10-K 1 d54987e10vk.htm FORM 10-K e10vk
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
     
þ   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2007
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
(Exact name of Registrant as Specified in Its Charter)
     
MARYLAND   90-0042860
(State or other jurisdiction of   (IRS employer
incorporation or organization)   identification no.)
9200 E. Panorama Circle, Suite 400
Englewood, Colorado 80112

(Address of principal executive office)
(303) 708-5959
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ
     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
     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 þ No o (Note: The registrant filed a Form 15 on December 14, 2007 to terminate the registration of our Series O Preferred Units, and a Form 15 on January 2, 2008 immediately suspending our reporting obligations under Section 15(d) of the Securities Exchange Act of 1934.)
     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer o    Accelerated filer o    Non-accelerated filer   þ
(Do not check if a smaller reporting company)
  Smaller Reporting Company o 
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
     At June 30, 2007, there were approximately 26.2 million Class A-1 Common Units outstanding held by non-affiliates. At March 30, 2008, none of the Common Units were held by non-affiliates. There was no established trading market for such Common Units at June 30, 2007 or subsequent to that date.
DOCUMENTS INCORPORATED BY REFERENCE
None
 
 

 


 

Table of Contents
         
Item   Description   Page
   
 
   
       
      3
1.     9
1A.     12
1B.     18
2.     19
3.     21
4.     24
   
 
   
       
5.     25
6.     25
7.     29
7A.     44
8.     47
9.     47
9A.     47
9B.     48
   
 
   
       
10.     49
11.     51
12.     79
13.     79
14.     81
   
 
   
       
15.     82
 Articles of Amendment of Amended and Restated Declaration of Trust
 Letter Agreement, dated October 5, 2007
 Letter Agreement, dated November 27, 2007
 Credit Agreement (Affiliate Borrower I-A)
 Credit Agreement (Affiliate Borrower I-B)
 Credit Agreement (Affiliate Borrower II - Revolving Credit Facility)
 Employment Agreement - R. Scot Sellers
 Award Agreement
 Unit Award Agreement
 Unit Award Agreement
 Unit Award Agreement
 Separation and General Release Agreement
 Amendment to Separation and General Release Agreement
 Subsidiaries
 Certification of Chief Executive Officer Pursuant to Section 302
 Certification of Chief Financial Officer Pursuant to Section 302
 Certification of Chief Executive Officer Pursuant to Section 906
 Certification of Chief Financial Officer Pursuant to Section 906

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GLOSSARY
     The following abbreviations, acronyms or defined terms used in this document are defined below:
     
Abbreviation, Acronym or Defined Term   Definition/Description
401(k) Plan
  Archstone’s 401(k) Plan.
 
   
A-1 Common Unitholders
  Holders of A-1 Common Units.
 
   
A-1 Common Units
  Archstone class A-1 common units of beneficial interest, par value $0.01 per unit, which prior to the Merger were redeemable for cash or, at the option of Archstone-Smith, Common Shares. A-1 Common Units are the common units of Archstone not held by Archstone-Smith or, after the Merger, Series I Trust.
 
   
A-2 Common Units
  Archstone class A-2 common units of beneficial interest, par value $0.01 per unit. Series I Trust is the sole holder of A-2 Common Units.
 
   
ADA
  Americans with Disabilities Act, as amended.
 
   
Ameriton
  AMERITON Properties Incorporated, which was a taxable REIT subsidiary of Archstone prior to the Merger that engaged in the opportunistic acquisition, development and eventual disposition of real estate with a shorter-term investment horizon. Ameriton merged into Archstone-Smith on October 5, 2007.
 
   
Annual Report
  This Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2007.
 
   
Archstone or Operating Trust
  Archstone, an entity organized as a real estate investment trust under Maryland law (formerly Archstone-Smith Operating Trust).
 
   
Archstone-Smith
  Archstone-Smith Trust, an entity organized as a real estate investment trust under Maryland law, which was a publicly traded entity and our sole trustee and owned 89.5% of our Common Units immediately prior to the Merger.
 
   
Archstone-Smith Board
  The Board of Trustees of Archstone-Smith.
 
   
Board
  Refers to the Archstone-Smith Board for periods prior to the Merger or to the Series I Trust Board for periods after the Merger.
 
   
Buyer Parties
  Subsidiaries of an entity jointly controlled by Tishman Speyer Real Estate Venture VII, L.P., and Lehman Brothers Holdings, Inc.
 
   
Common Share(s)
  Archstone-Smith common shares of beneficial interest, par value $0.01 per share.
 
   
Common Units
  The A-1 Common Units and the A-2 Common Units.
 
   
Common Unitholders
  Holders of Common Units.
 
   
Compensation Committee
  The Management Development and Executive Compensation Committee of the Archstone-Smith Board in office prior to completion of the Merger.
 
   
Convertible Debt
  $575 million exchangeable senior unsecured notes that were exchangeable into Common Shares prior to completion of the Merger.
 
   
Declaration of Trust
  Archstone’s Amended and Restated Declaration of Trust, as filed with the State of Maryland on October 4, 2007, as amended and supplemented.

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Abbreviation, Acronym or Defined Term   Definition/Description
Deferred Compensation Plan
  Archstone-Smith’s Deferred Compensation Plan, which was terminated upon completion of the Merger.
 
   
DEU
  Dividend Equivalent Unit; an amount credited to the account of holders of certain options and RSU’s under Archstone-Smith’s long-term incentive plan.
 
   
Distributions
  Distributions paid on Archstone Common Units or Preferred Units.
 
   
DeWAG
  DeWAG Deutsche WohnAnlage GmbH.
 
   
DRIP
  Archstone-Smith’s Dividend Reinvestment and Share Purchase Plan.
 
   
Fannie Mae Mezzanine Lenders
  Lehman Brothers Holdings Inc., Bank of America, N.A. and Barclays Capital Real Estate Finance Inc.
 
   
Freddie Mac Mezzanine Lenders
  Lehman Brothers Holdings Inc., Bank of America, N.A. and Barclays Capital Real Estate Finance Inc.
 
   
FASB
  Financial Accounting Standards Board.
 
   
FHA
  Fair Housing Act, as amended.
 
   
Fund GP
  Tishman Speyer Archstone-Smith Multifamily (GP), L.P., a Delaware limited partnership and the sole general partner of Tishman Speyer Archstone-Smith Multifamily JV, L.P.
 
   
Fund II GP
  Tishman Speyer Archstone-Smith Multifamily Parallel (GP), L.P., a Delaware limited partnership and the sole general partner of Tishman Speyer Archstone-Smith Multifamily Parallel JV, L.P.
 
   
GAAP
  Generally accepted accounting principles in the United States.
 
   
Governance GP
  Collectively, Tishman Speyer Real Estate Venture VII (Governance), L.P., a Delaware limited partnership, which is the sole general partner of the Fund GP, and Tishman Speyer Real Estate Venture VII Parallel (Governance), L.P., a Delaware limited partnership, which is the sole general partner of the Fund II GP
 
   
High-Rise
  Those communities with five or more above-ground floors.
 
   
Independent Trustees
  Members of the Archstone-Smith Board meeting the New York Stock Exchange definition of “Independent Director.”
 
   
In Planning
  Represents parcels of land owned or Under Control, which are in the development planning process, upon which construction of apartments is expected to commence subsequent to the completion of the entitlement and building permit processes.
 
   
International
  Refers to our operational and investment activities in Europe. Our real estate investments to date have been limited to Germany.
 
   
International Fund
  Combined group of Luxembourg, Dutch and German entities in which we have a minority ownership interest.
 
   
Junior Mezz Borrower
  Tishman Speyer Archstone-Smith Multifamily Junior Mezz Borrower, L.P., an affiliate of the Venture.
 
   
Lease-Up
  The phase during which newly constructed apartment units are being leased for the first time, but prior to the community becoming Stabilized.
 
   
Lehman Sponsor
  REPE Archstone GP Holdings LLC, a Delaware limited partnership.

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Abbreviation, Acronym or Defined Term   Definition/Description
LIBOR
  London Interbank Offered Rate.
 
   
Long-Term Unsecured Debt
  Collectively, Archstone’s long-term unsecured senior notes payable and unsecured tax-exempt bonds.
 
   
LTIP
  Archstone-Smith’s Long Term Incentive Plan.
 
   
Master Credit Facility
  Credit agreement with Lehman Brothers Inc., Banc of America Securities LLC, Bank of America, N.A., Barclays Capital Real Estate, Inc., and Lehman Commercial Paper Inc. and other lenders from time to time parties thereto which was entered into on October 5, 2007 and amended and restated on November 27, 2007.
 
   
Merger(s)
  A series of transactions which included (a) the merger on October 4, 2007 of River Trust Acquisition (MD), LLC with and into Archstone, with Archstone surviving (the “Operating Trust Merger”), and (b) the merger on October 5, 2007 of Archstone-Smith with and into Series I Trust, with Series I Trust surviving (the “Archstone-Smith Merger”).
 
   
Merger Agreement
  The Agreement and Plan of Merger, dated as of May 28, 2007, among Archstone-Smith, Archstone, River Holding, LP, River Acquisition (MD), LP and River Trust Acquisition (MD), LLC, as amended by Amendment No. 1 thereto.
 
   
Net Operating Income or NOI
  Represents rental revenues less rental expenses and real estate taxes. We rely on NOI for purposes of making decisions about resource allocations and assessing segment performance. We also believe NOI is a valuable means of comparing period-to-period property performance. NOI is a non-GAAP financial measure. See a reconciliation of NOI to Earnings from Operations in this Annual Report in Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Quantitative Summary.
 
   
Oakwood or Oakwood Worldwide
  The terms used in reference to a group of partnerships coordinated by a common sponsor who contributed a group of apartment communities to Archstone in 2005.
 
   
Oakwood Master Leases
  Refers to thirteen communities acquired from Oakwood and one community we previously owned and operated that were leased in their entirety to affiliates of Oakwood Worldwide under master lease agreements with seven year terms, subject to Oakwood’s right to terminate individual leases under certain circumstances after the one year anniversary of the acquisition.
 
   
Outside Trustees
  Trustees of Archstone-Smith who were not employees of Archstone-Smith or Archstone.
 
   
Outside Trustee Plan
  Archstone-Smith’s Equity Plan for Outside Trustees
 
   
Predecessor
  Archstone before the Operating Trust Merger.
 
   
Preferred Units or Perpetual Preferred Units
  The Series I, O, P, Q-1 and Q-2 Preferred Units.
 
   
REIT
  Real estate investment trust. This term is also used to refer to consolidated subsidiaries of Archstone, but excluding taxable and International subsidiaries unless the context indicates otherwise.
 
   
Restricted Share Unit or RSU
  A unit representing an interest in one Common Share, subject to certain vesting provisions, granted to an associate through Archstone-Smith’s long-term incentive plan.
 
   
Same-Store
  Term used to refer to a group of operating communities in the United States that had attained Stabilization and were fully operating

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Abbreviation, Acronym or Defined Term   Definition/Description
 
  during the entire time two periods are being compared. Excludes communities which were not eligible for inclusion due to (i) recent acquisition or development, (ii) major redevelopment, or (iii) a significant number of non-operational units (fires, floods, etc.). Also excludes Ameriton properties, due to their short-term holding periods, and International properties.
 
   
Series A Preferred Units
  Archstone Series A Cumulative Preferred Units of Beneficial Interest, par value $0.01 per unit, which were redeemed in full in November 2003.
 
   
Series D Preferred Units
  Archstone Series D Cumulative Perpetual Preferred Units of Beneficial Interest, par value $0.01 per unit, which were redeemed in full in August 2004.
 
   
Series E Perpetual Preferred Units
  Archstone Series E 8.375% Cumulative Perpetual Preferred Units, par value $0.01, which were redeemed in full in February 2005.
 
   
Series F Perpetual Preferred Units
  Archstone Series F 8.125% Cumulative Perpetual Preferred Units, par value $0.01, which were redeemed in full in September 2004.
 
   
Series G Perpetual Preferred Units
  Archstone Series G 8.625% Cumulative Perpetual Preferred Units, par value $0.01, which were redeemed in full in March 2005.
 
   
Series H Preferred Units
  Archstone Series H Cumulative Convertible Perpetual Preferred Units of Beneficial Interest, par value $0.01 per unit, which were converted into Common Units in full in May 2003.
 
   
Series I Preferred Units
  Archstone Series I Cumulative Redeemable Preferred Units of Beneficial Interest, par value $0.01 per unit, redeemable in February 2028.
 
   
Series K Preferred Units
  Archstone Series K Cumulative Convertible Perpetual Preferred Units of Beneficial Interest, par value $0.01 per unit, which were converted into Common Units in September 2004.
 
   
Series L Preferred Units
  Archstone Series L Cumulative Convertible Perpetual Preferred Units of Beneficial Interest, par value $0.01 per unit, which were converted into Common Units in December 2004.
 
   
Series M Preferred Unit
  Archstone Series M Preferred Unit of Beneficial Interest, par value $0.01 per unit. The Series M Preferred Unit was converted into a Series P Preferred Unit as of the Merger, on materially the same terms and conditions.
 
   
Series N-1 Preferred Units
  Archstone Series N-1 Convertible Redeemable Preferred Units of Beneficial Interest, par value $0.01 per unit. Each Series N-1 Preferred Unit was converted into a Series Q-1 Preferred Unit as of the Merger, on materially the same terms and conditions.
 
   
Series N-2 Preferred Units
  Archstone Series N-2 Convertible Redeemable Preferred Units of Beneficial Interest, par value $0.01 per unit. Each Series N-2 Preferred Unit was converted into a Series Q-2 Preferred Unit as of the Merger, on materially the same terms and conditions.
 
   
Series O Preferred Units
  Archstone Series O Preferred Units of Beneficial Interest, par value $0.01 per unit.

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Abbreviation, Acronym or Defined Term   Definition/Description
Series P Preferred Units
  Archstone Series P Preferred Units of Beneficial Interest, par value $0.01 per unit.
 
   
Series Q-1 Preferred Units
  Archstone Series Q-1 Preferred Units of Beneficial Interest, par value $0.01 per unit.
 
   
Series Q-2 Preferred Units
  Archstone Series Q-2 Preferred Units of Beneficial Interest, par value $0.01 per unit.
 
   
Series I Trust
  Tishman Speyer Archstone-Smith Multifamily Series I Trust, a Maryland real estate investment trust, which is the sole holder of the A-2 Common Units and sole trustee of Archstone after the Merger.
 
   
Series I Trust Board
  The Board of Trustees of Series I Trust.
 
   
Series II LLC
  Tishman Speyer Archstone-Smith Multifamily Series II, L.L.C.
 
   
Series III LLC
  Tishman Speyer Archstone-Smith Multifamily Series III, L.L.C.
 
   
Smith Merger
  The series of transactions in October 2001 whereby Archstone-Smith merged with Smith Residential, and Archstone Communities Trust (now, Archstone) merged with Smith Partnership.
 
   
Smith Partnership
  Charles E. Smith Residential Realty L.P.
 
   
Smith Residential
  Charles E. Smith Residential Realty, Inc.
 
   
SFAS
  Statement of Financial Accounting Standards.
 
   
Stabilized or Stabilization
  The classification assigned to an apartment community that has achieved 93% occupancy, and for which development, new management and new marketing programs (or development and marketing in the case of a newly developed community) have been completed.
 
   
Successor
  Archstone after the Merger
 
   
Tishman Speyer Sponsor
  Tishman Speyer Real Estate Venture VII, L.P., a Delaware limited partnership.
 
   
Trustees
  Members of the Archstone-Smith Board prior to the Merger and the members of the Series I Trust Board after the Merger.

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Abbreviation, Acronym or Defined Term   Definition/Description
Under Control
  A term used to identify land parcels which Archstone does not own, yet has an exclusive right through contingent contract or letter of intent during a contractually agreed upon time period to acquire the land, subject to satisfaction of contingencies during the due diligence and entitlement processes.
 
   
Unitholders
  The holders of Common Units and Preferred Units.
 
   
Venture
  Collectively, Tishman Speyer Archstone-Smith Multifamily JV, L.P., a Delaware limited partnership, and Tishman Speyer Archstone-Smith Multifamily Parallel JV, L.P., a Delaware limited partnership, together with any other parallel entity organized to own an interest in the entire portfolio.

