<PAGE>   1
 
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-K
 
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 1996       Commission file number 1-12792
                             SUMMIT PROPERTIES INC.
 
             (Exact name of registrant as specified in its charter)
                         ------------------------------
 
<TABLE>
<S>                                              <C>
                    MARYLAND                                        56-1857807
        (State or other jurisdiction of                          (I.R.S. Employer
         incorporation or organization)                        Identification No.)
 
             212 SOUTH TRYON STREET
                   SUITE 500
           CHARLOTTE, NORTH CAROLINA                                  28281
    (Address of principal executive offices)                        (Zip Code)
</TABLE>
 
                                 (704) 334-9905
              (Registrant's telephone number, including area code)
                         ------------------------------
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 
<TABLE>
<S>                                              <C>
     COMMON STOCK, PAR VALUE $.01 PER SHARE                  NEW YORK STOCK EXCHANGE
             (Title of each class)                 (Name of each exchange on which registered)
</TABLE>
 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
 
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
 
<TABLE>
<S>  <C>          <C>
(1)  Yes  X       No __
          -
(1)  Yes  X       No __
          -
</TABLE>
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ____
 
     The aggregate market value of the voting stock held by nonaffiliates of the
Registrant, as of February 20, 1997, was $456,616,250.
 
     The number of shares of the Registrant's Common Stock, par value $.01 per
share, outstanding as of February 20, 1997, was 23,072,136.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     Portions of the 1997 Proxy Statement for the Registrant's Annual Meeting of
Stockholders, to be filed with the Securities and Exchange Commission within 120
days after the end of the year covered by this Form 10-K, are incorporated by
reference in Part III, Items 10, 11, 12 and 13, of this Form 10-K.
 
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<PAGE>   2
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
 ITEM                                                                  PAGE
 ----                                                                  ----
<S>      <C>                                                           <C>
PART I
 
1.       Business....................................................     3
 
2.       Properties..................................................     8
 
3.       Legal Proceedings...........................................    10
 
4.       Submission of Matters to a Vote of Security Holders.........    10
 
PART II
 
5.       Market for Registrant's Common Equity and Related
           Stockholder Matters.......................................    11
 
6.       Selected Financial Data.....................................    12
 
7.       Management's Discussion and Analysis of Financial Condition
           and Results of Operations.................................    14
 
8.       Financial Statements and Supplementary Data.................    25
 
9.       Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure..................................    25
 
PART III
 
10.      Directors and Executive Officers of the Registrant..........    26
 
11.      Executive Compensation......................................    26
 
12.      Security Ownership of Certain Beneficial Owners and
           Management................................................    26
 
13.      Certain Relationships and Related Transactions..............    26
 
PART IV
 
14.      Exhibits, Financial Statement Schedules and Reports on Form
           8-K.......................................................    27
</TABLE>
 
                                        2
<PAGE>   3
 
                                     PART I
 
ITEM 1.  BUSINESS
 
THE COMPANY
 
Summit Properties Inc. ("the Company") is one of the largest developers and
operators of luxury garden apartment communities (the "Communities") in the
southeastern United States. The Company's current portfolio consists of 51
apartment Communities with 11,788 apartment homes, including Summit Foxcroft in
which the Company has a 75% managing general partner interest. The Company also
has nine apartment Communities with 2,716 apartment homes under construction or
in lease-up.
 
The Communities are located in six states throughout the southeastern United
States, as well as in Delaware, Ohio and Indiana. For the year ended December
31, 1996, the average physical occupancy rate of the Company's stabilized
Communities was 93.3%, and the average monthly rental revenue for these
Communities was $698 per apartment home. A Community is considered to be
stabilized at the earlier of its attainment of 93.0% physical occupancy or one
year from the completion of construction. The Company also manages approximately
7,520 apartment homes for unrelated third parties. The Company is a fully
integrated organization with multifamily development, construction, acquisition
and management expertise which employs approximately 560 individuals.
 
The Company's business is conducted principally through Summit Properties
Partnership, L.P., a Delaware limited partnership (the "Operating Partnership"),
of which the Company is the sole general partner and an 84.8% economic owner.
The Company's third party management and certain construction and other
businesses are conducted through its subsidiaries, Summit Management Company, a
Maryland corporation (the "Management Company"), and Summit Apartment Builders,
Inc., a Florida corporation (the "Construction Company"). Except where otherwise
explicitly noted, the "Company" shall also hereinafter refer to the Operating
Partnership, the Management Company and the Construction Company.
 
The Company has chosen to focus its efforts in three high growth regions of the
southeast: the corridor connecting Atlanta, Charlotte and the Raleigh-Durham
area of North Carolina, (the "I-85 Corridor"), central and south Florida and the
Greater Washington, DC/Virginia area. In keeping with this strategy, the Company
has established city operating offices in Charlotte, North Carolina; Tampa,
Florida; Reston, Virginia; Atlanta, Georgia; Fort Lauderdale, Florida and
Raleigh, North Carolina. These city offices have direct responsibility for
selecting and overseeing new developments and for managing the Communities in
their geographic areas. This decentralized structure enables corporate
management to maintain tight controls and allows the Company to compete
effectively in its core markets, while efficiently allocating development and
acquisition capital to those markets that will yield the highest risk-adjusted
return.
 
OPERATING PHILOSOPHY
 
The Company seeks to maximize the economic return from its Communities by
optimizing the trade-off between increasing rental rates and maintaining high
occupancy levels. Consistent with this strategy, the Company is among the rental
rate leaders in its markets. Although this strategy may result in slightly lower
occupancy rates, the Company believes that the dynamic tension created by this
balancing strategy maximizes operating income at the property level and improves
growth in the Company's cash flow over the long term. Generally, the Company has
found that it is not maximizing property operating income per apartment home
when occupancies are above 95%.
 
Historically, the Company has been able to charge market leading rents to its
residents while maintaining high occupancy rates due to: the upscale features of
its Communities, the comprehensive service provided by its on-site management
and its favorable mix of apartment homes. The Company's geographic market focus
and decentralized structure further promote income growth.
 
Upscale Apartment Communities.  Since its inception, the Company has been
dedicated to developing, acquiring and managing upscale apartment communities
designed to satisfy the aesthetic and lifestyle desires
 
                                        3
<PAGE>   4
 
of its residents. The Communities are characterized by high-quality
construction, superior architecture and design and extensive resident amenities.
The Communities target middle to upper income professionals who are generally
attracted to these communities because of their interior and exterior ambiance,
floor plan design, community location and amenities. Because these professionals
often can afford to pay higher rents, the ability of the Company to raise rents
is constrained only by its markets and not the income of its residents. This
resident profile, the Company believes, results in rental growth potential and
risk-adjusted returns that are more favorable than those available in other
classes of apartment communities.
 
Dedication to Customer Service.  The Company has long stressed the importance of
developing strong customer relationships with its residents. The Company's total
commitment to resident satisfaction is further evidenced by its "Sundown Policy"
which mandates a response by the appropriate Company employee to any resident
inquiry or complaint no later than "sundown" of the day on which the inquiry or
complaint was received. The Company has sought to provide its residents with
experienced, well-trained and attentive management staffs. Every Community
employee enters into a comprehensive training program when he or she is hired by
the Company. This training program ensures that employees have a clear
understanding of their job responsibilities, the high standards of performance
expected of them and the Company's operating philosophies. On-going Company
sponsored training following each employee's initial employment period further
enhances employee productivity. The Company believes that this training regimen
along with a proven hiring process has produced a higher quality management
staff, evidenced by higher resident satisfaction at the Communities and lower
employee turnover.
 
Mix of Apartment Homes.  The Company has sought to respond to the desires of its
target customer base by adjusting the unit composition and features of the
Communities. There have been broad demographic changes in the Company's resident
mix over the past ten years. Today's renters are older, more affluent and,
accordingly, desire larger apartment homes with more amenities. The Company has
responded to these shifts by developing and acquiring Communities with a greater
proportion of large two and three bedroom units with extensive amenities.
Because these features are generally not present in older apartment communities,
the Company, especially through its development activity, believes it is more
competitively positioned to meet the desires of its target renter group than
some of its competitors with older apartment portfolios.
 
Market Focus.  93% of the Company's portfolio is located in its three core
markets: the I-85 Corridor, central and south Florida and the Greater
Washington, DC/Virginia area. This market focus has enabled the Company to
capitalize on the stronger than average growth in population, employment and
household formation experienced in these markets in the past several years.
Additionally, it allows the Company to gain better brand recognition and improve
operating efficiencies.
 
Decentralized Organizational Structure.  The Company's operational structure
reflects its geographic market focus. The Company's decentralized format
provides each of its six city offices with operating accountability and control
over its respective market area. In addition, it capitalizes on specific market
knowledge which allows for superior site selection and valuation in connection
with the development of new communities, enhanced asset management and the
efficient allocation of capital to those development opportunities with the
greatest potential for financial performance.
 
1996 ACTIVITY
 
As of December 31, 1996, the Company had nine apartment Communities containing
2,716 apartment homes, with a budgeted cost of $201.5 million, under
construction. In 1996 the Company also completed development of four Communities
containing 1,061 apartment homes and acquired the remaining 75% interest in a
joint venture with 262 apartment homes.
 
                                        4
<PAGE>   5
 
Properties Under Construction.  The following provides summary information
regarding the nine Communities under construction as of December 31, 1996
(dollars in thousands):
 
<TABLE>
<CAPTION>
                                                        TOTAL               ESTIMATED   ANTICIPATED
                                          APARTMENT   ESTIMATED   COST TO    COST TO    CONSTRUCTION
               COMMUNITY                    HOMES       COSTS      DATE     COMPLETE     COMPLETION
----------------------------------------  ---------   ---------   -------   ---------   ------------
<S>                                       <C>         <C>         <C>       <C>         <C>
Summit on the River -- Atlanta, GA......       352    $ 23,900    $20,496   $  3,404      Q2 1997
Summit Russett -- Laurel, MD............       314      22,100     17,729      4,371      Q2 1997
Summit Stonefield -- Yardley, PA........       216      18,370      7,893     10,477      Q4 1997
Summit Sedgebrook I -- Charlotte, NC....       248      15,640      3,520     12,120      Q4 1997
Summit Ballantyne I -- Charlotte, NC....       246      16,800      4,138     12,662      Q4 1997
Summit Plantation II -- Plantation,
  FL....................................       240      22,000      6,217     15,783      Q4 1997
Summit Lake I -- Raleigh, NC............       302      19,700      2,805     16,895      Q2 1998
Summit Fair Lakes I -- Fairfax, VA......       370      32,900      6,790     26,110      Q4 1998
Summit New Albany -- Columbus, OH.......       428      30,100      3,778     26,322      Q1 1999
Other development and construction
  costs.................................        --          --     12,791         --
                                          --------    --------    -------   --------
                                             2,716    $201,510    $86,157   $128,144
                                          ========    ========    =======   ========
</TABLE>
 
The Company is optimistic about the operating prospects of the Communities under
construction even with the increased supply of newly constructed apartment homes
of comparable quality in many of its markets. As with any development project,
there are uncertainties and risks associated with the development of the
communities described above. While the Company has prepared development budgets
and has estimated completion and stabilization target dates based on what it
believes are reasonable assumptions in light of current conditions, there can be
no assurance that actual costs will not exceed current budgets or that the
Company will not experience construction delays due to the unavailability of
materials, weather conditions or other events. Similarly, market conditions at
the time these communities become available for leasing will affect the period
of time necessary to achieve stabilization and could result in achieving
stabilization later than currently anticipated.
 
GROWTH STRATEGIES
 
The Company's objective is to increase Funds from Operations per share and
distributions to stockholders through three core strategies: increasing cash
flow from existing Communities, development activity, and acquisitions of
additional Communities.
 
Increase Cash Flow From Existing Communities.  The Company seeks to maximize the
economic return from its Communities by optimizing the trade-off between
increasing rental rates and maintaining high occupancy levels. Consistent with
this strategy, the Company is among the rental rate leaders in its markets. Even
though this strategy may result in slightly lower occupancy rates, the Company
believes that the dynamic tension created by this balancing strategy maximizes
operating income at the property level and improves growth in the Company's cash
flow over the long term. The Company's affluent resident profile, well-trained
property management staff and management information systems support this
strategy. For the year ended December 31, 1996, average rent per apartment home
for the Company's Communities that were stabilized during the comparable period
in 1995 increased 3.8%, and property operating income from these Communities
increased 3.1% for the same period. Average occupancy, rental revenue and
property operating
 
                                        5
<PAGE>   6
 
income levels for the Company's Communities that were stabilized during the
comparable periods are as follows for the years set forth below:
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                               1996     1995     1994
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Average Physical Occupancy..................................    93.1%    94.0%    93.3%
Average Monthly Rental Revenue per Apartment Home...........  $  714   $  682   $  650
Average Monthly Rental Revenue per Apartment Home Growth
  Rate......................................................     3.8%     4.9%     5.1%
Property Operating Income Growth Rate (1)...................     3.1%     6.6%     8.8%
Number of Communities.......................................      32       27       27
</TABLE>
 
(1) Property Operating Income is defined as total rental and other property
    revenues less property operating and maintenance expense (excluding
    depreciation and amortization).
 
Development.  Development of new communities has been the foundation of the
Company's growth. Since its founding, the Company has developed more than $1
billion of multifamily apartment communities, representing over 20,000 apartment
homes. Of its 51 Communities, 34 have been developed by the Company or its
predecessors. The Company attributes much of its historical cash flow growth to
the quality of the apartment Communities it has developed over the years. Where
favorable opportunities exist, the Company plans to continue to capitalize on
its extensive experience and proven reputation as a developer by developing new
Communities.
 
The Company is also conducting feasibility and other pre-development work for
nine new Communities. The Company either owns or holds options to purchase the
land for each of these potential developments (dollars in millions):
 
<TABLE>
<CAPTION>
                                                                                       ANTICIPATED
                                                       APARTMENT      DEVELOPMENT      CONSTRUCTION
           COMMUNITIES IN PRE-DEVELOPMENT                HOMES          BUDGETS           START
-----------------------------------------------------  ---------      -----------      ------------
<S>                                                    <C>            <C>              <C>
Summit Norcroft II -- Charlotte, NC..................        54        $     3.5           1Q97
Summit Governors Village -- Chapel Hill, NC..........       242             16.8           2Q97
Summit Doral -- Miami, FL............................       260             22.6           3Q97
Summit Weston -- Raleigh, NC.........................       365             25.1           3Q97
Summit Ballantyne II -- Charlotte, NC................       154             10.7           1Q98
Summit Sedgebrook II -- Charlotte, NC................       120              8.1           1Q98
Summit Lake II -- Raleigh, NC........................       144              9.7           1Q98
Summit Pembroke -- Pembroke Pines, FL................       300             25.8           1Q98
Summit Fair Lakes II -- Fairfax, VA..................       160             14.5           4Q98
                                                       --------        ---------
                                                          1,799        $   136.8
                                                       ========        =========
</TABLE>
 
For each of these potential communities, the Company is only in the
pre-development phase, and there can be no assurance that all or any one of
these communities will be completed. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Development Activity" for a
discussion of uncertainties and risks associated with the Company's development
activity.
 
Acquisitions.  The Company also seeks to grow cash flow by acquiring existing
communities that have prospects for long-term growth in excess of industry
averages. The Company recently hired an acquisition specialist to support its
efforts in this area. The Company has recently acquired the following
Communities (dollars in thousands):
 
<TABLE>
<CAPTION>
                                                          ACQUISITION      APARTMENT      PURCHASE
                       COMMUNITY                             DATE            HOMES         PRICE
--------------------------------------------------------  -----------      ---------      --------
<S>                                                       <C>              <C>            <C>
Summit Portofino -- Broward County, FL..................     1/6/97             322       $28,000
Summit Mayfaire -- Raleigh, NC..........................    1/15/97             144         9,650
Summit Sand Lake -- Orlando, FL.........................    2/20/97             416        26,798
                                                                           --------       -------
                                                                                882       $64,448
                                                                           ========       =======
</TABLE>
 
                                        6
<PAGE>   7
 
Additionally, the Company has commenced a disposition program targeting those
Communities within its portfolio which do not align with the Company's long term
strategic plan and growth objectives. Currently two such Communities are subject
to Letters of Intent from qualified buyers. A third Community is in the initial
stages of marketing. These three Communities represent 2.5% of the Company's net
real estate assets. The Company does not expect to incur any losses related to
the sale of these Communities.
 
COMPANY HISTORY
 
The Company was formed in 1993 to continue and expand the multifamily
development, construction, acquisition, operation, management and leasing
businesses of Summit Properties, and its affiliated entities, which was founded
by the Company's Chairman of the Board, William B. McGuire, Jr., in 1972. In
1981, William F. Paulsen joined the Company as Chief Executive Officer and
shepherded the growth of its multifamily development and management activities.
 
The Company organized itself as a real estate investment trust and completed its
initial public offering (the "Initial Offering") of 10,000,000 shares of Common
Stock on February 15, 1994 and sold an additional 1,500,000 shares upon exercise
of the underwriters' over-allotment option on March 4, 1994. On June 2, 1995,
the Company completed a follow-on public offering of 4,000,000 shares of Common
Stock. A second follow-on public offering of 5,000,000 shares of the Company's
Common Stock was completed on August 7, 1996, with an additional 750,000 shares
sold upon exercise of the underwriters' over-allotment option on August 12,
1996.
 
The Company, a Maryland corporation, is a self-administered and self-managed
real estate investment trust (a "REIT"). The Company's Common Stock is listed on
the New York Stock Exchange under the symbol "SMT". The executive offices of the
Company are located at 212 South Tryon Street, Suite 500, Charlotte, North
Carolina 28281. The Company's telephone number is (704) 334-9905 and its
facsimile number is (704) 333-8340. The Company also maintains offices in
Atlanta, Georgia; Tampa, Florida; Reston, Virginia; Ft. Lauderdale, Florida and
Raleigh, North Carolina.
 
THE OPERATING PARTNERSHIP
 
The Operating Partnership was formed on January 14, 1994, and is the entity
through which principally all of the Company's business is conducted. The
Company controls the Operating Partnership as the sole general partner and as
the holder of an 84.8% economic and voting interest in the Operating
Partnership. As the sole general partner of the Operating Partnership, the
Company has the exclusive power to manage and conduct the business of the
Operating Partnership, subject to the consent of holders (including the Company)
of 85% of the units of partnership interest ("Units") in connection with a sale,
transfer or other disposition of all or substantially all of the assets of the
Operating Partnership, or any other transaction which would result in the
recognition of a significant taxable gain to the holders of Units. The Company's
general and limited partnership interests in the Operating Partnership entitle
it to share in 84.8% of the cash distributions from, and in the profits and
losses of, the Operating Partnership.
 
Each Unit of limited partnership interest may be redeemed by the holder thereof
for cash equal to the fair market value of a share of the Company's Common Stock
or, at the option of the Company, an equivalent number of shares of Common
Stock. The Company presently anticipates that it will elect to issue shares of
Common Stock in connection with redemptions of Units rather than paying cash.
With each redemption of Units for Common Stock, the Company's percentage
ownership interest in the Operating Partnership will increase. In addition,
whenever the Company issues shares of Common Stock for cash, the Company will
contribute any net proceeds therefrom to the Operating Partnership and the
Operating Partnership will issue an equivalent number of Units to the Company.
 
The Operating Partnership cannot be terminated, except in connection with a sale
of all or substantially all of the assets of the Company, for a period of 99
years without a vote of the limited partners of the Operating Partnership.
 
