SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________ FORM 10-Q X Quarterly Report Pursuant to Section 13 or 15(d) --- of the Securities Exchange Act of 1934 For the quarter ended March 31, 2001 or Transition Report Pursuant to Section 13 or 15(d) --- of the Securities Exchange Act of 1934 For the period from to Commission File Number: 1934 Act File Number: 0-25968 CHARLES E. SMITH RESIDENTIAL REALTY L.P. ---------------------------------------- (Exact name of registrant as specified in its charter) Delaware 54-1681657 -------- ---------- (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2345 Crystal Drive Crystal City, VA 22202 ---------------- ----- (Address of principal (Zip Code) executive offices) Registrant's telephone number including area code: (703) 920-8500 Securities registered pursuant to Section 12(b) of the Act: None Class A Units of Limited Partnership Interest (Title of Class) Securities registered pursuant to Section 12(g) of the Act: Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No____ ----- As of April 30, 2001, there were 35,950,388 Common Units of Limited Partnership of the Registrant issued and outstanding. CHARLES E. SMITH RESIDENTIAL REALTY L.P. FORM 10-Q INDEX Pages ----- PART I: FINANCIAL INFORMATION Item 1: Financial Statements Charles E. Smith Residential Realty L.P. Financial Statements as of March 31, 2001 and December 31, 2000, Filed as a Part of This Report Consolidated Balance Sheets 3 Consolidated Statements of Operations 4 Consolidated Statements of Partner's Equity and Other Limited Partners' Interests 5 Condensed Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 15 PART II: OTHER INFORMATION 26 SIGNATURES 27 2 CHARLES E. SMITH RESIDENTIAL REALTY L.P. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)

~~Pages~~March 31, 2001 December 31, 2000 ------------------------ ~~PART~~------------------------ I:(Unaudited) ~~FINANCIAL~~ASSETS ~~INFORMATION~~Rental ~~Item~~property, net $ 1:,867,381 ~~Financial~~$ ~~Statements~~1,850,171 ~~Charles~~Rental E.property ~~Smith~~under ~~Residential~~development ~~Realty~~77,518 ~~L.P.~~61,596 ~~Financial~~Escrow ~~Statements~~funds as6,873 of6,483 ~~September~~Investment 30in and advances to uncosolidated Property Service Businesses 111,863 ~~2000~~89,244 Investment in unconsolidated properties 55,175 32,397 Deferred charges, net 20,447 16,975 Security deposits 9,114 8,807 Other assets 22,415 9,559 ----------- ----------- $ 2,170,786 $ 2,075,232 =========== =========== LIABILITIES AND EQUITY Liabilities Mortgage loans and ~~December~~notes 31payable: Mortgage loans $ 1,109,088 ~~1999~~$ 1,064,845 ~~Filed~~Construction asloans a22,137 ~~Part~~14,859 Line of ~~This~~credit ~~Report~~175,000 ~~Consolidated~~144,000 ~~Balance~~----------- ~~Sheets~~----------- 3Total ~~Consolidated~~mortgage ~~Statements~~loans ofand ~~Operations~~notes 4payable ~~Consolidated~~1,306,225 ~~Statements~~1,223,704 ofAccounts ~~Partner's~~payable ~~Equity~~and accrued expenses 46,127 47,387 Security deposits 9,114 8,807 ----------- ----------- Total liabilities 1,361,466 1,279,898 ----------- ----------- Commitments and contingencies Minority Interest (82) -- Other Limited Partners' Interest 5Preferred ~~Condensed~~units, ~~Consolidated~~at ~~Statements~~liquidation ofvalue ~~Cash~~45,000 ~~Flows~~45,000 6Common ~~Notes~~units to- ~~Consolidated~~13,213,990 ~~Financial~~and ~~Statements~~13,503,732 7units ~~Item~~issued 2:and ~~Management~~outstanding at March 31, 2001 and December 31, 2000, respectively, at redemption value 601,104 634,675 ----------- ----------- 646,104 679,675 ----------- ----------- Partner's ~~Discussion~~Equity Preferred units, at liquidation value 251,500 251,500 Common units - 22,698,543 and ~~Analysis~~21,916,759 ofunits ~~Financial~~issued ~~Condition~~and outstanding at March 31, 2001 and ~~Results~~December of31, ~~Operations~~2000, 16respectively ~~PART~~(88,202) ~~II:~~(135,841) ~~OTHER~~----------- ~~INFORMATION~~----------- 29Total ~~SIGNATURES~~partner's 30equity 163,298 115,659 ----------- ----------- $ 2,170,786 $ 2,075,232 =========== ===========

The accompanying notes are an integral part of these consolidated statements. 3 CHARLES E. SMITH RESIDENTIAL REALTY L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands, Except Per Unit Data) (Unaudited)

~~September~~For ~~30,~~the ~~2000~~Three ~~December~~Months Ended March 31, ~~1999~~ ------------------ ----------------- ~~(Unaudited) ASSETS Rental property, net $ 1,667,107 $ 1,369,416 Rental property under development 57,461 169,626 Cash~~ ------------ ~~10,557~~2001 ~~Escrow~~2000 funds 7,175 18,309 Investment in and advances to Property Service Businesses 102,749 70,282 Investment in unconsolidated properties 32,169 22,338 Deferred charges, net 17,124 16,727 Security deposits 8,379 4,058 Other assets 20,118 23,465 ------------------- ------------------- Revenue $ 1106,~~912,282~~576 $ 188,~~704,778~~854 ~~================== ================= LIABILITIES AND EQUITY Liabilities Mortgage loans and notes payable~~Expenses: ~~Mortgage~~Operating ~~loans~~costs ~~$ 1~~(36,~~038,545~~450) ~~$ 817~~(27,~~278~~933) ~~Construction~~Real ~~loans~~estate 76taxes (9,~~414~~043) 80(7,~~045~~566) ~~Line~~Depreciation ofand ~~credit~~amortization 6(12,~~000~~592) 72(10,~~000~~567) ---------~~---------~~ ---------~~--------~~ Total ~~mortgage~~expenses ~~loans~~(58,085) ~~and~~(46,066) ~~notes~~Equity ~~payable~~in ~~1,120,959~~income ~~969~~of unconsolidated properties 895 783 Equity in income of unconsolidated Property Service Businesses 2,~~323~~983 ~~Accounts~~519 ~~payable~~Corporate general and ~~accrued~~administrative expenses 55(3,~~346~~856) 44(2,~~480~~695) ~~Security~~Interest ~~deposits~~income 8119 63 Interest expense (21,~~379~~992) 4(17,~~058~~856) ---------~~---------~~ ---------~~--------~~ ~~Total~~Net ~~liabilities~~income 126,~~184~~640 23,~~684~~602 1Less: Income attributable to preferred units (6,~~017~~111) (5,~~861~~925) ---------~~---------~~ ---------~~--------~~ ~~Commitments~~Net ~~and~~income ~~contingencies~~attributable ~~Other~~to ~~Limited~~common ~~Partners' Interest Preferred~~ units ~~45,000~~$ 4520,~~000~~529 ~~Common~~$ ~~units - 13~~17,~~599,855~~677 ~~and~~========= ~~13,855,404~~========= ~~units~~Earnings ~~issued~~per ~~and~~common ~~outstanding~~unit at- ~~September~~basic ~~30,~~Income ~~2000~~before ~~and~~extraordinary ~~December~~item ~~31,~~$ ~~1999,~~0.58 ~~respectively,~~$ at0.51 ~~redemption~~Extraordinary ~~value~~item ~~617,093 490,135~~ --~~----------------~~ --~~---------------~~ ~~662,093 535,135~~ ---------~~---------~~ ---------~~--------~~ ~~Partner's~~Net ~~Equity~~income ~~Preferred~~$ ~~units~~0.58 ~~251,500~~$ ~~251,500~~0.51 ~~Common~~========= ~~units~~========= -Earnings ~~21,808,230~~per ~~and~~common ~~20,673,039~~unit ~~units~~- ~~issued~~diluted ~~and~~Income ~~outstanding~~before atextraordinary ~~September~~item ~~30,~~$ ~~2000~~0.56 ~~and~~$ ~~December~~0.51 ~~31,~~Extraordinary ~~1999,~~item ~~respectively (185,995) (99,718)~~ --~~----------------~~ --~~---------------~~ ~~Total partner's equity 65,505 151,782~~ ---------~~---------~~ ---------~~--------~~ Net income $ ~~1,912,282~~0.56 $ ~~1,704,778~~0.51 =========~~=========~~ =========~~========~~

The accompanying notes are an integral part of these consolidated statements. 4 CHARLES E. SMITH RESIDENTIAL REALTY L.P. CONSOLIDATED STATEMENTS OF PARTNER'S EQUITY AND OTHER LIMITED PARTNERS' INTEREST (Dollars in Thousands)

