##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from          to          .
 Commission file number 1-16755
 Archstone-Smith Trust
 (Exact name of Registrant as Specified in Its Charter)
 MARYLAND
    
    84-1592064(State or other jurisdiction of
    
    (IRS employerincorporation or organization)
    
    identification no.)
 9200 E. Panorama Circle, Suite 400
Englewood, Colorado 80112  (Address of principal executive office)  (303) 708-5959  (Registrants telephone number, including area code)
  Name of each exchange onTitle of each class
    
    which registeredCommon Shares of Beneficial Interest, par value
    
    New York Stock Exchange$0.01 per share
  þ o
 o þ
 þ o
 o
  þ o o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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Table of Contents
 Item
    
    Description
    
    PagePART IGlossary
    
    
    31.
    
    Business
    
    
    7The Company
    
    
    72006 Accomplishments
    
    
    8Investment Strategy
    
    
    9Customer-focused Operations
    
    
    10Conservative Balance Sheet Management
    
    
    12Management
    
    
    13Biographies of Senior Officers of Archstone-Smith Trust
    
    
    13Employees
    
    
    14Insurance
    
    
    14Competition
    
    
    14Available Information and Code of Ethics
    
    
    151A.
    
    Risk Factors
    
    
    151B.
    
    Unresolved Staff Comments
    
    
    192.
    
    Properties
    
    
    19United States Geographic Distribution, excluding Ameriton
    
    
    19Real Estate Portfolio
    
    
    203.
    
    Legal Proceedings
    
    
    224.
    
    Submission of Matters to a Vote of Security Holders
    
    
    22PART II5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    236.
    
    Selected Financial Data
    
    
    257.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    27Results of Operations
    
    
    27Liquidity and Capital Resources
    
    
    36Litigation and Contingencies
    
    
    37Critical Accounting Policies
    
    
    38Off Balance Sheet Arrangements
    
    
    40Contractual Commitments
    
    
    40New Accounting Pronouncements
    
    
    407A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    418.
    
    Financial Statements and Supplementary Data
    
    
    439.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    439A.
    
    Controls and Procedures
    
    
    44Managements Report on Internal Control Over Financial Reporting
    
    
    449B.
    
    Other Information
    
    
    44PART III10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    4511.
    
    Executive Compensation
    
    
    4512.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    4513.
    
    Certain Relationships and Related Transactions and Director Independence
    
    
    4514.
    
    Principal Accounting Fees and Services
    
    
    45PART IV15.
    
    Exhibits, Financial Statement Schedules
    
    
    46IndentureFirst Supplemental IndentureSecond Supplemental IndentureThird Supplemental IndentureComputation of Ratio of Earnings to Fixed ChargesComputation of Ratio of Earnings to Combined Fixed ChargesConsent of Independent Registered Public Accounting FirmSubsidiariesCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




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GLOSSARY
  Abbreviation, Acronym or Defined Term
    
    Definition/DescriptionA-1 Common Unitholders
    
    Holders of A-1 Common Units.A-1 Common Units
    
    Operating Trust class A-1 common units, par value $0.01 per
unit, together with any class B-1 Common Units, which are
redeemable for cash or, at the option of Archstone-Smith,
Common Shares. A-1 Common Units are the common units of the
Operating Trust not held by Archstone-Smith and represent a
minority interest of approximately 11.8% in the Operating
Trust at December 31, 2006.A-2 Common Units
    
    Operating Trust class A-2 common units of beneficial
interest, par value $0.01 per unit. Archstone-Smith is the
sole holder of A-2 Common Units, which represent
approximately an 88.2% interest in the Operating Trust at
December 31, 2006.ADA
    
    Americans with Disabilities Act, as amended.Ameriton
    
    AMERITON Properties Incorporated, which is a taxable REIT
subsidiary that engages in the opportunistic acquisition,
development and eventual disposition of real estate with a
shorter-term investment horizon.Annual Report
    
    This Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the fiscal year ended December 31,
2006.Archstone-Smith
    
    Archstone-Smith Trust. Unless indicated otherwise, financial
information and references throughout this document are
labeled, Archstone-Smith for periods before and after the
Smith Merger.B Common Units
    
    Operating Trust class B common units of beneficial interest,
par value $0.01 per unit, which are issued to persons who
contribute property to the Operating Trust. B Common Units
convert automatically to A-1 Common Units immediately
following the distribution of income for the quarter in which
the property was contributed.Board
    
    Archstone-Smiths Board of Trustees.CES
    
    Consolidated Engineering Services, Inc. was a taxable REIT
subsidiary of Archstone-Smith in the business of delivering mission critical
facilities management services for corporate, government and
institutional customers. CES was sold to a third party in
December 2002 for $178 million.Common Share(s)
    
    Archstone-Smith common shares of beneficial interest, par
value $0.01 per share.Common
Shareholders
    
    Holders of the Common SharesCommon Units
    
    The A-1 Common Units and the A-2 Common Units.Convertible Debt
    
    $575 million exchangeable senior unsecured notes that are
exchangeable into Common Shares.Convertible Preferred Shares
    
    Collectively, the Series A, H, J, K and L Preferred Shares.Declaration of Trust
    
    Archstone-Smiths Amended and Restated Declaration of Trust,
as filed with the State of Maryland on May 31, 2006, as
amended and supplemented.DEU
    
    Dividend Equivalent Unit; an amount credited to the account
of holders of certain options and RSUs under our long-term
incentive plan.DeWAG
    
    DeWAG Deutsche WohnAnlage GmbH.DRIP
    
    Dividend Reinvestment and Share
Purchase Plan.EPS
    
    Earnings Per Share determined in accordance with GAAP.FASB
    
    Financial Accounting Standards Board.FHA
    
    Fair Housing Act, as amended.GAAP
    
    Generally accepted accounting principles in the United States.High-Rise
    
    Those communities with five or more above-ground floors.Independent Trustees
    
    Members of the Board meeting the NYSE definition of
Independent Director.
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Abbreviation, Acronym or Defined Term
    
    Definition/DescriptionIn Planning
    
    Represents parcels of land owned or Under Control,
which are in the development planning process, upon
which construction of apartments is expected to
commence subsequent to the completion of the
entitlement and building permit processes.International
    
    Refers to our operational and investment activities
in Europe. Our investments to date have been limited
to Germany.IRR
    
    On a sold community, IRR refers to the unleveraged
internal rate of return calculated by
Archstone-Smith, considering the initial purchase
price and all capital invested in the community, the
timing and amounts of net operating income during the
period owned and the net sales proceeds from the
sale. The
IRR calculations include property management overhead
and internal disposition costs but not depreciation
or allocations for corporate general and
administrative expenses, interest expenses, income
tax expenses (if any) or other indirect operating
expenses. Therefore, an IRR calculation is not a
substitute for net income as a measure of our
performance. Management believes that IRRs are an
important indicator of the value created during the
ownership period. Historical IRRs are not
necessarily indicative of IRRs that will be produced
in the future. Our methodology for calculating IRRs
may not be consistent with the methodology used by
other companies.Lease-Up
    
    The phase during which newly constructed apartment
units are being leased for the first time, but prior
to the community becoming Stabilized.LIBOR
    
    London Interbank Offered Rate.Long-Term Unsecured Debt
    
    Collectively, Archstone-Smiths long-term unsecured
senior notes payable and unsecured tax-exempt bonds.NAREIT
    
    National Association of Real Estate Investment Trusts.Net Operating Income or NOI
    
    Represents rental revenues less rental expenses and
real estate taxes. We rely on NOI for purposes of
making decisions about resource allocations and
assessing segment performance. We also believe NOI is
a valuable means of comparing period-to-period
property performance. NOI is a non-GAAP financial measure. See a reconciliation of NOI to
Earnings from Operations in this Annual Report in
Item 7  Managements Discussion and Analysis of
Financial Condition and Results of Operations 
Property-level operating results.NYSE
    
    New York Stock Exchange.Oakwood or Oakwood Worldwide
    
    The terms used in reference to a group of
partnerships coordinated by a common sponsor who
contributed a group of apartment communities to the
Operating Trust in 2005.Oakwood Master Leases
    
    Refers to thirteen communities acquired from Oakwood
and one community we previously owned and operated
that were leased in their entirety to an affiliate of
Oakwood Worldwide under master lease agreements with
seven year terms, subject to Oakwoods right to
terminate individual leases under certain
circumstances after the one year anniversary of the
acquisition.Operating Trust
    
    Archstone-Smith Operating Trust, the entity through
which we conduct all property ownership and business
operations.Preferred Shares or Perpetual
Preferred Shares
    
    The Series I Preferred Shares.REIT
    
    Real estate investment trust. This term is also used
to refer to consolidated subsidiaries of
Archstone-Smith, but excluding taxable and
International subsidiaries unless the context
indicates otherwise.Restricted Share Unit or RSU
    
    A unit representing an interest in one Common Share,
subject to certain vesting provisions, granted to an
associate through our long-term incentive plan.
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Abbreviation, Acronym or Defined Term
    
    Definition/DescriptionSame-Store
    
    Term used to refer to a group of operating
communities in the United States that had attained
Stabilization and were fully operating during the
entire time two periods are being compared.
Excludes communities which were not eligible for
inclusion due to (i) recent acquisition or
development, (ii) major redevelopment, or (iii) a
significant number of non-operational units (fires,
floods, etc.). Also excludes Ameriton properties,
due to their short-term holding periods, and
International properties.Series A Preferred Shares
    
    Archstone-Smith Series A Cumulative Preferred
Shares of Beneficial Interest, par value $0.01 per
share, which were redeemed in full in November
2003.Series C Preferred Shares
    
    Archstone-Smith Series C Cumulative Perpetual
Preferred Shares of Beneficial Interest, par value
$0.01 per share, which were redeemed in full in
August 2002.Series D Preferred Shares
    
    Archstone-Smith Series D Cumulative Perpetual
Preferred Shares of Beneficial Interest, par value
$0.01 per share, which were redeemed in full in
August 2004.Series E Perpetual Preferred Units
    
    8.375% Cumulative Perpetual Preferred Units, par
value $0.01, which were redeemed in full in
February 2005.Series F Perpetual Preferred Units
    
    8.125% Cumulative Perpetual Preferred Units, par
value $0.01, which were redeemed in full in
September 2004.Series G Perpetual Preferred Units
    
    8.625% Cumulative Perpetual Preferred Units, par
value $0.01, which were redeemed in full in March
2005.Series H Preferred Shares
    
    Archstone-Smith Series H Cumulative Convertible
Perpetual Preferred Shares of Beneficial Interest,
par value $0.01 per share, which were converted
into Common Shares in full in May 2003.Series I Preferred Shares
    
    Archstone-Smith Series I Cumulative Perpetual
Preferred Shares of Beneficial Interest, par value
$100,000 per share, redeemable in February 2028.Series J Preferred Shares
    
    Archstone-Smith Series J Cumulative Convertible
Perpetual Preferred Shares of Beneficial Interest,
par value $0.01 per share, which were converted
into Common Shares in full in July 2002.Series K Preferred Shares
    
    Archstone-Smith Series K Cumulative Convertible
Perpetual Preferred Shares of Beneficial Interest,
par value $0.01 per share, which were converted
into Common Shares in September 2004.Series L Preferred Shares
    
    Archstone-Smith Series L Cumulative Convertible
Perpetual Preferred Shares of Beneficial Interest,
par value $0.01 per share, which were converted
into Common Shares in December 2004.Series M Preferred Unit
    
    Operating Trust Series M Preferred Unit of
Beneficial Interest, par value $0.01 per unit.Series N-1 Preferred Units
    
    Operating Trust Series N-1 Convertible Redeemable
Preferred Units of Beneficial Interest, par value
$0.01 per unit.Series N-2 Preferred Units
    
    Operating Trust Series N-2 Convertible Redeemable
Preferred Units of Beneficial Interest, par value
$0.01 per unit.SMC
    
    Smith Management Construction, Inc. was a taxable
REIT subsidiary of Archstone-Smith in the business
of providing construction management and building
maintenance services. SMC was sold to members of
its senior management in February 2003.Smith Merger
    
    The series of transactions in October 2001 whereby
Archstone-Smith merged with Smith Residential, and
Archstone Communities Trust (now, the Operating
Trust) merged with Smith Partnership.Smith Partnership
    
    Charles E. Smith Residential Realty L.P.Smith Residential
    
    Charles E. Smith Residential Realty, Inc.SFAS
    
    Statement of Financial Accounting Standards.Stabilized or Stabilization
    
    The classification assigned to an apartment
community that has achieved 93% occupancy, and for
which development, new management and new marketing
programs (or development and marketing in the case
of a newly developed community) have been
completed.Total Expected Investment
    
    For development communities, represents the total
expected investment at completion; for operating
communities, represents the total expected
investment plus planned capital expenditures.Trustees
    
    Members of the Board of Trustees of Archstone-Smith.
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Abbreviation, Acronym or Defined Term
    
    Definition/DescriptionUnder Control
    
    A term used to identify land parcels which the
Operating Trust does not own, yet has an exclusive
right through contingent contract or letter of
intent during a contractually agreed upon time
period to acquire the land, subject to satisfaction
of contingencies during the due diligence and
entitlement processes.Unitholders
    
    The holders of the A-1 Common Units and the A-2
Common Units.UPREIT
    
    Umbrella Partnership Real Estate Investment Trust.
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Forward-Looking Statements
 Certain statements in this Annual Report that are not historical facts are forward-looking
statements as that term is defined under the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are based on our current expectations, beliefs, assumptions,
estimates and projections about the industry and markets in which we operate. Words such as
expects, anticipates, intends, plans, believes, seeks, estimates and variations of
such words and similar expressions are intended to identify such forward-looking statements.
Information concerning expected investment balances, expected funding sources, planned investments,
forecasted dates and revenue and expense growth assumptions are examples of forward-looking
statements. These statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions, which are difficult to predict and many of which are beyond our
control. Therefore, actual outcomes and results may differ materially from what is expressed,
forecasted or implied in such forward-looking statements. We undertake no obligation to update
publicly any forward-looking statements, whether as a result of new information, future events or
otherwise, except as required by applicable law.
 Our operating results depend primarily on income from apartment communities, which is
substantially influenced by supply and demand for apartment units, operating expense levels,
property level operations and the pace and price at which we develop, acquire or dispose of
apartment communities. Capital and credit market conditions, which affect our cost of capital, also
influence operating results. See Risk Factors in Item 1 of this Annual Report for a complete
discussion of the various risk factors that could affect our future performance.
 
 PART I
 
 Item 1.
 Business
   Washington, D.C. metropolitan area
    
    
    34.6
    %Southern California
    
    
    25.8New York City metropolitan area
    
    
    12.5San Francisco Bay Area, California
    
    
    11.5Boston, Massachusetts
    
    
    5.0Seattle, Washington
    
    
    4.2Southeast Florida
    
    
    2.2Chicago, Illinois
    
    
    2.0Total
    
    
    97.8
    %
 
 The Company
  
    
    Acquiring, developing, redeveloping and operating apartments in our core markets,
which are characterized by: protected locations with limited land for new housing
construction, expensive single-family home prices, and a strong, diversified economic
base with significant employment growth potential;
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
    
    Generating long-term sustainable growth in operating cash flow;
    
    Increasing our Common Share dividend, as we have done for the last 16 consecutive years;
    
    Recruiting, training and retaining people who we believe are the best and brightest in the apartment business;
    
    Building the dominant operating platform in the apartment industry, to produce an
operating franchise that we believe is more efficient, more profitable and difficult to
replicate. We invest in technology to improve our operations and customer service
delivery, strengthen our brand position and solidify our reputation for operational
leadership; and
    
    Managing our invested capital through the selective sale of apartment communities
with slower growth prospects and redeploying the proceeds to fund investments with
higher anticipated growth prospects and value creation, in many of the most desirable
neighborhoods in our core markets.
 
 2006 Accomplishments
 
    
    Archstone-Smith produced Same-Store revenue growth of 6.5% and NOI growth of 7.5% for
the full year of 2006.
    
    Archstone-Smiths reported Same-Store NOI outperformed our peer average by 1,002
basis points for the period from January 1, 2001 through December 31, 2006.
(1)
    
    We dramatically increased our presence in New York City through the acquisition of
five high-rise apartment communities, totaling $845.1 million and 1,382 units, and are
now the largest public owner of apartments in Manhattan. At year-end 2006, our committed
Total Expected Investment in the New York City metropolitan area, including joint
venture developments, totaled $2.0 billion.
    
    We made significant incremental investments in the San Francisco Bay Area, which now
represents almost 12% of our portfolio, acquiring five communities, totaling $655.9
million and 1,978 units.
    
    We achieved our 12-year-long goal of repositioning of our portfolio from undesirable,
commodity markets, into many of the most desirable neighborhoods in our core markets. As
of December 31, 2006, our portfolio was 97.8% in our core markets.
    
    In May 2006, we completed our second acquisition in Europe with the purchase of a
657-unit portfolio concentrated in Berlin, Germany, for $50.5 million. In July 2006, we
completed the acquisition of DeWAG, a German company that specializes in the
acquisition, long-term ownership and re-sale or privatization of attractive
residential properties in the major metropolitan areas of Southern and Western Germany.
At acquisition, the real estate portfolio consisted of approximately 6,400 units valued
at $646.3 million.
    
    In July 2006, we completed a successful $575 million convertible debt offering. This
offering was used to repay outstanding balances under our revolving credit facility and
certain other indebtedness, to make additional investments and for general corporate
purposes.
    
    On July 12, 2006, Fitch Ratings upgraded our credit rating to A- from BBB+.
    
    We increased our 2007 annualized Common Share dividend level 4.0% to $1.81, or
$0.4525 per quarter. This marks our 16th consecutive annual Common Share
dividend increase and a total increase of 183% since 1991. Our first quarter 2007 Common
Share dividend was paid in February 2007, representing our 126th consecutive
quarterly payment.
    
    Forbes magazine ranked Archstone-Smith at 954 on the Forbes 2000 List for 2006, the
magazines comprehensive ranking of the worlds largest corporations.
    
    Archstone-Smith was named Property Management Company of the Year by the National
Association of Home Builders.
 
