 147.4 | %
|                                                 | Communities sold                   |                                  |        | 151                             |  |          |        | 1,950  |  |      |       | -92.3    | % |   |         | 1,939   |  |   |         | 6,870   |  |  |       | -71.8 | %
|                                                 |                                    |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |         |  |   |         |         |  |  |       |      
|Total property operating and maintenance expense |                                    |                                  | 15,991 |                                 |  |          | 15,964 |        |  |      | 0.2   | %        |   |   | 47,246  |         |  |   | 47,572  |         |  |  | -0.7  | %    
|                                                 |                                    |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |         |  |   |         |         |  |  |       |      
|Property operating income:                       |                                    |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |         |  |   |         |         |  |  |       |      
|                                                 | Fully stabilized communities       |                                  |        | 21,423                          |  |          |        | 25,040 |  |      |       | -14.4    | % |   |         | 68,969  |  |   |         | 75,552  |  |  |       | -8.7  | %
|                                                 | Acquisition communities            |                                  |        | 256                             |  |          |        |       |  |      |       | 100.0    | % |   |         | 256     |  |   |         |        |  |  |       | 100.0 | %
|                                                 | Stabilized development communities |                                  |        | 1,676                           |  |          |        | 1,981  |  |      |       | -15.4    | % |   |         | 5,328   |  |   |         | 5,348   |  |  |       | -0.4  | %
|                                                 | Communities in lease-up            |                                  |        | 2,836                           |  |          |        | 2,039  |  |      |       | 39.1     | % |   |         | 6,806   |  |   |         | 3,681   |  |  |       | 84.9  | %
|                                                 | Communities sold                   |                                  |        | 435                             |  |          |        | 3,843  |  |      |       | -88.7    | % |   |         | 3,367   |  |   |         | 13,731  |  |  |       | -75.5 | %
|                                                 |                                    |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |         |  |   |         |         |  |  |       |      
|Total property operating income                  |                                    | $                                | 26,626 |                                 |  | $        | 32,903 |        |  |      | -19.1 | %        |   | $ | 84,726  |         |  | $ | 98,312  |         |  |  | -13.8 | %    
|                                                 |                                    |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |         |  |   |         |         |  |  |       |      

22



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##### 



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

|                                                               |  |      |        |      |  |  |        |  
|-------------------------------------------------------------- |  | ---- | ------ | ---- |  |  | ------ | -
|                                                               |  | 2002 |        | 2001
|                                                               |  |      |        |     
|Apartment homes at January 1 of the year                       |  |      | 16,739 |      |  |  | 18,928 |  
|Apartment homes acquired                                       |  |      | 222    |      |  |  |       |  
|Developments which began rental operations during
    the year |  |      | 761    |      |  |  |       |  
|Sale of apartment homes                                        |  |      | (1,136 | )    |  |  | (849   | )
|                                                               |  |      |        |      |  |  |        |  
|Apartment homes at September 30 of the year                    |  |      | 16,586 |      |  |  | 18,079 |  
|                                                               |  |      |        |      |  |  |        |  

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 September 30, |        | Nine Months Ended September 30,
|                                                 |                                  |                                  |        |                                
|                                                 |                                  | 2002                             |        | 2001                            |  | % Change |        | 2002   |  | 2001 |       | % Change
|                                                 |                                  |                                  |        |                                 |  |          |        |        |  |      |       |         
|Property revenues:                               |                                  |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |        |  |   |         |         |  |  |      |     
|                                                 | Rental                           |                                  | $      | 31,984                          |  |          | $      | 34,783 |  |      |       | -8.0     | % |   | $       | 99,311 |  |   | $       | 104,251 |  |  |      | -4.7 | %
|                                                 | Other                            |                                  |        | 2,408                           |  |          |        | 2,695  |  |      |       | -10.6    | % |   |         | 7,461  |  |   |         | 7,778   |  |  |      | -4.1 | %
|                                                 |                                  |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |        |  |   |         |         |  |  |      |     
|Total property revenues                          |                                  |                                  | 34,392 |                                 |  |          | 37,478 |        |  |      | -8.2  | %        |   |   | 106,772 |        |  |   | 112,029 |         |  |  | -4.7 | %   
|                                                 |                                  |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |        |  |   |         |         |  |  |      |     
|Property operating and maintenance expense:      |                                  |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |        |  |   |         |         |  |  |      |     
|                                                 | Personnel                        |                                  |        | 2,747                           |  |          |        | 2,665  |  |      |       | 3.1      | % |   |         | 8,047  |  |   |         | 7,637   |  |  |      | 5.4  | %
|                                                 | Advertising and promotion        |                                  |        | 502                             |  |          |        | 301    |  |      |       | 66.8     | % |   |         | 1,466  |  |   |         | 1,107   |  |  |      | 32.4 | %
|                                                 | Utilities                        |                                  |        | 1,676                           |  |          |        | 1,749  |  |      |       | -4.2     | % |   |         | 4,813  |  |   |         | 5,001   |  |  |      | -3.8 | %
|                                                 | Building repairs and maintenance |                                  |        | 1,851                           |  |          |        | 1,794  |  |      |       | 3.2      | % |   |         | 5,036  |  |   |         | 4,975   |  |  |      | 1.2  | %
|                                                 | Real estate taxes and insurance  |                                  |        | 4,676                           |  |          |        | 4,259  |  |      |       | 9.8      | % |   |         | 13,856 |  |   |         | 12,879  |  |  |      | 7.6  | %
|                                                 | Property supervision             |                                  |        | 979                             |  |          |        | 1,046  |  |      |       | -6.4     | % |   |         | 3,006  |  |   |         | 3,131   |  |  |      | -4.0 | %
|                                                 | Other operating expense          |                                  |        | 538                             |  |          |        | 624    |  |      |       | -13.8    | % |   |         | 1,579  |  |   |         | 1,747   |  |  |      | -9.6 | %
|                                                 |                                  |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |        |  |   |         |         |  |  |      |     
|Total property operating and maintenance expense |                                  |                                  | 12,969 |                                 |  |          | 12,438 |        |  |      | 4.3   | %        |   |   | 37,803  |        |  |   | 36,477  |         |  |  | 3.6  | %   
|                                                 |                                  |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |        |  |   |         |         |  |  |      |     
|Property operating income                        |                                  | $                                | 21,423 |                                 |  | $        | 25,040 |        |  |      | -14.4 | %        |   | $ | 68,969  |        |  | $ | 75,552  |         |  |  | -8.7 | %   
|                                                 |                                  |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |        |  |   |         |         |  |  |      |     
|Average physical occupancy                       |                                  |                                  | 92.0%  |                                 |  |          | 93.3%  |        |  |      | -1.4  | %        |   |   | 93.0%   |        |  |   | 93.4%   |         |  |  | -0.4 | %   
|                                                 |                                  |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |        |  |   |         |         |  |  |      |     
|Average monthly rental revenue                   |                                  | $                                | 890    |                                 |  | $        | 951    |        |  |      | -6.4  | %        |   | $ | 908     |        |  | $ | 949     |         |  |  | -4.3 | %   
|                                                 |                                  |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |        |  |   |         |         |  |  |      |     
|Number of apartment homes                        |                                  |                                  | 13,323 |                                 |  |          | 13,323 |        |  |      |       |          |   |   | 13,323  |        |  |   | 13,323  |         |  |  |      |     
|                                                 |                                  |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |        |  |   |         |         |  |  |      |     
|Number of apartment communities                  |                                  |                                  | 44     |                                 |  |          | 44     |        |  |      |       |          |   |   | 44      |        |  |   | 44      |         |  |  |      |     
|                                                 |                                  |                                  |        |                                 |  |          |        |        |  |      |       |          |   |   |         |        |  |   |         |         |  |  |      |     