                                        7
<PAGE>   8
 
ITEM 2.  PROPERTIES
 
THE COMMUNITIES
 
The Company owns and manages through the Operating Partnership 51 Communities
consisting of 11,788 luxury garden apartment homes. Twenty-six of the
Communities have been completed since January 1, 1990 and, as of December 31,
1996, the average age of the stabilized Communities was approximately 7.8 years.
The average physical occupancy rate at the stabilized Communities was 93.3% and
94.5% for the years ended December 31, 1996 and 1995, respectively. The average
monthly rental revenue per apartment home at the stabilized Communities during
1996 and 1995 was $698 and $669, respectively.
 
The Company has targeted ten growth markets located in six states throughout the
Southeastern United States (Florida, Georgia, Maryland, North Carolina, South
Carolina and Virginia) as well as in Delaware, Indiana and Ohio as shown below:
 
<TABLE>
<CAPTION>
                                                                        NUMBER OF      % OF TOTAL
                                                        NUMBER OF       APARTMENT       APARTMENT
                   CITY OR REGION                      COMMUNITIES        HOMES           HOMES
-----------------------------------------------------  -----------      ---------      -----------
<S>                                                    <C>              <C>            <C>
Tampa/Sarasota, Florida..............................           9          2,248             19.1%
Charlotte, North Carolina............................          12          2,164             18.4
Raleigh/Central North Carolina.......................           9          1,697             14.4
Washington, DC.......................................           5          1,307             11.0
South Florida........................................           4          1,197             10.2
Other................................................           4            882              7.5
Atlanta, Georgia.....................................           3            877              7.4
Richmond, Virginia...................................           3            862              7.3
Indianapolis, Indiana................................           1            314              2.7
Orlando, Florida.....................................           1            240              2.0
                                                       ----------       --------        ---------
          Total......................................          51         11,788            100.0%
                                                       ==========       ========        =========
</TABLE>
 
All of the Communities target middle to upper income apartment renters as
customers and have amenities, unit sizes and unit mixes consistent with the
desires of this resident population.
 
                                        8
<PAGE>   9
 
The following table highlights certain information regarding the Communities:
<TABLE>
<CAPTION>
 
                                                                                        AVERAGE     AVERAGE     AVERAGE
                                                              NUMBER OF      YEAR      APARTMENT   OCCUPANCY   OCCUPANCY
MARKET AREA/COMMUNITY               LOCATION       ZIP CODE   APARTMENTS   COMPLETED     SIZE        1996        1995
------------------------------  -----------------  --------   ----------   ---------   ---------   ---------   ---------
<S>                             <C>                <C>        <C>          <C>         <C>         <C>         <C>
ATLANTA
Summit Glen...................  Atlanta, GA         30342            242     1992            983        91.9        93.7
Summit Springs................  Norcross, GA        30093            312     1990            934        92.6        95.6
Summit Village................  Marietta, GA        30062            323     1991            984        91.8        95.0
                                                              ----------               ---------   ---------   ---------
ATLANTA SUBTOTAL/WEIGHTED AVERAGE..........................          877                     966        92.1        94.9
CHARLOTTE
Summit Arbors.................  Charlotte, NC       28202            120     1986            944        94.8        95.8
Summit Charleston.............  Charlotte, NC       28212            214     1986            806        93.3        94.7
Summit Creek..................  Charlotte, NC       28210            260     1983            910        92.7        95.7
Summit Crossing...............  Charlotte, NC       28210            128     1985            978        96.3        97.6
Summit Fairview...............  Charlotte, NC       28226            135     1983          1,036        93.6        94.1
Summit Foxcroft(1)............  Charlotte, NC       28226            156     1979            940        93.4        96.6
Summit Green(2)...............  Charlotte, NC       28262            300     1996          1,098         N/A         N/A
Summit Hollow.................  Charlotte, NC       28226            232     1978            949        94.5        95.3
Summit Norcroft...............  Charlotte, NC       28269            162     1991          1,112        94.0        94.6
Summit Radbourne..............  Charlotte, NC       28269            225     1991          1,006        92.0        96.7
Summit Simsbury...............  Charlotte, NC       28226            100     1985            874        93.6        95.3
Summit Touchstone.............  Charlotte, NC       28226            132     1986            899        94.0        94.8
                                                              ----------               ---------   ---------   ---------
CHARLOTTE SUBTOTAL/WEIGHTED AVERAGE........................        2,164                     969        93.7        95.6
INDIANAPOLIS
Summit River Crossing(2)......  Indianapolis, IN    46240            314     1996          1,086         N/A         N/A
ORLANDO
Summit Fairways(2)............  Orlando, FL         32779            240     1996          1,304         N/A         N/A
RALEIGH/CENTRAL NORTH CAROLINA
Summit Creekside..............  Hickory, NC         28601            118     1981          1,006        96.2        97.6
Summit Eastchester............  High Point, NC      27262            172     1981            947        96.1        97.5
Summit Highland...............  Raleigh, NC         27612            172     1987            986        94.5        94.2
Summit Hill I.................  Chapel Hill, NC     27514            204     1991            904        93.3        95.4
Summit Hill II(2).............  Chapel Hill, NC     27514            207     1996          1,023         N/A         N/A
Summit Oak....................  Goldsboro, NC       27534            100     1982            918        96.7        97.3
Summit Old Town...............  Winston-Salem, NC   27106            172     1979            954        90.9        95.5
Summit Sherwood...............  Winston-Salem, NC   27106            190     1968          1,028        95.2        95.0
Summit Square.................  Durham, NC          27707            362     1990            925        92.1        91.7
                                                              ----------               ---------   ---------   ---------
RALEIGH/CENTRAL NORTH CAROLINA
SUBTOTAL/WEIGHTED AVERAGE..................................        1,697                     963        93.9        94.9
RICHMOND
Summit Breckenridge...........  Glen Allen, VA      23060            300     1987            928        95.1        95.0
Summit Stony Point............  Richmond, VA        23235            250     1986          1,045        93.2        95.6
Summit Waterford..............  Midlothian, VA      23112            312     1990            995        91.4        95.2
                                                              ----------               ---------   ---------   ---------
RICHMOND SUBTOTAL/WEIGHTED AVERAGE.........................          862                     986        93.2        95.2
SOUTH FLORIDA
Summit Aventura(2)............  Aventura, FL        33108            379     1995          1,170         N/A         N/A
Summit Del Ray................  Delray Beach, FL    33445            252     1993            968        91.5        93.2
Summit Palm Lake..............  W. Palm Beach, FL   33417            304     1992            919        96.7        94.1
Summit Plantation(3)..........  Plantation, FL      33324            262     1995          1,283         N/A         N/A
                                                              ----------               ---------   ---------   ---------
SOUTH FLORIDA SUBTOTAL/WEIGHTED AVERAGE....................        1,197                   1,088        94.3        93.7
TAMPA/SARASOTA
                                St. Petersburg,
Summit Gateway................  FL                  33716            212     1987            828        93.7        94.4
Summit Hampton................  Bradenton, FL       34210            352     1988            933        93.0        94.2
Summit Heron's Run............  Sarasota, FL        34232            274     1990            863        92.5        92.0
Summit Lofts..................  Palm Harbour, FL    33684            200     1990          1,045        90.8        90.7
Summit McIntosh...............  Sarasota, FL        34232            212     1990            855        93.9        93.0
Summit Perico.................  Bradenton, FL       34209            256     1990            911        93.5        94.4
Summit Providence.............  Brandon, FL         33511            444     1991            952        93.0        92.2
Summit Station................  Tampa, FL           33624            230     1990            902        92.6        94.8
Summit Walk...................  Tampa, FL           33618             68     1993          1,614        95.9        95.1
                                                              ----------               ---------   ---------   ---------
TAMPA/SARASOTA SUBTOTAL/WEIGHTED AVERAGE...................        2,248                     936        93.0        93.2
 
<CAPTION>
                                 AVERAGE     AVERAGE
                                RENT PER    RENT PER
                                APARTMENT   APARTMENT
MARKET AREA/COMMUNITY             1996        1995
------------------------------  ---------   ---------
<S>                             <C>         <C>
ATLANTA
Summit Glen...................  $     847   $     823
Summit Springs................        708         673
Summit Village................        735         705
                                ---------   ---------
ATLANTA SUBTOTAL/WEIGHTED AVER        756         726
CHARLOTTE
Summit Arbors.................        748         692
Summit Charleston.............        581         562
Summit Creek..................        624         580
Summit Crossing...............        649         609
Summit Fairview...............        726         724
Summit Foxcroft(1)............        643         600
Summit Green(2)...............        N/A         N/A
Summit Hollow.................        656         610
Summit Norcroft...............        805         800
Summit Radbourne..............        786         770
Summit Simsbury...............        734         701
Summit Touchstone.............        677         639
                                ---------   ---------
CHARLOTTE SUBTOTAL/WEIGHTED AV        687         656
INDIANAPOLIS
Summit River Crossing(2)......        N/A         N/A
ORLANDO
Summit Fairways(2)............        N/A         N/A
RALEIGH/CENTRAL NORTH CAROLINA
Summit Creekside..............        566         517
Summit Eastchester............        559         510
Summit Highland...............        703         693
Summit Hill I.................        687         653
Summit Hill II(2).............        N/A         N/A
Summit Oak....................        532         508
Summit Old Town...............        542         500
Summit Sherwood...............        526         487
Summit Square.................        763         745
                                ---------   ---------
RALEIGH/CENTRAL NORTH CAROLINA
SUBTOTAL/WEIGHTED AVERAGE.....        635         604
RICHMOND
Summit Breckenridge...........        706         665
Summit Stony Point............        724         692
Summit Waterford..............        685         636
                                ---------   ---------
RICHMOND SUBTOTAL/WEIGHTED AVE        704         662
SOUTH FLORIDA
Summit Aventura(2)............        N/A         N/A
Summit Del Ray................        852         870
Summit Palm Lake..............        743         713
Summit Plantation(3)..........        N/A         N/A
                                ---------   ---------
SOUTH FLORIDA SUBTOTAL/WEIGHTE        792         784
TAMPA/SARASOTA
Summit Gateway................        626         611
Summit Hampton................        630         598
Summit Heron's Run............        653         632
Summit Lofts..................        690         694
Summit McIntosh...............        684         655
Summit Perico.................        657         621
Summit Providence.............        659         658
Summit Station................        619         594
Summit Walk...................      1,052       1,005
                                ---------   ---------
TAMPA/SARASOTA SUBTOTAL/WEIGHT        663         644
</TABLE>
 
                                        9
<PAGE>   10
<TABLE>
<CAPTION>
 
                                                                                        AVERAGE     AVERAGE     AVERAGE
                                                              NUMBER OF      YEAR      APARTMENT   OCCUPANCY   OCCUPANCY
MARKET AREA/COMMUNITY               LOCATION       ZIP CODE   APARTMENTS   COMPLETED     SIZE        1996        1995
------------------------------  -----------------  --------   ----------   ---------   ---------   ---------   ---------
<S>                             <C>                <C>        <C>          <C>         <C>         <C>         <C>
WASHINGTON, DC
                                Fredericksburg,
Summit Belmont................  VA                  22401            300     1987            881        90.2        93.9
Summit Meadow.................  Columbia, MD        21045            178     1990          1,020        93.6        94.8
Summit Pike Creek.............  Newark, DE          19711            264     1988            899        95.8        94.3
Summit Reston.................  Reston, VA          22090            418     1987            854        93.9        95.5
Summit Windsor................  Frederick, MD       21701            147     1989            911        92.7        93.7
                                                              ----------               ---------   ---------   ---------
WASHINGTON, DC SUBTOTAL/WEIGHTED AVERAGE...................        1,307                     898        93.2        94.6
OTHER
Summit Blue Ash...............  Blue Ash, OH        45242            242     1992          1,158        95.6        97.0
Summit Park...................  Forest Park, OH     45240            316     1989            963        91.7        94.7
Summit Beacon Ridge...........  Greenville, SC      29615            144     1988          1,046        91.9        95.4
Summit East Ridge.............  Greenville, SC      29687            180     1986            959        92.0        93.5
                                                              ----------               ---------   ---------   ---------
OTHER SUBTOTAL/WEIGHTED AVERAGE............................          882                   1,029        92.9        95.2
                                                              ----------               ---------   ---------   ---------
Total Weighted Average........                                    11,788                     982       93.3%        94.6%
                                                              ==========               =========   =========   =========
 
<CAPTION>
                                 AVERAGE     AVERAGE
                                RENT PER    RENT PER
                                APARTMENT   APARTMENT
MARKET AREA/COMMUNITY             1996        1995
------------------------------  ---------   ---------
<S>                             <C>         <C>
WASHINGTON, DC
 
Summit Belmont................        622         600
Summit Meadow.................        864         832
Summit Pike Creek.............        800         738
Summit Reston.................        917         866
Summit Windsor................        681         675
                                ---------   ---------
WASHINGTON, DC SUBTOTAL/WEIGHT        792         753
OTHER
Summit Blue Ash...............        769         735
Summit Park...................        602         575
Summit Beacon Ridge...........        653         632
Summit East Ridge.............        568         544
                                ---------   ---------
OTHER SUBTOTAL/WEIGHTED AVERAG        649         622
                                ---------   ---------
Total Weighted Average........  $     698   $     669
                                =========   =========
</TABLE>
 
(1) Summit Foxcroft is held by a partnership in which the Company is a 75%
    managing general partner.
 
(2) Community was not stabilized for entire period.
 
(3) Community acquired April 1, 1996.
 
Each Community has many of the following features: swimming pools, tennis,
racquetball and volleyball courts, saunas, whirlpools, fitness facilities,
picnic areas, large clubhouses and convenient parking facilities. Most of the
apartment homes offer amenities that include spacious open living areas,
sunrooms, patios or balconies, sunken living rooms, fireplaces, built-in shelves
or entertainment centers, large storage areas or walk-in closets, vaulted
ceilings, ceiling fans and separate in-home laundry facilities or laundry
hook-ups. In addition to these physical amenities, each Community has its own
highly trained and experienced on-site management and maintenance staff to
ensure that courteous and responsive service is provided to its residents.
 
COMMUNITY MANAGEMENT
 
Each of the Communities is managed by the Company's property management staff.
The property management team for each Community includes supervision by a
regional vice-president and regional property manager, as well as on-site
management, maintenance personnel and an off-site support staff. Community
management teams perform leasing and rent collection functions and coordinate
resident services. All personnel are extensively trained and experienced and are
encouraged to continue their education through both Company-designed and outside
courses.
 
ITEM 3.  LEGAL PROCEEDINGS
 
Neither the Company nor any of the Communities is presently subject to any
material litigation nor, to the Company's knowledge, is any litigation
threatened against the Company or any of the Communities, other than routine
actions for negligence or other claims and administrative proceedings arising in
the ordinary course of business, some of which are expected to be covered by
liability insurance and all of which collectively are not expected to have a
material adverse effect on the business or financial condition or results of
operations of the Company.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
NONE
 
                                       10
<PAGE>   11
 
                                    PART II
 
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
The Company's Common Stock began trading on the New York Stock Exchange (the
"NYSE") on February 8, 1994 under the symbol "SMT". The following table sets
forth the quarterly high and low sales prices per share reported on the NYSE.
 
<TABLE>
<CAPTION>
                                                           1996                    1995
                                                    ------------------      ------------------
                     QUARTER                         HIGH        LOW         HIGH        LOW
--------------------------------------------------  ------      ------      ------      ------
<S>                                                 <C>         <C>         <C>         <C>
January 1 through March 31........................  $21.25      $19.00      $19.13      $16.25
April 1 through June 30...........................   20.50       18.50       18.00       15.88
July 1 through September 30.......................   20.13       18.00       18.88       16.88
October 1 through December 31.....................   22.50       19.13       19.88       18.13
</TABLE>
 
On February 20, 1997, the last reported sale price of the Common Stock on the
NYSE was $20.25. On February 14, 1997, there was 409 holders of record of
23,072,136 shares of the Company's Common Stock.
 
The Company declared a dividend of $.3875 per share of Common Stock for each of
the four quarters in 1996, which was paid on May 15, 1996 for the first quarter,
August 15, 1996 for the second quarter, November 15, 1996 for the third quarter,
and February 14, 1997 for the fourth quarter.
 
The Company declared a dividend of $.3775 per share of Common Stock for each of
the four quarters in 1995, which was paid on May 15, 1995 for the first quarter,
August 15, 1995 for the second quarter, November 15, 1995 for the third quarter,
and February 14, 1996 for the fourth quarter.
 
The Company issued 106,330 Units in the Operating Partnership in conjunction
with the purchase of the Summit Sedgebrook land while 9,474 Units in the
Operating Partnership were exchanged for 9,474 shares of the Company's Common
Stock during 1996. Such shares of the Company's Common Stock were issued in
reliance on an exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
In light of the status of each recipient of Common Stock in such transactions as
a high net worth individual, management of the Company believes that it has
obtained sufficient information to reasonably conclude that each recipient of
Common Stock was either an "accredited investor" or, either alone or with his or
her representative, had knowledge and experience in financial and business
matters that he or she was capable of evaluating the merits and risks of owning
shares of the Company's Common Stock.
 
The Company intends to continue to make regular quarterly dividends to holders
of shares of Common Stock. Future dividends will be declared at the discretion
of the Board of Directors and will depend on actual cash flow of the Company,
its financial condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Internal Revenue Code, and such
other factors as the Board of Directors may deem relevant. The Board of
Directors may modify the Company's dividend policy from time to time.
 
In March 1995, the Company put in place a dividend reinvestment program under
which holders of Common Stock may elect automatically to reinvest their
dividends in additional shares of Common Stock. To fulfill its obligations under
this program, the Company may either issue additional shares of Common Stock or
repurchase Common Stock in the open market.
 
                                       11
<PAGE>   12
 
ITEM 6.  SELECTED FINANCIAL DATA
 
The following table sets forth selected consolidated financial and other
information on a consolidated historical basis for the Company and its
predecessors (the "Summit Entities") as of and for each of the years in the
five-year period ended December 31, 1996. This table should be read in
conjunction with the Consolidated Financial Statements of Summit Properties Inc.
and the Notes thereto included elsewhere herein.
 