~~For~~General ~~the~~Partner's ~~Three~~General ~~Months~~and ~~For~~Other ~~the~~Limited ~~Nine~~Limited ~~Months~~Interest ~~Ended~~Partners' ~~September~~Interest ~~30, Ended September 30,~~ ----------------------------------- -- -------------------------------- ~~2000~~Series ~~1999~~H ~~2000~~Preferred ~~1999~~Common Common Preferred Units Units Units Units -----------~~----~~ -------------~~---~~ -------------- ---------------- ~~Rental Properties: Revenues $ 98~~Balance,~~742~~ $December 7931,~~194~~ $1999 ~~282~~251,~~312~~500 ~~$ 218,749 Expenses Operating costs~~ (3099,~~058~~718) ~~(26~~490,~~759)~~135 ~~(85~~45,~~039)~~000 ~~(70,189)~~Units ~~Real~~exchanged ~~estate~~for ~~taxes~~acquisitions ~~(8,896)~~-- ~~(5,950)~~-- ~~(24~~1,~~498)~~270 ~~(16,678)~~-- ~~Depreciation~~Cancellation ~~and~~of ~~amortization~~units ~~(11,531)~~-- ~~(8,363)~~-- (321,~~993~~821) ~~(24,304)~~ --~~-------------~~ Amortization of grants --~~--------------~~ --~~------------~~ 979 ---~~-------------~~ ~~Total~~Net ~~expenses~~income ~~(50,485)~~-- ~~(41~~114,~~072)~~939 ~~(142~~64,~~530)~~309 ~~(111,171)~~-- ~~Equity~~Contribution inby ~~income~~Charles ofE. ~~unconsolidated~~Smith ~~properties~~Residential ~~524 347 1~~Realty,~~849~~ ~~677~~Inc. ~~Equity~~-- in21,638 ~~income~~-- of-- ~~Property~~Distributions ~~Service~~-- ~~Businesses 2~~(71,~~890~~400) 2(30,~~127~~574) ~~5,045~~-- ~~3,255~~Exercise ~~Corporate~~of ~~general~~options ~~and~~-- ~~administrative~~9,158 ~~expenses~~-- ~~(2,810)~~-- ~~(2,156)~~Other ~~(8,507)~~-- (~~6,785~~81) ~~Interest~~-- ~~income~~-- 38Adjustment ~~239~~to ~~182~~reflect ~~336~~Other Limited Partners' Interest ~~expense~~at ~~(19,306)~~redemption ~~(15,421)~~value -- (57110,~~291~~377) ~~(42~~110,~~040)~~377 -- ----------~~---~~ ------------~~----~~ -----------~~---~~ -----------~~-----~~ ~~Income~~Balance, ~~before~~December ~~gain~~31, on2000 ~~sales and extraordinary item 29~~251,~~593~~500 23(135,~~258~~841) 81634,~~060~~675 6345,~~021~~000 ~~Gain~~Units onexchanged ~~sales~~for -acquisitions ~~5,214 4,161 7,065~~ -- -- -- --~~-------~~ Amortization of grants --~~-------------~~ --~~------------~~ 275 --~~--------------~~ ~~Income~~Net ~~before~~income ~~extraordinary~~-- ~~item 29~~18,~~593~~102 288,~~472~~538 ~~85,221~~-- ~~70,086~~Contribution ~~Extraordinary~~by ~~item~~Charles -E. ~~loss~~Smith onResidential ~~extinguishment~~Realty, ofInc. ~~debt~~-- 4,625 -- -- Distributions -- (~~359~~19,201) (7,716) -- Exercise of options -- 9,502 -- --~~-------~~ Other --~~--------------~~ (57) --~~------------~~ --~~--------------~~ ~~Net~~Adjustment ~~income~~to ~~29,593~~reflect ~~28,472~~Other ~~85,221~~Limited ~~69,727~~Partners' ~~Less:~~Interest ~~Income~~at ~~attributable~~redemption tovalue ~~preferred~~-- ~~units (5~~34,~~925)~~668 (334,~~272~~668) ~~(17,776) (8,028)~~ -- ----------~~---~~ ------------~~----~~ -----------~~---~~ -----------~~-----~~ ~~Net~~Balance, ~~income~~March ~~attributable~~31, to2001 ~~common~~(unaudited) ~~units~~ $ 23251,~~668~~500 $ 25(88,~~200~~202) $ 67601,~~445~~104 $ 6145,~~699~~000 ==========~~=====~~ ============~~====~~ ===========~~===~~ ==========~~======~~ ~~Earnings~~Units ~~per~~issued ~~common~~and ~~unit~~outstanding -at ~~basic~~March ~~Income~~31, ~~before~~2001 ~~extraordinary~~6,833,449 ~~item~~22,698,543 $13,213,990 ~~0.67 $ 0.75 $~~ 1~~.93~~,800,000 ~~$ 1.90 Extraordinary item - - - (0.01) --------------- ---------------- -------------- ---------------- Net income $ 0.67 $ 0.75 $ 1.93 $ 1.89~~ ==========~~=====~~ ============~~====~~ ===========~~===~~ ==========~~======~~ ~~Earnings~~Units ~~per~~issued ~~common~~and ~~unit~~outstanding -at ~~diluted~~December ~~Income~~31, ~~before~~2000 ~~extraordinary~~6,833,449 ~~item~~21,916,759 $13,503,732 ~~0.65 $ 0.73 $~~ 1~~.89~~,800,000 ~~$ 1.86 Extraordinary item - - - (0.01) --------------- --------------- -------------- --------------- Net income $ 0.65 $ 0.73 $ 1.89 $ 1.85~~ ==========~~=====~~ ============~~====~~ ===========~~===~~ ==========~~======~~

The accompanying notes are an intergral part of these consolidated Statements. 5 CHARLES E. SMITH RESIDENTIAL REALTY L.P. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)

~~General~~For ~~Partner's~~the ~~General~~Three ~~and~~Months ~~Limited~~Ended ~~Interest~~March 31, ------------------------------------~~------~~ ~~Preferred~~2001 ~~Common~~2000 ~~Units Units~~ ----------~~--------~~ ----------~~---------~~ ~~Balance,~~CASH ~~December~~FLOWS ~~31,~~FROM ~~1998~~OPERATING ACTIVITIES: $ ~~141~~25,~~867~~239 $ ~~(198~~24,~~543)~~750 ~~Units~~CASH ~~exchanged~~FLOWS ~~for~~FROM ~~acquisitions~~INVESTING -ACTIVITIES: -Acquisitions ~~Adjustment~~and ~~for~~development ~~grants~~of -rental -property ~~Net~~(18,237) ~~income - 95~~(103,~~278~~193) ~~Contribution~~Additions byto ~~Charles~~rental E.property ~~Smith Residential Realty~~(27,223) ~~Inc. 130~~(9,~~000~~780) ~~30,625~~Increase ~~Proceeds~~in ~~from~~investment ~~issuance~~in ofand ~~Preferred~~advances ~~units - - Conversion of Preferred units~~ to ~~Common units~~ (2022,~~367~~619) ~~20,367 Offering costs -~~ (49,~~837~~433) ~~Distributions~~unconsolidated -Property ~~(56,247)~~Service ~~Other~~Businesses -Increase ~~3,596~~in ~~Adjustment~~investment toin ~~reflect~~unconsolidated ~~Other~~properties ~~Limited~~(22,808) ~~Partners'~~(2,443) ~~Interest~~Acquisition atdeposits ~~redemption~~and ~~value~~other -(1,816) 10,~~043~~614 ---------- ---------- Net cash used in investing activities (92,703) (114,235) ---------- ---------- ~~Balance,~~CASH ~~December~~FLOWS ~~31,~~FROM ~~1999~~FINANCING $ACTIVITIES: ~~251,500~~Increase $in deferred charges (992,~~718~~210) ~~Units~~(472) ~~exchanged~~Proceeds ~~for~~from ~~acquisitions~~sale ~~- - Amortization~~ of ~~grants~~common -stock, -net ~~Net~~14,117 ~~income - 55~~2,~~967~~604 ~~Contribution~~Mortgage ~~by Charles E. Smith Residential Realty~~loans, ~~Inc.~~net ~~- 21~~44,~~638~~243 ~~Distributions - (52~~48,~~491)~~086 ~~Exercise~~Lines of ~~options - 6~~credit,~~939~~ ~~Other~~net ~~- (~~31~~) Adjustment to reflect Other Limited Partners' Interest at redemption value - (118~~,~~299)~~000 ~~------------------ ------------------- Balance~~51,000 ~~September~~Construction 30loans, ~~2000~~net ~~(Unaudited) $ 251~~7,~~500~~278 ~~$ (185~~2,~~995)~~687 ~~==================~~Dividends ~~=================== Units issued~~ and ~~outstanding~~distributions at- ~~September~~Common 30(20,818) ~~2000 6~~(19,~~833,449~~052) ~~21,808,230~~Dividends ~~================== =================== Units issued~~ and ~~outstanding~~distributions at- ~~December~~Preferred ~~31, 1999~~ (6,~~833,449~~099) 20(5,~~673,039~~925) ~~================== ===================~~ Other, ~~Limited~~net ~~Partners'~~(47) ~~Interest~~ -- ---------- ----------~~--------------------~~ ~~Series~~Net Hcash ~~Common~~provided ~~Preferred~~by ~~Units~~financing ~~Units~~activities 67,464 78,928 ----------~~--------~~ ----------~~---------~~ ~~Balance,~~NET ~~December~~DECREASE ~~31,~~IN ~~1998~~CASH $AND ~~426,258~~CASH $EQUIVALENTS -- ~~Units~~(10,557) ~~exchanged~~CASH ~~for~~AND ~~acquisitions~~CASH 42EQUIVALENTS,~~426~~ -BEGINNING ~~Adjustment~~OF ~~for~~PERIOD ~~grants 762~~ - ~~Net income 58,536~~ - ~~Contribution by Charles E. Smith Residential Realty~~10,557 ~~Inc.~~CASH -AND -CASH ~~Proceeds from issuance of Preferred units - 45~~EQUIVALENTS,~~000~~ ~~Conversion~~END ofOF ~~Preferred~~PERIOD ~~units~~$ ~~to Common units~~ - - ~~Offering~~$ ~~costs~~ - - ~~Distributions~~========== ~~(28,637)~~========== -SUPPLEMENTAL ~~Other~~INFORMATION: ~~833~~Cash -paid ~~Adjustment~~during tothe ~~reflect~~period ~~Other~~for ~~Limited~~interest ~~Partners' Interest at redemption value (10~~22,~~043)~~981 - -~~-----------------~~ ~~-------------------~~Capitalized ~~Balance,~~interest ~~December 31~~1,360 ~~1999 $ 490,135 $ 45,000 Units exchanged for acquisitions~~ 1,~~270~~499 -Purchase ~~Amortization~~ of ~~grants~~property ~~761~~in -exchange ~~Net~~for ~~income~~Operating ~~29,254~~Partnership -units ~~Contribution by Charles E. Smith Residential Realty, Inc.~~ - - ~~Distributions (22~~14,~~626)~~405 -Purchase ~~Exercise~~ of ~~options~~property -in -exchange ~~Other~~for -assumption -of ~~Adjustment~~debt ~~to reflect Other Limited Partners' Interest at redemption value 118,299~~ - -~~-----------------~~ ~~------------------- Balance~~28,169 ~~September~~Proceeds ~~30,~~from ~~2000~~sale ~~(Unaudited)~~of $rental ~~617,093~~property $held ~~45,000~~in ~~==================~~escrow ~~===================~~-- ~~Units issued and outstanding at September 30~~8,127 ~~2000~~Purchase ~~13,599,855~~of ~~1,800,000~~property ~~==================~~with ~~===================~~escrow ~~Units~~proceeds ~~issued~~-- ~~and outstanding at December 31~~8, ~~1999 13,855,404 1,800,000 ================== ===================~~127