For the three and nine month periods ended
September 30, 2002, property revenues declined due to
weakening fundamentals in our markets primarily driven by
(a) a decline in job growth and/or an increase in job
losses, (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

23



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end of 2002 and into 2003. The increases in
advertising costs for the three and nine 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 35.4% for the nine months
ended September 30, 2002 from 32.6% for the nine months
ended September 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.


Operating Performance of Our Acquisition
Community

On July 1, 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.

The operating performance of Summit San Raphael
for the three and nine months ended September 30, 2002 and
2001 is summarized below (dollars in thousands, except average
monthly rental revenue):

|                                           |        |                |      |      |  |   |   |   | 
|------------------------------------------ | ------ | -------------- | ---- | ---- |  | - | - | - | 
|                                           |        |               
|                                           |        | Three and Nine
|                                           |        | Months Ended  
|                                           |        | September 30, 
|                                           |        |               
|                                           |        | 2002           |      | 2001
|                                           |        |                |      |     
|Property revenues:                         |        |                |      |      |  |   |   |  
|                                           | Rental |                | $    | 506  |  |   | $ |  | 
|                                           | Other  |                |      | 21   |  |   |   |  | 
|                                           |        |                |      |      |  |   |   |  
|Total property revenues                    |        |                | 527  |      |  |   |  |  
|Property operating and maintenance expense |        |                | 271  |      |  |   |  |  
|                                           |        |                |      |      |  |   |   |  
|Property operating income                  |        | $              | 256  |      |  | $ |  |  
|                                           |        |                |      |      |  |   |   |  
|Average physical occupancy                 |        |                | 86.8 | %    |  |   |  |  
|                                           |        |                |      |      |  |   |   |  
|Average monthly rental revenue             |        | $              | 917  |      |  | $ |  |  
|                                           |        |                |      |      |  |   |   |  
|Number of apartment homes                  |        |                | 222  |      |  |   |  |  
|                                           |        |                |      |      |  |   |   |  

Operating Performance of Our Stabilized
Development Communities

Summit Lenox and Summit Russett are considered
stabilized development communities as of September 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 nine months ended
September 30, 2002 and 2001 is summarized below (dollars in
thousands, except average monthly rental revenue):

|                                           |        |                    |       |                   |  |      |       |       |  |   |       |       |  |   |       |       | 
|------------------------------------------ | ------ | ------------------ | ----- | ----------------- |  | ---- | ----- | ----- |  | - | ----- | ----- |  | - | ----- | ----- | 
|                                           |        |                    |       |                  
|                                           |        | Three Months Ended |       | Nine Months Ended
|                                           |        | September 30,      |       | September 30,    
|                                           |        |                    |       |                  
|                                           |        | 2002               |       | 2001              |  | 2002 |       | 2001 
|                                           |        |                    |       |                   |  |      |       |      
|Property revenues:                         |        |                    |       |                   |  |      |       |       |  |   |       |       |  |   |       |      
|                                           | Rental |                    | $     | 2,421             |  |      | $     | 2,552 |  |   | $     | 7,483 |  |   | $     | 7,083 | 
|                                           | Other  |                    |       | 177               |  |      |       | 253   |  |   |       | 556   |  |   |       | 662   | 
|                                           |        |                    |       |                   |  |      |       |       |  |   |       |       |  |   |       |      
|Total property revenues                    |        |                    | 2,598 |                   |  |      | 2,805 |       |  |   | 8,039 |       |  |   | 7,745 |      
|Property operating and maintenance expense |        |                    | 922   |                   |  |      | 824   |       |  |   | 2,711 |       |  |   | 2,397 |      
|                                           |        |                    |       |                   |  |      |       |       |  |   |       |       |  |   |       |      
|Property operating income                  |        | $                  | 1,676 |                   |  | $    | 1,981 |       |  | $ | 5,328 |       |  | $ | 5,348 |      
|                                           |        |                    |       |                   |  |      |       |       |  |   |       |       |  |   |       |      
|Average physical occupancy                 |        |                    | 91.7  | %                 |  |      | 93.6  | %     |  |   | 93.0  | %     |  |   | 87.8  | %    
|                                           |        |                    |       |                   |  |      |       |       |  |   |       |       |  |   |       |      
|Average monthly rental revenue             |        | $                  | 1,071 |                   |  | $    | 1,090 |       |  | $ | 1,068 |       |  | $ | 1,081 |      
|                                           |        |                    |       |                   |  |      |       |       |  |   |       |       |  |   |       |      
|Number of apartment homes                  |        |                    | 857   |                   |  |      | 857   |       |  |   | 857   |       |  |   | 857   |      
|                                           |        |                    |       |                   |  |      |       |       |  |   |       |       |  |   |       |      

24



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##### 



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 9.0% for the nine months ended
September 30, 2002.