 (1)
    
    NOI performance is defined as cumulative same-store NOI growth for the period
presented, relative to the average Same-Store NOI growth for our peer companies, which are
Avalon Bay Communities; BRE Properties, Inc.; Camden Property Trust; Equity Residential;
Essex Property Trust, Inc.; Post Properties, Inc.; and United Dominion Realty. Each
companys cumulative same-store NOI growth is calculated from 2001 through 2006. Results
for 2001 through 2006 are per Green Street Advisors Apartment REITS: 4Q01 Review, 4Q03
Review, February 06 Update and February 07 Update, except for Archstone-Smith figures,
which are actual reported results. 8




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Investment Strategy
 Capital recycling program
  Focus on core markets
     Developments
   Ameriton
  9




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International
   
 Customer-focused Operations
  Powerful brands
 TM
  10




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Investing in technology
 Web-based property management system.
 Revenue management
  Resident websites
 Online Lease
  Internet marketing and lead management.
 Investing in our associates
  Associate engagement
 11




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================================================================================

Incentive-Based
Compensation
 Developing our leaders
 
 Conservative Balance Sheet Management
     % of Total MarketYear
    
    Total
    
    
    Capitalization(1)2007
    
    $
    491.1
    
    
    
    2.3
    %2008
    
    
    546.8
    
    
    
    2.6
    %2009
    
    
    481.5
    
    
    
    2.3
    %2010
    
    
    404.5
    
    
    
    1.9
    %2011
    
    
    843.6
    
    
    
    4.0
    %Thereafter and debt discount
    
    
    3,364.4
    
    
    
    16.0
    %Total
    
    $
    6,131.9
    
    
    
    29.1
    %
 
 (1)
    
    Total market capitalization as of December 31, 2006, represents the market capitalization
based on the closing share price on the last trading day of the
period for common shares, Units and the liquidation value for
Preferred Shares as well as the book value
of total debt. Consistent dividend growth
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Management
  Officers of Archstone-Smith
  Name
    
    TitleR. Scot Sellers*
    
    Chairman and Chief Executive OfficerJ. Lindsay Freeman*
    
    Chief Operating OfficerCharles E. Mueller, Jr*
    
    Chief Financial OfficerCaroline Brower*
    
    General Counsel and SecretaryAlfred G. Neely*
    
    Chief Development Officer and President  Charles E. Smith Residential DivisionMark A. Schumacher*
    
    Chief Accounting OfficerDaniel E. Amedro
    
    Chief Information OfficerJack
R. Callison
    
    Executive Vice President-East
OperationsDana K. Hamilton
    
    Managing Director  EuropeGerald
R. Morgan
    
    Senior Vice President-National
Operations
 
 *
    
    Executive Officers 
 Biographies of Senior Officers
 R. Scot Sellers  50
 J. Lindsay Freeman  61
 Charles E. Mueller, Jr.  43 
 Caroline Brower  58
 Alfred G. Neely  61
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Mark A. Schumacher  4
 Daniel E. Amedro  50 Spirit,
 Jack R. Callison  36
 Dana K. Hamilton  38
 Gerald R. Morgan  43
 
 Employees
  
 Insurance
  
 Competition
  14




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Available Information and Code of Ethics
 http://www.archstonesmith.com.
 
 Item 1A. Risk Factors
  We have restrictions on the sale of certain properties.
   We depend on our key personnel.
  Debt financing could adversely affect our performance.
   15




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We may not have access to equity capital.
  We could be subject to acts of terrorism.
  We are subject to risks inherent in ownership of real estate.
  We are subject to risks inherent in real estate development.
  Real estate investments are relatively illiquid and we may not be able to recover our
investments.
  Compliance with laws and regulatory requirements may be costly.
  16




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Costs associated with moisture infiltration and resulting mold remediation may be costly.
  Changes in laws may result in increased cost.
  Archstone-Smiths failure to qualify as a REIT would have adverse consequences.
  The Operating Trust intends to qualify as a partnership, but we cannot guarantee that the
Operating Trust will qualify.
  17




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We are subject to losses that may not be covered by insurance.
  We have a concentration of investments in certain markets.
  Our business is subject to extensive competition.
  Ownership of properties located outside of the United States subjects us to foreign currency
risks which may adversely impact our ability to make distributions.
   Acquisition and ownership of foreign properties involve risks greater than those faced by us
in the United States
  18




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Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
 
 United States Geographic Distribution, excluding Ameriton
  Washington, D.C. metropolitan area
    
    
    34.6
    %Southern California
    
    
    25.8New York City metropolitan area
    
    
    12.5San Francisco Bay Area, California
    
    
    11.5Boston, Massachusetts
    
    
    5.0Seattle, Washington
    
    
    4.2Southeast Florida
    
    
    2.2Chicago, Illinois
    
    
    2.0Total
    
    
    97.8
    %
  Total Portfolio(1)2006
    
    2005
    
    2004Core MarketsWashington, D.C. metropolitan area
    
    
    34.6
    %
    
    
    36.6
    %
    
    
    39.4
    %Southern California
    
    
    25.8
    
    
    
    24.9
    
    
    
    18.9New York City metropolitan area
    
    
    12.5
    
    
    
    6.8
    
    
    
    4.9San Francisco Bay Area, California
    
    
    11.5
    
    
    
    8.2
    
    
    
    8.2Boston, Massachusetts
    
    
    5.0
    
    
    
    4.7
    
    
    
    4.7Seattle, Washington
    
    
    4.2
    
    
    
    3.9
    
    
    
    3.1Southeast Florida
    
    
    2.2
    
    
    
    4.0
    
    
    
    4.7Chicago, Illinois
    
    
    2.0
    
    
    
    4.3
    
    
    
    6.1Total Core Markets
    
    
    97.8
    %
    
    
    93.4
    %
    
    
    90.0
    %Non-Core Markets(2)Houston, Texas
    
    
    
    
    
    
    1.3
    %
    
    
    1.5
    %Denver, Colorado
    
    
    
    
    
    
    1.1
    
    
    
    1.9Atlanta, Georgia
    
    
    
    
    
    
    
    
    
    
    2.3Raleigh, North Carolina
    
    
    
    
    
    
    
    
    
    
    1.1Other
    
    
    2.2
    
    
    
    4.2
    
    
    
    3.2Total Non-Core Markets
    
    
    2.2
    %
    
    
    6.6
    %
    
    
    10.0
    %Total All Markets
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 
 (1)
    
    Based on NOI for the fourth quarter of each calendar year, excluding NOI from
communities disposed of during the period. See Item 7 under the caption Property-level
operating resultsfor a discussion on why we believe NOI is a meaningful measure and a
reconciliation of NOI to Earnings from Operations.(2)
    
    Markets that represent 1.0% or less of NOI in any year are included in Other for that
year. 19




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##### Table of Contents



Real Estate Portfolio
  20




---



##### Table of Contents



Archstone-Number of
    
    
    Number of
    
    
    Smith
    
    
    PercentageCommunities
    
    
    Units
    
    
    Investment
    
    
    Leased(1)OPERATING APARTMENT COMMUNITIES:Garden Communities:Boston, Massachusetts(2)
    
    
    9
    
    
    
    2,044
    
    
    $
    474,586
    
    
    
    86.9
    %Dallas, Texas
    
    
    1
    
    
    
    514
    
    
    
    48,177
    
    
    
    96.1
    %Denver, Colorado
    
    
    1
    
    
    
    156
    
    
    
    10,549
    
    
    
    92.9
    %El Paso, Texas
    
    
    1
    
    
    
    379
    
    
    
    14,198
    
    
    
    92.9
    %Houston, Texas
    
    
    1
    
    
    
    616
    
    
    
    36,937
    
    
    
    97.7
    %Inland Empire, California
    
    
    3
    
    
    
    1,298
    
    
    
    84,475
    
    
    
    96.3
    %Los Angeles County, California
    
    
    20
    
    
    
    7,483
    
    
    
    1,454,616
    
    
    
    92.1
    %New York City metropolitan area
    
    
    1
    
    
    
    396
    
    
    
    89,118
    
    
    
    97.5
    %Orange County, California
    
    
    8
    
    
    
    2,063
    
    
    
    267,381
    
    
    
    96.3
    %Orlando, Florida
    
    
    1
    
    
    
    312
    
    
    
    22,100
    
    
    
    95.2
    %Phoenix, Arizona
    
    
    2
    
    
    
    742
    
    
    
    28,760
    
    
    
    94.1
    %San Diego, California
    
    
    8
    
    
    
    2,803
    
    
    
    358,793
    
    
    
    96.7
    %San Francisco Bay Area, California
    
    
    20
    
    
    
    7,419
    
    
    
    1,351,578
    
    
    
    93.9
    %Seattle, Washington
    
    
    9
    
    
    
    3,408
    
    
    
    308,999
    
    
    
    95.1
    %Southeast Florida
    
    
    5
    
    
    
    1,924
    
    
    
    232,675
    
    
    
    95.4
    %Stamford, Connecticut
    
    
    1
    
    
    
    160
    
    
    
    36,568
    
    
    
    95.6
    %Ventura County, California
    
    
    4
    
    
    
    1,018
    
    
    
    159,212
    
    
    
    96.1
    %Washington, D.C. metropolitan area
    
    
    17
    
    
    
    8,152
    
    
    
    1,111,173
    
    
    
    94.2
    %Garden Community Subtotal/Average
    
    
    112
    
    
    
    40,887
    
    
    $
    6,089,895
    
    
    
    94.2
    %High-Rise Properties:Boston, Massachusetts(2)
    
    
    5
    
    
    
    1,207
    
    
    $
    376,289
    
    
    
    72.6
    %Chicago, Illinois
    
    
    2
    
    
    
    1,113
    
    
    
    234,813
    
    
    
    95.2
    %Los Angeles County, California(3)
    
    
    3
    
    
    
    1,073
    
    
    
    238,151
    
    
    
    91.0
    %Minneapolis, Minnesota
    
    
    1
    
    
    
    250
    
    
    
    27,107
    
    
    
    95.6
    %New York City metropolitan area
    
    
    10
    
    
    
    2,929
    
    
    
    1,566,026
    
    
    
    96.9
    %Philadelphia, Pennsylvania
    
    
    1
    
    
    
    80
    
    
    
    19,035
    
    
    
    N/ASan Diego, California
    
    
    1
    
    
    
    387
    
    
    
    44,358
    
    
    
    93.5
    %San Francisco Bay Area, California
    
    
    2
    
    
    
    853
    
    
    
    268,575
    
    
    
    95.4
    %Seattle, Washington
    
    
    2
    
    
    
    338
    
    
    
    62,422
    
    
    
    N/AWashington, D.C. metropolitan area
    
    
    35
    
    
    
    11,722
    
    
    
    2,252,196
    
    
    
    95.4
    %High-Rise Subtotal/Average
    
    
    62
    
    
    
    19,952
    
    
    $
    5,088,972
    
    
    
    94.0
    %FHA/ADA Settlement Capital Accrual
    
    
    
    
    
    
    
    
    
    $
    29,185
    
    
    
    N/AOperating Apartment Communities Subtotal/Average
    
    
    174
    
    
    
    60,839
    
    
    $
    11,208,052
    
    
    
    94.1
    %APARTMENT COMMUNITIES UNDER CONSTRUCTION:Garden Communities:Los Angeles County, California
    
    
    2
    
    
    
    655
    
    
    
    172,783
    
    
    
    N/AOrange County, California
    
    
    1
    
    
    
    884
    
    
    
    60,161
    
    
    
    N/ASan Francisco Bay Area, California
    
    
    1
    
    
    
    185
    
    
    
    61,695
    
    
    
    N/AGarden Community Subtotal/Average
    
    
    4
    
    
    
    1,724
    
    
    $
    294,639High-Rise Properties:Boston, Massachusetts
    
    
    1
    
    
    
    426
    
    
    $
    112,242
    
    
    
    N/AApartment Communities Under Construction Subtotal/Average
    
    
    5
    
    
    
    2,150
    
    
    $
    406,881
    
    
    
    N/AAPARTMENT COMMUNITIES IN PLANNING:(4)Garden Communities:Boston, Massachusetts
    
    
    1
    
    
    
    420
    
    
    
    Washington, D.C. metropolitan area
    
    
    1
    
    
    
    357
    
    
    
    High-Rise Communities:Boston, Massachusetts
    
    
    1
    
    
    
    341
    
    
    $
    16,774Washington, D.C. metropolitan area
    
    
    2
    
    
    
    723
    
    
    
    58,764Total Apartment Communities In Planning (4) Subtotal/Average
    
    
    5
    
    
    
    1,841
    
    
    $
    75,538Total REIT Communities
    
    
    184
    
    
    
    64,830
    
    
    $
    11,690,471AMERITON PORTFOLIO:Operating Apartment Communities
    
    
    5
    
    
    
    1,474
    
    
    $
    174,983Apartment Communities Under Construction and In Planning (4)
    
    
    20
    
    
    
    6,670
    
    
    
    308,448Other Real Estate Assets
    
    
    
    
    
    
    
    
    
    
    102,093Subtotal/Average
    
    
    25
    
    
    
    8,144
    
    
    
    585,524INTERNATIONAL PORTFOLIO:German Operating Apartment Communities
    
    
    119
    
    
    
    8,334
    
    
    
    851,593OTHER REAL ESTATE ASSETS(5)
    
    
    
    
    
    
    
    
    
    $
    60,052Total Real Estate Owned at December 31, 2006
    
    
    328
    
    
    
    81,308
    
    
    $
    13,187,640
 
 See notes on following page. 21




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##### Table of Contents



(1)
    
    Represents the percentage leased as of December 31, 2006. For communities in Lease-Up, the
percentage leased is based on leased units divided by total number of units in the community
(completed and under construction) as of December 31, 2006. The N/A for the Seattle and
Philadelphia markets in the High-Rise operating community section indicates that the markets
are entirely comprised of Oakwood Master Lease communities. Oakwood Master Leased communities
have been excluded from the Percentage Leased calculation for other markets that have both
Oakwood Master Leased communities and communities with traditional resident leases. A N/A
indicates markets with communities under construction where Lease-Up has not yet commenced.(2)
    
    Lower average occupancy is due to the inclusion of certain recently completed development
communities which are in Lease-Up and therefore not yet Stabilized.(3)
    
    Includes a 623-unit community which recently completed redevelopment and whose occupancy was
85.9% as of December 31, 2006.(4)
    
    As of December 31, 2006, we had two investments representing $7.1 million or 777 units and
one investment representing $0.5 million or 176 units classified as In Planning and Under
Control for Archstone-Smith and Ameriton, respectively. Our actual investment in these communities is
reflected in the Other assets caption of our Balance Sheet.(5)
    
    Includes land that is not In Planning and other real estate assets. 
 Item 3. Legal Proceedings
     
 Item 4. Submission of Matters to a Vote of Security Holders
  22




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##### Table of Contents



PART II
 
 Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
  CashHigh
    
    
    Low
    
    
    Distributions2005:First Quarter
    
    $
    38.28
    
    
    $
    32.76
    
    
    $
    0.4325Second Quarter
    
    
    39.25
    
    
    
    33.63
    
    
    
    0.4325Third Quarter
    
    
    43.03
    
    
    
    38.25
    
    
    
    0.4325Fourth Quarter
    
    
    43.10
    
    
    
    36.31
    
    
    
    0.43252006:First Quarter
    
    $
    50.11
    
    
    $
    41.79
    
    
    $
    0.4350Second Quarter
    
    
    51.38
    
    
    
    44.81
    
    
    
    0.4350Third Quarter
    
    
    55.31
    
    
    
    49.66
    
    
    
    0.4350Fourth Quarter
    
    
    61.00
    
    
    
    53.81
    
    
    
    0.43502007:First Quarter (through February 20, 2007)
    
    $
    64.77
    
    
    $
    56.55
    
    
    $
    0.4525
      2006
    
    
    2005Per Common Share:Ordinary income
    
    $
    1.31
    
    
    $
    1.12Capital gains
    
    
    0.43
    
    
    
    0.61Total
    
    $
    1.74
    
    
    $
    1.73
 23




---



##### Table of Contents



2006
    
    
    2005Per Series I Preferred Share(1):Ordinary income
    
    $
    5,778
    
    
    $
    4,959Capital gains
    
    
    1,882
    
    
    
    2,701Total
    
    $
    7,660
    
    
    $
    7,660
 
 (1)
    
    The Series I Preferred Shares have a par value of $100,000 per share.    Total Number of
    
    
    Maximum ApproximateAverage Price Paid
    
    
    Shares Purchased as
    
    
    Dollar Value That MayNumber of Shares
    
    
    per Share
    
    
    Part of Publicly
    
    
    Yet Be PurchasedPeriod
    
    Purchased
    
    
    (1)
    
    
    Announced Plan
    
    
    Under the Plan1/1/05 - 2/28/05
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    188,6333/1/05 - 3/31/05
    
    
    1,210
    
    
    
    34.27
    
    
    
    1,210
    
    
    
    147,0834/1/05 - 4/30/05
    
    
    437
    
    
    
    34.40
    
    
    
    437
    
    
    
    132,137
    (2)5/1/05 - 12/31/05
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132,137Total
    
    
    1,647
    
    
    $
    34.31
    
    
    
    1,6471/1/06 - 12/31/06
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    132,137Total
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Price includes amounts paid for commissions.(2)
    
    On April 22, 2005, the Board increased the total authorized for share
repurchases to $255 million. 24




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##### Table of Contents



(1)
 
 12/31/2001
    
    12/31/2002
    
    12/31/2003
    
    12/31/2004
    
    12/31/2005
    
    12/31/2006Archstone-Smith
    
    
    100
    
    
    
    96
    
    
    
    122
    
    
    
    182
    
    
    
    208
    
    
    
    299S & P 500
    
    
    100
    
    
    
    78
    
    
    
    100
    
    
    
    111
    
    
    
    117
    
    
    
    135NAREIT Equity REIT Index
    
    
    100
    
    
    
    104
    
    
    
    142
    
    
    
    187
    
    
    
    210
    
    
    
    284NAREIT Apartment REIT Index
    
    
    100
    
    
    
    94
    
    
    
    118
    
    
    
    159
    
    
    
    182
    
    
    
    254
 
 (1)
    
    Assumes that the value of the investment in Common Shares and each index was $100.00
on December 31, 2001 and that all dividends were reinvested. 
 Item 6. Selected Financial Data
  Years ended December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002Operations Summary(1):Total revenues(2)
    
    $
    1,133,586
    
    
    $
    833,633
    
    
    $
    661,478
    
    
    $
    594,374
    
    
    $
    567,842Property operating expenses (rental expenses and real
estate taxes)
    
    
    343,342
    
    
    
    252,382
    
    
    
    210,747
    
    
    
    180,658
    
    
    
    181,794Net Operating Income(3)
    
    
    712,834
    
    
    
    525,221
    
    
    
    431,523
    
    
    
    394,382
    
    
    
    376,586Depreciation on real estate investments
    
    
    261,438
    
    
    
    187,771
    
    
    
    150,470
    
    
    
    119,776
    
    
    
    109,074Interest expense
    
    
    245,895
    
    
    
    164,035
    
    
    
    125,108
    
    
    
    107,791
    
    
    
    107,978General and administrative expense
    
    
    68,188
    
    
    
    58,604
    
    
    
    55,479
    
    
    
    49,838
    
    
    
    45,710Earnings from operations
    
    
    201,008
    
    
    
    121,609
    
    
    
    106,111
    
    
    
    100,658
    
    
    
    106,188Gains on dispositions of depreciated real estate,
net(4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,950Income from unconsolidated entities
    
    
    36,316
    
    
    
    22,432
    
    
    
    17,902
    
    
    
    5,745
    
    
    
    53,602Net earnings from discontinued operations(5)
    
    
    518,313
    
    
    
    464,488
    
    
    
    410,632
    
    
    
    341,913
    
    
    
    145,691Preferred Share dividends
    
    
    3,829
    
    
    
    3,831
    
    
    
    10,892
    
    
    
    20,997
    
    
    
    32,185Net earnings attributable to Common
Shares(3):
 25




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##### Table of Contents



Years ended December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002 Basic
    
    
    723,605
    
    
    
    612,341
    
    
    
    531,450
    
    
    
    412,660
    
    
    
    282,630 Diluted
    
    
    735,452
    
    
    
    612,693
    
    
    
    535,714
    
    
    
    426,192
    
    
    
    282,830Common Share dividends
    
    
    377,513
    
    
    
    353,623
    
    
    