The accompanying notes are an intergral part of these consolidated statements. 6 CHARLES E. SMITH RESIDENTIAL REALTY L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The accompanying interim financial statements include all of the accounts of Charles E. Smith Residential Realty L.P. (the "Operating Partnership") and its subsidiary financing partnerships, and Smith Realty Company ("SRC"). (As used herein, the term "Company" may also be used to mean Charles E. Smith Residential Realty L.P., or its sole general partner, Charles E. Smith Residential Realty, Inc., or both, unless the context indicates otherwise.) All significant intercompany balances and transactions have been eliminated. The financial information furnished is unaudited, and in management's opinion, includes all adjustments (consisting only of normal, recurring adjustments), that are necessary for a fair presentation of financial position as of March 31, 2001 and the results of operations for the interim periods ended March 31, 2001 and 2000. Such interim results are not necessarily indicative of the operating results for a full year. The accompanying financial statements should be read in conjunction with the audited financial statements and related footnotes appearing in the Company's Annual Report on Form 10-K. The Operating Partnership is engaged in the ownership, operation, management, leasing, acquisition, and development of real estate properties, primarily residential multifamily properties. As of March 31, 2001, the Operating Partnership owned 59 operating multifamily properties containing 27,186 apartment units, had 480 units under construction at one owned site, had 226 units under construction at one site for which the Company owned substantially all of the economic interest, and had an agreement to purchase 383 units at one additional site. The Operating Partnership also had interests in four operating multifamily properties totaling 1,724 apartment units and in one property under construction totaling 630 units. In addition, the Operating Partnership owned one freestanding retail shopping center aggregating 205,000 square feet. The Company's properties are located in the Washington, D.C., Chicago, Boston and Southeast Florida metropolitan areas. 2. DEBT In February 2001, the Company closed on two unsecured credit facilities totaling $150 million from bank groups led by PNC Bank, N.A., as administrative agent, which refinanced existing credit facilities scheduled to mature in March 2001. Draws upon the new lines are subject to certain unencumbered asset requirements and bear interest based on London Interbank Offer Rate (LIBOR) plus an applicable margin of 85 to 125 basis points based on the leverage ratio of the Company. If the Company chooses to and obtains an Investment Grade Rating the applicable margin will be between 62.5 and 100 basis points over LIBOR based on such rating. The Company also pays a quarterly fee ranging from 0.125% to 0.20% on the full amount available under the lines of credit, depending upon the applicable leverage ratio or investment rating. The line of credit agreements contain certain restrictive covenants, including maintenance of minimum equity value, debt to equity ratios and debt service coverage requirements. 7 In March 2001, the Company closed on two second mortgage loans totaling $31.1 million. The $23.4 million loan has a fixed interest rate of 6.795% and is collateralized by Crystal Towers. The $7.7 million loan has a fixed interest rate of 6.62% and is collateralized by 2000 Commonwealth. The loans require monthly payments of interest only and mature coterminous with their respective first mortgages in January 2006 and January 2007, respectively. In March 2001, the Company refinanced an existing $12.3 million mortgage loan on The Consulate with a $27.0 million mortgage loan. The new loan has a fixed interest rate of 6.7% and requires monthly payments of interest only through March 2011, at which time principal amortization begins using a 30-year amortization schedule with a balloon payment due March 2012. 3. INVESTMENT IN AND ADVANCES TO PROPERTY SERVICE BUSINESSES In January 2001 the Company and the Property Service Businesses ("PSB") elected to treat each PSB as a taxable REIT subsidiary. In addition, SRC approved the conversion of the Company's 99% non-voting stock into voting stock resulting in the Company's control of SRC. Accordingly, the Company began consolidating the financial results of SRC in 2001 instead of using the equity method of accounting. This had no impact to net income but simply changed the financial statement presentation of SRC's results. In February 2001, Consolidated Engineering Services, Inc. ("CES") acquired Commonwealth Air Conditioning and Heating, Inc., one of the largest independent service contractors in the metropolitan Boston, Massachusetts area. The purchase price of $19.1 million consisted of 100,310 shares of common stock (purchased by CES from the Company) and cash. CES funded the transaction through the Operating Partnership in exchange for a promissory note. In March 2001, CES closed on a twelve-month $50 million line of credit with PNC Bank and Commerzbank replacing an expiring facility. The line is guaranteed by the Operating Partnership and bears interest based on LIBOR plus an applicable margin of 75 to 115 basis points based on the leverage ratio of the Company. The current borrowing rate is LIBOR plus 100 basis points. CES also pays a quarterly fee of 10 basis points on the full amount available under the line. 4. INVESTMENT IN UNCONSOLIDATED PROPERTIES In February 2001, the Company entered into and funded a $23.8 million participating loan collateralized by Plaza 440, a 457-unit luxury high-rise property in downtown Chicago. The loan, which matures September 1, 2009, provides the Company with a 90% participation in the property cash flow after debt service if certain minimum property performance thresholds are met. Otherwise, the Company will earn a fixed interest rate of 7%. The loan is subordinate to a first mortgage of $63 million at 7%. After two years, the loan agreement provides the Company the option to convert its loan to an ownership interest. Simultaneous with the loan transaction, Smith Realty Company entered into a multi-year property management agreement with the owner. 8 5. PREFERRED EQUITY The following table sets forth the Operating Partnership's issued and outstanding preferred units:

~~For~~March ~~the~~31, ~~Nine~~December ~~Months~~31, ~~Ended~~2001 ~~September~~2000 ~~30,~~ -------- ------------~~---------------------~~ ~~2000~~(in ~~1999~~thousands) ~~---------------~~Series ~~----------------~~A ~~CASH~~Cumulative ~~FLOWS~~Convertible ~~FROM~~Redeemable ~~OPERATING~~Preferred ~~ACTIVITIES:~~Units, $0.01 ~~133~~par value; 2,~~472~~640,325 units authorized; liquidation preference of $27.08; ~~110~~2,~~590~~640,325 ~~CASH~~units ~~FLOWS~~issued ~~FROM~~and ~~INVESTING~~outstanding ~~ACTIVITIES:~~at ~~Acquisitions~~March 31, 2001 and ~~development~~December of31, ~~rental~~2000, ~~property~~respectively ~~(146~~$ 71,~~695)~~500 ~~(236~~$ 71,~~106)~~500 ~~Additions~~Series toC ~~rental~~Cumulative ~~property~~Redeemable ~~(42,633)~~Preferred ~~(14~~Units,~~703)~~ ~~Disposition~~$0.01 ofpar ~~rental~~value; ~~property~~500 -units ~~75,666~~authorized; ~~Increase~~liquidation inpreference ~~investment~~of in$100,000; ~~and~~500 ~~advances~~units toissued ~~Property~~and ~~Service~~outstanding ~~Businesses~~at ~~(32,467)~~March ~~(12~~31,~~861)~~ ~~Increase~~2001 inand ~~investment~~December in31, ~~unconsolidated~~2000, ~~properties~~respectively (950,~~921)~~000 (450,~~448)~~000 ~~Acquisition~~Series ~~deposits~~E ~~and~~Cumulative ~~other~~Convertible ~~(4,160)~~Redeemable ~~(15~~Preferred Units,~~194)~~ ~~---------------~~$0.01 ~~----------------~~par ~~Net~~value; ~~cash~~684,931 ~~used~~units inauthorized; ~~investing~~liquidation ~~activities~~preference ~~(235,876)~~of ~~(207~~$36.50; 684,~~646)~~931 ~~---------------~~units ~~----------------~~issued ~~CASH~~and ~~FLOWS~~outstanding ~~FROM~~at ~~FINANCING~~March ~~ACTIVITIES:~~31, ~~(Increase)~~2001 ~~decrease~~and inDecember ~~deferred~~31, ~~charges (2~~2000,~~986)~~ ~~920~~respectively ~~Proceeds~~25,000 ~~from~~25,000 ~~sale~~Series ofF ~~preferred~~Cumulative ~~stock~~Convertible ~~and~~Redeemable ~~units~~Preferred Units, ~~net~~$0.01 -par ~~121~~value; 666,~~367~~667 ~~Proceeds~~units ~~from~~authorized; ~~sale~~liquidation preference of ~~common~~$37.50; ~~stock~~666,667 ~~net~~units ~~21,638~~issued -and ~~Mortgage~~outstanding ~~loans,~~at ~~net~~March ~~211~~31,~~034~~ ~~88,787~~2001 ~~Lines~~and ofDecember ~~credit~~31, ~~net~~2000, ~~(66~~respectively 25,000) ~~(66~~25,~~512)~~000 ~~Construction~~Series ~~loans,~~G ~~net~~Cumulative ~~(3,631)~~Convertible 9Redeemable Preferred Units,~~902~~ ~~Prepayment~~$0.01 ~~penalties~~par -value; (1641,~~038)~~026 ~~Dividends~~units ~~and~~authorized; ~~distributions~~liquidation -preference ~~Common~~of ~~(57,484)~~$39.00; ~~(51~~641,~~539)~~026 ~~Dividends~~units issued and ~~distributions~~outstanding -at ~~Preferred~~March ~~(17~~31,~~632)~~ (82001 and December 31,~~744)~~ ~~Other~~2000, ~~net~~respectively 625,~~908~~000 325,~~913~~000 ~~---------------~~Series ~~----------------~~H ~~Net~~Cumulative ~~cash~~Convertible ~~provided~~Redeemable byPreferred ~~financing~~Units, ~~activities~~$0.01 ~~91,847~~par 97value; 4,~~056~~040,404 ~~---------------~~units ~~----------------~~authorized; ~~NET~~liquidation ~~DECREASE~~preference INof ~~CASH~~$25.00; ~~AND~~4,000,000 ~~CASH~~units ~~EQUIVALENTS~~issued ~~(10~~and outstanding at March 31,~~557)~~ -2001 ~~CASH~~and ~~AND~~December ~~CASH~~31, ~~EQUIVALENTS~~2000, ~~BEGINNING~~respectively OF100,000 ~~PERIOD~~100,000 - -------~~--------~~ ------------~~----~~ ~~CASH AND CASH EQUIVALENTS~~$296,500 ~~END OF PERIOD~~ $ ~~(10~~296,~~557)~~500 ~~$ -~~ ========~~=======~~ ================ SUPPLEMENTAL INFORMATION: Cash paid during the period for interest $ 59,557 $ 47,215 Capitalized interest 3,518 6,247 Purchase of property in exchange for Operating Partnership units 1,270 34,321 Purchase of property in exchange for assumption of debt 10,233 73,586 Proceeds from sale of rental property held in escrow 40,997 17,712 Purchase of property with escrow proceeds 40,124 17,712 Purchase of joint venture interest in exchange for Operating Partnership units - 6,088

9 6. PER UNIT DATA Earnings per common unit of the Company for the three months ended March 31, 2001 and 2000 is computed based on weighted average common units outstanding during the period as follows (in millions):

~~September~~Three ~~30,~~Months ~~December~~Ended March 31, ~~2000~~2001 ~~1999~~ ------------------- ------------------------------------- ~~(in~~2001 thousands) Series A Cumulative Convertible Redeemable Preferred Units, $0.01 par value; 2,640,325 units authorized; liquidation preference of $27.08; 2,640,325 units issued and outstanding at September 30, 2000 ~~and~~------------------------- ~~December~~------------------------ ~~31,~~Basic ~~1999,~~Diluted ~~respectively~~Basic $Diluted 71,500 $ 71,500 Series C Cumulative Redeemable Preferred Units, $0.01 par value; 500 units authorized; liquidation preference of $100,000; 500 units issued and outstanding at September 30, 2000 and December 31, 1999, respectively 50,000 50,000 Series E Cumulative Convertible Redeemable Preferred Units, $0.01 par value; 684,931 units authorized; liquidation preference of $36.50; 684,931 units issued and outstanding at September 30, 2000 and December 31, 1999, respectively 25,000 25,000 Series F Cumulative Convertible Redeemable Preferred Units, $0.01 par value; 666,667 units authorized; liquidation preference of $37.50; 666,667 units issued and outstanding at September 30, 2000 and December 31, 1999, respectively 25,000 25,000 Series G Cumulative Convertible Redeemable Preferred Units, $0.01 par value; 641,026 units authorized; liquidation preference of $39.00; 641,026 units issued and outstanding at September 30, 2000 and December 31, 1999, respectively 25,000 25,000 Series H Cumulative Convertible Redeemable Preferred Units, $0.01 par value; 4,040,404 units authorized; liquidation preference of $25.00; 2,200,000 units issued and outstanding at September 30, 2000 and December 31, 1999, respectively 100,000 100,000 --------- ---------- ---------- -------- $Weighted ~~296,500~~Average $Common ~~296,500~~Operating ~~===========~~Partnership ~~===========~~Units 35.7 36.5 34.6 34.9

A reconciliation of income and units used to calculate basic and diluted earnings per common unit for the three months ended March 31, 2001 follows (dilutive securities had no effect on earnings for the three months ended March 31, 2000):

~~Three~~Weighted ~~Months~~Per ~~Ended~~Unit ~~September~~Income ~~30,~~Average Units Amount -------------- -------------- ---------~~-----------~~ ~~2000~~(In ~~1999~~Thousands) (In Thousands) Three Months Ended March 31, 2001: --------------------- ------------~~--------~~ ~~Basic~~Income ~~Diluted~~$26,640 ~~Basic~~Income ~~Diluted~~attributable ~~-----~~to Preferred Units (6,111) ------- ~~-----~~Earnings per common units -~~------~~ ~~Weighted~~Basic ~~Average~~Income ~~Common~~attributable ~~Operating~~to ~~35.2~~common ~~38.6~~unitholders ~~33.4~~20,529 ~~36.3~~35,659 ~~Partnership~~$ ~~Units~~0.58 ~~Nine~~Effect ~~Months~~of ~~Ended~~dilutive ~~September~~securities: ~~30,~~Options -~~------------------------------------------------~~ ~~2000~~847 ~~1999~~(0.02) ------- -------------- --------~~-------------~~ ~~Basic~~Earnings ~~Diluted~~per ~~Basic~~common ~~Diluted~~unit -~~----~~ ~~-------~~Diluted ~~-----~~$20,529 ~~-------~~36,506 ~~Weighted~~$ ~~Average Common Operating Partnership Units 34~~0.956 ~~38.0~~======= ~~32.6~~============= ~~35.8~~========

