##### Table of Contents









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


FORM 10-Q

|   |  |                                                                                                 
|-- |  | ------------------------------------------------------------------------------------------------
|þ  |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934 
|  
|   |  | For the quarterly period ended March 31,
    2003                                               
|  
|OR
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
|  
|   |  | For the transition period
    from           to          .                                      

Commission File Number 1-10272

Archstone-Smith Operating Trust

(Exact name of registrant as specified in its
charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Maryland                                                           |  | 74-6056896                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. employer
    identification no.)

9200 E Panorama Circle,
Suite 400

Englewood, Colorado 80112


(Address of principal executive offices and
zip code)


(303) 708-5959

(Registrants telephone number, including
area code)


(Former name, former address and former fiscal
year,

if changed since last report)


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 for the past
90 days.     Yes þ          No o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Act).     Yes þ          No o

At April 30, 2003, there were approximately
19,337,307 Class A-1 Common Units outstanding held by
non-affiliates.



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TABLE OF CONTENTS



|                                                                                                                     |                              |  |  |  |  |  |  | 
|-------------------------------------------------------------------------------------------------------------------- | ---------------------------- |  |  |  |  |  |  | 
|PART I -- FINANCIAL INFORMATION                                                                                     
|                                                                                                                     | Item 1. Financial Statements
|CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except unit data)                                              
|CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS                                                                       
|CONDENSED CONSOLIDATED STATEMENT OF UNITHOLDERS EQUITY, OTHER COMMON UNITHOLDERS INTEREST AND COMPREHENSIVE INCOME
|CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                     
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                                                
|INDEPENDENT ACCOUNTANTS REVIEW REPORT                                                                              
|PART II -- OTHER INFORMATION                                                                                        
|SIGNATURES                                                                                                          
|CERTIFICATIONS                                                                                                      
|CERTIFICATIONS                                                                                                      
|EX-12.1 Computation of Earnings to Fixed Charges                                                                    
|EX-12.2 Computation of Earnings to Fixed Charges                                                                    
|EX-15.1 Letter from KPMG LLP                                                                                        
|EX-99.1 Certification of Chief Executive Officer                                                                    
|EX-99.2 Certification of Chief Financial Officer                                                                    



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##### Table of Contents



Table of Contents

|        |    |             |  |                                                                                                                                                                                  |  |  |    | 
|------- | -- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | -- | 
|        |    |             |  | Page                                                                                                                                                                            
|Item    |    | Description |  | Number                                                                                                                                                                          
|        |    |             |  |                                                                                                                                                                                 
|PART 1 
|        | 1. |             |  | Financial Statements                                                                                                                                                             |  |  |    | 
|        |    |             |  | Condensed Consolidated Balance Sheets 
    March 31, 2003 (unaudited) and December 31, 2002                                                                                     |  |  | 3  | 
|        |    |             |  | Condensed Consolidated Statements of
    Earnings  Three months ended March 31, 2003 and
    2002 (unaudited)                                                                   |  |  | 4  | 
|        |    |             |  | Condensed Consolidated Statement of
    Unitholders Equity, Other Common Unitholders
    Interest and Comprehensive Income  Three months ended
    March 31, 2003 (unaudited) |  |  | 5  | 
|        |    |             |  | Condensed Consolidated Statements of Cash
    Flows  Three months ended March 31, 2003 and
    2002 (unaudited)                                                                 |  |  | 6  | 
|        |    |             |  | Notes to Condensed Consolidated Financial
    Statements (unaudited)                                                                                                             |  |  | 7  | 
|        |    |             |  | Independent Accountants Review Report                                                                                                                                           |  |  | 16 | 
|        | 2. |             |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations                                                                                        |  |  | 17 | 
|        | 3. |             |  | Quantitative and Qualitative Disclosures About
    Market Risk                                                                                                                   |  |  | 27 | 
|        | 4. |             |  | Controls and Procedures                                                                                                                                                          |  |  | 27 | 
|PART II
|        | 1. |             |  | Legal Proceedings                                                                                                                                                                |  |  | 27 | 
|        | 6. |             |  | Exhibits and Reports on Form 8-K                                                                                                                                                 |  |  | 28 | 

2



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##### Table of Contents






PART I  FINANCIAL
INFORMATION






|        |                     
|------- | --------------------
|Item 1. | Financial Statements

ARCHSTONE-SMITH OPERATING TRUST






CONDENSED CONSOLIDATED BALANCE
SHEETS


(In thousands, except unit data)


|                                                                                                                              |                                                                                                            |              |                              |              |           |           |           |           |           |           | 
|----------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | ------------ | ---------------------------- | ------------ | --------- | --------- | --------- | --------- | --------- | --------- | 
|                                                                                                                              |                                                                                                            | March 31,    |                              | December 31,
|                                                                                                                              |                                                                                                            | 2003         |                              | 2002        
|                                                                                                                              |                                                                                                            |              |                              |             
|                                                                                                                              |                                                                                                            | (Unaudited)  |                              |             
|ASSETS                                                                                                                       
|Real estate                                                                                                                   |                                                                                                            | $            | 8,784,599                    |              |           | $         | 8,838,821 |          
|Less accumulated depreciation                                                                                                 |                                                                                                            |              | 608,027                      |              |           |           | 571,247   |          
|                                                                                                                              |                                                                                                            |              |                              |              |           |           |           |          
|                                                                                                                              |                                                                                                            |              | 8,176,572                    |              |           |           | 8,267,574 |          
|Investments in and advances to unconsolidated
    entities                                                                    |                                                                                                            |              | 391,684                      |              |           |           | 346,946   |          
|                                                                                                                              |                                                                                                            |              |                              |              |           |           |           |          
|                                                                                                                              |                                                                                                            |              | Net investments              |              |           | 8,568,256 |           |           |           | 8,614,520 | 
|Cash and cash equivalents                                                                                                     |                                                                                                            |              | 14,041                       |              |           |           | 12,846    |          
|Restricted cash in tax-deferred exchange escrow                                                                               |                                                                                                            |              | 48                           |              |           |           |          |          
|Other assets                                                                                                                  |                                                                                                            |              | 262,145                      |              |           |           | 227,702   |          
|                                                                                                                              |                                                                                                            |              |                              |              |           |           |           |          
|                                                                                                                              |                                                                                                            | Total assets |                              | $            | 8,844,490 |           |           | $         | 8,855,068 |          
|                                                                                                                              |                                                                                                            |              |                              |              |           |           |           |          
|LIABILITIES AND EQUITY                                                                                                       
|Liabilities:                                                                                                                  |                                                                                                            |              |                              |              |           |           |           |          
|                                                                                                                              | Unsecured credit facilities                                                                                |              | $                            | 409,610      |           |           | $         | 365,578   |          
|                                                                                                                              | Long-Term Unsecured Debt                                                                                   |              |                              | 1,752,222    |           |           |           | 1,776,103 |          
|                                                                                                                              | Mortgages payable                                                                                          |              |                              | 1,928,348    |           |           |           | 1,960,827 |          
|                                                                                                                              | Distributions payable                                                                                      |              |                              | 3,808        |           |           |           | 91,616    |          
|                                                                                                                              | Accounts payable, accrued expenses and other
    liabilities                                               |              |                              | 247,354      |           |           |           | 279,685   |          
|                                                                                                                              |                                                                                                            |              |                              |              |           |           |           |          
|                                                                                                                              |                                                                                                            |              | Total liabilities            |              |           | 4,341,342 |           |           |           | 4,473,809 | 
|                                                                                                                              |                                                                                                            |              |                              |              |           |           |           |          
|Minority interest                                                                                                             |                                                                                                            |              | 2,510                        |              |           |           | 2,600     |          
|                                                                                                                              |                                                                                                            |              |                              |              |           |           |           |          
|Other common unitholders interest, at
    redemption value (A-1 Common Units: 25,269,344 in 2003 and
    24,621,853 in 2002) |                                                                                                            |              | 554,914                      |              |           |           | 579,598   |          
|                                                                                                                              |                                                                                                            |              |                              |              |           |           |           |          
|Unitholders equity:                                                                                                          |                                                                                                            |              |                              |              |           |           |           |          
|                                                                                                                              | Convertible Preferred Units                                                                                |              |                              | 194,666      |           |           |           | 194,671   |          
|                                                                                                                              | Perpetual Preferred Units                                                                                  |              |                              | 160,363      |           |           |           | 160,550   |          
|                                                                                                                              | Common unitholders equity (A-2 Common
    Units: 181,852,139 units in 2003 and 180,705,795 units in 2002) |              |                              | 3,609,680    |           |           |           | 3,456,179 |          
|                                                                                                                              | Accumulated other comprehensive loss                                                                       |              |                              | (18,985      | )         |           |           | (12,339   | )        
|                                                                                                                              |                                                                                                            |              |                              |              |           |           |           |          
|                                                                                                                              |                                                                                                            |              | Total unitholders equity    |              |           | 3,945,724 |           |           |           | 3,799,061 | 
|                                                                                                                              |                                                                                                            |              |                              |              |           |           |           |          
|                                                                                                                              |                                                                                                            |              | Total liabilities and equity |              | $         | 8,844,490 |           |           | $         | 8,855,068 | 
|                                                                                                                              |                                                                                                            |              |                              |              |           |           |           |          

The accompanying notes are an integral part of
these condensed consolidated financial statements.

3



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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST






CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS


|                                                                           |                                                                |                           |         |         |   |   |         |         | 
|-------------------------------------------------------------------------- | -------------------------------------------------------------- | ------------------------- | ------- | ------- | - | - | ------- | ------- | 
|                                                                           |                                                                |                          
|                                                                           |                                                                | Three Months Ended       
|                                                                           |                                                                | March 31,                
|                                                                           |                                                                |                          
|                                                                           |                                                                | 2003                      |         | 2002   
|                                                                           |                                                                |                           |         |        
|                                                                           |                                                                |                          
|                                                                           |                                                                | (In thousands, except per
|                                                                           |                                                                | unit amounts)            
|                                                                           |                                                                | (Unaudited)              
|Revenues:                                                                  |                                                                |                           |         |         |   |   |         |        
|                                                                           | Rental revenues                                                |                           | $       | 234,118 |   |   | $       | 228,529 | 
|                                                                           | Income from unconsolidated entities                            |                           |         | 5,350   |   |   |         | 4,776   | 
|                                                                           | Other income                                                   |                           |         | 7,164   |   |   |         | 1,509   | 
|                                                                           |                                                                |                           |         |         |   |   |         |        
|                                                                           |                                                                |                           | 246,632 |         |   |   | 234,814 |        
|                                                                           |                                                                |                           |         |         |   |   |         |        
|Expenses:                                                                  |                                                                |                           |         |         |   |   |         |        
|                                                                           | Rental expenses                                                |                           |         | 60,750  |   |   |         | 57,210  | 
|                                                                           | Real estate taxes                                              |                           |         | 23,193  |   |   |         | 21,549  | 
|                                                                           | Depreciation on real estate investments                        |                           |         | 48,014  |   |   |         | 42,572  | 
|                                                                           | Interest expense                                               |                           |         | 49,136  |   |   |         | 41,434  | 
|                                                                           | General and administrative expenses                            |                           |         | 12,182  |   |   |         | 9,885   | 
|                                                                           | Other expenses                                                 |                           |         | 2,063   |   |   |         | 1,812   | 
|                                                                           |                                                                |                           |         |         |   |   |         |        
|                                                                           |                                                                |                           | 195,338 |         |   |   | 174,462 |        
|                                                                           |                                                                |                           |         |         |   |   |         |        
|Earnings from operations                                                   |                                                                |                           | 51,294  |         |   |   | 60,352  |        
|                                                                           | Plus: gains on dispositions of real estate
    investments     |                           |         |        |   |   |         | 1,281   | 
|                                                                           | Less: minority interest                                        |                           |         | (90     | ) |   |         | 1,937   | 
|                                                                           |                                                                |                           |         |         |   |   |         |        
|Net earnings before discontinued operations                                |                                                                |                           | 51,384  |         |   |   | 59,696  |        
|                                                                           | Plus: net earnings from discontinued apartment
    communities |                           |         | 46,474  |   |   |         | 6,679   | 
|                                                                           |                                                                |                           |         |         |   |   |         |        
|Net earnings                                                               |                                                                |                           | 97,858  |         |   |   | 66,375  |        
|                                                                           | Less: Preferred Unit distributions                             |                           |         | 8,358   |   |   |         | 8,759   | 
|                                                                           |                                                                |                           |         |         |   |   |         |        
|Net earnings attributable to Common
    Units  Basic                      |                                                                | $                         | 89,500  |         |   | $ | 57,616  |        
|                                                                           |                                                                |                           |         |         |   |   |         |        
|Weighted average Common Units
    outstanding  Basic                      |                                                                |                           | 206,886 |         |   |   | 200,293 |        
|                                                                           |                                                                |                           |         |         |   |   |         |        
|Weighted average Common Units
    outstanding  Diluted                    |                                                                |                           | 219,053 |         |   |   | 201,824 |        
|                                                                           |                                                                |                           |         |         |   |   |         |        
|Net earnings before discontinued operations per
    Common Unit  Basic:   |                                                                |                           |         |         |   |   |         |        
|                                                                           | Net earnings before discontinued operations                    |                           | $       | 0.21    |   |   | $       | 0.26    | 
|                                                                           | Discontinued operations, net                                   |                           |         | 0.22    |   |   |         | 0.03    | 
|                                                                           |                                                                |                           |         |         |   |   |         |        
|                                                                           | Net earnings                                                   |                           | $       | 0.43    |   |   | $       | 0.29    | 
|                                                                           |                                                                |                           |         |         |   |   |         |        
|Net earnings before discontinued operations per
    Common Unit  Diluted: |                                                                |                           |         |         |   |   |         |        
|                                                                           | Net earnings before discontinued operations                    |                           | $       | 0.21    |   |   | $       | 0.26    | 
|                                                                           | Discontinued operations, net                                   |                           |         | 0.22    |   |   |         | 0.03    | 
|                                                                           |                                                                |                           |         |         |   |   |         |        
|                                                                           | Net earnings                                                   |                           | $       | 0.43    |   |   | $       | 0.29    | 
|                                                                           |                                                                |                           |         |         |   |   |         |        
|Distributions paid per Common Unit                                         |                                                                | $                         | 0.4275  |         |   | $ | 0.4250  |        
|                                                                           |                                                                |                           |         |         |   |   |         |        

The accompanying notes are an integral part of
these condensed consolidated financial statements.