    539,116
    
    
    
    245,460
    
    
    
    306,189Per Share Data:Net earnings attributable to Common Shares: Basic
    
    $
    3.35
    
    
    $
    3.01
    
    
    $
    2.71
    
    
    $
    2.20
    
    
    $
    1.59 Diluted
    
    
    3.33
    
    
    
    3.00
    
    
    
    2.69
    
    
    
    2.18
    
    
    
    1.58Common Share cash dividends paid(6)
    
    
    1.74
    
    
    
    1.73
    
    
    
    2.72
    
    
    
    1.71
    
    
    
    1.70Cash dividends paid per share:Series A Preferred Share(7)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.11
    
    
    
    2.29Series C Preferred Share(8)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.38Series D Preferred Share(9)
    
    
    
    
    
    
    
    
    
    
    1.31
    
    
    
    2.19
    
    
    
    2.19Series H, J, K and L Preferred Shares(10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.38
    
    
    
    3.36Series I Preferred Share(10)(11)
    
    
    7,660.00
    
    
    
    7,660.00
    
    
    
    7,660.00
    
    
    
    7,660.00
    
    
    
    7,660.00Weighted average Common Shares outstanding: Basic
    
    
    216,159
    
    
    
    203,526
    
    
    
    196,098
    
    
    
    187,170
    
    
    
    177,757 Diluted
    
    
    221,153
    
    
    
    204,492
    
    
    
    199,233
    
    
    
    195,640
    
    
    
    178,780
 
 (1)
    
    Net earnings from discontinued operations have been reclassified to reflect communities
classified as discontinued operations as of December 31, 2006 for all years presented.(2)
    
    Annual revenues and other income, inclusive of discontinued operations, for 2006, 2005,
2004, 2003 and 2002 were $1.3 billion, $1.1 billion, $1.0 billion, $1.0 billion and $1.0
billion, respectively.(3)
    
    Defined as rental revenues less rental expenses and real estate taxes. We believe that
net earnings attributable to Common Shares and NOI are the most relevant measures of our
operating performance and allow investors to evaluate our business against our industry
peers and against all publicly traded companies as a whole. We rely on NOI for purposes of
making decisions about resource allocations and assessing segment performance. We also
believe NOI is a valuable means of comparing period-to-period property performance. See
Item 7 of this Annual Report under Results of Operationsfor a reconciliation of NOI to
Earnings from Operations, and to obtain the required information to recalculate NOI from
continuing operations.(4)
    
    Gains on the disposition of real estate investments classified as held for sale after
January 1, 2002 are included in discontinued operations.(5)
    
    Represents property-specific components of net earnings and gains/losses on the
disposition of real estate classified as held for sale subsequent to January 1, 2002.(6)
    
    Includes a $1.00 per share special dividend issued to our Common Shareholders and
Unitholders in December 2004.(7)
    
    The Series A Preferred Shares were called for redemption during October 2003; of the
2.9 million Preferred Shares outstanding, 2.8 million were converted to Common Shares and
the remaining were redeemed.(8)
    
    All of the outstanding Series C Preferred Shares were redeemed at liquidation value
plus accrued dividends in August 2002.(9)
    
    All of the outstanding Series D Preferred Shares were redeemed at liquidation value
plus accrued dividends in August 2004.(10)
    
    The Series L Preferred Shares were converted into Common Shares during December 2004
and the dividend paid during 2004 prior to conversion was $3.40 per share. In September
2004, the Series K Preferred Shares were converted into Common Shares and the dividend paid
during 2004 prior to conversion was $2.55 per share. The Series H Preferred Shares were
converted into Common Shares during May 2003 and the dividend paid during 2003 prior to
conversion was $1.27 per share. In July 2002, Series J Preferred Shares were converted into
Common Shares. During the fourth quarter 2001, we paid approximately $5.8 million of
dividends on the Series H, I, J, K and L Preferred Shares that were declared by Smith
Residential prior to the Smith Merger.(11)
    
    Series I Preferred Shares have a par value of $100,000 per share. 26




---



##### Table of Contents



Years Ended December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002Financial Position:Real estate owned, at cost
    
    $
    12,858,507
    
    
    $
    11,031,917
    
    
    $
    8,972,860
    
    
    $
    8,891,418
    
    
    $
    9,229,398Real estate held for sale(1)
    
    
    329,133
    
    
    
    327,347
    
    
    
    249,178
    
    
    
    107,762
    
    
    
    68,337Investments in and advances to
unconsolidated entities
    
    
    235,323
    
    
    
    132,728
    
    
    
    111,481
    
    
    
    86,367
    
    
    
    116,594Total assets
    
    
    13,259,127
    
    
    
    11,462,095
    
    
    
    9,061,280
    
    
    
    8,916,591
    
    
    
    9,091,647Unsecured credit facilities
    
    
    84,723
    
    
    
    394,578
    
    
    
    19,000
    
    
    
    103,790
    
    
    
    365,578Long-Term Unsecured Debt
    
    
    3,355,699
    
    
    
    2,540,036
    
    
    
    2,094,358
    
    
    
    1,866,861
    
    
    
    1,771,724Mortgages Payable
    
    
    2,776,234
    
    
    
    2,393,652
    
    
    
    2,031,505
    
    
    
    1,960,827
    
    
    
    2,330,533Total liabilities
    
    
    6,956,789
    
    
    
    5,693,305
    
    
    
    4,469,994
    
    
    
    4,179,488
    
    
    
    4,699,920Perpetual Preferred Shares
    
    
    50,000
    
    
    
    50,000
    
    
    
    50,000
    
    
    
    148,940
    
    
    
    294,041Total shareholders equity
    
    
    5,563,189
    
    
    
    4,981,517
    
    
    
    4,093,178
    
    
    
    4,144,687
    
    
    
    3,843,818Number of Common Shares outstanding
    
    
    220,147
    
    
    
    212,414
    
    
    
    199,577
    
    
    
    194,762
    
    
    
    180,706
 Years Ended December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002Other Data:Net cash flows provided by (used in):Operating activities
    
    $
    537,428
    
    
    $
    414,019
    
    
    $
    399,897
    
    
    $
    343,696
    
    
    $
    385,107Investing activities
    
    
    (506,264
    )
    
    
    (964,621
    )
    
    
    528,253
    
    
    
    428,166
    
    
    
    (137,401
    )Financing activities
    
    
    3,853
    
    
    
    360,985
    
    
    
    (730,125
    )
    
    
    (779,478
    )
    
    
    (241,887
    )
 
 (1)
    
    Previous years have been restated to include assets that were classified as held for sale as
of December 31, 2006. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 
 Results of Operations
 Executive Summary
   27




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##### Table of Contents



United
States Geographic Distribution - 1995 vs. 2006 (1)
 
 
 (1)
    
    Allocation is based on the relative NOI in core versus non-core markets for
the three months ended December 31, 1994 for the 1995 geographic distribution and the
three months ended December 31, 2006 for the 2006 geographic distribution. Core
markets are defined as the Washington D.C. metropolitan area; Southern California;
the New York City metropolitan area; the San Francisco Bay Area in California;
Boston, Massachusetts; Seattle, Washington; Southeast Florida and Chicago, Illinois.
Non-core is defined as all other markets in the United States.  Diluted Earnings Per Share
 
 28




---



##### Table of Contents




    
    Our Same-Store NOI has increased 11.0% in 2006 as compared to 2004. We believe the
improvement in our Same-Store performance has resulted from a number of factors including
strengthening market fundamentals as well as benefits from the significant investments we
have made in people and operating systems.
    
    The significant disposition volume resulting from the portfolio repositioning strategy
mentioned above, resulted in REIT GAAP gains, net of disposition costs, of $546.3 million,
$446.7 million and $372.2 million in 2006, 2005 and 2004, respectively. These gains have
been a major driver of our earnings per share growth.
    
    Utilizing the REITs development, acquisition and operating expertise, Ameriton has
identified under-managed operating communities, as well as development and redevelopment
opportunities with a short-term ownership horizon of one to two years that have produced
GAAP gains, net of dispositions costs, of $51.2 million, $75.2 million and $65.1 million in
2006, 2005 and 2004, respectively. The timing and amount of Ameritons contributions to
our earnings will fluctuate from year to year and depend primarily on its ability to
identify profitable investment opportunities, timing of completion of investments in its
development pipeline and real estate market values.
    
    During 2006, we recognized a net loss of $13.1 million ($6.4 million excluding
depreciation) as a result of building our International platform and our expansion efforts
in Germany.
    
    We recognized $77.4 million, $56.0 million and $19.2 million in other income during
2006, 2005 and 2004, respectively, related primarily to non-recurring insurance-related
reimbursement, gains from land sales (including Ameriton land sales) and interest income.
    
    We recognized $275.8 million, $217.6 million and $208.8 million in interest expense,
including discontinued operations, during 2006, 2005 and 2004, respectively. The year over
year increases were due primarily to financing related to the growth in our real estate
portfolio and higher average interest rates.
    
    We recognized $37.5 million, $72.2 million and $29.3 million in other expense, including
discontinued operations, during 2006, 2005 and 2004, respectively, related primarily to
Ameriton income taxes, debt extinguishment costs and loss contingencies. Most of the
costs in other expense are event-driven and will not necessarily reoccur each year.
    
    We recognized $2.3 million and $28.8 million in other non-operating income during 2006
and 2005, respectively, related primarily to gains from the sale of our Rent.com
investment.
 29




---



##### Table of Contents



Reconciliation of Quantitative Summary to Consolidated Statements of Earnings
  2006
    
    
    2005
    
    
    2004Continuing
    
    
    Discontinued
    
    
    
    
    
    
    Continuing
    
    
    Discontinued
    
    
    
    
    
    
    Continuing
    
    
    DiscontinuedOperations
    
    
    Operations
    
    
    Total
    
    
    Operations
    
    
    Operations
    
    
    Total
    
    
    Operations
    
    
    Operations
    
    
    TotalRental revenue
    
    $
    1,056,176
    
    
    $
    139,457
    
    
    $
    1,195,633
    
    
    $
    777,603
    
    
    $
    239,806
    
    
    $
    1,017,409
    
    
    $
    642,270
    
    
    $
    325,784
    
    
    $
    968,054Other income
    
    
    77,410
    
    
    
    
    
    
    
    77,410
    
    
    
    56,030
    
    
    
    
    
    
    
    56,030
    
    
    
    19,208
    
    
    
    
    
    
    
    19,208Property operating
expenses (rental
expenses and real
estate taxes)
    
    
    (343,342
    )
    
    
    (61,022
    )
    
    
    (404,364
    )
    
    
    (252,382
    )
    
    
    (105,587
    )
    
    
    (357,969
    )
    
    
    (210,747
    )
    
    
    (143,341
    )
    
    
    (354,088
    )Depreciation on
real estate
investments
    
    
    (261,438
    )
    
    
    (26,858
    )
    
    
    (288,296
    )
    
    
    (187,771
    )
    
    
    (51,017
    )
    
    
    (238,788
    )
    
    
    (150,470
    )
    
    
    (69,519
    )
    
    
    (219,989
    )Interest expense
    
    
    (245,895
    )
    
    
    (29,931
    )
    
    
    (275,826
    )
    
    
    (164,035
    )
    
    
    (53,533
    )
    
    
    (217,568
    )
    
    
    (125,108
    )
    
    
    (83,644
    )
    
    
    (208,752
    )General and
administrative
expenses
    
    
    (68,188
    )
    
    
    
    
    
    
    (68,188
    )
    
    
    (58,604
    )
    
    
    
    
    
    
    (58,604
    )
    
    
    (55,479
    )
    
    
    
    
    
    
    (55,479
    )Other expense
    
    
    (13,715
    )
    
    
    (23,805
    )
    
    
    (37,520
    )
    
    
    (49,232
    )
    
    
    (22,947
    )
    
    
    (72,179
    )
    
    
    (13,563
    )
    
    
    (15,739
    )
    
    
    (29,302
    )Minority interest
    
    
    (30,541
    )
    
    
    (77,100
    )
    
    
    (107,641
    )
    
    
    (21,164
    )
    
    
    (64,168
    )
    
    
    (85,332
    )
    
    
    (20,465
    )
    
    
    (49,356
    )
    
    
    (69,821
    )Income from
unconsolidated
entities
    
    
    36,316
    
    
    
    
    
    
    
    36,316
    
    
    
    22,432
    
    
    
    
    
    
    
    22,432
    
    
    
    17,902
    
    
    
    
    
    
    
    17,902Other non-operating
income
    
    
    2,338
    
    
    
    
    
    
    
    2,338
    
    
    
    28,807
    
    
    
    
    
    
    
    28,807
    
    
    
    28,162
    
    
    
    
    
    
    
    28,162Gains, net of
disposition costs
    
    
    
    
    
    
    597,572
    
    
    
    597,572
    
    
    
    
    
    
    
    521,934
    
    
    
    521,934
    
    
    
    
    
    
    
    446,447
    
    
    
    446,447Net earnings
    
    $
    209,121
    
    
    $
    518,313
    
    
    $
    727,434
    
    
    $
    151,684
    
    
    $
    464,488
    
    
    $
    616,172
    
    
    $
    131,710
    
    
    $
    410,632
    
    
    $
    542,342
 Quantitative Summary
 including
 30




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##### Table of Contents



2006 vs. 2005
    
    
    2005 vs. 2004Increase /
    
    
    Increase /2006
    
    
    2005
    
    
    2004
    
    
    (Decrease)
    
    
    (Decrease)Rental revenues:Same-Store (1)
    
    $
    637,079
    
    
    $
    600,358
    
    
    $
    579,358
    
    
    $
    36,721
    
    
    $
    21,000Non Same-Store
    
    
    491,668
    
    
    
    375,712
    
    
    
    348,668
    
    
    
    115,956
    
    
    
    27,044Ameriton
    
    
    20,869
    
    
    
    33,986
    
    
    
    36,752
    
    
    
    (13,117
    )
    
    
    (2,766
    )International
    
    
    34,920
    
    
    
    
    
    
    
    
    
    
    
    34,920
    
    
    
    Non-multifamily
    
    
    11,097
    
    
    
    7,353
    
    
    
    3,276
    
    
    
    3,744
    
    
    
    4,077Total revenues
    
    
    1,195,633
    
    
    
    1,017,409
    
    
    
    968,054
    
    
    
    178,224
    
    
    
    49,355Property operating expenses (rental expenses and real estate taxes):Same-Store (1)
    
    
    201,158
    
    
    
    193,906
    
    
    
    186,512
    
    
    
    7,252
    
    
    
    7,394Non Same-Store
    
    
    173,108
    
    
    
    145,033
    
    
    
    148,224
    
    
    
    28,075
    
    
    
    (3,191
    )Ameriton
    
    
    10,619
    
    
    
    17,038
    
    
    
    18,884
    
    
    
    (6,419
    )
    
    
    (1,846
    )International
    
    
    16,225
    
    
    
    
    
    
    
    
    
    
    
    16,225
    
    
    
    Non-multifamily
    
    
    3,254
    
    
    
    1,992
    
    
    
    468
    
    
    
    1,262
    
    
    
    1,524Total operating expenses
    
    
    404,364
    
    
    
    357,969
    
    
    
    354,088
    
    
    
    46,395
    
    
    
    3,881Net
Operating Income (rental revenues less property operating
expenses)
    
    
    791,269
    
    
    
    659,440
    
    
    
    613,966
    
    
    
    131,829
    
    
    
    45,474Margin (NOI/rental revenues):
    
    
    66.2
    %
    
    
    64.8
    %
    
    
    63.4
    %
    
    
    1.4
    %
    
    
    1.4
    %Average occupancy during period: (2)
    
    
    93.9
    %
    
    
    94.6
    %
    
    
    94.8
    %
    
    
    (0.7
    %)
    
    
    (0.2
    %)Other income
    
    
    77,410
    
    
    
    56,030
    
    
    
    19,208
    
    
    
    21,380
    
    
    
    36,822Depreciation of real estate investments
    
    
    288,296
    
    
    
    238,788
    
    
    
    219,989
    
    
    
    49,508
    
    
    
    18,799Interest expense
    
    
    327,634
    
    
    
    256,679
    
    
    
    232,324
    
    
    
    70,955
    
    
    
    24,355Capitalized interest
    
    
    51,808
    
    
    
    39,111
    
    
    
    23,572
    
    
    
    12,697
    
    
    
    15,539Net interest expense
    
    
    275,826
    
    
    
    217,568
    
    
    
    208,752
    
    
    
    58,258
    
    
    
    8,816General and administrative expenses
    
    
    68,188
    
    
    
    58,604
    
    
    
    55,479
    
    
    
    9,584
    
    
    
    3,125Other expense
    
    
    37,520
    
    
    
    72,179
    
    
    
    29,302
    
    
    
    (34,659
    )
    
    
    42,877Earnings from continuing and discontinued
operations
    
    
    198,849
    
    
    
    128,331
    
    
    
    119,652
    
    
    
    70,518
    
    
    
    8,679Minority interest
    
    
    107,641
    
    
    
    85,332
    
    
    
    69,821
    
    
    
    22,309
    
    
    
    15,511Equity in earnings from unconsolidated entities
    
    
    36,316
    
    
    
    22,432
    
    
    
    17,902
    
    
    
    13,884
    
    
    
    4,530Other non-operating incomeGains on disposition of real estate investments,
net of disposition costs:
    
    
    2,338
    
    
    
    28,807
    
    
    
    28,162
    
    
    
    (26,469
    )
    
    
    645Taxable subsidiaries
    
    
    51,245
    
    
    
    75,248
    
    
    
    74,230
    
    
    
    (24,003
    )
    
    
    1,018REIT
    
    
    546,327
    
    
    
    446,686
    
    
    
    372,217
    
    
    
    99,641
    
    
    
    74,469Net earnings
    
    $
    727,434
    
    
    $
    616,172
    
    
    $
    542,342
    
    
    $
    111,262
    
    
    $
    73,830
 
 (1)
    
    Reflects revenues and operating expenses for Same-Store communities that were owned on
December 31, 2006 and fully operating during all three years in the comparison period.(2)
    
    Does not include occupancy associated with properties owned by Ameriton, operated under
the Oakwood Master Leases or International. 31




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##### Table of Contents



Property-level operating results  2006 compared to 2005
  Same-Store Analysis
  Same-Store
    
    Same-StoreRevenue
    
    Expense
    
    Same-StoreGrowth
    
    Growth
    
    NOI GrowthGarden
    
    
    6.6
    %
    
    
    6.2
    %
    
    
    6.7
    %High-Rise
    
    
    6.5
    %
    
    
    1.9
    %
    
    
    8.8
    %Total
    
    
    6.5
    %
    
    
    4.4
    %
    
    
    7.5
    %
  Non Same-Store and Other Analysis
  Ameriton
  International
  Non Multi-family
  32




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##### Table of Contents



Property-level operating results  2005 compared to 2004
 Same-Store Analysis
  Same-Store
    
    Same-StoreRevenue
    
    Expense
    
    Same-StoreGrowth
    
    Growth
    
    NOI GrowthGarden
    
    
    3.6
    %
    
    
    3.5
    %
    
    
    3.6
    %High-Rise
    
    
    3.9
    %
    
    
    4.8
    %
    
    
    3.4
    %Total
    
    
    3.7
    %
    
    
    4.1
    %
    
    
    3.6
    %
  Non Same-Store and Other Analysis
  Ameriton
  Non Multi-family
  Other Income
   33