10 7. SEGMENT REPORTING Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by senior management in deciding how to allocate resources and in assessing performance. Property Segments The Company's primary business is the ownership and operation of multifamily residential real estate. As such, the residential constitute the four primary operating segments -- Core, Acquisition/Disposition, Redevelopment and Development portfolios -- depending upon the maturity and nature of each property. Core consists of multifamily properties, other than Redevelopment or Development, which have been owned more than one full calendar year. Therefore, the 2001 Core represents properties owned as of December 31, 1999. Acquisition/Disposition consists of purchased properties which have not yet reflected one full calendar year of operations and disposed properties. Redevelopment includes purchased properties in which the Company is making significant renovations to reposition the property in the marketplace. Properties will remain in the Redevelopment Portfolio until one full calendar year of operating results is reflected subsequent to completion of the renovations. Development consists of properties which the Company has constructed or is in the process of constructing which have not yet had a full calendar year of stabilized operating results. On the first of January each year, Acquisition, Redevelopment and Development properties that meet the one- year requirement are transferred to the Core portfolio. The Company's fifth property segment is the Retail portfolio, which reflects results for the one free standing retail property. The Company evaluates performance for the Property Segments based on Net Operating Income ("NOI") which is the difference between Rental Revenue and Operating Expenses (which primarily excludes interest expense, general and administrative costs and depreciation). Property Service Business Segment The Company also evaluates the separate financial information of the Property Service Businesses. These businesses provide professional services such as property management, furnished corporate apartment rentals, engineering and technical consulting, and construction management to both Company-owned properties and properties owned by third parties. Given the similarities in the nature of services, customers and distribution methods, the Company considers the Property Service Businesses to be one segment. The Company evaluates performance for the Property Service Business segment based on Funds from Operations ("FFO"), which is defined using the revised definition adopted by the National Association of Real Estate Investment Trusts ("NAREIT") as net income (loss) (computed in accordance with generally accepted accounting principles) excluding gains (or losses) from debt restructuring and sale of property, plus depreciation/amortization of assets unique to the 11 real estate industry. Depreciation/amortization of assets not unique to the industry, such as amortization of deferred financing costs, goodwill and non-real estate assets, is not added back. The accounting policies for all segments are the same as those described in the summary of significant accounting policies in the Company's Annual Report on Form 10-K. 12 Information concerning operations by segment for the three months ended March 31, 2001 and 2000 was as follows (in thousands):

~~Weighted~~Property ~~Per~~Segments ~~Unit~~Three ~~Income~~Months ~~Average~~Ended ~~Units~~March ~~Amount~~31, -------------- --------~~------~~ 2001 2000 ---------- ~~(In Thousands) (In Thousands) Three Months Ended September 30, 2000:~~ ---------- Net Operating Income --------------------~~-------~~ ~~Income~~Core ~~before~~Portfolio ~~extraordinary~~$ ~~item~~45,412 $ 2942,~~593~~200 ~~Income~~Acquisition/Disposition ~~attributable~~Portfolio to2,941 ~~Preferred Units (5~~2,~~925)~~566 ~~-----------~~Redevelopment ~~Earnings~~Portfolio ~~per unit - Basic Income attributable to common unitholders before extraordinary item $ 23~~9,~~668~~389 356,~~176~~640 $Development ~~0.67~~Portfolio ~~Effect~~3,421 ~~of dilutive securities: Preferred units - Series A~~ 1,~~452~~496 ~~2,640~~Retail ~~(0.01)~~Portfolio ~~Options~~141 -453 ~~771 (0.01)~~ ----------- -------- --~~-----~~ ~~Earnings~~Consolidated ~~per~~total ~~unit - Diluted $ 25~~61,~~120~~304 3853,~~587~~355 $Other ~~0.65~~(221) ~~=========== ======== ======= Nine Months Ended September 30, 2000:~~ -~~-----------------------------------~~ ~~Income~~Depreciation ~~before~~and ~~extraordinary~~amortization ~~item $ 85~~(12,~~221~~592) ~~Income attributable to Preferred Units~~ (1710,~~776~~567) ~~-----------~~Equity ~~Earnings~~in ~~per~~income ~~unit~~of -unconsolidated ~~Basic~~properties ~~Income~~895 ~~attributable~~783 toEquity ~~common~~in ~~unitholders~~income ~~before~~of ~~extraordinary~~unconsolidated ~~item~~Property $Service ~~67,445~~Businesses 342,~~859~~983 $519 ~~1.93~~Corporate ~~Effect~~general ofand ~~dilutive~~administrative ~~securities:~~expenses ~~Preferred units - Series A 4~~(3,~~357~~856) (2,~~640 (0.02~~695) ~~Options~~Net -interest ~~526~~expense (~~0.02~~21,873) (17,793) ----------- -------- --~~-----~~ ~~Earnings~~Net ~~per~~income ~~unit~~of -the ~~Diluted~~Operating Partnership $ 7126,~~802~~640 ~~38,025~~ $ ~~1.89~~23,602 =========== ======== ==~~======~~ ~~Three~~Revenues ~~Months Ended September 30, 1999:~~ --------~~-----------------------------~~ ~~Income~~Core ~~before~~Portfolio ~~extraordinary~~$ ~~item~~73,964 $ 2868,~~472~~187 ~~Income~~Acquisition/Disposition ~~attributable~~Portfolio to4,598 ~~Preferred~~4,328 ~~Units~~Redevelopment (Portfolio 17,483 12,218 Development Portfolio 5,732 3,~~272)~~295 Retail Portfolio 628 826 ----------- ~~Earnings per unit~~ ---------- ~~Basic~~Consolidated ~~Income~~total ~~attributable to common unitholders before extraordinary item $ 25~~102,~~200~~405 3388,~~413~~854 $Other ~~0.75 Effect of dilutive securities: Preferred units - Series A 1~~4,~~452~~171 ~~2,640 (0.02) Options~~ - ~~288 (0.00)~~ ----------- -------- --~~-----~~ ~~Earnings~~Total ~~per~~revenue ~~unit - Diluted~~ $ 26106,~~652~~576 ~~36,341~~ $ ~~0.73~~88,854 =========== ======== ==~~=====~~ ~~Nine~~Real ~~Months~~Estate ~~Ended September 30~~Assets, ~~1999:~~gross -------------------------~~-----------~~ ~~Income~~Core ~~before~~Portfolio ~~extraordinary~~$1,289,673 ~~item~~ $1,261,725 70Acquisition/Disposition Portfolio 130,~~086~~463 ~~Income~~63,240 ~~attributable~~Redevelopment toPortfolio ~~Preferred~~491,709 ~~Units~~225,861 (8Development Portfolio 291,~~028)~~515 336,801 Retail Portfolio 15,183 15,135 ---------- ---------- ~~Earnings per unit~~ Sub-total ~~Basic Income attributable to common unitholders before extraordinary item $ 62~~2,~~058 32~~218,~~569~~543 $ 1~~.90 Effect of dilutive securities: Preferred units - Series A and B 4~~,~~593 2~~902,~~979~~762 Accumulated depreciation (~~0.04~~273,644) ~~Options - 207~~ (~~0.00~~253,039) ----------- -------- --~~-----~~ ~~Earnings~~Consolidated ~~per~~total, ~~unit~~net ~~- Diluted~~ $ 661,~~651 35~~944,~~755~~899 $ 1~~.86~~,649,723 =========== ======== ==~~=====~~

13 Property Service Business Segment

Three Months Ended ~~Nine~~March ~~Months ended September 30~~31, ~~September 30,~~ ----------------~~----------~~ ~~-----------------------------~~2001 2000 ~~1999 2000 1999~~ -------~~-----~~ -------~~-----~~ ~~-----------~~Funds ~~------------~~from ~~Net~~Operations ~~Operating Income -------------------- Core Portfolio~~ $ 402,~~421~~572 $ ~~36,266~~626 $Revenues ~~119~~93,~~782~~776 ~~$ 108~~49,~~875~~901 Acquisition/Disposition Portfolio 13,846 7,328 36,398 14,929 Development Portfolio 5,097 1,288 13,012 2,999 Retail Portfolio 424 1,603 3,583 5,079 ------------ --------- ----------- ---------- Consolidated Total 59,788 46,485 172,775 131,882 Depreciation and Amortization ~~(11,531) (8,363) (32,993) (24,304) Equity in Income of Unconsolidated Properties 524 347 1,849 677 Equity in Income of Property Service Businesses~~ 2,~~890~~450 2,127 5,045 3,255 Corporate General and Administrative Expenses (2,810) (2,156) (8,507) (6,785) Net interest expense (19,268) (15,182) (57,109) (41,704) ----------- --------- ----------- ---------- Income before Gain on Sale and Extraordinary Item $ 29,593 $ 23,258 $ 81,060 $ 63,021 =========== ========= ============ ========== Revenues -------- Core Portfolio $ 66,227 $ 61,260 $ 192,063 $ 178,891 Acquisition/Disposition Portfolio 23,300 12,428 63,685 25,884 Development Portfolio 8,424 3,049 20,997 6,421 Retail Portfolio 791 2,457 5,567 7,553 ----------- --------- ----------- ---------- Consolidated Total $ 98,742 $ 79,194 $ 282,312 $ 218,749 =========== ========= =========== ========== Real Estate Assets, gross ------------------------- Core Portfolio $ 1,098,345 $ 902,902 Acquisition/Disposition Portfolio 600,340 435,494 Development Portfolio 272,924 216,617 Retail Portfolio 15,148 60,051 ----------- ---------- Subtotal 1,986,757 1,615,064 Accumulated depreciation (262,189) (249,788) ----------- ---------- Consolidated Total, Net $ 1,724,568 $1,365,276 =========== ==========396

14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The following discussion should be read in conjunction with the accompanying financial statements and notes thereto. The results of operations for the three months ended March 31, 2001 and 2000 presented in the Consolidated Statements of Operations and discussed below represent the operations of Charles E. Smith Residential Realty L.P. (the "Operating Partnership") and its subsidiary financing partnerships and Smith Realty Company ("SRC"). (As used herein, the term "Company" may also be used to mean Charles E. Smith Residential Realty L.P. , or its sole general partner, Charles E. Smith Residential Realty, Inc., or both, unless the context indicated otherwise). FORWARD-LOOKING STATEMENTS When used throughout this report, the words "believes," "anticipates," "expects" and similar expressions are intended to identify forward-looking statements. Such statements indicate that assumptions have been used that are subject to a number of risks and uncertainties which could cause actual financial results or management plans and objectives to differ materially from those projected or expressed herein, including: the effect of national and regional economic conditions, particularly with regard to the levels of multifamily property occupancy and rental growth in the Washington, D.C., southeast Florida, Chicago, and Boston metropolitan areas; the Company's ability to identify and secure additional properties and sites that meet its criteria for acquisition or development; the acceptance of the Company's financing plans by the capital markets, and the effect of prevailing market interest rates and the pricing of the Company's stock; and other risks described from time to time in the Company's filings with the Securities and Exchange Commission. Given these uncertainties, readers are cautioned not to place undue reliance on such statements. The registrant undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. Rental Revenue Average revenue per apartment unit for the Company's core multifamily properties increased approximately 8.5% in the first quarter of 2001 as compared with 2000. A schedule of portfolio statistics follows: 15 CHARLES E. SMITH RESIDENTIAL REALTY L.P. -------------------------------------------------------------------------------- Residential Portfolio Statistics For the Quarter Ended March 31, 2001