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Forward-Looking Statements
     Certain statements in this Annual Report that are not historical facts are “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations, beliefs, assumptions, estimates and projections about the industry and markets in which we operate. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and variations of such words and similar expressions are intended to identify such forward-looking statements. Information concerning expected investment balances, expected funding sources, planned investments, forecasted dates and revenue and expense growth assumptions are examples of forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. Therefore, actual outcomes and results may differ materially from what is expressed, forecasted or implied in such forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
     Our operating results depend primarily on income from apartment communities, which is substantially influenced by supply and demand for apartment units, operating expense levels, property level operations and the pace and price at which we develop, acquire or dispose of apartment communities. Capital and credit market conditions, which affect our cost of capital, also influence operating results. See “Risk Factors” in Item 1A of this Annual Report for a more complete discussion of the various risk factors that could affect our future performance.
     EXPLANATORY NOTE: On December 14, 2007, we filed a Form 15 with the Securities and Exchange Commission to terminate the registration of our Series O Preferred Units, which termination became effective 90 days after the filing of such Form 15. On January 2, 2008, we filed a Form 15 with the Securities and Exchange Commission to immediately suspend our reporting obligations under Section 15(d) of the Securities Exchange Act of 1934, as amended. As a result of these filings, our obligations to file annual, quarterly and periodic reports, other than our obligation to file this Annual Report, and our obligations with respect to certain Unitholder communications and the obligations of certain Unitholders to report their ownership of and transactions in our Units, have terminated. The statements and information set forth in this Annual Report are qualified by reference to the foregoing.
PART I
Item 1. Business
     References in this Annual Report to “Archstone,” the “Operating Trust”, “Company,” “company, “we” or “us” refer to Archstone (formerly Archstone-Smith Operating Trust), a Maryland real estate investment trust, organized in 1963.
     Unless indicated otherwise, the financial information presented in this Annual Report relates to the Successor after October 4, 2007 and to the Predecessor prior to October 5, 2007. See “Item 1. Business — Consummation of Merger” for further information regarding our recent Merger.
Overview
     Archstone’s business is focused primarily on creating value for our unitholders by acquiring, developing, redeveloping and operating apartments in markets characterized by protected locations with limited land for new housing construction, expensive single-family home prices, and a strong, diversified economic base with significant employment growth potential.
     As of December 31, 2007, we owned or had an ownership position in 56,896 units, including 1,053 units under construction. At year-end, our operating portfolio was concentrated in protected locations in the following core markets,

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based on NOI for the three months ended December 31, 2007, excluding International investments and joint ventures:
         
Washington, D.C. metropolitan area
    40.7 %
Southern California
    21.6  
San Francisco Bay Area, California
    14.4  
New York City metropolitan area
    8.6  
Boston, Massachusetts
    7.4  
Seattle, Washington
    4.7  
 
       
Total
    97.4 %
 
       
     We define our garden communities and High-Rise properties each as an operating segment. In addition, prior to the Merger, we defined the activities from Ameriton as an individual operating segment as its focus was the opportunistic acquisition, development and eventual disposition of assets with a shorter investment horizon. For information regarding our business segments and our international operations, see “Item 15. Exhibits and Financial Statement Schedules.”
Consummation of Merger
     As of October 4, 2007 approximately 89.5% of our outstanding Common Units were owned by Archstone-Smith and the remaining 10.5% of the outstanding Common Units were owned by minority interest holders. Archstone-Smith was a publicly traded equity REIT organized under the laws of the State of Maryland.
     On May 29, 2007, Archstone-Smith announced it had signed the Merger Agreement, whereby both Archstone-Smith and Archstone would be acquired by the Buyer Parties. The transactions contemplated by the Merger Agreement were consummated on October 4 and 5, 2007. As a result of the transactions contemplated by the Merger Agreement, the sole trustee of Archstone, effective as of October 5, 2007, is Series I Trust, which along with Series II LLC and Series III LLC owns 100% of Archstone’s outstanding Common Units.
     Under the terms of the Merger Agreement, all outstanding Common Shares of Archstone-Smith were acquired by Series I Trust, Series II LLC and Series III LLC for $60.75 in cash, without interest and less applicable withholding taxes, for each Common Share issued and outstanding immediately prior to the effective time of the Merger. With respect to the outstanding Series I Preferred Shares, the Buyer Parties elected to replace them with substantially identical Series I Preferred Shares of Series I Trust.
     As part of the transaction, Archstone merged on October 4, 2007 with River Trust Acquisition (MD), LLC, a subsidiary of the Buyer Parties. A total of 39.6 million Common Units remain outstanding. Approximately 3.9 million A-1 Common Units, held by less than 300 holders, were converted into newly issued Series O Preferred Units, whereas holders of approximately 22.2 million A-1 Common Units elected to exchange their A-1 Common Units for cash consideration of $60.75 without interest and less applicable withholding taxes. Each Series O Preferred Unit has a redemption price of $60.75 and bears cumulative preferential distributions payable quarterly at an annual rate of 6%. During any period of time after we incur indebtedness in excess of $10 million in principal amount (excluding draws on our line of credit or refinancings of existing indebtedness) and as a result of which our loan to value ratio exceeds 85%, until such time as our loan to value ratio no longer exceeds 85%, the distribution rate on our Series O Preferred Units shall increase from 6% per annum to 8% per annum. The Series O Preferred Units, which have only limited voting rights, are redeemable by the holder or Archstone under certain circumstances. The Series I Preferred Units remain outstanding and unchanged. The Series M Preferred Unit and each Series N-1 and N-2 Preferred Unit was converted into the right to receive one newly issued Series P Preferred Unit, Series Q-1 Preferred Unit and Series Q-2 Preferred Unit, respectively, of Archstone.
     In summary, the total purchase consideration paid by the Buyer Parties for the assets owned by Predecessor immediately prior to the Mergers was $22.1 billion which consisted of cash equity of $4.9 billion (net of capital raising costs), replacement or issuance of Preferred Units of $0.3 billion, borrowings of $15.2 billion in new debt, assumption of $0.9 billion of existing debt and the assumption of trade payables and other accrued liabilities of $0.8 billion. The accrued liabilities included a payment of $0.1 billion related to Predecessor employee stock awards under the LTIP. We incurred $1.0 billion of transaction-related costs that were financed through our borrowings. Although Archstone is the surviving entity, River Trust Acquisition (MD), LLC was viewed as the acquirer for accounting purposes due to the resulting change in control. As such, the total purchase consideration was allocated to the fair value of the net assets acquired through the application of purchase accounting in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations.” The majority of our fair value adjustments pertained to real estate and lease-related intangibles. The financial statements in this Annual Report include the operations of the Predecessor for periods prior to the Merger on October 4, 2007 and the Successor for periods after the Merger. In connection with the Merger, through a series of legal transactions, the Buyer Parties caused Predecessor to make certain material distributions to affiliated entities. These assets consisted primarily of communities that are not subject to unitholder tax protection agreements, domestic joint ventures, communities under development and communities formerly owned by Ameriton.

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Following is a summary of the fair values of assets and liabilities owned by Successor as compared to the fair value attributable to the assets and liabilities distributed to and owned by affiliated entities at October 5, 2007 (in thousands):
                         
            Fair Value Attributable to  
    Aggregate Fair Value     Affiliates     Successor  
Real estate
  $ 18,662,371     $ 3,641,083     $ 15,021,288  
Investment in unconsolidated entities
    1,018,725       550,399       468,326  
Lease and other intangibles
    594,306       91,439       502,867  
Other assets
    1,840,255       116,021       1,724,234  
Intercompany assets (liabilities)
          (12,873 )     12,873  
 
                 
Total assets
  $ 22,115,657     $ 4,386,069     $ 17,729,588  
 
                 
 
                       
Debt
  $ 16,108,709     $ 2,013,815     $ 14,094,894  
Other liabilities
    834,452       120,757       713,695  
Other Preferred Units
    285,944             285,944  
 
                 
 
                       
Net assets at fair value
  $ 4,886,552     $ 2,251,497     $ 2,635,055  
 
                 
     The purchase price allocation reflected above was based on preliminary estimates and is subject to change as we obtain more complete information regarding land, building and lease intangible values.
Officers of Archstone
Executive officers of Archstone are:
     
Name   Title
R. Scot Sellers
  Chief Executive Officer
J. Lindsay Freeman*
  Chief Operating Officer
Charles E. Mueller, Jr.
 
Chief Financial Officer (Chief Operating Officer effective January 1, 2008)
Caroline Brower*
  General Counsel and Secretary
Alfred G. Neely
  Chief Development Officer
 
*   Retired as of December 31, 2007.
     Please refer to “Item 10. Directors, Executive Officers, and Corporate Governance” for further information.
Employees
     We currently employ approximately 2,659 individuals, of whom approximately 2,038 are focused on the site-level operation of our garden communities and High-Rise properties. Of the site-level associates, approximately 130 are subject to collective bargaining agreements with two unions in New York. The balance are professionals who manage corporate and regional operations, including our investment program, property operations, financial activities and other support functions. We consider our relationship with our employees to be very good.
Insurance
     We carry comprehensive general liability coverage on our owned communities, with limits of liability customary within the industry to insure against liability claims and related defense costs. Similarly, we are insured against the risk of direct physical damage in amounts necessary to reimburse the company on a replacement cost basis for costs incurred to repair or rebuild each property, including loss of rental income during the reconstruction period. Our property policies for all United States operating and development communities and certain International communities include coverage for the perils of flood and earthquake shock with limits and deductibles customary in the industry. We also obtain title insurance policies when acquiring new properties, which insure fee title to our real properties. We currently have coverage for losses incurred in connection with both domestic and foreign terrorist-related activities. The terms of our property and general liability policies may exclude certain mold-related claims or other types of claims based on the specific circumstances and allegations. Should an uninsured loss arise against the company, we would be required to use our own funds to resolve the issue, including litigation costs. In addition, for our United States communities we self-insure certain portions of our insurance program

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through a wholly-owned captive insurance company, and therefore use our own funds to satisfy those limits, when applicable.
Competition
     There are numerous commercial developers, real estate companies and other owners of real estate that we compete with in seeking land for development, apartment communities for acquisition and disposition and residents for apartment communities. All of our apartment communities are located in developed areas that include other apartment communities. The number of competitive apartment communities in a particular area could have a material adverse effect on our ability to lease units and on the rents charged. In addition, single-family homes and other residential properties provide housing alternatives to residents and potential residents of our apartment communities.
Available Information and Code of Ethics
     Our website is http://www.archstonesmith.com. We make available free of charge, on or through our website, this Annual Report, our prior annual, quarterly and current reports, as well as any amendments to these reports, as soon as reasonably practicable after electronically filing these reports with the Securities and Exchange Commission. To the extent we are required to file reports in the future, we will also make available free of charge on or through our website, any future annual, quarterly and current reports and any amendments to such reports. The Archstone-Smith Board adopted, and we continue to operate under, a Code of Ethics and Business Conduct applicable to our officers and employees, including our principal executive officer, principal financial officer and principal accounting officer or controller. A copy of our Code of Ethics and Business Conduct is available through our website or at no charge upon written request to Investor Relations, 9200 East Panorama Circle, Suite 400, Englewood, Colorado 80112. Any amendments to or waivers of our Code of Ethics and Business Conduct that apply to the principal executive officer, principal financial officer and principal accounting officer or controller and that relate to any matter enumerated in Item 406(b) of Regulation S-K, will be disclosed on our website to the extent we are subject to the requirements of Regulation S-K. Any reference to our website in this Annual Report does not incorporate by reference the information contained in the website and such information should not be considered a part of this Annual Report.
Item 1A. Risk Factors
     The following factors could affect our future financial performance:
Risks Associated with our Operations
  We have restrictions on the sale of certain properties which could limit our operating flexibility.
     A taxable sale of any of the properties contributed to us could result in increased costs to us in light of the tax-related obligations made to the contributors, including the Smith Partnership Unitholders and the Oakwood Unitholders. The restrictions applicable to the Smith Partnership Unitholders last until January 1, 2022. We have similar restrictions with respect to the properties acquired from Oakwood Worldwide in 2005. The Oakwood restrictions last until the earlier of (a) such time as 99% of the contributing partners have sold, redeemed or otherwise disposed of their Series O Preferred Units in a taxable event and (b) the later to occur of (x) 10 years from the closing of the contribution of such properties and (y) the last to die of Howard Ruby and Ed Broida. Mr. Broida died in 2006. During the period of time that these restrictions apply, it may be cost-prohibitive for us to sell one or more of these properties even though such sale may be in our Unitholders’ best interests. The built in gain on communities subject to tax protection is estimated to be approximately $350 million at December 31, 2007.
  We depend on our key personnel.
     Our success depends on our ability to attract and retain the services of executive officers, senior officers and company managers. There is substantial competition for qualified personnel in the real estate industry and the loss of several of our key personnel could have an adverse effect on us.
  We do not have access to public equity capital which could adversely affect our cash flows.
     Our Trustee is no longer a publicly traded entity and does not have securities listed on a national stock exchange. Because we no longer have access to the public equity markets, we will have to rely on alternative financing sources to undertake new investment activities, including debt and private equity. These alternative sources of financing may be more costly than raising funds in the public equity markets. Further, if we cannot access sufficient funds through debt, the private

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equity markets or other sources, we may need to rely upon the Venture participants for capital contributions. However, the Venture participants are not obligated to provide additional capital and there is no assurance that the Venture participants would contribute adequate funds to capitalize us and our operations.
  We have a limited operating history under our current ownership.
     The Merger was completed in October 2007. We have only a limited operating history under our current ownership. Although our current chief executive officer and several key officers remain with Archstone after the Merger, until recently, the Venture was not involved in our operation or performance of our business. We cannot guarantee that changes associated with the Merger will yield favorable results or that we will realize the benefits anticipated in connection with the Merger. As a result, we cannot be sure how we will be operated or will perform financially. Furthermore, the new ownership has retained flexibility to change our investment strategy, for any reason, including changing conditions in the real estate investment and capital markets and changes in general economic conditions. Any such strategy changes could adversely affect our financial condition and results of operations and our ability to pay distributions to our Unitholders.
  There is no public market for our units.
     There is currently no public market for our units. On December 14, 2007, we filed a Form 15 with the Securities and Exchange Commission to terminate the registration of our Series O Preferred Units, which termination became effective 90 days after the filing of such Form 15. Our declaration of trust contains limited rights of our Unitholders to request our redemption of their Units, but we have no current obligation to repurchase Units from or make distributions to our Unitholders other than upon a Unitholder’s death. There can be no assurances that we will be able to liquidate our investments in the event of an emergency.
There may be limited or no public information available about us or our Unitholders in the future.
     On December 14, 2007, we filed a Form 15 with the Securities and Exchange Commission to terminate the registration of our Series O Preferred Units, which termination became effective 90 days after the filing of such Form 15. On January 2, 2008, we filed a Form 15 with the Securities and Exchange Commission to immediately suspend our reporting obligations under Section 15(d) of the Securities Exchange Act of 1934, as amended. As a result of these filings, our obligations to file annual, quarterly and periodic reports, other than our obligation to file this Annual Report on Form 10-K, and our obligations with respect to certain Unitholder communications and the obligations of certain Unitholders to report their ownership of and transactions in our Units, have terminated. As a result, we anticipate that there will be limited, if any, publicly available information about us and our Unitholders in the future. The limited availability or lack of such publicly available information may have an adverse impact on your ability to assess the value of your investment in the Company and make determinations regarding your ownership of our Units.
Risks Associated with our Indebtedness and Financing
  Continued volatility in the debt market could make it more difficult or costly for us to borrow money to finance our business.
     Recently, the residential mortgage market in the United States has experienced a number of difficulties and changed economic conditions that may adversely affect the credit markets generally, including the commercial lending market. We rely on national and regional institutions including Fannie Mae and Freddie Mac to provide financing for our acquisitions and development projects. These institutions may originate mortgage loans and may have suffered financial difficulties as a result of these changing market conditions. As a result, these institutions may become insolvent or may tighten their lending standards, which could make it more difficult for us to obtain financing on favorable terms or at all. If we are unable to obtain financing on favorable terms or at all from these institutions, our financial condition and results of operations would be adversely affected.
  Debt financing could adversely affect our performance and our ability to make distributions to our Unitholders.
     We are subject to risks associated with debt financing and preferred equity. These risks include the following:
    We may not have sufficient cash flow from operations to meet required payments of principal and interest or to pay distributions on our securities at expected rates.
 
    We may be unable to refinance current or future indebtedness.
 
    The terms of any refinancing may not be as favorable as the terms of existing indebtedness.
 
    We may be unable to make necessary investments in new business initiatives due to lack of available funds.

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    If we are unable to make required payments on indebtedness that is secured by a mortgage on our property, the asset may be transferred to the lender with a consequent loss of income and value to us.
     We do not plan on making distributions in the near term, and it is uncertain when any distributions will be made.
  We have significant debt, which could have important adverse consequences.
     We had $13.9 billion in total debt outstanding as of December 31, 2007, all of which was directly or indirectly secured by real estate assets and $8.1 billion ($1.0 billion when including the effect of interest rate hedges) was subject to variable interest rates, including $60.0 million outstanding on our revolving credit facilities. On March 20, 2008, the revolver portion of our credit facilities had a drawn balance of $445.0 million and we had $163.7 million outstanding under letters of credit, leaving available borrowing capacity on the revolving portion of our Master Credit Facility of $141.3 million. In addition, as of March 20, 2008, we had unfunded term loan commitments of $242.5 million. This debt level could limit our flexibility in planning for, or reacting to, changes in our business and our industry in general. The substantial amount of debt and the amount needed to service our debt obligations could place us at a disadvantage compared to our competitors which are less highly-leveraged. This high degree of leverage could adversely affect our ability to obtain additional financing in the future on favorable terms or at all for working capital, capital expenditures, acquisitions, development or other general corporate purposes, making us more vulnerable to a downturn in business or the economy in general. We may not have sufficient cash flow from operations or capital transactions to service our indebtedness and we may be unable to incur additional indebtedness without violating various financial ratios contained in our debt agreements. If we cannot meet required payments under our debt agreements or cannot comply with the covenants contained in these agreement, the lenders may declare us in default and may seek available remedies under the agreements, which may include transferring properties to the lender under indebtedness which is secured by real property.
  Our debt agreements include restrictive covenants relating to our operations, which could limit our ability to respond to changing market conditions and our ability to make distributions.
     Our debt agreements contain customary covenants which, among other things, restrict our ability to incur additional indebtedness and, in certain instances, restrict our ability to engage in material asset sales, mergers, consolidations and acquisitions, and restrict our ability to make capital expenditures. These debt agreements also require us to maintain various financial ratios. Our Master Credit Facility required the establishment of a funded interest reserve of $500 million to facilitate compliance with debt service coverage ratios under the facility. We expect that we will need to draw on these reserves in 2008 to maintain compliance with these ratios. Some loans under our major credit facilities are cross-collateralized and contain cross default provisions with other material loans. Due to this cross-collateralization, a failure or default with respect to certain properties could have an adverse impact on us or our properties that are subject to the cross-collateralization under the applicable debt instrument. Failure to comply with these covenants could cause a default under the agreements and result in a requirement to repay the indebtedness prior to its maturity, which could have an adverse effect on our cash flow and ability to make distributions to our Unitholders.
  Variable rate debt is subject to interest rate risk which could adversely affect our ability to pay distributions to our Unitholders.
     As of December 31, 2007, we had $8.1 billion ($1.0 billion when including the effect of interest rate hedges) of debt outstanding under instruments which bear interest at variable rates. Increases in interest rates would increase our interest expense under these instruments and would increase the cost of refinancing these instruments and issuing new debt. As a result, higher interest rates would adversely affect cash flow and our ability to service our indebtedness and to make distributions to our Unitholders.
  Possible increases in interest and other costs in connection with the syndication of some of our debt could adversely affect our results of operation, our ability to satisfy our debt obligations and our ability to pay distributions to our Unitholders.
     A significant portion of our debt is subject to increases in interest and borrowing costs and payment of fees to lenders in connection with the potential syndication of such debt. Specifically, the lenders under our Master Credit Facility and our mezzanine loans provided by the Fannie Mae Mezzanine Lenders and the Freddie Mac Mezzanine Lenders have the option to syndicate or sell the outstanding principal amount under such agreements to other investors at a discount and may revise the interest rate spread or discount or increase fees to a level necessary to facilitate syndication based on current market conditions at the syndication date. As of December 31, 2007, $5.6 billion in outstanding principal indebtedness under these loans was subject to syndication and the increased borrowing costs described above. The cost associated with any incremental interest or additional fees, as well as any original issue discount realized, is required to be born by the Company.