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##### Table of Contents



Depreciation Expense
  Interest Expense
   General and Administrative Expenses
   Other Expenses
   Minority Interest
  Equity in Income from Unconsolidated Entities
  34




---



##### Table of Contents



Other Non-Operating Income
   Gains on real estate dispositions
  Discontinued Operations Analysis
  Years Ended December 31,2006
    
    
    2005
    
    
    2004Rental revenue
    
    $
    139,457
    
    
    $
    239,806
    
    
    $
    325,784Rental expenses
    
    
    (44,043
    )
    
    
    (74,715
    )
    
    
    (104,023
    )Real estate taxes
    
    
    (16,979
    )
    
    
    (30,872
    )
    
    
    (39,318
    )Depreciation on real estate investments
    
    
    (26,858
    )
    
    
    (51,017
    )
    
    
    (69,519
    )Interest expense(1)
    
    
    (29,931
    )
    
    
    (53,533
    )
    
    
    (83,644
    )Income taxes from taxable REIT subsidiaries
    
    
    (9,972
    )
    
    
    (15,600
    )
    
    
    (13,975
    )Provision for possible loss on real estate investment
    
    
    (4,328
    )
    
    
    (1,500
    )
    
    
    Debt extinguishment costs related to dispositions
    
    
    (9,505
    )
    
    
    (5,847
    )
    
    
    (1,764
    )Allocation of minority interest
    
    
    (77,100
    )
    
    
    (64,168
    )
    
    
    (49,356
    )Gains on disposition of real estate investments, net
of disposition costs:Taxable subsidiaries
    
    
    51,245
    
    
    
    75,248
    
    
    
    62,629REIT
    
    
    546,327
    
    
    
    446,686
    
    
    
    383,818Total discontinued operations
    
    $
    518,313
    
    
    $
    464,488
    
    
    $
    410,632Number of communities sold during period
    
    
    42
    
    
    
    35
    
    
    
    30Number of communities classified as held for sale
    
    
    9
    
    
    
    9
    
    
    
    6
 
 (1)
    
    The portion of interest expense included in discontinued operations that is allocated to
properties based on the companys leverage ratio was $20.9 million, $40.3 million and $62.2
million for 2006, 2005 and 2004, respectively.  35




---



##### Table of Contents



Preferred Share Dividend Analysis
  
 Liquidity and Capital Resources
  Scheduled Debt Maturities and Interest Payment Requirements
     Shareholder Dividend/Distribution Requirements
  Per Share
    
    
    TotalCommon Share and Common Unit distributions(1)(2):Common Shares
    
    $
    1.81
    
    
    $
    398,466A-1 Common Unit distributions
    
    
    1.81
    
    
    
    53,421M Preferred Unit
    
    
    476.03
    
    
    
    N-1 Preferred Units
    
    
    20.96
    
    
    
    6N-2 Preferred Units
    
    
    8.98
    
    
    
    6Series I Preferred Share dividends(3)
    
    
    7,660.00
    
    
    
    3,830Total dividend/distribution requirements
    
    
    
    
    
    $
    455,729
 
 (1)
    
    Future distributions on Common Shares and Common Units are contingent upon approval by our
Board of Trustees.(2)
    
    See Note 11 in our audited financial statements in this Annual Report for more information on
minority interests.(3)
    
    Series I Preferred Shares have a par value of $100,000 per share. 36




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##### Table of Contents



Planned Investments
  Planned InvestmentsDiscretionary
    
    
    CommittedCommunities under redevelopment
    
    $
    1,812
    
    
    $
    3,082Communities under construction
    
    
    
    
    
    
    619,441Communities In Planning and Owned
    
    
    1,196,121
    
    
    
    Communities In Planning and Under Control
    
    
    406,336
    
    
    
    Community acquisitions under contract
    
    
    146,766
    
    
    
    FHA/ADA Settlement Capital Accrual
    
    
    
    
    
    
    29,185Total
    
    $
    1,751,035
    
    
    $
    651,708
   Funding Sources
 .
 
 Litigation and Contingencies
   37




---



##### Table of Contents



Critical Accounting Policies
  Internal Cost Capitalization
   Valuation of Real Estate
 Accounting for Impairment or Disposal of
Long-Lived Assets,
   38




---



##### Table of Contents



Capital Expenditures and Depreciable Lives
    Pursuit Costs
   Consolidation vs. Equity Method of Accounting for Ventures
 Consolidation of Variable Interest Entities Determining Whether a General Partner, or the
General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited
Partners Have Certain Rights
  39




---



##### Table of Contents



Off Balance Sheet Arrangements
 Investments in and Advances to
Unconsolidated Entities
  
 Contractual Commitments
  2008
    
    
    2010
    
    
    20122007
    
    
    and 2009
    
    
    and 2011
    
    
    thru 2096
    
    
    TotalScheduled long-term debt maturities
    
    $
    491.1
    
    
    $
    1,028.3
    
    
    $
    1,248.1
    
    
    $
    3,364.4
    
    
    $
    6,131.9Unsecured credit facilities(1)
    
    
    
    
    
    
    
    
    
    
    84.7
    
    
    
    
    
    
    
    84.7Term loan  International
    
    
    235.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    235.8Interest on indebtedness
    
    
    335.3
    
    
    
    590.7
    
    
    
    481.7
    
    
    
    188.2
    
    
    
    1,595.9Development and redevelopment expenditures
    
    
    307.9
    
    
    
    314.6
    
    
    
    
    
    
    
    
    
    
    
    622.5Performance bonds and guarantees
    
    
    26.9
    
    
    
    11.5
    
    
    
    
    
    
    
    1.2
    
    
    
    39.6FHA/ADA Settlement(2)
    
    
    14.6
    
    
    
    14.6
    
    
    
    
    
    
    
    
    
    
    
    29.2Lease commitments and other(3)
    
    
    86.0
    
    
    
    17.7
    
    
    
    19.2
    
    
    
    217.8
    
    
    
    340.7Total
    
    $
    1,497.6
    
    
    $
    1,977.4
    
    
    $
    1,833.7
    
    
    $
    3,771.6
    
    
    $
    9,080.3
 
 (1)
    
    The $600 million unsecured facility matures December 2010, with a one-year extension option
available at our discretion.(2)
    
    Represents the estimated capital spending associated with the FHA and ADA settlement
assuming the remainder will be spent evenly over the next two years. Certain communities
impacted by the settlement may be sold, which could impact the ultimate timing and amounts
spent.(3)
    
    Includes letters of credit and lease commitments relating principally to ground lease
payments as of December 31, 2006. 
 New Accounting Pronouncements
 Determining Whether a
General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights
 Determining the
Variability to Be Considered in Applying FASB Interpretation No. 46(R). Consolidation
of Variable Interest Entities.
 40




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##### Table of Contents



Accounting for Uncertainty in
Income Taxes  An Interpretation of FASB Statement No. 109.
   
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Stock Investments
  Interest Rate Hedging Activities
    41




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##### Table of Contents



Notional
    
    Maturity
    
    Carrying andAmount
    
    Date Range
    
    Estimated Fair ValueCash flow hedges:Interest rate caps
    
    $
    486,354
    
    
    
    2007-2013
    
    
    $
    809Interest rate swaps
    
    
    367,054
    
    
    
    2007-2014
    
    
    
    7,080Total cash flow hedges
    
    $
    853,408
    
    
    
    2007-2014
    
    
    $
    7,889Fair value hedges:Interest rate swaps
    
    $
    75,055
    
    
    
    2008
    
    
    $
    1,185Total rate of return swaps
    
    
    36,346
    
    
    
    2007
    
    
    
    (1,447
    )Total fair value hedges
    
    $
    111,401
    
    
    
    2007-2008
    
    
    $
    (262
    )Total hedges
    
    $
    964,809
    
    
    
    2007-2014
    
    
    $
    7,627
 Foreign Currency Hedging Activities
 
 Energy Contract Hedging Activities
  Equity Securities Hedging Activities
  Interest Rate Sensitive Liabilities
   42




---



##### Table of Contents



EstimatedTotal
    
    Fair2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    Thereafter
    
    Balance
    
    Value(1)Interest rate sensitive liabilities:Unsecured credit facilities:
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    84,723
    
    
    $
    
    
    
    $
    
    
    
    $
    84,723
    
    
    $
    84,723Average nominal interest rate(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.5
    %
    
    
    
    
    
    
    
    
    
    
    5.5
    %
    
    
    Term loan  International:
    
    $
    235,771
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    235,771
    
    
    $
    235,771Average nominal interest rate(2)
    
    
    4.1
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.1
    %
    
    
    Long-Term Unsecured Debt:Fixed rate
    
    $
    386,250
    
    
    $
    312,822
    
    
    $
    81,250
    
    
    $
    263,750
    
    
    $
    625,000
    
    
    $
    1,610,332
    
    
    $
    3,279,404
    
    
    $
    3,360,607Average nominal interest rate(2)
    
    
    5.4
    %
    
    
    4.0
    %
    
    
    7.6
    %
    
    
    6.0
    %
    
    
    4.5
    %
    
    
    5.7
    %
    
    
    5.4
    %
    
    
    Variable rate(3)
    
    $
    
    
    
    $
    21,468
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    54,827
    
    
    $
    76,295
    
    
    $
    76,295Average nominal interest rate(2)
    
    
    
    
    
    
    3.9
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.0
    %
    
    
    4.0
    %
    
    
    Mortgages payable:Fixed rate debt
    
    $
    77,690
    
    
    $
    196,637
    
    
    $
    392,102
    
    
    $
    131,931
    
    
    $
    174,143
    
    
    $
    820,480
    
    
    $
    1,792,983
    
    
    $
    1,818,091Average nominal interest rate(2)
    
    
    5.8
    %
    
    
    5.7
    %
    
    
    6.0
    %
    
    
    6.0
    %
    
    
    6.1
    %
    
    
    6.0
    %
    
    
    6.0
    %
    
    
    Variable rate debt
    
    $
    27,235
    
    
    $
    15,859
    
    
    $
    8,132
    
    
    $
    8,813
    
    
    $
    44,446
    
    
    $
    878,766
    
    
    $
    983,251
    
    
    $
    983,251Average nominal interest rate(2)
    
    
    5.1
    %
    
    
    2.4
    %
    
    
    5.1
    %
    
    
    5.1
    %
    
    
    4.6
    %
    
    
    4.9
    %
    
    
    4.8
    %
    
    
    
 
 (1)
    
    The estimated fair value for each of the liabilities listed was calculated by discounting the
actual principal payment stream at prevailing interest rates (obtained from third party
financial institutions) currently available on debt instruments with similar terms and
features.(2)
    
    Reflects the weighted average nominal interest rate on the liabilities outstanding during
each period, giving effect to principal payments and final maturities during each period, if
any. The nominal rates for variable rate mortgages payable have been held constant during each
period presented based on the actual variable rates as of December 31, 2006. The weighted
average effective interest rate on the unsecured credit facilities, Long-Term Unsecured Debt
and mortgages payable was 5.9%, 5.6% and 5.4, respectively, as of December 31, 2006.(3)
    
    Represents unsecured tax-exempt bonds. 
 Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  43




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##### Table of Contents



Item 9A. Controls and Procedures
  
 Managements Report on Internal Control Over Financial Reporting
    /s/ R. Scot SellersR. Scot SellersChairman of the Board, Chief Executive Officer and Trustee (principal executive officer)/s/ Charles E. Mueller, Jr.Charles E. Mueller, Jr.Chief Financial Officer (principal financial officer)
 
 Item 9B. Other Information
  44




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##### Table of Contents



Part III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  Equity Compensation Plan Information
 (c)(a)
    
    
    (b)
    
    
    Number of securitiesNumber of securities
    
    
    Weighted-average
    
    
    remaining available forto be issued upon
    
    
    exercise price of
    
    
    future issuance underexercise of
    
    
    outstanding
    
    
    equity compensation plansoutstanding options,
    
    
    options, warrants
    
    
    (excluding securitiesPlan Category
    
    warrants and rights
    
    
    and rights
    
    
    reflected in column (a))Equity compensation
plans approved by security
holders
    
    
    3,151,540
    
    
    $
    30.72
    
    
    
    10,316,885Equity compensation plans
not approved by security
holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    3,151,540
    
    
    $
    30.72
    
    
    
    10,316,885
 
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accounting Fees and Services
  45




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##### Table of Contents



Part IV
 
 Item 15. Exhibits, Financial Statement Schedules
             46




---



##### Table of Contents



INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
 PageReports of Independent Registered Public Accounting Firm
    
    
    48-49Consolidated Balance Sheets as of December 31, 2006 and 2005
    
    
    50Consolidated Statements of Earnings for the years ended December
31, 2006, 2005 and 2004
    
    
    51Consolidated Statements of Shareholders Equity and
Comprehensive Income (Loss) for the years ended December 31,
2006, 2005 and 2004
    
    
    52Consolidated Statements of Cash Flows for the years ended
December 31, 2006, 2005 and 2004
    
    
    53Notes to Consolidated Financial Statements
    
    
    54-83Report of Independent Registered Public Accounting Firm on
Supplementary Information
    
    
    84Schedule III  Real Estate and Accumulated Depreciation as of
December 31, 2006
    
    
    85-86Schedule IV  Mortgage Loans on Real Estate as of December 31,
2006
    
    
    87Signatures
    
    
    88Index to Exhibits
    
    
    89-90
 47




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    .
  
 48




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
 .
    . .
  .
  
 49




---



##### Table of Contents



ARCHSTONE-SMITH TRUST
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, except share data)
 December 31,2006
    
    
    2005ASSETSReal estate
    
    $
    12,858,507
    
    
    $
    11,031,917Real estate  held for sale
    
    
    329,133
    
    
    
    327,347Less accumulated depreciation
    
    
    957,146
    
    
    
    836,69312,230,494
    
    
    
    10,522,571Investments in and advances to unconsolidated entities
    
    
    235,323
    
    
    
    132,728Net real estate investments
    
    
    12,465,817
    
    
    
    10,655,299Cash and cash equivalents
    
    
    48,655
    
    
    
    13,638Restricted cash in tax-deferred exchange and bond escrow
    
    
    319,312
    
    
    
    495,274Other assets
    
    
    425,343
    
    
    
    297,884Total assets
    
    $
    13,259,127
    
    
    $
    11,462,095LIABILITIES AND SHAREHOLDERS EQUITYLiabilities:Unsecured credit facilities
    
    $
    84,723
    
    
    $
    394,578Term Loan  International
    
    
    235,771
    
    
    
    Long-Term Unsecured Debt
    
    
    3,339,462
    
    
    
    2,523,639Long-Term Unsecured Debt  held for sale
    
    
    16,237
    
    
    
    16,397Mortgages payable
    
    
    2,743,081
    
    
    
    2,360,181Mortgages payable  held for sale
    
    
    33,153
    
    
    
    33,471Accounts payable
    
    
    71,967
    
    
    
    53,366Accrued
interest
    
    
    67,135
    
    
    
    50,991Accrued expenses and other liabilities
    
    
    365,260
    
    
    
    260,682Total liabilities
    
    
    6,956,789
    
    
    
    5,693,305Minority interest
    
    
    739,149
    
    
    
    787,273Shareholders equity:Perpetual Preferred Shares
    
    
    50,000
    
    
    
    50,000Common Shares (Par value $0.01; 450,000,000 shares
authorized; 220,147,167 and 212,413,939 shares issued
and outstanding in 2006 and 2005, respectively)
    
    
    2,201
    
    
    
    2,124Additional paid-in capital
    
    
    4,883,164
    
    
    
    4,652,901Accumulated other comprehensive income (loss)
    
    
    3,520
    
    
    
    (1,720
    )Retained Earnings
    
    
    624,304
    
    
    
    278,212Total shareholders equity
    
    
    5,563,189
    
    
    
    4,981,517Total liabilities and shareholders equity
    
    $
    13,259,127
    
    
    $
    11,462,095
  50




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 
 CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
 Years Ending December 31,2006
    
    
    2005
    
    
    2004Revenues:Rental revenues
    
    $
    1,056,176
    
    
    $
    777,603
    
    
    $
    642,270Other income
    
    
    77,410
    
    
    
    56,030
    
    
    
    19,2081,133,586
    
    
    
    833,633
    
    
    
    661,478Expenses:Rental expenses
    
    
    248,837
    
    
    
    182,546
    
    
    
    155,350Real estate taxes
    
    
    94,505
    
    
    
    69,836
    
    
    
    55,397Depreciation on real estate investments
    
    
    261,438
    
    
    
    187,771
    
    
    
    150,470Interest expense
    
    
    245,895
    
    
    
    164,035
    
    
    
    125,108General and administrative expenses
    
    
    68,188
    
    
    
    58,604
    
    
    
    55,479Other expenses
    
    
    13,715
    
    
    
    49,232
    
    
    
    13,563932,578
    
    
    
    712,024
    
    
    
    555,367Earnings from operations
    
    
    201,008
    
    
    
    121,609
    
    
    
    106,111Minority interest
    
    
    (30,541
    )
    
    
    (21,164
    )
    
    
    (20,465
    )Income from unconsolidated entities
    
    
    36,316
    
    
    
    22,432
    
    
    
    17,902Other non-operating income
    
    
    2,338
    
    
    
    28,807
    
    
    
    28,162Net earnings before discontinued operations
    
    
    209,121
    
    
    
    151,684
    
    
    
    131,710Net earnings from discontinued operations
    
    
    518,313
    
    
    
    464,488
    
    
    
    410,632Net earnings
    
    
    727,434
    
    
    
    616,172
    
    
    
    542,342Preferred Share dividends
    
    
    (3,829
    )
    
    
    (3,831
    )
    
    
    (10,892
    )Net earnings attributable to Common Shares  Basic
    
    
    723,605
    
    
    
    612,341
    
    
    
    531,450Interest on Convertible Debt
    
    
    11,139
    
    
    
    
    
    
    
    Dividends on Convertible Preferred Shares
    
    
    
    
    
    
    
    
    
    
    3,755Minority interest
    
    
    708
    
    
    
    352
    
    
    
    509Net earnings attributable to Common Shares  Diluted
    
    $
    735,452
    
    
    $
    612,693
    
    
    
    535,714Weighted average Common Shares outstanding:Basic
    
    
    216,159
    
    
    
    203,526
    
    
    
    196,098Diluted
    
    
    221,153
    
    
    
    204,492
    
    
    
    199,233Net earnings per Common Share  Basic:Net earnings before discontinued operations
    
    $
    0.95
    
    
    $
    0.73
    
    
    $
    0.62Discontinued operations, net
    
    
    2.40
    
    
    
    2.28
    
    
    
    2.09Net earnings
    
    $
    3.35
    
    
    $
    3.01
    
    
    $
    2.71Net earnings per Common Share  Diluted:Net earnings before discontinued operations
    
    $
    0.95
    
    
    $
    0.73
    
    
    $
    0.61Discontinued operations, net
    
    
    2.38
    
    
    
    2.27
    
    
    
    2.08Net earnings
    
    $
    3.33
    
    
    $
    3.00
    
    
    $
    2.69Dividends paid per Common Share
    
    $
    1.74
    
    
    $
    1.73
    
    
    $
    2.72
  51




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND
COMPREHENSIVE INCOME (LOSS)
Years Ended December 31, 2006, 2005 and 2004
(In thousands)
 Convertible
    