4



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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST






CONDENSED CONSOLIDATED STATEMENT OF
UNITHOLDERS EQUITY,


OTHER COMMON UNITHOLDERS INTEREST AND
COMPREHENSIVE INCOME


Three Months Ended March 31,
2003


|                                                  |                                               |                |         |             |  |              |         |                 |  |              |           |              |   |       |         |        |   |   |           |        |   |   |         |        |  |   |           |        |  
|------------------------------------------------- | --------------------------------------------- | -------------- | ------- | ----------- |  | ------------ | ------- | --------------- |  | ------------ | --------- | ------------ | - | ----- | ------- | ------ | - | - | --------- | ------ | - | - | ------- | ------ |  | - | --------- | ------ | -
|                                                  |                                               | Convertible    |         | Perpetual   |  |              |         |                 |  |              |           |              |   |      
|                                                  |                                               | Preferred      |         | Preferred   |  |              |         |                 |  |              |           |              |   |      
|                                                  |                                               | Units at       |         | Units at    |  |              |         | Accumulated     |  |              |           | Other        |   |      
|                                                  |                                               | Aggregate      |         | Aggregate   |  | Common       |         | Other           |  | Total        |           | Common       |   |      
|                                                  |                                               | Liquidation    |         | Liquidation |  | Unitholders |         | Comprehensive   |  | Unitholders |           | Unitholders |   |      
|                                                  |                                               | Preference     |         | Preference  |  | Equity       |         | Earnings/(Loss) |  | Equity       |           | Interest     |   | Total
|                                                  |                                               |                |         |             |  |              |         |                 |  |              |           |              |   |      
|                                                  |                                               |               
|                                                  |                                               | (In thousands)
|                                                  |                                               | (Unaudited)   
|Balances at December 31, 2002                     |                                               | $              | 194,671 |             |  | $            | 160,550 |                 |  | $            | 3,456,179 |              |   | $     | (12,339 | )      |   | $ | 3,799,061 |        |   | $ | 579,598 |        |  | $ | 4,378,659 |       
|Comprehensive income:                             |                                               |                |         |             |  |              |         |                 |  |              |           |              |   |       |         |        |   |   |           |        |   |   |         |        |  |   |           |       
|                                                  | Net earnings                                  |                |         |            |  |              |         |                |  |              |           | 85,508       |   |       |         |       |   |   |           | 85,508 |   |   |         | 12,350 |  |   |           | 97,858 |  
|                                                  | Preferred Unit distributions                  |                |         |            |  |              |         |                |  |              |           | (8,358       | ) |       |         |       |   |   |           | (8,358 | ) |   |         |       |  |   |           | (8,358 | )
|                                                  | Change in fair value of cash flow hedges      |                |         |            |  |              |         |                |  |              |           |             |   |       |         | (10    | ) |   |           | (10    | ) |   |         |       |  |   |           | (10    | )
|                                                  | Change in fair value of marketable securities |                |         |            |  |              |         |                |  |              |           |             |   |       |         | (6,636 | ) |   |           | (6,636 | ) |   |         |       |  |   |           | (6,636 | )
|                                                  |                                               |                |         |             |  |              |         |                 |  |              |           |              |   |       |         |        |   |   |           |        |   |   |         |        |  |   |           |       
|Comprehensive income attributable to Common Units |                                               |                |         |             |  |              |         |                 |  |              |           |              |   |       |         |        |   |   |           |        |   |   |         |        |  |   | 82,854    |       
|                                                  |                                               |                |         |             |  |              |         |                 |  |              |           |              |   |       |         |        |   |   |           |        |   |   |         |        |  |   |           |       
|A-1 Common Units converted into A-2 Common Units  |                                               |                |        |             |  |              |        |                 |  |              | 15,632    |              |   |       |        |        |   |   | 15,632    |        |   |   | (15,632 | )      |  |   |          |       
|Common Unit repurchases                           |                                               |                |        |             |  |              |        |                 |  |              | (13,163   | )            |   |       |        |        |   |   | (13,163   | )      |   |   |        |        |  |   | (13,163   | )     
|Preferred Unit repurchases                        |                                               |                |        |             |  |              | (187    | )               |  |              | (11       | )            |   |       |        |        |   |   | (198      | )      |   |   |        |        |  |   | (198      | )     
|Proceeds from Dividend Reinvestment Plan (DRIP)   |                                               |                |        |             |  |              |        |                 |  |              | 15,090    |              |   |       |        |        |   |   | 15,090    |        |   |   |        |        |  |   | 15,090    |       
|Issuance of A-1 Common Units                      |                                               |                |         |             |  |              |         |                 |  |              |           |              |   |       |         |        |   |   |           |        |   |   | 33,355  |        |  |   | 33,355    |       
|Adjustment to redemption value                    |                                               |                |        |             |  |              |        |                 |  |              | 54,757    |              |   |       |        |        |   |   | 54,757    |        |   |   | (54,757 | )      |  |   |          |       
|Other, net                                        |                                               |                | (5      | )           |  |              |        |                 |  |              | 4,046     |              |   |       |        |        |   |   | 4,041     |        |   |   |        |        |  |   | 4,041     |       
|                                                  |                                               |                |         |             |  |              |         |                 |  |              |           |              |   |       |         |        |   |   |           |        |   |   |         |        |  |   |           |       
|Balances at March 31, 2003                        |                                               | $              | 94,666  |             |  | $            | 160,363 |                 |  | $            | 3,609,680 |              |   | $     | (18,985 | )      |   | $ | 3,945,724 |        |   | $ | 554,914 |        |  | $ | 4,500,638 |       
|                                                  |                                               |                |         |             |  |              |         |                 |  |              |           |              |   |       |         |        |   |   |           |        |   |   |         |        |  |   |           |       

The accompanying notes are an integral part of
these condensed consolidated financial statements.

5



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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST






CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS


|                                                             |                                                                                              |                                                              |        |         |          |   |        |          |          |  
|------------------------------------------------------------ | -------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | ------ | ------- | -------- | - | ------ | -------- | -------- | -
|                                                             |                                                                                              |                                                             
|                                                             |                                                                                              | Three Months Ended                                          
|                                                             |                                                                                              | March 31,                                                   
|                                                             |                                                                                              |                                                             
|                                                             |                                                                                              | 2003                                                         |        | 2002   
|                                                             |                                                                                              |                                                              |        |        
|                                                             |                                                                                              |                                                             
|                                                             |                                                                                              | (In thousands)                                              
|                                                             |                                                                                              | (Unaudited)                                                 
|Operating activities:                                        |                                                                                              |                                                              |        |         |          |   |        |         
|                                                             | Net earnings                                                                                 |                                                              | $      | 97,858  |          |   | $      | 66,375   |         
|                                                             | Adjustments to reconcile net earnings to net cash
    flow provided by operating activities: |                                                              |        |         |          |   |        |          |         
|                                                             |                                                                                              | Depreciation and amortization                                |        |         | 51,916   |   |        |          | 48,645   |  
|                                                             |                                                                                              | Gains on dispositions of depreciated real estate,
    net    |        |         | (44,736  | ) |        |          | (1,281   | )
|                                                             |                                                                                              | Provision for possible loss on real estate
    investments   |        |         | 3,714    |   |        |          |         |  
|                                                             |                                                                                              | Minority interest                                            |        |         | (90      | ) |        |          | 1,937    |  
|                                                             | Change in other assets                                                                       |                                                              |        | (6,777  | )        |   |        | (5,348   | )       
|                                                             | Change in accounts payable, accrued expenses and
    other liabilities                       |                                                              |        | (21,183 | )        |   |        | (3,185   | )       
|                                                             | Other, net                                                                                   |                                                              |        | (395    | )        |   |        | 976      |         
|                                                             |                                                                                              |                                                              |        |         |          |   |        |         
|                                                             |                                                                                              | Net cash flow provided by operating activities               |        |         | 80,307   |   |        |          | 108,119  |  
|                                                             |                                                                                              |                                                              |        |         |          |   |        |         
|Investing activities:                                        |                                                                                              |                                                              |        |         |          |   |        |         
|                                                             | Real estate investments                                                                      |                                                              |        | (83,069 | )        |   |        | (140,047 | )       
|                                                             | Change in investments in and advances to
    unconsolidated entities, net                    |                                                              |        | 11,288  |          |   |        | (56,811  | )       
|                                                             | Proceeds from dispositions, net of closing costs                                             |                                                              |        | 129,356 |          |   |        | 19,239   |         
|                                                             | Change in tax-deferred exchange escrow                                                       |                                                              |        | (48     | )        |   |        | 45,019   |         
|                                                             | Other, net                                                                                   |                                                              |        | (31,857 | )        |   |        | (17,563  | )       
|                                                             |                                                                                              |                                                              |        |         |          |   |        |         
|                                                             |                                                                                              | Net cash flow provided by (used in) investing
    activities |        |         | 25,670   |   |        |          | (150,163 | )
|                                                             |                                                                                              |                                                              |        |         |          |   |        |         
|Financing activities:                                        |                                                                                              |                                                              |        |         |          |   |        |         
|                                                             | Proceeds from Long-Term Unsecured Debt, net of
    issuance costs                            |                                                              |        |        |          |   |        | 198,570  |         
|                                                             | Payments on Long-Term Unsecured Debt                                                         |                                                              |        | (18,750 | )        |   |        | (12,500  | )       
|                                                             | Principal prepayment of mortgages payable,
    including prepayment penalties                |                                                              |        | (30,236 | )        |   |        | (100,295 | )       
|                                                             | Regularly scheduled principal payments on
    mortgages payable                              |                                                              |        | (2,501  | )        |   |        | (2,266   | )       
|                                                             | Proceeds from unsecured credit facilities, net                                               |                                                              |        | 44,032  |          |   |        | 45,830   |         
|                                                             | Proceeds from Common Units issued under DRIP and
    employee stock options                  |                                                              |        | 20,544  |          |   |        | 4,292    |         
|                                                             | Repurchase of Common Units and Preferred Units                                               |                                                              |        | (13,361 | )        |   |        |         |         
|                                                             | Cash distributions paid on Common Units                                                      |                                                              |        | (88,224 | )        |   |        | (84,942  | )       
|                                                             | Cash distributions paid on Preferred Units                                                   |                                                              |        | (8,358  | )        |   |        | (8,759   | )       
|                                                             | Cash distributions paid to minority interests                                                |                                                              |        |        |          |   |        | (1,937   | )       
|                                                             | Other, net                                                                                   |                                                              |        | (7,928  | )        |   |        | 8,725    |         
|                                                             |                                                                                              |                                                              |        |         |          |   |        |         
|                                                             |                                                                                              | Net cash flow (used in) provided by financing
    activities |        |         | (104,782 | ) |        |          | 46,718   |  
|                                                             |                                                                                              |                                                              |        |         |          |   |        |         
|Net change in cash and cash equivalents                      |                                                                                              |                                                              | 1,195  |         |          |   | 4,674  |         
|Cash and cash equivalents at beginning of period             |                                                                                              |                                                              | 12,846 |         |          |   | 7,027  |         
|                                                             |                                                                                              |                                                              |        |         |          |   |        |         
|Cash and cash equivalents at end of period                   |                                                                                              | $                                                            | 14,041 |         |          | $ | 11,701 |         
|                                                             |                                                                                              |                                                              |        |         |          |   |        |         
|Significant non-cash investing and financing
    activities: |                                                                                              |                                                              |        |         |          |   |        |         
|                                                             | Apartment communities in development contributed
    to Ameriton                             |                                                              | $      | 56,026  |          |   | $      |         |         
|                                                             | A-1 Common Units issued in exchange for land                                                 |                                                              |        | 33,355  |          |   |        |         |         
|                                                             | Assumption of mortgages payable upon purchase of
    apartment communities                   |                                                              |        |        |          |   |        | 18,330   |         
|                                                             | A-1 Common Units converted to Common Units                                                   |                                                              |        | 15,632  |          |   |        | 10,900   |         

The accompanying notes are an integral part of
these condensed consolidated financial statements.