Operating Performance of Our Communities in
Lease-up

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

|                                              |  |           |       |           |  |              |         |               |  |           |         |               |  |  |         |  |  |  |       |  |  |  |        | 
|--------------------------------------------- |  | --------- | ----- | --------- |  | ------------ | ------- | ------------- |  | --------- | ------- | ------------- |  |  | ------- |  |  |  | ----- |  |  |  | ------ | 
|                                              |  |           |       | Total     |  | Actual/      |         |               |  |           |         | % Leased     
|                                              |  | Number of |       | Actual/   |  | Anticipated  |         | Actual/       |  | Q3 2002   |         | as of        
|                                              |  | Apartment |       | Estimated |  | Construction |         | Anticipated   |  | Average   |         | September 30,
|Community                                     |  | Homes     |       | Cost      |  | Completion   |         | Stabilization |  | Occupancy |         | 2002         
|                                              |  |           |       |           |  |              |         |               |  |           |         |              
|Summit Grandview  Charlotte, NC (1)          |  |           | 266   |           |  | $            | 51,260  |               |  |           | Q4 2000 |               |  |  | Q4 2001 |  |  |  | 87.5% |  |  |  | 88.3%  | 
|Summit Overlook  Raleigh, NC                 |  |           | 320   |           |  |              | 28,456  |               |  |           | Q3 2001 |               |  |  | Q3 2002 |  |  |  | 93.6% |  |  |  | 98.8%  | 
|Summit Crest  Raleigh, NC                    |  |           | 438   |           |  |              | 32,612  |               |  |           | Q3 2001 |               |  |  | Q3 2002 |  |  |  | 93.2% |  |  |  | 96.8%  | 
|Summit Peachtree City  Atlanta, GA           |  |           | 399   |           |  |              | 33,229  |               |  |           | Q4 2001 |               |  |  | Q4 2002 |  |  |  | 77.4% |  |  |  | 93.0%  | 
|Summit Shiloh II  Atlanta, GA                |  |           | 50    |           |  |              | 4,015   |               |  |           | Q1 2002 |               |  |  | Q2 2002 |  |  |  | 99.7% |  |  |  | 100.0% | 
|Summit Brookwood  Atlanta, GA (2)            |  |           | 359   |           |  |              | 41,500  |               |  |           | Q4 2002 |               |  |  | Q2 2003 |  |  |  | 18.5% |  |  |  | 50.1%  | 
|Summit Valleybrook  Philadelphia,
    PA (2) |  |           | 352   |           |  |              | 37,000  |               |  |           | Q4 2002 |               |  |  | Q3 2003 |  |  |  | 33.1% |  |  |  | 49.7%  | 
|                                              |  |           |       |           |  |              |         |               |  |           |         |               |  |  |         |  |  |  |       |  |  |  |        | 
|                                              |  |           | 2,184 |           |  | $            | 228,072 |               |  |           |         |               |  |  |         |  |  |  |       |  |  |  |        | 
|                                              |  |           |       |           |  |              |         |               |  |           |         |               |  |  |         |  |  |  |       |  |  |  |        | 






|    |                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 74.7% leased
    and 74.7% occupied as of September 30, 2002.
|(2) | The related assets of this property are included
    in the Construction in progress category as of
    September 30, 2002.                                                                                                                                                                                                                                  

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 may need to
continue to offer rent concessions to residents.

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

|                                           |                        |               |       |               |  |      |       |       |  |   |        |        |  |   |       |       | 
|------------------------------------------ | ---------------------- | ------------- | ----- | ------------- |  | ---- | ----- | ----- |  | - | ------ | ------ |  | - | ----- | ----- | 
|                                           |                        |               |       |              
|                                           |                        | Three Months  |       | Nine Months  
|                                           |                        | Ended         |       | Ended        
|                                           |                        | September 30, |       | September 30,
|                                           |                        |               |       |              
|                                           |                        | 2002          |       | 2001          |  | 2002 |       | 2001 
|                                           |                        |               |       |               |  |      |       |      
|Property revenues:                         |                        |               |       |               |  |      |       |       |  |   |        |        |  |   |       |      
|                                           | Rental revenues        |               | $     | 4,282         |  |      | $     | 2,665 |  |   | $      | 10,696 |  |   | $     | 5,120 | 
|                                           | Other property revenue |               |       | 232           |  |      |       | 126   |  |   |        | 632    |  |   |       | 389   | 
|                                           |                        |               |       |               |  |      |       |       |  |   |        |        |  |   |       |      
|Total property revenues                    |                        |               | 4,514 |               |  |      | 2,791 |       |  |   | 11,328 |        |  |   | 5,509 |      
|Property operating and maintenance expense |                        |               | 1,678 |               |  |      | 752   |       |  |   | 4,522  |        |  |   | 1,828 |      
|                                           |                        |               |       |               |  |      |       |       |  |   |        |        |  |   |       |      
|Property operating income                  |                        | $             | 2,836 |               |  | $    | 2,039 |       |  | $ | 6,806  |        |  | $ | 3,681 |      
|                                           |                        |               |       |               |  |      |       |       |  |   |        |        |  |   |       |      
|Number of apartment homes                  |                        |               | 2,184 |               |  |      | 2,184 |       |  |   | 2,184  |        |  |   | 2,184 |      
|                                           |                        |               |       |               |  |      |       |       |  |   |        |        |  |   |       |      

Operating Performance of Our Disposition
Communities

During the nine months ended September 30,
2002, we sold four apartment communities formerly known as
Summit Breckenridge (300 apartment homes) located in Richmond,
Virginia, Summit New Albany (428 apartment homes) located in
Columbus, Ohio, Summit Pike Creek (264 apartment homes) located
in Newark, Delaware and Summit Mayfaire (144 apartment homes)
located in Raleigh, North Carolina. The

25



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##### 



disposition of three of these four communities
completed our exit of the Richmond, Columbus and Newark markets.


During the nine months ended September 30,
2002, a joint venture in which we held a 50% ownership interest
sold an apartment community formerly known as the Heights at
Cheshire Bridge (318 apartment homes) located in Atlanta,
Georgia.