                            SELECTED FINANCIAL DATA
                    SUMMIT PROPERTIES INC. (HISTORICAL) (1)
 
<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                               ---------------------------------------------------------
                                                 1996        1995        1994        1993        1992
                                               ---------   ---------   ---------   ---------   ---------
                                                 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND PROPERTY
                                                                     INFORMATION)
<S>                                            <C>         <C>         <C>         <C>         <C>
OPERATING INFORMATION:
Revenue
  Rental.....................................  $  88,864   $  70,773   $  54,198   $  45,561   $  39,693
  Property management(2).....................         --          --         536       4,102       2,988
  Interest and other.........................      5,625       4,221       3,700       3,779       4,393
                                               ---------   ---------   ---------   ---------   ---------
         Total...............................     94,489      74,994      58,434      53,442      47,074
                                               ---------   ---------   ---------   ---------   ---------
Property operating and maintenance expense
  (before depreciation and amortization).....     35,226      28,012      21,502      18,991      17,306
Property management expenses(2)..............         --          --         366       2,799       2,453
Interest expense.............................     17,138      14,802      14,067      26,400      25,925
Depreciation and amortization................     18,208      15,141      11,700       9,735       9,219
REIT formation costs.........................         --          --         457          --          --
General and administrative expense...........      2,557       1,949       1,756       1,375       1,973
Loss from equity investments.................        173          39          59          --          --
                                               ---------   ---------   ---------   ---------   ---------
         Total...............................     73,302      59,943      49,907      59,300      56,876
                                               ---------   ---------   ---------   ---------   ---------
Income (loss) before extraordinary items and
  minority interest of unitholders in
  Operating Partnership......................  $  21,187   $  15,051   $   8,527   $  (5,858)  $  (9,802)
                                               =========   =========   =========   =========   =========
Net income (loss)............................  $  16,948   $  11,819   $  14,032   $  (3,408)  $  (9,802)
                                               =========   =========   =========   =========   =========
Income per share before extraordinary
  items......................................  $     .92   $     .83   $     .64         N/A         N/A
                                               =========   =========   =========   =========   =========
Net income per share.........................  $     .90   $     .80   $    1.28         N/A         N/A
                                               =========   =========   =========   =========   =========
Dividends per share..........................  $    1.55   $    1.51   $    1.29         N/A         N/A
                                               =========   =========   =========   =========   =========
Weighted average shares outstanding..........     18,915      14,754      10,992         N/A         N/A
                                               =========   =========   =========   =========   =========
Weighted average shares and units
  outstanding................................     22,941      18,117      13,390         N/A         N/A
                                               =========   =========   =========   =========   =========
 
OTHER INFORMATION:
Cash flow provided by (used in):
  Operating activities.......................  $  41,176   $  30,994   $  17,525   $   8,712   $   4,475
  Investing activities.......................   (103,971)    (63,734)   (113,741)     (2,092)    (16,106)
  Financing activities.......................     63,579      34,440      88,993      (9,141)     14,123
Funds from Operations(3).....................  $  39,391   $  30,148   $  20,120   $   3,777   $    (683)
Recurring capital expenditures...............  $   3,291   $   2,180   $   1,710   $   1,050   $     591
Funds Available for Distribution(4)..........  $  36,100   $  27,968   $  18,410   $   2,727   $  (1,274)
Non-recurring capital expenditures(5)........  $   2,973   $     864          --          --          --
Total completed communities (at end of
  period)....................................         51          46          32          27          26
Total apartment homes developed(6)...........      1,061         379          --         320         788
Total apartment homes acquired...............        262       2,025       1,332          --          --
Total apartment homes (at end of
  period)(7).................................     11,788      10,465       8,061       6,729       6,409
Average monthly rental revenue per apartment
  home(8)....................................  $     698   $     669   $     657   $     617   $     576
Average physical occupancy(9)................       93.3%       94.5%       93.5%       93.1%       93.3%
</TABLE>
 
                                       12
<PAGE>   13
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                          ----------------------------------------------------
                                            1996       1995       1994       1993       1992
                                          --------   --------   --------   --------   --------
<S>                                       <C>        <C>        <C>        <C>        <C>
BALANCE SHEET INFORMATION:
Real estate, before accumulated
  depreciation..........................  $704,779   $586,264   $439,025   $317,374   $313,634
Total assets............................   634,991    533,252    397,945    297,670    309,239
Total long-term debt....................   309,933    297,010    249,009    315,847    319,916
Stockholders' equity (deficiency).......   257,214    175,454    115,525    (38,127)   (28,825)
</TABLE>
 
(1) For purposes of the Selected Financial Data, historical information is
     presented both for the Company and its predecessors; provided that
     historical financial information for its predecessors only includes
     information relating to the Communities held by the Company immediately
     following the Initial Offering and the entities which provided property and
     general management services for those Communities.
 
(2) Consists of revenues and expenses from property management services provided
     to Communities owned by unrelated third parties and by certain predecessor
     partnerships prior to the Initial Offering. Since the Initial Offering,
     these services have been performed by Summit Management Company, which is
     accounted for under the equity method of accounting.
 
(3) The Company generally considers Funds from Operations to be an appropriate
     measure of the performance of an equity REIT. Funds from Operations, as
     defined by the National Association of Real Estate Investment Trusts
     (NAREIT), represents net income (loss) determined in accordance with
     generally accepted accounting principles (GAAP), excluding gains or losses
     from sales of assets or debt restructuring, plus certain non-cash items,
     primarily real estate depreciation, and after adjustments for
     unconsolidated partnerships and joint ventures. Adjustments for all periods
     consisted only of real estate depreciation. Funds from Operations should
     not be considered as an alternative to net income (determined in accordance
     with GAAP), as an indication of the Company's financial performance, or to
     cash flow from operating activities (determined in accordance with GAAP) as
     a measure of liquidity. Funds from Operations is calculated as follows
     (dollars in thousands):
 
<TABLE>
<CAPTION>
                                                          YEARS ENDED DECEMBER 31,
                                               -----------------------------------------------
                                                1996      1995      1994      1993      1992
                                               -------   -------   -------   -------   -------
<S>                                            <C>       <C>       <C>       <C>       <C>
     Income (loss) before extraordinary items
       and Minority Interest of unitholders
       in Operating Partnership..............  $21,187   $15,051   $ 8,527   $(5,858)  $(9,802)
     Real estate depreciation................   18,204    15,097    11,593     9,635     9,119
                                               -------   -------   -------   -------   -------
     Funds from Operations...................  $39,391   $30,148   $20,120   $ 3,777   $  (683)
                                               =======   =======   =======   =======   =======
</TABLE>
 
(4) Funds Available for Distribution is defined as Funds from Operations less
     recurring capital expenditures.
 
(5) Represents improvements made in conjunction with acquisitions, construction
     of garages and other major non-recurring capital expenditures.
 
(6) Represents the total number of apartment homes in Communities completed and
     owned by the Company during the period.
 
(7) Represents the total number of apartment homes in Communities completed and
     owned by the Company at the end of the period.
 
(8) Represents the average monthly rental revenue per occupied apartment home at
     Communities deemed to have achieved stabilized occupancy on the earlier of
     the attainment of 93% physical occupancy or one year after the completion
     of construction ("Stabilized Communities").
 
(9) Physical occupancy is defined as the number of apartment homes occupied
     divided by the total number of apartment homes contained in the
     Communities, expressed as a percentage, and reflects only Stabilized
     Communities. Physical occupancy has been calculated using the average of
     the midweek occupancy that existed during each week of the period.
 
                                       13
<PAGE>   14
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
 
This Form 10-K contains forward-looking statements including, without
limitation, statements relating to development activities of the Company within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, as amended. Although the Company believes that
the expectations reflected in such forward-looking statements are based on
reasonable assumptions, the Company's actual results and performance of
development Communities could differ materially from those set forth in the
forward-looking statements. Certain factors that might cause such a difference
include general economic conditions, local real estate conditions, construction
delays due to unavailability of materials, weather conditions or other delays
and those factors discussed in the section entitled "Development
Activity -- Certain Factors Affecting the Performance of Development
Communities" on page 23 of this Form 10-K.
 
OVERVIEW
 
The following discussion should be read in conjunction with the Consolidated
Financial Statements of Summit Properties Inc. and the Notes thereto appearing
elsewhere herein.
 
As of December 31, 1996, there were 26,434,920 Units outstanding of the
Operating Partnership, of which 22,409,638, or 84.8% were owned by the Company
and 4,025,282, or 15.2% were owned by other partners (including certain officers
and directors of the Company).
 
FORMATION OF THE COMPANY, THE INITIAL OFFERING AND SUBSEQUENT OFFERINGS
 
On February 15, 1994, the Company completed the Initial Offering and a business
combination involving entities under varying common ownership. On June 2, 1995,
the Company completed an offering of four million shares of Common Stock (the
"1995 Offering"). On August 7, 1996 the Company completed an offering of five
million shares of Common Stock and sold an additional 750,000 shares upon
exercise of the underwriters' over-allotment option on August 12, 1996 (the
"1996 Offering"). The net proceeds from the Initial Offering were used by the
Company to acquire a controlling interest in the Operating Partnership, which
was formed to succeed to interests in a portfolio of 27 Communities, comprising
a total of 6,729 apartment homes, to acquire Summit Stony Point comprising 250
apartment homes, and to acquire certain development, construction, management
and leasing businesses of the Company's predecessors (collectively, "Summit
Entities"). Summit Entities' third party management businesses were transferred
to Summit Management Company (the "Management Company"), in which the Operating
Partnership owns a 1% voting interest and a 99% economic interest. Summit
Apartment Builders, Inc. (the "Construction Company"), which was formed to
perform certain construction services for the Company, is wholly-owned by the
Management Company. The Company's interest in the Management Company and the
Construction Company is accounted for under the equity method of accounting. The
net proceeds from the 1995 and 1996 Offerings were used to repay debt and fund
development costs.
 
HISTORICAL RESULTS OF OPERATIONS
 
The Company's net income is generated primarily from the operations of its
apartment communities (the "Communities"). The changes in operating results from
period to period reflect changes in existing community performance as well as
increases in the number of apartment homes due to the acquisition and
development of Communities. Where appropriate, comparisons are made on a
"stabilized Communities," "acquisition Communities" and "Communities in
lease-up" basis in order to adjust for changes in the number of apartment homes.
A Community is deemed to be "stabilized" at the earlier of when it has attained
a
 
                                       14
<PAGE>   15
 
physical occupancy level of at least 93% or when construction has been completed
for one year. A summary of the Company's apartment homes for the years ended
December 31, 1996, 1995 and 1994 is as follows:
 
<TABLE>
<CAPTION>
                                                               1996        1995       1994
                                                              ------      ------      -----
<S>                                                           <C>         <C>         <C>
Apartment homes at the beginning of the year................  11,286       8,061         --
Initial business combination................................      --          --      6,729
Acquisitions................................................     262       2,025      1,332
Developments which began rental operations during the
  year......................................................     906       1,200         --
                                                              ------      ------      -----
Apartment homes at the end of the year......................  12,454      11,286      8,061
                                                              ======      ======      =====
</TABLE>
 
The 1995 acquisitions were completed in the second quarter and consisted of
twelve apartment communities and a 75% interest in another apartment community,
all of which were owned by The Crosland Group Inc. and its affiliates (the
"Crosland Acquisition").
 
Results of Operations for the Years Ended December 31, 1996, 1995 and 1994
 
Income before minority interest of unitholders in the Operating Partnership and
extraordinary items increased from 1994 ($8.5 million) to 1995 ($15.1 million)
and from 1995 to 1996 ($21.2 million) primarily due to increased property
operating income at stabilized Communities, property operating income from
acquisition Communities and Communities in lease-up.
 
OPERATING PERFORMANCE OF THE COMPANY'S PORTFOLIO OF COMMUNITIES
 
The operating performance of the Communities is summarized below (dollars in
thousands):
 
<TABLE>
<CAPTION>
                                      YEAR ENDED DECEMBER 31,          YEAR ENDED DECEMBER 31,
                                   -----------------------------    -----------------------------
                                    1996      1995     % CHANGE      1995      1994     % CHANGE
                                   -------   -------   ---------    -------   -------   ---------
<S>                                <C>       <C>       <C>          <C>       <C>       <C>
Property revenues:
  Stabilized communities(1)......  $66,974   $64,646       3.6%     $53,566   $50,579      5.9%
  Acquisition communities........   16,993     8,716      95.0%      19,796     6,201    219.2%
  Communities in lease-up(2).....    9,580       767   1,149.0%         767        --    100.0%
                                   -------   -------                -------   -------
Total property revenues..........   93,547    74,129      26.2%      74,129    56,780     30.6%
                                   -------   -------                -------   -------
Property operating and
  maintenance expense(3):
  Stabilized communities.........   25,302    24,245       4.4%      20,206    19,277      4.8%
  Acquisition communities........    6,444     3,492      84.5%       7,531     2,225    238.5%
  Communities in lease-up........    3,480       275   1,165.5%         275        --    100.0%
                                   -------   -------                -------   -------
Total property operating and
  maintenance expense............   35,226    28,012      25.8%      28,012    21,502     30.3%
                                   -------   -------                -------   -------
Property operating income........  $58,321   $46,117      26.5%     $46,117   $35,278     30.7%
                                   =======   =======                =======   =======
Apartment homes, end of period...   12,454    11,286      10.3%      11,286     8,061     40.0%
                                   =======   =======                =======   =======
</TABLE>
 
(1) Includes Communities which were stabilized during the entire period for each
     of the comparable periods presented. The 1995 and 1994 comparison includes
     Communities acquired during the initial business combination while the 1996
     and 1995 comparison also includes the Communities acquired in 1994.
 
(2) Includes seven Communities in 1996, of which five had completed construction
     as of December 31, 1996. Includes four Communities in 1995, of which one
     had completed construction as of December 31, 1995.
 
(3) Before real estate depreciation and amortization expense.
 
                                       15
<PAGE>   16
 
OPERATING PERFORMANCE OF THE COMPANY'S STABILIZED COMMUNITIES
 
The operating performance of the Communities stabilized during the entire period
in each of the comparable periods presented is summarized below (dollars in
thousands except average monthly rental revenue):
 
<TABLE>
<CAPTION>
                                      YEAR ENDED DECEMBER 31,          YEAR ENDED DECEMBER 31,
                                   -----------------------------    -----------------------------
                                    1996      1995     % CHANGE      1995      1994     % CHANGE
                                   -------   -------   ---------    -------   -------   ---------
<S>                                <C>       <C>       <C>          <C>       <C>       <C>
Property revenues:
  Rental.........................  $63,556   $61,613      3.2%      $50,971   $48,234      5.7%
  Other..........................    3,418     3,033     12.7%        2,595     2,345     10.7%
                                   -------   -------                -------   -------
Total property revenues..........   66,974    64,646      3.6%       53,566    50,579      5.9%
                                   -------   -------                -------   -------
Property operating and
  maintenance expense(1):
  Personnel......................    5,879     5,570      5.5%        4,640     4,520      2.7%
  Advertising and promotion......      680       561     21.2%          469       452      3.8%
  Utilities......................    3,041     3,034      0.2%        2,616     2,568      1.9%
  Building repairs and
     maintenance.................    5,657     5,290      6.9%        4,480     3,985     12.4%
  Real estate taxes and
     insurance...................    6,595     6,257      5.4%        5,077     4,931      3.0%
  Property supervision...........    1,671     1,602      4.3%        1,326     1,272      4.2%
  Other operating expense........    1,779     1,931     (7.9)%       1,598     1,549      3.2%
                                   -------   -------                -------   -------
Total property operating and
  maintenance expense............   25,302    24,245      4.4%       20,206    19,277      4.8%
                                   -------   -------                -------   -------
Property operating income........  $41,672   $40,401      3.1%      $33,360   $31,302      6.6%
                                   =======   =======                =======   =======
Average physical occupancy(2)....     93.1%     94.3%    (1.2)%        94.0%     93.3%     0.8%
                                   =======   =======                =======   =======
Average monthly rental
  revenue(3).....................  $   714   $   688      3.8%      $   682   $   650      4.9%
                                   =======   =======                =======   =======
Number of apartment homes........    8,061     8,061                  6,729     6,729
                                   =======   =======                =======   =======
</TABLE>
 
(1) Before real estate depreciation and amortization expense.
 
(2) Average physical occupancy is defined as the number of apartment homes
     occupied divided by the total number of apartment homes contained in the
     Communities, expressed as a percentage. Average physical occupancy has been
     calculated using the average of the midweek occupancy that existed during
     each week of the period.
 
(3) Represents the average monthly net rental revenue per occupied apartment
     home.
 
Rental and other revenue increased from 1995 to 1996 due to higher rental rates
partially offset by a decrease in occupancy. The 3.6% property revenue growth
rate was lower than the prior year rate of growth primarily as a result of a new
supply of competing multi-family Communities in the markets in which the Company
operates. In 1997 the Company expects the rate of growth to be similar to the
growth rate in 1996 as the supply of new multi-family Communities continues to
increase balanced by the continued strength of the local economies in which the
Company operates. The Company believes its expectations relative to property
revenue growth are based on reasonable assumptions as to future economic
conditions and the quantity of competitive multi-family Communities in the
markets in which the Company does business. There can be no assurance that
actual results will not differ from these assumptions.
 
The increase in property operating and maintenance expenses from 1995 to 1996
was primarily due to increased insurance costs ($240,000 or a 40% increase),
higher advertising costs and higher building and repair costs. The increase in
insurance expense was due to higher insurance rates in the Company's Florida
markets, caused by the significant storm damages incurred in the past years by
the insurance industry. Included in the building repairs and maintenance cost
was a $148,000 or a 14% increase for replacement of carpets. Rental and other
revenue increased from 1994 to 1995 due to higher rental rates and increased
occupancy. The increase in property operating and maintenance expenses from 1994
to 1995 was due primarily to building repairs and maintenance expense.
Replacement carpets increased $196,000 or 28.6%, which was a
 
                                       16
<PAGE>   17
 
significant component of the building repairs and maintenance increase. As a
percentage of total property revenues, property operating and maintenance
expense was 37.8%, 37.5% and 38.1% for the years ended December 31, 1996, 1995
and 1994, respectively.
 
OPERATING PERFORMANCE OF THE COMPANY'S ACQUISITION COMMUNITIES
 
Acquisition Communities consist of Summit Plantation (262 apartment homes) in
1996 and the Crosland Acquisition Communities (2,025 apartment homes) in 1995.
Acquisition Communities in 1994 consist of five Communities (Summit Stony Point,
Summit Reston, Summit Hill I, Summit Creek and Summit Lofts). The operations of
these Communities are summarized as follows (dollars in thousands except average
monthly rental revenue):
 
<TABLE>
<CAPTION>
                                                 YEAR ENDED DECEMBER 31,       YEAR ENDED DECEMBER 31,
                                                 -----------------------       -----------------------
                                                   1996           1995           1995           1994
                                                 ---------      --------       ---------      --------
<S>                                              <C>            <C>            <C>            <C>
Property revenues:
  Rental.......................................    $16,401        $8,467         $19,109        $5,964
  Other........................................        592           249             687           237
                                                   -------        ------         -------        ------
Total property revenues........................     16,993         8,716          19,796         6,201
                                                   -------        ------         -------        ------
Property operating and maintenance
  expense(1)...................................      6,444         3,492           7,531         2,225
                                                   -------        ------         -------        ------
Property operating income......................    $10,549        $5,224         $12,265        $3,976
                                                   =======        ======         =======        ======
Average physical occupancy(2)..................       94.0%         96.1%           95.5%         94.7%
                                                   =======        ======         =======        ======
Average monthly rental revenue(3)..............    $   672        $  592         $   643        $  688
                                                   =======        ======         =======        ======
Number of apartment homes:
  1994 Acquisitions............................         --            --           1,332         1,332
  1995 Acquisitions............................      2,025         2,025           2,025            --
  1996 Acquisitions............................        262            --              --            --
                                                   -------        ------         -------        ------
Total number of apartment homes................      2,287         2,025           3,357         1,332
                                                   =======        ======         =======        ======
</TABLE>
 
(1) Before real estate depreciation and amortization expense.
 
(2) Average physical occupancy is defined as the number of apartment homes
     occupied divided by the total number of apartment homes contained in the
     Communities, expressed as a percentage. Average physical occupancy has been
     calculated using the average of the midweek occupancy that existed during
     each week of the period.
 
(3) Represents the average monthly net rental revenue per occupied apartment
     home.
 
The unleveraged yield, defined as property operating income over total
acquisition cost, for the year ended December 31, 1996 on the Crosland
Acquisition Communities was 10.7% compared to an annualized yield of 10.0% for
the period from acquisition (May 16, 1995, except Summit East Ridge which was
acquired June 22, 1995) to December 31, 1995.
 