6



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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST






NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS


March 31, 2003 and 2002


(Unaudited)




|    |                                                                               
|--- | ------------------------------------------------------------------------------
|(1) | Description of the Business and Summary of
    Significant Accounting Policies



| |         
| | --------
| | Business

We are structured as an UPREIT under which
substantially all property ownership and business operations are
conducted through the Operating Trust. Archstone-Smith is our
sole trustee and owns approximately 87.8% of the Operating
Trust. As used herein, we, our and the
company refers to the Operating Trust and
Archstone-Smith, collectively, except where the context
otherwise requires.



| |             
| | ------------
| | Smith Merger

In October 2001, Archstone Communities Trust
converted into an UPREIT structure, changed its name to
Archstone-Smith Operating Trust (the Operating
Trust) and became a wholly owned subsidiary of
Archstone-Smith. Through a series of transactions,
Archstone-Smith and Archstone merged with Charles E. Smith
Residential Realty, Inc. and Charles E. Smith Residential
Realty, L.P., respectively. Archstone-Smith is the successor
registrant to Archstone. The Smith Merger was structured as a
tax-free merger and was accounted for using the purchase method
of accounting. See Note 2 in our Annual Report on
Form 10-K (2002 Form 10-K) for a more
complete description of the reorganization and the Smith Merger.



| |                            
| | ---------------------------
| | Interim Financial Reporting

The accompanying condensed consolidated financial
statements of the Operating Trust are unaudited and certain
information and footnote disclosures normally included in
financial statements have been omitted. While management
believes that the disclosures presented are adequate for interim
reporting, these interim financial statements should be read in
conjunction with the financial statements and notes included in
our 2002 Form 10-K. See the glossary in our 2002
Form 10-K for all defined terms not defined herein.

In the opinion of management, the accompanying
unaudited financial statements contain all adjustments necessary
for a fair presentation of the Operating Trusts financial
statements for the interim periods presented. The results of
operations for the three months ended March 31, 2003 and
2002 are not necessarily indicative of the results to be
expected for the entire year.



| |                 
| | ----------------
| | Use of Estimates

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates
and assumptions that affect amounts reported in the financial
statements and the related notes. Actual results could differ
from those estimates. Estimates and assumptions are reviewed
periodically and the effects of revisions are reflected in the
period they are determined to be necessary.



| |                                                     
| | ----------------------------------------------------
| | Moisture Infiltration and Mold Remediation
    Costs

We estimate and accrue costs related to the
correction of moisture infiltration and related mold remediation
when we anticipate incurring such remediation costs because of
the assertion of a legal claim or threatened litigation. When we
incur remediation costs at our own discretion, the cost is
recognized as incurred. Moisture infiltration and resulting mold
remediation costs are only capitalized, subject to
recoverability, when it is determined by management that such
remediation costs also extend the life, increase the capacity,
or improve the safety or efficiency of the property relative to
when the community was originally constructed or acquired, if
later. All other related costs are expensed.

7



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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                         
| | ------------------------
| | Stock-Based Compensation

As of March 31, 2003, the company has one
stock-based employee compensation plan. Effective
January 1, 2003, the company adopted the fair value
recognition provision of FASB Statement No. 123,
Accounting for Stock-Based Compensation,
prospectively to all employee awards granted, modified or
settled after January 1, 2003, which results in expensing
of options. There were no significant employee awards granted
during the first quarter of 2003. For employee awards granted
prior to January 1, 2003, the company accounted for this
plan under the recognition and measurement provisions of APB
Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations. With respect
to options granted under the plan prior to January 1, 2003,
no stock-based employee compensation expense is reflected in the
accompanying condensed consolidated statements of earnings, as
all options granted under those plans had an exercise price
equal to the market value of the underlying common stock on the
date of grant. The following table illustrates the effect on net
earnings and earnings per unit if the fair value based method
had been applied to all outstanding and unvested awards in each
period (dollar amounts in thousands, except per unit amounts):

|                                                                                                                    |                       |                    |           |      |  |   |           |      | 
|------------------------------------------------------------------------------------------------------------------- | --------------------- | ------------------ | --------- | ---- |  | - | --------- | ---- | 
|                                                                                                                    |                       |                   
|                                                                                                                    |                       | Three Months Ended
|                                                                                                                    |                       | March 31,         
|                                                                                                                    |                       |                   
|                                                                                                                    |                       | 2003               |           | 2002
|                                                                                                                    |                       |                    |           |     
|Net earnings attributable to Common
    Units  Basic                                                               |                       | $                  | 89,500    |      |  | $ | 57,616    |     
|Add: Stock-based employee compensation expense
    included in reported net earnings                                |                       |                    |          |      |  |   |          |     
|Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards |                       |                    | (505      | )    |  |   | (474      | )   
|                                                                                                                    |                       |                    |           |      |  |   |           |     
|Pro forma net earnings attributable to Common
    Units  Basic                                                     |                       | $                  | 88,995    |      |  | $ | 57,142    |     
|                                                                                                                    |                       |                    |           |      |  |   |           |     
|Net earnings per Common Unit:                                                                                       |                       |                    |           |      |  |   |           |     
|                                                                                                                    | Basic  as reported   |                    | $         | 0.43 |  |   | $         | 0.29 | 
|                                                                                                                    |                       |                    |           |      |  |   |           |     
|                                                                                                                    | Basic  pro forma     |                    | $         | 0.43 |  |   | $         | 0.29 | 
|                                                                                                                    |                       |                    |           |      |  |   |           |     
|                                                                                                                    | Diluted  as reported |                    | $         | 0.43 |  |   | $         | 0.29 | 
|                                                                                                                    |                       |                    |           |      |  |   |           |     
|                                                                                                                    | Diluted  pro forma   |                    | $         | 0.43 |  |   | $         | 0.28 | 
|                                                                                                                    |                       |                    |           |      |  |   |           |     
|Weighted average risk-free interest rate                                                                            |                       |                    | 3.54      | %    |  |   | 4.06      | %   
|Weighted average distribution yield                                                                                 |                       |                    | 6.74      | %    |  |   | 6.79      | %   
|Weighted average volatility                                                                                         |                       |                    | 19.58     | %    |  |   | 15.67     | %   
|Weighted average expected option life                                                                               |                       |                    | 5.0 years |      |  |   | 5.0 years |     



| |                              
| | -----------------------------
| | New Accounting Pronouncements

In July 2002, the FASB issued SFAS 146
Accounting for Costs Associated with Exit or Disposal
Activities. We adopted SFAS 146 on
January 1, 2003. SFAS 146 requires that certain
expenses associated with restructuring charges be accrued as
liabilities in the period in which the liability is incurred.
The adoption of SFAS 146 did not have a material impact on
our financial position, net earnings or cash flows.

In November 2002, the FASB issued Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements
No. 5, 57 and 107 and a rescission of FASB Interpretation
No. 34. This Interpretation elaborates on the
disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under guarantees
issued. The Interpretation also clarifies that a guarantor is
required to recognize, at inception of a guarantee, a liability
for the fair value of the obligation undertaken. The initial
recognition and

8



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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

measurement provisions of the Interpretation are
applicable to guarantees issued or modified after
December 31, 2002. The adoption of the Interpretation did
not have a material impact on our financial position, net
earnings or cash flows.

In January 2003, the FASB issued Interpretation
No. 46 Consolidation of Variable Interest
Entities. We are required to adopt the Interpretation
for financial statements for the fiscal year or interim period
beginning after June 15, 2003. This Interpretation
clarifies the application of Accounting Research Bulletin
No. 51, Consolidated Financial
Statements, and requires that we consolidate the
results of variable interest entities in which we have a
majority variable interest. Although we have not yet determined
the total impact of adopting the Interpretation, we expect to
consolidate the results of Ameriton in the third quarter of 2003.



| |                  
| | -----------------
| | Reclassifications

Certain 2002 amounts have been reclassified to
conform to the 2003 presentation.



| |              
| | -------------
| | Per Unit Data

Following is a reconciliation of basic net
earnings attributable to Common Units to diluted net earnings
attributable to Common Units for the periods indicated (in
thousands):

|                                                                                             |                                                                         |                    |         |        |  |   |         |       | 
|-------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------ | ------- | ------ |  | - | ------- | ----- | 
|                                                                                             |                                                                         |                   
|                                                                                             |                                                                         | Three Months Ended
|                                                                                             |                                                                         | March 31,         
|                                                                                             |                                                                         |                   
|                                                                                             |                                                                         | 2003               |         | 2002  
|                                                                                             |                                                                         |                    |         |       
|Reconciliation of numerator between basic and
    diluted net earnings per Common Unit(1):   |                                                                         |                    |         |        |  |   |         |      
|Net earnings attributable to Common
    Units  Basic                                        |                                                                         | $                  | 89,500  |        |  | $ | 57,616  |      
|                                                                                             | Distributions on Convertible Preferred Units                            |                    |         | 5,011  |  |   |         |      | 
|                                                                                             |                                                                         |                    |         |        |  |   |         |      
|Net earnings attributable to Common
    Units  Diluted                                      |                                                                         | $                  | 94,511  |        |  | $ | 57,616  |      
|                                                                                             |                                                                         |                    |         |        |  |   |         |      
|Reconciliation of denominator between basic
    and diluted net earnings per Common Unit(1): |                                                                         |                    |         |        |  |   |         |      
|Weighted average number of Common Units
    outstanding  Basic                              |                                                                         |                    | 206,886 |        |  |   | 200,293 |      
|                                                                                             | Assumed conversion of Convertible Preferred Units
    into Common Units |                    |         | 11,739 |  |   |         |      | 
|                                                                                             | Assumed exercise of options                                             |                    |         | 428    |  |   |         | 1,531 | 
|                                                                                             |                                                                         |                    |         |        |  |   |         |      
|Weighted average number of Common Units
    outstanding  Diluted                            |                                                                         |                    | 219,053 |        |  |   | 201,824 |      
|                                                                                             |                                                                         |                    |         |        |  |   |         |      



---



|    |                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------
|(1) | Excludes the impact of potentially dilutive
    equity securities during periods in which they are anti-dilutive.

9



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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |            
|--- | -----------
|(2) | Real Estate



| |                           
| | --------------------------
| | Investments in Real Estate

Investments in real estate, at cost, were as
follows (dollar amounts in thousands):

|                        |                                      |                  |                                           |                             |        |            |           |          |       |       |        |           |        |        |           |        |       |       |        | 
|----------------------- | ------------------------------------ | ---------------- | ----------------------------------------- | --------------------------- | ------ | ---------- | --------- | -------- | ----- | ----- | ------ | --------- | ------ | ------ | --------- | ------ | ----- | ----- | ------ | 
|                        |                                      |                  |                                           |                            
|                        |                                      | March 31, 2003   |                                           | December 31, 2002          
|                        |                                      |                  |                                           |                            
|                        |                                      | Investment       |                                           | Units(1)                    |        | Investment |           | Units(1)
|                        |                                      |                  |                                           |                             |        |            |           |         
|Apartment Communities:  |                                      |                  |                                           |                             |        |            |           |          |       |       |        |           |        |        |           |       
|                        | Operating communities                |                  | $                                         | 8,338,893                   |        |            |           | 74,052   |       |       | $      | 8,380,779 |        |        |           | 75,693 |      
|                        | Communities under construction       |                  |                                           | 333,752                     |        |            |           | 2,501    |       |       |        | 328,390   |        |        |           | 2,295  |      
|                        | Development communities In Planning: |                  |                                           |                             |        |            |           |          |       |       |        |           |        |        |           |        |      
|                        |                                      | Owned            |                                           |                             | 71,844 |            |           |          | 2,157 |       |        |           | 89,501 |        |           |        | 2,870 |      
|                        |                                      | Under control(2) |                                           |                             |       |            |           |          | 1,370 |       |        |           |       |        |           |        | 428   |      
|                        |                                      |                  |                                           |                             |        |            |           |          |       |       |        |           |        |        |           |       
|                        |                                      |                  | Total development communities In Planning |                             |        | 71,844     |           |          |       | 3,527 |        |           |        | 89,501 |           |        |       | 3,298 |       
|                        |                                      |                  |                                           |                             |        |            |           |          |       |       |        |           |        |        |           |       
|                        |                                      |                  |                                           | Total apartment communities |        |            | 8,744,489 |          |       |       | 80,080 |           |        |        | 8,798,670 |        |       |       | 81,286 | 
|                        |                                      |                  |                                           |                             |        |            |           |          |       |       |        |           |        |        |           |       
|Retail, hotel and other |                                      |                  | 40,110                                    |                             |        |            |           |          |       |       | 40,151 |           |        |        |           |       
|                        |                                      |                  |                                           |                             |        |            |           |          |       |       |        |           |        |        |           |       
|                        |                                      |                  |                                           | Total real estate           |        | $          | 8,784,599 |          |       |       |        |           |        | $      | 8,838,821 |        |       |       |        | 
|                        |                                      |                  |                                           |                             |        |            |           |          |       |       |        |           |        |        |           |       



---



|    |                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Unit information is based on managements
    estimates and has not been audited or reviewed by our
    independent auditors.                                                                                                 
|   
|(2) | Our investment as of March 31, 2003 and
    December 31, 2002 for developments Under Control was
    $6.5 million and $2.7 million, respectively and is
    reflected on the Other assets caption of our Balance
    Sheets.