The information in the table below represents
operating results for the three and nine months ended
September 30, 2002 and 2001 for the former Summit
Breckenridge, Summit New Albany, Summit Pike Creek and Summit
Mayfaire communities. The information in the table below also
includes operating results for the three and nine months ended
September 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  |       | Nine Months  
|                                           |                        | Ended         |       | Ended        
|                                           |                        | September 30, |       | September 30,
|                                           |                        |               |       |              
|                                           |                        | 2002          |       | 2001          |  | 2002 |       | 2001 
|                                           |                        |               |       |               |  |      |       |      
|Property revenues:                         |                        |               |       |               |  |      |       |       |  |   |       |       |  |   |        |       
|                                           | Rental revenues        |               | $     | 565           |  |      | $     | 5,377 |  |   | $     | 5,043 |  |   | $      | 19,175 | 
|                                           | Other property revenue |               |       | 21            |  |      |       | 416   |  |   |       | 263   |  |   |        | 1,426  | 
|                                           |                        |               |       |               |  |      |       |       |  |   |       |       |  |   |        |       
|Total property revenues                    |                        |               | 586   |               |  |      | 5,793 |       |  |   | 5,306 |       |  |   | 20,601 |       
|Property operating and maintenance expense |                        |               | 151   |               |  |      | 1,950 |       |  |   | 1,939 |       |  |   | 6,870  |       
|                                           |                        |               |       |               |  |      |       |       |  |   |       |       |  |   |        |       
|Property operating income                  |                        | $             | 435   |               |  | $    | 3,843 |       |  | $ | 3,367 |       |  | $ | 13,731 |       
|                                           |                        |               |       |               |  |      |       |       |  |   |       |       |  |   |        |       
|Number of apartment homes                  |                        |               | 1,136 |               |  |      | 3,325 |       |  |   | 1,136 |       |  |   | 3,325  |       
|                                           |                        |               |       |               |  |      |       |       |  |   |       |       |  |   |        |       

On November 12, 2002, we sold Summit
Stonefield, located in Yardley, Pennsylvania, for $32.3 million
as part of our strategy to exit our non-core markets. We expect
to record a gain on disposition of Summit Stonefield.

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

26



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##### 



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


|                  |                                                           |                    |    |                   |       |          |     |       |       |      |        |          |       |   |     |       |       |   |     |       |       |  |      |       |       |  
|----------------- | --------------------------------------------------------- | ------------------ | -- | ----------------- | ----- | -------- | --- | ----- | ----- | ---- | ------ | -------- | ----- | - | --- | ----- | ----- | - | --- | ----- | ----- |  | ---- | ----- | ----- | -
|                  |                                                           |                    |    |                  
|                  |                                                           | Three Months Ended |    | Nine Months Ended
|                  |                                                           | September 30,      |    | September 30,    
|                  |                                                           |                    |    |                  
|                  |                                                           | 2002               |    | 2001              |       | % Change |     | 2002  |       | 2001 |        | % Change
|                  |                                                           |                    |    |                   |       |          |     |       |       |      |        |         
|Revenues:         |                                                           |                    |    |                   |       |          |     |       |       |      |        |          |       |   |     |       |       |   |     |       |       |  |      |      
|                  | Management fees charged to Operating Partnership          |                    | $  | 1,565             |       |          | $   | 1,418 |       |      |        | 10.4     | %     |   | $   | 4,795 |       |   | $   | 5,010 |       |  |      | -4.3  | %    
|                  | Third party management fee revenue                        |                    |    | 164               |       |          |     | 194   |       |      |        | -15.5    | %     |   |     | 627   |       |   |     | 633   |       |  |      | -0.9  | %    
|                  | Construction revenue charged to Operating
    Partnership |                    |    | 556               |       |          |     | 701   |       |      |        | -20.7    | %     |   |     | 1,622 |       |   |     | 2,255 |       |  |      | -28.1 | %    
|                  | Other revenue                                             |                    |    | 64                |       |          |     | 120   |       |      |        | -46.7    | %     |   |     | 205   |       |   |     | 372   |       |  |      | -44.9 | %    
|                  |                                                           |                    |    |                   |       |          |     |       |       |      |        |          |       |   |     |       |       |   |     |       |       |  |      |      
|                  |                                                           | Total revenue      |    |                   | 2,349 |          |     |       | 2,433 |      |        |          | -3.5  | % |     |       | 7,249 |   |     |       | 8,270 |  |      |       | -12.3 | %
|                  |                                                           |                    |    |                   |       |          |     |       |       |      |        |          |       |   |     |       |       |   |     |       |       |  |      |      
|Expenses:         |                                                           |                    |    |                   |       |          |     |       |       |      |        |          |       |   |     |       |       |   |     |       |       |  |      |      
|                  | Operating                                                 |                    |    | 2,032             |       |          |     | 2,293 |       |      |        | -11.4    | %     |   |     | 6,192 |       |   |     | 7,186 |       |  |      | -13.8 | %    
|                  | Depreciation                                              |                    |    | 77                |       |          |     | 80    |       |      |        | -3.8     | %     |   |     | 230   |       |   |     | 239   |       |  |      | -3.8  | %    
|                  | Amortization                                              |                    |    | 74                |       |          |     | 74    |       |      |        | 0.0      | %     |   |     | 221   |       |   |     | 224   |       |  |      | -1.3  | %    
|                  | Interest                                                  |                    |    | 75                |       |          |     | 75    |       |      |        | 0.0      | %     |   |     | 225   |       |   |     | 225   |       |  |      | 0.0   | %    
|                  |                                                           |                    |    |                   |       |          |     |       |       |      |        |          |       |   |     |       |       |   |     |       |       |  |      |      
|                  |                                                           | Total expenses     |    |                   | 2,258 |          |     |       | 2,522 |      |        |          | -10.5 | % |     |       | 6,868 |   |     |       | 7,874 |  |      |       | -12.8 | %
|                  |                                                           |                    |    |                   |       |          |     |       |       |      |        |          |       |   |     |       |       |   |     |       |       |  |      |      
|Net income (loss) |                                                           | $                  | 91 |                   |       | $        | (89 | )     |       |      | -202.2 | %        |       | $ | 381 |       |       | $ | 396 |       |       |  | -3.8 | %    
|                  |                                                           |                    |    |                   |       |          |     |       |       |      |        |          |       |   |     |       |       |   |     |       |       |  |      |      

The increase in management fees charged to the
Operating Partnership for the three-month period is primarily
due to an increase of fees earned from communities under
development as a result of the stage of development of such
communities during the third quarter of 2002 when compared to
the same period of 2001. The decrease in management fees charged
to the Operating Partnership for the nine-month period is
primarily due to the absence in 2002 of management fees earned
from communities disposed during 2001, as well as decreased
collections from stabilized communities during the nine months
ended September 30, 2002 when compared to the same period in
2001. Construction revenue declined for the three and nine
months ended September 30, 2002 and 2001 due to a reduction
in our development activity. All of the construction revenue
during the three and nine months ended September 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 fees from third parties as a
percentage of total property management revenues were 9.5% and
11.6% for the three and nine months ended September 30,
2002 and 12.0% and 11.2% for the three and nine months ended
September 30, 2001.