~~Three~~Monthly ~~Months~~% ~~Ended~~% ~~Nine~~Average ~~Months~~GOI ~~Ended~~Change ~~September~~Change 30Apartment Sq. Ft. GOI Per Unit From Occupancy From Property Type Units Per Unit QTD 01 QTD 01 QTD 00 QTD 01 QTD 00 --------------------------------------------------------------------------------------------------------------------------------- (in 000s) CORE RESIDENTIAL PORTFOLIO Washington, ~~September~~D.C. 301841 Columbia Road Mid-rise 115 635 $ 400 $1,159 7.4% 99.0% -0.2% 2501 Porter Street High-rise 202 757 975 1,609 1.2% 92.0% -2.0% Albemarle High-rise 235 1,122 1,085 1,539 11.5% 98.0% -0.1% Calvert-Woodley High-rise 136 909 591 1,449 8.1% 97.5% -1.7% Car Barn Garden 196 959 630 1,071 8.6% 96.1% -1.7% Cleveland House High-rise 216 897 973 1,502 13.3% 97.4% -0.7% Connecticut Heights High-rise 519 656 1,797 1,154 12.2% 98.5% 0.4% The Consulate High-rise 269 828 1,076 1,333 10.1% 92.6% -0.2% Corcoran House High-rise 138 528 419 1,012 12.1% 96.7% 2.1% Statesman High-rise 281 593 866 1,027 17.0% 99.2% 2.2% Van Ness South High-rise 625 957 2,527 1,348 8.5% 98.0% -0.7% The Kenmore High-rise 376 715 1,125 997 14.3% 98.9% 1.0% Tunlaw Gardens Garden 167 850 513 1,024 11.9% 97.0% -0.4% Tunlaw Park Mid-rise 120 855 491 1,364 9.3% 97.2% -1.7% ------- ----- ------- ------ ------ ------ ~~2000~~------ ~~1999~~3,595 ~~2000~~809 ~~1999~~$13,468 $1,249 10.3% 97.0% -0.3% Northern Virginia Crystal City ------------ The Bennington High-rise 348 798 1,210 1,159 5.0% 96.0% 0.2% Crystal House I High-rise 426 896 1,566 1,225 7.5% 98.4% -0.7% Crystal House II High-rise 402 896 1,417 1,175 8.0% 98.2% -1.0% Crystal Square High-rise 378 1,080 1,553 1,369 7.5% 97.9% -0.7% Crystal Place High-rise 180 915 801 1,483 6.5% 96.4% -0.2% Gateway Place High-rise 162 828 769 1,582 13.4% 77.3% 1.0% Water Park Towers High-rise 360 959 1,703 1,577 1.9% 93.3% -2.9% Crystal Plaza High-rise 540 1,124 2,335 1,441 5.3% 97.7% -1.3% Crystal Towers High-rise 912 1,118 3,701 1,353 7.8% 97.8% -0.9% Parc Vista High-rise 299 770 1,225 1,366 3.1% 90.7% 1.6% ------- ----- ------- ~~Funds~~------ ~~from~~------ ~~Operations~~------ ------ 4,007 980 $16,280 $1,354 6.4% 95.7% -0.7% Rosslyn/Ballston ---------------- Courthouse Place High-rise 564 850 2,~~918~~597 $1,535 8.5% 98.9% 0.0% Courthouse Plaza High-rise 396 838 1,869 1,573 14.2% 97.8% 0.5% Lincoln Towers High-rise 714 878 3,~~233~~285 1,534 9.4% 96.2% -0.3% ------- ----- ------- ------ ------ ------ ------ 1,674 859 $ 7,751 $1,543 10.2% 97.5% 0.0% Tysons/Dulles ------------- Charter Oak Garden 262 1,~~288~~098 845 1,075 3.7% 93.6% -4.5% Oaks of Tysons Garden 218 967 766 1,171 11.9% 91.9% -1.3% Bedford Village Garden 752 1,098 2,587 1,147 10.4% 95.9% -1.6% Patriot Village Garden 1,065 1,149 3,552 1,112 10.0% 97.0% -1.6% Westerly at Worldgate Garden 320 921 1,176 1,225 1.6% 96.1% -0.9% ------- ----- ------- ------ ------ ------ ------ 2,617 1,086 $ 8,926 $1,137 8.5% 95.8% -1.8% Other ----- Arlington Overlook Mid-rise 711 877 2,125 996 10.8% 96.0% -1.6% Boulevard of Old Town Garden 159 672 485 1,017 11.1% 97.8% 0.6% Columbia Crossing Garden 247 977 1,030 1,390 10.1% 99.5% -0.3% Concord Village Garden 531 925 1,~~577~~562 ~~Revenues~~981 748.4% 98.3% 1.1% Newport Village Garden 937 1,~~971~~060 373,~~462~~042 ~~182~~1,~~897~~082 8.8% 98.0% -0.9% Skyline Towers High-rise 940 1,107 3,244 1,150 6.3% 96.5% -1.1% ------- ----- ------- ------ ------ ------ ------ 3,~~157~~525 ~~Depreciation/Amortization~~992 $11,488 $1,~~486~~086 ~~645~~8.6% 97.4% -0.6% Boston Cronin's Landing Mid-rise 281 1,~~326~~062 1,~~604~~955 2,319 10.4% 99.8% 0.7% 2000 Commonwealth High-rise 188 862 1,138 2,018 8.1% 99.8% -0.1% ------- ----- ------- ------ ------ ------ ------ 469 982 $ 3,093 $2,198 9.5% 99.8% 0.4% Chicago One East Delaware High-rise 306 704 1,997 2,175 3.8% 98.8% 0.7% McClurg Court High-rise 1,075 732 4,743 1,471 13.1% 94.9% -0.4% Park Lincoln High-rise 139 581 504 1,209 3.0% 95.2% 0.2% Terrace Garden 427 814 1,017 794 -6.6% 87.3% -9.9% Countryside Garden 720 872 2,072 959 5.6% 93.3% -0.4% Stonegate Garden 1,158 581 2,625 756 11.7% 95.3% 6.1% ------- ----- ------- ------ ------ ------ ------ 3,825 714 $12,958 $1,129 7.9% 94.4% 0.3% ------- ----- ------- ------ ------ ------ ------ 19,712 903 $73,964 $1,251 8.5% 96.3% -0.5% ------- ----- ------- ------ ------ ------ ------