The change in investments in real estate, at
cost, consisted of the following (in thousands):

|                             |                        |                                                            |           |  |         |  
|---------------------------- | ---------------------- | ---------------------------------------------------------- | --------- |  | ------- | -
|Balance at December 31, 2002 |                        | $                                                          | 8,838,821 | 
|                             | Apartment communities: |                                                            |           |  |        
|                             |                        | Acquisition-related expenditures                           |           |  | 44,810  |  
|                             |                        | Redevelopment expenditures                                 |           |  | 8,283   |  
|                             |                        | Recurring capital expenditures                             |           |  | 5,497   |  
|                             |                        | Development expenditures, excluding land
    acquisitions  |           |  | 45,039  |  
|                             |                        | Dispositions                                               |           |  | (98,111 | )
|                             |                        | Transfers to Ameriton                                      |           |  | (56,026 | )
|                             |                        | Provision for possible loss on real estate
    investments |           |  | (3,714  | )
|                             |                        |                                                            |           | 
|Balance at March 31, 2003    |                        | $                                                          | 8,784,599 | 
|                             |                        |                                                            |           | 

At March 31, 2003, we had unfunded
contractual commitments related to real estate investment
activities aggregating approximately $235.5 million, of
which $202.3 million related to communities under
construction.



|    |                        
|--- | -----------------------
|(3) | Discontinued Operations

At March 31, 2003, we had 24 operating
apartment communities classified as held for sale under the
provisions of SFAS 144. Accordingly, we have classified the
operating earnings from these 24 properties within
discontinued operations for the three months ended
March 31, 2003 and 2002. During the three months ended
March 31, 2003, we sold six operating communities. The
operating results of these six communities before the

10



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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

sale and the related gain/loss on sale are also
included in discontinued operations for both 2003 and 2002.
Lastly, discontinued operations for the three months ended
March 31, 2002, include the net operating results of eight
operating communities and one retail property which were sold
during the last three quarters of 2002. All of the apartment
communities sold during the three months ended March 31,
2002 were held for sale at December 31, 2001, and therefore
gains on these dispositions are not classified as discontinued
operations in accordance with SFAS 144. The following is a
summary of net earnings from discontinued operations (in
thousands):

|                                                           |  |                    |        |      |  |   |        |  
|---------------------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | -
|                                                           |  |                   
|                                                           |  | Three Months Ended
|                                                           |  | March 31,         
|                                                           |  |                   
|                                                           |  | 2003               |        | 2002
|                                                           |  |                    |        |     
|Rental revenues                                            |  | $                  | 21,706 |      |  | $ | 31,516 |  
|Rental expenses                                            |  |                    | (6,822 | )    |  |   | (9,517 | )
|Real estate taxes                                          |  |                    | (2,532 | )    |  |   | (3,120 | )
|Depreciation on real estate investments                    |  |                    | (2,223 | )    |  |   | (4,707 | )
|Interest expense(1)                                        |  |                    | (4,677 | )    |  |   | (7,493 | )
|Provision for possible loss on real estate
    investments |  |                    | (3,714 | )    |  |   |       |  
|Gains on dispositions of real estate investments,
    net  |  |                    | 44,736 |      |  |   |       |  
|                                                           |  |                    |        |      |  |   |        |  
|Net earnings from discontinued apartment
    communities   |  | $                  | 46,474 |      |  | $ | 6,679  |  
|                                                           |  |                    |        |      |  |   |        |  



---



|    |                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The portion of interest expense included in
    discontinued operations that is allocated to properties based on
    the companys leverage ratio was $3.7 million and
    $5.1 million for the three months ended March 31, 2003
    and 2002, respectively.

Assets classified as held for sale, pursuant to
SFAS 144 at March 31, 2003, had aggregate carrying value of
$556.4 million with $97.8 million of secured debt. The
estimated proceeds less anticipated costs to sell for three
assets were less than the net book value, and therefore a
provision for possible loss of $3.7 million was recorded.



|    |                                                           
|--- | ----------------------------------------------------------
|(4) | Investments in and Advances to Unconsolidated
    Entities

We have investments in entities that we account
for using the equity method. Following is a summary of these
investments (in thousands):

|                                       |  |           |         |              |  |   |         | 
|-------------------------------------- |  | --------- | ------- | ------------ |  | - | ------- | 
|                                       |  | March 31, |         | December 31,
|                                       |  | 2003      |         | 2002        
|                                       |  |           |         |             
|Ameriton                               |  | $         | 340,267 |              |  | $ | 292,043 | 
|Smith Management Construction (SMC)(1) |  |           |        |              |  |   |        | 
|Real estate joint ventures             |  |           | 51,417  |              |  |   | 54,903  | 
|                                       |  |           |         |              |  |   |         | 
|                                       |  | $         | 391,684 |              |  | $ | 346,946 | 
|                                       |  |           |         |              |  |   |         | 



---



|    |                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | SMC was sold to members of SMCs management
    in February 2003; see details below. Cash distributions exceeded
    investments in and advances to SMC at December 31, 2002,
    therefore the investment balance was zero.

We have a $10 million committed unsecured
credit facility with Ameriton to facilitate working capital
advances, with $5.6 million available at March 31,
2003. We also have an uncommitted unsecured credit facility with
Ameriton, with $113.1 million of available capacity at
March 31, 2003. Advances to Ameriton under this uncommitted
facility are made solely at our discretion. During the three
months ended March 31, 2003, we contributed two non-core
development communities under construction to Ameriton at their
current cost basis of $56.0 million.

11



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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                                
| | -----------------------------------------------
| | Sale of Smith Management Construction,
    Inc.

Smith Management Construction, Inc. is a service
business that we acquired in the Smith Merger in 2001. Prior to
the business being sold to SMCs senior management on
February 23, 2003, SMC had been reported as an
unconsolidated entity in our financial statements. We received
two notes receivable totaling $5.8 million and bearing an
interest rate of 7.0% as consideration for the sale. The first
note for $3.5 million has principal payments beginning in
August 2003 with payment in full by February 2008. The second
note for $2.3 million will be repaid in equal monthly
installments by August 2003. For accounting purposes, we will
not recognize the divestiture until our responsibilities for
certain performance guarantees expire and we collect sufficient
cash from the notes receivable. Principal and interest payments
received prior to the recognition of this transaction as a
divestiture will be recorded as reduction to our investment
basis, which is included in other assets in the accompanying
condensed consolidated balance sheets.



|    |           
|--- | ----------
|(5) | Borrowings



| |                            
| | ---------------------------
| | Unsecured Credit Facilities

The following table summarizes our
$700 million unsecured revolving credit facility borrowings
(in thousands, except for percentages):

|                                                  |  |                   |         |                   |  |   |         |  
|------------------------------------------------- |  | ----------------- | ------- | ----------------- |  | - | ------- | -
|                                                  |  | As of and for the |         | As of and for the
|                                                  |  | Quarter Ended     |         | Year Ended       
|                                                  |  | March 31, 2003    |         | December 31, 2002
|                                                  |  |                   |         |                  
|Total unsecured revolving credit facility         |  | $                 | 700,000 |                   |  | $ | 700,000 |  
|Borrowings outstanding at end of period           |  |                   | 404,500 |                   |  |   | 348,500 |  
|Outstanding letters of credit under this facility |  |                   | 1,795   |                   |  |   | 11,890  |  
|Weighted average daily borrowings                 |  |                   | 384,367 |                   |  |   | 248,398 |  
|Maximum borrowings outstanding during the period  |  |                   | 461,500 |                   |  |   | 465,000 |  
|Weighted average daily nominal interest rate      |  |                   | 2.04    | %                 |  |   | 2.26    | %
|Weighted average daily effective interest rate    |  |                   | 2.70    | %                 |  |   | 3.08    | %

We also have a short-term unsecured borrowing
agreement with JPMorgan Chase Bank, which provides for maximum
borrowings of $100 million. The agreement bears interest at
an overnight rate that ranged from 1.85% to 1.95% during the
three months ended March 31, 2003. At March 31, 2003
and December 31, 2002, there were $5.1 million and
$17.1 million of borrowings outstanding under this
agreement, respectively.



| |                         
| | ------------------------
| | Long-Term Unsecured Debt

Following is a summary of our Long-Term Unsecured
Debt (dollar amounts in thousands):

|                                 |                |         |      |           |   |            |       |              |  |              |           |           |  |   |           |           |  |  |      |     | 
|-------------------------------- | -------------- | ------- | ---- | --------- | - | ---------- | ----- | ------------ |  | ------------ | --------- | --------- |  | - | --------- | --------- |  |  | ---- | --- | 
|                                 |                |         |      | Effective |   | Balance at |       | Balance at   |  | Average     
|                                 |                | Coupon  |      | Interest  |   | March 31,  |       | December 31, |  | Remaining   
|Type of Debt                     |                | Rate(1) |      | Rate(2)   |   | 2003       |       | 2002         |  | Life (Years)
|                                 |                |         |      |           |   |            |       |              |  |             
|Long-term unsecured senior notes |                |         | 6.92 | %         |   |            | 7.06% |              |  | $            | 1,673,900 |           |  | $ | 1,692,727 |           |  |  | 5.8  |    
|Unsecured tax-exempt bonds       |                |         | 1.72 | %         |   |            | 1.96% |              |  |              | 78,322    |           |  |   | 83,376    |           |  |  | 26.2 |    
|                                 |                |         |      |           |   |            |       |              |  |              |           |           |  |   |           |           |  |  |      |    
|                                 | Total/ average |         |      | 6.69      | % |            |       | 6.83%        |  |              | $         | 1,752,222 |  |   | $         | 1,776,103 |  |  |      | 6.7 | 
|                                 |                |         |      |           |   |            |       |              |  |              |           |           |  |   |           |           |  |  |      |    



---



|    |                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents a fixed rate for the long-term
    unsecured notes and a variable rate for the unsecured tax-exempt
    bonds.                                    
|   
|(2) | Represents the effective interest rate, including
    interest rate hedges, loan cost amortization and other ongoing
    fees and expenses, where applicable.

12



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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                  
| | -----------------
| | Mortgages payable

Our mortgages payable generally feature either
monthly interest and principal payments or monthly interest-only
payments with balloon payments due at maturity. Following is a
summary of our mortgages payable (dollar amounts in thousands):

|                                   |                              |           |      |                         |   |              |           |           |  |   |           |           | 
|---------------------------------- | ---------------------------- | --------- | ---- | ----------------------- | - | ------------ | --------- | --------- |  | - | --------- | --------- | 
|                                   |                              |           |      |                        
|                                   |                              |           |      | Principal Balance(2) at
|                                   |                              | Effective |      |                        
|                                   |                              | Interest  |      | March 31,               |   | December 31,
|Type of Mortgage                   |                              | Rate(1)   |      | 2003                    |   | 2002        
|                                   |                              |           |      |                         |   |             
|Fannie Mae secured debt            |                              |           | 6.55 | %                       |   | $            | 539,838   |           |  | $ | 540,364   |          
|Freddie Mac secured line of credit |                              |           | 2.13 | %                       |   |              | 10,725    |           |  |   | 10,725    |          
|Conventional fixed rate            |                              |           | 6.40 | %                       |   |              | 1,020,646 |           |  |   | 1,054,750 |          
|Tax-exempt fixed rate              |                              |           | 7.26 | %                       |   |              | 6,992     |           |  |   | 7,035     |          
|Tax-exempt floating rate           |                              |           | 2.01 | %                       |   |              | 327,528   |           |  |   | 325,103   |          
|Other                              |                              |           | 4.95 | %                       |   |              | 22,619    |           |  |   | 22,850    |          
|                                   |                              |           |      |                         |   |              |           |           |  |   |           |          
|                                   | Total/ average mortgage debt |           |      | 5.66                    | % |              | $         | 1,928,348 |  |   | $         | 1,960,827 | 
|                                   |                              |           |      |                         |   |              |           |           |  |   |           |          



---



|    |                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes the effect of fair value hedges, credit
    enhancement fees, the amortization of fair market value purchase
    adjustment, and other related costs, where applicable as of
    March 31, 2003.
|   
|(2) | Includes net fair market value adjustment
    recorded in connection with the Smith Merger of
    $67.0 million and $69.7 million at March 31, 2003
    and December 31, 2002, respectively.             

The change in mortgages payable during the three
months ended March 31, 2003 consisted of the following (in
thousands):

|                             |                                            |   |           |         |  
|---------------------------- | ------------------------------------------ | - | --------- | ------- | -
|Balance at December 31, 2002 |                                            | $ | 1,960,827 |        
|                             | Regularly scheduled principal amortization |   |           | (2,501  | )
|                             | Prepayments, final maturities and other    |   |           | (29,978 | )
|                             |                                            |   |           |        
|Balance at March 31, 2003    |                                            | $ | 1,928,348 |        
|                             |                                            |   |           |        



| |      
| | -----
| | Other

Our debt instruments generally contain certain
covenants common to the type of facility or borrowing, including
financial covenants establishing minimum debt service coverage
ratios and maximum leverage ratios. We were in compliance with
all financial covenants pertaining to our debt instruments
during the three month period ended March 31, 2003.