As a percentage of total property revenues, property operating and maintenance
expense was 37.9%, 40.1% and 35.9% for the years ended December 31, 1996, 1995
and 1994, respectively.
 
OPERATING PERFORMANCE OF THE COMPANY'S COMMUNITIES IN LEASE-UP
 
The Company had seven Communities in lease-up with a total of 2,106 apartment
homes during the year ended December 31, 1996. A Community in lease-up is
defined as one which has commenced rental operations but has not achieved
stabilization as of the beginning of the period. Five of the seven Communities
had completed construction as of December 31, 1996. In order to evaluate the
impact of developments and lease-ups on the Company's operations, the amount of
interest expensed on Communities in development and lease-up is presented. The
results of operations of these seven Communities in lease-up for the last four
 
                                       17
<PAGE>   18
 
quarters, including interest expense incurred during construction and lease-up,
are summarized as follows (dollars in thousands except average monthly rental
revenue):
 
<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED
                                                -------------------------------------------------------
                                                DECEMBER 31,   SEPTEMBER 30,    JUNE 30,      MARCH 31,
                                                    1996           1996           1996          1996
                                                ------------   -------------    --------      ---------
<S>                                             <C>            <C>              <C>           <C>
Property revenues:
  Rental......................................     $3,317         $2,792         $1,756        $1,042
  Other.......................................        241            213            135            84
                                                   ------         ------         ------        ------
Total property revenues.......................      3,558          3,005          1,891         1,126
Property operating and maintenance
  expense(1)..................................      1,192          1,003            762           523
                                                   ------         ------         ------        ------
Property operating income.....................      2,366          2,002          1,129           603
Interest expense..............................      1,775          1,400            999           662
                                                   ------         ------         ------        ------
Property income (loss) after interest
  expense.....................................     $  591         $  602         $  130        $  (59)
                                                   ======         ======         ======        ======
Average monthly rental revenue(2).............     $  873         $  877         $  876        $  889
                                                   ======         ======         ======        ======
Number of apartment homes completed...........      1,708          1,526          1,178           870
                                                   ======         ======         ======        ======
Number of apartment homes leased..............      1,481          1,345          1,041           681
                                                   ======         ======         ======        ======
Number of apartment homes occupied............      1,414          1,242            895           539
                                                   ======         ======         ======        ======
</TABLE>
 
(1) Before real estate depreciation, amortization and interest expense.
 
(2) Represents the average monthly net rental revenue per occupied apartment
    home.
 
A summary of the five Communities (1,440 apartment homes) in lease-up which had
completed construction as of December 31, 1996 is as follows (dollars in
thousands):
 
<TABLE>
<CAPTION>
                                                                                                     % LEASED
                             NUMBER OF                                  ACTUAL/        AVERAGE        AS OF
                             APARTMENT     TOTAL     CONSTRUCTION     ANTICIPATED     OCCUPANCY    DECEMBER 31,
         COMMUNITY             HOMES       COST       COMPLETION     STABILIZATION      1996           1996
---------------------------  ---------    -------    ------------    -------------    ---------    ------------
<S>                          <C>          <C>        <C>             <C>              <C>          <C>
Summit Aventura............        379    $31,255      Q4 1995          Q3 1996         78.8%          97.1%
Summit Hill II.............        207     11,383      Q2 1996          Q3 1996         75.1%          95.7%
Summit Green...............        300     18,552      Q2 1996          Q4 1996         60.1%          94.7%
Summit River Crossing......        314     19,111      Q3 1996          Q4 1996         48.8%          94.6%
Summit Fairways............        240     17,668      Q4 1996          Q3 1997         11.1%          48.8%
                             ---------    -------
                                 1,440    $97,969
                             =========    =======
</TABLE>
 
The remaining Communities in lease-up, Summit on the River and Summit Russett,
are still under construction, with completion anticipated in the second quarter
of 1997. As of December 31, 1996, the Company had leased: 48.3%, or 170 of the
352 apartment homes at Summit on the River, which opened in May 1996; and 15.0%,
or 47 of the 314 apartment homes at Summit Russett, which opened in November
1996. These two Communities are expected to represent a total investment upon
completion of approximately $46.0 million.
 
                                       18
<PAGE>   19
 
OPERATING PERFORMANCE OF SUMMIT MANAGEMENT COMPANY
 
The operating performance of Summit Management Company and its wholly-owned
subsidiary, Summit Apartment Builders, Inc. is summarized below (dollars in
thousands):
 
<TABLE>
<CAPTION>
                                         YEAR ENDED DECEMBER 31,        YEAR ENDED DECEMBER 31,
                                       ---------------------------    ---------------------------
                                        1996     1995    % CHANGE      1995     1994    % CHANGE
                                       ------   ------   ---------    ------   ------   ---------
<S>                                    <C>      <C>      <C>          <C>      <C>      <C>
Property management revenue..........  $4,706   $5,189      (9.3)%    $5,189   $5,122       1.3%
Construction company income..........     529      288      83.7%        288      264       9.1%
Other management company income......     129      155     (16.8)%       155      149       4.0%
                                       ------   ------                ------   ------
  Total revenue......................   5,364    5,632      (4.8)%     5,632    5,535       1.8%
Property management expenses:
  Operating..........................   4,407    4,581      (3.8)%     4,581    4,512       1.5%
  Depreciation.......................     110      120      (8.3)%       120       53     126.4%
  Amortization.......................     278      274       1.5%        274      219      25.1%
  Interest...........................     300      300       0.0%        300      262      14.5%
                                       ------   ------                ------   ------
  Total property management
     expenses........................   5,095    5,275      (3.4)%     5,275    5,046       4.5%
Construction company expenses........     442      437       1.1%        437      378      15.6%
                                       ------   ------                ------   ------
  Total expenses.....................   5,537    5,712      (3.1)%     5,712    5,424       5.3%
                                       ------   ------                ------   ------
Net income (loss) of Summit
  Management Company.................  $ (173)  $  (80)   (116.3)%    $  (80)  $  111    (172.1)%
                                       ======   ======                ======   ======
</TABLE>
 
The decrease in property management revenue from 1994 to 1996 was the result of
a reduction in the average number of communities managed for third parties
partially offset by an increase in the average number of the Company's
Communities. Total average third party apartment homes under management were
7,919, 10,927 and 12,362 during each of the years ended December 31, 1996, 1995
and 1994, respectively. The decrease was primarily due to the termination of the
Management Company's contract to manage a portfolio of 4,050 apartment homes
effective October 1, 1995. This contract was terminated as a result of the
owner's decision to provide its own property management for these apartment
homes.
 
Property management fees include $2.3 million, $3.3 million and $3.9 million of
fees from third parties for the years ended December 31, 1996, 1995 and 1994,
respectively. Property management fees from third parties as a percentage of
total property management revenues were 48.1%, 62.9% and 73.0% for the years
ended December 31, 1996, 1995 and 1994, respectively. The Company expects third
party management revenue as a percentage of total property management revenues
to continue to decline as revenues from the Company's Communities continue to
increase.
 
Construction Company revenues and expenses increased in 1996 compared to 1995
primarily due to the increased number of construction projects. The increase in
construction projects was a result of the Company's decision to expand its
in-house construction operations in the state of Florida to cover the entire
geographic area in which the Company operates. All of the Construction Company's
income for the years ended December 31, 1996, 1995 and 1994 is from contracts
with the Company, except for the contract to build Summit Plantation (formerly
Plantation Cove). The company owned a 25% interest in the Plantation Cove joint
venture during construction.
 
OTHER INCOME AND EXPENSES
 
Interest income increased $97,000 to $558,000 in 1996 compared to 1995,
primarily due to interest earned on the proceeds from the 1996 Offering prior to
using the proceeds to fund development projects.
 
Development and other fees from related parties decreased in 1995 compared to
1994, primarily due to the development of Summit Plantation in 1994. The Company
held a joint venture interest in this Community until April 1, 1996, when the
Company acquired the remaining 75% interest.
 
Interest expense increased $2.3 million or 15.8% to $17.1 million in 1996
compared to 1995, primarily due to interest on debt related to the Company's
1995 acquisitions and an increase in interest expense related to the
 
                                       19
<PAGE>   20
 
Communities in lease-up, partially offset by the Company's repayment of debt in
connection with the 1995 and 1996 Offerings. The 1995 and 1996 Offerings
together resulted in aggregate net proceeds of approximately $163.0 million.
Interest expense increased $735,000 or 5.22% in 1995 compared to 1994, primarily
due to interest incurred in connection with the Company's 1994 and 1995
acquisitions and Communities in lease-up in 1995, substantially offset by the
Company's repayment of debt in connection with the 1995 Offering.
 
General and administrative expense increased in 1996 compared to 1995 and in
1995 compared to 1994 primarily due to increased compensation costs and
professional fees. The increase in compensation in 1996 includes the cost of the
Company's restricted stock grants and the cost of the Company's employee stock
purchase plan. As a percentage of revenues, general and administrative cost was
2.7%, 2.6% and 3.0% for the years ended December 31, 1996, 1995 and 1994,
respectively.
 
The extraordinary items in 1996 and 1995 resulted primarily from the write-off
of deferred financing costs in conjunction with the repayment of debt with the
proceeds from the 1996 and 1995 Offerings and with the proceeds of the $31.0
million unsecured debt financing received in August, 1996. The 1994
extraordinary item resulted from debt repayment related to the Initial Offering.
 
LIQUIDITY AND CAPITAL RESOURCES
 
In August 1996, the Company completed the sale of an additional 5.75 million
shares of Common Stock with net proceeds of $97.6 million. In addition, in
August 1996, the Company obtained $31.0 million of unsecured debt financing
consisting of a $15.0 million unsecured note with a four-year term and a $16.0
million unsecured note with a six-year term, which bear interest at 7.61% and
7.85%, respectively. Approximately $97.7 million of the proceeds from the
issuance of Common Stock and the unsecured debt financing were utilized to fully
repay the outstanding balance under the Company's revolving credit facility and
development loans. The remaining $30.9 million of the proceeds were used to fund
current development.
 
In November 1996, the Company replaced its $50 million revolving credit facility
with a new unsecured $150 million credit facility (the "Unsecured Credit
Facility"). The Unsecured Credit Facility has a three year term and currently
bears interest at LIBOR + 110 basis points based upon the Company's credit
rating of BBB- by Standard & Poors Rating Group. The interest rate can be
reduced in the event an upgrade of the Company's unsecured credit rating as
assigned by Standard & Poors Rating Group (which rating must be accompanied by
the comparable senior unsecured bond rating from one of Moody's, Duff & Phelps
or Fitch) as follows:
 
<TABLE>
<CAPTION>
         CREDIT RATING              RATE
         -------------         ---------------
  <S>                          <C>    <C>  <C>
  BBB-.......................  LIBOR  +    110
  BBB........................  LIBOR  +     95
  BBB+.......................  LIBOR  +     80
</TABLE>
 
The Unsecured Credit Facility provides $25 million for general working capital
purposes with the remaining $125 million available to finance new development
and acquisitions.
 
The Company's outstanding indebtedness at December 31, 1996 totaled $309.9
million. This amount includes approximately $193.3 million in fixed rate
conventional mortgages, $53.8 million of variable rate tax-exempt bonds, $31.0
million of unsecured notes, $9.4 million of tax exempt fixed rate loans, and
$22.4 million under the Unsecured Credit Facility.
 
                                       20
<PAGE>   21
 
The Company's outstanding indebtedness had an average maturity of 8.7 years as
of December 31, 1996. The aggregate maturities of all outstanding debt as of
December 31, 1996 for each of the years ended after December 31, 1996 were as
follows (in thousands):
 
<TABLE>
<S>                                                 <C>
1997............................................    $  4,620
1998............................................       4,902
1999............................................      27,563
2000............................................      20,501
2001............................................     114,262
Thereafter......................................     138,085
                                                    --------
                                                    $309,933
                                                    ========
</TABLE>
 
Of the significant maturities in the above table, $22.4 million relates to the
expiration of the Unsecured Credit Facility in 1999, $15.0 million and $16.0
million relate to the unsecured notes that mature in 2000 and 2002,
respectively; and $111.4 million relates to a mortgage loan balloon payment in
2001.
 
The Company's net cash provided by operating activities increased from $31.0
million for the year ended December 31, 1995 to $41.2 million for the same
period in 1996 primarily due to a $12.2 million increase in property operating
income, offset by a $2.3 million increase in interest expense. The increase in
interest expense was small relative to the increase in property operating income
due to the retirement of debt with the proceeds from the 1995 and 1996
Offerings.
 
Net cash used in investing activities increased from $63.7 million for the year
ended December 31, 1995 to $104.0 million for the same period in 1996 due to an
increase in development of Communities, higher capital expenditures on existing
properties and an increase in acquisition Communities.
 
Net cash provided by financing activities increased from $34.4 million for the
year ended December 31, 1995 to $63.6 million for the same period in 1996,
primarily due to an increase in offering proceeds, partially offset by higher
dividends and distributions to unitholders.
 
The Company expects to meet its short-term liquidity requirements generally
through its net cash provided by operations and borrowings under the Unsecured
Credit Facility. The Company believes that its net cash provided by operations
will be adequate to meet its operating requirements and to satisfy applicable
REIT dividend payment requirements in both the short-term and in the long-term.
Improvements and renovations at existing Communities are expected to also be
funded from property operations.
 
The Company expects to meet its long-term liquidity requirements, such as future
developments, debt maturities, acquisitions, renovations and other non-recurring
capital expenditures, with borrowings under its Unsecured Credit Facility,
through the issuance of long-term secured and unsecured debt securities and
additional equity securities of the Company, or in connection with the
acquisition of land or improved property, through the issuance of Units of the
Operating Partnership.
 
                                       21
<PAGE>   22
 
The following table sets forth certain information regarding debt financing as
of December 31, 1996 and 1995 (dollars in thousands):
 
<TABLE>
<CAPTION>
                                                                             PRINCIPAL OUTSTANDING
                                                INTEREST                          DECEMBER 31,
                                               RATE AS OF        MATURITY    ----------------------
                                            DECEMBER 31, 1996      DATE        1996         1995
                                            -----------------    --------    ---------    ---------
<S>                                         <C>                  <C>         <C>          <C>
FIXED RATE DEBT
  MORTGAGE LOAN(1)........................      5.88%             2/15/01     $122,950     $125,000
  MORTGAGE LOAN(1)........................      7.71%            12/15/05       29,653       30,000
  MORTGAGE LOAN(2)........................      8.00%              9/1/05        8,638        8,712
  MORTGAGE NOTES
     Summit Hollow I......................      8.00%             11/1/18        2,286        2,326
     Summit Hollow II.....................      7.75%              1/1/29        2,587        2,607
     Summit Creekside.....................      8.00%              6/1/22        2,877        2,914
     Summit Old Town......................      8.00%              9/1/20        3,097        3,143
     Summit Eastchester...................      8.00%              5/1/21        3,872        3,925
     Summit Foxcroft......................      8.00%              4/1/20        2,788        2,844
     Summit Oak...........................      7.75%             12/1/23        2,585        2,615
     Summit Sherwood......................      7.88%              3/1/29        3,329        3,353
     Summit Radbourne.....................      9.80%              3/1/02        8,683        8,758
  TAX EXEMPT MORTGAGE NOTES
     Summit Crossing......................      6.95%             11/1/25        4,213        4,261
     Summit East Ridge....................      7.25%             12/1/26        5,156        5,207
                                                                              --------     --------
          TOTAL MORTGAGE DEBT.............                                     202,714      205,665
                                                                              --------     --------
  UNSECURED NOTES
     Bank Note............................      7.85%              8/3/02       16,000           --
     Bank Note............................      7.61%              8/3/00       15,000           --
                                                                              --------     --------
          TOTAL UNSECURED NOTES...........                                      31,000           --
                                                                              --------     --------
          TOTAL FIXED RATE DEBT...........                                     233,714      205,665
 
VARIABLE RATE DEBT
  UNSECURED CREDIT FACILITY...............   LIBOR + 110         11/18/99       22,357        4,396
  TAX EXEMPT BONDS
     Summit Belmont.......................      5.60%              4/1/07       11,850       11,900
     Summit Hampton.......................      5.60%              6/1/07       12,700       12,800
     Summit Pike Creek....................      5.60%             8/15/20       13,262       13,545
     Summit Gateway.......................      5.60%              7/1/07        7,300        7,700
     Summit Stony Point...................      5.60%              4/1/29        8,750        8,895
                                                                              --------     --------
       TOTAL TAX EXEMPT BONDS.............                                      53,862       54,840
  DEVELOPMENT LOANS REPAID IN 1996........                                          --       32,109
                                                                              --------     --------
       TOTAL VARIABLE RATE DEBT...........                                      76,219       91,345
                                                                              --------     --------
          TOTAL OUTSTANDING INDEBTEDNESS.................................     $309,933     $297,010
                                                                              ========     ========
</TABLE>
 
(1) Mortgage Loans secured by fifteen Communities
 
(2) Mortgage Loan secured by two Communities
 
The London Interbank Offered Rate (LIBOR) at December 31, 1996 was 5.56%.
 
                                       22
<PAGE>   23
 
ACQUISITIONS SUBSEQUENT TO YEAR END
 
The Company acquired three Communities subsequent to December 31, 1996. The
three acquisitions are summarized as follows (dollars in thousands):
 
<TABLE>
<CAPTION>
                                                                                         FUNDED BY
                                                                           --------------------------------------
                                      ACQUISITION   APARTMENT   PURCHASE      UNSECURED      ISSUANCE   ISSUANCE
             COMMUNITY                   DATE         HOMES      PRICE     CREDIT FACILITY   OF UNITS   OF SHARES
------------------------------------  -----------   ---------   --------   ---------------   --------   ---------
<S>                                   <C>           <C>         <C>        <C>               <C>        <C>
Summit Portofino -- Broward County,
  FL................................     1/6/97           322   $28,000    $        21,187               $ 6,813
Summit Mayfaire -- Raleigh, NC......    1/15/97           144     9,650              9,650                    --
Summit Sand Lake -- Orlando, FL.....    2/20/97           416    26,798              2,700    $3,939       4,933
                                                    ---------   -------    ---------------    ------     -------
                                                          882   $64,448    $        33,537    $3,939     $11,746
                                                    =========   =======    ===============    ======     =======
</TABLE>
 
Concurrently with the purchase of Summit Portofino, the Company sold 315,029
shares of Common Stock to the public for cash. The Company used the net proceeds
of this sale to fund a portion of the purchase price. The Company issued 243,608
shares of Common Stock and 194,495 Units in the Operating Partnership in
conjunction with the purchase of Summit Sand Lake. In addition, the Company
assumed $15.2 million of debt in the purchase of Summit Sand Lake.
 