Monthly Average GOI Apartment Sq. Ft. GOI Per Unit Property Type Units Per Unit QTD 0001 QTD 01 -------- ---- ----- -------- --------- ~~(in 000s) CORE RESIDENTIAL PORTFOLIO Washington, D.C. 1841 Columbia Road Mid~~-~~rise 115 635 $ 392 2501 Porter Street High~~-~~rise 202 757 1,093 Albemarle High~~-~~rise 235 1,122 1,040 Calvert~~-~~Woodley High~~-~~rise 136 909 572 Car Barn Garden 196 959 621 Cleveland House High~~-~~rise 216 897 915 Connecticut Heights High~~-~~rise 519 656 1,720 Corcoran House High~~-~~rise 138 528 441 Statesman High~~-~~rise 281 593 835 Van Ness South High~~-~~rise 625 957 2,459 The Kenmore High~~-~~rise 376 715 1,066 Tunlaw Gardens Garden 167 850 494 Tunlaw Park Mid~~-~~rise 120 855 485~~ --------- --------- --------- ~~3,326 808 $ 12,133 Northern Virginia Crystal City~~ ------------ ~~The Bennington High~~-~~rise 348 798 1,227 Crystal House I High~~-~~rise 426 896 1,491 Crystal House II High~~-~~rise 402 896 1,343 Crystal Square High~~-~~rise 378 1,080 1,516 Crystal Place High~~-~~rise 180 915 790 Gateway Place High~~-~~rise 162 828 1,021 Water Park Towers High~~-~~rise 360 959 1,771 Crystal Plaza High~~-~~rise 540 1,124 2,288 Crystal Towers High~~-~~rise 912 1,118 3,579 Parc Vista High~~-~~rise 299 770 1,381~~ --------- --------- -----~~----~~ ~~4,007~~(in ~~980~~000s) $ACQUISITION ~~16,407~~PORTFOLIO ~~Rosslyn/Ballston~~2000 -----~~-----------~~ ~~Courthouse~~Delaware ~~Plaza~~Place ~~High-rise 396 838 1~~(Chicago,~~845~~ ~~Lincoln~~IL) ~~Towers~~ High-rise ~~714~~185 ~~878~~706 ~~3,376~~$ ~~---------~~872 ~~--------- ---------~~ $1,~~110~~571 ~~864~~New $River 5Village (S.E.,~~221~~ ~~Tysons/Dulles~~Florida) Mid-~~------------~~rise ~~Charter~~240 ~~Oak~~1,128 ~~Garden~~1,045 ~~262~~ 1,~~098~~451 ~~876~~2201 ~~Oaks~~Wilson ofBoulevard ~~Tysons Garden 218 967 860 Bedford Village Garden 752 1~~(Rosslyn/Ballston,~~098~~ ~~2,498~~VA) ~~Patriot~~High-rise ~~Village~~219 ~~Garden~~838 1,~~065~~091 1,~~149~~661 ~~3,362~~Reston ~~Westerly~~Landing at(Tysons/Dulles, ~~Worldgate~~VA) Garden ~~320~~400 ~~921~~995 1,~~276~~675 1,396 ------~~---~~ ------~~---~~ --------- ~~2,617 1,086 $ 8,872 Other~~ ----- ~~Arlington Overlook Mid~~-~~rise 711 877 2,061 Berkeley Mid~~-~~rise~~ ~~138 809 345 Boulevard of Old Town Garden 159 672 456 Columbia Crossing Garden 247 977 980 Concord Village Garden 531 925~~ 1,~~503~~044 ~~Newport~~941 ~~Village~~$ ~~Garden 937 1~~4,~~060~~683 ~~2,904 Orleans Village Garden 851~~ $1,~~015~~495 ~~2,437 Skyline Towers High~~-~~rise 940 1,107 3,154~~ ----- ---- -- -------- --------- ~~4,514~~REDEVELOPMENT ~~991~~PORTFOLIO $Properties ~~13,840~~held ~~Boston/Chicago~~more ~~2000~~than ~~Commonwealth~~1 ~~High-rise~~year ~~188~~Buchanan ~~862~~House 1(Crystal City,~~096~~ ~~One~~VA) ~~East Delaware~~ High-rise ~~306~~442 ~~704~~1,173 $ 2,~~021~~086 ~~McClurg~~$1,573 ~~Court~~Mirador (S.E. Florida) High-rise 1,~~075~~339 ~~732~~772 43,~~754~~633 ~~Cronin's~~904 ~~Landing~~Ocean ~~Mid~~View (S.E. Florida) High-rise ~~281~~ 1,~~062~~199 1,~~883~~080 ~~---------~~3,698 ~~---------~~1,028 ------~~---~~ ~~1,850 791 $ 9,754~~ ------~~---~~ --------- --------- 172,~~424~~980 ~~938~~955 $ 669,~~227~~417 ~~---------~~$1,053 ------~~---~~ ------~~---~~ ~~Monthly % % GOI Change Change Per Unit From Occupancy From Property QTD 00 QTD 99 QTD 00 QTD 99~~ -------- --------- ~~------~~Properties ~~------~~held ~~------~~less ~~CORE~~than ~~RESIDENTIAL~~1 ~~PORTFOLIO~~year ~~Washington,~~Harbour ~~D.C.~~House ~~1841 Columbia Road $ 1,137 5~~(S.~~4% 99~~E.6% Florida) High-~~0.2%~~rise ~~2501 Porter Street 1,~~804 ~~9.0%~~990 ~~97.~~3%,001 ~~-2.6% Albemarle~~ 1,~~476~~244 ~~12.1%~~Ocean ~~97.1%~~Crest ~~0.7%~~Club ~~Calvert-Woodley 1,403 8~~(S.~~1% 97~~E.9% Florida) High-~~1.1%~~rise ~~Car~~527 ~~Barn~~987 1,~~056~~627 ~~10.4% 98.0% -~~1~~.3%~~,029 ~~Cleveland~~Ocean ~~House~~Crest ~~1,412~~Beach 11(S.~~1% 96~~E.0% Florida) High-~~1.7%~~rise ~~Connecticut~~943 ~~Heights~~995 12,~~105~~853 ~~12.7% 97.6% 0.8% Corcoran House~~ 1,~~066~~008 ~~17.5%~~Sagamore ~~98.6%~~Towers ~~1.0% Statesman 990 15.7% 98.4% 3.5% Van Ness South 1~~(Boston,~~311~~ ~~9.4%~~MA) ~~98.1%~~ High-~~0.4%~~rise ~~The~~225 ~~Kenmore~~707 ~~945~~585 ~~11.9%~~867 ~~98.9% 0.4% Tunlaw Gardens 985 13.9% 97.2% 0.1% Tunlaw Park 1,347 12.7% 98.4% 1.6%~~ -------- -------- -------- -------- ~~$ 1~~2,~~216~~499 ~~11.3%~~966 ~~97.~~$ 8%,066 ~~-0.~~$1%,076 ~~Northern~~------ ~~Virginia~~------ ~~Crystal City~~ -------- ------- ~~The~~DEVELOPMENT ~~Bennington~~PORTFOLIO ~~1,175~~One ~~3.1%~~Superior ~~97.5%~~Place ~~0.6% Crystal House I 1~~(Chicago,~~167~~ ~~4.9%~~IL) ~~96.7%~~ High-~~1.4%~~rise ~~Crystal~~809 ~~House~~729 II$ 14,~~114~~800 ~~5.3% 96.8% -~~$1~~.6%~~,978 ~~Crystal~~Park ~~Square~~Connecticut 1(Washington,~~337~~ 6D.~~5% 99~~C.0%) High-~~0.3%~~rise ~~Crystal~~142 ~~Place~~915 ~~1,464~~932 ~~5.0% 99.1% 1.~~2~~% Gateway Place 2~~,~~102~~188 ~~19.2%~~Alban ~~88.5% -4.5% Water Park~~ Towers 1(Washington,~~640~~ 7D.~~2% 96~~C.~~0% 0.~~)/(1%)/ ~~Crystal~~Mid-rise ~~Plaza~~226 ~~1,412~~915 ~~5.9%~~N/A ~~98.6%~~N/A ~~-0.3%~~Park ~~Crystal~~Millennium ~~Towers~~(Chicago, IL)/(1~~,308~~)/ ~~6.3% 98.2%~~ High-~~0.7%~~rise ~~Parc~~480 ~~Vista~~907 ~~1,539~~N/A ~~1.5%~~N/A ~~92.5%~~ -~~5.4%~~ -----~~---~~ -------- -------- -------- $ 1,~~365~~657 ~~6.1%~~822 ~~96.9%~~$ ~~-1.1% Rosslyn/Ballston ---------------- Courthouse Plaza 1,553 9.~~5~~% 94.0% -6.0% Lincoln Towers 1~~,~~576~~732 ~~10.2%~~N/A ~~97.1%~~ -~~0.6%~~ -----~~---~~ -------- -------- -------- $ALL ~~1,568~~RESIDENTIAL ~~9.9%~~PROPERTIES ~~96.0% -2.9% Tysons/Dulles ------------- Charter Oak 1~~27,~~115~~892 ~~7.6% 96.0% -0.6% Oaks of Tysons 1~~$101,~~316~~862 ~~21.6% 96.2% 0.1% Bedford Village 1,107 9.7% 97.0%~~ PARTIALLY-~~0.7%~~OWNED ~~Patriot~~PORTFOLIO ~~Village~~====== ~~1,052~~======== ~~7.6% 97.4%~~ -~~0.8% Westerly at Worldgate 1,328 9.6% 96.8%~~ -~~0.8%~~ -------- -------- -------- ~~--------~~Renaissance ~~$ 1,130 9.7~~(25% ~~97.0%~~owned) High-~~0.4%~~rise ~~Other~~330 ~~-----~~984 ~~Arlington~~$ ~~Overlook 966 9.4% 96.4% -~~1~~.1%~~,355 ~~Berkeley 834 7.0% 98.4% 2.~~$1~~% Boulevard of Old Town 955 5.3% 96.6% 0.0% Columbia Crossing 1~~,~~322~~369 ~~9.6%~~Springfield ~~98.9%~~Station ~~0.5~~(48% ~~Concord~~owned) ~~Village~~Garden/Mid-rise ~~943~~631 ~~6.6%~~909 ~~97.4% 0.6% Newport Village 1~~2,~~033~~330 6.1~~% 97.6% -0.9% Orleans Village 954 6.0% 98.6% 1.4% Skyline Towers 1~~,~~118~~231 ~~4.8%~~Brandywine ~~98.0~~(25% ~~0.8%~~owned) High-~~-------~~rise ~~--------~~306 ~~-------- -------- $~~ 1,~~022~~009 ~~6.5% 97.7% 0.2% Boston/Chicago 2000 Commonwealth~~ 1,~~944~~284 ~~6.7% 98.3%~~ 1~~.7%~~,399 ~~One~~Stoneridge ~~East~~at ~~Delaware~~University ~~2,201~~Center ~~7.9~~(40% ~~98.~~owned)(1%) ~~-0.6%~~Garden ~~McClurg~~630 ~~Court~~993 1,~~474~~323 ~~7.0%~~N/A ~~97.4%~~Plaza ~~1.2%~~440 ~~Cronin's Landing 2,234 7.5~~(90% ~~98.6%~~cash ~~-0.1%~~flow ~~--------~~note) High-~~-------~~rise ~~--------~~457 ~~--------~~869 $606 ~~1,758~~N/A ~~7.3% 97.9% 0.7%~~ -------- -------- -------- ~~--------~~2,354 947 $ 16,~~267~~898 ~~8.1%~~====== ~~97.3%~~====== ~~-0.4% -------- -------- -------- --------~~========

/(1)/ Property is currently under construction.

~~Monthly~~% ~~Average~~% ~~GOI~~Change ~~Apartment~~Change ~~Sq.~~From ~~Ft.~~Occupancy ~~GOI~~From ~~Per~~QTD ~~Unit~~00 ~~Property Type Units Per Unit~~ QTD 0001 QTD 00 -------- ---- ----- -------- ~~--------- --------- (in 000s)~~ ACQUISITION PORTFOLIO ~~1999~~2000 ---- ~~Buchanan House (Crystal City, VA) High~~-~~rise~~ ~~442~~Delaware ~~1,173~~Place ~~$ 2,159 $ 1,628 Park Lincoln~~ (Chicago, IL) ~~High-rise~~N/A 139 581 527 1,264 Terrace (Chicago, IL) Garden 427 814 1,122 876 The Consulate (Washington, DC) High-rise 269 828 1,117 1,384 Countryside (Chicago, IL) Garden 720 872 2,084 965 Stonegate (Chicago, IL) Garden 1,158 581 2,532 729 Forte Towers (S91.E.7% ~~Florida)~~N/A ~~High-rise~~New ~~1,339~~River ~~772~~Village ~~3,335 830 Ocean View at Aventura~~ (S.E. ~~Florida) High-rise 1~~,~~199~~ ~~1,080 3,404 946 2000 ---- Ocean View at Sunset Pointe-North (S.E.~~ Florida) ~~High-rise~~N/A ~~527 987 1,520 961 Ocean View at Sunset Pointe-South (S~~92.E.7% ~~Florida) High-rise 943 995 2,754 973 Dearborn Place (Chicago, IL) High-rise 185 706 1,022 1,841 Reston Landing (Tysons~~N/~~Dulles,~~A ~~VA)~~2201 ~~Garden~~Wilson ~~400~~Boulevard ~~995 1,672 1,394 ---------- -------- ----------- 7,748 876 $ 23,248 DEVELOPMENT PORTFOLIO Courthouse Place~~ (Rosslyn/Ballston, VA) ~~High-rise 564 850 $ 2,528 $ 1,494 One Superior Place (Chicago, IL) High-rise 809 729 5,083 2,094 Park Connecticut (Washington, DC) High-rise 142 915 813~~ N/A ~~Alban~~99.0% ~~Towers (Washington, DC)(1) Mid-rise 226~~ N/A ~~N/A~~Reston ~~N/A~~Landing ~~Park Millennium~~ (~~Chicago~~Tysons/Dulles, ILVA)~~(1)~~ ~~High-rise 480~~ N/A ~~N/A~~95.8% N/A -----~~-----~~ ------ ------ ~~2,221~~N/A $95.3% ~~8,424~~N/A -----~~-----~~ ------~~-----~~ ~~ALL RESIDENTIAL PROPERTIES 27,393 $ 97,899 ========== =========== PARTIALLY~~-~~OWNED PORTFOLIO~~ -----~~--------------------~~ ~~Renaissance~~REDEVELOPMENT ~~(25%~~PORTFOLIO ~~owned)~~Properties ~~High-rise~~held ~~330~~more ~~984~~than $ 1~~,335~~ $year ~~1,348~~Buchanan ~~Springfield~~House ~~Station~~ (~~48%~~Crystal ~~owned~~City, VA) ~~Garden/Mid-rise~~3.3% ~~631~~95.9% ~~909~~ -2~~,230~~.4% ~~1,178~~Mirador ~~Brandywine~~ (~~25%~~S.E. ~~owned~~Florida) ~~High-rise~~13.2% ~~306~~95.5% -1~~,009~~.9% ~~1,264~~Ocean ~~1,277~~View ~~Stoneridge at University Center~~ (~~40%~~S.E. ~~owned~~Florida)~~(1)~~ ~~Garden~~7.8% ~~630~~96.5% ~~N/A~~-0.6% ~~188 N/A~~ -----~~-----~~ ------ ------ ~~1,897 $ 5,017 ========== ===========~~ 8.8% 96.0% ~~Change Change From Occupancy From Property QTD 99 QTD 00 QTD 99~~ -~~-------~~1.4% ------ ------ ------ ~~ACQUISITION~~Properties ~~PORTFOLIO~~held ~~1999~~less ~~----~~than ~~Buchanan~~1 ~~House~~year ~~(Crystal~~Harbour ~~City,~~House ~~VA) N/A 98.5% N/A Park Lincoln~~ (~~Chicago, IL) N/A 98.0% N/A Terrace (Chicago, IL) N/A 94.9% N/A The Consulate (Washington, DC) N/A 96.3% N/A Countryside (Chicago, IL) N/A 94.3% N/A Stonegate (Chicago, IL) N/A 92.9% N/A Forte Towers (~~S.E. Florida) N/A 9592.14% N/A Ocean ~~View~~Crest atClub ~~Aventura~~ (S.E. Florida) N/A 94.59% N/A ~~2000 ----~~ Ocean ~~View~~Crest atBeach ~~Sunset Pointe-North~~ (S.E. Florida) N/A 92.54% N/A ~~Ocean~~Sagamore ~~View~~Towers ~~at Sunset Pointe-South~~ (~~S.E.~~Boston, ~~Florida~~MA) N/A 9396.24% N/A ~~Dearborn~~----- ~~Place~~------ ~~(Chicago,~~------ ~~IL)~~ N/A 9894.26% N/A ~~Reston~~----- ~~Landing~~------ ~~(Tysons/Dulles,~~------ ~~VA) N/A 98.2% N/A~~ DEVELOPMENT PORTFOLIO ~~Courthouse Place (Rosslyn/Ballston, VA) N/A 99.1% N/A~~ One Superior Place (Chicago, IL) N/A 9997.9% N/A Park Connecticut (Washington, DCD.C.) N/A ~~N/A~~97.4% N/A Alban Towers (Washington, DCD.C.)(1) N/A N/A N/A Park Millennium (Chicago, IL)(1) N/A N/A N/A ----- ------ ------ N/A N/A N/A ----- ------ ------ ALL RESIDENTIAL PROPERTIES PARTIALLY-OWNED PORTFOLIO -------------------------- Renaissance (25% owned) 8.62% 9896.74% 0-2.30% Springfield Station (48% owned) ~~N/A 97~~13.4% ~~N/A~~98.5% 0.6% Brandywine (25% owned) ~~N/A~~7.4% 9893.56% ~~N/A~~-4.4% Stoneridge at University Center (40% owned)(1) N/A N/A N/A Plaza 440 (90% cash flow note) N/A N/A N/A