For the three months ended March 31, 2003
and 2002, the total interest paid on all outstanding debt was
$48.0 million and $69.9 million, respectively. We
capitalize interest incurred during the construction period as
part of the cost of apartment communities under development.
Interest capitalized during the three months ended
March 31, 2003 and 2002 was $4.5 million and
$5.6 million, respectively.

13



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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                             
|--- | ----------------------------
|(6) | Distributions to Unitholders

The following table summarizes the quarterly cash
distributions paid per unit on Common and Preferred Units during
the three months ended March 31, 2003 and the annualized
distribution we expect to pay for 2003:

|                                     |  |                   |        |                   |  |   |       | 
|------------------------------------ |  | ----------------- | ------ | ----------------- |  | - | ----- | 
|                                     |  | Quarterly         |        | Annualized       
|                                     |  | Cash Distribution |        | Cash Distribution
|                                     |  | Per Unit          |        | Per Unit         
|                                     |  |                   |        |                  
|Common Units and A-1 Units           |  | $                 | 0.4275 |                   |  | $ | 1.71  | 
|Series A Convertible Preferred Units |  |                   | 0.5750 |                   |  |   | 2.30  | 
|Series D Preferred Units             |  |                   | 0.5475 |                   |  |   | 2.19  | 
|Series E Preferred Units             |  |                   | 0.5225 |                   |  |   | 2.09  | 
|Series F Preferred Units             |  |                   | 0.5075 |                   |  |   | 2.03  | 
|Series G Preferred Units             |  |                   | 0.5400 |                   |  |   | 2.16  | 
|Series H Preferred Units             |  |                   | 0.8450 |                   |  |   | 3.38  | 
|Series I Preferred Units(1)          |  |                   | 1,915  |                   |  |   | 7,660 | 
|Series K Preferred Units             |  |                   | 0.8450 |                   |  |   | 3.38  | 
|Series L Preferred Units             |  |                   | 0.8450 |                   |  |   | 3.38  | 



---



|    |                                                                    
|--- | -------------------------------------------------------------------
|(1) | Series I Preferred Units have a par value of
    $100,000 per unit.



|    |             
|--- | ------------
|(7) | Segment Data

We define our garden communities and high-rise
properties each as individual operating segments. We have
determined that each of our garden communities and each of our
high-rise properties have similar economic characteristics and
also meet the other GAAP criteria, which permit the garden
communities and high-rise properties to be aggregated into two
reportable segments. Net Operating Income (NOI) is defined as
rental revenues less rental expenses and real estate taxes. We
rely on NOI for purposes of making decisions about resource
allocations and assessing segment performance. We also believe
NOI is a valuable means of comparing year-to-year property
performance.

Following are reconciliations of each reportable
segments (i) revenues to consolidated revenues;
(ii) NOI to consolidated earnings from operations; and
(iii) assets to consolidated assets, for the periods
indicated (in thousands):

|                                                   |                      |                                         |        |         |         |  |       |         |         | 
|-------------------------------------------------- | -------------------- | --------------------------------------- | ------ | ------- | ------- |  | ----- | ------- | ------- | 
|                                                   |                      |                                        
|                                                   |                      | Three Months Ended                     
|                                                   |                      | March 31,                              
|                                                   |                      |                                        
|                                                   |                      | 2003                                    |        | 2002   
|                                                   |                      |                                         |        |        
|Reportable apartment communities segment revenues: |                      |                                         |        |         |         |  |       |        
|                                                   | Garden communities   |                                         | $      | 144,070 |         |  | $     | 144,156 |        
|                                                   | High-rise properties |                                         |        | 89,348  |         |  |       | 83,921  |        
|Other non-reportable operating segment revenues    |                      |                                         | 13,214 |         |         |  | 6,737 |        
|                                                   |                      |                                         |        |         |         |  |       |        
|                                                   |                      | Total segment and consolidated revenues |        | $       | 246,632 |  |       | $       | 234,814 | 
|                                                   |                      |                                         |        |         |         |  |       |        

14



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##### Table of Contents



ARCHSTONE-SMITH OPERATING TRUST


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Concluded)

|                                              |                                         |                                       |     |         |         |  |     |         |         | 
|--------------------------------------------- | --------------------------------------- | ------------------------------------- | --- | ------- | ------- |  | --- | ------- | ------- | 
|                                              |                                         |                                      
|                                              |                                         | Three Months Ended                   
|                                              |                                         | March 31,                            
|                                              |                                         |                                      
|                                              |                                         | 2003                                  |     | 2002   
|                                              |                                         |                                       |     |        
|Reportable apartment communities segment NOI: |                                         |                                       |     |         |         |  |     |        
|                                              | Garden communities                      |                                       | $   | 96,764  |         |  | $   | 98,375  |        
|                                              | High-rise properties                    |                                       |     | 52,855  |         |  |     | 51,034  |        
|Other non-reportable operating segment NOI    |                                         |                                       | 556 |         |         |  | 361 |        
|                                              |                                         |                                       |     |         |         |  |     |        
|                                              |                                         | Total segment and consolidated NOI    |     |         | 150,175 |  |     |         | 149,770 | 
|                                              |                                         |                                       |     |         |         |  |     |        
|Reconciling items:                            |                                         |                                       |     |         |         |  |     |        
|                                              | Income from unconsolidated entities     |                                       |     | 5,350   |         |  |     | 4,776   |        
|                                              | Other income                            |                                       |     | 7,164   |         |  |     | 1,509   |        
|                                              | Depreciation on real estate investments |                                       |     | (48,014 | )       |  |     | (42,572 | )      
|                                              | Interest expense                        |                                       |     | (49,136 | )       |  |     | (41,434 | )      
|                                              | General and administrative expenses     |                                       |     | (12,182 | )       |  |     | (9,885  | )      
|                                              | Other expenses                          |                                       |     | (2,063  | )       |  |     | (1,812  | )      
|                                              |                                         |                                       |     |         |         |  |     |        
|                                              |                                         | Consolidated earnings from operations |     | $       | 51,294  |  |     | $       | 60,352  | 
|                                              |                                         |                                       |     |         |         |  |     |        

|                                                 |                                                           |                           |        |              |           |  |        |           |           | 
|------------------------------------------------ | --------------------------------------------------------- | ------------------------- | ------ | ------------ | --------- |  | ------ | --------- | --------- | 
|                                                 |                                                           | March 31,                 |        | December 31,
|                                                 |                                                           | 2003                      |        | 2002        
|                                                 |                                                           |                           |        |             
|Reportable operating communities segment assets: |                                                           |                           |        |              |           |  |        |          
|                                                 | Garden communities                                        |                           | $      | 4,626,682    |           |  | $      | 4,726,523 |          
|                                                 | High-rise properties                                      |                           |        | 3,509,780    |           |  |        | 3,500,900 |          
|Other non-reportable operating segment assets    |                                                           |                           | 40,110 |              |           |  | 40,151 |          
|                                                 |                                                           |                           |        |              |           |  |        |          
|                                                 |                                                           | Total segment assets      |        |              | 8,176,572 |  |        |           | 8,267,574 | 
|                                                 |                                                           |                           |        |              |           |  |        |          
|Reconciling items:                               |                                                           |                           |        |              |           |  |        |          
|                                                 | Investment in and advances to unconsolidated
    entities |                           |        | 391,684      |           |  |        | 346,946   |          
|                                                 | Cash and cash equivalents                                 |                           |        | 14,041       |           |  |        | 12,846    |          
|                                                 | Restricted cash in tax deferred exchange escrow           |                           |        | 48           |           |  |        |          |          
|                                                 | Other assets                                              |                           |        | 262,145      |           |  |        | 227,702   |          
|                                                 |                                                           |                           |        |              |           |  |        |          
|                                                 |                                                           | Consolidated total assets |        | $            | 8,844,490 |  |        | $         | 8,855,068 | 
|                                                 |                                                           |                           |        |              |           |  |        |          

Total capital expenditures for garden communities
were $4.7 million and $15.4 million for the three
months ended March 31, 2003 and 2002, respectively. Total
capital expenditures for high-rise properties were
$9.1 million and $30.2 million for the three months
ended March 31, 2003 and 2002, respectively.



|    |                 
|--- | ----------------
|(8) | Subsequent Event



| |                                                                                
| | -------------------------------------------------------------------------------
| | Redemption of the Series H Cumulative
    Convertible Perpetual Preferred Units

We have called for redemption of our
Series H Cumulative Convertible Preferred Units. The
Series H Preferred Units will be redeemed on May 15,
2003, unless such Series H Preferred Units are converted
into Common Units prior to the redemption date, at a price equal
to 1.975 Common Units for each Series H Preferred Unit
redeemed, plus accrued distributions through the redemption
date. We expect that all of the Series H Preferred Units
will be converted into Common Units.

15



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##### Table of Contents






INDEPENDENT ACCOUNTANTS REVIEW
REPORT

The Trustee and Unitholders

Archstone-Smith Operating Trust:


We have reviewed the accompanying condensed
consolidated balance sheet of Archstone-Smith Operating Trust
and subsidiaries as of March 31, 2003, and the related
condensed consolidated statements of earnings for the three
month periods ended March 31, 2003 and 2002, the condensed
consolidated statement of unitholders equity, other common
unitholders interest and comprehensive income for the
three month period ended March 31, 2003 and the condensed
consolidated statements of cash flows for the three month
periods ended March 31, 2003 and 2002. These condensed
consolidated financial statements are the responsibility of
Archstone-Smith Operating Trusts management.

We conducted our review in accordance with
standards established by the American Institute of Certified
Public Accountants. A review of interim financial information
consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
audit conducted in accordance with auditing standards generally
accepted in the United States of America, the objective of which
is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such
an opinion.

Based on our review, we are not aware of any
material modifications that should be made to the condensed
consolidated financial statements referred to above for them to
be in conformity with accounting principles generally accepted
in the United States of America.

We have previously audited, in accordance with
auditing standards generally accepted in the United States of
America, the consolidated balance sheet of Archstone-Smith
Operating Trust as of December 31, 2002, and the related
consolidated statements of earnings, unitholders equity,
other common unitholders interest and comprehensive
income, and cash flows for the year then ended (not presented
herein); and in our report dated January 24, 2003, except
as to Note 18, which is as of February 12, 2003, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of
December 31, 2002 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from
which it has been derived.



| |             
| | ------------
| | /s/ KPMG LLP

Denver, Colorado

April 18, 2003


16



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##### Table of Contents





|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

The following information should be read in
conjunction with Archstone-Smith Operating Trusts 2002
Form 10-K as well as the financial statements and notes
included in Item 1 of this report.

Forward-Looking Statements

Certain statements in this Form 10-Q that
are not historical facts are forward-looking
statements as that term is defined under the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements are based on our current expectations, beliefs,
assumptions, estimates and projections about the industry and
markets in which we operate. Words such as expects,
anticipates, intends, plans,
believes, seeks, estimates
and variations of such words and similar expressions are
intended to identify such forward-looking statements.
Information concerning expected investment balances, expected
funding sources, planned investments, forecasted dates and
revenue and expense growth assumptions are examples of
forward-looking statements. These statements are not guarantees
of future performance and involve certain risks, uncertainties
and assumptions, which are difficult to predict and many of
which are beyond our control. Therefore, actual outcomes and
results may differ materially from what is expressed, forecasted
or implied in such forward-looking statements. We undertake no
obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or
otherwise, except as required by applicable law.

Our operating results depend primarily on
income from apartment communities, which is substantially
influenced by supply and demand for apartment units, operating
expense levels, property level operations and the pace and price
at which we can develop, acquire or dispose of apartment
communities. Capital and credit market conditions, which affect
our cost of capital, also influence operating results. See
Archstone-Smith Operating Trusts 2002 Form 10-K
Item 1. Business for a more complete discussion
of risk factors that could impact our future financial
performance.

The Company

We are engaged primarily in the acquisition,
development, management and operation of apartment communities
throughout the United States. The company is structured as an
UPREIT, under which all property ownership and business
operations are conducted through the Operating Trust and our
subsidiaries and affiliates. Archstone-Smith is our sole trustee
and owns 87.8% of our Common Units.