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These same lenders have committed to lend us up to $148.8 million to fund such costs, although we can make no assurance that we will be able to incur these additional borrowings without violating the financial covenants under our debt agreements or obtaining covenant waivers. As of March 20, 2008, we had approximately $73.0 million set aside in restricted cash to fund syndication discounts. As of March 20, 2008, $43.0 million of principal had been syndicated at a discount of 3%. The deterioration of the residential mortgage market has caused a widening of the credit spreads on both commercial mortgage-backed securities and commercial real estate collateralized debt obligations recently. If these conditions continue or worsen, the lenders may be required to increase the pricing or fees. Such increases in interest and payments would adversely affect our cash flow, our ability to satisfy our debt obligations and our ability to make distributions to our Unitholders.
  A reduction in the value of our assets or an increase in indebtedness could trigger an increased distribution rate and a redemption right of our Series O preferred unitholders, which could adversely effect our cash flows.
     During any period of time after we incur indebtedness in excess of $10 million in principal amount (excluding draws on our line of credit or refinancings of existing indebtedness) and as a result of which our loan to value ratio exceeds 85%, until such time as our loan to value ratio no longer exceeds 85%, the distribution rate on our Series O Preferred Units shall increase from 6% per annum to 8% per annum. Further, if at any time prior to January 1, 2022, either (1) our loan to value ratio is higher than 85% and we make a distribution to the holders of Common Units; or (2) we incur indebtedness in excess of $10 million in principal amount (excluding draws on our line of credit or refinancings of existing indebtedness) and after such borrowing our loan to value ratio is higher than 85% and we have made a distribution to our Common Units in contemplation of the incurrence of that indebtedness, then each holder of a Series O Preferred Unit will have the right to exercise an immediate redemption right, including payment of any tax protection amount (as defined in our Declaration of Trust) with respect to the Series O Preferred Units being redeemed. If we were required to pay this higher distribution or to redeem a material portion of the outstanding Series O Preferred Units, our cash flows and our ability to satisfy our debt obligations would be materially adversely affected. As of December 31, 2007, we have Series O Preferred Units outstanding with an aggregate redemption value of $235.7 million.
  A default by our affiliated entities on intercompany loans could adversely affect our cash flows, ability to satisfy our debt obligations and our ability to make distributions to our Unitholders.
     We have intercompany transactions with affiliated entities and record a receivable from affiliated entities when they borrow from Archstone or we pay billings on their behalf. We charge interest on balances owed by affiliates to Archstone under the intercompany loans at the same rate that we are paying and therefore do not recognize any profit from our affiliated entities. As of December 31, 2007, there was an aggregate of $393.8 million outstanding under all such transactions. Furthermore, Archstone’s employees render services for affiliated entities where Archstone is reimbursed based on an estimate of the allocable cost. We also record a payable to our affiliates when we receive funds on the affiliated entity’s behalf or the affiliate pays bills on our behalf. A default by one or more of the affiliated entities on payments to us under our intercompany balances would adversely affect our ability to satisfy our debt obligations and our ability to make distributions to our Unitholders. Further, because of the way the Venture’s credit facilities and intracompany loans are structured, a failure or default with respect to one or more affiliate entities’ properties could have an adverse impact on us or our other properties.
Risks Associated with Real Estate
  Unfavorable changes in economic conditions could adversely affect our results of operation.
     Changes in the general economic climate, local, regional or national conditions (such as an oversupply of communities or a reduction in rental demand in a specific area) could adversely affect real estate values and the cash flow of the properties, which would in turn have an adverse impact on our results of operations and ability to make distributions to our Unitholders. Specifically, several of the markets in which we operate have recently experienced a decrease in job growth. If job growth continues to slow in these markets, our market rental rates could be adversely affected.
  We are subject to additional risks inherent in ownership of real estate.
     Real estate, cash flows and values are affected by a number of additional factors, including the quality and philosophy of management, competition from other available properties and the ability to provide adequate property maintenance and insurance and to control operating costs. Real estate cash flows and values are also affected by such factors as government regulations, including zoning, usage and tax laws, caps on rent and rent increases, interest rate levels, the availability of financing, property tax rates, utility expenses, potential liability under environmental and other laws and changes in environmental and other laws. Although we seek to minimize these risks through our market research and property management capabilities, they cannot be totally eliminated.

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  We have a concentration of investments in certain markets.
     As shown in the United States Geographic Distribution table below in “Item 2. Properties,” our most significant investment concentrations are in the Washington, D.C. metropolitan area, Southern California, the New York City metropolitan area and the San Francisco Bay Area. Southern California is the geographic area comprising the Los Angeles County, San Diego, Orange County, Ventura County and the Inland Empire markets. We are, therefore, subject to increased exposure (positive or negative) from economic and other competitive factors specific to markets within these geographic areas. Some of these areas have recently experienced a decrease in job growth and depressed conditions in the local real estate market. To the extent general economic conditions worsen in one or more of these markets, or if any of these areas experience a natural disaster, the value of our portfolio and our market rental rates could be adversely affected. As a result, our results of operations, cash flow, cash available for distribution, including cash available to pay distributions to our Unitholders and our ability to satisfy our debt obligations could be materially adversely affected.
  We are subject to risks inherent in real estate development.
     We have developed or commenced development on a substantial number of apartment communities and expect to develop additional apartment communities in the future. Real estate development involves risks in addition to those involved in the ownership and operation of established communities, including the risks that financing, if needed, may not be available on favorable terms, construction may not be completed on schedule, contractors may default, estimates of the costs of developing apartment communities may prove to be inaccurate, the costs and availability of materials may be adversely affected by global supply and demand, and communities may not be leased or rented on profitable terms or in the time frame anticipated. Timely construction may be affected by local weather conditions, local moratoria on construction, local or national strikes and local or national shortages in materials, building supplies or energy and fuel for equipment. These risks may cause the development project to fail to perform as expected.
  Our business is subject to extensive competition.
     There are numerous commercial developers, real estate companies and other owners of real estate that we compete with in seeking land for development, apartment communities for acquisition and disposition and residents for apartment communities. All of our apartment communities are located in developed areas that include other apartment communities. The number of competitive apartment communities in a particular area could have a material adverse effect on our ability to lease units and on the rents charged. In addition, single-family homes and other residential properties provide housing alternatives to residents and potential residents of our apartment communities.
  Real estate investments are relatively illiquid and we may not be able to recover our investments.
     Equity real estate investments are relatively illiquid, which may tend to limit our ability to react promptly to changes in economic or other market conditions. Our ability to dispose of assets in the future will depend on prevailing economic and market conditions. We intend to repay a portion of our debt obligations with proceeds from sales of our assets. Our inability to sell our properties on favorable terms or at all could have a material adverse effect on our results of operations and our ability to satisfy our debt obligations. Furthermore, our mezzanine loans to real estate investors may not be recoverable if those investors are unable to monetize the underlying asset at underwritten amounts.
  We could be subject to acts of terrorism.
     Periodically, we receive alerts from government agencies that apartment communities could be the target of both domestic and foreign terrorism. Although we currently have insurance coverage for losses incurred in connection with terrorist-related activities, losses could exceed our coverage limits and have a material adverse affect on our operating results.
  Compliance with laws and regulatory requirements may be costly.
     We must comply with certain accessibility, environmental, building, and health and safety laws and regulations related to the ownership, operation, development and acquisition of apartments. Under those laws and regulations, we may be liable for, among other things, the costs of bringing our properties into compliance with the statutory and regulatory requirements. Non-compliance with certain of these laws and regulations may impose liability without regard to fault, and could give rise to actions brought against us by governmental entities and/or third parties who claim to be or have been damaged as a consequence of an apartment not being in compliance with the subject laws and regulations. As part of our due diligence procedures in connection with the acquisition of a property, whether it is an apartment community or land to be developed, we conduct an investigation of the property’s compliance with known laws and regulatory requirements with which we must comply once we acquire a property, which investigation includes performing a Phase I environmental

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assessment of the property and a Phase II assessment if recommended in the Phase I report. We hire architects and general contractors to design and build our development projects, and we rely on them to design and build in accordance with all legal requirements. We cannot, however, give any assurance that our investigations and these assessments have revealed all potential non-compliance issues or related liabilities, or that our development properties have been designed and built in accordance with all applicable legal requirements.
  Costs associated with moisture infiltration and resulting mold remediation may be costly.
     As a general matter, concern about indoor exposure to mold continues as such exposure has been alleged to have a variety of adverse effects on health. As a result, there have been a number of lawsuits in our industry against owners and managers of apartment communities relating to moisture infiltration and resulting mold. We have implemented guidelines and procedures to address moisture infiltration and resulting mold issues if and when they arise. We believe that these measures will minimize the potential for any adverse effect on our residents, but such adverse effects cannot be completely eliminated. Specifically, several tenants have filed complaints against entities related to us in connection with moisture infiltration at Archstone Westbury, an apartment community in Westbury, NY. We estimate that remediation of moisture infiltration at Archstone Westbury described in this report, will require that the apartments be vacated during the remediation, which is expected to take approximately twelve to eighteen months, with a resulting loss of rental revenue during this period. 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 can make no assurance that liabilities resulting from moisture infiltration and the presence of or exposure to mold will not have a future material impact on our financial results.
  Changes in laws may result in increased cost.
     We may not be able to pass on increased costs resulting from increases in real estate taxes, income taxes or other governmental requirements directly to our residents. Substantial increases in rents, as a result of those increased costs, may affect the ability of a resident to pay rent, causing increased vacancy.
  We are subject to losses that may not be covered by insurance.
     There are certain types of losses (such as from war) that may be uninsurable or not economically insurable. Additionally, many of our communities in California are located in the general vicinity of active earthquake fault lines. Although we maintain insurance to cover most reasonably likely risks, including earthquakes and hurricanes, if an uninsured loss or a loss in excess of insured limits occurs, we could lose both our invested capital in, and anticipated profits from, one or more communities. We may also be required to continue to repay mortgage indebtedness or other obligations related to such communities. The terms of our property and general liability policies after June 30, 2002, may exclude certain mold-related claims. We can make no assurance that liabilities resulting from moisture infiltration and the presence of or exposure to mold will not have a future material impact on our financial results. Should an uninsured loss arise against the company, we would be required to use our own funds to resolve the issue, including litigation costs. Any such loss could materially adversely affect our business, financial condition and results of operations.
  Ownership of properties located outside of the United States subjects us to foreign currency risks which may adversely impact our ability to make distributions.
     We currently own or have a minority ownership interest in properties located outside of the United States, which subjects us to risk from fluctuations in exchange rates between foreign currencies and the U.S. dollar. We expect that our principal foreign currency exposure will be to the Euro. Changes in the relation of these currencies to U.S. dollars may affect the fair values and earnings streams of our international holdings, and therefore our revenues and operating margins on our non-dollar denominated foreign holdings. These fluctuations in foreign currency exchange rates may materially adversely impact our financial condition, results of operations, cash flow, cash available for distribution, including cash available to pay distributions, and ability to satisfy our debt obligations.
     We intend to attempt to mitigate the risk of currency fluctuation by financing our properties in the local currency denominations, although we cannot assure you that we will be able to do so or that this will be effective. We have engaged, and may continue to engage, in direct hedging activities to mitigate the risks of exchange rate fluctuations. We do not currently have any foreign currency hedges in place.

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  Acquisition and ownership of foreign properties may involve risks greater than those faced by us in the United States.
     Foreign real estate investments generally involve certain risks not associated with investments in the United States. Our international acquisitions and operations are subject to a number of risks, including acquisition risk resulting from less knowledge of local real estate markets, economies, and business practices and customs; our limited knowledge of and relationships with sellers in these markets; higher due diligence, transaction and structuring costs than those we may face in the United States; additional accounting and control expenses; complexity and costs associated with managing international operations; difficulty in hiring qualified management, leasing personnel and service providers in a timely fashion; multiple, conflicting and changing legal, regulatory, tax and treaty environments, including land use, zoning and environmental laws, as well as the enactment of laws prohibiting or restricting the foreign ownership of property; exposure to increased taxation, confiscation or expropriation; currency transfer restrictions and limitations on our ability to distribute cash earned in foreign jurisdictions to the United States; difficulty in enforcing agreements in non-United States jurisdictions, including those entered into in connection with our acquisitions; and change in the availability, cost and terms of property financing resulting from varying national economic policies or changes in interest rates. Our inability to overcome these risks could adversely affect our foreign operations and could harm our business and results of operations.
Risks Associated with Tax Laws
  We intend to qualify as a partnership, but we cannot guarantee that we will qualify.
     We intend to qualify as a partnership for federal income tax purposes. However, we will be treated as an association taxable as a corporation for federal income tax purposes if we are deemed to be a publicly traded partnership, unless at least 90% of our income is qualifying income as defined in the tax code. Qualifying income for our 90% test generally includes passive income, such as real property rents, distributions and interest. We believe that we will meet this qualifying income test, but cannot guarantee that we will. If we were to be taxed as a corporation, we would incur substantial tax liabilities and our ability to raise additional capital would be impaired.
Item 1B. Unresolved Staff Comments
     None.

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Item 2. Properties
United States Geographic Distribution
          At December 31, 2007, the geographic distribution for our six core markets based on NOI for the three months ended December 31, 2007 was as follows:
         
Washington, D.C. metropolitan area
    40.7 %
Southern California
    21.6  
San Francisco Bay Area, California
    14.4  
New York City metropolitan area
    8.6  
Boston, Massachusetts
    7.4  
Seattle, Washington
    4.7  
 
     
Total
    97.4 %
 
     
     The following table summarizes the geographic distribution for 2007, 2006 and 2005 based on NOI:
                           
    Successor     Predecessor
    Total Portfolio(1)          
    December 31,          
    2007     2006   2005
Core Markets
                         
Washington, D.C. metropolitan area
    40.7 %       34.6 %     36.6 %
Southern California
    21.6         25.8       24.9  
San Francisco Bay Area, California
    14.4         11.5       8.2  
New York City metropolitan area
    8.6         12.5       6.8  
Boston, Massachusetts
    7.4         5.0       4.7  
Seattle, Washington
    4.7         4.2       3.9  
 
                         
Total Core Markets
    97.4 %       93.6 %     85.1 %
Non-Core Markets (2)
                         
Chicago, Illinois
    2.4 %       2.0 %     4.3 %
Southeast Florida
            2.2       4.0  
Houston, Texas
                  1.3  
Denver, Colorado
                  1.1  
Other
    0.2         2.2       4.2  
 
                         
Total Non-Core Markets
    2.6 %       6.4 %     14.9 %
 
                         
Total All Markets
    100 %       100 %     100 %
 
                         
 
(1)   Based on NOI for the fourth quarter of each calendar year, excluding NOI from communities disposed of during the period. See Item 7 under the caption “Property-level operating results – 2007 compared to 2006” for a discussion on why we believe NOI is a meaningful measure and the caption for “Quantitative Summary” for a reconciliation of NOI to Earnings from Operations.
 
(2)   Markets that represent 1.0% or less of NOI in any year are included in Other for that year.

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Real Estate Portfolio
          We are a leading multifamily company focused primarily on the operation, development, redevelopment, acquisition, and management of apartment communities in protected markets throughout the United States. The following information summarizes Successor’s wholly owned real estate portfolio as of December 31, 2007 and includes information about our operating segments – garden communities and High Rise properties (dollar amounts in thousands). Additional information on our real estate portfolio is contained in “Schedule III, Real Estate and Accumulated Depreciation” and in our audited financial statements contained in this Annual Report:
                                 
    Number of     Number of             Percentage  
    Communities     Units     Investment     Leased(1)  
OPERATING APARTMENT COMMUNITIES:
                               
Garden Communities:
                               
Boston, Massachusetts
    5       1,164     $ 425,883       97.7 %
Inland Empire, California
    1       300       66,888       92.7 %
Los Angeles County, California(2)
    21       7,518       2,548,929       90.6 %
San Diego, California
    3       468       120,474       95.9 %
San Francisco Bay Area, California
    20       6,855       1,920,372       93.0 %
Seattle, Washington
    8       2,327       465,617       95.2 %
Ventura County, California(2)
    7       1,773       537,582       91.3 %
Washington, D.C. metropolitan area
    15       5,867       1,486,902       95.4 %
 
                       
Garden Community Subtotal/Average
    80       26,272     $ 7,572,647       93.6 %
 
                       
High-Rise Properties:
                               
Boston, Massachusetts(2)
    6       1,519     $ 677,873       89.0 %
Chicago, Illinois
    2       304       134,277       N/A  
Los Angeles County, California
    3       1,073       392,427       93.9 %
New York City metropolitan area
    7       1,974       1,595,411       95.7 %
Philadelphia, Pennsylvania
    1       80       15,967       N/A  
San Francisco Bay Area, California
    2       853       313,495       94.4 %
Seattle, Washington
    3       694       180,224       94.7 %
Washington, D.C. metropolitan area
    34       11,239       3,779,097       95.8 %
 
                       
High-Rise Subtotal/Average
    58       17,736     $ 7,088,771       95.0 %
 
                       
Operating Apartment Communities Subtotal /Average
    138       44,008     $ 14,661,418       94.2 %
 
                       
APARTMENT COMMUNITIES UNDER CONSTRUCTION:
                               
High-Rise Properties:
                               
Boston, Massachusetts
    1       426     $ 206,070       N/A  
APARTMENT COMMUNITIES IN PLANNING:(3)
                               
Garden Communities:
                               
Los Angeles County, California
    2       568       37,740          
San Francisco Bay Area, California
    2       416                
 
                         
High-Rise Communities:
                               
Boston, Massachusetts
    1       341     $ 19,595          
 
                         
Total Apartment Communities In Planning(3) Subtotal/Average
    5       1,325     $ 57,335          
 
                         
Total Communities
    144       45,759     $ 14,924,823          
 
                         
INTERNATIONAL PORTFOLIO:
                               
German Operating Apartment Communities
    10       807       53,458          
 
                         
OTHER REAL ESTATE ASSETS(4)
              $ 90,791          
 
                         
Total Real Estate Owned at December 31, 2007
    154       46,566     $ 15,069,072          
 
                         
See notes on following page.
 
(1)   Represents the percentage leased as of December 31, 2007. For communities in Lease-Up, the percentage leased is based on leased units divided by total number of units in the community (completed and under

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    construction) as of December 31, 2007. The “N/A” for the Philadelphia and Chicago markets in the High-Rise operating community section indicates that the market is entirely comprised of Oakwood Master Lease communities or ground lease properties. Oakwood Master Leased communities and ground lease properties have been excluded from the Percentage Leased calculation for other markets that have both Oakwood Master Leased communities and communities with traditional resident leases. A “N/A” related to Boston indicates the community is under construction where Lease-Up has not yet commenced.
 
(2)   Lower average occupancy is due to the inclusion of certain recently completed development communities which are in Lease-Up and therefore not yet Stabilized.
 
(3)   As of December 31, 2007, we had three investments representing $0.5 million or 780 units classified as In Planning and Under Control. Our investment in these communities is reflected in the “Other assets” caption of our Balance Sheet.
 