17 RENTAL PROPERTIES Revenues, expenses and income from the multifamily and retail properties for the three months ended March 31, 2001 and 2000 were as follows (in thousands):

Three Months Ended ~~Nine~~March ~~Months Ended September 30~~31, ~~September 30,~~ -------------------- 2001 2000/(2)/ ---------- ---------~~-------------------~~ ~~2000~~Core ~~1999~~Portfolio/(21)/ ~~2000~~Revenues ~~1999~~$ 73,964 $ 68,187 Expenses (228,552) ~~--------------~~(25,987) --------~~-----~~ --------~~-----~~ ~~------------~~Income ~~Core~~before ~~Portfolio(1)~~depreciation ~~Revenues~~ $ 6645,~~227~~412 $ 6142,~~260~~200 ======== ======== Acquisition/Disposition Portfolio Revenues $ ~~192~~4,~~063~~598 $ ~~178~~4,~~891~~328 Expenses (251,~~806~~657) (241,~~994~~762) ~~(72,281) (70,016)~~ --------~~---~~ --------~~---~~ ~~---------- -----------~~ Income before depreciation $ 402,~~421~~941 $ 362,~~266~~566 ~~$ 119,782 $ 108,875~~ ========~~===~~ ========~~===~~ ~~==========~~Redevelopment ~~=========== Acquisitions/Disposition~~ Portfolio Revenues $ 2317,~~300~~483 $ 12,~~428~~218 ~~$ 63,685 $ 25,884~~ Expenses (98,~~454~~094) (5,~~100~~578) ~~(27,287) (10,955)~~ --------~~---~~ --------~~---~~ ~~---------- -----------~~ Income before depreciation $ 139,~~846~~389 $ 76,~~328~~640 ~~$ 36,398 $ 14,929~~ ========~~===~~ ========~~===~~ ~~========== ===========~~ Development Portfolio Revenues $ 85,~~424~~732 $ 3,~~049~~295 ~~$ 20,997 $ 6,421~~ Expenses (32,~~327~~311) (1,~~761~~799) ~~(7,985) (3,422)~~ --------~~---~~ --------~~---~~ ~~---------- -----------~~ Income before depreciation $ 53,~~097~~421 $ 1,~~288~~496 ~~$ 13,012 $ 2,999~~ ========~~===~~ ========~~===~~ ~~========== ===========~~ Retail Portfolio Revenues $ ~~791~~628 $ ~~2,457~~826 ~~$ 5,567 $ 7,553~~ Expenses (~~367~~487) (~~854~~373) ~~(1,984) (2,474)~~ --------~~----~~ --------~~---~~ ~~----------- ------------~~ Income before depreciation $ ~~424~~141 $ ~~1,603~~453 ~~$ 3,583 $ 5,079~~ ========~~===~~ ========~~===~~ ~~=========== ===========~~ Total Rental Properties Revenues $ 98102,~~742~~405 $ 7988,~~194~~854 ~~$ 282,312 $ 218,749~~ Expenses (3841,~~954~~101) (3235,~~709~~499) ~~(109,537) (86,867)~~ Depreciation (1112,~~531~~384) (810,~~363~~567) ~~(32,993) (24,304)~~ --------~~---~~ --------~~---~~ ~~---------- -----------~~ Income from Rental Properties $ 48,~~257~~920 $ 3842,~~122~~788 ~~$ 139,782 $ 107,578~~ ========~~===~~ ========~~=== ========== ===========~~

/(1)/ Represents properties owned as of December 31, 1999 (other than Redevelopment or Development properties). /(2)/ Certain prior period amounts have been reclassified to conform with the current period's presentation. 18 PROPERTY SERVICE BUSINESSES Revenues, expenses and income from the Property Service Businesses for the three months ended March 31, 2001 and 2000 were as follows (in thousands):

Three Months Ended ~~Nine~~March ~~Months Ended September 30~~31, ~~September 30,~~ --------------------~~-----------~~ ~~------------------------------~~2001 2000 ~~1999 2000 1999~~ --------~~------~~ --------~~------~~ ~~------------- --------------~~ Total Property Service Businesses Revenues $ 7493,~~971~~776 $ 3749,~~462~~901 ~~$ 182,897 $ 96,157~~ Expenses (7088,~~595~~754) (3447,~~690~~986) Amortization of Goodwill (~~173,526~~983) (~~91,298~~491) Depreciation~~/Amortization~~ (1,~~486~~467) (~~645~~905) ~~(4,326) (1,604)~~ --------~~---~~ -------- Income from Property Service Businesses 2,572 519 Deduct SRC results/(1)/ 411 --- ---------- --------~~-----~~ ~~Income~~Equity ~~from~~in income of unconsolidated Property Service Businesses $ 2,~~890~~983 $ ~~2,127~~519 ~~$ 5,045 $ 3,255~~ ========~~===~~ ========~~=== ========== =============~~

/(1)/ SRC is consolidated in 2001 due to change in voting control. RESULTS OF OPERATIONS Comparison of Three Months Ended March 31, 2001 to Three Months Ended March 31, 2000. Summary. Net income of the Operating Partnership increased $3.0 million, or 12.9%, from $23.6 million for the three months ended March 31, 2000 to $26.6 million for the three months ended March 31, 2001. Funds from Operations ("FFO") of the Operating Partnership increased $8.4 million, or 27.7%, from $30.0 million to $38.4 million during the same period. The increases in FFO and net income are primarily attributable to net operating income growth of 7.6% on the core portfolio and contributions from acquired and developed properties. Revenue increased $17.7 million, or 19.9%, from $88.9 million for the three months ended March 31, 2000 to $106.6 million for the three months ended March 31, 2001. Operating expenses increased $10.0 million, or 28.2%, from $35.5 million during the first quarter of 2000 to $45.5 million during the current quarter. Core Portfolio. Revenue from the core portfolio increased $5.8 million, or 8.5%, over the prior year period resulting in average monthly revenue per apartment unit of $1,251. This was primarily due to continued strong demand in all submarkets, which allowed management to continue to aggressively raise rents. In addition, the Company continued its selective kitchen and/or bath renovation program, which has significantly enhanced its ability to increase rents. Management estimates the return on such investments is approximately 12% to 15%. Overall, rent potential increased 7.3% during the quarter as compared to the prior year. This was partially offset by a slight 19 decrease in occupancy. Average economic occupancy for the core portfolio was 96.3% for the three months ended March 31, 2001 compared to 96.8% for the comparable prior year quarter. Expenses for the core portfolio increased $2.6 million, or 9.9%, due primarily to a significant increase in utility costs over the prior year's quarter. A combination of higher usage due to colder weather and significantly higher gas rates resulted in a $1.3 million increase over the prior year. Acquisition/Disposition Portfolio. The acquisition properties are defined as properties acquired subsequent to December 31, 1999. Results for the first quarter of 2000 reflect no acquisition properties, two residential dispositions totaling 989 apartment units, and one retail disposition. Results for the first quarter of 2001 reflect four acquisition properties and no dispositions totaling 1,044 apartment units. Total capitalized cost of the acquisition portfolio at March 31, 2001 was $130.5 million. Redevelopment Portfolio. The redevelopment portfolio includes purchased properties in which the Company is making significant renovations to reposition the property in the market place. The redevelopment portfolio consists of seven properties totaling 5,479 units and contributed approximately 30%, or $5.3 million, of the total revenue increase. Total capitalized cost of the redevelopment portfolio at March 31, 2001 was $491.7 million. The total spent on renovations for the first quarter of 2001 was $14.6 million. Development Portfolio. One Superior Place reached stabilized occupancy in June 2000 and produced net operating income of $3.0 million for current quarter, compared to $1.7 million in the prior year quarter. Total capitalized cost at March 31, 2001 was $113.7 million, which does not reflect an earnout payment expected to be paid to the developer in early 2002. Park Connecticut reached stabilized occupancy in October 2000 and produced net operating income of $0.6 million for the current quarter compared to a $0.2 million loss in the prior year quarter. Total capitalized cost at March 31, 2001 was $28.3 million. Property Service Businesses. Recent tax legislation which became effective January 1, 2001 allows the direct ownership and control by REITs of Taxable REIT Subsidiaries ("TRS"). Such TRS's may engage in activities which were previously considered impermissible for REITs in terms of qualifying income for purposes of maintaining REIT qualification. Effective January 1, 2001, the Company and all of its Property Service Businesses have elected TRS status in accordance with the new legislation. No changes have been made, however, to the ownership structure of CES or SMC. The Company continues to maintain its 99%, non-voting interest as it has in the past. However, SRC has changed. Effective January 1, 2001 SRC converted the Company's 99% non-voting interest into a 99% voting interest. The Company began consolidating the financial results of SRC instead of using the equity method of accounting in 2001. This had no impact to net income or FFO but simply changed the financial statement presentation of SRC's results. Income from Property Service Businesses increased $2.5 million in the first quarter of 2001 compared to the prior year quarter. Consolidated Engineering Services, Inc. and affiliates contributed an increase of $0.7 million in income during the quarter, which was due to both internal 20 growth and the acquisition of four businesses during the second half of 2000. Smith Management Construction contributed $0.7 million to the increase. Other. Corporate general and administrative expenses were 3.6% of total revenues. The increase in total cost of $1.2 million, or 43.1%, was due primarily to a $0.8 million reserve established in connection with the Company's investment in Broadband Residential, Inc. ("BBR"), a privately owned telecommunications company. Net interest expense increased $4.1 million during the quarter, or 22.9%, due to financing of acquisition and development activity. LIQUIDITY AND CAPITAL RESOURCES Summary. Net cash flow provided by operating activities increased $0.7 million from $24.8 million for the three months ended March 31, 2000 to $25.2 million for the three months ended March 31, 2001. Net cash flow of $92.7 million was used by investment activities during the three months ended March 31, 2001 compared to $114.2 million during the comparable prior year period. The decrease was due primarily to no acquisition activity in the first quarter of 2001, which was partially offset by higher development activity and capital improvements. Net cash flows provided by financing activities were $67.5 million for the three months ended March 31, 2001, primarily comprised of $82.5 million of net borrowings against the properties, lines of credit, and construction loans, offset by a $26.9 million cash outflow for dividends and distributions. Net cash flows provided by financing activities of $78.9 million in the comparable prior year period primarily consisted of $101.8 million of net cash inflow from borrowings less $25.0 million of dividends/distributions. Funds from Operations FFO is defined by the National Association of Real Estate Investment Trusts ("NAREIT") as net income (loss), computed in accordance with Generally Accepted Accounting Principles ("GAAP"), excluding gains (or losses) from debt restructuring and property sales, plus depreciation/amortization of assets unique to the real estate industry. FFO does not represent cash flow from operating activities in accordance with GAAP (which, unlike FFO, generally reflects all cash effects of transactions and other events in the determination of net income) and should not be considered an alternative to net income as an indication of the Company's performance or to cash flow as a measure of liquidity or ability to make distributions. The Company considers FFO a meaningful, additional measure of operating performance primarily because it excludes the assumption that the value of real estate assets diminishes predictably over time, and because industry analysts have accepted it as a performance measure. Comparison of the Company's presentation of FFO, using the NAREIT definition, to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs. 21 Funds from Operations for the three months ended March 31, 2001 and 2000 are computed as follows (in thousands):