    
    PerpetualPreferred
    
    
    Preferred
    
    
    
    
    
    
    
    
    
    
    AccumulatedShares at
    
    
    Shares at
    
    
    
    
    
    
    
    
    
    
    OtherAggregate
    
    
    Aggregate
    
    
    Common
    
    
    Additional
    
    
    ComprehensiveLiquidation
    
    
    Liquidation
    
    
    Shares at
    
    
    Paid-in
    
    
    Income
    
    
    RetainedPreference
    
    
    Preference
    
    
    Par Value
    
    
    Capital
    
    
    (Loss)
    
    
    Earnings
    
    
    TotalBalances at December 31, 2003
    
    $
    50,000
    
    
    $
    98,940
    
    
    $
    1,948
    
    
    $
    3,952,404
    
    
    $
    14,235
    
    
    $
    27,160
    
    
    $
    4,144,687Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    542,342
    
    
    
    542,342Change in fair value of cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,750
    
    
    
    
    
    
    
    3,750Change in fair value/sale of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,410
    )
    
    
    
    
    
    
    (22,410
    )Comprehensive income attributable to Common Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    523,682Preferred Share dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,892
    )
    
    
    (10,892
    )Common Share dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (539,116
    )
    
    
    (539,116
    )A-1 Common Units converted into Common Shares
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    47,925
    
    
    
    
    
    
    
    
    
    
    
    47,949Conversion of Preferred Shares into Common Shares
    
    
    (50,000
    )
    
    
    
    
    
    
    26
    
    
    
    49,974
    
    
    
    
    
    
    
    
    
    
    
    Common Share repurchases
    
    
    
    
    
    
    
    
    
    
    (35
    )
    
    
    (95,633
    )
    
    
    
    
    
    
    
    
    
    
    (95,668
    )Preferred Share repurchases
    
    
    
    
    
    
    (48,940
    )
    
    
    
    
    
    
    1,727
    
    
    
    
    
    
    
    
    
    
    
    (47,213
    )Exercise of Options
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    61,436
    
    
    
    
    
    
    
    
    
    
    
    61,467Issuance of Common Shares in exchange for real estate
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    4,500
    
    
    
    
    
    
    
    
    
    
    
    4,502Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,780
    
    
    
    
    
    
    
    
    
    
    
    3,780Balances at December 31, 2004
    
    
    
    
    
    
    50,000
    
    
    
    1,996
    
    
    
    4,026,113
    
    
    
    (4,425
    )
    
    
    19,494
    
    
    
    4,093,178Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    616,172
    
    
    
    616,172Change in fair value of cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,211
    
    
    
    
    
    
    
    4,211Change in fair value/sale of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,214
    )
    
    
    
    
    
    
    (1,214
    )Foreign currency exchange translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (292
    )
    
    
    
    
    
    
    (292
    )Comprehensive income attributable to Common Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    618,877Preferred Share dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,831
    )
    
    
    (3,831
    )Common Share dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (353,623
    )
    
    
    (353,623
    )A-1 Common Units converted into Common Shares
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    8,411
    
    
    
    
    
    
    
    
    
    
    
    8,415Common Share repurchases
    
    
    
    
    
    
    
    
    
    
    (16
    )
    
    
    (56,479
    )
    
    
    
    
    
    
    
    
    
    
    (56,495
    )Exercise of Options
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    41,549
    
    
    
    
    
    
    
    
    
    
    
    41,566Equity-classified awards under Compensation Plans
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    14,668
    
    
    
    
    
    
    
    
    
    
    
    14,670Issuance of Common Shares
    
    
    
    
    
    
    
    
    
    
    121
    
    
    
    491,277
    
    
    
    
    
    
    
    
    
    
    
    491,398Other, net (Including Minority Interest Revaluation
of $129,051)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127,362
    
    
    
    
    
    
    
    
    
    
    
    127,362Balances at December 31, 2005
    
    $
    
    
    
    $
    50,000
    
    
    $
    2,124
    
    
    $
    4,652,901
    
    
    $
    (1,720
    )
    
    $
    278,212
    
    
    $
    4,981,517Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    727,434
    
    
    
    727,434Change in fair value of hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,058
    
    
    
    
    
    
    
    1,058Change in fair value of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,638
    
    
    
    
    
    
    
    1,638Foreign currency exchange translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,544
    
    
    
    
    
    
    
    2,544Comprehensive income attributable to Common Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    732,674Preferred Share dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,829
    )
    
    
    (3,829
    )Common Share dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (377,513
    )
    
    
    (377,513
    )A-1 Common Units converted into Common Shares
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    143,344
    
    
    
    
    
    
    
    
    
    
    
    143,404Issuance of Common Shares under Dividend
Reinvestment Plan
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    27,095
    
    
    
    
    
    
    
    
    
    
    
    27,100Exercise of Options
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    27,704
    
    
    
    
    
    
    
    
    
    
    
    27,716Equity-classified awards under Compensation Plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,681
    
    
    
    
    
    
    
    
    
    
    
    10,681Other, net (Including Minority Interest Revaluation
of $26,618)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,439
    
    
    
    
    
    
    
    
    
    
    
    21,439Balances at December 31, 2006
    
    $
    
    
    
    $
    50,000
    
    
    $
    2,201
    
    
    $
    4,883,164
    
    
    $
    3,520
    
    
    $
    624,304
    
    
    $
    5,563,189
  52




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Years Ended December 31,2006
    
    
    2005
    
    
    2004Operating activities:Net earnings
    
    $
    727,434
    
    
    $
    616,172
    
    
    $
    542,342Adjustments to reconcile net earnings to net cash flow provided by
operating activities:Depreciation and amortization
    
    
    302,495
    
    
    
    252,174
    
    
    
    232,990Gains on dispositions of depreciated real estate
    
    
    (602,915
    )
    
    
    (524,684
    )
    
    
    (451,816
    )Gains on sale of marketable equity securities
    
    
    (1,673
    )
    
    
    (27,948
    )
    
    
    (28,162
    )Provisions for possible loss on investments
    
    
    4,328
    
    
    
    9,803
    
    
    
    Minority interest
    
    
    107,641
    
    
    
    85,332
    
    
    
    69,821Equity in earnings from unconsolidated entities
    
    
    (6,118
    )
    
    
    6,605
    
    
    
    6,233Interest accrued on Mezzanine loans
    
    
    (9,781
    )
    
    
    (5,224
    )
    
    
    Change in other assets
    
    
    (14,786
    )
    
    
    7,132
    
    
    
    526Change in accounts payable, accrued expenses and other liabilities
    
    
    49,067
    
    
    
    7,663
    
    
    
    32,113Other, net
    
    
    (18,264
    )
    
    
    (13,006
    )
    
    
    (4,150
    )Net cash flow provided by operating activities
    
    
    537,428
    
    
    
    414,019
    
    
    
    399,897Investing activities:Real estate investments
    
    
    (2,216,598
    )
    
    
    (2,016,573
    )
    
    
    (1,423,549
    )Purchase of DeWAG net of cash acquired of $20,364
    
    
    (252,428
    )
    
    
    
    
    
    
    Change in investments in unconsolidated entities, net
    
    
    (76,366
    )
    
    
    (10,991
    )
    
    
    (21,662
    )Proceeds from dispositions
    
    
    1,888,341
    
    
    
    1,538,839
    
    
    
    1,821,641Change in restricted cash
    
    
    175,962
    
    
    
    (375,179
    )
    
    
    60,825Change in notes receivable, net
    
    
    (82,414
    )
    
    
    (98,909
    )
    
    
    (6,077
    )Proceeds from notes receivable
    
    
    46,081
    
    
    
    36,654
    
    
    
    Other, net
    
    
    11,158
    
    
    
    (38,462
    )
    
    
    97,075Net cash flow provided by (used in) investing activities
    
    
    (506,264
    )
    
    
    (964,621
    )
    
    
    528,253Financing activities:Proceeds from Long-Term Unsecured Debt
    
    
    859,385
    
    
    
    695,724
    
    
    
    297,052Payments on Long-Term Unsecured Debt
    
    
    (51,250
    )
    
    
    (251,250
    )
    
    
    (72,950
    )Principal repayment of mortgages payable, including prepayment penalties
    
    
    (324,700
    )
    
    
    (500,963
    )
    
    
    (159,558
    )Regularly scheduled principal payments on mortgages payable
    
    
    (12,949
    )
    
    
    (15,067
    )
    
    
    (11,512
    )Proceeds from Term Loan   International
    
    
    272,792
    
    
    
    
    
    
    
    Principal repayments on Term Loan  International
    
    
    (37,021
    )
    
    
    
    
    
    
    Proceeds from mortgage notes payable
    
    
    
    
    
    
    33,807
    
    
    
    51,656Proceeds from (payments on) unsecured credit facilities, net
    
    
    (309,855
    )
    
    
    375,578
    
    
    
    (84,790
    )Proceeds from issuance of Common Shares, net
    
    
    
    
    
    
    491,398
    
    
    
    Proceeds from Common Shares issued under DRIP and employee stock options
    
    
    57,773
    
    
    
    41,566
    
    
    
    61,467Repurchase of Common Shares and Preferred Shares
    
    
    
    
    
    
    (56,495
    )
    
    
    (146,954
    )Repurchase of Series E and F Perpetual Preferred Units
    
    
    
    
    
    
    (19,522
    )
    
    
    (42,712
    )Cash dividends paid on Common Shares
    
    
    (377,513
    )
    
    
    (353,623
    )
    
    
    (539,116
    )Cash dividends paid on Preferred Shares
    
    
    (3,829
    )
    
    
    (3,831
    )
    
    
    (9,165
    )Cash dividends paid to minority interests
    
    
    (55,079
    )
    
    
    (64,385
    )
    
    
    (69,799
    )Other, net
    
    
    (13,901
    )
    
    
    (11,952
    )
    
    
    (3,744
    )Net cash flow provided by (used in) financing activities
    
    
    3,853
    
    
    
    360,985
    
    
    
    (730,125
    )Net change in cash and cash equivalents
    
    
    35,017
    
    
    
    (189,617
    )
    
    
    198,025Cash and cash equivalents at beginning of period
    
    
    13,638
    
    
    
    203,255
    
    
    
    5,230Cash and cash equivalents at end of period
    
    $
    48,655
    
    
    $
    13,638
    
    
    $
    203,255
 
  53




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006, 2005 and 2004
(The glossary included in this Annual Report is hereby incorporated by reference)
 (1) Description of Business and Summary of Significant Accounting Policies
 Business
  Principles of Consolidation
  Use of Estimates
  Discontinued Operations
 Accounting for Impairment or Disposal of
Long-Lived Assets,
 Cash and Cash Equivalents
  54




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Restricted Cash in Tax-Deferred Exchange and Bond Escrow
  Marketable Securities and Other Investments
  Real Estate and Depreciation
      Building and related land improvements
    
    15-40 yearsFurniture, fixtures, equipment and other
    
    3-10 yearsIntangible value of retail and commercial lease agreements
    
    1-20 yearsIntangible value of residential lease agreements
    
    6-48 months
 55




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Interest
   Cost of Raising Capital
  Moisture Infiltration and Mold Remediation Costs
  Intangibles
   WeightedGross
    
    
    
    AverageCarrying
    
    Accumulated
    
    Useful LifeAmount
    
    Amortization
    
    (in years)In-place leases
    
    $64,127
    
    $49,933
    
    2Above-market leases
    
    936
    

141
    
    7Total intangible assets
    
    $65,063
    
    $50,074Below-market leases
    
    $17,921
    
    $1,794
    
    6Total intangible liabilities
    
    $17,921
    
    $1,794
 56




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Estimated net amortization for the year ended2007
    
    $
    5,8682008
    
    $
    4402009
    
    $
    (133
    )2010
    
    $
    (353
    )2011
    
    $
    (313
    )
  Insurance Recoveries
  Derivative Financial Instruments
 Amendment of
Statement 133 on Derivative Instruments and Hedging Activities
 Revenue and Gain Recognition
   Rental Expenses
  Legal Fees
  57




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Foreign Currency Translation
  Stock-Based Compensation
 Share-Based Payment
 Income Taxes
   Comprehensive Income
 Derivative Financial
Instruments
  NetUnrealized
    
    
    
    
    
    
    
    
    
    AccumulatedGains on
    
    
    
    
    
    Foreign
    
    OtherMarketable
    
    Cash Flow
    
    Currency
    
    ComprehensiveSecurities
    
    Hedges
    
    Translation
    
    Income/(Loss)Balance at December 31, 2003
    
    $
    23,808
    
    
    $
    (9,573
    )
    
    $
    
    
    
    $
    14,235Change in fair value of hedges
    
    
    
    
    
    
    3,750
    
    
    
    
    
    
    
    3,750Change in fair value of marketable securities
    
    
    1,372
    
    
    
    
    
    
    
    
    
    
    
    1,372Reclassification adjustments for realized net gains
    
    
    (23,782
    )
    
    
    
    
    
    
    
    
    
    
    (23,782
    )Balance at December 31, 2004
    
    $
    1,398
    
    
    $
    (5,823
    )
    
    $
    
    
    
    $
    (4,425
    )Change in fair value of hedges
    
    
    
    
    
    
    4,211
    
    
    
    
    
    
    
    4,211Change in fair value of marketable securities
    
    
    865
    
    
    
    
    
    
    
    
    
    
    
    865Reclassification adjustments for realized net gains
    
    
    (2,079
    )
    
    
    
    
    
    
    
    
    
    
    (2,079
    )Foreign currency exchange translation
    
    
    
    
    
    
    
    
    
    
    (292
    )
    
    
    (292
    )Balance at December 31, 2005
    
    $
    184
    
    
    $
    (1,612
    )
    
    $
    (292
    )
    
    $
    (1,720
    )Change in fair value of hedges
    
    
    
    
    
    
    1,058
    
    
    
    
    
    
    
    1,058Change in fair value of marketable securities
    
    
    1,638
    
    
    
    
    
    
    
    
    
    
    
    1,638Foreign currency exchange translation
    
    
    
    
    
    
    
    
    
    
    2,544
    
    
    
    2,544Balance at December 31, 2006
    
    $
    1,822
    
    
    $
    (554
    )
    
    $
    2,252
    
    
    $
    3,520
 58




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Per Share Data
  Years Ended December 31,2006
    
    
    2005
    
    
    2004Reconciliation of numerator between basic and
diluted net earnings per Common Share(1):Net earnings attributable to Common Shares  Basic
    
    $
    723,605
    
    
    $
    612,341
    
    
    $
    531,450Interest on Convertible Debt
    
    
    11,139
    
    
    
    
    
    
    
    Dividends on Convertible Preferred Shares
    
    
    
    
    
    
    
    
    
    
    3,755Minority interest
    
    
    708
    
    
    
    352
    
    
    
    509Net earnings attributable to Common Shares  Diluted
    
    $
    735,452
    
    
    $
    612,693
    
    
    $
    535,714Reconciliation of denominator between basic and
diluted net earnings per Common Share(1):Weighted average number of Common Shares outstanding
Basic
    
    
    216,159
    
    
    
    203,526
    
    
    
    196,098Assumed conversion of Convertible Debt into Common
Shares
    
    
    4,210
    
    
    
    
    
    
    
    Assumed conversion of Preferred Shares into Common
Shares
    
    
    
    
    
    
    
    
    
    
    2,182Incremental options
    
    
    784
    
    
    
    966
    
    
    
    953Weighted average number of Common Shares outstanding
Diluted
    
    
    221,153
    
    
    
    204,492
    
    
    
    199,233
 
 (1)
    
    Excludes the impact of potentially dilutive equity securities during
periods in which they are anti-dilutive. Market Concentration Risk
  Preferred Share Redemptions
 The Effect on the Calculation of Earnings per Share for the
Redemption or Induced Conversion of Preferred Stock
 Reclassifications
  New Accounting Pronouncements
 Determining Whether a
General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights
 59




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##### Table of Contents



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




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (2)
    
    Includes development communities In Planning  Owned and In Planning  Under Control.
Our investment as of December 31, 2006 and December 31, 2005 for development communities In
Planning  Under Control was $7.6 million and $145,000, respectively, and is reflected in
the Other assets caption of our Consolidated Balance Sheets.(3)
    
    Includes land that is not In Planning and other real estate assets.
 Capital Expenditures
      Years Ended December 31,2006
    
    
    2005Balance at January 1
    
    $
    11,359,264
    
    
    $
    9,221,038Acquisition-related expenditures
    
    
    2,530,459
    
    
    
    2,671,112Redevelopment expenditures
    
    
    57,414
    
    
    
    106,264Recurring capital expenditures
    
    
    46,354
    
    
    
    48,311Development expenditures, excluding initial acquisition costs
    
    
    388,502
    
    
    
    324,740Acquisition and improvement of land for development
    
    
    209,916
    
    
    
    81,340Dispositions
    
    
    (1,403,858
    )
    
    
    (1,175,834
    )Provision for possible loss on investment
    
    
    (4,328
    )
    
    
    (1,500
    )Change in estimated hurricane retirements
    
    
    4,496
    
    
    
    Other
    
    
    7,987
    
    
    
    (8,303
    )Net apartment community activity
    
    
    1,836,942
    
    
    
    2,046,130Change in other real estate assets
    
    
    (8,566
    )
    
    
    92,096Balance at December 31
    
    $
    13,187,640
    
    
    $
    11,359,264
  (3) DeWAG Acquisition
  61




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Real estate
    
    $
    646,285Other assets
    
    
    67,722Intangible assets
    
    
    30,958Goodwill
    
    
    34,490Total assets
    
    $
    779,455Mortgages payable
    
    $
    407,933Other liabilities
    
    
    10,759Deferred tax liability
    
    
    69,327Intangible liabilities
    
    
    20,514Total liabilities
    
    
    508,533Net assets acquired
    
    $
    270,922
  WeightedGross
    
    
    
    
    
    
    AverageCarrying
    
    
    Accumulated
    
    
    Useful LifeAmount
    
    
    Amortization
    
    
    (in years)Non-compete agreements
    
    $
    19,672
    
    
    $
    (2,459
    )
    
    
    4In-place leases
    
    
    12,765
    
    
    
    (1,596
    )
    
    
    4Total intangible assets
    
    $
    32,437
    
    
    $
    (4,055
    )Below-market leases
    
    $
    21,496
    
    
    $
    (2,687
    )
    
    
    4Total intangible liabilities
    
    $
    21,496
    
    
    $
    (2,687
    )
 Estimated net amortization for the year ended2007
    
    $
    2,7352008
    
    $
    2,7352009
    
    $
    2,7352010
    
    $
    1,368
  Balance July 1, 2006
    
    $
    34,490Change in foreign currency translation
    
    
    960Balance December 31, 2006
    
    $
    35,450
 62




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  (4)Oakwood Asset Acquisition
   (5) Discontinued Operations
   63




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Years Ended December 31,2006
    
    
    2005
    
    
    2004Rental revenue
    
    $
    139,457
    
    
    $
    239,806
    
    
    $
    325,784Rental expenses
    
    
    (44,043
    )
    
    
    (74,715
    )
    
    
    (104,023
    )Real estate taxes
    
    
    (16,979
    )
    
    
    (30,872
    )
    