(4)   Includes land that is not In Planning and other real estate assets.
Item 3. Legal Proceedings
Shareholder Litigation
          On May 30, 2007, two separate purported shareholder class-action lawsuits related to the Merger Agreement and the transactions contemplated thereby were filed naming Archstone-Smith and each of Archstone-Smith’s trustees as defendants. One of these lawsuits, Seymour Schiff v. James A. Cardwell, et al. (Case No. 2007cv1135), was filed in the United States District Court for the District of Colorado. The other, Mortimer J. Cohen v. Archstone-Smith Trust, et al. (Case No. 2007cv1060), was filed in the District Court, County of Arapahoe, Colorado. On May 31, 2007, two additional purported shareholder class-action lawsuits related to the Merger Agreement and the transactions contemplated thereby were filed in the District Court, County of Arapahoe, Colorado. The first, Howard Lasker v. R. Scot Sellers, et al. (Case No. 2007cv1073), names Archstone-Smith, each of Archstone-Smith’s trustees and one of Archstone-Smith’s senior officers as defendants. The second, Steamship Trade Association/International Longshoremen’s Association Pension Fund v. Archstone-Smith Trust, et al. (Case No. 2007cv1070), names Archstone-Smith, each of Archstone-Smith’s trustees, Tishman Speyer and Lehman Brothers as defendants. On June 11, 2007, an additional purported shareholder class-action lawsuit related to the Merger Agreement, Doris Staehr v. Archstone-Smith Trust, et al. (Case No. 2007cv1081), was filed in the District Court, County of Arapahoe, Colorado, naming Archstone-Smith and each of Archstone-Smith’s trustees as defendants. All five lawsuits allege, among other things, that Archstone-Smith’s trustees violated their fiduciary duties to Archstone-Smith’s shareholders in approving the Mergers.
          On June 21, 2007, the District Court, County of Arapahoe, Colorado entered an order consolidating the Lasker, Steamship Trade Association/International Longshoremen’s Association Pension Fund and Staehr actions into the Cohen action, under the caption In re Archstone-Smith Trust Shareholder Litigation.
          On August 17, 2007, Archstone-Smith and the other defendants entered into a memorandum of understanding with the plaintiffs regarding the settlement of both the Schiff and the consolidated action captioned In re Archstone-Smith Trust Shareholder Litigation. In connection with the settlement, Archstone-Smith agreed to make certain additional disclosures to its shareholders. Subject to the completion of certain confirmatory discovery by counsel to the plaintiffs, the memorandum of understanding contemplates that the parties will enter into a stipulation of settlement. The stipulation of settlement will be subject to customary conditions, including court approval following notice to Archstone-Smith’s shareholders and consummation of the Merger. In the event that the parties enter into a stipulation of settlement, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement, which, if finally approved by the court, will resolve all of the claims that were or could have been brought in the actions being settled, including all claims relating to the Merger, the Merger Agreement and any disclosure made in connection therewith. In addition, in connection with the settlement, the parties contemplate that plaintiffs’ counsel will petition the court for an award of attorneys’ fees and expenses to be paid by us, up to $1.0 million. There can be no assurance that the parties will ultimately enter into a stipulation of settlement or that the court will approve the settlement even if the parties were to enter into such stipulation. In such event, the proposed settlement as contemplated by the memorandum of understanding may be terminated. The settlement will not affect the amount of the Merger consideration that the plaintiffs are entitled to receive in the Merger. Archstone-Smith and the other defendants vigorously deny all liability with respect to the facts and claims

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alleged in the lawsuits, and specifically deny that any modifications to the Merger Agreement or any further supplemental disclosure was required under any applicable rule, statute, regulation or law. However, to avoid the risk of delaying or adversely affecting the Merger and the related transactions, to minimize the expense of defending the lawsuits, and to provide additional information to Archstone-Smith shareholders at a time and in a manner that would not cause any delay of the Merger, Archstone-Smith and the Archstone-Smith Trustees agreed to the settlement described above. Archstone-Smith and the other defendants further considered it desirable that the actions be settled to avoid the substantial burden, expense, risk, inconvenience and distraction of continued litigation and to fully and finally resolve the settled claims.
Clinton Green
          The Clinton Green project is a mixed-use apartment, condominium, and retail complex in New York City on 10th Avenue between 51st and 53rd Streets. The Clinton Green Project is owned by Clinton Green Holdings, LLC (“CG Holdings”), a joint venture consisting of our wholly-owned indirect subsidiary (“ASN-CG Member”) and an affiliate of The Dermot Company (“Dermot Member”). The Clinton Green Project also includes a small condominium component that is separately owned by Clinton Green Condo, LLC (“CG Condo”), a joint venture of the ASN-CG Member and the Dermot Member. In addition to other investments in CG Holdings and CG Condo, we provided a letter of credit under our pre-Merger Credit Facility to support tax-exempt bonds issued to finance the CG Project.
          On September 21, 2007, the Dermot Member filed a lawsuit captioned Clinton Green Holdings, LLC and DPIC Clinton Green, LLC v. Archstone-Smith Operating Trust, ASN Clinton Green Member, LLC, and Ameriton Properties Incorporated, Index No. 07/603154, Supreme Court of the State of New York, County of New York. The Dermot Member alleges (a) that the Merger caused a breach of the CG Holdings Operating Agreement because the transfer violated certain covenants in the Pre-Merger Credit Facility and also breached a provision of the CG Holdings Operating Agreement prohibiting a change of control of ASN-CG Member, (b) that the Merger caused a breach of a Put-Call Agreement under which the Dermot Member is entitled to be bought out of CG Holdings by ASN-CG Member through a tax-free contribution to us for an interest that could be converted into Archstone-Smith’s publicly traded stock and (c) that the Merger caused a breach of the CG Condo Operating Agreement as a result of a change in control of Ameriton. The Dermot Member is seeking unspecified damages as well as the ability to have CG Holdings dissolved.
          Prior to the Merger, the ASN-CG Member reached agreement with the Dermot Member and the lenders under the Pre-Merger Credit Facility to waive any breach of covenants for a period of six months. The agreement involved certain immaterial payments and concessions to the Dermot Member. The Dermot Member has also agreed to an extension of the date by which the Archstone defendants must respond to the Complaint until April 30, 2008.
Tax Protection Agreements and Unitholder Claims
          Prior to the Mergers, Archstone and several related parties had entered into tax protection agreements and other contracts with various holders of the A-1 Common Units. Those tax protection and related agreements provided such Unitholders, among other things, with the right to tax protection payments under specified circumstances detailed in such agreements. Archstone has received various tax claim notices and other communications from various former Unitholders asserting that those former Unitholders are owed tax protection payments and alleging a variety of other claims. Other former Unitholders may assert similar or additional claims in the future. The tax protection agreements generally provide that, after a Unitholder sends a tax claim notice to Archstone, Archstone may reject such claims (as it has with respect to tax claim notices sent to date). Following such rejection, unless the parties are able to negotiate an amicable resolution, the parties are generally required to submit to arbitration with respect to claims for tax protection payments. It is expected that arbitrations will be commenced in the future.
          In addition, on November 30, 2007, a purported class action lawsuit related to the Mergers, captioned Steven A. Stender and Infinity Clark Street Operating v. James A. Cardwell, et al. (Case no. 2007cv2503), was filed in the United States District Court for the District of Colorado. The lawsuit names, among others, Archstone, Archstone-Smith, certain of their former trustees and officers, Lehman Brothers Holdings Inc. and Tishman Speyer Development Corporation as defendants. This action was brought by certain former Unitholders, individually and

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purportedly on behalf of all former holders of A-1 Common Units as of the Mergers, and alleges, among other things: (i) that Archstone and Archstone-Smith entered into enforceable property contribution agreements and partnership agreements with such Unitholders; (ii) that Archstone and Archstone-Smith agreed not to enter into any transactions or dispose of any interest in the property contributed by such Unitholders that would result in such Unitholders realizing a taxable gain, and agreed to provide such Unitholders with the ability to receive dividends and also to liquidate their units by receiving cash or converting them to common shares in the publicly traded Archstone-Smith; (iii) that Archstone and Archstone-Smith failed to perform their duties under the Declaration of Trust, contribution and partnership agreements, and statutory and common law partnership principles in connection with the Mergers; (iv) that such failures discharge such Unitholders’ obligations to defendants (as noted above, the former Unitholders undertook certain obligations to arbitrate with respect to claimed rights to tax protection payments); and (v) that Archstone-Smith and former trustees and officers, aided and abetted by Lehman Brothers and Tishman Speyer, violated their fiduciary duties owed to such Unitholders in connection with the Mergers. The purported class action seeks an unspecified amount of damages. Although Archstone and the Venture believe that the claims that have been asserted are without merit, there can be no assurance that the disposition of such claims will not result in material liability to Archstone.
FHA/ADA
          During the second quarter of 2005, we entered into a full and final settlement in the United States District Court for the District of Maryland with three national disability organizations and agreed to make capital improvements in a number of our communities in order to make them fully compliant with the FHA and ADA. The litigation, settled by this agreement, alleged lack of full compliance with certain design and construction requirements under the two federal statutes at 71 of our wholly-owned and joint venture communities, of which we or our affiliates still own or have an interest in 18. As part of the settlement, the three disability organizations all recognized that Archstone had no intention to build any of its communities in a manner inconsistent with the FHA or ADA.
          The amount of the capital expenditures required to remediate the communities named in the settlement was estimated at $47.2 million and was accrued as an addition to real estate during the fourth quarter of 2005. The settlement agreement approved by the court allows us to remediate each of the designated communities over a three-year period, and also provides that we are not restricted from selling any of our communities during the remediation period. We agreed to pay damages totaling $1.4 million, which included legal fees and costs incurred by the plaintiffs. We had $10.9 million of the original accrual remaining on December 31, 2007.
Water Intrusion-Florida
          We are subject to various claims filed in 2002 and 2003 in connection with moisture infiltration and resulting mold issues at certain High-Rise properties we once owned in Southeast Florida. These claims generally allege that water infiltration and resulting mold contamination resulted in the claimants having personal injuries and/or property damage. Although certain of these claims continue to be in various stages of litigation, with respect to the majority of these claims, we have either settled the claims and/or we have been dismissed from the lawsuits that had been filed. With respect to the lawsuits that have not been resolved, we continue to defend these claims in the normal course of litigation.
Water Intrusion — Westbury
          In November, 2007, we began notifying residents of Archstone Westbury that, due to water intrusion and some related mold growth, we had concluded that the appropriate course of action was to perform necessary remediation and reconstruction at the community. Further, we determined it would be necessary to terminate every tenant’s lease, effective March 31, 2008, to ensure the safety of tenants during the potentially year-long construction project. As a consequence, four complaints were filed by tenants at Westbury against entities related to us and various other entities allegedly involved in the design, construction and ownership of the Project. These cases are Andrea Sorrentino, et al. v. ASN Roosevelt Center LLC d/b/a Archstone Westbury, et al., filed on November 28, 2007, in the Supreme Court of the State of New York, County of Nassau, Case No. 07-021135, removed on February 8, 2008 to U.S. Federal District Court for the Eastern District of New York; Richardo Francois v. ASN Roosevelt Center LLC D/B/A Archstone Westbury, filed on December 7, 2007, in the Supreme Court of the State of

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New York, County of Nassau, Case No. 07-021967; Pasquale Marchese, et al. v. ASN Roosevelt Center LLC, et al., filed on December 7, 2007, but not yet served on us; and John DiGiovanna and Farideh DiGiovanna vs. ASN Roosevelt Center LLC d/b/a Archstone Westbury, filed on January 7, 2008, in the Supreme Court of the State of New York, County of Nassau, Case No. 08-000347. In addition to the foregoing cases, there are a number of threatened lawsuits. Plaintiffs in the filed cases seek monetary damages and equitable relief alleging, among other things, that water damage and mold has caused the tenants at Westbury personal harm and property damage. Although no assurances can be given with respect to the outcome of these lawsuits, we intend to vigorously defend against the claims alleged in these lawsuits.
Other
          We are a 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 or litigation, individually or in the aggregate, will have a material adverse effect on our business, financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
          No matters were submitted to a vote of our security holders during the quarter ended December 31, 2007.

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PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
          Our Common Units are not traded in any public market. At the effective time of the Operating Trust Merger, under the Merger Agreement, holders of our A-1 Common Units were entitled to receive at their election one newly-issued Series O Preferred Unit or $60.75 for each of their Class A-1 Common Units. Each of the A-1 Common Units that were not converted to Series O Preferred Units, and all of the A-2 Common Units outstanding (other than A-1 Common Units and A-2 Common Units held by Archstone-Smith, its subsidiaries and certain affiliates of the Buyer Parties) immediately prior to the Operating Trust Merger, were converted into, and canceled in exchange for the right to receive $60.75 in cash, without interest and less applicable withholding tax. There have been no transfers of any Common Units since October 4, 2007. Following the Mergers, Series I Trust, Series II LLC and Series III LLC are the only holders of our common equity.
          In 2006, distributions were declared and paid quarterly on our common units. The annual distribution for 2006 was $1.74 per common unit. In 2007, distributions were declared and paid during the first and second quarter at a rate of $0.4525 per common unit. No distributions have been declared or paid since the second quarter. We do not plan on making distributions in the near term, and it is uncertain when any distributions will be made.
          As of December 31, 2007, no securities were authorized for issuance under any equity compensation plans.
          During 2007, we redeemed 1,108,323 A-1 Common Units at an average price of $59.16 per Common Unit. In connection with the Mergers, holders of 22.2 million A-1 Common Units elected to receive the merger consideration of $60.75 per Common Unit.
Item 6. Selected Financial Data
          The following table provides selected financial data relating to our historical financial condition and results of operations as of and for each of the years ending December 31, 2003 to 2006, and the periods January 1, 2007 through October 4, 2007 (Predecessor) and October 5, 2007 through December 31, 2007 (Successor). This data is qualified in its entirety by, and should be read in conjunction with, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes that have been included or incorporated by reference in this Annual Report. Prior year’s amounts have been restated for amounts classified within discontinued operations (in thousands, except per unit data):

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    Combined            
    Successor and            
    Predecessor     Successor     Predecessor
              Period from     Period from                
              October 5, 2007     January 1, 2007                
    Year Ended     Through     Through           Year Ended    
    December 31,     December 31,     October 4,           December 31,    
    2007     2007     2007   2006   2005   2004   2003
Operations Summary(1):
                                                           
Total revenues(2)
  $ 945,432       $ 255,271       $ 690,161     $ 759,825     $ 513,855     $ 405,681     $ 333,063  
Property operating expenses (rental expenses and real estate taxes)
    296,063         76,348         219,715       225,822       148,640       130,725       100,242  
Net Operating Income(3)
    562,044         137,429         424,615       456,593       309,185       255,748       213,487  
Depreciation on real estate investments
    329,323         162,427         166,896       177,264       115,997       97,396       67,745  
Interest expense
    422,237         255,709         166,528       161,231       75,968       56,240       53,183  
General and administrative expense
    84,765         24,160         60,605       68,188       58,604       55,479       49,838  
Earnings (loss) from operations
    (232,413 )       (268,062 )       35,649       109,615       61,370       47,907       26,795  
Income from unconsolidated entities
    (12,974 )       (7,680 )       (5,294 )     36,316       22,432       17,902       5,745  
Net earnings (loss) from discontinued operations(4)(5)
    707,015         (7,816 )       714,831       686,806       588,895       518,192       461,651  
Preferred Unit distributions
    2,917                 2,917       3,829       4,572       16,254       26,153  
Net earnings (loss) attributable to Common Units(6):
                                                           
— Basic
    354,325         (413,475 )       767,800       831,246       696,932       596,369       468,038  
— Diluted
    374,541         (413,475 )       788,016       842,385       696,932       600,124       480,910  
Common Unit distributions
                    227,868       432,592       397,466       603,553       277,035  
Per Unit Data:(15)
                                                           
Net earnings (loss) attributable to Common Units:
                                                           
— Basic
                  $ 3.07     $ 3.35     $ 3.01     $ 2.71     $ 2.20  
— Diluted
                    3.03       3.33       3.00       2.69       2.18  
Common Unit cash distributions paid(7)
                    0.9050       1.74       1.73       2.72       1.71  
Cash distributions paid per unit:
                                                           
Series A Preferred Unit(8)
                                            2.11  
Series D Preferred Unit(9)
                                      1.31       2.19  
Series E Preferred Unit(9)
                                2.09       2.09       2.09  
Series F Preferred Unit(9)
                                      1.50       2.03  
Series G Preferred Unit(9)
                                2.16       2.16       2.16  
Series H, J, K, and L Preferred Unit(9)(10)
                                            3.38  
Series I Preferred Unit(11)
                    5,745       7,660.00       7,660.00       7,660.00       7,660.00  
Series P Preferred Unit(12)
                    228.81       457.62       364.74              
Series Q-1 Preferred Unit(13)
                    10.08       20.16       3.54              
Series Q-2 Preferred Unit(14)
                    4.32       8.64       1.52              
Weighted average Common Units outstanding:
                                                           
— Basic
                    250,223       248,314       231,642       220,053       212,288  
— Diluted
                    260,026       253,308       232,608       223,187       220,758  

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(1)   Net earnings from discontinued operations have been reclassified to reflect communities classified as discontinued operations as of December 31, 2007 for all years presented.
 
(2)   Annual revenues and other income, inclusive of discontinued operations, for 2007 (combined Successor and Predecessor), 2006, 2005, 2004 and 2003 were $1.2 billion, $1.3 billion, $1.1 billion, $1.0 billion and $1.0 billion, respectively.
 
(3)   Defined as rental revenues less rental expenses and real estate taxes. We believe that net earnings (loss) attributable to Common Units and NOI are the most relevant measures of our operating performance and allow investors to evaluate our business against our industry peers and against all publicly traded companies as a whole. We rely on NOI for purposes of making decisions about resource allocations and assessing segment performance. We also believe NOI is a valuable means of comparing period-to-period property performance. See Item 7 of this Annual Report under Results of Operations for a reconciliation of NOI to Earnings from Operations, and to obtain the required information to recalculate NOI from continuing operations.
 
(4)   Gains on the disposition of real estate investments classified as held for sale after January 1, 2003 are included in discontinued operations.
 
(5)   Represents property-specific components of net earnings and gains/(losses) related to real estate sold or classified as held for sale at December 31, 2007.
 
(6)   Includes $131.0 million of unrealized derivative losses from interest rate hedges for the period of October 5, 2007 through December 31, 2007 recorded in Other non-operating income (loss).
 
(7)   Includes a $1.00 per unit special distribution issued to our Common Unitholders in December 2004.
 
(8)   The Series A Preferred Units were called for redemption during October 2003; of the 2.9 million Series A Preferred Units then outstanding, 2.8 million were converted to Common Units and the remaining were redeemed.
 
(9)   All of the outstanding Series D, Series E, Series F, Series G and Series J Preferred Units were redeemed at liquidation value plus accrued distributions.
 
(10)   The Series L Preferred Units were converted into Common Units during December 2004 and the distribution paid during 2004 prior to conversion was $3.40 per unit. In September 2004, the Series K Preferred Units were converted into Common Units and the distribution paid during 2004 prior to conversion was $2.55 per unit. The Series H Preferred Units were converted into Common Units during May 2003 and the distribution paid during 2003 prior to conversion was $1.27 per unit.
 
(11)   Series I Preferred Units have a par value of $0.01 per unit.
 
(12)   The Series P Preferred Unit replaced the Series M Preferred Unit in connection with the Merger.
 
(13)   The Series Q-1 Preferred Unit replaced the Series N-1 Preferred Unit in connection with the Merger.
 
(14)   The Series Q-2 Preferred Unit replaced the Series N-2 Preferred Unit in connection with the Merger.
(15)   Per unit data is not presented for the Successor as a result of the Merger.