DEVELOPMENT ACTIVITY
 
The Company's developments in process at December 31, 1996 are summarized as
follows (dollars in thousands):
 
<TABLE>
<CAPTION>
                                                            TOTAL               ESTIMATED   ANTICIPATED
                                              APARTMENT   ESTIMATED   COST TO    COST TO    CONSTRUCTION
                 COMMUNITY                      HOMES       COSTS      DATE     COMPLETE     COMPLETION
--------------------------------------------  ---------   ---------   -------   ---------   ------------
<S>                                           <C>         <C>         <C>       <C>         <C>
Summit on the River -- Atlanta, GA..........        352   $ 23,900    $20,496   $  3,404      Q2 1997
Summit Russett -- Laurel, MD................        314     22,100     17,729      4,371      Q2 1997
Summit Stonefield -- Yardley, PA............        216     18,370      7,893     10,477      Q4 1997
Summit Sedgebrook I -- Charlotte, NC........        248     15,640      3,520     12,120      Q4 1997
Summit Ballantyne I -- Charlotte, NC........        246     16,800      4,138     12,662      Q4 1997
Summit Plantation II -- Plantation, FL......        240     22,000      6,217     15,783      Q4 1997
Summit Lake I -- Raleigh, NC................        302     19,700      2,805     16,895      Q2 1998
Summit Fair Lakes I -- Fairfax, VA..........        370     32,900      6,790     26,110      Q4 1998
Summit New Albany -- Columbus, OH...........        428     30,100      3,778     26,322      Q1 1999
Other development and construction costs....         --         --     12,791         --
                                              ---------   --------    -------   --------
                                                  2,716   $201,510    $86,157   $128,144
                                              =========   ========    =======   ========
</TABLE>
 
In addition, the Company has a commitment to purchase a Community (Summit St.
Claire) currently under construction in Atlanta, Georgia for approximately $27.5
million. The 336 apartment home Community is expected to be purchased, after
reaching rental stabilization, in the fourth quarter of 1998.
 
  Certain Factors Affecting the Performance of Development Communities
 
The Company is optimistic about the operating prospects of the Communities under
construction even with the increased supply of newly constructed apartment homes
of comparable quality in many of its markets. As with any development Community,
there are uncertainties and risks associated with the development of the
Communities described above. While the Company has prepared development budgets
and has estimated completion and stabilization target dates based on what it
believes are reasonable assumptions in light of current conditions, there can be
no assurance that actual costs will not exceed current budgets or that the
Company will not experience construction delays due to the unavailability of
materials, weather conditions or other events. Other development risks include
the possibility of incurring additional cost or liability resulting from defects
in construction materials and the possibility that financing may not be
available on favorable
 
                                       23
<PAGE>   24
 
terms, or at all, to pursue or complete development activities. Similarly,
market conditions at the time these Communities become available for leasing
will affect the rental rates that may be charged and the period of time
necessary to achieve stabilization, which could make one or more of the
development communities unprofitable or result in achieving stabilization later
than currently anticipated. In addition, the Company is conducting feasibility
and other pre-development work for nine Communities. The Company could abandon
the development of any one or more of these potential Communities in the event
that it determines that market conditions do not support development, financing
is not available on favorable terms or other circumstances prevent development.
Similarly, there can be no assurance that if the Company does pursue one or more
of these potential Communities that it will be able to complete construction
within the currently estimated development budgets or that construction can be
started at the time currently anticipated.
 
CAPITALIZATION OF FIXED ASSETS AND PROPERTY IMPROVEMENTS
 
The Company has established a policy of capitalizing those expenditures relating
to acquiring new assets, materially enhancing the value of an existing asset, or
substantially extending the useful life of an existing asset. All expenditures
necessary to maintain a Community in ordinary operating condition (including
replacement carpets) are expensed as incurred.
 
Capitalized expenditures for the years ended December 31, 1996, 1995 and 1994
are summarized as follows (dollars in thousands):
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                             --------------------------------
                                                               1996        1995        1994
                                                             --------    --------    --------
<S>                                                          <C>         <C>         <C>
Acquisition of Communities(1)..............................  $ 21,913    $ 82,935    $ 75,921
Construction of Communities(2).............................    88,064      58,104      26,694
Capitalized interest.......................................     4,266       3,110         686
Cost of acquiring existing Communities in conjunction with
  the initial business combination.........................        --          --       1,469
Non-recurring capital expenditures:
  Construction of garages..................................       578         153          --
  Access gates.............................................       138          --          --
  New signage..............................................       225          --          --
  Water meters.............................................       201          --          --
  Washer/dryer units.......................................        74          --          --
  Major improvements.......................................     1,698          --          --
  Improvements at acquisition..............................        --         706          --
  Other....................................................        59           5          --
                                                             --------    --------    --------
          Total non-recurring..............................     2,973         864          --
                                                             --------    --------    --------
Recurring capital expenditures:
  Exterior painting........................................     1,131         810         980
  Other....................................................     2,160       1,370         730
                                                             --------    --------    --------
          Total recurring..................................     3,291       2,180       1,710
                                                             --------    --------    --------
                                                             $120,507    $147,193    $106,480
                                                             ========    ========    ========
</TABLE>
 
(1) Includes the assumption of $14.3 million, $52.6 million and $9.1 million of
     debt in 1996, 1995 and 1994 respectively. In addition, includes conversion
     of equity investment into fixed assets of $1.2 million in conjunction with
     the purchase of Summit Plantation in 1996 and the issuance of 1.5 million
     Units of the Operating Partnership with a value of $26.2 million in 1995.
 
(2) Includes the issuance of $2.1 million, $896,000 and $735,000 of Units in the
     Operating Partnership for the acquisition of land in 1996, 1995 and 1994,
     respectively.
 
Construction of Communities was funded primarily by development loans, equity
offering proceeds and borrowing under the credit facilities. Other additions and
improvements were funded primarily by Community operations and the credit
facilities.
 
                                       24
<PAGE>   25
 
INFLATION
 
Substantially all of the leases at the Communities are for a term of one year or
less, which, coupled with the relatively high occupancy rates, may enable the
Company to seek increased rents upon renewal of existing leases or commencement
of new leases. The short-term nature of these leases generally serves to reduce
the risk to the Company of the adverse effect of inflation.
 
FUNDS FROM OPERATIONS
 
The Company generally considers Funds from Operations to be an appropriate
measure of performance of an equity REIT. Funds from Operations, as defined by
the National Association of Real Estate Investment Trusts (NAREIT), represents
net income (loss) determined in accordance with generally accepted accounting
principles (GAAP), excluding gains or losses from sales of assets or debt
restructuring, plus certain non-cash items, primarily real estate depreciation,
and after adjustments for unconsolidated partnerships and joint ventures.
Adjustments for all periods consisted only of real estate depreciation. Funds
Available for Distribution is defined as Funds from Operations less recurring
capital expenditures funded by operations. Funds from Operations and Funds
Available for Distribution should not be considered as an alternative to net
income (determined in accordance with GAAP), as an indication of the Company's
financial performance, or to cash flow from operating activities (determined in
accordance with GAAP) as a measure of liquidity.
 
Funds from Operations and Funds Available for Distribution are calculated as
follows (dollars in thousands):
 
<TABLE>
<CAPTION>
                                                                        PRO FORMA
                                              1996          1995          1994          1994
                                           -----------   -----------   -----------   -----------
<S>                                        <C>           <C>           <C>           <C>
Net income...............................  $    16,948   $    11,819   $     9,271   $    14,032
Minority Interest of unitholders in
  Operating Partnership..................        3,723         2,793         1,789         1,527
Extraordinary items......................          516           439            --        (7,032)
Depreciation:
  Real estate assets.....................       18,171        15,021        11,702        11,593
  Summit Plantation......................           33            76            --            --
                                           -----------   -----------   -----------   -----------
Funds from Operations....................       39,391        30,148        22,762        20,120
Recurring capital expenditures...........       (3,291)       (2,180)       (1,710)       (1,710)
                                           -----------   -----------   -----------   -----------
Funds Available for Distribution.........  $    36,100   $    27,968   $    21,052   $    18,410
                                           ===========   ===========   ===========   ===========
Weighted average shares and units
  outstanding............................   22,940,998    18,116,664    14,827,257    13,389,757
                                           ===========   ===========   ===========   ===========
</TABLE>
 
The Pro Forma 1994 information is presented as if the Initial Offering had
occurred as of January 1, 1994.
 
The above Funds from Operations calculations in 1996, 1995, pro-forma 1994 and
historical 1994 reflect changes required by NAREIT for fiscal years beginning in
1996. The primary effect of the changes on the Company's calculation of Funds
from Operations was that amortization of financing cost is no longer added back
in arriving at Funds from Operations. Funds from Operations under the previous
calculation method would have been $40.5 million, $31.4 million, $23.9 million
and $21.3 million for the years ended December 31, 1996, 1995, pro-forma 1994
and historical 1994, respectively.
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
Financial statements and supplementary data are contained on the pages indicated
on the Index to Financial Statements and Supplementary Data on page 30 of this
Report.
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
 
Not applicable.
 
                                       25
<PAGE>   26
 
                                    PART III
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
 
Incorporated herein by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission within 120 days after the
end of the year covered by this Form 10-K with respect to its Annual Meeting of
Stockholders to be held on May 13, 1997.
 
ITEM 11.  EXECUTIVE COMPENSATION
 
Incorporated herein by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission within 120 days after the
end of the year covered by this Form 10-K with respect to its Annual Meeting of
Stockholders to be held on May 13, 1997.
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT
 
Incorporated herein by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission within 120 days after the
end of the year covered by this Form 10-K with respect to its Annual Meeting of
Stockholders to be held on May 13, 1997.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
Incorporated herein by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission within 120 days after the
end of the year covered by this Form 10-K with respect to its Annual Meeting of
Stockholders to be held on May 13, 1997.
 
                                       26
<PAGE>   27
 
                                    PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
       (a) Financial Statements and Financial Statement Schedule
 
The consolidated financial statements and financial statement schedule of the
Company and its predecessors (Summit Entities) are listed in the Index to
Financial Statements and Supplementary Data on page 30 of this Report.
 
       (b) Reports on Form 8-K
 
No reports on Form 8-K were filed by the Company during the quarter ended
December 31, 1996.
 
       (c) Exhibits
 
As noted below, certain of the exhibits required by Item 601 of Regulation S-K
have been filed with previous reports by the Company and are incorporated by
reference herein.
 
<TABLE>
<CAPTION>
EXHIBIT NO.                                DESCRIPTION
-----------                                -----------
<S>           <C>  <C>
 1.1****           Underwriting Agreement dated May 25, 1995
 1.2***            Underwriting Agreement
 3.1*              Articles of Incorporation of the Company
 3.2*              Bylaws of the Company
10.1*              Agreement of Limited Partnership of the Operating
                   Partnership
10.2**             Registration Rights Agreement among the Company and the
                   Continuing Investors
10.3**             Articles of Incorporation of the Management Company
10.4**             Bylaws of the Management Company
10.5*****          Summit Properties Inc. 1996 Non-Qualified Employee Stock
                   Purchase Plan
10.6*              Option and Transfer Agreement among the Management Company,
                   William F. Paulsen and the Operating Partnership
10.7*              Employment Agreement between the Company and William F.
                   Paulsen
10.8*              Employment Agreement between the Company and William B.
                   McGuire, Jr.
10.9*              Employment Agreement between the Company and Raymond V.
                   Jones
10.10*             Employment Agreement between the Company and Keith H.
                   Kuhlman
10.11*             Employment Agreement between the Company and David F. Tufaro
10.12*             Employment Agreement between the Company and John C. Moore
10.12.1*           Employment Agreement between the Company and Michael G.
                   Malone
10.12.2**          Employment Agreement between the Company and Keith L. Downey
10.12.3**          Employment Agreement between the Company and Christopher A.
                   Hughes
10.14**            Omnibus Option Agreement dated as of December 1, 1993 among
                   the Operating Partnership and the Grantors named therein
10.15*             Acquisition Agreement of Stony Point Community
10.16**            Indemnification Agreement
10.17**            Promissory Note from the Management Company to Old Summit
                   Management Company
10.18*             Letter of Commitment to enter into the Mortgage Loan between
                   the Operating Partnership and Northwestern Mutual Life
                   Insurance Company
10.18.1**          Promissory Note
10.18.2**          Mortgage and Security Agreement and Financing Statement
10.19*             Letter of Commitment to enter into the Credit Facility
10.19.1**          Revolving Credit Agreement
10.19.2**          Mortgage and Security Agreement and Financing Statement
10.20**            Lock-Up Agreement
10.21**            Assignment, Assumption and Option Agreement for Henderson
                   Place/McGuire Partners Limited Partnership
10.22**            Option Agreement between the Operating Partnership and LMES
                   Limited Partnership
</TABLE>
 
                                       27
<PAGE>   28
 
<TABLE>
<S>           <C>  <C>
10.23*             Waiver of Rescission Rights and Contribution Agreement
10.24*             Noncompetition Agreement between the Company and William F.
                   Paulsen
10.25*             Noncompetition Agreement between the Company and William B.
                   McGuire, Jr.
10.26*             Noncompetition Agreement between the Company and Raymond V.
                   Jones
10.27*             Noncompetition Agreement between the Company and Keith H.
                   Kuhlman
10.28*             Noncompetition Agreement between the Company and David F.
                   Tufaro
10.29*             Noncompetition Agreement between the Company and John T.
                   Gray
10.30*             Noncompetition Agreement between the Company and John C.
                   Moore
10.31*             Noncompetition Agreement between the Company and Michael G.
                   Malone
10.32*             Supplemental Representations and Warranties Agreement
10.33**            Interest Rate Protection Agreement between the Company and
                   Morgan Stanley Capital Services Inc.
10.34***           $31,000,000 Loan Agreement from Wachovia Bank of North
                   Carolina, N.A.
10.35              $150,000,000 Credit Agreement
10.36              Employment Agreement between the Company and William B.
                   Hamilton
10.37              Noncompetition Agreement between the Company and William B.
                   Hamilton
21.1*              Schedule of Subsidiaries of the Company
27.1               Financial Data Schedule
</TABLE>
 
     * Previously filed as an exhibit to the Registrant's Registration Statement
      on Form S-11, commission number 3390706 initially filed with the
      Securities and Exchange Commission (the "Commission") on March 28, 1995.
 
   ** Previously filed as an exhibit to the Registrant's 1994 Form 10-Q filed
      with the Commission on March 18, 1995.
 
  *** Previously filed as an exhibit to the Registrant's 1996 Form 10-Q filed
      with the Commission on October 28, 1996.
 
 **** Previously filed as an exhibit to the Registrant's 1995 Form 10-K filed
      with the Commission on April 1, 1996.
 
***** Previously filed as an exhibit to the Registrant's Registration Statement
      on Form S-8, commission number 333-78, filed with the Commission on
      January 4, 1996.
 
                                       28
<PAGE>   29
 
                                   SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Summit Properties Inc. certifies that it has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in Charlotte, North Carolina on February 24, 1997.
 
                                          SUMMIT PROPERTIES INC.
 
                                          /s/  William F. Paulsen
                                          --------------------------------------
                                             William F. Paulsen,
                                             President and Chief Executive
                                             Officer
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities and on the dates
indicated.
 
<TABLE>
<CAPTION>
                     SIGNATURES                                    TITLE                    DATE
                     ----------                                    -----                    ----
<S>                                                    <C>                            <C>
 
/s/ WILLIAM B. MCGUIRE, JR.                            Chairman of the Board of       February 24, 1997
-----------------------------------------------------    Directors
William B. McGuire, Jr.
 
/s/ WILLIAM F. PAULSEN                                 President, Chief Executive     February 24, 1997
-----------------------------------------------------    Officer and Director
William F. Paulsen                                       (Principal Executive
                                                         Officer)
 
/s/ MICHAEL L. SCHWARZ                                 Chief Financial Officer        February 24, 1997
-----------------------------------------------------    (Principal Financial
Michael L. Schwarz                                       Officer and Principal
                                                         Accounting Officer)
 
                                                       Director                       February 24, 1997
-----------------------------------------------------
John Crosland, Jr.
 
                                                       Director                       February 24, 1997
-----------------------------------------------------
Henry H. Fishkind
 
/s/ JAMES H. HANCE, JR.                                Director                       February 24, 1997
-----------------------------------------------------
James H. Hance, Jr.
 
/s/ NELSON SCHWAB, III                                 Director                       February 24, 1997
-----------------------------------------------------
Nelson Schwab, III
</TABLE>
 
                                       29
<PAGE>   30
 
              INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
The following financial statements of the Company required to be included in
Item 14(a)(1) are listed below:
 
SUMMIT PROPERTIES INC.
 
<TABLE>
<CAPTION>
                                                                PAGE
                                                                ----
<S>                                                             <C>
Independent Auditors' Report................................     31
 
Consolidated Balance Sheets as of December 31, 1996 and
  1995......................................................     32
 
Consolidated Statements of Earnings for the Years Ended
  December 31, 1996, 1995 and 1994..........................     33
 
Consolidated Statements of Stockholders' Equity for the
  Years Ended December 31, 1996, 1995 and 1994..............     34
 
Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1996, 1995 and 1994..........................     35
 
Notes to Consolidated Financial Statements..................     36
 
The following financial statement supplementary data of the
  Company required to be included in Item 14(a)(2) is listed
  below:
 
Schedule III -- Real Estate and Accumulated Depreciation....     47
</TABLE>
 
All other schedules are omitted because they are not applicable or not required.
 
                                       30
<PAGE>   31
 
                          INDEPENDENT AUDITORS' REPORT
 
Board of Directors
Summit Properties Inc.
Charlotte, North Carolina
 
We have audited the accompanying consolidated balance sheets of Summit
Properties Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of earnings, stockholders' equity, and cash flows of Summit
Properties Inc. and Predecessors (Summit Entities -- see Note 1), as more fully
described in Note 1, for each of the three years in the period ended December
31, 1996. Our audits also included the financial statement schedule listed in
the Index at Item 14. These financial statements and financial statement
schedule are the responsibility of the management of Summit Properties Inc. and
Predecessors. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
 
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Summit Properties Inc. as of
December 31, 1996 and 1995, and the results of operations and cash flows of
Summit Properties Inc. and Predecessors for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
 
We consent to the incorporation by reference of the above report in Registration
Statement Nos. 33-90704, 33-90706, and 33-93540 on Form S-3, and Registration
Statement Nos. 33-88202 and 333-78 on Form S-8 of Summit Properties Inc.
 
DELOITTE & TOUCHE LLP
 
Charlotte, North Carolina
January 24, 1997
(February 20, 1997 as to Note 13)
 
                                       31
<PAGE>   32
 
                             SUMMIT PROPERTIES INC.
                          CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              --------------------
                                                                1996        1995
                                                              --------    --------
<S>                                                           <C>         <C>
ASSETS
Real estate assets:
  Land and land improvements................................  $102,605    $ 90,336
  Buildings and improvements................................   472,996     399,057
  Furniture, fixtures and equipment.........................    43,021      36,336
                                                              --------    --------
                                                               618,622     525,729
  Less: accumulated depreciation............................   (85,651)    (67,884)
                                                              --------    --------
          Operating real estate assets......................   532,971     457,845
  Construction in progress..................................    86,157      59,300
  Investment in real estate joint venture...................        --       1,235
                                                              --------    --------
          Net real estate assets............................   619,128     518,380
Cash and cash equivalents...................................     3,665       2,881
Restricted cash.............................................     4,121       4,188
Investment in Summit Management Company.....................       687         590
Deferred financing costs, net of accumulated amortization of
  $2,441 and $1,914 in 1996 and 1995........................     4,675       5,398
Other assets................................................     2,715       1,815
                                                              --------    --------
Total assets................................................  $634,991    $533,252
                                                              ========    ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Notes payable.............................................  $309,933    $297,010
  Accrued interest payable..................................     1,318         903
  Accounts payable and accrued expenses.....................     7,257       7,850
  Dividends and distributions payable.......................    10,244       7,699
  Security deposits and prepaid rents.......................     3,196       2,651
                                                              --------    --------
          Total liabilities.................................   331,948     316,113
                                                              --------    --------
Commitments
Minority interest...........................................    45,829      41,685
Stockholders' equity:
  Common stock, $.01 par value -- 100,000,000 authorized,
     22,409,638 and 16,500,789 shares issued and outstanding
     in 1996 and 1995, respectively.........................       224         165
  Additional paid-in capital................................   342,872     247,064
  Accumulated deficit.......................................   (85,068)    (71,775)
  Unamortized restricted stock compensation.................      (814)         --
                                                              --------    --------
          Total stockholders' equity........................   257,214     175,454
                                                              --------    --------
Total liabilities and stockholders' equity..................  $634,991    $533,252
                                                              ========    ========
</TABLE>
 
See notes to consolidated financial statements.
 