Other Income and Expenses

Other income increased by $76,000 to $206,000 for
the three months ended September 30, 2002 and decreased by
$409,000 to $411,000 for the nine months ended
September 30, 2002 when compared to the same periods in
2001. The decrease in the nine-month period is 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 $1.5 million, or
14.9%, and $3.3 million, or 11.0%, for the three and nine months
ended September 30, 2002 compared with the same periods in
2001. These decreases were primarily due to a decrease of 0.43%
in our average interest rate and a decrease of $14.6 million in
average indebtedness outstanding for the three-month period
ended September 30, 2002 when compared to the same period
of 2001, as well as a decrease of 0.34% in our average interest
rate and a decrease of $30.1 million in average indebtedness
outstanding for the nine-month period ended September 30,
2002 when compared to the same period in 2001.

27



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General and administrative expenses decreased
$780,000 and $163,000, or 43.3% and 3.8%, for the three and nine
months ended September 30, 2002 as compared to the same
periods in 2001. The decrease for the three-month period was
primarily the result of a decrease in the amount recorded for
executive compensation during the three months ended
September 30, 2002 of $555,000 when compared to the amount
recorded during the three months ended September 30, 2001
as certain performance objectives required by the executive
compensation plan for payment of incentive compensation have not
yet been met. In addition, the amount recorded for abandoned
pursuit projects decreased by $170,000 during the three months
ended September 30, 2002 when compared to the same period
in 2001. This decrease in abandoned pursuit project costs is due
to the fact that we are curtailing, and may continue to curtail,
our development efforts to increase our financial flexibility in
the current economic environment. As a percentage of revenues,
general and administrative expenses were 2.4% and 3.2% for the
three and nine months ended September 30, 2002 and 3.8% and
3.1% for the three and nine months ended September 30, 2001.

Liquidity and Capital Resources

Liquidity

Our net cash provided by operating activities
decreased to $53.0 million for the nine months ended
September 30, 2002 from $71.3 million for the same period
in 2001, primarily due to a $9.9 million decrease in income from
continuing operations before gain on sale of real estate assets
and impairment loss. In addition, the amount of cash provided by
accounts payable and accrued expenses within operating
activities decreased by $6.2 million.

Net cash used in investing activities decreased
to $27.2 million for the nine months ended September 30,
2002 from $32.9 million for the same period in 2001 primarily
due to an increase of $14.7 million in proceeds received from
the sale of communities, an increase in cash provided by
investments in joint ventures of $8.1 million, and a decrease in
cash used for capital expenditures of $3.5 million, all offset
by an increase in cash used for the acquisition of real estate
assets of $17.9 million and an increase in cash used for
construction of real estate assets and land acquisitions of $4.8
million. Sale proceeds from six of the nine communities sold
during 2001 and two of the four communities sold during the nine
months ended September 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 dispositions which were 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 $25.2 million for the nine months ended September 30,
2002 from $38.9 million for the nine months ended
September 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 $79.0 million, an increase in
proceeds from the issuance of mortgages of $6.9 million, an
increase in the repayments of unsecured notes and medium-term
notes of $11.0 million, and the 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 and to repay $41.0 million of
unsecured notes and medium-term notes which matured during the
period.

The ratio of earnings to fixed charges was 1.91
for the nine months ended September 30, 2002 compared to
1.61 for the nine months ended September 30, 2001. The
increase in the ratio of earnings to fixed charges is primarily
due to an $18.1 million increase in gain on sale of real estate
assets for the nine months ended September 30, 2002 when
compared to the same period in 2001.

Our outstanding indebtedness as of
September 30, 2002 totaled $732.6 million. This amount
included $282.9 million of fixed rate conventional mortgages,
$6.9 million of variable rate mortgages, $10.6 million of
variable rate tax-exempt bonds, $267.0 million of fixed rate
unsecured notes, $3.8 million of tax-exempt fixed rate
mortgages, $156.5 million under our unsecured credit facility,
and $4.9 million of fair value adjustments of hedged debt
instruments.

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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,
proceeds from disposition of certain communities 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.



| |                
| | ---------------
| | 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 September 30, 2002, the outstanding balance of the
credit facility was $156.5 million, leaving $68.5 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.

On September 27, 2002, we entered into an
amendment to the credit agreement related to our unsecured line
of credit which modified certain definitions and financial
covenants that we are required to meet at the end of each
quarter.

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 (MTN) 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 September 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 September 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.

Mortgage
Refinancing

During the three months ended September 30,
2002, we refinanced a fixed rate conventional mortgage with a
$2.4 million balance at the time of the refinancing. The new
variable rate mortgage loan has a principal balance of $6.9
million and is payable monthly on an interest only basis with
principal due at maturity. This mortgage bears interest at a
rate of LIBOR plus 170 basis points (3.51% as of
September 30, 2002). The principal balance and any unpaid
interest are due on August 1, 2005; however, there are two
one-year extension options.

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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 No. 133 establishes
accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that entities
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at
fair value. The cumulative effect of adopting SFAS No. 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 September 30, 2002 was
4.1675%. The fair value of the interest rate swap was an asset
of $3.7 million as of September 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 SFAS No. 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 September 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 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, whether or not consecutive, 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 made distributions to the holders of the Series B
preferred units in the aggregate amount of $5.7 million during
each of the nine month periods ended September 30, 2002 and 2001.

As of September 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, whether
or not consecutive, (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

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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 made distributions to the
holder of the Series C preferred units in the aggregate
amount of $3.6 million during each of the nine month periods
ended September 30, 2002 and 2001.


Common
Stock Repurchase Program

Summit has a common stock repurchase program,
approved by its Board of Directors, pursuant to which Summit is
authorized to purchase up to $56.0 million of currently issued
and outstanding shares of its common stock. 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 nine months ended September 30,
2002 or 2001. As of September 30, 2002, Summit had
repurchased 288,200 shares of common stock valued at $5.7
million under its repurchase program.