Three Months Ended ~~Nine~~March ~~Months Ended September 30~~31, ~~September~~2001 ~~30,~~ ------------------~~-------------~~ ~~-----------------------------~~2001 2000 ~~1999 2000 1999~~ -------~~-------~~ -------~~-------~~ ~~-------------- -------------~~ Net ~~Income~~income of the Operating Partnership $ 2926,~~593~~640 $ 2823,~~472~~602 ~~$ 85,221 $ 69,727~~ Preferred dividends (989) (14,~~820~~473) ~~(10,513) (3,808)~~ Depreciation of ~~real~~rental property 1112,~~531~~384 810,~~363~~567 ~~32,993 24,304~~ Depreciation ~~from~~of unconsolidated properties ~~240~~323 ~~205~~239 ~~718 328~~ Amortization of goodwill ~~110 106 325 322 Gain on sale of property~~ -- ~~(5,214)~~107 ~~(4,161) (7,065) Extraordinary item~~ -- -- -- ~~359~~ -~~----------~~ -------~~----~~ ~~---------- -----------~~ Funds from Operations of the Operating Partnership $ 4038,~~485~~358 $ 30,~~112~~042 ~~$ 104,583 $ 84,167~~ =======~~====~~ =======~~==== ========== ===========~~

Development As of March 31, 2001, the Company had the following properties under construction:

Number Units Initial Estimated Estimated Estimated ofOf Units Delivered Delivery Completion Stabilization Cost -------- --------- --------- ---------- ------------- ------------- (in millions) Stoneridge at University Center (Tysons/Dulles, VA)/(1)/ 630 ~~110~~401 June 2000 Q3, 2001 Q1Q4, ~~2002~~2001 $ 66 Alban Towers (Washington, DCD.C.)/(2)/ 226 N/A Q2, 2001 Q3Q4, 2001 Q4Q1, ~~2001~~2002 5863 Park ~~Millennium~~Millenium (Chicago, IL) 480 N/A Q2, 2002 Q4, 2002 Q1Q2, 2003 106 ------ ---- ----~~------~~ 1,336 ~~110~~401 $235 ~~230~~ ====== ==== ====~~======~~

(1) The Company has a 40% ownership interest. (2) The Company owns substantially all of the economic interest. Commitments As of March 31, 2001, the Company had executed contracts to purchase multifamily properties under construction as follows:

Number Estimated Purchase Estimated of Units Completion Date Cost --------- ---------- ----~~--------~~ ----~~--------~~ (in millions) ~~New River Village (Ft. Lauderdale, FL) 240 Q4, 2000 Q4, 2000 $ 34 Wilson Boulevard (Rosslyn/~~Ballston) ~~220 Q4, 2000 Q4, 2000 30 Ballston~~ Place ~~(Rosslyn/Ballston)~~ 383 Q2, 2001 Q4, 2001 $54 ~~-----~~(Rosslyn/Ballston, ~~------- 843 $ 118 ===== =======~~VA)

22 This contract is contingent upon satisfactory completion of construction and attainment of final certificates of occupancy by the owners. As of March 31, 2001, the Company had posted a $10.9 million letter-of-credit in accordance with the contract to be drawn only if the Company defaults on its contractual obligation to purchase the completed asset. Several other acquisition and development projects are being pursued by the Company. As of March 31, 2001, the capitalized development costs related to probable development projects totaled $3.9 million. The Company anticipates meeting funding requirements for acquisitions and development, including the repositioning program, through draws on its lines of credit, long-term borrowings, asset sales and public or privates issuances of equity, including Operating Partnership unit exchanges. Debt In February 2001, the Company closed on two unsecured credit facilities, totaling $150 million, both from bank groups led by PNC Bank, N.A., as administrative agent, which refinanced existing unsecured credit facilities scheduled to mature in March 2001. Draws upon the lines are subject to certain unencumbered asset requirements and bear interest based on London Interbank Offer Rate (LIBOR) plus an applicable margin of 85 to 125 basis points based on the leverage ratio of the Company. If the Company chooses to and obtains an Investment Grade Rating the applicable margin will be between 62.5 and 100 basis points over LIBOR based on such rating. The Company also pays a quarterly fee ranging from 0.125% to 0.20% on the full amount available under the lines of credit, depending upon the applicable leverage ratio or investment rating. The line of credit agreements contain certain restrictive covenants, including maintenance of minimum equity value, debt to equity ratios and debt service coverage requirements. In March 2001, the Company closed on two second mortgage loans totaling $31.1 million. The $23.4 million loan has a fixed interest rate of 6.795% and is collateralized by Crystal Towers. The $7.7 million loan has a fixed interest rate of 6.62% and is collateralized by 2000 Commonwealth. The loans require monthly payments of interest only and mature coterminous with their respective first mortgages in January 2006 and January 2007, respectively. In March 2001, the Company refinanced an existing $12.3 million mortgage loan on The Consulate with a $27.0 million mortgage loan. The new loan has a fixed interest rate of 6.7% and requires monthly payments of interest only through March 2011, at which time principal amortization begins using a 30-year amortization schedule with a balloon payment due March 2012. In March 2001, CES closed on a twelve-month $50 million line of credit with PNC Bank and Commerzbank replacing an expiring facility. The line is guaranteed by the Operating Partnership and bears interest based on LIBOR plus an applicable margin of 75 to 115 basis points based on the leverage ratio of the Company. The current borrowing rate is LIBOR plus 100 basis points. CES also pays a quarterly fee of 10 basis points on the full amount available under the line. 23 As of March 31, 2001, the Company had mortgage indebtedness and other borrowings, which carried a weighted average interest rate of 7.13%, as follows:

~~Number~~Dollars ~~Average~~in ~~Total~~% $ of ~~Cost~~Thousands ~~Spent~~Total ~~Units Per Unit~~ ---------~~-----~~ -----~~---~~ ~~----------~~Fixed ~~(In~~Rate ~~Thousands)~~Debt: ~~Expenditure~~Mortgages ~~Type~~$1,109,088 ~~----------------~~84.9% ~~Core~~Variable ~~Repositioning~~Rate ~~Kitchen/Bath~~Debt: $300M ~~15,006~~Line 1of Credit 134,~~261~~000 10.3% $100M ~~11,892~~Line ~~Washer/Dryer~~of ~~885~~Credit ~~276~~41,000 3~~,206~~.1% ~~---------~~$50M ~~Total~~Line ~~Core~~of ~~Repositioning~~Credit $- ~~15,891~~0.0% ~~Recurring~~Construction ~~Improvements~~Loans 922,~~421~~137 ~~17,424~~1.7% ~~$ 541~~ ------- -- ~~Total Capital Expenditures~~ ---- ~~Core Portfolio~~ $ 251,~~312~~306,225 100.0% ========== ======

As of March 31, 2001, the Company had $152.4 million of unused borrowing capacity on lines of credit and construction loans. (Unused borrowing capacity includes $29.8 million from the $300 million line, which reflects the borrowing capacity currently available under the line of $163.8 million, less $134.0 million used at March 31, 2001.) Amounts outstanding under lines of credit average $171.8 million for the three months ended March 31, 2001 compared to $104.5 million for the three months ended March 31, 2000. As of March 31, 2001, the Company's Debt to Total Market Capitalization Ratio was 39.4% (based on 22.7 million common shares, 7.2 million convertible preferred shares and units, and 13.2 million partnership units outstanding at a common stock price of $45.49, and $50 million of perpetual preferred stock) versus 37.3% as of December 31, 2000 and 40.5% as of March 31, 2000. The Company's Interest Coverage Ratio, excluding gains on sales and extraordinary items, for the three months ended March 31, 2001 was 2.98 to 1 compared to 3.09 to 1 for the comparable prior year period. 24 Capital Expenditures For the three months ended March 31, 2001, total capital improvements were $27.2 million, of which $12.2 million were for the core portfolio ($621 per unit). Approximately 57% of the capital expenditures on the core portfolio in 2001 are considered by management to be non-recurring, repositioning improvements. Management considers such improvements as one-time, non-recurring capital expenditures, which significantly enhance the asset. Certain repositioning improvements directly result in higher revenues. For example, the Company renovated approximately 375 kitchens and baths during the first quarter of 2001 based solely on the ability to charge and obtain a rent premium. The remaining 43% of the capital expenditures on the core portfolio indirectly influence the Company's ability to generate revenues and are considered more recurring in nature and less discretionary. For example, periodic replacement is expected for items such as appliances and HVAC equipment. However, the Company does not generate additional revenue from these improvements and has little discretion as to whether or not they are made. A summary of core capital expenditures for the period follows:

/(1)/ Primarily represents carryover repositioning improvements which were identified and/or begun upon acquisition of the property. 25 PART II Item 1. Legal Proceedings None Item 2. Changes in Securities On January 31, 2001, the Company issued 100,310 unregistered shares of Class A Common Stock of the Company for $4,624,918 or $46.11 per share, CES pursuant to a Common Stock Purchase Agreement between CES and the Company dated January 31, 2001. CES subsequently transferred these shares in exchange for shares of Commonwealth Heating and Air Conditioning, Inc., a Massachusetts corporation, in a cash and securities acquisition of a 100% interest in that corporation. The Company believes that the shares described above were exempt from registration under the Securities Act of 1933, as amended (the "Securities Act") by virtue of Section 4(2) of the Securities Act and the provisions of Rule 506 of Regulation D. Following the above transaction, the Company contributed the net proceeds from the issuance of Common Stock to the Operating Partnership in exchange for 100,310 Common Units. Item 3. Defaults on Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K None 26 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. CHARLES E. SMITH RESIDENTIAL REALTY L.P. By: Charles E. Smith Residential Realty, Inc., its General Partner May 4, 2001 By: /s/ W. D. Minami ---------------------------------------------- W. D. Minami Executive Vice President, Chief Operating Officer and Chief Financial Officer Charles E. Smith Residential Realty, Inc. (on behalf of the Registrant and as Principal Financial Officer) By: /s/ Steven E. Gulley --------------------------------------------- Steven E. Gulley Chief Accounting Officer Charles E. Smith Residential Realty, Inc. 27

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