                                       32
<PAGE>   33
 
                             SUMMIT PROPERTIES INC.
                      CONSOLIDATED STATEMENTS OF EARNINGS
               (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                                      -----------------------------------------
                                                         1996           1995           1994
                                                      -----------    -----------    -----------
<S>                                                   <C>            <C>            <C>
Revenues:
  Rental............................................  $    88,864    $    70,773    $    54,198
  Other property income.............................        4,683          3,356          2,582
  Property management...............................           --             --            536
  Interest..........................................          558            461            416
  Development and other fees from related parties...           72            112            385
  Other income......................................          312            292            317
                                                      -----------    -----------    -----------
          Total revenues............................       94,489         74,994         58,434
                                                      -----------    -----------    -----------
Expenses:
  Property operating and maintenance:
     Personnel......................................        8,368          6,640          5,033
     Advertising and promotion......................        1,417            698            504
     Utilities......................................        4,115          3,432          2,782
     Building repairs and maintenance...............        7,547          6,116          4,456
     Real estate taxes and insurance................        8,823          6,965          5,552
     Depreciation...................................       18,208         15,141         11,700
     Property supervision...........................        2,240          1,848          1,430
     Other operating expenses.......................        2,716          2,313          1,745
                                                      -----------    -----------    -----------
                                                           53,434         43,153         33,202
  Property management...............................           --             --            366
  Interest..........................................       17,138         14,802         14,067
  General and administrative........................        2,557          1,949          1,756
  REIT formation costs..............................           --             --            457
  Loss (income) in equity investments:
     Summit Management Company......................          173             80             59
     Real estate joint venture......................           --            (41)            --
                                                      -----------    -----------    -----------
          Total expenses............................       73,302         59,943         49,907
                                                      -----------    -----------    -----------
Income before minority interest of unitholders in
  Operating Partnership and extraordinary items.....       21,187         15,051          8,527
Minority interest of unitholders in Operating
  Partnership.......................................       (3,723)        (2,793)        (1,527)
                                                      -----------    -----------    -----------
Income before extraordinary items...................       17,464         12,258          7,000
Extraordinary items, net of minority interest of
  unitholders in Operating Partnership..............         (516)          (439)         7,032
                                                      -----------    -----------    -----------
Net income..........................................  $    16,948    $    11,819    $    14,032
                                                      ===========    ===========    ===========
Per share data:
  Income before extraordinary items.................  $      0.92    $      0.83    $      0.64
                                                      ===========    ===========    ===========
  Net income........................................  $      0.90    $      0.80    $      1.28
                                                      ===========    ===========    ===========
  Dividends declared................................  $      1.55    $      1.51    $      1.29
                                                      ===========    ===========    ===========
  Weighted average shares...........................   18,914,674     14,754,337     10,991,734
                                                      ===========    ===========    ===========
</TABLE>
 
See notes to consolidated financial statements.
 
                                       33
<PAGE>   34
 
                             SUMMIT PROPERTIES INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                              UNAMORTIZED
                                                 ADDITIONAL                    RESTRICTED
                                       COMMON      PAID IN     ACCUMULATED       STOCK
                                        STOCK      CAPITAL       DEFICIT      COMPENSATION    TOTAL
                                       -------   -----------   ------------   ------------   --------
<S>                                    <C>       <C>           <C>            <C>            <C>
Balance, December 31, 1993...........  $   --     $ (2,006)      $(36,121)                   $(38,127)
  Capital distributions..............      --           --        (16,308)                    (16,308)
  Dividends..........................      --           --        (15,987)                    (15,987)
  Proceeds of public offering, net of
     underwriting discount and
     offering costs..................     124      199,473             --                     199,597
  Purchase of prior owner's
     interest........................      --           --         (5,885)                     (5,885)
  Issuance of stock..................      --           60             --                          60
  Adjustment for minority interest of
     unitholders in Operating
     Partnership.....................      --      (21,857)            --                     (21,857)
  Net income.........................      --           --         14,032                      14,032
                                       -------    --------       --------     ------------   --------
Balance, December 31, 1994...........     124      175,670        (60,269)                    115,525
  Dividends..........................      --           --        (23,325)                    (23,325)
  Proceeds of public offering, net of
     underwriting discount and
     offering costs..................      40       65,897             --                      65,937
  Proceeds from Dividend Reinvestment
     Plan............................      --          240             --                         240
  Conversion of units to shares......       1        1,013             --                       1,014
  Issuance of stock grants...........      --           28             --                          28
  Adjustment for minority interest of
     unitholders in Operating
     Partnership.....................      --        4,216             --                       4,216
  Net income.........................      --           --         11,819                      11,819
                                       -------    --------       --------     ------------   --------
Balance, December 31, 1995...........     165      247,064        (71,775)                    175,454
  Dividends..........................      --           --        (30,241)                    (30,241)
  Proceeds of public offering, net of
     underwriting discount and
     offering costs..................      58       97,576             --                      97,634
  Proceeds from Dividend Reinvestment
     and Employee Stock Purchase
     Plans...........................      --        1,597             --                       1,597
  Conversion of units to shares......      --          167             --                         167
  Exercise of stock options..........      --          287             --                         287
  Issuance of restricted stock
     grants..........................       1        1,015             --     $     (1,016)        --
  Amortization of restricted stock
     grants..........................      --           --             --              202        202
  Adjustment for minority interest of
     unitholders in Operating
     Partnership.....................      --       (4,834)            --               --     (4,834)
  Net income.........................      --           --         16,948               --     16,948
                                       -------    --------       --------     ------------   --------
Balance, December 31, 1996...........  $  224     $342,872       $(85,068)    $       (814)  $257,214
                                       =======    ========       ========     ============   ========
</TABLE>
 
See notes to consolidated financial statements.
 
                                       34
<PAGE>   35
 
                             SUMMIT PROPERTIES INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                                              --------------------------------
                                                                1996        1995       1994
                                                              ---------   --------   ---------
<S>                                                           <C>         <C>        <C>
Cash flows from operating activities:
  Net income................................................  $  16,948   $ 11,819   $  14,032
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Extraordinary items....................................        516        439      (7,032)
     Loss on equity method investments......................        173         39          59
     Depreciation and amortization..........................     19,183     15,978      12,542
     Decrease (increase) in restricted cash.................        235        575        (239)
     Decrease (increase) in other assets....................       (866)      (992)        582
     Increase (decrease) in accrued interest payable........        333        (47)     (4,388)
     Increase in accounts payable and accrued expenses......        386        209         112
     Increase in security deposits and prepaid rents........        545        181         330
     Minority interest of unitholders in Operating
       Partnership..........................................      3,723      2,793       1,527
                                                              ---------   --------   ---------
          Net cash provided by operating activities.........     41,176     30,994      17,525
                                                              ---------   --------   ---------
Cash flows from investing activities:
  Construction of real estate assets and land acquisitions,
     net of payables........................................    (87,081)   (52,499)    (94,249)
  Capitalized interest......................................     (4,266)    (3,110)       (686)
  Recurring capital expenditures............................     (3,291)    (2,180)     (1,710)
  Non-recurring capital expenditures........................     (2,973)      (864)         --
  Purchase of Communities...................................     (6,360)    (5,081)         --
  Purchase of non-continuing investors' interests...........         --         --     (20,834)
  Investment in Summit Management Company...................         --         --        (260)
  Proceeds from investments.................................         --         --       3,998
                                                              ---------   --------   ---------
          Net cash used in investing activities:............   (103,971)   (63,734)   (113,741)
                                                              ---------   --------   ---------
Cash flows from financing activities:
  Debt proceeds.............................................     89,359     97,075     193,542
  Debt repayments...........................................    (90,783)  (101,650)   (269,021)
  Dividends and distributions to unitholders................    (34,000)   (26,157)    (13,615)
  Payment of financing costs................................       (515)    (1,033)     (5,202)
  Offering proceeds, net of underwriters discount and
     offering costs.........................................     97,634     65,937     199,597
  Proceeds from Dividend Reinvestment and Employee Stock
     Purchase Plans.........................................      1,597        268          --
  Exercise of stock options.................................        287         --          --
  Capital distributions.....................................         --         --     (16,308)
                                                              ---------   --------   ---------
          Net cash provided by financing activities.........     63,579     34,440      88,993
                                                              ---------   --------   ---------
Net increase (decrease) in cash and cash equivalents........        784      1,700      (7,223)
Cash and cash equivalents, beginning of year................      2,881      1,181       8,404
                                                              ---------   --------   ---------
Cash and cash equivalents, end of year......................  $   3,665   $  2,881   $   1,181
                                                              =========   ========   =========
Supplemental disclosure of cash flow information -- Cash
  paid for interest, net of capitalized interest............  $  15,780   $ 13,762   $  15,027
                                                              =========   ========   =========
</TABLE>
 
See notes to consolidated financial statements.
 
                                       35
<PAGE>   36
 
SUMMIT PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1.  ORGANIZATION AND FORMATION OF THE COMPANY
 
Summit Properties Inc. (the "Company") was initially organized as a Maryland
real estate investment trust on December 1, 1993 under the Maryland Real Estate
Investment Trust Act. The Company became a Maryland corporation under the
General Corporation Law of Maryland on January 13, 1994. On February 15, 1994,
the Company completed an Initial Public Offering ("Initial Offering"). In
connection with the Initial Offering, the Company consummated a business
combination involving the Partnerships (the "Property Partnerships") which owned
the 27 communities (the "Communities") and the affiliated entities which
provided development, construction, management and leasing services to each of
the Communities prior to the Initial Offering (collectively, "Summit Entities").
A portion of the proceeds from the Initial Offering was used to acquire an
economic and voting interest in Summit Properties Partnership, L.P. (the
"Operating Partnership"), which was formed to succeed to substantially all of
the interests of the Property Partnerships in the Communities and the operations
of Summit Entities (the "Formation"). The Company became the sole general
partner and the majority owner of the Operating Partnership upon completion of
the Initial Offering and, accordingly, reports its investment in the Operating
Partnership on a consolidated basis.
 
In June 1995, the Company completed the sale of 4 million shares of Common
Stock, ("1995 Offering"). In August 1996, the Company completed the sale of 5.75
million shares of Common Stock, ("1996 Offering"). The net proceeds of $65.9
million and $97.6 million from the 1995 and 1996 Offerings, respectively, were
used to repay mortgage debt and to fund current development projects.
 
Net income per share on a pro forma basis for the years ended December 31, 1996
and 1995 would not have changed materially assuming the 1996 Offering and 1995
Offering had occurred on January 1, 1996 and January 1, 1995, respectively.
 
2.  BASIS OF PRESENTATION
 
For the period after the Initial Offering, the accompanying financial statements
include the consolidated accounts of the Company and the Operating Partnership.
For the period prior to the Initial Offering, the accompanying financial
statements reflect the combined accounts of Summit Entities.
 
In conjunction with the Initial Offering, construction, management and leasing
activities for third parties were transferred to Summit Management Company (the
"Management Company"). The Operating Partnership has a 99% economic interest in
the Management Company but controls only 1% of the voting stock. The remaining
99% of the voting stock is held by an executive officer of the Company, which
stock is subject to certain restrictions on transfer designed to ensure that the
holder of the Management Company's voting stock will have interests aligned with
those of the Company. Because of the Company's ability to exercise significant
influence, the Management Company is accounted for on the equity method of
accounting. Prior to the Initial Offering on February 15, 1994, these activities
were consolidated in the Statement of Earnings.
 
As a result of the Formation, the partners and owners of the entities comprising
the Summit Entities have either retained their existing ownership interests,
received shares of Common Stock or received limited partnership interests
("Units") in the Operating Partnership. Purchase accounting was applied to the
acquisition of all non-controlled interests in which cash consideration was
paid. The acquisition of all other interests was accounted for as a
reorganization of entities under common control and, accordingly, was reflected
at historical cost in a manner similar to that in pooling of interests
accounting.
 
All significant intercompany accounts and transactions have been eliminated in
consolidation. The financial statements of the Company, for the periods ended
after the Initial Offering, have been adjusted for the minority interest of
unitholders in the Operating Partnership. Since Units can be exchanged for cash,
or at the option of the Company, for shares of Common Stock on a one-for-one
basis, minority interest of unitholders in the Operating Partnership is
calculated based on the weighted average shares of Common Stock and Units
outstanding during the period. For the purposes of this calculation, shares of
Common Stock issued at the date of the Initial Offering in exchange for
interests in entities included in Summit Entities are treated as if such
 
                                       36
<PAGE>   37
 
shares were outstanding at the beginning of the period. Shares of Common Stock
issued to the public in the Initial Offering are assumed outstanding from the
date of issuance.
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
REAL ESTATE ASSETS AND DEPRECIATION -- Real estate assets are stated at
depreciated cost reduced for any estimated impairment in value of which there is
none.
 
Expenditures directly related to the acquisition, development and improvement of
real estate assets are capitalized at cost as land, buildings and improvements.
Improvements are broken down into recurring capital expenditures and
nonrecurring capital expenditures. Nonrecurring capital expenditures primarily
consist of the cost of improvements such as new garages, initial water meters,
major renovations and improvements made in conjunction with acquisitions. All
other improvements are deemed as recurring capital expenditures.
 
Ordinary repairs and maintenance, including carpet replacements and interior
painting, are expensed as incurred; major replacements and betterments are
capitalized and depreciated over their estimated useful lives. Depreciation is
computed on a straight-line basis over the useful lives of the properties
(buildings -- 40 years; land improvements -- 15 years; furniture, fixtures and
equipment -- 5 to 7 years).
 
The Financial Accounting Standard Board's Statement of Financial Accounting
Standard No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," became effective in 1996. FAS 121
established standards for determining when impairments on long-lived assets have
occurred and how impairment losses should be measured. The new standard had no
impact on the Company's financial statements in 1996.
 
RENTAL REVENUE RECOGNITION -- The Company leases its residential properties
under operating leases with terms generally one year or less. Rental revenue is
recognized on the accrual method of accounting as earned.
 
PROPERTY MANAGEMENT -- The Management Company provides property management
services for properties which it does not own. Revenue is recognized when
earned, as the services are provided.
 
CASH AND CASH EQUIVALENTS -- For purposes of the statement of cash flows, the
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
 
RESTRICTED CASH -- Restricted cash is comprised primarily of resident security
deposits, bond repayment escrows and replacement reserve escrows.
 
DEFERRED FINANCING COSTS -- Deferred financing costs include fees and costs
incurred to obtain long-term financings and are amortized on the straight-line
method over the terms of the related debt. Such amortization is included in
interest expense in the accompanying consolidated statements of earnings.
 
INTEREST AND REAL ESTATE TAXES -- Interest and real estate taxes incurred during
the construction period are capitalized and depreciated over the lives of the
constructed assets. Interest capitalized was $4.3 million, $3.1 million and
$686,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
 
INCOME TAXES -- Prior to the Formation, the Company's operations were conducted
through a variety of partnerships. In accordance with partnership taxation, each
partner was responsible for reporting its share of taxable income or loss.
Accordingly, no provision has been made in the accompanying consolidated
financial statements for federal, state or local income taxes through February
15, 1994.
 
The Company elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), commencing with the taxable year ended December
31, 1994. As a result, the Company generally will not be subject to federal and
state income taxation at the corporate level to the extent it distributes
annually at least 95% of its taxable income, as defined in the Code, to its
stockholders and satisfies certain other requirements. Accordingly, no provision
has been made for federal and state income taxes in the accompanying
consolidated financial statements for the period subsequent to February 15,
1994.
 
Financial Accounting Standard No. 109, "Accounting for Income Taxes" requires a
public enterprise to disclose the aggregate difference in the basis of its net
assets for financial and tax reporting purposes. The carrying value reported in
the Company's consolidated financial statements exceeded the tax basis by
 
                                       37
<PAGE>   38
 
approximately $24.1 million and $28.5 million, as of December 31, 1996 and 1995,
respectively. The change between December 31, 1996 and 1995 was primarily due to
financial depreciation exceeding tax depreciation by approximately $5.7 million.
 
A portion of the Company's dividends is deemed as return of capital for
shareholder income tax purposes. The percentage of dividends that was return of
capital was 21%, 26% and 21% for each of the years ended December 31, 1996, 1995
and 1994, respectively.
 
PER SHARE DATA -- Earnings per share with respect to the Company for the years
ended December 31, 1996, 1995 and 1994 are computed based upon the weighted
average number of shares outstanding during the period.
 
ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
4.  PROPERTY MANAGEMENT AND RELATED PARTY TRANSACTIONS
 
In conjunction with the Formation, construction, management and leasing
activities for third parties were transferred to the Management Company, which
is accounted for using the equity method of accounting. Prior to the Formation
on February 15, 1994, these activities were consolidated in the Summit Entities'
Statement of Earnings. The net assets of the Management Company are not
material, therefore no balance sheet information is presented.
 
The Management Company has a wholly-owned subsidiary, Summit Apartment Builders,
Inc., (the "Construction Company") which conducts certain construction
activities. The activities of the Construction Company are accounted for on a
consolidated basis with those of the Management Company. The net assets of the
Construction Company, Inc. are not material.
 
A summary of the Management Company operations for the years ended December 31,
1996, 1995, and 1994 is as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                       FEBRUARY 16,     JANUARY 1,
                                                                         1994 TO         1994 TO
                                                             TOTAL     DECEMBER 31,    FEBRUARY 15,
                                          1996      1995      1994         1994            1994
                                         ------    ------    ------    ------------    ------------
<S>                                      <C>       <C>       <C>       <C>             <C>
Property management fees...............  $4,706    $5,189    $5,122    $      4,586    $        536
Construction company income............     529       288       264             264              --
Other management company income........     129       155       149             149              --
                                         ------    ------    ------    ------------    ------------
          Total revenues...............   5,364     5,632     5,535           4,999             536
Property management expenses:
  Operating............................   4,407     4,581     4,512           4,146             366
  Depreciation.........................     110       120        53              53              --
  Amortization.........................     278       274       219             219              --
  Interest.............................     300       300       262             262              --
                                         ------    ------    ------    ------------    ------------
                                          5,095     5,275     5,046           4,680             366
Construction company expenses..........     442       437       378             378              --
                                         ------    ------    ------    ------------    ------------
          Total expenses...............   5,537     5,712     5,424           5,058             366
                                         ------    ------    ------    ------------    ------------
  Net income (loss) of Summit
     Management Company................  $ (173)   $  (80)   $  111    $        (59)   $        170
                                         ======    ======    ======    ============    ============
</TABLE>
 
Interest and amortization expenses are related to the Management Company's
purchase from the Company of its rights to third party management contracts for
$2.5 million, payable over time under a promissory note
 
                                       38
<PAGE>   39
 
executed by the Management Company. Corresponding amounts of interest income and
amortization of deferred revenue (included in other income) are included in the
Company's operating results.
 
The Management Company provides management services to apartment communities in
which executive officers and certain directors of the Company are general
partners. The Management Company received management fees of approximately
$267,000, $294,000 and $1.0 million for the performance of such services for the
years ended December 31, 1996, 1995 and 1994, respectively.
 