Dividend
Reinvestment and Stock Purchase Plans

Summit has a non-qualified employee stock
purchase plan (ESPP) as well as a dividend
reinvestment and direct stock purchase plan (DRIP).
Transactions under the ESPP were suspended effective
July 2, 2002. Direct stock purchases under the DRIP were
suspended effective October 31, 2002 and dividend
reinvestment under the DRIP will be suspended effective
November 15, 2002. The dividend reinvestment and direct
stock purchase plan provided both new investors and existing
shareholders of Summits stock with a method to purchase
shares of common stock and/or the ability for those shareholders
to designate all, a portion or none of the cash dividends on
shares of Summits common stock owned for reinvestment in
more shares of Summits common stock. The employee stock
purchase plan allowed Summits employees to purchase up to
$25,000 per year of Summits common stock at a discount of
15%.

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. As a result of
recent legislation, Summit is no longer permitted to make loans
to its executive officers and, therefore, new issuances under
the loan program have been terminated. Under the terms of the
loan program, Summit lent 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. 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 three months ended June 30, 2002, Summit issued
$6.7 million of loans to six of its executive officers. If the
market price of Summits common stock falls materially
below the price at which the shares of stock were purchased, the
proceeds of the sale of the common stock may not be sufficient
to repay the loan. The closing market price of our common stock
was $19.40 per share on September 30, 2002. This common
stock price is below the price at which all loans were issued
and, therefore, the proceeds from the shares which serve as
collateral for the loans would not be sufficient to repay the
loans in full. As of September 30, 2002, Summit had loans
receivable in the net amount of $20.1 million which were
collateralized by 936,000 shares of its common stock valued at
$18.1 million. However, since the loans are full recourse,
Summit has the right to collect any additional amount owed
directly from the officer or employee to

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the extent such officer or employee is able to
pay such amount. Summit had loans receivable in the net amount
of $14.5 million as of December 31, 2001.


Communities Sold or Held for Sale

In accordance with SFAS No. 144, net income
and gain (loss) on disposition of real estate for
communities sold or 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, Summit Pike Creek and Summit Mayfaire for
the three and nine months ended September 30, 2002 (in
thousands). There were no assets considered held for sale as of
September 30, 2002.

|                                                                                                  |                        |                    |        |                   |  |      |       |       |  |   |        |       |  |   |       |       | 
|------------------------------------------------------------------------------------------------- | ---------------------- | ------------------ | ------ | ----------------- |  | ---- | ----- | ----- |  | - | ------ | ----- |  | - | ----- | ----- | 
|                                                                                                  |                        |                    |        |                  
|                                                                                                  |                        | Three Months Ended |        | Nine Months Ended
|                                                                                                  |                        | September 30,      |        | September 30,    
|                                                                                                  |                        |                    |        |                  
|                                                                                                  |                        | 2002               |        | 2001              |  | 2002 |       | 2001 
|                                                                                                  |                        |                    |        |                   |  |      |       |      
|Property revenues:                                                                                |                        |                    |        |                   |  |      |       |       |  |   |        |       |  |   |       |      
|                                                                                                  | Rental revenues        |                    | $      | 565               |  |      | $     | 2,018 |  |   | $      | 4,331 |  |   | $     | 6,074 | 
|                                                                                                  | Other property revenue |                    |        | 20                |  |      |       | 105   |  |   |        | 213   |  |   |       | 350   | 
|                                                                                                  |                        |                    |        |                   |  |      |       |       |  |   |        |       |  |   |       |      
|Total property revenues                                                                           |                        |                    | 585    |                   |  |      | 2,123 |       |  |   | 4,544  |       |  |   | 6,424 |      
|Property operating and maintenance expense                                                        |                        |                    | 151    |                   |  |      | 777   |       |  |   | 1,653  |       |  |   | 2,268 |      
|Depreciation                                                                                      |                        |                    | 14     |                   |  |      | 447   |       |  |   | 883    |       |  |   | 1,339 |      
|Interest and amortization                                                                         |                        |                    | 29     |                   |  |      | 111   |       |  |   | 174    |       |  |   | 397   |      
|                                                                                                  |                        |                    |        |                   |  |      |       |       |  |   |        |       |  |   |       |      
|Income from discontinued operations before net
    gain on disposition of discontinued operations |                        |                    | 391    |                   |  |      | 788   |       |  |   | 1,834  |       |  |   | 2,420 |      
|Net gain on disposition of discontinued operations                                                |                        |                    | 16,900 |                   |  |      |      |       |  |   | 12,691 |       |  |   |      |      
|                                                                                                  |                        |                    |        |                   |  |      |       |       |  |   |        |       |  |   |       |      
|Net Income from discontinued operations                                                           |                        | $                  | 17,291 |                   |  | $    | 788   |       |  | $ | 14,525 |       |  | $ | 2,420 |      
|                                                                                                  |                        |                    |        |                   |  |      |       |       |  |   |        |       |  |   |       |      

Subsequent to September 30, 2002, we
executed separate contracts for the sale of two communities. The
assets of these two communities were recorded at the lower of
cost or fair value less costs to sell, or $40.5 million in
the aggregate as of September 30, 2002. The revenues and
property operating income of these two communities represented
4.3% and 4.4% of total revenues and property operating income
for the nine months ended September 30, 2002. The sales of
these two communities are subject to customary closing
conditions and are both expected to occur during the three
months ended December 31, 2002. On November 12, 2002,
we sold one of these communities, Summit Stonefield located in
Yardley, Pennsylvania, for $32.3 million as part of our
strategy to exit our non-core markets.