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    Successor     Predecessor
    December 31,     December 31,   December 31,   December 31,   December 31,
    2007     2006   2005   2004   2003
Financial Position:
                                         
Real estate owned, at cost
  $ 14,680,183       $ 12,967,709     $ 11,142,311     $ 9,006,114     $ 8,785,004  
 
                                         
Real estate held for sale(1)
    388,890         219,931       216,953       215,924       214,176  
Investments in and advances to unconsolidated entities
    297,113         235,323       132,728       111,481       86,367  
Total assets
    17,154,659         13,259,127       11,462,095       9,061,280       8,916,591  
Revolving credit facilities
    60,000         84,723       394,578       19,000       103,790  
Long-Term Unsecured Debt
            3,355,699       2,540,036       2,094,358       1,866,861  
Term Loans
    4,591,822                            
Property Mortgages Payable
    9,212,648         2,776,234       2,393,652       2,031,505       1,960,827  
Total Liabilities
    14,635,771         6,956,789       5,693,305       4,469,994       4,179,488  
Other Common Unitholders’ interest (at redemption value)
            1,718,017       1,420,491       885,400       707,924  
Series O Preferred Units
    235,944                            
Perpetual Preferred Units
    50,000         50,000       50,000       69,522       210,120  
Total unitholders’ equity
    2,282,944         4,584,321       4,348,299       3,703,826       4,017,669  
Number of Common Units outstanding
    39,565         249,661       246,324       222,694       220,063  
 
    Combined
Successor and
Predecessor
    Predecessor
    December 31,     December 31,   December 31,   December 31,   December 31,
    2007     2006   2005   2004   2003
Other Data:
                                         
Net cash flows provided by (used in):
                                         
Operating activities
  $ 411,355       $ 537,428     $ 414,019     $ 399,897     $ 343,696  
Investing activities
    14,657         (506,264 )     (964,621 )     528,253       428,166  
Financing activities
    (452,245 )       3,853       360,985       (730,125 )     (779,478 )
 
(1)   Previous years have been restated to include assets that were classified as held for sale as of December 31, 2007.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
     Please refer to “Item 1. Business — Consummation of Mergers” for important information regarding the recent Mergers. Unless indicated otherwise, the following discussion of our “Results of Operations” is based on the combined operating results of the Successor and Predecessor for 2007 and the Predecessor’s operating results for 2006 and 2005. Unless indicated otherwise, the “Liquidity and Capital Resources” discussion is based on the liquidity and capital resources of the Successor entity. Our analysis includes discussion of areas where comparability was significantly impacted by the Merger.
Results of Operations
Reconciliation of Quantitative Summary to Consolidated Statements of Earnings
     The following schedule is provided to reconcile our consolidated statements of earnings to the information presented in the “Quantitative Summary” provided in the next section:
                                                                           
    Combined Successor and Predecessor       Predecessor  
    2007       2006     2005  
    Continuing     Discontinued               Continuing     Discontinued             Continuing     Discontinued        
    Operations     Operations     Total       Operations     Operations     Total     Operations     Operations     Total  
Rental revenue
  $ 858,107     $ 286,768     $ 1,144,875       $ 682,415     $ 513,218     $ 1,195,633     $ 457,825     $ 559,584     $ 1,017,409  
 
                                                                         
Other income
    87,325             87,325         77,410             77,410       56,030             56,030  
 
                                                                         
Property operating expenses (rental expenses and real estate taxes)
    (296,063 )     (92,165 )     (388,228 )       (225,822 )     (178,542 )     (404,364 )     (148,640 )     (209,329 )     (357,969 )
 
                                                                         
Depreciation on real estate investments
    (329,323 )     (53,033 )     (382,356 )       (177,264 )     (111,032 )     (288,296 )     (115,997 )     (122,791 )     (238,788 )
 
                                                                         
Interest expense
    (422,237 )     (73,067 )     (495,304 )       (161,231 )     (114,595 )     (275,826 )     (75,968 )     (141,600 )     (217,568 )
 
                                                                         
General and administrative expenses
    (84,765 )           (84,765 )       (68,188 )           (68,188 )     (58,604 )           (58,604 )
 
                                                                         
Other expense
    (45,457 )     (6,356 )     (51,813 )       (17,705 )     (19,815 )     (37,520 )     (53,276 )     (18,903 )     (72,179 )
 
                                                                         
Income from unconsolidated entities
    (12,974 )           (12,974 )       36,316             36,316       22,432             22,432  
 
                                                                         
Other non-operating income (loss)
    (98,929 )           (98,929 )       2,338             2,338       28,807             28,807  
 
                                                                         
Gains, net of disposition costs
          644,868       644,868               597,572       597,572             521,934       521,934  
 
                                                       
Net earnings
  $ (344,316 )   $ 707,015     $ 362,699       $ 148,269     $ 686,806     $ 835,075     $ 112,609     $ 588,895     $ 701,504  
 
                                                       

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Quantitative Summary
     This summary is provided for reference purposes and is intended to support and be read in conjunction with the narrative discussion of our results of operations. This quantitative summary includes all operating activities, including those classified as discontinued operations for GAAP reporting purposes. This information is presented to correspond with the manner in which we analyze the business. We have historically reinvested disposition proceeds into new developments and operating communities and therefore believe it is most useful to analyze continuing and discontinued operations on a combined basis. The impact of communities classified as “discontinued operations” for GAAP reporting purposes is discussed separately in a later section under the caption “Discontinued Operations Analysis.”
                                           
    Combined                                
    Successor and                       2007 vs. 2006     2006 vs. 2005  
    Predecessor       Predecessor     Increase /     Increase /  
    2007       2006     2005     (Decrease)     (Decrease)  
Rental revenues:
                                         
Same-Store (1)
  $ 435,286       $ 413,989     $ 387,213     $ 21,297     $ 26,776  
Non Same-Store
    647,952         714,758       588,857       (66,806 )     125,901  
Ameriton
    9,921         20,869       33,986       (10,948 )     (13,117 )
International
    43,660         34,920             8,740       34,920  
Non-multifamily
    8,056         11,097       7,353       (3,041 )     3,744  
 
                               
Total revenues
    1,144,875         1,195,633       1,017,409       (50,758 )     178,224  
 
                               
 
                                         
Property operating expenses (rental expenses and real estate taxes):
                                         
Same-Store (1)
    139,713         130,545       124,545       9,168       6,000  
Non Same-Store
    216,165         243,721       214,394       (27,556 )     29,327  
Incremental operating expenses related to the Merger (2)
    4,975                     4,975        
Ameriton
    4,963         10,619       17,038       (5,656 )     (6,419 )
International
    21,625         16,225             5,400       16,225  
Non-multifamily
    787         3,254       1,992       (2,467 )     1,262  
 
                               
 
                                         
Total operating expenses
    388,228         404,364       357,969       (16,136 )     46,395  
 
                               
 
                                         
Net Operating Income (rental revenues less property operating expenses)
    756,647         791,269       659,440       (34,622 )     131,829  
 
                                         
Margin (NOI/rental revenues):
    66.1 %       66.2 %     64.8 %     (0.1 %)     1.4 %
Average occupancy during period: (3)
    92.4 %       93.9 %     94.6 %     (1.5 %)     (0.7 %)
 
                                         
Other income
    87,325         77,410       56,030       9,915       21,380  
Depreciation of real estate investments
    382,356         288,296       238,788       94,060       49,508  
Interest expense
    533,679         327,634       256,679       206,045       70,955  
Capitalized interest
    38,375         51,808       39,111       (13,433 )     12,697  
 
                               
Net interest expense
    495,304         275,826       217,568       219,478       58,258  
General and administrative expenses
    84,765         68,188       58,604       16,577       9,584  
Other expense
    51,813         37,520       72,179       14,293       (34,659 )
 
                               
Earnings from continuing and discontinued operations
    (170,266 )       198,849       128,331       (369,115 )     70,518  
 
                               
 
                                         
Equity in earnings from unconsolidated entities
    (12,974 )       36,316       22,432       (49,290 )     13,884  
Other non-operating income (loss)
    (98,929 )       2,338       28,807       (101,267 )     (26,469 )
Gains on disposition of real estate investments, net of disposition costs:
                                         
Taxable subsidiaries
    16,891         51,245       75,248       (34,354 )     (24,003 )
Non-taxable transactions
    627,977         546,327       446,686       81,650       99,641  
 
                               
 
                                         
Net earnings
  $ 362,699       $ 835,075     $ 701,504     $ (472,376 )   $ 133,571  
 
                               

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(1)   Reflects revenues and operating expenses for Same-Store communities that were owned on December 31, 2007 and fully operating during all three years in the comparison period.
 
(2)   Reflects incremental real estate taxes triggered by revaluations stemming from the Merger and the amortization of an intangible related to below market ground leases.
 
(3)   Does not include occupancy associated with properties owned by Ameriton, operated under the Oakwood Master Leases or International.
Property-level operating results — 2007 compared to 2006
     We utilize NOI as the primary measure to evaluate the performance of our operating communities and for purposes of making decisions about resource allocations and assessing segment performance. We also believe NOI is a valuable means of comparing period-to-period property performance. In analyzing the performance of our operating portfolio, we evaluate Same-Store communities separately from Non Same-Store communities and other properties.
Same-Store Analysis
     The following table reflects revenue, expense and NOI growth in 2007 as compared to 2006 for Same-Store communities that were owned on December 31, 2007 and fully operating during all three years.
                         
    Same-Store   Same-Store    
    Revenue   Expense   Same-Store
    Growth   Growth   NOI Growth
Garden
    5.6 %     6.6 %     5.1 %
High-Rise
    4.8 %     7.3 %     3.5 %
 
                       
Total
    5.1 %     7.0. %     4.3 %
 
                       
     Same-Store revenues were up 5.1% in 2007 as compared to 2006 due primarily to an increase in average rental revenue per unit partially offset by a reduction in the occupancy rate. Same-Store expenses were up 7.0% for the comparison period, primarily due to higher real estate taxes and increased personnel costs. These changes in revenues and expenses resulted in an increase in Same-Store NOI of 4.3% driven principally by strong revenue growth in Seattle, Southern California, the New York City Metropolitan Area and the San Francisco Bay Area, which collectively represented 49.3% of the company’s portfolio at December 31, 2007.
Non Same-Store and Other Analysis
     The $39.3 million decrease in NOI in the Non Same-Store portfolio for the 2007 as compared to 2006 is primarily attributable to a $98.2 million decrease related to community dispositions and a $29.5 million decrease due to assets sold to affiliated entities at the date of the Merger. These decreases were offset by a $48.6 million increase related to acquisitions, a $23.7 million increase related to recently stabilized development communities and communities in lease-up, a $16.2 million increase due to the Oakwood Master Leases and ground lease revenue on three new ground leases and other non same-store assets. The $5.0 million in incremental operating expenses related to the Merger reflects real estate taxes triggered by revaluations stemming from the Merger and the amortization of an intangible related to below-market ground leases.
Ameriton
     The decrease in NOI from Ameriton apartment communities in 2007 as compared to 2006 is primarily attributable to dispositions. Ameriton was liquidated in connection with the Mergers which also contributed to the decrease.

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International
     NOI from International operations for 2007 increased $3.3 million as compared to 2006 due primarily to the DeWAG acquisition that occurred in July 2006. The increase was partially offset by a decrease related to the contribution of the majority of our international operations to the International Fund on June 29, 2007 at which date the results of operations from the International Fund are included in income from unconsolidated entities rather than NOI since we do not control this entity.
Property-level operating results — 2006 compared to 2005
Same-Store Analysis
     The following table reflects revenue, expense and NOI growth in 2006 as compared to 2005 for Same-Store communities that were owned on December 31, 2007 and fully operating during all three years.
                         
    Same-Store   Same-Store    
    Revenue   Expense   Same-Store
    Growth   Growth   NOI Growth
Garden
    7.6 %     6.8 %     8.0 %
High-Rise
    6.3 %     3.3 %     7.8 %
 
                       
Total
    6.9 %     4.8 %     7.9 %
 
                       
     Same-Store revenues were up 6.9% in 2006 as compared to 2005 due primarily to an increase in average rental revenue per unit. Same-Store expenses were up 4.8% for the comparison period, primarily due to higher insurance costs, real estate taxes and personnel costs. These changes in revenues and expenses resulted in an increase in Same-Store NOI of 7.9% driven principally by strong growth in the Washington, D.C. metropolitan area, Southern California and the New York City metropolitan area which represented approximately 72% of the Company’s portfolio at December 31, 2006.
Non Same-Store and Other Analysis
     The $96.6 million NOI increase in the non Same-Store portfolio for 2006 as compared to 2005 is primarily attributable to (i) $86.6 million related to acquisitions; (ii) $15.6 million related to newly developed apartment communities, including Lease-Ups; (iii) $33.3 million related to the Oakwood Master Leases; and offset by (iv) $39.2 million related to community dispositions.
Ameriton
     The $6.7 million NOI decrease from Ameriton apartment communities for 2006 as compared to 2005 is primarily attributable to a $10.3 million decline related to community dispositions, including the sale of new developments, partially offset by $3.5 million increase from community acquisitions.
International
     The increase in NOI from International operations of $18.7 million for 2006 as compared to 2005 is primarily attributable to the DeWAG acquisition that occurred in July 2006.
Non Multi-family
     The $2.5 million NOI increase from non-multifamily assets for 2006 as compared to 2005 is primarily attributable to commercial/retail income associated with an asset purchased by Ameriton in July 2005.
Other Income
     Other income was higher in 2007 as compared to 2006 due to a $32.4 million increase in interest income due to increased restricted cash balances resulting from our recent Merger and a $9.6 million management fee

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increase from the German management company. This increase is offset by $22.4 million decrease related to higher 2006 gains on land sales and a $10.9 million decrease in insurance recoveries.
     The increase in other income during 2006 as compared to 2005 resulted primarily from a $19.0 million increase in interest income on mortgage loans to third parties and other interest bearing instruments and a $19.6 million increase in gains on land sales, primarily in Ameriton. These increases were offset by a $21.9 million decrease in 2006 related to insurance recoveries.
Depreciation Expense
     In 2007, the increase in depreciation expense is primarily attributable to the fair market value adjustment which increased the basis of our real estate and the amortization of in place lease intangible values established in connection with the Merger.
     In 2006, the depreciation increase was primarily related to the increase in the size of the real estate portfolio. A few of the major drivers are amortization of the value associated with in-place leases over the lease term on our new acquisitions; disposition of assets with a lower depreciable basis at significant gains, and reinvestment of the proceeds into assets with a higher depreciable basis partially offset by cessation of depreciation on assets sold or classified as held for sale.
Interest Expense
     Gross interest expense increased in 2007 as compared to 2006 due to a substantial increase in borrowings related to our recent Merger, interest charges related to our international operations that began material operations in July 2006 and higher borrowings on our lines of credit which carry a higher effective interest rate as compared to our long-term debt and mortgages. These increases were partially offset by the impact of the deconsolidation of the majority of our international operations as of July 1, 2007. Capitalized interest decreased in 2007 primarily as a result of the distribution of most of our communities under development to affiliated entities in connection with the Merger transactions.
     The increase in gross interest expense during 2006 as compared to 2005 is due to higher average debt levels associated with the increased size of the real estate portfolio combined with higher average interest rates on our unsecured credit facilities and other debt instruments. The International transactions were the most significant drivers of the portfolio increase in 2006. Capitalized interest also increased significantly as a result of the increase in the size and number of communities under construction and, to a lesser extent, higher average interest rates in 2006.
General and Administrative Expenses
     General and administrative expenses were higher in 2007 as compared to 2006 due primarily to higher personnel-related costs associated with our international expansion that began material operations in July 2006 and higher payroll-related costs and professional fees. Our post-Merger expenses were also higher due to certain bonuses paid in lieu of equity awards which would have otherwise been issued under Archstone-Smith’s long-term incentive plan and amortized over three years.
     The increase in the general and administrative expenses during 2006 as compared to 2005 is principally due to higher personnel-related costs related to our International expansion.
Other Expenses
     Other expense in 2007 was higher as compared to 2006 due principally a $17.6 million charge for transaction costs related to the Merger and a $17.1 million increase in impairment charges. The 2007 impairment charge related primarily to a community in New York which will require significant renovation due to a water intrusion issue. These costs were offset by $20.7 million in lower income tax expense related to Ameriton dispositions.

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     The decrease in other expenses during 2006 as compared to 2005 is primarily attributable to a $14.3 million decrease in early debt extinguishment costs; an $8.5 million decrease in legal expenses; a $1.5 million decrease in taxes in our taxable REIT subsidiaries; a $7.8 million decrease in hurricane related charges; a $2.8 million writeoff of a loan to a prior affiliate in 2005; and a $1.5 million impairment related to a non-core asset in 2005 offset by a $4.3 million impairment charge on that asset in 2006.
Equity in Income from Unconsolidated Entities
     Earnings from unconsolidated entities were lower in 2007 as compared to 2006 primarily due to a $29.2 million decrease in gains on the sale of joint venture assets and losses on the International Fund due primarily to the initial formation costs. In addition, the majority of our domestic joint ventures were sold or distributed to affiliated entities in connection with the Merger.
     The increase in income from unconsolidated entities during 2006 as compared to 2005 is due primarily to more income from community dispositions and related venture liquidations.
Other Non-Operating Income (Loss)
     In 2007, we had a non-operating loss compared to non-operating income in 2006, due to a $131.0 million unrealized loss on our interest rate swaps which were not designated as hedges for accounting purposes by the Successor entity. These derivative losses were partially offset by foreign currency gains on our international investments and gains recognized on the sale of International Fund shares.
     Other non-operating income during 2006 consists primarily of a $1.7 million of gain from the sale of our Rent.com investment which was recorded upon the resolution of certain contingencies.
Gains on real estate dispositions
     See “Discontinued Operations Analysis” below for discussion of gains.
Discontinued Operations Analysis
     Included in the overall results discussed above are the following amounts associated with properties which have been sold or were classified as held for sale as of December 31, 2007 (dollars in thousands).
                                   