Property management fees include $2.0 million, $3.0 million and $2.9 million of
fees from unrelated third parties in 1996, 1995 and 1994, respectively.
 
Construction Company income is earned from construction contracts with the
Company or from joint ventures in which the Company has an interest. Income from
contracts with the Company was $529,000, $311,000 and $154,000 for the years
ended December 31, 1996, 1995 and 1994 respectively. The Company has $1.3
million and $978,000 of construction contracts payable to the Construction
Company as of December 31, 1996 and 1995, respectively.
 
The Company's investment in the Management Company as of December 31, 1996 and
1995, reported on the equity method, includes the following (in thousands):
 
<TABLE>
<CAPTION>
                                                               1996         1995
                                                              -------      -------
<S>                                                           <C>          <C>
Equity investment...........................................  $   (32)     $   121
Note receivable.............................................    2,500        2,500
Deferred gain on sale of third party contract rights........   (1,781)      (2,031)
                                                              -------      -------
                                                              $   687      $   590
                                                              =======      =======
</TABLE>
 
5.  NOTES PAYABLE
 
Notes payable consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                        INTEREST          PRINCIPAL OUTSTANDING
                                                       RATE AS OF              DECEMBER 31,
                                                      DECEMBER 31,        ----------------------
                                                          1996              1996         1995
                                                      ------------        ---------    ---------
<S>                                                   <C>                 <C>          <C>
FIXED RATE DEBT
-----------------
  Mortgage Loan.....................................     5.88%             $122,950     $125,000
  Mortgage Loan.....................................     7.71%               29,653       30,000
  Mortgage Loan.....................................     8.00%                8,638        8,712
  Mortgage Notes....................................  7.75%-9.80%            32,104       32,485
  Tax Exempt Mortgage Notes.........................  6.95%-7.25%             9,369        9,468
                                                                           --------     --------
          Total Mortgage Debt.......................                        202,714      205,665
  Unsecured Note....................................     7.85%               16,000           --
  Unsecured Note....................................     7.61%               15,000           --
                                                                           --------     --------
          Total Fixed Rate Debt.....................                        233,714      205,665
VARIABLE RATE DEBT
--------------------
  Unsecured Credit Facility.........................  LIBOR + 110            22,357        4,396
  Tax Exempt Bonds..................................     5.60%               53,862       54,840
  Development Loans Repaid in 1996..................                             --       32,109
                                                                           --------     --------
          Total Variable Rate Debt..................                         76,219       91,345
                                                                           --------     --------
Total Outstanding Indebtedness......................                       $309,933     $297,010
                                                                           ========     ========
</TABLE>
 
The London Interbank Offered Rate (LIBOR) at December 31, 1996 was 5.56%.
 
MORTGAGE LOANS -- The 5.88% fixed rate Mortgage Loan requires monthly principal
and interest payments on a 24-year amortization schedule with a balloon payment
due at maturity in February, 2001. The Company has
 
                                       39
<PAGE>   40
 
an option to extend the final maturity date for a period of up to two years at
an interest rate equal to the then current year treasury rate plus a
predetermined spread.
 
The 7.71% fixed rate Mortgage Loan requires monthly principal and interest
payments on a 25-year amortization schedule with a balloon payment due at
maturity in December, 2005.
 
The 8.00% Mortgage Loan requires monthly principal and interest payments on a
30-year amortization schedule with a balloon payment due at maturity in
September, 2005.
 
MORTGAGE NOTES -- The Mortgage Notes bear interest at fixed rates ranging from
7.75% to 9.80% and require monthly interest and principal payments over the life
of the notes. The weighted average interest rate and debt maturity at December
31, 1996 for these nine Mortgage Notes were 8.43% and 20.6 years, respectively.
 
TAX EXEMPT MORTGAGE NOTES -- The Tax Exempt Mortgage Notes bear interest at
fixed rates ranging from 6.95% to 7.25% and require monthly interest and
principal payments over the life of the notes. The weighted average interest
rate and debt maturity at December 31, 1996 for these two mortgage notes were
7.12% and 29.5 years, respectively.
 
UNSECURED NOTES -- In August 1996, the Company obtained $31.0 million of
unsecured debt financing consisting of a $16.0 million note with a six-year term
and a $15.0 million note with a four-year term (collectively, the "Unsecured
Notes"). The notes require quarterly interest only payments until the end of the
respective terms.
 
UNSECURED CREDIT FACILITY -- The Company obtained a $150 million unsecured
credit facility (the "Unsecured Credit Facility") on November 18, 1996 to
replace a $50 million secured credit facility. The Unsecured Credit Facility has
a three-year term and currently bears interest at LIBOR + 110 basis points. The
interest rate can be reduced based upon an upgrade in the Company's unsecured
credit rating. The Unsecured Credit Facility provides $25 million for general
working capital purposes with the remainder available to finance development
projects and acquisitions. The Unsecured Credit Facility is repayable monthly on
an interest-only basis with the balance of all principal and accrued interest
due no later than November 18, 1999.
 
The Unsecured Credit Facility and the Unsecured Notes require the Company to
comply with certain affirmative and negative covenants including the
requirements: (i) that the Company maintain its qualification as a REIT; (ii)
that the ratio of unencumbered assets to debt equal or exceed 150%; (iii) that
the ratio of debt to assets not exceed 60%; (iv) that the maximum secured debt
not exceed $350 million or 40% of assets; (v) that the Company maintain a debt
service ratio of not less than 1.75 to 1; and (vi) that the Company maintain a
ratio of adjusted funds flow, as defined, to debt of greater than .15 to 1.
 
VARIABLE RATE TAX EXEMPT BONDS -- The effective interest rate of the Variable
Rate Tax Exempt Bonds was 4.99% for the year ended December 31, 1996. These
bonds bear interest at various rates set by a remarketing agent at the demand
note index plus 0.50%, set weekly, or the lowest percentage of prime which
allows the resale at a price of par. The bonds contain covenants which require
that the Company lease or hold for lease 20% (or 25% under certain state or
local requirements) of the apartment homes for moderate-income residents. The
bonds require maintenance of letters of credit or surety bonds (credit
enhancements) aggregating $55.6 million. The credit enhancements on four of the
five tax exempt bonds ($46.6 million of debt) provide for a principal
amortization schedule which approximates a 25-year term during the term of the
credit enhancement.
 
Real estate assets with a net book value of $297.8 million serve as collateral
for the various debt agreements.
 
                                       40
<PAGE>   41
 
The aggregate maturities of all debt for each of the years ending December 31
are as follows (in thousands):
 
<TABLE>
<CAPTION>
                          FIXED RATE    FIXED RATE    FIXED RATE    TAX EXEMPT    UNSECURED
                           MORTGAGE      MORTGAGE     UNSECURED      VARIABLE      CREDIT
                            LOANS         NOTES         NOTES       RATE BONDS    FACILITY      TOTAL
                          ----------    ----------    ----------    ----------    ---------    --------
<S>                       <C>           <C>           <C>           <C>           <C>          <C>
1997....................   $  3,091      $   519       $    --      $    1,010     $    --     $  4,620
1998....................      3,287          560            --           1,055          --        4,902
1999....................      3,497          604            --           1,105      22,357       27,563
2000....................      3,718          653        15,000           1,130          --       20,501
2001....................    112,407          705            --           1,150          --      114,262
Thereafter..............     35,241       38,432        16,000          48,412          --      138,085
                           --------      -------       -------      ----------     -------     --------
                           $161,241      $41,473       $31,000      $   53,862     $22,357     $309,933
                           ========      =======       =======      ==========     =======     ========
</TABLE>
 
EXTRAORDINARY ITEMS -- The 1996 extraordinary item resulted from the write-off
of deferred financing costs on development loans repaid with the proceeds from
the 1996 Offering and with the proceeds of the $31.0 million Unsecured Notes.
The extraordinary item is net of $110,000 which was allocated to the minority
interest of the unitholders in the Operating Partnership, calculated on the
weighted average number of units outstanding.
 
The 1995 extraordinary items resulted from the write-off of deferred financing
costs on variable rate mortgage debt repaid with the proceeds from the 1995
Offering and with the proceeds of the $30 million Mortgage Loan, and from the
write-off of deferred financing costs related to the refunding of two variable
rate tax exempt bonds. The extraordinary items are net of $100,000 which was
allocated to the minority interest of the unitholders in the Operating
Partnership, calculated on the weighted average number of units outstanding.
 
In conjunction with the debt repayment related to the Initial Offering in 1994,
the Company incurred prepayment penalties of $4.3 million on certain mortgage
indebtedness, expenses of $2.5 million associated with the write-off of deferred
financing costs related to mortgages satisfied with proceeds of the Initial
Offering, and the write-off of accrued interest and mortgages payable that was
not required to be repaid of $15.4 million. These extraordinary items are net of
$1.5 million which was allocated to the minority interest of the unitholders in
the Operating Partnership, calculated on the weighted average units outstanding.
 
6.  MINORITY INTEREST
 
Minority interest consists of the following at December 31 (in thousands):
 
<TABLE>
<CAPTION>
                                                               1996         1995
                                                              -------      -------
<S>                                                           <C>          <C>
Minority interest of unitholders in Operating Partnership...  $46,202      $42,042
Minority interest in one operating Community................     (373)        (357)
                                                              -------      -------
                                                              $45,829      $41,685
                                                              =======      =======
</TABLE>
 
Operating Partnership Units can be exchanged for cash, or at the option of the
Company, for shares of Common Stock on a one-for-one basis. Accordingly,
minority interest of Unitholders in the Operating Partnership is calculated
based on the shares of Common Stock and Units outstanding at December 31, 1996
and 1995, respectively. Operating Partnership Units as a percentage of total
Units and shares outstanding was 15.2% and 19.3% at December 31, 1996 and 1995,
respectively.
 
7.  CROSLAND ACQUISITION
 
During the second quarter of 1995, the Company completed an acquisition of 12
apartment communities and a 75% interest in another apartment community, which
were owned by The Crosland Group, Inc. and its affiliates (the "Crosland
Acquisition"). The Crosland Acquisition added a total of 2,025 apartments to the
Company's portfolio and was accounted for using the purchase method of
accounting. The costs of the Crosland Acquisition have been allocated on the
basis of the fair values of the assets acquired and liabilities assumed (See
Note 10-D).
 
The following summary of unaudited pro forma results of operations presents
information as if the Crosland Acquisition had occurred at the beginning of each
fiscal year. In addition, the year ended December 31, 1994
 
                                       41
<PAGE>   42
 
information is presented as if the Company's Initial Offering had occurred at
the beginning of 1994. The pro forma information for the years ended December
31, 1995 and 1994 is provided for informational purposes only and is not
indicative of results which would have occurred or which may occur in the future
(in thousands, except per share amounts):
 
<TABLE>
<CAPTION>
                                                               1995         1994
                                                              -------      -------
<S>                                                           <C>          <C>
Net revenues................................................  $80,239      $71,298
Income before extraordinary items...........................   12,129        8,965
Net income..................................................   11,703        8,965
Earnings per share:
  Income before extraordinary items.........................      .82          .72
  Net income................................................      .79          .72
</TABLE>
 
8.  COMMITMENTS
 
The estimated cost to complete nine development projects currently under
construction was approximately $128.1 million at December 31, 1996. Anticipated
construction completion dates of the projects range from the second quarter of
1997 to the first quarter of 1999.
 
The Company has a commitment to purchase a Community being constructed in
Atlanta, Georgia for approximately $27.5 million. The Company expects the
purchase to close in the fourth quarter of 1998 after the Community reaches
rental stabilization.
 
The Company rents office space in several locations. Rental expense for the
years ended December 31, 1996, 1995 and 1994 amounted to $109,000, $125,000 and
$123,000 ($376,000 in 1996, $405,000 in 1995 and $377,000 in 1994 including
amounts recorded at the Management Company). Future minimum rental payments for
the next five years for those operating leases (including the Management
Company) that have initial or remaining non-cancelable lease terms in excess of
one year are as follows (in thousands):
 
<TABLE>
<CAPTION>
                  YEARS ENDED DECEMBER 31:
                  ------------------------
<S>                                                           <C>
1997........................................................  $  395
1998........................................................     402
1999........................................................     407
2000........................................................     131
2001........................................................      72
Thereafter..................................................       2
                                                              ------
                                                              $1,409
                                                              ======
</TABLE>
 
The Company has employment agreements with six executive officers. Five of these
agreements will expire on February 15, 1999 unless otherwise extended, and may
be terminated by the officer after giving 180 days prior written notice, without
breaching such agreements. One of these agreements provided for an original term
through February 16, 1996, and has been automatically extended until such time
as terminated pursuant to the terms of such executive officers' employment
agreement.
 
Each of the executive officers and the Chairman of the Board have
non-competition agreements with the Company which prohibit them, without the
prior written consent of the Board of Directors, from competing with the Company
for a period of the latter of (1) one year from the termination of their
employment with the Company, or (2) any period during which such individuals
receive severance payments.
 
The Company is obligated to redeem each Unit of interest in the Operating
Partnership at the request of the holder thereof for cash equal to the fair
market value of one share of Common Stock, except that the Company may elect to
acquire each Unit presented for redemption for one share of Common Stock. The
Company presently anticipates that it will elect to issue Common Stock in
connection with such redemption, rather than pay cash.
 
                                       42
<PAGE>   43
 
9.  EMPLOYEE BENEFIT PLANS
 
PROFIT SHARING PLAN
 
The Company has a defined contribution plan pursuant to Section 401(k) of the
Internal Revenue Code which covers all employees with one year or greater
service. The Company's contributions are equal to one-half of each employee's
contribution up to a maximum of 3% of each employee's compensation. Aggregate
contributions of approximately $223,000, $191,000 and $189,000 were made for the
years ended December 31, 1996, 1995 and 1994, respectively.
 
STOCK OPTION PLAN
 
In 1994, the Company established the 1994 Stock Option Plan ("the Plan") under
which 1,000,000 shares of the Company's Common Stock are reserved for issuance.
The Plan provides that the option price shall not be less than the fair market
value of the shares at the date of grant. The options vest in three or five
annual installments on the anniversaries of the date of grant except for shares
granted to independent directors of the Company, which vest on the date of
grant.
 
A summary of changes in common stock options for the three years ended December
31, 1996 is as follows:
 
<TABLE>
<CAPTION>
                                                                           WEIGHTED AVERAGE
                                                              OPTIONS       EXERCISE PRICE
                                                              -------      ----------------
<S>                                                           <C>          <C>
Year ended December 1994
-----------------------------
  Granted...................................................  482,500           $19.13
  Forfeited.................................................  (52,600)           19.00
                                                              -------
     Outstanding at December 31, 1994.......................  429,900            19.14
Year ended December 1995
-----------------------------
  Granted...................................................  130,000            17.13
  Forfeited.................................................  (20,800)           19.72
                                                              -------
     Outstanding at December 31, 1995.......................  539,100            18.64
Year ended December 1996
-----------------------------
  Granted...................................................   28,000            19.30
  Exercised.................................................  (15,073)           19.04
  Forfeited.................................................  (53,381)           19.22
                                                              -------
     Outstanding at December 31, 1996.......................  498,646            18.60
                                                              =======
</TABLE>
 
Exercise prices for options outstanding as of December 31, 1996 ranged from
$17.13 to $20.75. The weighted average remaining contractual life of those
options is 7.5 years.
 
As of December 31, 1996, 1995 and 1994 options to purchase 283,228, 132,784 and
9,000 shares of Common Stock were exercisable, respectively. The weighted
average exercise price for the shares exercisable as of December 31, 1996, 1995
and 1994 was $18.36, $19.03 and $19.83, respectively.
 
The estimated weighted average fair value of options granted were $2.10 per
share in 1996 and $1.61 per share in 1995. The Company applies Accounting
Principal Board Opinion No. 25 and related interpretations in accounting for its
stock options. Accordingly, no compensation cost has been recognized for its
stock options. Had compensation cost for the Company's stock options been
determined based on the fair value at the grant dates, consistent with the
method of Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", the Company's net income and net income per share for
the years ended December 31, 1996 and 1995 would have changed to the pro forma
amounts indicated below (dollars in thousands except per share amounts):
 
<TABLE>
<CAPTION>
                                                               1996         1995
                                                              -------      -------
<S>                                                           <C>          <C>
Pro forma net income........................................  $16,898      $11,808
Pro forma net income per share..............................      .89          .80
</TABLE>
 
                                       43
<PAGE>   44
 
The fair value of options granted during 1996 and 1995 were estimated on the
date of grant using the Binomial option-pricing model with the following
weighted-average assumptions: dividend yields ranging from 7.80% to 8.82%,
expected volatility of 16%, risk free interest rate of 6.52%, and expected lives
of 10 years.
 
In addition, the Plan provides for the issuance of stock grants to employees.
The Company granted 56,046 shares of restricted stock grants under the Plan in
January, 1996. The market value of the restricted stock grants, net of shares
subsequently retired, totaled $1.0 million, which was recorded as unamortized
restricted stock compensation and is shown as a separate component of
stockholders' equity. Unearned compensation is being amortized to expense over
the five year vesting period. Unrestricted stock grants of 1,639 shares were
issued in the year ended December 31, 1995. The Company recognized $223,000 and
$28,000 of expense in the statement of earnings in the years ended December 31,
1996 and 1995, respectively, relative to the stock grants.
 
EMPLOYEE STOCK PURCHASE PLAN
 
In 1996, the Company established a non-qualified employee stock purchase plan.
The plan allows Company employees to purchase up to $100,000 per year of the
Company's Common Stock. The price of the shares of the Common Stock purchased
will be the lesser of 85 percent of the closing price of such shares either on
(a) the first day of each six month purchase period, or (b) the last day of each
six month purchase period. Total shares issued under the plan in 1996 were
44,362 with a market value of $871,000. An additional 41,493 shares with a
market value of $908,000 were issued in January, 1997 under the plan. The
Company recognized $151,000 of expense in the statement of earnings in the year
ended December 31, 1996 relative to the employee stock purchase plan.
 
10.  SUPPLEMENTAL CASH FLOW INFORMATION
 
Non-cash investing and financing activities for the years ended December 31,
1996, 1995 and 1994 are as follows:
 
     A. The Company issued 106,330 Units of the Operating Partnership, valued at
       $2.1 million at issuance, for the purchase of land in the first quarter
       of 1996.
 
     B. In 1996 the Company issued 52,086 (net of 3,960 shares issued but
       subsequently retired) of restricted stock grants valued at $1.0 million.
 
     C. On April 1, 1996, the Company acquired its joint venture partner's
       interest in the Summit Plantation (formerly Plantation Cove) apartment
       community. The Company paid $6.4 million in cash for the remaining 75%
       interest in this joint venture, which is now owned entirely by the
       Company. The recording of the purchase is summarized as follows (in
       thousands):
 
<TABLE>
       <S>                                                             <C>
       Fixed assets................................................    $ 21,913
       Current assets..............................................         202
       Deferred charges............................................          95
       Debt assumed................................................     (14,347)
       Current liabilities assumed.................................        (288)
       Minority interest...........................................      (1,215)
                                                                       --------
       Net cash paid...............................................    $  6,360
                                                                       ========
</TABLE>
 
                                       44
<PAGE>   45
 
     D. In the second quarter of 1995, the Company completed its Crosland
       Acquisition. The Company purchased the communities by assuming debt,
       issuing approximately 1.5 million Operating Partnership Units, assuming
       certain liabilities and current assets, and the payment of cash. The
       recording of the purchase is summarized as follows (in thousands):
 
<TABLE>
       <S>                                                             <C>
       Fixed assets................................................    $ 82,935
       Restricted cash.............................................       1,427
       Other assets................................................          93
       Debt assumed................................................     (52,576)
       Current liabilities assumed.................................        (996)
       Minority interest...........................................         388
       Value of units issued.......................................     (26,190)
                                                                       --------
       Net cash paid...............................................    $  5,081
                                                                       ========
</TABLE>
 
     E. A $9.1 million tax-exempt bond was assumed with the purchase of the
       Stony Point Community in 1994.
 
     F. The Company transferred certain third party property management
       contracts to the Management Company in exchange for a promissory note of
       $2.5 million in 1994. To record the transaction, the Company recorded the
       promissory note and included in other liabilities $2.5 million of
       deferred revenue to be amortized over the estimated lives of the
       contracts.
 