Development Activity

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

|                                              |  |           |       |           |  |         |         |           |  |              |         |  |  |   |         |  |  |  |         | 
|--------------------------------------------- |  | --------- | ----- | --------- |  | ------- | ------- | --------- |  | ------------ | ------- |  |  | - | ------- |  |  |  | ------- | 
|                                              |  |           |       | Total     |  |         |         | Estimated |  | Anticipated 
|                                              |  | Apartment |       | Estimated |  | Cost To |         | Cost To   |  | Construction
|Community                                     |  | Homes     |       | Costs     |  | Date    |         | Complete  |  | Anticipated 
|                                              |  |           |       |           |  |         |         |           |  |             
|Summit Brookwood  Atlanta, GA (1)            |  |           | 359   |           |  | $       | 41,500  |           |  | $            | 36,905  |  |  | $ | 4,595   |  |  |  | Q4 2002 | 
|Summit Grand Parc  Washington,
    DC (2)    |  |           | 105   |           |  |         | 42,000  |           |  |              | 40,736  |  |  |   | 1,264   |  |  |  | Q4 2002 | 
|Summit Valleybrook  Philadelphia,
    PA (1) |  |           | 352   |           |  |         | 37,000  |           |  |              | 36,269  |  |  |   | 731     |  |  |  | Q4 2002 | 
|Summit Roosevelt  Washington, DC             |  |           | 198   |           |  |         | 49,600  |           |  |              | 37,111  |  |  |   | 12,489  |  |  |  | Q3 2003 | 
|Summit Stockbridge  Atlanta, GA              |  |           | 304   |           |  |         | 23,600  |           |  |              | 14,768  |  |  |   | 8,832   |  |  |  | Q4 2003 | 
|Summit Silo Creek  Washington, DC            |  |           | 284   |           |  |         | 41,700  |           |  |              | 15,316  |  |  |   | 26,384  |  |  |  | Q2 2004 | 
|Summit Las Olas  Ft. Lauderdale, FL          |  |           | 420   |           |  |         | 73,700  |           |  |              | 27,656  |  |  |   | 46,044  |  |  |  | Q3 2005 | 
|Other development and construction costs (3)  |  |           |      |           |  |         |        |           |  |              | 26,036  |  |  |   |        |  |  |  |         | 
|                                              |  |           |       |           |  |         |         |           |  |              |         |  |  |   |         |  |  |  |         | 
|                                              |  |           | 2,022 |           |  | $       | 309,100 |           |  | $            | 234,797 |  |  | $ | 100,339 |  |  |  |         | 
|                                              |  |           |       |           |  |         |         |           |  |              |         |  |  |   |         |  |  |  |         | 






|    |                                                                 
|--- | ----------------------------------------------------------------
|(1) | These communities were in lease-up as of
    September 30, 2002.

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 97%
    complete as of September 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 $100.3 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 September 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 four 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 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 seven
development projects currently under construction was $100.3
million as of September 30, 2002. Anticipated construction
completion dates of the projects range from the fourth quarter
of 2002 to the third quarter of 2005.

In January 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 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

33



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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 change order
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 will serve as a credit enhancement to the
developers construction loan. In the event that any amount
under the letter of credit is drawn upon, 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.


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 that 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 required to fund such cost
overruns, up to $5.0 million. This loan would accrue interest at
the rate of eleven percent (11%) per year. Subsequent to
September 30, 2002, we received formal notice from the
lender that there are, in fact, cost overruns which we will be
responsible for funding through the limited liability company.
The total amount of the overruns has not yet been determined.

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 through
December 31, 2011. 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). Each
employment agreement also requires that Summit provide
participation in its life insurance plan, office space,
information systems support and administrative support for the
remainder of each officers life, and participation in its
health and dental insurance plans until the last to die of the
officer or such officers spouse. 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 (ACMs),
when these materials are in poor condition or in the event of
construction, remodeling, renovation or demolition of a
building. These laws, ordinances and regulations may impose
liability for release of ACMs and may provide for third parties
to seek recovery from owners or operators of real properties for
personal injury associated with ACMs. In connection with the
ownership, operation, management and development of our
communities and other real properties, we may be potentially
liable for these costs.

34



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

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

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.

35



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

|                                                        |                                    |                    |            |                   |   |      |            |         |   |   |            |         |   |   |            |         |  
|------------------------------------------------------- | ---------------------------------- | ------------------ | ---------- | ----------------- | - | ---- | ---------- | ------- | - | - | ---------- | ------- | - | - | ---------- | ------- | -
|                                                        |                                    |                    |            |                  
|                                                        |                                    | Three Months Ended |            | Nine Months Ended
|                                                        |                                    | September 30,      |            | September 30,    
|                                                        |                                    |                    |            |                  
|                                                        |                                    | 2002               |            | 2001              |   | 2002 |            | 2001   
|                                                        |                                    |                    |            |                   |   |      |            |        
|Income available to common unitholders                  |                                    | $                  | 26,918     |                   |   | $    | 11,383     |         |   | $ | 48,532     |         |   | $ | 39,639     |        
|Gain on sale of real estate assets                      |                                    |                    | (16,900    | )                 |   |      | (2,788     | )       |   |   | (26,530    | )       |   |   | (13,570    | )      
|Gain on sale of real estate assets 
    joint ventures |                                    |                    | (5,423     | )                 |   |      | (271       | )       |   |   | (5,423     | )       |   |   | (271       | )      
|                                                        |                                    |                    |            |                   |   |      |            |         |   |   |            |         |   |   |            |        
|                                                        | Adjusted income                    |                    |            | 4,595             |   |      |            | 8,324   |   |   |            | 16,579  |   |   |            | 25,798  |  
|Depreciation:                                           |                                    |                    |            |                   |   |      |            |         |   |   |            |         |   |   |            |        
|                                                        | Real estate assets                 |                    |            | 9,916             |   |      |            | 9,768   |   |   |            | 29,376  |   |   |            | 29,115  |  
|                                                        | Real estate joint ventures         |                    |            | 306               |   |      |            | 282     |   |   |            | 922     |   |   |            | 856     |  
|                                                        |                                    |                    |            |                   |   |      |            |         |   |   |            |         |   |   |            |        
|Funds from Operations                                   |                                    |                    | 14,817     |                   |   |      | 18,374     |         |   |   | 46,877     |         |   |   | 55,769     |        
|                                                        | Recurring capital expenditures (1) |                    |            | (1,248            | ) |      |            | (1,201  | ) |   |            | (3,159  | ) |   |            | (3,736  | )
|Funds Available for Distribution                        |                                    | $                  | 13,569     |                   |   | $    | 17,173     |         |   | $ | 43,718     |         |   | $ | 52,033     |        
|                                                        |                                    |                    |            |                   |   |      |            |         |   |   |            |         |   |   |            |        
|Non-recurring capital expenditures (2)                  |                                    | $                  | 424        |                   |   | $    | 748        |         |   | $ | 1,056      |         |   | $ | 2,881      |        
|                                                        |                                    |                    |            |                   |   |      |            |         |   |   |            |         |   |   |            |        
|Cash flow provided by (used in):                        |                                    |                    |            |                   |   |      |            |         |   |   |            |         |   |   |            |        
|                                                        | Operating activities               |                    | $          | 15,834            |   |      | $          | 28,377  |   |   | $          | 52,958  |   |   | $          | 71,289  |  
|                                                        | Investing activities               |                    |            | (4,176            | ) |      |            | (19,871 | ) |   |            | (27,231 | ) |   |            | (32,902 | )
|                                                        | Financing activities               |                    |            | (11,432           | ) |      |            | (8,357  | ) |   |            | (25,188 | ) |   |            | (38,882 | )
|                                                        |                                    |                    |            |                   |   |      |            |         |   |   |            |         |   |   |            |        
|Weighted average units outstanding 
    basic          |                                    |                    | 31,047,380 |                   |   |      | 30,502,457 |         |   |   | 30,873,231 |         |   |   | 30,868,393 |        
|                                                        |                                    |                    |            |                   |   |      |            |         |   |   |            |         |   |   |            |        
|Weighted average units outstanding 
    diluted        |                                    |                    | 31,178,281 |                   |   |      | 30,879,316 |         |   |   | 31,097,274 |         |   |   | 31,191,185 |        
|                                                        |                                    |                    |            |                   |   |      |            |         |   |   |            |         |   |   |            |        