Results of Operations



| |         
| | --------
| | Overview

Basic net earnings attributable to Common Units
increased $31.9 million during the three months ended
March 31, 2003 as compared to the same period in 2002. This
increase is primarily attributable to a $43.5 million
increase in gains on dispositions of real estate due to higher
disposition activity during the quarter, which was reported in
earnings from discontinued operations. This increase was
partially offset by:



| |   |                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A 3.9% decrease in NOI in our Same-Store
    portfolio, driven by 1.9% revenue decline and 2.1% expense
    growth (see Note 7 in our financial statements in this
    Quarterly Report for a definition and reconciliation of NOI to
    Earnings from Operations);                            
|
| |  | An increase in interest expense of
    $7.7 million primarily due to the issuance of long-term
    debt in 2002;                                                                                                                                                                                
|
| |  | A $5.4 million increase in depreciation
    expense, which is principally attributable to a greater
    allocation of depreciation expense to the discontinued
    operations classification during 2002 as compared to 2003, as
    well as acquisition and redevelopment activity in 2002; and
|
| |  | A $3.7 million provision for possible loss
    on real estate investments in the first quarter of 2003, which
    was reported in earnings from discontinued operations.                                                                                                                        

17



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##### Table of Contents





| |                                   
| | ----------------------------------
| | Apartment Community
    Operations

At March 31, 2003, investments in operating
apartment communities comprised over 99% of our total real
estate portfolio, based on NOI. The following table summarizes
the performance of our garden and high-rise apartments for each
period (in thousands, except for units and percentages):

|                                       |  |                              |         |                      |  |      |         |      |  |   |        |   |  |   |        |  
|-------------------------------------- |  | ---------------------------- | ------- | -------------------- |  | ---- | ------- | ---- |  | - | ------ | - |  | - | ------ | -
|                                       |  |                              |         |                     
|                                       |  | Garden Communities           |         | High-Rise Properties
|                                       |  |                              |         |                     
|                                       |  |                             
|                                       |  | Three Months Ended March 31,
|                                       |  |                             
|                                       |  | 2003                         |         | 2002                 |  | 2003 |         | 2002
|                                       |  |                              |         |                      |  |      |         |     
|Rental revenues                        |  | $                            | 144,070 |                      |  | $    | 144,156 |      |  | $ | 89,348 |   |  | $ | 83,921 |  
|Property operating expenses            |  |                              | 47,306  |                      |  |      | 45,781  |      |  |   | 36,493 |   |  |   | 32,887 |  
|                                       |  |                              |         |                      |  |      |         |      |  |   |        |   |  |   |        |  
|NOI                                    |  | $                            | 96,764  |                      |  | $    | 98,375  |      |  | $ | 52,855 |   |  | $ | 51,034 |  
|                                       |  |                              |         |                      |  |      |         |      |  |   |        |   |  |   |        |  
|Operating margin (NOI/rental revenues) |  |                              | 67.2    | %                    |  |      | 68.2    | %    |  |   | 59.2   | % |  |   | 60.8   | %
|                                       |  |                              |         |                      |  |      |         |      |  |   |        |   |  |   |        |  
|Average occupancy during period        |  |                              | 95.0    | %                    |  |      | 94.8    | %    |  |   | 93.3   | % |  |   | 94.3   | %
|                                       |  |                              |         |                      |  |      |         |      |  |   |        |   |  |   |        |  
|Average number of operating units      |  |                              | 53,798  |                      |  |      | 56,136  |      |  |   | 21,061 |   |  |   | 21,270 |  
|                                       |  |                              |         |                      |  |      |         |      |  |   |        |   |  |   |        |  

NOI for the entire apartment portfolio, excluding
properties reported in discontinued operations, increased
$0.2 million, or 0.1%, for the three months ended
March 31, 2003 compared to the same period in 2002
primarily due to:



| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | The continued successful lease-up and
    stabilization of apartment communities and
|
| |  | The acquisition of seven apartment communities in
    2002.                         

These increases were partially offset by:



| |   |                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Slightly negative revenue growth attributed to
    the macroeconomic environment and                                                                                                                          
|
| |  | Higher operating expenses, driven principally by
    higher snow removal and utility costs related to the harsh
    winter weather in Washington, D.C. and the Northeast,
    insurance and real estate taxes.

The following table reflects revenue, expense and
NOI growth for Same-Store communities that were fully operating
during the three month period ended March 31 for each
respective comparison period:

|     |  |            |      |            |  |                |     |   |  |  |      |   
|---- |  | ---------- | ---- | ---------- |  | -------------- | --- | - |  |  | ---- | --
|     |  | Same-Store |      | Same-Store |  | Same-Store Net
|     |  | Revenue    |      | Expense    |  | Operating     
|     |  | Decline    |      | Growth     |  | Income Decline
|     |  |            |      |            |  |               
|2003 |  |            | (1.9 | )%         |  |                | 2.1 | % |  |  | (3.9 | )%

Based on our reported Same-Store revenue and NOI
results, our strongest core markets during the period included
the greater Washington D.C. metropolitan area, Southern
California and Southeast Florida, all of which produced positive
revenue growth in the first quarter. Core markets that continue
to experience the greatest challenges in NOI growth include the
San Francisco Bay area and Chicago.

18



---



##### Table of Contents



Same-Store results represent 185 apartment
communities that were fully operational during the entire three
months ended March 31, 2003 and 2002, respectively. This
excludes 20 apartment communities which were not eligible for
inclusion due to (i) recent acquisition or development;
(ii) major redevelopment; or (iii) a significant
number of non-operational units (fires, floods, etc.). The
following is a reconciliation of Same-Store NOI to Earnings from
Operations (in thousands):

|                                          |                          |                    |         |         |  |   |         |         | 
|----------------------------------------- | ------------------------ | ------------------ | ------- | ------- |  | - | ------- | ------- | 
|                                          |                          |                   
|                                          |                          | Three Months Ended
|                                          |                          | March 31,         
|                                          |                          |                   
|                                          |                          | 2003               |         | 2002   
|                                          |                          |                    |         |        
|Same-Store NOI                            |                          | $                  | 140,155 |         |  | $ | 145,829 |        
|Non-Same Store NOI                        |                          |                    | 22,372  |         |  |   | 22,820  |        
|NOI classified as discontinued operations |                          |                    | (12,352 | )       |  |   | (18,879 | )      
|                                          |                          |                    |         |         |  |   |         |        
|                                          | Net Operating Income     |                    |         | 150,175 |  |   |         | 149,770 | 
|Income from unconsolidated entities       |                          |                    | 5,350   |         |  |   | 4,776   |        
|Other income                              |                          |                    | 7,164   |         |  |   | 1,509   |        
|Depreciation on real estate investments   |                          |                    | (48,014 | )       |  |   | (42,572 | )      
|Interest expense                          |                          |                    | (49,136 | )       |  |   | (41,434 | )      
|General and administrative expenses       |                          |                    | (12,182 | )       |  |   | (9,885  | )      
|Other expense                             |                          |                    | (2,063  | )       |  |   | (1,812  | )      
|                                          |                          |                    |         |         |  |   |         |        
|                                          | Earnings from Operations |                    | $       | 51,294  |  |   | $       | 60,352  | 
|                                          |                          |                    |         |         |  |   |         |        



| |                                        
| | ---------------------------------------
| | Income from Unconsolidated
    Entities

Income from unconsolidated entities increased
$0.6 million for the three months ended March 31, 2003
as compared to same period in 2002 primarily due to gains on the
sale of an Ameriton operating community in 2003, partially
offset by the loss of earnings due to the sale of CES and SMC,
and decreased Ameriton earnings due to the sale of operating
communities.



| |             
| | ------------
| | Other Income

Other income increased $5.7 million for the
three months ended March 31, 2003 as compared to the same
period in 2002, principally as a result of a recovery of
contingent proceeds related to indemnification of certain CES
accounts receivable over 120 days and other investment
income.



| |                     
| | --------------------
| | Depreciation Expense

The $5.4 million increase in depreciation
expense, excluding properties reported in discontinued
operations, for the three months ended March 31, 2003 as
compared to the same period in 2002 is principally attributable
to a greater allocation of depreciation expense to the
discontinued operations classification during 2002 as compared
to 2003, an increased cost basis from acquisitions relative to
dispositions and ongoing redevelopment expenditures at our
operating communities in 2002.



| |                 
| | ----------------
| | Interest Expense

The $7.7 million increase in net interest
expense, excluding properties reported in discontinued
operations, for the three months ended March 31, 2003 as
compared to 2002 is primarily due to $535 million of
long-term debt issued in 2002 at higher effective rates,
partially offset by lower mortgage interest due to dispositions,
mortgage prepayments and favorable rates on our credit
facilities.



| |                                        
| | ---------------------------------------
| | General and Administrative
    Expenses

The $2.3 million increase in general and
administrative expenses for the three months ended
March 31, 2003 as compared to the same period in 2002
relates primarily to increased severance costs, insurance
expense,

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increased depreciation of capitalized costs
associated with our new revenue management program called Lease
Rent OptimizerTM, new on-site property management
software, and a decrease in amounts charged to Ameriton for
development activities.




| |                                               
| | ----------------------------------------------
| | Provision for Possible Loss on
    Investments

We recognized a $3.7 million provision for
possible loss on investments due to an impairment and related
write-down to the estimated fair value of three real estate
investments held for sale, which is included in net earnings
from discontinued operations during the three months ended
March 31, 2003. No provision was recognized for the three
months ended March 31, 2002.



| |                                                        
| | -------------------------------------------------------
| | Minority Interests and Preferred Unit
    Distributions

Minority interests and Preferred Unit
distributions decreased for the three months ended
March 31, 2003 as compared to the same period in 2002. The
$2.0 million decrease in minority interest is due to the
conversion of DownREIT Perpetual Preferred Units into Operating
Trust Perpetual Preferred Units in August 2002.

The $0.4 million decrease in Preferred Unit
distributions is primarily the result of the redemption of the
Series C Preferred Units in August 2002, the conversion of
Series J Preferred Units into Common Units in July 2002,
and the lower distributions on Series A Preferred Units
resulting from periodic conversions by unitholders into Common
Units, partially offset by $1.3 million in distributions on
Series E, F and G Preferred Units.



| |                                     
| | ------------------------------------
| | Impact of Disposition
    Activities

During the three months ended March 31,
2003, we disposed of six apartment communities representing net
proceeds of $129.4 million. During the three months ended
March 31, 2002, we disposed of two apartment communities
representing net proceeds of $19.2 million. Aggregate net
gains of $44.7 million and $1.3 million were recorded
for the three months ended March 31, 2003 and 2002,
respectively. As part of our capital recycling program, we
anticipate our total disposition volume for 2003 to be
approximately $600 to $800 million.



| |                        
| | -----------------------
| | Discontinued Operations

In October 2001, the FASB issued SFAS 144,
Accounting for Impairment or Disposal of Long-Lived
Assets which became effective on January 1, 2002.
For properties accounted for under SFAS 144, the results of
operations for properties sold during the period or designated
as held for sale at the end of the period are required to be
classified as discontinued operations. The property-specific
components of net earnings that are classified as discontinued
operations include net operating income, depreciation expense
and interest expense (actual interest expense for encumbered
properties and a pro-rata allocation of interest expense for any
unencumbered portion up to our weighted average leverage ratio),
as well as the net gain or loss on the eventual disposal of
properties held for sale.

At March 31, 2003, we had 24 operating
apartment communities classified as held for sale under the
provisions of SFAS 144. Accordingly, we have classified the
operating earnings from these 24 properties within
discontinued operations for the three months ended
March 31, 2003 and 2002. During the three months ended
March 31, 2003, we sold six operating communities. The
operating results of these six communities before the sale and
the related gain/loss on sale are also included in discontinued
operations for both 2003 and 2002. Lastly, discontinued
operations for the three months ended March 31, 2002,
include the net operating results of eight operating communities
and one retail property which were sold during the last three
quarters of 2002. All of the apartment communities sold during
the three months ended March 31, 2002 were held for sale at
December 31, 2001, and therefore gains on these
dispositions are not classified as discontinued operations in
accordance with SFAS 144.

Liquidity and Capital Resources

We are committed to maintaining a strong balance
sheet and preserving our financial flexibility, which we believe
enhances our ability to capitalize on attractive investment
opportunities, as they become available. We

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believe our liquidity and financial condition are
sufficient to meet all of our cash flow needs during 2003 and
anticipated requirements thereafter. See Archstone-Smith
Operating Trusts condensed consolidated statements of cash
flows for a summary of operating, investing and financing
activities for the three months ended March 31, 2003 and
2002.




| |                     
| | --------------------
| | Operating Activities

Net cash flow provided by operating activities
decreased $27.8 million, for the three months ended
March 31, 2003 as compared to the same period of 2002. This
is principally due to lower accrued expenses, higher other
assets, lower Same-Store NOI and lost NOI resulting from our
2003 and 2002 disposition activity. See Results of Operations
for a more complete discussion of the factors impacting our
operating performance.



| |                                       
| | --------------------------------------
| | Investing and Financing
    Activities

For the three months ended March 31, 2003,
cash flows from investing activities increased
$175.8 million as compared to the same period in 2002. The
increase is principally the result of a $110.1 million
increase in the proceeds on dispositions of apartment
communities, a $57.0 million decrease in investments in
real estate and a $68.1 million increase in cash flows from
our investments in and advances to our unconsolidated investees.
These increases were partially offset by a $45.1 million
reduction in cash flows from restricted cash in tax-deferred
exchange escrows.

Cash flows provided by financing activities
decreased by $151.5 million for the three months ended
March 31, 2003 as compared to the same period in 2002. The
decrease is principally the result of the issuance of
$200 million senior unsecured notes in February 2002,
partially offset by a $70.1 million decrease in principal
repayments of mortgages payable.

Included above in the cash flows from financing
activities are the payment of $88.2 million and
$8.4 million in distributions on Common Units and Preferred
Units, respectively, in the first quarter of 2003.

Our most significant non-cash investing and
financing activities during the three months ended
March 31, 2003 and 2002 included: (i) the contribution
of two non-core development communities under construction to
Ameriton; (ii) the issuance of A-1 Common Units in exchange
for land; and (iii) the assumption of mortgages payable
upon the purchase of apartment communities.



| |                                                                
| | ---------------------------------------------------------------
| | Scheduled Debt Maturities and Interest
    Payment Requirements

Our long-term debt is structured to create a
relatively level principal maturity schedule, without
significant repayment obligations in any year, to mitigate
future liquidity issues and refinancing risk. As of
March 31, 2003, we have approximately $169.7 million
of long-term debt maturing during the remainder of 2003,
$103.0 million maturing during 2004 and $276.3 million
maturing during 2005.