     G. The Company accrued a dividend and distribution payable of $10.2
       million, $7.7 million and $5.5 million at December 31, 1996, 1995 and
       1994, respectively.
 
     H. Purchase accounting was applied to the acquisition of non-continuing
       investors' interests for which cash consideration was paid resulting in
       an increase of $14.9 million in the historical cost basis of the related
       real estate assets in 1994.
 
     I. The Company issued 45,359 Units of interest in the Operating Partnership
       (valued at $896,000) for the purchase of land in 1995.
 
     J. The Company issued 38,500 Units of interest in the Operating Partnership
       (valued at $735,000) for the purchase of land in 1994.
 
11.  FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
 
The following disclosures of estimated fair value were determined by management
using available market information and appropriate valuation methodologies.
However, considerable judgment is necessary to interpret market data and develop
the related estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts that could be realized upon
disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
 
Cash and cash equivalents, rents receivable, accounts payable, accrued expenses,
security deposits, other liabilities, tax-exempt bond indebtedness and the
credit facility are carried at amounts which reasonably approximate their fair
values at December 31, 1996.
 
Fixed rate mortgage debt and unsecured notes with a carrying value of $233.7
million has an estimated aggregate fair value of $229.3 million at December 31,
1996. Rates currently available to the Company for debt with similar terms and
maturities were used to estimate the fair value of this debt.
 
The fair value estimates presented herein are based on information available to
management as of December 31, 1996. Although management is not aware of any
factors that would significantly affect the estimated fair value amounts, such
amounts have not been comprehensively re-valued for purposes of these financial
statements since that date, and current estimates of fair value may differ
significantly from the amounts presented herein.
 
                                       45
<PAGE>   46
 
12.  GEOGRAPHIC CONCENTRATION
 
The Company's completed Communities are concentrated in three major markets:
 
<TABLE>
<CAPTION>
                                                           NUMBER         APARTMENT
                                                             OF            HOMES --
                                                          APARTMENT           %              % OF
MARKET                                                      HOMES        OF PORTFOLIO      REVENUES
------                                                    ---------      ------------      --------
<S>                                                       <C>            <C>               <C>
I-85 Corridor (Raleigh, NC to Atlanta, GA)..............      5,062               43%           42%
Washington, DC/Virginia.................................      2,169               19%           21%
Central/South Florida...................................      3,685               31%           31%
Other...................................................        872                7%            6%
                                                          ---------      ------------      --------
                                                             11,788              100%          100%
                                                          =========      ============      ========
</TABLE>
 
13.  SUBSEQUENT EVENTS
 
On January 6, 1997, the Company purchased Summit Portofino (formerly Portofino
Place), a 322 apartment community located in Broward County, Florida. Summit
Portofino, built in 1995, was purchased for $28.0 million in cash. Concurrently
with the purchase, the Company sold 315,029 shares of Common Stock to the public
for cash to fund a portion of the purchase.
 
On January 15, 1997, the Company purchased Summit Mayfaire (formerly The
Mayfaire), a 144 apartment community located in Raleigh, North Carolina. Summit
Mayfaire, built in 1995, was purchased for $9.65 million in cash.
 
On February 20, 1997, the Company purchased Summit Sand Lake (formerly The
Vining at Sand Lake), a 416 apartment community located in Orlando, Florida.
Summit Sand Lake, built in 1995, was purchased for $26.8 million. The Company
issued the seller 243,608 shares of Common Stock and 194,495 Units in the
Operating Partnership, assumed $15.2 million in debt and paid the remaining $2.7
million balance in cash.
 
14.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 
Quarterly financial information for the years 1996 and 1995 are as follows (in
thousands):
 
<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31, 1996
                                                            -------------------------------------
                                                             FIRST    SECOND     THIRD    FOURTH
                                                            -------   -------   -------   -------
<S>                                                         <C>       <C>       <C>       <C>
Revenues..................................................  $21,430   $23,062   $24,771   $25,226
Income before minority interest of unitholders in
  Operating Partnership and extraordinary items...........    4,237     4,345     5,740     6,865
Minority interest of unitholders in Operating
  Partnership.............................................     (828)     (850)     (974)   (1,071)
Extraordinary items.......................................       --        --      (516)       --
Net income................................................    3,409     3,495     4,250     5,794
Income per share:
  Income before extraordinary items.......................     0.21      0.21      0.24      0.26
  Net income..............................................     0.21      0.21      0.21      0.26
</TABLE>
 
<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31, 1995
                                                            -------------------------------------
                                                             FIRST    SECOND     THIRD    FOURTH
                                                            -------   -------   -------   -------
<S>                                                         <C>       <C>       <C>       <C>
Revenues..................................................  $15,891   $17,872   $20,267   $20,964
Income before minority interest of unitholders in
  Operating Partnership and extraordinary items...........    2,804     3,345     4,479     4,423
Minority interest of unitholders in Operating
  Partnership.............................................     (458)     (635)     (846)     (854)
Extraordinary items.......................................       --       (63)       --      (376)
Net income................................................    2,346     2,647     3,633     3,193
Income per share:
  Income before extraordinary items.......................     0.19      0.20      0.22      0.22
  Net income..............................................     0.19      0.19      0.22      0.19
</TABLE>
 
                                       46
<PAGE>   47
 
                            SUMMIT PROPERTIES, INC.
                    REAL ESTATE AND ACCUMULATED DEPRECIATION        SCHEDULE III
                               DECEMBER 31, 1996
                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                             GROSS AMOUNT AT WHICH
                                                 INITIAL COSTS            COSTS           CARRIED AT CLOSE OF PERIOD
                                           -------------------------   CAPITALIZED   -------------------------------------
                                                        BUILDINGS      SUBSEQUENT                  BUILDINGS
                              RELATED                      AND             TO                         AND
        COMMUNITY           ENCUMBRANCES    LAND     IMPROVEMENTS(6)   ACQUISITION     LAND     IMPROVEMENTS(6)   TOTAL(1)
        ---------           ------------   -------   ---------------   -----------   --------   ---------------   --------
<S>                         <C>            <C>       <C>               <C>           <C>        <C>               <C>
Atlanta, GA
  Summit Glen.............     $   (2)     $ 3,652      $                $ 11,732    $  3,693      $ 11,691       $15,384
  Summit Springs..........         (2)       2,575                         11,974       2,667        11,882        14,549
  Summit Village..........         (2)       3,212                         13,132       3,653        12,691        16,344
Charlotte, NC
  Summit Arbors...........         --          780         5,066               33         780         5,099         5,879
  Summit Charleston.......         (2)       1,094                          6,129       1,095         6,128         7,223
  Summit Creek............         --        1,430         9,125              154       1,430         9,279        10,709
  Summit Crossing.........      4,213          768         5,174               58         768         5,232         6,000
  Summit Fairview.........         --          404                          4,299         536         4,167         4,703
  Summit Foxcroft.........      2,788          925         3,797              178         925         3,975         4,900
  Summit Green............         --        1,970                         16,582       1,970        16,582        18,552
  Summit Hollow I & II....      4,873        1,470         7,463              290       1,472         7,751         9,223
  Summit Norcroft.........         (2)       1,072                          7,063       1,253         6,882         8,135
  Summit Radbourne........      8,683        1,395        12,607               53       1,395        12,660        14,055
  Summit Simsbury.........         (3)         650         4,570               58         650         4,628         5,278
  Summit Touchstone.......         (3)         766         5,568               77         766         5,645         6,411
Greenville, SC
  Summit Beacon Ridge.....         --        1,053                          5,691       1,154         5,590         6,744
  Summit East Ridge.......      5,156          900         6,303               97         910         6,390         7,300
Indianapolis, IN
  Summit River Crossing...         --        2,562                         16,549       2,562        16,549        19,111
Ohio
    Summit Blue Ash.......         (2)       2,033                         11,712       2,170        11,575        13,745
    Summit Park...........         --        1,680                         10,603       1,921        10,362        12,283
Orlando, FL
    Summit Fairways.......         --        2,819                         14,849       2,819        14,849        17,668
Raleigh/Central, NC
  Summit Creekside........      2,877          414         3,614               35         414         3,649         4,063
  Summit Eastchester......      3,872          912         4,699              124         912         4,823         5,735
  Summit Highland.........         --        1,374                          6,214       1,374         6,214         7,588
  Summit Hill I...........         --        1,224         8,500               27       1,224         8,527         9,751
  Summit Hill II..........         --        1,474                          9,909       1,474         9,909        11,383
  Summit Oak..............      2,585          400         3,065               25         400         3,090         3,490
  Summit Old Town.........      3,097          774         4,693               64         774         4,757         5,531
  Summit Sherwood.........      3,329        1,102         4,863               46       1,106         4,905         6,011
  Summit Square...........         (2)       2,757                         14,986       3,775        13,968        17,743
 
<CAPTION>
 
                                                                      DEPRECIABLE
                            ACCUMULATED      DATE OF         DATE        LIVES
        COMMUNITY           DEPRECIATION   CONSTRUCTION    ACQUIRED      YEARS
        ---------           ------------   ------------    --------   -----------
<S>                         <C>            <C>             <C>        <C>
Atlanta, GA
  Summit Glen.............   $  (2,117)      5/90-8/92       4/90     5-40 years
  Summit Springs..........      (3,225)     12/88-4/90      12/88     5-40 years
  Summit Village..........      (2,921)      9/89-1/91       8/89     5-40 years
Charlotte, NC
  Summit Arbors...........        (318)           1986(5)    5/95     5-40 years
  Summit Charleston.......      (2,270)    10/85-12/86       7/85     5-40 years
  Summit Creek............        (959)           1983(5)    9/94     5-40 years
  Summit Crossing.........        (342)           1985(5)    5/95     5-40 years
  Summit Fairview.........      (1,844)      3/82-3/83       3/82     5-40 years
  Summit Foxcroft.........        (288)           1979(5)    5/95     5-40 years
  Summit Green............        (428)      1/95-6/96      12/94     5-40 years
  Summit Hollow I & II....        (552)           1976(5)    5/95     5-40 years
  Summit Norcroft.........      (1,560)      2/90-3/91      12/89     5-40 years
  Summit Radbourne........        (675)           1991(5)    5/95     5-40 years
  Summit Simsbury.........        (294)           1985(5)    5/95     5-40 years
  Summit Touchstone.......        (358)           1986(5)    5/95     5-40 years
Greenville, SC
  Summit Beacon Ridge.....      (1,713)      1/88-7/88       1/88     5-40 years
  Summit East Ridge.......        (388)           1986(5)    6/95     5-40 years
Indianapolis, IN
  Summit River Crossing...        (334)      3/95-9/96      10/94     5-40 years
Ohio
    Summit Blue Ash.......      (1,893)      1/92-5/92       1/91     5-40 years
    Summit Park...........      (2,998)      4/88-4/89       1/88     5-40 years
Orlando, FL
    Summit Fairways.......        (100)     9/95-12/96       8/95     5-40 years
Raleigh/Central, NC
  Summit Creekside........        (258)           1981(5)    5/95     5-40 years
  Summit Eastchester......        (356)           1981(5)    5/95     5-40 years
  Summit Highland.........      (2,270)      3/86-1/87      11/85     5-40 years
  Summit Hill I...........        (880)           1991(5)    6/94     5-40 years
  Summit Hill II..........        (292)     11/94-6/96       6/94     5-40 years
  Summit Oak..............        (220)           1982(5)    5/95     5-40 years
  Summit Old Town.........        (347)           1979(5)    5/95     5-40 years
  Summit Sherwood.........        (360)           1968(5)    5/95     5-40 years
  Summit Square...........      (3,138)      3/89-8/90       2/89     5-40 years
</TABLE>
 
                                       47
<PAGE>   48
<TABLE>
<CAPTION>
                                                                                             GROSS AMOUNT AT WHICH
                                                 INITIAL COSTS            COSTS           CARRIED AT CLOSE OF PERIOD
                                           -------------------------   CAPITALIZED   -------------------------------------
                                                        BUILDINGS      SUBSEQUENT                  BUILDINGS
                              RELATED                      AND             TO                         AND
        COMMUNITY           ENCUMBRANCES    LAND     IMPROVEMENTS(6)   ACQUISITION     LAND     IMPROVEMENTS(6)   TOTAL(1)
        ---------           ------------   -------   ---------------   -----------   --------   ---------------   --------
<S>                         <C>            <C>       <C>               <C>           <C>        <C>               <C>
Richmond, VA
  Summit Breckenridge.....         --          812                         11,700         812        11,700         12,512
  Summit Stony Point......         (4)       1,638        13,041              286       1,638        13,327         14,965
  Summit Waterford........         (2)       1,568                         14,265       1,949        13,884         15,833
South Florida                                                                                                             
  Summit Aventura.........         --        6,367                         24,923       6,368        24,922         31,290
  Summit Del Ray..........         (2)       3,120                         14,772       5,402        12,490         17,892
  Summit Palm Lake........         (2)       4,949                         16,764       5,083        16,630         21,713
  Summit Plantation.......         --        3,428        18,485                0       3,428        18,485         21,913
Tampa/Sarasota, FL                                                                                                        
  Summit Gateway..........         (4)       1,738                         10,235       2,256         9,717         11,973
  Summit Hampton..........         (4)       2,577                         12,009       2,972        11,614         14,586
  Summit Heron's Run......         (2)       3,154                         10,429       3,192        10,391         13,583
  Summit Lofts............         --        1,800         7,337              582       1,800         7,919          9,719
  Summit McIntosh.........         --        1,862                         10,047       1,942         9,967         11,909
  Summit Perico...........         (2)       1,588                         11,616       2,174        11,030         13,204
  Summit Providence.......         (2)       3,043                         16,841       3,391        16,493         19,884
  Summit Station..........         --        1,688                         10,062       1,989         9,761         11,750
  Summit Walk.............         --          568           237            5,392         983         5,214          6,197
Washington, DC                                                                                                            
  Summit Belmont..........         (4)         974                         10,944         984        10,934         11,918
  Summit Meadow...........         (2)       2,313                          8,397       2,539         8,171         10,710
  Summit Pike Creek.......         (4)       1,132                         10,895       1,259        10,768         12,027
  Summit Reston...........         --        5,434        26,255              403       5,434        26,658         32,092
  Summit Windsor..........         (2)         644                          6,297         969         5,972          6,941
                                           -------      --------         --------    --------      --------       --------
                            Total          $94,038      $154,462         $369,602    $102,606      $515,496       $618,102
                                           =======      ========         ========    ========      ========       ========
 
<CAPTION>
 
                                                                      DEPRECIABLE
                            ACCUMULATED      DATE OF         DATE        LIVES
        COMMUNITY           DEPRECIATION   CONSTRUCTION    ACQUIRED      YEARS
        ---------           ------------   ------------    --------   -----------
<S>                         <C>            <C>             <C>        <C>
Richmond, VA
  Summit Breckenridge.....      (4,021)      7/85-5/87       6/85     5-40 years
  Summit Stony Point......      (1,568)           1986(5)    2/94     5-40 years
  Summit Waterford........      (3,229)      1/89-6/90      11/88     5-40 years
South Florida
  Summit Aventura.........        (965)     6/94-12/95      12/93     5-40 years
  Summit Del Ray..........      (2,016)      1/92-2/93       1/92     5-40 years
  Summit Palm Lake........      (3,196)      3/90-2/92       1/90     5-40 years
  Summit Plantation.......        (453)      1/94-7/95(5)    4/96     5-40 years
Tampa/Sarasota, FL
  Summit Gateway..........      (2,856)      1/86-1/87      12/85     5-40 years
  Summit Hampton..........      (4,089)     11/86-3/88      10/86     5-40 years
  Summit Heron's Run......      (2,449)     7/89-10/90       6/89     5-40 years
  Summit Lofts............        (835)           1990(5)   10/94     5-40 years
  Summit McIntosh.........      (2,514)      7/89-6/90       1/89     5-40 years
  Summit Perico...........      (2,687)      1/89-2/90       8/88     5-40 years
  Summit Providence.......      (4,168)      9/88-2/91       4/88     5-40 years
  Summit Station..........      (2,074)     10/89-9/90       9/89     5-40 years
  Summit Walk.............        (665)      4/92-2/93       4/92     5-40 years
Washington, DC
  Summit Belmont..........      (3,621)      1/86-5/87       1/86     5-40 years
  Summit Meadow...........      (2,025)      8/89-8/90       2/89     5-40 years
  Summit Pike Creek.......      (3,436)     11/86-2/88       4/86     5-40 years
  Summit Reston...........      (2,785)           1987(5)    4/94     5-40 years
  Summit Windsor..........      (1,681)      8/88-8/89       3/95     5-40 years
                             ---------
                             $ (85,031)
                             =========
</TABLE>
 
(1) The aggregate cost for federal income tax purposes at December 31, 1996 is
    $559.0 million.
 
(2) Encumbered by fixed rate mortgages of $153 million.
 
(3) Encumbered by fixed rate mortgage of $8.6 million.
 
(4) Collateral for $55.6 million of letter of credit which serves as collateral
    for $53.9 million in tax exempt bonds.
 
(5) Property purchased by Company. Date reflects date construction completed.
 
(6) Includes furniture, fixtures and equipment.
 
                                       48
<PAGE>   49
 
                                                                    SCHEDULE III
 
                             SUMMIT PROPERTIES INC.
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                             (DOLLARS IN THOUSANDS)
 
A summary of activity for real estate assets and accumulated depreciation is as
follows:
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                             --------------------------------
                                                               1996        1995        1994
                                                             --------    --------    --------
<S>                                                          <C>         <C>         <C>
REAL ESTATE ASSETS(1):
  Balance at beginning of year.............................  $524,772    $407,707    $313,698
                                                             --------    --------    --------
  Acquisitions.............................................    21,913      82,935      75,921
  Improvements.............................................     4,780       2,560       1,710
  Developments.............................................    66,637      31,570          --
  Step-up in basis and other costs related to Initial
     Offering..............................................        --          --      16,378
                                                             --------    --------    --------
                                                               93,329     117,065      94,009
                                                             --------    --------    --------
  Balance at end of year...................................  $618,102    $524,772    $407,707
                                                             ========    ========    ========
ACCUMULATED DEPRECIATION(1):
  Balance at beginning of year.............................  $ 66,978    $ 51,957    $ 40,367
  Depreciation.............................................    18,053      15,021      11,590
                                                             --------    --------    --------
  Balance at end of year...................................  $ 85,031    $ 66,978    $ 51,957
                                                             ========    ========    ========
</TABLE>
 
(1) Includes only apartment communities and does not include fixed assets used
     in property development, construction and management of apartment
     communities.
 
                                       49