    Successor       Predecessor  
    Period from       Period from        
    October 5, 2007       January 1, 2007        
    through       through     Year Ended  
    December 31,       October 4,     December 31,  
    2007       2007     2006     2005  
Rental revenue
  $ 10,795       $ 275,973     $ 513,218     $ 559,584  
Rental expenses
    (1,719 )       (66,326 )     (129,685 )     (150,604 )
Real estate taxes
    (904 )       (23,216 )     (48,857 )     (58,725 )
Depreciation on real estate investments
    (3,171 )       (49,862 )     (111,032 )     (122,791 )
Interest expense(1)
    (10,118 )       (62,949 )     (114,595 )     (141,600 )
Income taxes from taxable REIT subsidiaries
            (1,126 )     (5,982 )     (11,556 )
 
                                 
Provision for possible loss on real estate investment
                  (4,328 )     (1,500 )
Debt extinguishment costs related to dispositions
    (2,694 )       (2,536 )     (9,505 )     (5,847 )
Gain from the disposition of REIT real estate investments, net
            629,444       548,187       448,358  
Internal Disposition Costs — REIT transactions
            (1,462 )     (1,860 )     (1,672 )
Gain from the dispositions of taxable REIT subsidiary real estate investments, net
    (5 )       17,769       54,728       76,326  
 
                                 
Internal Disposition Costs — Taxable REIT subsidiary transactions
            (878 )     (3,483 )     (1,078 )
 
                         
Total discontinued operations
  $ (7,816 )     $ 714,831     $ 686,806     $ 588,895  
 
                         

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(1)   Interest expense included in discontinued operations is allocated to properties based on each asset’s cost in relation to the company’s leverage ratio and the average effective interest rate for each respective period.
     As a result of the execution of our strategy of managing our invested capital through the selective sale of apartment communities in non-core locations and redeploying the proceeds to fund investments with higher anticipated growth prospects in our core markets, we had significant disposition activity in all three years. The resulting gains, net of disposition costs, were the biggest driver of overall earnings from discontinued operations. The relative level of gains in each year were primarily attributable to the volume of disposition activity. Revenues and expense levels related to communities sold or classified as held-for-sale are primarily dependent on the number of communities meeting the held-for-sale criteria and the period of time they were owned. Prior to the Merger, income taxes fluctuated in relation to the taxable gains associated with communities sold by our taxable REIT subsidiaries.
Preferred Unit Distribution Analysis
     Preferred Unit distributions were lower in 2007 as compared to 2006 as no distributions have been declared or paid since the second quarter of 2007. Preferred Unit distributions were lower in 2006 as compared to 2005 due to redemptions during 2005.
Liquidity and Capital Resources
     We generally finance a portion of our long-term investing and operating activities with long-term debt. In connection with the recent Merger, we paid off most of our pre-Merger debt and entered into several new loans and credit agreements to finance a significant portion of the transaction. Our leverage ratio after the Merger is significantly higher and interest rates on the new credit facilities are generally higher than those of the Predecessor entity. As a result of the cash flow generated by our operations, the available capacity under our credit facilities and term loans, available cash balances, draws on our interest reserve, expected proceeds from the planned disposition of real estate or from joint venture formations and our anticipated ability to secure additional financing, we believe our liquidity and financial condition are sufficient to meet all of our reasonably anticipated cash flow needs during the next 12 months. Please refer to the Consolidated Statement of Cash Flows for detailed information of our sources and uses of cash for 2007, 2006 and 2005. The 2007 cash flow statement combines pre and post Merger information.
Scheduled Debt Maturities and Interest Payment Requirements
     On October 5, 2007 we borrowed approximately $13.8 billion under various credit facilities with third party lenders to, among other things, finance a portion of the cost of the Merger and refinance a portion of our existing indebtedness. As of December 31, 2007 we had total outstanding debt of $13.9 billion with a weighted average nominal interest rate of 6.94%. As of March 20, 2008 we had $14.0 billion of total outstanding debt with a weighted average nominal interest rate of 6.12 %.
Master Credit Facility
     Our Master Credit Facility was entered into on October 5, 2007 as subsequently amended or restated from time to time thereafter. The amendments, among other things, increased the amount of Tranche B Term Loans (see further detail below) available under the Master Credit Facility. The Master Credit Facility provides a $750 million revolving credit facility, which includes a $75 million swing line and a letter of credit commitment with a maximum of $425 million for the first year, which decreases thereafter. The revolving credit facility bears interest at (a) 2.0% plus the greater of (i) the prime rate or (ii) the federal funds rate plus 0.50% or, at our option, (b) LIBOR plus 3.00%, and has a maturity date of October 5, 2011. The swing line bears interest at the same rate as the revolving credit facility. The Master Credit Facility also includes a $1.75 billion term loan (“Tranche A Term Loan”) maturing on October 5, 2011, bearing interest at (a) 2.0% plus the greater of (i) the prime rate or (ii) the federal funds rate plus 0.50% or, at our option, (b) LIBOR plus 3.00%, and a $3.0 billion term loan (“Tranche B Term Loan”) maturing on October 5, 2012, bearing interest at (a) 2.25% plus the greater of (i) the prime rate or (ii) the federal funds rate plus 0.50% or, at our option, (b) LIBOR plus 3.25%. All interest rates are subject to a 1.0% increase if the combined leverage ratio,

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tangible net worth test and, on or prior to December 31, 2008, the consolidated debt service coverage ratio covenants are not satisfied as provided in the agreement. The Tranche A Term Loan is payable in four annual installments, beginning on October 5, 2008. The lenders under our Master Credit Facility and our mezzanine loans provided by the Fannie Mae Mezzanine Lenders and the Freddie Mac Mezzanine Lenders have the option to syndicate or sell the outstanding principal amount under such agreements to other investors at a discount and may revise the interest rate spread or discount or increase fees to a level necessary to facilitate syndication based on current market conditions at the syndication date. As of December 31, 2007, $5.6 billion in outstanding principal indebtedness under these loans was subject to syndication and the increased borrowing costs described above. The cost associated with any incremental interest or additional fees, as well as any original issue discount realized, is required to be born by the Company. These same lenders have committed to lend us up to $148.8 million to fund such costs, at any time prior to December 31, 2008. As of March 20, 2008, we had approximately $73.0 million set aside in restricted cash to fund syndication discounts. As of March 20, 2008, $43.0 million of principal had been syndicated at a discount of 3%.
     The Master Credit Facility also provides that, if certain conditions are satisfied, the Company may request up to an aggregate principal amount of $242.5 million of new term loans, which may be used for syndication costs, working capital, including refinancing revolving loans, and which otherwise have substantially the same terms as the Tranche B Term Loan. The lenders under the Master Credit Facility have committed to lend us up to $242.5 million of such new term loans, $148.8 million of which may be used for syndication costs as described above and the remaining $93.7 million of which may be used to pay additional transaction costs and other miscellaneous costs and expenses. Nothing was drawn on the incremental facility at December 31, 2007. Further, if certain conditions are satisfied, the Company may request up to an aggregate principal amount of $250 million increase in the revolving credit facility, provided that the total revolving credit commitments may not exceed $1.0 billion at any time.
     The Master Credit Facility loans are prepayable by us in whole or in part without penalty. The following amounts are required to be applied to prepay the Master Credit Facility loans, subject to certain carve-outs: (i) 100% of net cash proceeds from the sale or issuance of certain equity or incurrence of certain indebtedness, (ii) 100% of net cash proceeds from any sale or other disposition of any assets yielding gross proceeds in excess of $500,000 in any fiscal year, subject to certain exceptions after $500,000,000 of net cash proceeds have been applied to prepay the Tranche A Term Loan, including capacity for reinvestment of an amount not exceeding 50% of such net cash proceeds and (iii) 100% of excess cash flow for each fiscal year. After the Tranche A Term Loan has been repaid in full, if the combined leverage ratio is less than or equal to 60% and the consolidated debt service coverage ratio is greater than or equal to 1.25 to 1.00, then the foregoing percentages shall be reduced from 100% to 25%. Subject to certain exceptions, all such amounts shall be applied first, to the Tranche A Term Loan, second, to the Tranche B Term Loan and third, to the Revolving Loans and, the replacement or cash collateralization of outstanding letters of credit.
     In addition to the mandatory prepayments described above, if at the end of any fiscal quarter, the leverage ratio is greater than the ratio required by the Master Credit Facility, the tangible net worth test is less than the amount required by the Master Credit Facility or, on or prior to December 31, 2008, the consolidated debt service coverage ratio is less than the ratio required by the Master Credit Facility, then the Company is generally required to cause the Master Credit Facility loans to be prepaid by an amount necessary to cause the combined leverage ratio, tangible net worth test and consolidated debt service coverage ratio to be in compliance on or prior to the later of January 1, 2009 and the last day of the fiscal quarter ending immediately after the initial fiscal quarter. All such mandatory prepayments may be made with the net cash proceeds of any sale or other disposition of assets or the sale or issuance of certain equity. Although failure to comply with the leverage ratio, tangible net worth test or, on or prior to December 31, 2008, consolidated debt service coverage ratio generally is not an event of default until the later of January 1, 2009 and the last day of the fiscal quarter ending immediately after the initial fiscal quarter as described above, until such time as the Company is in compliance with the combined leverage ratio, tangible net worth test, and consolidated debt service coverage ratio (i) the Company would not be permitted to incur certain types of indebtedness, make certain investments (other than those investments committed to be made prior to such failure) or pay certain dividends and (ii) the applicable margin with respect to the Master Credit Facility loans will increase by 1.00%.
     Loans under the Master Credit Facility are secured, subject to permitted liens and other agreed upon exceptions, by substantially all of our owned assets, including (i) all of our properties other than those properties which are prohibited from being pledged as collateral pursuant to our and our subsidiaries existing contractual obligations, as well as any real property acquired by us or our subsidiaries in the future that is valued at $5.0 million or more and (ii) all the ownership interests in our subsidiaries held by us. Further, we and various parent and subsidiary guarantors, including our trustee, entered into a guarantee and collateral agreement, whereby the guarantors guarantee our obligations under the Master Credit Facility and we guarantee the guarantors’ obligations under certain pledge agreements with the lenders and their affiliates contemplated by the Master Credit Facility. The guarantees are secured by pledges of each such entity’s personal property, including all ownership interests held by such entity.

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     The Master Credit Facility required the establishment of a funded interest reserve of $500 million to facilitate compliance with certain debt service coverage ratios. We anticipate that we will need to draw on such reserves during 2008 to maintain compliance with such ratios. As of December 31, 2007 the balance in this restricted cash account was $427.9 million.
     A summary of our Master Credit Facility Debt outstanding at December 31, 2007 is as follows (dollar amounts in thousands):
                         
            Successor        
            Balance at     Average  
    Nominal     December 31,     Remaining  
Type of Debt   Interest Rate(3)     2007     Life (Years)  
Term loans(1)(2)
    8.18 %   $ 4,591,822       4.42  
Revolving credit facility(2)
    7.95 %     60,000       3.76  
 
                 
Total/average
    8.18 %   $ 4,651,822       4.41  
 
                 
 
(1)   Includes Tranche A and Tranche B of the Master Credit Facility. The interest rates for both instruments are described above.
 
(2)   The interest rates for these instruments are described above.
 
(3)   The effective interest rates for the term loans and revolving credit facility are 8.42% and 28.31%, respectively, which includes the effect of loan cost amortization and other ongoing fees and expenses, where applicable. The effective interest rate on the revolving credit facility is high due primarily to the fees on the unfunded commitment. The higher the average outstanding drawn balance, the lower the effective interest.
Property Mortgages
     In connection with the Merger, we entered into a $7.1 billion credit facility (“Fannie Facility”) provided by Fannie Mae, which is secured by 105 of our properties. This facility is divided into 9 loan pools. Pools 1 through 3, totaling $2.5 billion at issuance, mature on November 1, 2017 and bear interest at 6.256%. Pool 4, totaling $963.5 million at issuance, matures on November 1, 2014, and bears interest at 5.883%. Pools 5 through 7, totaling $2.3 billion at issuance, matures on November 1, 2012 and bears interest at 6.193%. Pools 8 and 9, totaling $1.3 billion at issuance, matures on November 1, 2009 and bears interest at LIBOR plus 1.265%. The variable rate loans are prepayable without penalty after October 31, 2008. Fixed rate loans are subject to a prepayment premium equal to the greater of 1% of the principal being repaid or a market rate present value determined in accordance with the loan’s terms. In addition to the Fannie Facility, the Fannie Mae Mezzanine Lenders have provided $768.9 million of mezzanine loans subordinate to each of the nine Fannie Facility pools. The interest rates on these mezzanine loans range from LIBOR plus 2.65% to LIBOR plus 2.85%. The Fannie Mae Mezzanine Lenders have the option to syndicate or sell the debt to other investors at a discount and may revise the interest rate spread or discount or fees to a level necessary to facilitate syndication based on current market as further described above.
     Also in connection with the Merger, we entered in to an $847 million facility (“Freddie Facility”) provided by the Federal Home Loan Mortgage Corporation (“Freddie Mac”), which is secured by 13 of our properties. This facility matures on November 1, 2012 and bears interest at LIBOR plus 1.025%. The Freddie Facility is subject to a prepayment premium of 1% of the principal amount being repaid. In addition to the Freddie Facility, Freddie Mac Mezzanine Lenders, have provided $135.4 million of mezzanine loans subordinate to the Freddie Facility. The interest rate on the mezzanine loans is LIBOR plus 3.00%. The Freddie Mac Mezzanine Lenders have the option to syndicate or sell the debt to other investors at a discount and may revise the interest rate spread or discount or fees to a level necessary to facilitate syndication based on current market as further described above.
     In addition to the property mortgages originated in connection with the Merger, the Successor entity assumed $479.3 million in existing pre-Merger tax-exempt bonds and mortgages.

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Covenants
     Our debt instruments are generally secured by real estate and other tangible assets and contain covenants common to the type of facility or borrowing, including financial covenants establishing minimum debt service coverage and tangible net worth ratios and maximum leverage ratios. The covenant limits under certain of our credit facilities become more restrictive beginning in 2009. We were in compliance with all required financial ratios pertaining to our debt instruments as of December 31, 2007. In addition to financial and other negative covenants certain of our debt facilities contain restrictions on our operations, including our ability to make capital expenditures over certain amounts and our ability to make distributions or voluntarily redeem or prepay any of our outstanding Preferred Units. While we will endeavor to maintain compliance with all required financial ratios during 2008 and beyond, we face risks that could impact our ability to do so and some of these risks are beyond our direct control. See “Item 1A. Risk Factors” for further discussion of risks associated with our indebtedness and financing. In the event of non-compliance, we can not provide any assurance as to whether such violations would be waived or the effect non-compliance would have on us.
Unitholder Distribution Requirements
     From January 1, 2007 to September 30, 2007, we paid distributions of $230.8 million related to our Common and Preferred Units. There have been no distributions declared or paid on Common Units or Preferred Units subsequent to the October 5, 2007 Merger date. As of December 31, 2007, we had Preferred Units with a redemption value of approximately $285.9 million. These securities generally provide for a cumulative distribution. The undeclared and unaccrued distribution as of December 31, 2007 aggregated approximately $5.5 million.
     Each holder of a Series O Preferred Unit will have the right to exercise an immediate put right, including payment of any tax protection amount (as defined in our Declaration of Trust) with respect to the Series O Preferred Units being redeemed, if at any time prior to January 1, 2022, (1) our loan to value ratio is higher than 85% and we make a distribution to the holders of Common Units; or (2) we incur indebtedness in excess of $10 million in principal amount (excluding draws on our line of credit or refinancings of existing indebtedness) and after such borrowing our loan to value ratio is higher than 85% and we have made a distribution to our Common Units in contemplation of the incurrence of that indebtedness. During any period of time after we incur indebtedness in excess of $10 million in principal amount (excluding draws on our line of credit or refinancings of existing indebtedness) and as a result of which our loan to value ratio exceeds 85%, until such time as our loan to value ratio no longer exceed 85%, the distribution rate on our Series O Preferred Units shall increase from 6% per annum to 8% per annum.
Planned Investments
     Following is a summary of planned investments as of December 31, 2007, excluding joint ventures. 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 in accordance with contracts with general contractors.
                 
    Planned Investments  
    (in thousands)  
    Discretionary     Committed  
Communities under redevelopment
  $ 103,566     $  
Communities under construction
          24,975  
Communities In Planning and owned
    359,897        
Communities In Planning and Under Control
    117,452        
FHA/ADA settlement capital accrual
          10,883  
 
           
Total
  $ 580,915     $ 35,858  
 
           
     In addition to the planned investments noted above, we expect to make additional investments relating to planned expenditures on recently acquired communities as well as recurring expenditures to improve and maintain our established operating communities.
     We anticipate completion of most of the communities that are currently under construction and the planned operating community improvements by the end of 2008. No assurances can be given that planned developments will actually occur. In addition, actual costs incurred could be greater or less than our current estimates.

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Funding Sources
     We anticipate financing our planned investment and operating needs primarily with cash flow from operating activities, disposition proceeds, draws on interest reserves, joint venture or fund formations and borrowings under our credit facilities and term loans. On March 20, 2008, the revolver portion of our credit facilities had a drawn balance of $445.0 million and we had $163.7 million outstanding under letters of credit, leaving available borrowing capacity on the revolving portion of our Master Credit Facility of $141.3 million. In addition, as of March 20, 2008, we had unfunded term loan commitments of $242.5 million. In addition, we expect the proceeds from dispositions to exceed our investment in new operating community acquisitions in 2008 because net proceeds from dispositions are expected to be utilized to repay debt and fund other cash needs. We therefore believe that the dispositions proceeds related to discontinued operations will have a favorable impact on our liquidity in the foreseeable future.
Litigation and Contingencies
Shareholder Litigation
     On May 30, 2007, two separate purported shareholder class-action lawsuits related to the Merger Agreement and the transactions contemplated thereby were filed naming Archstone-Smith and each of Archstone-Smith’s trustees as defendants. One of these lawsuits, Seymour Schiff v. James A. Cardwell, et al. (Case No. 2007cv1135), was filed in the United States District Court for the District of Colorado. The other, Mortimer J. Cohen v. Archstone-Smith Trust, et al. (Case No. 2007cv1060), was filed in the District Court, County of Arapahoe, Colorado. On May 31, 2007, two additional purported shareholder class-action lawsuits related to the Merger Agreement and the transactions contemplated thereby were filed in the District Court, County of Arapahoe, Colorado. The first, Howard Lasker v. R. Scot Sellers, et al. (Case No. 2007cv1073), names Archstone-Smith, each of Archstone-Smith’s trustees and one of Archstone-Smith’s senior officers as defendants. The second, Steamship Trade Association/International Longshoremen’s Association Pension Fund v. Archstone-Smith Trust, et al. (Case No. 2007cv1070), names Archstone-Smith, each of Archstone-Smith’s trustees, Tishman Speyer and Lehman Brothers as defendants. On June 11, 2007, an additional purported shareholder class-action lawsuit related to the Merger Agreement, Doris Staehr v. Archstone-Smith Trust, et al. (Case No. 2007cv1081), was filed in the District Court, County of Arapahoe, Colorado, naming Archstone-Smith and each of Archstone-Smith’s trustees as defendants. All five lawsuits allege, among other things, that Archstone-Smith’s trustees violated their fiduciary duties to Archstone-Smith’s shareholders in approving the Mergers.
     On June 21, 2007, the District Court, County of Arapahoe, Colorado entered an order consolidating the Lasker, Steamship Trade Association/International Longshoremen’s Association Pension Fund and Staehr actions into the Cohen action, under the caption In re Archstone-Smith Trust Shareholder Litigation.
     On August 17, 2007, Archstone-Smith and the other defendants entered into a memorandum of understanding with the plaintiffs regarding the settlement of both the Schiff and the consolidated action captioned In re Archstone-Smith Trust Shareholder Litigation. In connection with the settlement, Archstone-Smith agreed to make certain additional disclosures to its shareholders. Subject to the completion of certain confirmatory discovery by counsel to the plaintiffs, the memorandum of understanding contemplates that the parties will enter into a stipulation of settlement. The stipulation of settlement will be subject to customary conditions, including court approval following notice to Archstone-Smith’s shareholders and consummation of the Merger. In the event that the parties enter into a stipulation of settlement, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement, which, if finally approved by the court, will resolve all of the claims that were or could have been brought in the actions being settled, including all claims relating to the Merger, the Merger Agreement and any disclosure made in connection therewith. In addition, in connection with the settlement, the parties contemplate that plaintiffs’ counsel will petition the court for an award of attorneys’ fees and expenses to be paid by us, up to $1.0 million. There can be no assurance that the parties will ultimately enter into a stipulation of settlement or that the court will approve the settlement even if the parties were to enter into such stipulation. In such event, the proposed settlement as contemplated by the memorandum of understanding may be terminated. The settlement will not affect the amount of the Merger consideration that the plaintiffs are entitled to receive in the Merger. Archstone-Smith and the other defendants vigorously deny all liability with respect to the facts and claims alleged in the lawsuits, and specifically deny that any modifications to the Merger Agreement or any further supplemental disclosure was required under any applicable rule, statute, regulation or law. However, to avoid the