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 nine
    months ended September 30, 2002 and 2001 primarily consist of:
    $781,000 and $646,000 for major renovations in 2002 and 2001;
    $10,000 and $120,000 for access gates and security fences in
    2002 and 2001; $265,000 and $1.1 million in other revenue
    enhancement expenditures in 2002 and 2001; and $1.0 million 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 medium-term note (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
September 30, 2002 was 4.1675%. The fair value of the
interest rate swap was an asset of $3.7 million as of
September 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
SFAS No. 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.

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

36



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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.

ITEM 4. CONTROLS AND
PROCEDURES

(a) Evaluation of disclosure controls and
procedures.

As required by new Rule 13a-15 under the
Securities Exchange Act of 1934, within the 90 days prior
to the date of this report, we carried out an evaluation under
the supervision and with the participation of our management,
including Summits Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based upon
that evaluation, Summits Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and
procedures are effective to ensure that information required to
be disclosed by us in the reports we file or submit under the
Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Securities and Exchange
Commissions rules and forms. In connection with the new
rules, we currently are in the process of further reviewing and
documenting our disclosure controls and procedures, including
our internal controls and procedures for financial reporting,
and may from time to time make changes aimed at enhancing their
effectiveness and to ensure that our systems evolve with our
business.

(b) Changes in internal controls.

None

37



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##### 



PART II



ITEM 2.     CHANGES
IN SECURITIES


During the three months ended September 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 July 1, 2002 and August 15, 2002,
    Summit issued 4,104 and 160,504 shares of common stock pursuant
    to its Dividend Reinvestment and Stock Purchase Plans. Summit
    contributed the proceeds ($3.2 million in the aggregate) of
    these sales to us in consideration of an aggregate of 164,608
    common units.                                            
|
| | B. | On August 2, 2002, August 28, 2002,
    September 16, 2002 and September 28, 2002, Summit
    issued 2,400, 3,200, 3,600, and 1,200 shares of common stock
    pursuant to the exercise of stock options. Summit contributed
    the proceeds ($184,000 in the aggregate) of these option
    exercises to us in consideration of an aggregate of 10,400
    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  |  | Amendment No. 2 to Amended and Restated
    Credit Agreement, dated as of September 27, 2002, by and
    among the Operating Partnership, the Company and the lenders
    listed therein (incorporated by reference to Exhibit 10.3
    to the Operating Partnerships Current Report on
    Form 8-K filed October 3, 2002, File No. 0-22411).
|*12.1 |  | Statement Regarding Calculation of Ratio of
    Earnings to Fixed Charges for the nine months ended
    September 30, 2002.                                                                                                                                                                                                                    




* Filed herewith

(b) Reports on Form 8-K

On August 14, 2002, we filed a Current
Report on Form 8-K dated August 14, 2002, regarding
the certifications made by Summits Chief Executive Officer
and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.

On October 3, 2002, we filed a Current
Report on Form 8-K dated September 27, 2002, in connection
with an amendment to the Operating Partnerships Amended
and Restated Credit Agreement.

38



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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                                               
|                       
|November 14, 2002(Date) |  | /s/ STEVEN R. LEBLANC
    ----------------------------------------------
    Steven R. LeBlanc,President and Chief Executive Officer
|                       
|November 14, 2002(Date) |  | /s/ GREGG D. ADZEMAGregg D. Adzema,Executive Vice President and
    Chief Financial Officer                                         

39



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##### 



CERTIFICATIONS

I, Steven R. LeBlanc, President and Chief
Executive Officer of Summit Properties Inc., the General Partner
of Summit Properties Partnership, L.P., certify that:

1. I have reviewed this quarterly report on
Form 10-Q of Summit Properties Partnership, L.P.;

2. Based on my knowledge, this quarterly
report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this quarterly report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;

4. The registrants other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) Designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this quarterly report is being prepared;
|
| | b) Evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                      
|
| | c) Presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5. The registrants other certifying
officers and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons
performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) All significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) Any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. The registrants other certifying
officers and I have indicated in this quarterly report whether
or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



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

Date: November 14, 2002

40



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##### 



CERTIFICATIONS

I, Gregg D. Adzema, Executive Vice President and
Chief Financial Officer of Summit Properties, Inc., General
Partner of Summit Properties Partnership, L.P., certify that:

1. I have reviewed this quarterly report on
Form 10-Q of Summit Properties Partnership, L.P.;

2. Based on my knowledge, this quarterly
report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this quarterly report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;

4. The registrants other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) Designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this quarterly report is being prepared;
|
| | b) Evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                      
|
| | c) Presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5. The registrants other certifying
officers and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons
performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) All significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) Any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. The registrants other certifying
officers and I have indicated in this quarterly report whether
or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



| |                         
| | ------------------------
| | /s/ GREGG D. ADZEMA     
| |                         
| | Gregg D. Adzema         
| | Executive Vice President
| | Chief Financial Officer 

Date: November 14, 2002

41