    
    (39,318
    )Depreciation on real estate investments
    
    
    (26,858
    )
    
    
    (51,017
    )
    
    
    (69,519
    )Interest expense(1)
    
    
    (29,931
    )
    
    
    (53,533
    )
    
    
    (83,644
    )Income taxes from taxable REIT subsidiaries
    
    
    (9,972
    )
    
    
    (15,600
    )
    
    
    (13,975
    )Provision for possible loss on real estate investment
    
    
    (4,328
    )
    
    
    (1,500
    )
    
    
    Debt extinguishment costs related to dispositions
    
    
    (9,505
    )
    
    
    (5,847
    )
    
    
    (1,764
    )Allocation of minority interest
    
    
    (77,100
    )
    
    
    (64,168
    )
    
    
    (49,356
    )Gain from the disposition of REIT real estate investments,
net
    
    
    548,187
    
    
    
    448,358
    
    
    
    386,792Internal Disposition Costs  REIT transactions (2)
    
    
    (1,860
    )
    
    
    (1,672
    )
    
    
    (2,974
    )Gain from the dispositions of taxable REIT subsidiary real
estate investments, net
    
    
    54,728
    
    
    
    76,326
    
    
    
    65,024Internal Disposition Costs  Taxable REIT subsidiary
transactions (2)
    
    
    (3,483
    )
    
    
    (1,078
    )
    
    
    (2,395
    )Total discontinued operations
    
    $
    518,313
    
    
    $
    464,488
    
    
    $
    410,632
 
 (1)
    
    The portion of interest expense included in discontinued operations that is allocated to
properties based on the companys leverage ratio was $20.9 million, $40.2 million and $62.2
million for 2006, 2005 and 2004, respectively.(2)
    
    Represents the direct and incremental compensation and related costs associated with the
employees dedicated to our significant disposition activity.  Accounting for the Impairment or Disposal of Long-Lived
Assets
 (6) Investments in and Advances to Unconsolidated Entities
 Real Estate Joint Ventures
 Accounting for Investments in Real Estate Ventures,
 64




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Summary Financial Information
  2006
    
    
    2005Assets:Real estate
    
    $
    1,530,659
    
    
    $
    1,142,921Other assets
    
    
    213,569
    
    
    
    244,557Total assets
    
    $
    1,744,228
    
    
    $
    1,387,478Liabilities and owners equity:Inter-company debt payable to Archstone-Smith
    
    $
    1,519
    
    
    $
    2,324Mortgages payable(1)
    
    
    1,063,451
    
    
    
    894,300Other liabilities
    
    
    126,048
    
    
    
    120,898Total liabilities
    
    
    1,191,018
    
    
    
    1,017,522Owners equity
    
    
    553,210
    
    
    
    369,956Total liabilities and owners equity
    
    $
    1,744,228
    
    
    $
    1,387,478
 
 (1)
    
    The Operating Trust guarantees $292.0 million of the outstanding debt balance as of
December 31, 2006 and is committed to guarantee another $16.9 million upon funding of
additional debt.  2006
    
    
    2005
    
    
    2004REIT Joint VenturesRevenues
    
    $
    132,671
    
    
    $
    128,844
    
    
    $
    140,390Net Earnings(1)
    
    
    69,341
    
    
    
    57,141
    
    
    
    29,559Ameriton Joint VenturesRevenues
    
    $
    340
    
    
    $
    4,080
    
    
    $
    5,950Net Earnings(2)
    
    
    17,790
    
    
    
    12,507
    
    
    
    (713
    )TotalRevenues
    
    $
    133,011
    
    
    $
    132,924
    
    
    $
    146,340Net Earnings
    
    $
    87,131
    
    
    $
    69,648
    
    
    $
    28,846
 
 (1)
    
    Includes gains associated with the disposition of REIT Joint Venture assets of $68.4
million, $31.6 million and $32.4 million during 2006, 2005 and 2004, respectively.(2)
    
    Includes Ameritons share of pre-tax gains associated with the disposition of real
estate joint venture assets. These gains totaled $19.8 million, $14.2 million and $7.0
million during 2006, 2005 and 2004, respectively.   65




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  (7) Mortgage and Other Notes Receivable
  Years EndedDecember 31,2006
    
    
    2005Balance at January 1
    
    $
    74,396
    
    
    $
    8,729Funding of additional notes
    
    
    85,165
    
    
    
    97,096Accrued interest
    
    
    9,781
    
    
    
    5,224Repayments and sales of notes
    
    
    (46,081
    )
    
    
    (36,653
    )Balance at December 31
    
    $
    123,261
    
    
    $
    74,396
  (8) Borrowings
 Unsecured Credit Facilities
   Years EndedDecember 31,2006
    
    2005Total unsecured revolving credit facility
    
    $
    600,000
    
    
    $
    600,000Borrowings outstanding at December 31
    
    $
    80,000
    
    
    $
    360,000Outstanding letters of credit under this facility
    
    $
    14,880
    
    
    $
    37,813Weighted average daily borrowings
    
    $
    100,474
    
    
    $
    183,434Maximum
borrowings outstanding during the period
    
    $
    360,000
    
    
    $
    580,000Weighted average daily nominal interest rate
    
    
    5.0
    %
    
    
    4.0
    %Weighted average daily effective interest rate
    
    
    6.3
    %
    
    
    4.3
    %
  66




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Term Loan  International
  Long-Term Unsecured Debt
    Balance at
    
    
    Balance at
    
    
    AverageEffective
    
    
    December 31,
    
    
    December 31,
    
    
    Remaining LifeType of Debt
    
    Coupon Rate(1)
    
    
    Interest Rate(2)
    
    
    2006
    
    
    2005
    
    
    (Years)Long-term unsecured
senior notes
    
    
    5.4
    %
    
    
    5.6
    %
    
    $
    3,279,404
    
    
    $
    2,462,964
    
    
    
    5.23Unsecured
tax-exempt bonds
    
    
    4.0
    %
    
    
    4.2
    %
    
    
    76,295
    
    
    
    77,072
    
    
    
    16.60Total/average
    
    
    5.4
    %
    
    
    5.6
    %
    
    $
    3,355,699
    
    
    $
    2,540,036
    
    
    
    5.54
 
 (1)
    
    Represents a fixed rate for the long-term unsecured notes and a variable rate for the
unsecured tax-exempt bonds.(2)
    
    Includes the effect of fair value hedges, loan cost amortization and other ongoing fees and
expenses, where applicable.  67




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Mortgages Payable
 Scheduled Debt
Maturities).
 Outstanding Balance at(1)
    
    
    Effective InterestDecember 31, 2006
    
    
    December 31, 2005
    
    
    Rate(2)Secured floating rate debt:Tax-exempt debt
    
    $
    935,536
    
    
    $
    839,318
    
    
    
    4.9
    %Conventional mortgages
    
    
    167,020
    
    
    
    54,455
    
    
    
    4.6
    %Total Floating
    
    
    1,102,556
    
    
    
    893,773
    
    
    
    4.9
    %Secured fixed rate debt:Tax-exempt debt
    
    
    3,086
    
    
    
    
    
    
    
    6.4
    %Conventional mortgages
    
    
    1,651,650
    
    
    
    1,480,170
    
    
    
    5.8
    %Other secured debt
    
    
    18,942
    
    
    
    19,709
    
    
    
    3.2
    %Total Fixed
    
    
    1,673,678
    
    
    
    1,499,879
    
    
    
    5.8
    %Total debt outstanding at end of period
    
    $
    2,776,234
    
    
    $
    2,393,652
    
    
    
    5.4
    %
 
 (1)
    
    Includes the unamortized fair market value adjustment associated with assumption of fixed
rate mortgages in connection with real estate acquisitions. The unamortized balance
aggregated $43.9 million and $63.5 million at December 31, 2006 and 2005 respectively, and is
being amortized into interest expense over the life of the underlying debt.(2)
    
    Includes the effect of fair value hedges, credit enhancement fees, the amortization of fair
market value purchase adjustment, and other related costs, where applicable. 68




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  2006
    
    
    2005Balance at January 1
    
    $
    2,393,652
    
    
    $
    2,031,505Proceeds from mortgage notes payable
    
    
    
    
    
    
    33,152Mortgage assumptions related to property acquisitions
    
    
    728,484
    
    
    
    864,155Proceeds from construction loans
    
    
    
    
    
    
    655Regularly scheduled principal amortization
    
    
    (12,949
    )
    
    
    (15,067
    )Prepayments, final maturities and other
    
    
    (332,953
    )
    
    
    (520,748
    )Balance at December 31
    
    $
    2,776,234
    
    
    $
    2,393,652
 Scheduled Debt Maturities
  Long Term Unsecured Debt
    
    
    Mortgages PayableRegularly
    
    
    
    
    
    
    RegularlyScheduled
    
    
    Final
    
    
    Scheduled
    
    
    FinalPrincipal
    
    
    Maturities
    
    
    Principal
    
    
    MaturitiesAmortization
    
    
    and Other
    
    
    Amortization
    
    
    and Other
    
    
    Total2007
    
    $
    31,250
    
    
    $
    355,000
    
    
    $
    18,992
    
    
    $
    85,933
    
    
    $
    491,1752008
    
    
    31,250
    
    
    
    303,040
    
    
    
    19,387
    
    
    
    193,109
    
    
    
    546,7862009
    
    
    51,250
    
    
    
    30,000
    
    
    
    19,138
    
    
    
    381,096
    
    
    
    481,4842010
    
    
    43,750
    
    
    
    220,000
    
    
    
    17,984
    
    
    
    122,760
    
    
    
    404,4942011
    
    
    50,000
    
    
    
    575,000
    
    
    
    19,208
    
    
    
    199,381
    
    
    
    843,589Thereafter and debt discount(1)
    
    
    252,500
    
    
    
    1,412,659
    
    
    
    499,365
    
    
    
    1,199,881
    
    
    
    3,364,405Total
    
    $
    460,000
    
    
    $
    2,895,699
    
    
    $
    594,074
    
    
    $
    2,182,160
    
    
    $
    6,131,933
 
 (1)
    
    The average annual principal payments due from 2012 to 2040
are $116.4 million per year. Other
  (9) Dividends to Shareholders
   2006
    
    2005
    
    2004Common Shares and A-1 Units(1)
    
    $
    1.74
    
    
    $
    1.73
    
    
    $
    2.72Series D Preferred Shares(2)
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    1.31Series I Preferred Shares(3)
    
    
    7,660.00
    
    
    
    7,660.00
    
    
    
    7,660.00Series K Preferred Shares(4)
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    2.55Series L Preferred Shares(5)
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3.40
 
 See notes on following page. 69




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ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (1)
    
    Includes a $1.00 per share special dividend issued to our Common Shareholders in December
2004.(2)
    
    The Series D Preferred Shares were redeemed in August 2004.(3)
    
    The Series I Preferred Shares have a par value of $100,000.(4)
    
    The Series K Preferred Shares were converted into Common Shares in September 2004.(5)
    
    The Series L Preferred Shares were converted to Common Shares in December 2004. (10) Shareholders Equity
 Shares of Beneficial Interest
  Preferred Share Redemption and Conversions
  Common Share Repurchase and Issuances
   Preferred Shares
  AnnualRedemption
    
    Liquidation
    
    Dividend Rate
    
    December 31,Description
    
    Date(1)
    
    Value
    
    Per Share
    
    2006
    
    2005Series I Preferred
Shares; 500 shares
issued and
outstanding at
December 31, 2006
and 2005,
respectively(1)
    
    
    02/01/28
    
    
    
    100,000
    
    
    
    7,660
    
    
    $
    50,000
    
    
    $
    50,000
 
 (1)
    
    Series I Preferred Shares may be redeemed for cash at our option, in whole or in part,
at a redemption price equal to the liquidation price per share, plus accrued and unpaid
dividends, if any, on or after the redemption date indicated.  70




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Dividend Reinvestment and Share Purchase Plan
  Ownership Restrictions and Significant Shareholders
   (11) Minority Interest
   2006
    
    
    2005A-1 Common Units
    
    $
    738,910
    
    
    $
    787,023N-1 and N-2 Units
    
    
    239
    
    
    
    250Total
    
    $
    739,149
    
    
    $
    787,273
  Balance at December 31,2006
    
    
    2005Beginning balance
    
    $
    787,273
    
    
    $
    498,098A-1 Common
Unit conversions
    
    
    (143,462
    )
    
    
    (8,415
    )A-1 Common
Unit redemptions
    
    
    (12,065
    )
    
    
    (3,618
    )Unitholders share of net earnings
    
    
    107,641
    
    
    
    85,332Common Units issued for real estate
    
    
    81,401
    
    
    
    408,042N-1 and N-2 Units issued for real estate
    
    
    
    
    
    
    250Series E, F & G Redemptions
    
    
    
    
    
    
    (19,522
    )Unitholders distributions
    
    
    (55,079
    )
    
    
    (43,843
    )A-1 revaluation ($26,618) and other
    
    
    (26,560
    )
    
    
    (129,051
    )Ending balance
    
    $
    739,149
    
    
    $
    787,273
 71




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 A-1 Common Units
   Series M Preferred Unit
  Series N-1 and N-2 Preferred Units
  Perpetual Preferred Units
  (12) Benefit Plans and Implementation of SFAS 123R
 Share-Based Payment. Accounting for Stock-Based Compensation, Accounting for Stock Issued to Employees.
  72




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
     Option Awards
    
    RSU AwardsWeighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    Average GrantOptions
    
    Exercise Price
    
    Units
    
    PriceBalance, December 31, 2005
    
    
    2,702,026
    
    
    $
    24.94
    
    
    
    948,735
    
    
    $
    27.77Granted
    
    
    426,977
    
    
    
    45.61
    
    
    
    310,855
    
    
    
    45.85Exercised/Settled
    
    
    1,249,089
    
    
    
    23.96
    
    
    
    296,215
    
    
    
    33.23Forfeited
    
    
    48,559
    
    
    
    35.86
    
    
    
    16,760
    
    
    
    34.31Expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2006
    
    
    1,831,355
    
    
    $
    30.14
    
    
    
    946,615
    
    
    $
    31.82
 Options
   73




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Restricted Share Units
   Special Long Term Incentive Plan
  Summary
  Dividend Equivalent Units
    401(k) Plan and Nonqualified Deferred Compensation Plan
  74




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Deferral of Fees by Non-Employee Trustees
   (13) Financial Instruments and Hedging Activities
 Fair Value of Financial Instruments
  Balance at December 31, 2006
    
    Balance at December 31, 2005Carrying
    
    Estimated
    
    Carrying
    
    EstimatedAmounts
    
    Fair Value
    
    Amounts
    
    Fair ValueMarketable
equity securities
    
    $
    6,600
    
    
    $
    6,600
    
    
    $
    4,648
    
    
    $
    4,648Borrowings:Unsecured credit facilities
    
    $
    84,723
    
    
    $
    84,723
    
    
    $
    394,578
    
    
    $
    394,578Term Loan  International
    
    
    235,771
    
    
    
    235,771
    
    
    
    
    
    
    
    Long-Term Unsecured Debt
    
    
    3,355,699
    
    
    
    3,436,902
    
    
    
    2,540,036
    
    
    
    2,623,056Mortgages payable
    
    
    2,776,234
    
    
    
    2,801,342
    
    
    
    2,393,652
    
    
    
    2,393,389Interest rate contracts:Interest rate swaps
    
    $
    6,818
    
    
    $
    6,818
    
    
    $
    3,618
    
    
    $
    3,618Interest rate caps
    
    
    809
    
    
    
    809
    
    
    
    339
    
    
    
    339Forward contracts:Forward sale agreement
    
    $
    (313
    )
    
    $
    (313
    )
    
    
    
    
    
    
    Foreign currency forward
    
    
    (1,172
    )
    
    
    (1,172
    )
    
    
    (15
    )
    
    
    (15
    )Energy contracts:Electricity contracts
    
    $
    (8
    )
    
    $
    (8
    )
    
    $
    (26
    )
    
    $
    (26
    )Natural gas contracts
    
    
    (1,047
    )
    
    
    (1,047
    )
    
    
    
    
    
    
    Fuel oil contracts
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )
  75




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Interest Rate Hedging Activities
      Carrying andNotional
    
    Maturity
    
    EstimatedAmount
    
    Date Range
    
    Fair ValueCash flow hedges:Interest rate caps
    
    $
    486,354
    
    
    
    2007-2013
    
    
    $
    809Interest rate swaps
    
    
    367,054
    
    
    
    2007-2014
    
    
    
    7,080Total cash flow hedges
    
    $
    853,408
    
    
    
    2007-2014
    
    
    $
    7,889Fair value hedges:Interest rate swaps
    
    $
    75,055
    
    
    
    2008
    
    
    $
    1,185Total rate of return swaps
    
    
    36,346
    
    
    
    2007
    
    
    
    (1,447
    )Total fair value hedges
    
    $
    111,401
    
    
    
    2007-2008
    
    
    $
    (262
    )Total hedges
    
    $
    964,809
    
    
    
    2007-2014
    
    
    $
    7,627
 Foreign Currency Hedging Activities
 
 76




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Energy Contract Hedging Activities
  Equity Securities Hedging Activities
  (14) Selected Quarterly Financial Data (Unaudited)
  Three Months Ended3-31(1)
    
    
    6-30(1)
    
    
    9-30(1)
    
    
    12-31(1)2006:Total revenues
    
    $
    252,412
    
    
    $
    265,145
    
    
    $
    305,313
    
    
    $
    310,716Earnings from operations
    
    
    41,219
    
    
    
    47,159
    
    
    
    58,584
    
    
    
    54,046Income from unconsolidated entities
    
    
    18,878
    
    
    
    10,518
    
    
    
    2,088
    
    
    
    4,832Other non-operating income
    
    
    176
    
    
    
    243
    
    
    
    1,718
    
    
    
    201Less minority interest:Convertible
operating partnership units(2)
    
    
    7,598
    
    
    
    6,944
    
    
    
    7,337
    
    
    
    6,977Plus net earnings from discontinued
operations
    
    
    71,780
    
    
    
    115,873
    
    
    
    76,129
    
    
    
    254,531Less Preferred Share dividends
    
    
    958
    
    
    
    957
    
    
    
    957
    
    
    
    957Net earnings attributable to Common
Shares  Basic
    
    $
    123,497
    
    
    $
    165,892
    
    
    $
    130,225
    
    
    $
    305,676Net earnings
per Common Share(2):Basic
    
    $
    0.58
    
    
    $
    0.77
    
    
    $
    0.60
    
    
    $
    1.39Diluted
    
    $
    0.58
    
    
    $
    0.77
    
    
    $
    0.60
    
    
    $
    1.362005:Total revenues
    
    $
    177,902
    
    
    $
    184,889
    
    
    $
    231,778
    
    
    $
    239,064Earnings from operations
    
    
    2,122
    
    
    
    25,998
    
    
    
    53,342
    
    
    
    40,147Income from unconsolidated entities
    
    
    11,117
    
    
    
    5,794
    
    
    
    1,839
    
    
    
    3,682Other non-operating income
    
    
    24,005
    
    
    
    4,778
    
    
    
    72
    
    
    
    (48
    )Less minority interest:Perpetual
preferred units (2)
    
    
    741
    
    
    
    
    
    
    
    
    
    
    
    Convertible operating partnership
units(2)
    