We currently have $800 million in total
borrowing capacity under our unsecured credit facilities, with
$544.2 million outstanding and $255.8 million of
available capacity at April 29, 2003. Our unsecured credit
facilities, Long-Term Unsecured Debt and mortgages payable had
effective interest rates of 2.69%, 6.83% and 5.66%,
respectively, as of March 31, 2003. These rates give effect
to the impact of interest rate swaps and caps, as applicable.

We were in compliance will all financial
covenants pertaining to our debt instruments during the period
ended March 31, 2003.



| |                                         
| | ----------------------------------------
| | Unitholder Distribution
    Requirements

Based on anticipated distribution levels for 2003
and the number of units outstanding as of March 31, 2003,
we anticipate that we will pay distributions of
$384.6 million in the aggregate during 2003. This amount
represents distributions on our Common Units, all Preferred
Units and all minority interests.

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| |                    
| | -------------------
| | Planned Investments

Following is a summary of unfunded planned
investments as of March 31, 2003 (dollar amounts in
thousands). The amounts labeled Discretionary
represent future investments that we plan to make, although
there is not a contractual commitment to do so. The amounts
labeled Committed represent the approximate amount
that we are contractually committed to fund for communities
under construction.

|                                          |       |       |       |                     |  |           |         |         |  |   |         |         | 
|----------------------------------------- | ----- | ----- | ----- | ------------------- |  | --------- | ------- | ------- |  | - | ------- | ------- | 
|                                          |       |       |       |                    
|                                          |       |       |       | Planned Investments
|                                          |       |       |       |                    
|                                          |       | Units |       | Discretionary       |  | Committed
|                                          |       |       |       |                     |  |          
|Communities under redevelopment(1)        |       |       | 7,183 |                     |  | $         | 39,615  |         |  | $ | 33,193  |        
|Communities under construction            |       |       | 2,501 |                     |  |           |        |         |  |   | 202,285 |        
|Communities In Planning and owned         |       |       | 2,157 |                     |  |           | 480,554 |         |  |   |        |        
|Communities In Planning and Under Control |       |       | 1,370 |                     |  |           | 306,864 |         |  |   |        |        
|Community acquisitions under contract     |       |       | 852   |                     |  |           | 144,500 |         |  |   |        |        
|                                          |       |       |       |                     |  |           |         |         |  |   |         |        
|                                          | Total |       |       | 14,063              |  |           | $       | 971,533 |  |   | $       | 235,478 | 
|                                          |       |       |       |                     |  |           |         |         |  |   |         |        



---



|    |                                                                                    
|--- | -----------------------------------------------------------------------------------
|(1) | Includes planned investments at nine properties
    undergoing major redevelopment.

In addition to the planned investments noted
above, we expect to make smaller capital investments relating to
planned expenditures on recently acquired communities, as well
as redevelopment and recurring expenditures to improve and
maintain our more established operating communities.

We anticipate completion of most of the
communities that are currently under construction and the
planned operating community improvements during the remainder of
2003 and 2004 and expect to start construction on approximately
$250 to $300 million, based on Total Expected Investment,
of communities that are currently In Planning during the
remainder of 2003. No assurances can be given that communities
the Operating Trust does not currently own will be acquired or
that planned developments will actually occur. In addition,
actual costs incurred could be greater or less than our current
estimates.



| |                
| | ---------------
| | Funding Sources

We anticipate financing our planned investment
and operating needs primarily with cash flow from operating
activities, disposition proceeds from our capital recycling
program and borrowings under our unsecured credit facilities,
prior to arranging long-term financing. We anticipate that net
cash flow from operating activities and proceeds from our
unsecured credit facilities or dispositions during 2003 will be
sufficient to fund debt principal payments and anticipated
distribution requirements. To fund planned investment
activities, we had $255.8 million in available capacity on
our unsecured credit facilities and $26.6 million of cash
on hand, of which $22.8 million was restricted cash in
tax-deferred exchange escrow, at April 29, 2003. In
addition, during 2003, we expect to complete the dispositions of
$600 to $800 million of operating communities.

At April 29, 2003, Archstone-Smith and the
Operating Trust had $1.3 billion available in shelf
registered securities, which can be issued subject to our
ability to effect offerings on satisfactory terms based on
prevailing market conditions.



| |                                               
| | ----------------------------------------------
| | Other Contingencies and Hedging
    Activities

During 2002, we accrued and/or incurred a
liability for approximately $30.8 million relating to
moisture infiltration and resulting mold issues at one of our
high-rise properties in Southeast Florida. Of this amount,
approximately $11.3 million represents amounts expensed
during 2002 for the estimated cost of repairing or replacing
residents property and incurred legal fees. The remaining
$19.5 million represents costs capitalized in accordance
with GAAP pertaining to remediation and capital improvements to
the building. As of March 31, 2003, total cash payments
related to moisture infiltration and mold remediation were
$23.3 million at this property.

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We are in the process of addressing this issue,
and there are still considerable uncertainties that affect our
ability to estimate the ultimate cost of remediation efforts.
These uncertainties include the exact nature and extent of the
issues, the extent of required remediation efforts and varying
costs of alternative strategies for addressing the issues. The
accrual represents managements best estimate of the
probable and reasonably estimable costs and is based, in part,
on estimates obtained from third-party contractors and actual
costs incurred to date. It is possible that these estimates
could increase or decrease as better information becomes
available.

We are also subject to litigation in connection
with these issues. We intend to vigorously contest the claims
asserted in the litigation. Due to the preliminary nature of the
litigation, it is not possible to predict or determine the
outcome of the legal actions nor is it reasonably possible to
estimate the amount of loss associated with an adverse decision.
Expected legal fees related to known litigation should
approximate $5.0 to $6.0 million in 2003. During the
quarter ended March 31, 2003, we incurred and expensed
approximately $1.5 million in additional legal fees
relating to these claims.

We believe these costs are covered by our
insurance policies and are pursuing recovery from our carriers.
In addition, we believe there is a basis for other potential
recoveries from third parties. As of March 31, 2003, no
estimated recovery has been recorded because we have no basis
for making such an estimate at this time.

As a general matter, concern about indoor
exposure to mold has been increasing as such exposure has been
alleged to have a variety of adverse effects on health. There
has been an increasing number of lawsuits in our industry
against owners and managers of apartment communities relating to
moisture infiltration and resulting mold. We have received
specific complaints from a number of residents at certain of our
Southeast Florida properties and some of these complaints may
result in additional litigation.

Whenever we receive a resident complaint
concerning moisture infiltration, condensation or mold problems
and/or become aware that an air quality concern exists, we
implement corrective measures in accordance with guidelines and
protocols we developed with the assistance of indoor air quality
experts. We are working proactively with all of our residents to
resolve all moisture infiltration and mold-related issues.
However, we can make no assurance that additional material legal
claims relating to moisture infiltration and the presence of, or
exposure to, mold will not arise in the future.

The terms of our property and general liability
policies after June 30, 2002, may exclude certain
mold-related claims. Should an uninsured loss arise against the
company, we would be required to use our own funds to resolve
the issue, including litigation costs.

We are party to various other claims and routine
litigation arising in the ordinary course of business. We do not
believe that the results of any such claims and litigation,
individually or in the aggregate, will have a material adverse
effect on our business, financial position or results of
operations.

Our involvement with derivative financial
instruments is limited and we do not use them for trading or
other speculative purposes. We occasionally utilize interest
rate swaps and caps as interest rate hedges in an effort to
lower our overall borrowing costs.

Critical Accounting Policies

We define critical accounting policies as those
accounting policies that require our management to exercise
their most difficult, subjective and complex judgments. Our
management has discussed the development and selection of all of
these critical accounting policies with our audit committee, and
the audit committee has reviewed the disclosure relating to
these policies. Our critical accounting policies relate
principally to the following key areas:



| |                             
| | ----------------------------
| | Internal Cost Capitalization

We have an investment organization and
infrastructure that supports the due diligence, land
acquisition, development and redevelopment of apartment
communities. Consistent with GAAP, all direct and indirect
costs, including interest and real estate taxes, incurred during
construction relating to these activities are capitalized.
Included in these costs is managements estimate for the
portion of internal costs that are incremental and deemed

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directly or indirectly related to such
development activities. Because the estimation of capitalizable
internal costs requires managements judgment, we believe
internal cost capitalization is a critical accounting
estimate. If future accounting rules limit our ability to
capitalize internal costs or if our development activity
decreased significantly without a proportionate decrease in
internal costs, there could be an increase in our operating
expenses.




| |                         
| | ------------------------
| | Valuation of Real Estate

Long-lived assets to be held and used are carried
at cost and evaluated for impairment when events or changes in
circumstances indicate such an evaluation is warranted. We also
evaluate assets for potential impairment when we deem them to be
held for sale. Valuation of real estate is considered a
critical accounting estimate because the evaluation
of impairment and the determination of fair values involve a
number of management assumptions relating to future economic
events that could materially affect the determination of the
ultimate value, and therefore, the carrying amounts of our real
estate.

When determining if there is an indication of
impairment, we estimate the assets NOI over the
anticipated holding period on an undiscounted cash flow basis
and compare this amount to its carrying value. Estimating the
expected NOI and holding period requires significant management
judgment. If it is determined that there is an indication of
impairment for assets to be held and used, or if an asset is
deemed to be held for sale, we then determine the assets
fair value.

The apartment industry uses capitalization rates
as the primary measure of fair value. Specifically, annual NOI
for a community is divided by an estimated capitalization rate
to determine the fair value of the community. Determining the
appropriate capitalization rate requires significant judgment
and is typically based on the prevailing rate for the market or
submarket. Further, capitalization rates can fluctuate up or
down due to a variety of factors in the overall economy or
within local markets. If the actual capitalization rate for a
community is significantly different from our estimated rate,
the impairment evaluation for an individual asset could be
materially affected. Historically we have had limited and
infrequent impairment charges, and the majority of our apartment
community sales have produced gains. We evaluate a real estate
asset for potential impairment when events or changes in
circumstances indicate that its carrying amount may not be
recoverable.



| |                                               
| | ----------------------------------------------
| | Capital Expenditures and Depreciable
    Lives

We incur costs relating to redevelopment
initiatives, revenue enhancing and expense reducing capital
expenditures, and recurring capital expenditures that are
capitalized as part of our real estate. These amounts are
capitalized and depreciated over estimated useful lives
determined by management. Determining whether expenditures meet
the criteria for capitalization and the assignment of
depreciable lives requires our management to exercise
significant judgment and is therefore considered a
significant accounting estimate.



| |                                                     
| | ----------------------------------------------------
| | Moisture Infiltration and Mold Remediation
    Costs

Accounting for correction of moisture
infiltration and mold remediation costs is considered a
critical accounting estimate because significant
judgment is required by management to determine when to record a
liability, how much should be accrued as a liability and whether
such costs meet the criteria for capitalization.

We estimate and accrue costs related to
correcting the moisture infiltration and remediating resulting
mold when we anticipate incurring costs because of the threat of
litigation or the assertion of a legal claim. When we incur
costs at our own discretion, the cost is recognized as incurred.
Moisture infiltration and resulting mold remediation costs are
only capitalized when it is determined by management that such
remediation costs also extend the life, increase the capacity,
or improve the safety or efficiency of the property relative to
when the community was originally constructed or acquired, if
later. All other related costs are expensed.

There are considerable uncertainties that affect
our ability to estimate the ultimate cost of correction and
remediation efforts. These uncertainties include, but are not
limited to, assessing the exact nature and extent of the issues,
the extent of required remediation efforts and the varying costs
of alternative strategies for addressing the issues. Any accrual
represents managements best estimate of the probable and
reasonably estimable costs

24



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##### Table of Contents



and is based, in part, on estimates obtained from
third-party environmental contractors and actual costs incurred
to date. It is possible that these estimates could increase or
decrease as better information becomes available. Further, due
to the preliminary nature of the litigation, it is not currently
possible to predict or determine the outcome of the legal
actions nor is it reasonably possible to estimate the amount of
loss associated with an adverse decision. Therefore, we have not
accrued a liability for litigation settlement costs.


Off Balance Sheet Arrangements

Investments in entities that are not controlled
through majority voting interest are not consolidated and are
reported as investments in unconsolidated entities. Our
investments in unconsolidated entities include a
$51.4 million investment in real estate joint ventures and
a $340.3 million investment in Ameriton at March 31,
2003. In connection with our investments in Ameriton, we have
extended a $10 million committed unsecured credit facility
with $5.6 million of available capacity at March 31,
2003. Additionally, we have extended an uncommitted unsecured
credit facility with Ameriton whereby advances are made solely
at our discretion. Ameriton had $113.1 million of available
capacity on this facility at March 31, 2003. In accordance
with FASB Interpretation No. 46, Consolidation of
Variable Interest Entities, which requires that we
consolidate the results of variable interest entities in which
we have a majority variable interest, we expect to consolidate
the results of Ameriton in the third quarter of 2003.