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risk of delaying or adversely affecting the Merger and the related transactions, to minimize the expense of defending the lawsuits, and to provide additional information to Archstone-Smith shareholders at a time and in a manner that would not cause any delay of the Merger, Archstone-Smith and the Archstone-Smith Trustees agreed to the settlement described above. Archstone-Smith and the other defendants further considered it desirable that the actions be settled to avoid the substantial burden, expense, risk, inconvenience and distraction of continued litigation and to fully and finally resolve the settled claims.
Clinton Green
     The Clinton Green project is a mixed-use apartment, condominium, and retail complex in New York City on 10th Avenue between 51st and 53rd Streets. The Clinton Green Project is owned by Clinton Green Holdings, LLC (“CG Holdings”), a joint venture consisting of our wholly-owned indirect subsidiary (“ASN-CG Member”) and an affiliate of The Dermot Company (“Dermot Member”). The Clinton Green Project also includes a small condominium component that is separately owned by Clinton Green Condo, LLC (“CG Condo”), a joint venture of the ASN-CG Member and the Dermot Member. In addition to other investments in CG Holdings and CG Condo, we provided a letter of credit under our pre-Merger Credit Facility to support tax-exempt bonds issued to finance the CG Project.
     On September 21, 2007, the Dermot Member filed a lawsuit captioned Clinton Green Holdings, LLC and DPIC Clinton Green, LLC v. Archstone-Smith Operating Trust, ASN Clinton Green Member, LLC, and Ameriton Properties Incorporated, Index No. 07/603154, Supreme Court of the State of New York, County of New York. The Dermot Member alleges (a) that the Merger caused a breach of the CG Holdings Operating Agreement because the transfer violated certain covenants in the Pre-Merger Credit Facility and also breached a provision of the CG Holdings Operating Agreement prohibiting a change of control of ASN-CG Member, (b) that the Merger caused a breach of a Put-Call Agreement under which the Dermot Member is entitled to be bought out of CG Holdings by ASN-CG Member through a tax-free contribution to us for an interest that could be converted into Archstone-Smith’s publicly traded stock and (c) that the Merger caused a breach of the CG Condo Operating Agreement as a result of a change in control of Ameriton. The Dermot Member is seeking unspecified damages as well as the ability to have CG Holdings dissolved.
     Prior to the Merger, the ASN-CG Member reached agreement with the Dermot Member and the lenders under the Pre-Merger Credit Facility to waive any breach of covenants for a period of six months. The agreement involved certain immaterial payments and concessions to the Dermot Member. The Dermot Member has also agreed to an extension of the date by which the Archstone defendants must respond to the Complaint until April 30, 2008.
Tax Protection Agreements and Unitholder Claims
     Prior to the Mergers, Archstone and several related parties had entered into tax protection agreements and other contracts with various holders of the A-1 Common Units. Those tax protection and related agreements provided such Unitholders, among other things, with the right to tax protection payments under specified circumstances detailed in such agreements. Archstone has received various tax claim notices and other communications from various former Unitholders asserting that those former Unitholders are owed tax protection payments and alleging a variety of other claims. Other former Unitholders may assert similar or additional claims in the future. The tax protection agreements generally provide that, after a Unitholder sends a tax claim notice to Archstone, Archstone may reject such claims (as it has with respect to tax claim notices sent to date). Following such rejection, unless the parties are able to negotiate an amicable resolution, the parties are generally required to submit to arbitration with respect to claims for tax protection payments. It is expected that arbitrations will be commenced in the future.
     In addition, on November 30, 2007, a purported class action lawsuit related to the Mergers, captioned Steven A. Stender and Infinity Clark Street Operating v. James A. Cardwell, et al. (Case no. 2007cv2503), was filed in the United States District Court for the District of Colorado. The lawsuit names, among others, Archstone, Archstone-Smith, certain of their former trustees and officers, Lehman Brothers Holdings Inc. and Tishman Speyer Development Corporation as defendants. This action was brought by certain former Unitholders, individually and purportedly on behalf of all former holders of A-1 Common Units as of the Mergers, and alleges, among other things: (i) that Archstone and Archstone-Smith entered into enforceable property contribution agreements and

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partnership agreements with such Unitholders; (ii) that Archstone and Archstone-Smith agreed not to enter into any transactions or dispose of any interest in the property contributed by such Unitholders that would result in such Unitholders realizing a taxable gain, and agreed to provide such Unitholders with the ability to receive dividends and also to liquidate their units by receiving cash or converting them to common shares in the publicly traded Archstone-Smith; (iii) that Archstone and Archstone-Smith failed to perform their duties under the Declaration of Trust, contribution and partnership agreements, and statutory and common law partnership principles in connection with the Mergers; (iv) that such failures discharge such Unitholders’ obligations to defendants (as noted above, the former Unitholders undertook certain obligations to arbitrate with respect to claimed rights to tax protection payments); and (v) that Archstone-Smith and former trustees and officers, aided and abetted by Lehman Brothers and Tishman Speyer, violated their fiduciary duties owed to such Unitholders in connection with the Mergers. The purported class action seeks an unspecified amount of damages. Although Archstone and the Venture believe that the claims that have been asserted are without merit, there can be no assurance that the disposition of such claims will not result in material liability to Archstone.
FHA/ADA
     During the second quarter of 2005, we entered into a full and final settlement in the United States District Court for the District of Maryland with three national disability organizations and agreed to make capital improvements in a number of our communities in order to make them fully compliant with the FHA and ADA. The litigation, settled by this agreement, alleged lack of full compliance with certain design and construction requirements under the two federal statutes at 71 of our wholly-owned and joint venture communities, of which we or our affiliates still own or have an interest in 18. As part of the settlement, the three disability organizations all recognized that Archstone had no intention to build any of its communities in a manner inconsistent with the FHA or ADA.
     The amount of the capital expenditures required to remediate the communities named in the settlement was estimated at $47.2 million and was accrued as an addition to real estate during the fourth quarter of 2005. The settlement agreement approved by the court allows us to remediate each of the designated communities over a three-year period, and also provides that we are not restricted from selling any of our communities during the remediation period. We agreed to pay damages totaling $1.4 million, which included legal fees and costs incurred by the plaintiffs. We had $10.9 million of the original accrual remaining on December 31, 2007.
Water Intrusion-Florida
     We are subject to various claims filed in 2002 and 2003 in connection with moisture infiltration and resulting mold issues at certain High-Rise properties we once owned in Southeast Florida. These claims generally allege that water infiltration and resulting mold contamination resulted in the claimants having personal injuries and/or property damage. Although certain of these claims continue to be in various stages of litigation, with respect to the majority of these claims, we have either settled the claims and/or we have been dismissed from the lawsuits that had been filed. With respect to the lawsuits that have not been resolved, we continue to defend these claims in the normal course of litigation.
Water Intrusion — Westbury
     In November, 2007, we began notifying residents of Archstone Westbury that, due to water intrusion and some related mold growth, we had concluded that the appropriate course of action was to perform necessary remediation and reconstruction at the community. Further, we determined it would be necessary to terminate every tenant’s lease, effective March 31, 2008, to ensure the safety of tenants during the potentially year-long construction project. As a consequence, four complaints were filed by tenants at Westbury against entities related to us and various other entities allegedly involved in the design, construction and ownership of the Project. These cases are Andrea Sorrentino, et al. v. ASN Roosevelt Center LLC d/b/a Archstone Westbury, et al., filed on November 28, 2007, in the Supreme Court of the State of New York, County of Nassau, Case No. 07-021135, removed on February 8, 2008 to U.S. Federal District Court for the Eastern District of New York; Richardo Francois v. ASN Roosevelt Center LLC D/B/A Archstone Westbury, filed on December 7, 2007, in the Supreme Court of the State of New York, County of Nassau, Case No. 07-021967; Pasquale Marchese, et al. v. ASN Roosevelt Center LLC, et al., filed on December 7, 2007, but not yet served on us; and John DiGiovanna and Farideh DiGiovanna vs. ASN

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Roosevelt Center LLC d/b/a Archstone Westbury, filed on January 7, 2008, in the Supreme Court of the State of New York, County of Nassau, Case No. 08-000347. In addition to the foregoing cases, there are a number of threatened lawsuits. Plaintiffs in the filed cases seek monetary damages and equitable relief alleging, among other things, that water damage and mold has caused the tenants at Westbury personal harm and property damage. Although no assurances can be given with respect to the outcome of these lawsuits, we intend to vigorously defend against the claims alleged in these lawsuits.
Other
     We are a 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 or litigation, individually or in the aggregate, will have a material adverse effect on our business, financial position or results of operations.
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:
Business Combinations
     From time to time, we are involved in transactions that are deemed to be business combinations. The purchase price for such allocations is allocated to the various components of the combination based on their respective fair value. The components typically include land, building, debt and other assumed liabilities and intangibles related to in-place leases, above and below market leases, technology, management agreements and non-compete agreements as well as other assets and liabilities. If the acquisition relates to multiple properties or entities, we must also allocate the purchase price among the acquired group. In the allocation of purchase price, management makes significant assumptions as it relates to expected future cash flows or replacement cost from which the fair value is derived. Subsequent adjustments made to the initial purchase price allocation are made within the allocation period, which typically does not exceed one year.
     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. Furthermore, decisions regarding when a property should be classified as held-for-sale under SFAS No. 144 requires significant management judgment. There are many phases to the disposition process ranging from the initial market research to being under contract with non-refundable earnest money to closing. Deciding when management is committed to selling an asset is therefore highly subjective.
     When determining if there is an indication of impairment for assets intended to be held and used, 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 estimated fair value of the asset.
     The apartment industry uses capitalization rates and NOI as the primary components to measure 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 many factors including the prevailing rate for the market or submarket, as well as the quality and location of the properties. 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.
     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. We allocate the cost of newly acquired properties between net tangible and identifiable intangible assets. The primary intangible asset associated with an apartment community acquisition is the value of the existing lease agreements. When allocating cost to an acquired property, we first allocate costs to the estimated intangible value of the existing lease agreements and then to the estimated value of the land, building and fixtures assuming the property is vacant. We estimate the intangible

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value of the lease agreements by determining the lost revenue associated with a hypothetical lease-up. We depreciate the building and fixtures based on the expected useful life of the asset and amortize the intangible value of the lease agreements over the average remaining life of the existing leases.
     Determining whether expenditures meet the criteria for capitalization, the assignment of depreciable lives and determining the appropriate amounts to allocate between tangible and intangible assets for property acquisitions requires our management to exercise significant judgment and is therefore considered a “critical accounting estimate.”
     Consolidation vs. Equity Method of Accounting for Ventures
     From time to time, we make co-investments in real estate ventures with third parties and are required to determine whether to consolidate or use the equity method of accounting for the venture. FASB Interpretation No. 46R, “ Consolidation of Variable Interest Entities,” (as revised) and Emerging Issues Task Force issued EITF No. 04-5, “ Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights,” are the two primary sources of accounting guidance in this area. Appropriate application of these relatively complex rules requires substantial management judgment, which we believe, makes the choice of the appropriate accounting method for these ventures a “critical accounting estimate.”
Off Balance Sheet Arrangements
     Our real estate investments in entities that do not qualify as variable interest entities, variable interest entities where we are not the primary beneficiary and entities we do not control through majority economic interest are not consolidated and are reported as investments in unconsolidated entities. Our investments in and advances to unconsolidated entities at December 31, 2007 aggregated $297.1 million. Please refer to Note 6 to the financial statements included in this report, Investments in and Advances to Unconsolidated Entities, for additional information.
     As part of the Smith Merger, the Oakwood transaction and other unit-related contributions of property to us, we are required to indemnify certain Unitholders for any personal income tax expense resulting from the sale of properties identified in tax protection agreements. We intend to minimize or eliminate exposure to tax protection payments under the terms of the indemnification agreements by holding and using these properties through the term of the indemnification period or disposing of assets through tax-deferred exchanges. The built in gain subject to tax protection is estimated to be approximately $350 million as of December 31, 2007.
Contractual Commitments
     The following table summarizes information contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in our audited financial statements in this Annual Report regarding contractual commitments as of December 31, 2007 (amounts in millions).
                                         
    Amount of Commitment Expiration Per Period  
            2009     2011     2013        
    2008     and 2010     and 2012     thru 2096     Total  
Scheduled debt maturities
  $ 331     $ 2,310     $ 6,948     $ 4,215     $ 13,804  
Revolving credit facilities
                60             60  
Interest on indebtedness
    978       1,768       1,521       268       4,535  
Development expenditures
    25                         25  
Performance bonds
    67       1             1       69  
FHA/ADA Settlement(1)
    11                         11  
Lease commitments and other(2)
    227       17       11       184       439  
 
                             
Total
  $ 1,639     $ 4,096     $ 8,540     $ 4,668     $ 18,943  
 
                             
 
(1)   Represents the estimated capital spending associated with the FHA and ADA settlement assuming the remainder will be spent evenly over the next year. Certain communities impacted by the settlement may be

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    sold, which could impact the ultimate timing and amounts spent.
 
(2)   Includes letters of credit and lease commitments relating principally to ground lease payments as of December 31, 2007.
New Accounting Pronouncements
     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. The statement does not require new fair value measurements, but is applied to the extent other accounting pronouncements require or permit fair value measurements. The statement emphasizes fair value as a market-based measurement which should be determined based on assumptions market participants would use in pricing an asset or liability. We will be required to disclose the extent to which fair value is used to measure assets and liabilities, the inputs used to develop the measurements, and the effect of certain of the measurements on earnings (or changes in net assets) for the period. SFAS No. 157 is effective for our fiscal year beginning January 1, 2008. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157” (“FSP FAS 157-2”), that delays the effective date of SFAS 157’s fair value measurement requirements for nonfinancial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis. Fair value measurements identified in FSP FAS 157-2 will be effective for our fiscal year beginning January 1, 2009. The adoption of SFAS 157 will primarily impact the valuation of our financial instruments, and is not expected to materially impact our financial position and results of operations.
     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” which gives entities the option to measure eligible financial assets, financial liabilities and firm commitments at fair value on an instrument-by-instrument basis (i.e., the fair value option), which are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability or upon entering into a firm commitment. Subsequent changes in fair value must be recorded in earnings. Additionally, SFAS No. 159 allows for a one-time election for existing positions upon adoption, with the transition adjustment recorded to beginning retained earnings. This statement is effective for fiscal years beginning after November 15, 2007. We do not anticipate the adoption of this statement will have a material impact on our financial position, results of operations or cash flows.
     In December 2007, the FASB issued SFAS No. 141R, “ Business Combinations” (“SFAS 141R”) and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51” (“SFAS 160”). SFAS 141R and 160 require most identifiable assets, liabilities, noncontrolling interests, and goodwill acquired in a business combination to be recorded at “full fair value” and require noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity, which changes the accounting for transactions with noncontrolling interest holders. The provisions of SFAS 141R and 160 are effective for our fiscal year beginning January 1, 2009. SFAS 141R will be applied to business combinations occurring after the effective date and SFAS 160 will be applied prospectively to all noncontrolling interests, including any that arose before the effective date. We are currently assessing what impact the adoption of SFAS 141R and 160 will have on our financial position and results of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Stock Investments
     From time to time we make public and private investments in equity securities. The publicly traded equity securities are classified as “available for sale securities” and carried at fair value, with unrealized gains and losses reported as a separate component of Unitholders’ equity. The private investments, for which we lack the ability to exercise significant influence, are accounted for at cost. Declines in the value of public and private investments that our management determines are other than temporary, are recorded as a provision for possible loss on investments. Our evaluation of the carrying value of these investments is primarily based upon a regular review of market valuations (if available), each company’s operating performance and assumptions underlying cash flow forecasts. In addition, our management considers events and circumstances that may signal the impairment of an investment.

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Interest Rate Hedging Activities
     We are exposed to the impact of interest rate changes and will occasionally utilize interest rate swaps and interest rate caps as hedges with the objective of lowering our overall borrowing costs. Prior to the Merger, these derivatives were designated as either cash flow or fair value hedges. Subsequent to the Merger we have entered into interest rate swaps and caps to fix the rates associated with various debt instruments. These derivatives were not designated as hedges for accounting purposes and the resulting gains and losses are recorded as other non-operating income or expense. We do not use these derivatives for trading or other speculative purposes. Further, as a matter of policy, we only enter into contracts with major financial institutions based upon their credit ratings and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, we have not, nor do we expect to sustain a material realized loss from the use of these hedging instruments. In 2007, we recorded an unrealized loss of $131.0 million on interest rate swaps established in connection with the Merger that were not designated as hedges for accounting purposes. This loss is included in other non-operating income (loss) in our Consolidated Statement of Operations.
     During the period January 1, 2007 through October 4, 2007 and years ended December 31, 2006 and 2005 the Predecessor recorded an increase/(decrease) to interest expense of $168,000, $372,000 and $(174,000), respectively, for hedge ineffectiveness caused by a difference between the interest rate index on a portion of our outstanding variable rate debt and the underlying index of the associated interest rate swap. We pursue hedging strategies that we expect will result in the lowest overall borrowing costs.
     To determine the fair values of derivative and other financial instruments, we use a variety of methods and assumptions that are based on market value conditions and risks existing at each balance sheet date. These methods and assumptions include standard market conventions and techniques such as discounted cash flow analysis, option pricing models, replacement cost and termination cost. All methods of assessing fair value result in a general approximation of value, and therefore, are not necessarily indicative of the actual amounts that we could realize upon disposition.
     The following table summarizes the notional amount, carrying value and estimated fair value of our derivative financial instruments used to hedge interest rates, as of December 31, 2007 (dollar amounts in thousands). The notional amount represents the aggregate amount of a particular security that is currently hedged at one time, but does not represent exposure to credit, interest rate or market risks.
                         