    
    4,757
    
    
    
    4,515
    
    
    
    11,200
    
    
    
    5,898Plus net earnings from discontinued
operations
    
    
    33,611
    
    
    
    23,647
    
    
    
    119,670
    
    
    
    287,560Less Preferred Share dividends
    
    
    957
    
    
    
    958
    
    
    
    958
    
    
    
    958Net earnings attributable to Common
Shares  Basic(2)
    
    $
    64,400
    
    
    $
    54,744
    
    
    $
    162,765
    
    
    $
    324,485Net earnings
per Common Share(2):Basic
    
    $
    0.32
    
    
    $
    0.28
    
    
    $
    0.80
    
    
    $
    1.53Diluted
    
    $
    0.32
    
    
    $
    0.27
    
    
    $
    0.80
    
    
    $
    1.52
 
 (1)
    
    Net earnings from discontinued operations have been reclassified for all periods
presented. 77




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (2)
    
    Due to the quarterly pro-rata calculation of minority interest and rounding, the sum of
the quarterly per share and/or dollar amounts does not equal the year-to-date totals. (15) Segment Data
   Years Ended December 31,2006
    
    2005
    
    2004Reportable apartment communities segment
rental revenues:Same-Store:Garden communities
    
    $
    363,677
    
    
    $
    343,476
    
    
    $
    331,746High-Rise properties
    
    
    254,549
    
    
    
    239,549
    
    
    
    231,000Non Same-Store:Garden communities
    
    
    210,830
    
    
    
    93,320
    
    
    
    39,512High-rise properties
    
    
    174,147
    
    
    
    88,447
    
    
    
    33,534Ameriton(1)
    
    
    6,956
    
    
    
    5,458
    
    
    
    3,202Other non-reportable operating segment revenues
    
    
    46,017
    
    
    
    7,353
    
    
    
    3,276Total segment and consolidated rental revenues
    
    $
    1,056,176
    
    
    $
    777,603
    
    
    $
    642,270
 Years Ended December 31,2006
    
    2005
    
    2004Reportable apartment communities segment NOI:Same-Store:Garden communities
    
    $
    251,293
    
    
    $
    236,606
    
    
    $
    228,084High-Rise properties
    
    
    172,547
    
    
    
    158,660
    
    
    
    154,002Non Same-Store:Garden communities
    
    
    142,153
    
    
    
    63,178
    
    
    
    22,739High-Rise properties
    
    
    117,146
    
    
    
    59,425
    
    
    
    22,623Ameriton(1)
    
    
    3,158
    
    
    
    1,990
    
    
    
    1,266Other non-reportable operating segment NOI
    
    
    26,537
    
    
    
    5,362
    
    
    
    2,809Total segment and consolidated NOI
    
    
    712,834
    
    
    
    525,221
    
    
    
    431,523Reconciling items:Other income
    
    
    77,410
    
    
    
    56,030
    
    
    
    19,208Depreciation on real estate investments
    
    
    (261,438
    )
    
    
    (187,771
    )
    
    
    (150,470
    )Interest expense
    
    
    (245,895
    )
    
    
    (164,035
    )
    
    
    (125,108
    )General and administrative expenses
    
    
    (68,188
    )
    
    
    (58,604
    )
    
    
    (55,479
    )Other expenses
    
    
    (13,715
    )
    
    
    (49,232
    )
    
    
    (13,563
    )Consolidated earnings from operations
    
    $
    201,008
    
    
    $
    121,609
    
    
    $
    106,111
 78




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ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 
 (1)
    
    While rental revenue and NOI are the primary measures we use to evaluate the
performance of our assets, management also utilizes gains from the disposition of real
estate when evaluating the performance of Ameriton as its primary focus is the
opportunistic acquisition, development and eventual disposition of real estate with a short
term investment horizon. During 2006, 2005 and 2004, pre-tax gains, net of internal
disposition costs, from the disposition of Ameriton depreciated real estate were $51.2
million, $75.2 million and $65.1 million, respectively. These gains are classified within
discontinued operations. Ameriton assets are excluded from our Same-Store population as
they are acquired or developed to achieve short-term opportunistic gains, and therefore,
the average holding period is typically much shorter than the holding period of assets
operated by the REIT. Year Ended December 31,2006
    
    
    2005Reportable operating communities segment assets:Same-Store:Garden communities
    
    $
    2,594,681
    
    
    $
    2,632,382High-Rise properties
    
    
    2,508,155
    
    
    
    2,539,302Non Same-Store:Garden communities
    
    
    2,950,252
    
    
    
    2,829,915High-Rise properties
    
    
    2,388,235
    
    
    
    1,457,841Ameriton
    
    
    434,282
    
    
    
    557,684FHA/ADA settlement capital accrual
    
    
    29,185
    
    
    
    47,198International
    
    
    843,003
    
    
    
    Other non-reportable operating segment assets
    
    
    153,568
    
    
    
    130,902Total segment assets
    
    
    11,901,361
    
    
    
    10,195,224Real estate held for sale, net
    
    
    329,133
    
    
    
    327,347Total segment assets
    
    
    12,230,494
    
    
    
    10,522,571Reconciling items:Investment in and advances to unconsolidated
entities
    
    
    235,323
    
    
    
    132,728Cash and cash equivalents
    
    
    48,655
    
    
    
    13,638Restricted cash in tax-deferred exchange escrow
    
    
    319,312
    
    
    
    495,274Other assets
    
    
    425,343
    
    
    
    297,884Consolidated total assets
    
    $
    13,259,127
    
    
    $
    11,462,095
  (16) Income Taxes
  79




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ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  For the Year Ended December 31,2006
    
    
    2005
    
    
    2004(estimated)GAAP net earnings
    
    $
    727,435
    
    
    $
    616,172
    
    
    $
    542,342Book to tax differences:Forward contracts
    
    
    
    
    
    
    
    
    
    
    (20,067
    )Depreciation and amortization(1)
    
    
    43,778
    
    
    
    11,678
    
    
    
    4,630Gain or loss from capital transactions(2)
    
    
    (389,805
    )
    
    
    (258,406
    )
    
    
    (37,173
    )Reserves
    
    
    (13,053
    )
    
    
    (3,046
    )
    
    
    9,359Other, net
    
    
    (10,690
    )
    
    
    (17,281
    )
    
    
    (21,369
    )Taxable income
    
    
    357,665
    
    
    
    349,117
    
    
    
    477,722Less: capital gains recognized(2)
    
    
    (93,150
    )
    
    
    (136,120
    )
    
    
    (299,178
    )Taxable income subject to dividend distribution
requirement
    
    $
    264,515
    
    
    $
    212,997
    
    
    $
    178,544
 
 (1)
    
    We use accelerated depreciable lives for tax purposes. This results in higher
depreciation expense on newly acquired assets for tax purposes relative to GAAP. This is
offset by the Smith Merger in 2001 and the Oakwood transaction in 2005 as GAAP depreciation
expense for the related assets is based on fair value and tax depreciation is based on a
lower historical tax basis.(2)
    
    Taxable gains are smaller than book gains due primarily to tax-deferred exchanges.  For the Year Ended December 31,2006
    
    
    2005
    
    
    2004(estimated)Taxable component of dividends paid
    
    $
    379,087
    
    
    $
    353,572
    
    
    $
    545,586Plus: dividends designated from following year
    
    
    
    
    
    
    
    
    
    
    Less: dividends designated to prior year
    
    
    
    
    
    
    
    
    
    
    (16,048
    )Dividends paid deduction(1)
    
    $
    379,087
    
    
    $
    353,572
    
    
    $
    529,538
 
 (1)
    
    Includes a special dividend of $221 million paid in December 2004, and reflects distribution
of all ordinary income and capital gains.  For the Year Ended December 31,2006
    
    2005
    
    2004Ordinary income
    
    
    75
    %
    
    
    65
    %
    
    
    46
    %Capital gains(1)
    
    
    25
    %
    
    
    35
    %
    
    
    54
    %100
    %
    
    
    100
    %
    
    
    100
    %
 
 (1)
    
    Includes 11.4%, 34.3% and 22.8% of unrecaptured Section 1250 gains in 2006, 2005, and 2004,
respectively. 80




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ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  For the Year Ended December 31,2006
    
    
    2005
    
    
    2004Income tax
expense (benefit)Current
    
    $
    14,825
    
    
    $
    21,854
    
    
    $
    20,119Deferred
    
    
    3,208
    
    
    
    (2,255
    )
    
    
    (1,314
    )Total expense
    
    $
    18,033
    
    
    $
    19,599
    
    
    $
    18,805
  For the Year Ended December 31,2006
    
    
    2005
    
    
    2004Computed expected tax expense
    
    $
    19,018
    
    
    $
    19,039
    
    
    $
    17,801Increase
(decrease) in income taxes
resulting from state taxes
and other
    
    
    (985
    )
    
    
    560
    
    
    
    1,004Income tax expense
    
    $
    18,033
    
    
    $
    19,599
    
    
    $
    18,805
  Years Ended December 31,2006
    
    
    2005Deferred tax assets:Deferred compensation
    
    $
    712
    
    
    $
    3,775Reserves
    
    
    560
    
    
    
    421Real estate, principally due to depreciation
    
    
    1,211
    
    
    
    1,310Other
    
    
    75
    
    
    
    928Deferred tax assets
    
    
    2,558
    
    
    
    6,434Deferred tax liabilities:Real estate, principally due to depreciation
    
    
    
    
    
    
    Income from unconsolidated entities
    
    
    2,603
    
    
    
    3,271Deferred tax liabilities
    
    
    2,603
    
    
    
    3,271Net deferred tax asset (liability)
    
    $
    (45
    )
    
    $
    3,163
 International Income Taxes
  (17) Commitments and Contingencies
 Commitments
  81




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  2007
    
    $
    3,7672008
    
    
    3,8162009
    
    
    3,8682010
    
    
    3,8862011
    
    
    3,926Thereafter (2012-2077)
    
    $
    215,623Total
    
    $
    234,886
 .
 Guarantees and Indemnifications
   Litigation and Contingencies
     82




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##### Table of Contents



ARCHSTONE-SMITH TRUST
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (18) Supplemental Cash Flow Information
  
    
    Issued $81.4 million, $408.0 million and $10.8 million of A-1 Common Units as
partial consideration for properties acquired during 2006, 2005 and 2004,
respectively;
    
    Issued $250,000 of Series N-1 and N-2 Preferred Units ($125,000 each) as partial
consideration for real estate during 2005;
    
    Converted $143.4 million, $8.4 million and $47.9 million A-1 Common Units to Common
Shares during 2006, 2005 and 2004, respectively;
    
    Assumed mortgage debt of $728.5 million, $864.2 million and $113.6 million during
2006, 2005 and 2004, respectively, in connection with the acquisition of apartment
communities;
    
    Recorded a $47.2 million accrual for anticipated capital spending to bring
properties named in the FHA and ADA settlement into compliance in 2005;
    
    See Notes 3 and 4 for further discussion regarding the non-cash financing
components of the DeWAG and Oakwood acquisitions.
 (19) Related Party Transactions
     83




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Report of Independent Registered Public Accounting Firm
 
    
 84




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ARCHSTONE-SMITH TRUST
 SCHEDULE III
 REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2006
(Dollar amounts in thousands)
 Initial Cost to
    
    
    
    
    
    Gross Amount at WhichArchstone-Smith Trust
    
    Costs
    
    Carried at Year EndCapitalizedEncum-
    
    
    
    
    
    Buildings &
    
    Subsequent to
    
    
    
    
    
    Buildings &
    
    
    
    
    
    Accumulated
    
    Construction
    
    YearUnits
    
    brances
    
    Land
    
    Improvements
    
    Acquisition
    
    Land
    
    Improvements
    
    Totals
    
    Depreciation
    
    Year(1)
    
    AcquiredApartment Communities:Garden Communities:Atlanta, Georgia
    
    
    1,006
    
    
    
    
    
    
    
    24,440
    
    
    
    
    
    
    
    59,772
    
    
    
    24,780
    
    
    
    59,432
    
    
    
    84,212
    
    
    
    (15
    )
    
    Under Construction
    
    
    2001Austin, Texas
    
    
    444
    
    
    
    
    
    
    
    4
    
    
    
    1,158
    
    
    
    33,091
    
    
    
    4,830
    
    
    
    29,423
    
    
    
    34,253
    
    
    
    (4,712
    )
    
    
    2001
    
    
    
    2001Boston, Massachusetts
    
    
    2,044
    
    
    
    129,612
    
    
    
    66,944
    
    
    
    327,909
    
    
    
    79,733
    
    
    
    75,204
    
    
    
    399,382
    
    
    
    474,586
    
    
    
    (42,224
    )
    
    
    1898-2006
    
    
    
    1999-2006Dallas, Texas
    
    
    514
    
    
    
    33,280
    
    
    
    8,912
    
    
    
    38,550
    
    
    
    715
    
    
    
    8,927
    
    
    
    39,250
    
    
    
    48,177
    
    
    
    (1,585
    )
    
    
    1998
    
    
    
    2005Denver, Colorado
    
    
    156
    
    
    
    
    
    
    
    1,030
    
    
    
    4,596
    
    
    
    4,923
    
    
    
    1,523
    
    
    
    9,026
    
    
    
    10,549
    
    
    
    (3,157
    )
    
    
    1981
    
    
    
    1992El Paso, Texas
    
    
    379
    
    
    
    11,685
    
    
    
    1,307
    
    
    
    11,802
    
    
    
    1,089
    
    
    
    1,337
    
    
    
    12,861
    
    
    
    14,198
    
    
    
    (503
    )
    
    
    1974
    
    
    
    2005Greater NYC metropolitan area
    
    
    396
    
    
    
    78,000
    
    
    
    23,211
    
    
    
    4,058
    
    
    
    61,849
    
    
    
    23,182
    
    
    
    65,936
    
    
    
    89,118
    
    
    
    (3,914
    )
    
    
    2006
    
    
    
    2006Houston, Texas
    
    
    1,036
    
    
    
    
    
    
    
    18,965
    
    
    
    24,307
    
    
    
    12,300
    
    
    
    19,181
    
    
    
    36,391
    
    
    
    55,572
    
    
    
    (9,764
    )
    
    
    1996
    
    
    
    1998Inland Empire, California
    
    
    1,298
    
    
    
    
    
    
    
    10,436
    
    
    
    59,147
    
    
    
    14,892
    
    
    
    12,180
    
    
    
    72,295
    
    
    
    84,475
    
    
    
    (21,149
    )
    
    
    1985-1990
    
    
    
    1995-1997Los Angeles, California
    
    
    8,138
    
    
    
    254,461
    
    
    
    504,186
    
    
    
    785,620
    
    
    
    337,594
    
    
    
    507,439
    
    
    
    1,119,961
    
    
    
    1,627,400
    
    
    
    (76,734
    )
    
    
    1969-2006
    
    
    
    1998-2006Orange County, California
    
    
    2,947
    
    
    
    
    
    
    
    79,497
    
    
    
    121,417
    
    
    
    126,627
    
    
    
    89,548
    
    
    
    237,993
    
    
    
    327,541
    
    
    
    (40,393
    )
    
    
    1986-2002
    
    
    
    1996-2005Orlando, Florida
    
    
    312
    
    
    
    
    
    
    
    3,110
    
    
    
    17,620
    
    
    
    1,370
    
    
    
    3,748
    
    
    
    18,352
    
    
    
    22,100
    
    
    
    (6,298
    )
    
    
    1988
    
    
    
    1998Phoenix, Arizona
    
    
    1,403
    
    
    
    23,770
    
    
    
    26,363
    
    
    
    45,809
    
    
    
    19,347
    
    
    
    26,529
    
    
    
    64,990
    
    
    
    91,519
    
    
    
    (949
    )
    
    
    1978-1999
    
    
    
    2005-2006San Diego, California
    
    
    2,968
    
    
    
    33,376
    
    
    
    84,916
    
    
    
    108,480
    
    
    
    185,750
    
    
    
    91,277
    
    
    
    287,869
    
    
    
    379,146
    
    
    
    (50,957
    )
    
    
    1973-2005
    
    
    
    1996-2006Bay Area, California
    
    
    7,604
    
    
    
    249,521
    
    
    
    413,676
    
    
    
    724,210
    
    
    
    275,421
    
    
    
    420,165
    
    
    
    993,142
    
    
    
    1,413,307
    
    
    
    (115,542
    )
    
    
    1909-2004
    
    
    
    1995-2006Seattle, Washington
    
    
    3,408
    
    
    
    25,709
    
    
    
    67,521
    
    
    
    144,561
    
    
    
    96,917
    
    
    
    74,510
    
    
    
    234,489
    
    
    
    308,999
    
    
    
    (56,169
    )
    
    
    1976-2003
    
    
    
    1997-2005Southeast Florida
    
    
    2,282
    
    
    
    
    
    
    
    69,856
    
    
    
    197,603
    
    
    
    8,269
    
    
    
    74,678
    
    
    
    201,050
    
    
    
    275,728
    
    
    
    (20,219
    )
    
    
    1990-2003
    
    
    
    1998-2005Stamford, Connecticut
    
    
    160
    
    
    
    
    
    
    
    5,775
    
    
    
    1,225
    
    
    
    29,568
    
    
    
    6,320
    
    
    
    30,248
    
    
    
    36,568
    
    
    
    (3,595
    )
    
    
    2002
    
    
    
    2002Ventura County, California
    
    
    1,018
    
    
    
    
    
    
    
    40,210
    
    
    
    72,232
    
    
    
    46,770
    
    
    
    40,780
    
    
    
    118,432
    
    
    
    159,212
    
    
    
    (13,759
    )
    
    
    1985-2005
    
    
    
    1997-2005Washington, D.C. metropolitan area
    
    
    9,048
    
    
    
    258,925
    
    
    
    289,655
    
    
    
    660,646
    
    
    
    236,150
    
    
    
    300,484
    
    
    
    885,967
    
    
    
    1,186,451
    
    
    
    (113,308
    )
    
    
    1967-2003
    
    
    
    1999-2006Garden Communities Total
    
    
    46,561
    
    
    
    1,098,339
    
    
    
    1,740,014
    
    
    
    3,350,950
    
    
    
    1,632,147
    
    
    
    1,806,622
    
    
    
    4,916,489
    
    
    
    6,723,111
    
    
    
    (584,946
    )High-Rise Properties:Boston, Massachusetts
    
    
    1,633
    
    
    
    27,505
    
    
    
    67,518
    
    
    
    172,030
    
    
    
    248,983
    
    
    
    78,088
    
    
    
    410,443
    
    
    
    488,531
    
    
    
    (23,298
    )
    
    
    1901-2006
    
    
    
    2001-2006Chicago, Illinois
    
    
    1,113
    
    
    
    36,682
    
    
    
    39,837
    
    
    
    188,925
    
    
    
    6,051
    
    
    
    40,111
    
    
    
    194,702
    
    
    
    234,813
    
    
    
    (23,791
    )
    
    
    1988-1999
    
    
    
    2001-2005Dallas, Texas
    
    
    181
    
    
    
    
    
    
    
    2,323
    
    
    
    
    
    
    
    1,410
    
    
    
    2,323
    
    
    
    1,410
    
    
    
    3,733
    
    
    
    
    
    
    Under Construction
    
    
    2004Los Angeles, California
    
    
    1,073
    
    
    
    
    