Consolidated Engineering Services (CES) is a
service business that we acquired during the Smith Merger in
2001 and prior to its sale had been reported as an
unconsolidated entity in our financial statements. CES provides
engineering services for commercial and residential real estate
across the country. On December 19, 2002, CES was sold to a
third party for $178 million in cash. We recorded a
$35.4 million net gain on the sale of the business or $0.16
per unit on a fully diluted basis. Excluded from the gain was
approximately $6.7 million in contingent proceeds related
to indemnification of accounts receivable over 120 days. We
have recognized $2.6 million of these contingent proceeds
during the three months ended March 31, 2003, since this
amount of the indemnified accounts receivable was collected.

As a condition of sale, we agreed to indemnify
the buyer for certain representations and warranties contained
in the sale contract. The indemnifications terminate on
June 30, 2004, and while we do not believe it is probable
that the indemnities will reach the maximum amount, the related
liability is limited to a maximum exposure of $44.5 million
with exceptions including third party claims, insurance,
arbitration, environmental issues and collection of specified
accounts receivable, each of which is without deduction or
limitation. There are no recourse provisions available to us to
recover any potential future payments from third parties.

Prior to their sale, we extended approximately
$54.7 million in performance bond guarantees relating to
contracts entered into by CES and SMC, which are customary to
the type of business in which these entities engage.
Archstone-Smith, our subsidiaries and investees have not been
required to perform on these guarantees, nor do we anticipate
being required to perform on such guarantees. We also will not
extend any such performance bond guarantees in the future due to
the sale of both CES and SMC. Since we believe that our risk of
loss under these contingencies is remote, no accrual for
potential loss has been made in the accompanying financial
statements. There are recourse provisions available to us to
recover any potential future payments from the new owners of CES
and SMC.

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##### Table of Contents



Contractual Commitments

The following table summarizes information
contained in Managements Discussion and Analysis of
Financial Condition and Results of Operations and in our
financial statements in this Form 10-Q regarding
contractual commitments (amounts in millions):

|                                           |       |      |       |          |  |          |       |           |  |       |       |       |  |   |         |         |  |   |         |         | 
|------------------------------------------ | ----- | ---- | ----- | -------- |  | -------- | ----- | --------- |  | ----- | ----- | ----- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                                           |       |      |       | 2004     |  | 2006     |       | 2008      |  |      
|                                           |       | 2003 |       | and 2005 |  | and 2007 |       | thru 2095 |  | Total
|                                           |       |      |       |          |  |          |       |           |  |      
|Scheduled long-term debt maturities        |       | $    | 169.7 |          |  | $        | 379.3 |           |  | $     | 864.6 |       |  | $ | 2,267.0 |         |  | $ | 3,680.6 |        
|Unsecured credit facilities(1)             |       |      | 409.6 |          |  |          |      |           |  |       |      |       |  |   |        |         |  |   | 409.6   |        
|Ameriton credit facility                   |       |      | 4.4   |          |  |          |      |           |  |       |      |       |  |   |        |         |  |   | 4.4     |        
|Development and redevelopment expenditures |       |      | 235.5 |          |  |          |      |           |  |       |      |       |  |   |        |         |  |   | 235.5   |        
|Performance bond guarantees(2)             |       |      | 71.7  |          |  |          | 9.9   |           |  |       | .2    |       |  |   |        |         |  |   | 81.8    |        
|Lease commitments and other(3)             |       |      | 19.8  |          |  |          | 13.8  |           |  |       | 9.8   |       |  |   | 194.8   |         |  |   | 238.2   |        
|                                           |       |      |       |          |  |          |       |           |  |       |       |       |  |   |         |         |  |   |         |        
|                                           | Total |      | $     | 910.7    |  |          | $     | 403.0     |  |       | $     | 874.6 |  |   | $       | 2,461.8 |  |   | $       | 4,650.1 | 
|                                           |       |      |       |          |  |          |       |           |  |       |       |       |  |   |         |         |  |   |         |        



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The $700 million unsecured credit facility
    matures on December 20, 2003, and has a one-year extension
    at our option. We plan to renew and extend the facility for
    three years during 2003.                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(2) | Archstone-Smith, our subsidiaries and investees
    have not been required to perform on these guarantees, nor do we
    anticipate being required to perform on such guarantees. Since
    we believe that our risk of loss under these contingencies is
    remote, no accrual for potential loss has been made in the
    accompanying financial statements. We are still obligated for
    performance bond guarantees for CES and SMC subsequent to their
    sale, but there are recourse provisions available to us to
    recover any potential future payments from the new owners of CES
    and SMC.
|   
|(3) | Lease commitments relate principally to ground
    lease payments as of December 31, 2002. There have been no
    material changes since that date.                                                                                                                                                                                                                                                                                                                                                                                                                                                            

New Accounting Pronouncements

In July 2002, the FASB issued SFAS 146
Accounting for Costs Associated with Exit or Disposal
Activities. We adopted SFAS 146 on
January 1, 2003. SFAS 146 requires that certain
expenses associated with restructuring charges be accrued as
liabilities in the period in which the liability is incurred.
The adoption of SFAS 146 did not have a material impact on
our financial position, net earnings or cash flows.

In November 2002, the FASB issued Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements
No. 5, 57 and 107 and a rescission of FASB Interpretation
No. 34. This Interpretation elaborates on the
disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under guarantees
issued. The Interpretation also clarifies that a guarantor is
required to recognize, at inception of a guarantee, a liability
for the fair value of the obligation undertaken. The initial
recognition and measurement provisions of the Interpretation are
applicable to guarantees issued or modified after
December 31, 2002. The adoption of the Interpretation did
not have a material impact on our financial position, net
earnings or cash flows.

In January 2003, the FASB issued Interpretation
No. 46 Consolidation of Variable Interest
Entities. We are required to adopt the Interpretation
for financial statements for the fiscal year or interim period
beginning after June 15, 2003. This Interpretation
clarifies the application of Accounting Research Bulletin
No. 51, Consolidated Financial
Statements, and requires that we consolidate the
results of variable interest entities in which we have a
majority variable interest. Although we have not yet determined
the total impact of adopting the Interpretation, we expect to
consolidate the results of Ameriton in the third quarter of 2003.

26



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##### Table of Contents





|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures
    About Market Risk

Our capital structure includes the use of both
fixed and floating rate debt and we are exposed to the impact of
changes in interest rates. We also use interest rate swap and
interest rate cap derivative financial instruments in order to
modify interest rate characteristics of our debt in an effort to
minimize our overall borrowing costs. We do not utilize these
derivative financial instruments for speculative purposes. To
assist us in evaluating our interest rate risk and counter-party
credit risk, we use the services of third party consultants.

As a result of our balance sheet management
philosophy, we have managed our debt maturities to create a
relatively level principal maturity schedule, without
significant repayment obligations in any year. If current market
conditions do not permit us to replace maturing debt at
comparable interest rates, we are not exposed to significant
portfolio level interest rate volatility due to the management
of our maturity schedules. There have been no material changes
to our market risk profile since December 31, 2002. See
Item 7a in our 2002 Form 10-K for detailed information
about the qualitative and quantitative disclosures about our
market risk.



|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures

Within the 90-day period prior to the filing of
this report, an evaluation was carried out under the supervision
and with the participation of Archstone-Smith Operating
Trusts management, including our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures (as defined in
Rule 13a-14(c) under the Securities Exchange Act of 1934).
Based on their evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that Archstone-Smith Operating
Trusts disclosure controls and procedures are, to the best
of their knowledge, effective to ensure that information
required to be disclosed by Archstone-Smith Operating Trust in
reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules
and forms. Subsequent to the date of their evaluation, there
were no significant changes in Archstone-Smith Operating
Trusts internal controls or in other factors that could
significantly affect these controls, including any corrective
actions with regard to significant deficiencies and material
weaknesses.




PART II  OTHER
INFORMATION



|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings

We are subject to litigation in connection with
moisture infiltration and resulting mold issues at one of our
high-rise properties in Southeast Florida. A claim,
Henriques, et al. v. Archstone-Smith Operating
Trust, et al., was filed on August 27, 2002, and
another claim, Santos, et. al. v. Archstone-Smith
Operating Trust et. al., was filed on February 13,
2003, in the Circuit Court of the Eleventh Judicial Circuit in
and for Miami-Dade County, Florida, on behalf of classes of
residents of this Southeast Florida property. The cases allege
that mold contamination at this Southeast Florida property
caused by faulty air-conditioning resulted in both personal
injury to the plaintiffs and damage to their property.
Plaintiffs seek both injunctive relief and unspecified monetary
and punitive damages. We intend to vigorously contest the claims
asserted in this litigation. Due to the preliminary nature of
the litigation, it is not possible to predict or determine the
outcome of the legal actions nor is it reasonably possible to
estimate the amount of loss associated with adverse decisions.

We are party to various other claims and routine
litigation arising in the ordinary course of business. We do not
believe that the results of any such claims and litigation,
individually or in the aggregate, will have a material adverse
effect on our business, financial position or results of
operations.

27



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##### Table of Contents





|        |                                     
|------- | ------------------------------------
|Item 6. | Exhibits and Reports on
    Form 8-K

(a) Exhibits:

|     |  |                                                                                                       
|---- |  | ------------------------------------------------------------------------------------------------------
|12.1 |  | Computation of Ratio of Earnings to Fixed Charges                                                     
|12.2 |  | Computation of Ratio of Earnings to Combined
    Fixed Charges and Preferred Unit Distributions       
|15.1 |  | Letter from KPMG LLP dated May 8, 2003
    regarding unaudited financial information                  
|99.1 |  | Certification of Chief Executive Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002
|99.2 |  | Certification of Chief Financial Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K: The
following report on Form 8-K was filed during the quarter
of the period covered by this report.

None.

28



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##### Table of Contents






SIGNATURES

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



| |                                
| | -------------------------------
| | ARCHSTONE-SMITH OPERATING TRUST



| |     |                    
| | --- | -------------------
| | By: | /s/ R. SCOT SELLERS

| |                        
| | -----------------------
| |                        
| | R. Scot Sellers        
| | Chief Executive Officer



| |     |                            
| | --- | ---------------------------
| | By: | /s/ CHARLES E. MUELLER, JR.

| |                              
| | -----------------------------
| |                              
| | Charles E. Mueller, Jr.      
| | Chief Financial Officer      
| | (Principal Financial Officer)



| |     |                       
| | --- | ----------------------
| | By: | /s/ MARK A. SCHUMACHER

| |                                     
| | ------------------------------------
| |                                     
| | Mark A. Schumacher                  
| | Senior Vice President and Controller
| | (Principal Accounting Officer)      

Date: May 8, 2003

29



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##### Table of Contents






CERTIFICATIONS

I, R. Scot Sellers, certify that:



| |    |                                                                                                                  
| | -- | -----------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this quarterly report on
    Form 10-Q of Archstone-Smith Operating Trust (the
    registrant).



| |    |                                                                                                                                                                                                                                                                                                                                                   
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Based on my knowledge, this quarterly report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    quarterly report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this quarterly
    report, fairly present in all material respects the financial
    condition, results of operations and cash flows of the
    registrant as of, and for, the periods presented in this
    quarterly report;                   
|
| | 4. | The registrants other certifying officer
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                              



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



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



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | All significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and



| |    |                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | Any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and



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



| |     |                    
| | --- | -------------------
| | By: | /s/ R. SCOT SELLERS

| |                        
| | -----------------------
| |                        
| | R. Scot Sellers        
| | Chief Executive Officer

Date: May 8, 2003

30



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##### Table of Contents






CERTIFICATIONS

I, Charles E. Mueller, Jr., certify that:



| |    |                                                                                                                                                                                                                                                                                                                                                   
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this quarterly report on
    Form 10-Q of Archstone-Smith Operating Trust (the
    registrant).                                                                                                                                                                                                                                 
|
| | 2. | Based on my knowledge, this quarterly report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    quarterly report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this quarterly
    report, fairly present in all material respects the financial
    condition, results of operations and cash flows of the
    registrant as of, and for, the periods presented in this
    quarterly report;                   
|
| | 4. | The registrants other certifying officer
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                              



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



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



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



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



| |     |                            
| | --- | ---------------------------
| | By: | /s/ CHARLES E. MUELLER, JR.

| |                              
| | -----------------------------
| |                              
| | Charles E. Mueller, Jr.      
| | Chief Financial Officer      
| | (Principal Financial Officer)

Date: May 8, 2003

31



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##### Table of Contents



INDEX TO EXHIBITS

|        |    |    |  |             |  |                                                                                                       
|------- | -- | -- |  | ----------- |  | ------------------------------------------------------------------------------------------------------
|Exhibit |    |    |  |            
|Number  |    |    |  | Description
|        |    |    |  |            
|        | 12 | .1 |  |             |  | Computation of Ratio of Earnings to Fixed Charges                                                     
|        | 12 | .2 |  |             |  | Computation of Ratio of Earnings to Combined
    Fixed Charges and Preferred Unit Distributions       
|        | 15 | .1 |  |             |  | Letter from KPMG LLP dated May 8, 2003
    regarding unaudited financial information                  
|        | 99 | .1 |  |             |  | Certification of Chief Executive Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002
|        | 99 | .2 |  |             |  | Certification of Chief Financial Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002