    
    
    34,402
    
    
    
    139,613
    
    
    
    64,136
    
    
    
    34,697
    
    
    
    203,454
    
    
    
    238,151
    
    
    
    (16,424
    )
    
    
    1934-2004
    
    
    
    2003-2004Minneapolis, Minnesota
    
    
    250
    
    
    
    17,803
    
    
    
    5,002
    
    
    
    21,768
    
    
    
    337
    
    
    
    5,008
    
    
    
    22,099
    
    
    
    27,107
    
    
    
    (915
    )
    
    
    1983
    
    
    
    2005NYC metropolitan area
    
    
    3,028
    
    
    
    462,066
    
    
    
    584,270
    
    
    
    793,256
    
    
    
    218,187
    
    
    
    649,519
    
    
    
    946,194
    
    
    
    1,595,713
    
    
    
    (45,067
    )
    
    
    1870-2003
    
    
    
    2002-2006Philadelphia, Pennsylvania
    
    
    80
    
    
    
    
    
    
    
    2,229
    
    
    
    16,741
    
    
    
    65
    
    
    
    2,231
    
    
    
    16,804
    
    
    
    19,035
    
    
    
    (357
    )
    
    
    1945
    
    
    
    2006San Diego, California
    
    
    387
    
    
    
    
    
    
    
    5,963
    
    
    
    33,789
    
    
    
    4,606
    
    
    
    6,054
    
    
    
    38,304
    
    
    
    44,358
    
    
    
    (10,162
    )
    
    
    1992
    
    
    
    1999Bay Area, California
    
    
    853
    
    
    
    
    
    
    
    87,664
    
    
    
    176,474
    
    
    
    4,437
    
    
    
    87,905
    
    
    
    180,670
    
    
    
    268,575
    
    
    
    (4,106
    )
    
    
    1966-1986
    
    
    
    2005-2006Seattle, Washington
    
    
    338
    
    
    
    34,360
    
    
    
    16,279
    
    
    
    46,041
    
    
    
    102
    
    
    
    16,288
    
    
    
    46,134
    
    
    
    62,422
    
    
    
    (1,822
    )
    
    
    1992-1998
    
    
    
    2005Washington, D.C. metropolitan area
    
    
    11,722
    
    
    
    587,896
    
    
    
    582,947
    
    
    
    1,420,478
    
    
    
    248,771
    
    
    
    597,753
    
    
    
    1,654,443
    
    
    
    2,252,196
    
    
    
    (229,124
    )
    
    
    1929-2005
    
    
    
    2001-2006High-Rise Properties Total
    
    
    20,658
    
    
    
    1,166,312
    
    
    
    1,428,434
    
    
    
    3,009,115
    
    
    
    797,085
    
    
    
    1,519,977
    
    
    
    3,714,657
    
    
    
    5,234,634
    
    
    
    (355,066
    )Germany(2)
    
    
    8,334
    
    
    
    499,550
    
    
    
    161,465
    
    
    
    627,144
    
    
    
    62,984
    
    
    
    174,403
    
    
    
    677,190
    
    
    
    851,593
    
    
    
    (8,590
    )
    
    
    1903-2006
    
    
    
    2005-2006FHA/ADA Settlement Capital accrual
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,185Total Apartment Communities  Operating and
Under Construction
    
    
    75,553
    
    
    
    2,764,201
    
    
    
    3,329,913
    
    
    
    6,987,209
    
    
    
    2,492,216
    
    
    
    3,501,002
    
    
    
    9,308,336
    
    
    
    12,838,523
    
    
    
    (948,602
    )Other:Development communities In Planning and Owned
    
    
    4,802
    
    
    
    8,362
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    216,479Hotel, retail and other assets
    
    
    
    
    
    
    3,671
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132,638
    
    
    
    (8,544
    )Total real estate assets
    
    
    80,355
    
    
    
    2,776,234
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,187,640
    
    
    
    (957,146
    )
 
 (1)
    
    Represents the date that the building structure was originally completed. For phased
developments, it represents the date the earliest phase was constructed.(2)
    
    Our German portfolio is concentrated primarily in the Federal States of North-Rhine
Westphalia, Hesse, Baden-Wurttemburg and Berlin. 85




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##### Table of Contents



SCHEDULE III
  Years Ended December 31,Carrying Amounts
    
    2006
    
    
    2005
    
    
    2004Balance at January 1
    
    $
    11,359,264
    
    
    $
    9,221,038
    
    
    $
    8,999,180Apartment communities:Acquisition-related expenditures
    
    
    2,530,459
    
    
    
    2,671,112
    
    
    
    1,080,639Redevelopment expenditures
    
    
    57,414
    
    
    
    106,264
    
    
    
    40,999Recurring capital expenditures
    
    
    46,354
    
    
    
    48,311
    
    
    
    50,147Development expenditures, excluding land
acquisitions
    
    
    388,502
    
    
    
    324,740
    
    
    
    333,782Acquisition and improvement of land for
development
    
    
    209,916
    
    
    
    81,340
    
    
    
    175,470Dispositions
    
    
    (1,403,858
    )
    
    
    (1,175,834
    )
    
    
    (1,460,046
    )Provision for possible loss on investment
    
    
    (4,328
    )
    
    
    (1,500
    )
    
    
    3⁄4Change in estimated hurricane retirements
    
    
    4,496
    
    
    
    3⁄4
    
    
    
    3⁄4Other
    
    
    7,987
    
    
    
    (8,303
    )
    
    
    3⁄4Net apartment community activity
    
    $
    1,836,942
    
    
    $
    2,046,130
    
    
    $
    220,991Other:Change in other real estate assets
    
    
    (8,566
    )
    
    
    92,096
    
    
    
    867Balance at December 31
    
    $
    13,187,640
    
    
    $
    11,359,264
    
    
    $
    9,221,038
 Years Ended December 31,Accumulated Depreciation
    
    2006
    
    
    2005
    
    
    2004Balance at January 1
    
    $
    836,693
    
    
    $
    763,542
    
    
    $
    648,982Depreciation for the year(1)
    
    
    266,589
    
    
    
    220,770
    
    
    
    203,639Accumulated depreciation on real
estate dispositions
    
    
    (146,136
    )
    
    
    (147,619
    )
    
    
    (89,079
    )Balance at December 31
    
    $
    957,146
    
    
    $
    836,693
    
    
    $
    763,542
 
 (1)
    
    Depreciation is net of $21.7 million and $18.0 million for intangible assets related to the
value of leases in place for real estate acquired in 2006 and 2005, respectively. 86




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##### Table of Contents



SCHEDULE IV
 ARCHSTONE-SMITH TRUST
 
 MORTGAGE LOANS ON REAL ESTATE
 December 31, 2006
(Dollar amounts in thousands)
 Principalamount ofloanssubject toCarrying


    
    delinquentFinal Maturity
    

    Periodic
    
    Prior
    
    Face amount
    
    amount of
    
    principal orDescription
    
    Interest Rate
    
    Date
    


    payment term
    
    liens
    
    of mortgages
    
    mortgages
    
    interestMortgage and Other Notes Receivable:Washington, D.C.
    
    
    18
    %
    
    
    7/17/07
    
    
    
    (1)
    
    
    
    (3)
    
    
    $
    9,235
    
    
    $
    6,955
    
    
    
    Massachusetts
    
    
    18
    %
    
    
    1/01/08
    
    
    
    (1)
    
    
    
    (3)
    
    
    
    7,687
    
    
    
    6,483
    
    
    
    New York
    
    LIBOR + 5%
    
    
    9/30/10
    
    
    
    (1)
    
    
    
    (3)
    
    
    
    25,654
    
    
    
    25,654
    
    
    
    Massachusetts
    
    LIBOR + 7%
    
    
    2/07/11
    
    
    
    (1)
    
    
    
    (3)
    
    
    
    9,268
    
    
    
    8,216
    
    
    
    Washington, D.C.
    
    
    14
    %
    
    
    6/03/09
    
    
    
    (1)
    
    
    
    (3)
    
    
    
    7,524
    
    
    
    4,685
    
    
    
    New York
    
    LIBOR + 7%
    
    
    6/22/09
    
    
    
    (1)
    
    
    
    (3)
    
    
    
    42,070
    
    
    
    26,708
    
    
    
    Maryland
    
    
    7
    %
    
    
    3/24/07
    
    
    
    (1)
    
    
    
    
    
    
    
    44,560
    
    
    
    44,560
    
    
    
    $
    145,998
    
    
    $
    123,261
    
    
    
    
 2006
    
    
    2005Balance at January 1
    
    $
    74,396
    
    
    $
    8,729New Mortgage Loans
    
    
    85,165
    
    
    
    97,096Other(2)
    
    
    9,781
    
    
    
    5,224Collections of Principal
    
    
    (46,081
    )
    
    
    (36,653
    )Balance at December 31
    
    $
    123,261
    
    
    $
    74,396
 
 (1)
    
    Outstanding principal plus accrued and unpaid interest is generally due on the maturity
date unless specified as payable monthly in the loan agreement. Partial prepayment is
required to the extent the borrower receives proceeds from the sale of constructed units in
accordance with contracted terms.(2)
    
    A portion of the accrued interest amount is added to the principal amount on a monthly
basis on the majority of the loans.(3)
    
    Our rights to the underlying collateral in the event of default are subordinate to a primary
mortgage lender. 87




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##### Table of Contents



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

R. Scot Sellers
    
    Chairman of the Board, Chief Executive

Officer and Trustee (principal executive
officer)
    
    March 1, 2007/s/     Charles E. Mueller, Jr.

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

Mark A. Schumacher
    
    Chief Accounting Officer (principal
accounting
officer)
    
    March 1, 2007/s/     James A. Cardwell

James A. Cardwell
    
    Trustee
    
    March 1, 2007/s/     Stephen R. Demeritt

Stephen R. Demeritt
    
    Trustee
    
    March 1, 2007/s/     Ernest A. Gerardi, Jr.

Ernest A. Gerardi, Jr.
    
    Trustee
    
    March 1, 2007/s/     Ruth Ann M. Gillis

Ruth Ann M. Gillis
    
    Trustee
    
    March 1, 2007/s/     Ned S. Holmes

Ned S. Holmes
    
    Trustee
    
    March 1, 2007/s/     Robert P. Kogod

Robert P. Kogod
    
    Trustee
    
    March 1, 2007/s/     James H. Polk III

James H. Polk III
    
    Trustee
    
    March 1, 2007/s/     John M. Richman

John M. Richman
    
    Trustee
    
    March 1, 2007/s/     John C. Schweitzer

John C. Schweitzer
    
    Trustee
    
    March 1, 2007/s/     Robert H. Smith

Robert H. Smith
    
    Trustee
    
    March 1, 2007
 88




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##### Table of Contents



INDEX TO EXHIBITS
  Number
    
    Description3.1
    
    Amended and Restated Declaration of Trust of Archstone-Smith Operating Trust (incorporated by
reference to Exhibit 3.1 to Archstone-Smith Trusts Current Report of Form 8-K filed with the SEC
on June 2, 2006)3.2
    
    Restated Bylaws of Archstone-Smith Trust (incorporated by reference to Exhibit 3.2 to the
Archstone-Smith Trusts Current Report on Form 8-K filed with the SEC on June 2, 2006)4.1
    
    Indenture, dated as of February 1, 1994, between Archstone-Smith Operating Trust (formerly
Property Trust of America) and Morgan Guaranty Trust Company of New York, as Trustee relating to
Archstone-Smith Operating Trusts (formerly Property Trust of America) unsecured senior debt
securities4.2
    
    First Supplemental Indenture, dated February 2, 1994, among Archstone-Smith Operating Trust
(formerly Property Trust of America), Morgan Guaranty Trust Company of New York and State Street
Bank and Trust Company, as successor Trustee4.3
    
    Second Supplemental Indenture, dated August 2, 2004, between Archstone-Smith Operating Trust and
U.S. Bank National Association, as successor Trustee4.4
    
    Third Supplemental Indenture, dated July 14, 2006, between Archstone-Smith Operating Trust and
U.S. Bank National Association, as successor Trustee4.5
    
    Indenture, dated as of August 14, 1997, between Security Capital Atlantic Incorporated and State
Street Bank and Trust Company, as Trustee (incorporated by reference to Exhibit 4.8 to Security
Capital Atlantic Incorporateds Registration Statement on Form S-11 (File No. 333-30747))4.6
    
    Form of Archstone-Smith Trust common share ownership certificate (incorporated by reference to
Exhibit 3.3 to Archstone-Smith Trusts Registration Statement on Form S-4 (File No. 333-63734))4.7
    
    Form of Archstone-Smith Trust share certificate for Series I Preferred Shares (incorporated by
reference to Exhibit 3.8 to Archstone-Smith Trusts Registration Statement on Form S-4 (File No.
333-63734))10.1
    
    Amended and Restated Declaration of Trust of Archstone-Smith Operating Trust (incorporated by
reference to Exhibit 4.1 to the Archstone-Smith Trusts Current Report on Form 8-K filed with the
SEC on June 2, 2006)10.2
    
    Amended and Restated Bylaws of Archstone-Smith Operating Trust (incorporated by reference to
Exhibit 4.2 to the Archstone-Smith Trusts Current Report on Form 8-K filed with the SEC on June
2, 2006)10.3
    
    Articles Supplementary for Series M Preferred Unit of Beneficial Interest of Archstone-Smith
Operating Trust (incorporated by reference to Exhibit 3.1 to the Archstone-Smith Trusts Current
Report on Form 8-K filed with the SEC on December 16, 2004)10.4
    
    Articles Supplementary for Series N-1 Preferred Unit of Beneficial Interest and N-2 Preferred
Unit of Beneficial Interest of Archstone-Smith Operating Trust (incorporated by reference to
Exhibit 3.1 to the Archstone-Smith Operating Trusts Current Report on Form 8-K filed with the
SEC on August 2, 2005)10.5
    
    Amended and Restated Archstone-Smith Trust Equity Plan for Outside Trustee and all amendments
thereto (incorporated by reference to Exhibits 10.5, 10.6 and 10.7 to Archstone-Smith Trusts
Current Report on Form 8-K filed with the SEC on December 12, 2006)10.6
    
    Archstone-Smith Trust 2001 Long-Term Incentive Plan and all amendments thereto (incorporated by
reference to Exhibit 10.1, 10.2, 10.3 and 10.4 to Archstone-Smith Trusts Current Report on Form
8-K filed with the SEC on December 12, 2006)10.7
    
    Archstone-Smith Deferred Compensation Plan (incorporated by reference to Exhibit 10.5 to
Archstone-Smiths Annual Report on Form 10-K for the year ended December 31, 2001)10.8
    
    Form of Non-Qualified Share Option Agreement for Archstone-Smith Trust 2001 Long-Term Incentive
Plan (incorporated by reference to Exhibit 10.1 of Archstone-Smith Trusts Annual Report on Form
10-Q for the Quarter Ended September 30, 2004)10.9
    
    Form of Restricted Share Unit Agreement for Archstone-Smith Trust 2001 Long-Term Incentive Plan
(incorporated by reference to Exhibit 10.2 of Archstone-Smith Trusts Annual Report on Form 10-Q
for the Quarter Ended September 30, 2004)10.10
    
    Form of Restricted Share Unit Agreement for Archstone-Smith Trust Equity Plan for Outside
Trustees (incorporated by reference to Exhibit 10.3 of Archstone-Smith Trusts Annual Report on
Form 10-Q for the Quarter Ended September 30, 2004)
 89




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##### Table of Contents



Number
    
    Description10.11
    
    Form of Indemnification Agreement entered into between Archstone-Smith Trust and each of its
officers and Trustees (incorporated by reference to Exhibit 10.6 to Archstone-Smith Trusts
Annual Report on From 10K for the year ended December 31, 2003)10.12
    
    Form of Change in Control Agreement between Archstone-Smith Trust and certain of its officers
(incorporated by reference to Exhibit 10.7 to Archstone-Smiths Annual Report on Form 10-K for
the year ended December 31, 2002)10.13
    
    Amended and Restated Credit Agreement, dated as of June 21, 2006, by and among Archstone-Smith
Operating Trust, as borrower, and Archstone-Smith Trust as parent, and J.P. Morgan Chase Bank, as
administrative agent,, J.P. Morgan Europe Limited, as administrative agent for foreign
currencies, Bank of America, N.A., and Wells Fargo Bank, N.A., as syndication agents, and
Suntrust Bank and Citicorp North America, Inc. as documentation agents and the various banks
signatory thereto (incorporated by reference to Exhibit 10.2 to Archstone-Smiths Current Report
on Form 8-K filed with the SEC on June 27, 2006)10.14
    
    Guaranty, dated as of June 21, 2006, by Archstone-Smith Trust,
as guarantor, for the benefit of J.P. Morgan Chase Bank, as administrative agent, J.P. Morgan Europe Limited, as administrative
agent for foreign currencies, Bank of America, N.A., and Wells Fargo Bank, N.A., as syndication
agents, and Suntrust Bank and Citicorp North America, Inc. as documentation agents and the
various banks signatory thereto (incorporated by reference to Exhibit 10.1 to Archstone-Smiths
Current Report on Form 8-K filed with the SEC on June 27, 2006)10.15
    
    Archstone Dividend Reinvestment and Share Purchase Plan (incorporated by reference to the
prospectus contained in Archstone-Smith Trusts Registration Statement on Form S-3 (No.
333-44639-01))10.16
    
    2006 and 2007 schedule of applicable dates under the Archstone Dividend Reinvestment and Share
Purchase Plan (included by reference to Exhibit 99.1 to Archstone-Smith Trusts current report on
form 8-K filed with the SEC on February 14, 2006)10.17
    
    Shareholders Agreement, dated as of October 31, 2001, by and among Archstone-Smith Trust,
Archstone-Smith Operating Trust, Robert H. Smith and Robert P. Kogod (incorporated by reference
to Exhibit 10.1 to Archstone-Smith Trusts Current Report on Form 8-K filed with the SEC on
November 1, 2001)10.18
    
    Noncompetition Agreement by and among Charles E. Smith Residential Realty, Inc., Charles E. Smith
Residential Realty L.P. and Robert P. Kogod and Robert H. Smith (incorporated by reference to
Exhibit 10.1 of Charles E. Smith Residential Realty, Inc.s Annual Report on Form 10-K for the
year ended December 31, 1994)10.19
    
    Registration Rights and Lock-up Agreement (incorporated by reference to Exhibit 10.2 of Charles
E. Smith Residential Realty, Inc.s Annual Report on Form 10-K for the year ended December 31,
1994)10.20
    
    License Agreement between Charles E. Smith Management, Inc. and Charles E. Smith Residential
Realty, Inc. (incorporated by reference to Exhibit 10.35 of Charles E. Smith Residential Realty,
Inc.s Annual Report on Form 10-K for the year ended December 31, 1994)10.21
    
    License Agreement between Charles E. Smith Management, Inc. and Charles E. Smith Residential
Realty L.P. (incorporated by reference to Exhibit 10.36 of Charles E. Smith Residential Realty,
Inc.s Annual Report on Form 10-K for the year ended December 31, 1994)12.1
    
    Computation of Ratio of Earnings to Fixed Charges12.2
    
    Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Share Dividends15.1
    
    Consent of Independent Registered Public Accounting Firm21
    
    Subsidiaries of Archstone-Smith31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 90