                    Carrying and  
    Notional     Maturity     Estimated  
    Amount     Date Range     Fair Value  
Cash flow hedges:
                       
Interest rate caps
  $ 3,033,498       2008 - 2011     $ 3,326  
Interest rate swaps
    4,001,155       2010 - 2017       (155,262 )
 
                 
Total cash flow hedges
  $ 7,034,653       2008 - 2017     $ (151,936 )
 
                 
Fair value hedges:
                       
Total rate of return swaps
    49,600       2011       166  
 
                 
Total hedges
  $ 7,084,253             $ (151,770 )
 
                   
Foreign Currency Hedging Activities
     We are exposed to foreign-exchange related variability and earnings volatility on our foreign investments. There are no forward contracts outstanding at December 31, 2007.
Energy Contract Hedging Activities
     We are exposed to price risk associated with the volatility of natural gas, fuel oil and electricity rates. During 2007 and 2006, we entered into contracts with several of our suppliers to fix our payments on set quantities of natural gas, fuel oil and electricity. If the contract meets the criteria of a derivative, we designate these contracts as cash flow hedges of the overall changes in floating-rate payments made on our energy purchases. As of December 31, 2007, none of the contracts met the definition of a derivative as they are considered normal purchases and sales.

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Equity Securities Hedging Activities
     We were exposed to price risk associated with changes in the fair value of certain equity securities. During 2006, we entered into forward sale agreements with an aggregate notional amount, which represents the fair value of the underlying marketable securities, of approximately $6.6 million and an aggregate fair value of the forward sale agreements of approximately ($0.3) million, to protect against a reduction in the fair value of these securities. We designated this forward sale as a fair value hedge. There were no forward sale agreements outstanding as of December 31, 2007.
Interest Rate Sensitive Liabilities
     The table below provides information about our liabilities that are sensitive to changes in interest rates as of December 31, 2007. As the table incorporates only those exposures that existed as of December 31, 2007, it does not consider those exposures or positions that could arise after that date.
     Moreover, because there were no firm commitments to actually sell these instruments at fair value as of December 31, 2007, the information presented herein is an estimate and has limited predictive value. As a result, our ultimate realized gain or loss, if any, will depend on the exposures that arise during future periods, hedging strategies, prevailing interest rates and other market factors existing at the time. The debt classification and interest rates shown below give effect to other fees or expenses, where applicable (in thousands):
                                                                 
                                                    Total   Estimated
    2008   2009   2010   2011   2012   Thereafter   Balance   Fair Value(1)
     
Interest rate sensitive liabilities:
                                                               
 
                                                               
Revolving credit facilities
  $     $     $     $ 60,000     $     $     $ 60,000     $ 58,292  
 
                                                               
Average nominal interest rate(2)
                      8.1 %                 8.1 %        
Term Loans:
                                                               
 
                                                               
Fixed rate
  $     $     $     $ 230     $     $     $ 230       230  
 
                                                               
Average nominal interest rate(2)
                      4.0 %                 4.0 %        
Variable rate
  $ 327,592     $ 350,000     $ 300,000     $ 600,000     $ 3,014,000     $     $ 4,591,592     $ 4,460,880  
 
                                                               
Average nominal interest rate(2)
    8.3 %     8.3 %     8.3 %     8.3 %     8.5 %           8.4 %        
Property Mortgages payable:
                                                               
 
                                                               
Fixed rate debt
  $     $     $     $     $ 2,302,961     $ 3,482,335     $ 5,785,296     $ 5,785,840  
 
                                                               
Average nominal interest rate(2)
                            6.2 %     6.1 %     6.2 %        
Variable rate debt
  $ 3,608     $ 1,520,558     $ 139,672     $ 4,577     $ 1,026,118     $ 732,819     $ 3,427,352     $ 3,427,352  
 
                                                               
Average nominal interest rate(2)
    3.5 %     6.8 %     8.1 %     3.5 %     6.3 %     5.9 %     6.5 %        
 
(1)   The estimated fair value for each of the liabilities listed was calculated by discounting the actual principal payment stream at prevailing interest rates (obtained from third party financial institutions) currently available on debt instruments with similar terms and features.
 
(2)   Reflects the weighted average nominal interest rate on the liabilities outstanding during each period, giving effect to principal payments and final maturities during each period, if any. The nominal rates for variable rate mortgages payable have been held constant during each period presented based on the actual variable rates as of December 31, 2007. The weighted average effective interest rate on the revolving credit facilities, term loans and property mortgages payable was 28.3%, 8.4% and 6.8%, respectively, as of December 31, 2007. The effective interest rate on the revolving credit facility is high due primarily to the fees on the unfunded commitment. The higher the average outstanding drawn balance, the lower the effective interest. The amount drawn as of December 31, 2007 was $60 million.

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     The lenders under our Master Credit Facility and our mezzanine loans provided by the Fannie Mae Mezzanine Lenders and the Freddie Mac Mezzanine Lenders have the option to syndicate or sell the outstanding principal amount under such agreements to other investors at a discount and may revise the interest rate spread or discount or increase fees to a level necessary to facilitate syndication based on current market conditions at the syndication date. As of December 31, 2007, $5.6 billion in outstanding principal indebtedness under these loans was subject to syndication and the increased borrowing costs described above. The cost associated with any incremental interest or additional fees, as well as any original issue discount realized, is required to be born by the Company. These same lenders have committed to lend us up to $148.8 million to fund such costs. As of March 20, 2008, we had approximately $73.0 million set aside in restricted cash to fund syndication discounts. As of March 20, 2008, $43.0 million of principal had been syndicated at a discount of 3%.
Item 8. Financial Statements and Supplementary Data
     Our Balance Sheets as of December 31, 2007 and 2006, and our Statements of Operations, Unitholders’ Equity, other Common Unitholders’ Interest and Comprehensive Income (Loss) and Cash Flows for each of the years in the three-year period ended December 31, 2007, Schedule III — Real Estate and Accumulated Depreciation and Schedule IV – Mortgage Loans on Real Estate, together with the reports of KPMG LLP, Independent Registered Public Accounting Firm, are included under Item 15 of this Annual Report and are incorporated herein by reference. Unaudited selected quarterly financial data is presented in Note 13 of our audited financial statements in this Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
     Not applicable.
Item 9A. Controls and Procedures
     An evaluation was carried out under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d — 15(e) under the Securities Exchange Act of 1934, as amended). Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were, to the best of their knowledge, effective as of December 31, 2007, to ensure that information required to be disclosed in reports that are filed or submitted under the Securities Exchange Act of 1934, as amended, are recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
Management’s Report on Internal Control Over Financial Reporting
     Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) or 15d – 15(f) under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2007. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Our management has concluded that, as of December 31, 2007, our internal control over financial reporting was effective based on these criteria.
     There was no change to our internal control over financial reporting during the fourth quarter ended December 31, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
     Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of their inherent

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limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Archstone have been detected.
     This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
     
/s/ R. Scot Sellers
   
 
R. Scot Sellers
   
Chief Executive Officer (principal executive officer)
   
 
   
/s/ Charles E. Mueller, Jr.
   
 
Charles E. Mueller, Jr.
   
Chief Financial Officer (principal financial officer); Chief Operating Officer effective January 1, 2008
Item 9B. Other Information
     None.

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Part III
Item 10. Directors, Executive Officers and Corporate Governance
Trustees and Executive Officers
     Set forth below are the Trustees of Series I Trust, which is our sole Trustee, as of December 31, 2007. As of the date hereof Mr. David Augarten is the sole Trustee of Series I Trust. Mr. Augarten shall remain in office until the first annual meeting of the shareholders of the Series I Trust and until pursuant to the Declaration of Trust, as amended, of Series I Trust, his successor is duly elected and qualifies.
                     
                Trustee
Trustee   Age   Business Experience   Since
 
                   
David Augarten
    52     Mr. Augarten has served as a trustee of Series I Trust since October 2007 and serves as the sole member of the Series I Trust Audit Committee. Mr. Augarten also directs Tishman Speyer’s global portfolio management and investor relations activities. Mr. Augarten is a member of the Management, Investment, and Compensation committees of Tishman Speyer. In 1984, Mr. Augarten joined Tishman Speyer as the director of taxes. While at Tishman Speyer, he has also worked in the acquisitions and development areas prior to serving as treasurer from 1993 to 1996 and chief financial officer from 1996 to 2000.     2007  
 
           
Jerry I. Speyer
    67     Jerry I. Speyer served as a trustee of Series I Trust from October 2007 until March of 2008. Mr. Speyer is one of the two founding partners of Tishman Speyer and served as president and CEO since its formation in 1978, prior to assuming the role of CEO and Chairman in September 2007. Mr. Speyer also serves as chairman of the Board of Directors of the Federal Reserve Bank of New York; chairman of the Museum of Modern Art; vice chairman of New York Presbyterian Hospital; chairman emeritus of Columbia University; chairman emeritus of the Real Estate Board of New York; and chair emeritus of the Venture for New York City. Mr. Speyer also serves on the Boards of Siemens AG, Yankee Global Enterprises and Carnegie Hall.      
 
           
Robert J. Speyer
    38     Robert J. Speyer served as a trustee of Series I Trust from October 2007 until March of 2008. Mr. Speyer was named president of Tishman Speyer in September 2007. Since he joined Tishman Speyer in 1996, he has worked in senior positions in each of its major spheres of activity, including acquisitions, development and leasing. He is a member of the Board of Visitors of Columbia College (emeritus), the Board of Trustees of the New York City Police Foundation, and the Executive Committee of the Board of Governors of the Real Estate Board of New York.      
Executive Officers:
             
Executive        
Officer   Age   Business Experience
 
           
R. Scot Sellers,
Chief Executive
Officer
    51     Chairman and Chief Executive Officer of Archstone from June 1997 to July 1998 and since December 1998, with overall responsibility for Archstone’s strategic direction, investments and operations; Co-Chairman and Chief Investment Officer of Archstone from July 1998 to December 1998; other executive management positions within Archstone and its predecessors and affiliates since 1993; Member, Executive Committee of the Board of Governors and, during 2006, Chairman, National Association of Real Estate Investment Trusts; Member, Executive Committee of the Board of Directors of the National Multi Housing Council; Director, Christian International Scholarship Foundation; Director of CEO Forum; and Director, Alliance for Choice in Education.
 
           
J. Lindsay Freeman,
Chief Operating
Officer
    62     Chief Operating Officer of Archstone since September 2002, with responsibility for managing all investment and operating activities for Archstone; President – East Division of Archstone, from October 2001 to September 2002, with responsibility for all investments and operations of the East Division; other executive management positions with Archstone and its predecessors and affiliates since May 1994. Mr. Freeman retired on December 31, 2007.
 
           
Charles E.
Mueller, Jr.,
Chief Financial
Officer
    44     Chief Financial Officer of Archstone since December 1998, with responsibility for the planning and execution of Archstone’s financial strategy, balance sheet management and corporate operations, and oversight of the company’s accounting/financial reporting, corporate finance, investor relations, corporate and property tax, due diligence, risk management, human resources, national marketing and ancillary services functions; various other management positions with Archstone and its predecessors and affiliates since April 1994; Member, Executive Committee of the Board of Directors of the National Multi Housing Council Executive Committee; Director, Colorado UpLIFT; Director, Denver K-Life. Mr. Mueller assumed the position of Chief Operating Officer of Archstone as of January 1, 2008.
 
           
Alfred G. Neely,
Chief
Development
Officer
    62     President, Charles E. Smith Residential Division of Archstone, since February 2005; Chief Development Officer of Archstone since April 2003, with responsibility for the oversight and direction of all Archstone residential development projects; Executive Vice President of Archstone, and, prior to November 2001, Charles E. Smith Residential Realty, Inc. (a predecessor of Archstone-Smith) from April 1989 to April 2003 with responsibility for oversight and direction of High-Rise and garden residential development projects.
 
           
Caroline Brower,
General Counsel
and Secretary
    59     General Counsel and Secretary of Archstone since September 1999, with responsibility for legal and corporate governance; from September 1998 to September 1999, President of Ameriton; prior thereto, Ms. Brower was a partner of Mayer, Brown & Platt (now Mayer, Brown, Rowe & Maw, LLP) where she practiced transaction and real estate law. Ms. Brower retired on December 31, 2007.
Section 16(a) Beneficial Ownership Reporting Compliance
     Section 16(a) of the Exchange Act requires our Trustees, executive officers and prior to the Merger, beneficial owners of more than ten percent of the outstanding A-1 Common Units and, following the Merger, beneficial owners of more than ten percent of the outstanding Series O Preferred Units, to file reports of ownership

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and changes in ownership of the Common Units or Series O Preferred Units, as applicable, with the SEC and to send copies of those reports to us. Based solely on a review of those reports and amendments thereto furnished to us and on representations made to us by our trustee and executive officers, we believe that no such person failed to file any such report or report any transaction on a timely basis during 2007, except that, after the consummation of the Merger, each of Messrs. Sellers, Mueller, Freeman, and Neely and Ms. Brower, as the executive officers of the Company, and Series I Trust as our sole trustee, failed to timely file an initial statement of beneficial ownership of securities on Form 3. These forms have now been filed.
Code of Ethics
     Archstone-Smith adopted a Code of Business Conduct and Ethics which remains applicable to our officers and employees, including our principal executive officer, principal financial officer and principal accounting officer or controller. To the extent we are subject to the requirements of Item 406 of Regulation S-K, a copy of our Code of Business Conduct and Ethics is posted on our website, www.archstonesmith.com. Any amendments to or waivers of our Code of Business Conduct and Ethics that apply to the principal executive officer, principal financial officer and principal accounting officer or controller and that relate to any matter enumerated in Item 406(b) of Regulation S-K, will be disclosed on our website.
Nomination Procedures
     Series I Trust, as the holder of 100% of our A–2 Common Units, has the sole authority to elect our trustee.
Audit Committee
     The Board of Trustees of Series I Trust has an Audit Committee, which as of December 31, 2007 is comprised of its sole member, David Augarten. Mr. Augarten is not an “audit committee financial expert.” Because, Series I Trust is not a listed company, the Common Units are privately held by affiliates of Series I Trust, and, as of January 1, 2008, our reporting obligations were automatically suspended, the Board determined that it was not necessary for the Audit Committee to include an “audit committee financial expert”.

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Item 11. Executive Compensation
Compensation of Trustees
Trustees Fees
     Prior to the consummation of the Archstone-Smith Merger on October 5, 2007, our Trustee was Archstone-Smith, which received no compensation for acting as our Trustee. The Outside Trustees received an annual retainer of $25,000, prorated for service of less than one year, plus meeting fees as follows: Outside Trustees received $1,500 for each Archstone-Smith Board meeting attended and $1,000 for each committee meeting attended. In addition, each Outside Trustee was awarded 2,000 RSUs on May16, 2007. The Chairman of any committee of the Archstone-Smith Board also received $7,500 per year per committee chaired. The Lead Independent Trustee of Archstone-Smith was paid an annual fee of $7,500. Retainers and meeting fees were paid quarterly. The Archstone-Smith Trustees were reimbursed for commercial airfare (or, if private air transportation is used, the cost such Trustee would have incurred for a commercial flight) and other travel expenses incurred in connection with attendance at Board meetings. In connection with the Archstone-Smith Merger, each outstanding share option held by the Trustees became fully vested and exercisable and was exchanged for a cash payment equal to the product of the number of shares subject to the option and the excess, if any, of $60.75 cash consideration per share, referred to as the “common share merger consideration,” over the exercise price of the option. Further, each RSU, DEU and phantom common share held by the Trustees became fully vested and was exchanged for the common share merger consideration.
     On October 5, 2007, our Trustee, Archstone-Smith, merged with and into Series I Trust. Series I Trust does not receive any compensation for acting as our Trustee. The Trustee of Series I Trust, Mr. David Augarten, does not receive any compensation for his service as a Trustee.
Outside Trustees Plan
     The purpose of the Outside Trustees Plan was to enable the Outside Trustees to increase their ownership in Archstone-Smith and thereby increase the alignment of their interests with those of the other shareholders. The Outside Trustees Plan provided for grants of RSUs, which converted into Common Shares on a one-to-one basis when they vested, provided the Outside Trustee had not opted to defer settlement of such units. RSUs awarded prior to 2006 were entitled to accrue DEUs, which in turn accrued further DEUs. RSUs granted in 2006 and later no longer were entitled to earn DEUs but instead received a quarterly cash payment equal in amount to the dividend paid on the Common Shares. Such payments were payable on RSUs granted in 2006 or later which were held as of each dividend record date for the Common Shares. Additionally, the Outside Trustees continued to earn DEUs on any outstanding option grants which were made between 1999 and 2001, and DEUs continued to be credited on these DEUs. Our Secretary administered the Outside Trustees Plan.
     On the date of each annual meeting of the Archstone-Smith shareholders, each Outside Trustee was granted 2,000 RSUs. A Trustee elected other than at an annual meeting was granted a pro rata award for the period of time between the date of election and the anticipated date of the next annual meeting. The RSUs vested at the rate of 25% per year for grants made prior to July 2002 and at 33.33% per year for grants made after June 2002, with vesting beginning on the first anniversary date of the grant.
     DEUs were earned on options granted between 1999 and 2001, RSUs and DEUs, and were determined as soon as practicable after each January 1. For options, the number of new DEUs earned was determined by multiplying the average of the number of options held as of each dividend record date in the prior year by the difference between the average annual dividend yield on Common Shares for the prior year and the average annual dividend yield for the Standard & Poor’s 500 Stock Index for the prior year. For RSUs, the number of new DEUs earned was determined by multiplying the average of the number of RSUs held as of each dividend record date in the prior year by the average annual dividend yield on Common Shares for the prior year. The number of DEUs earned on previously earned DEUs was determined by multiplying the number of DEUs held as of December 31 of the prior year by the annual dividend yield on Common Shares for the prior year. The DEUs associated with any given award vested in accordance with the vesting schedule applicable to that award.
     Settlement of DEUs earned by Outside Trustees could be triggered by exercise of the associated options, settlement of the associated RSUs, or cessation of service as a Trustee. Upon settlement, DEUs converted to

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Common Shares on a one-to-one basis. The settlement of RSU awards and DEU awards under the Outside Trustees Plan could be deferred pursuant to the Deferred Compensation Plan, which is described below. The Outside Trustees Plan was terminated as of the effective date of the Merger. As discussed above under “Trustees Fees,” all outstanding share options, RSUs, and DEUs awarded pursuant to the Outside Trustees Plan became fully vested in connection with the Merger and were exchanged for cash pursuant to the merger agreement, as set forth in the “Trustee Compensation Summary” below.
Deferred Compensation Plan
     Under the Deferred Compensation Plan, described in more detail later in this section, Outside Trustees could elect to defer payment of their eligible cash fees and settlement of their RSUs and DEUs. Prior to 2006, an Outside Trustee could elect to defer eligible cash fees into phantom Common Shares. If fees were deferred into phantom Common Shares they were entitled to earn additional phantom Common Shares following each dividend payable date for Common Shares. Such additional phantom Common Shares were determined by multiplying the number of phantom Common Shares held as of the dividend record date by the amount of the dividend paid on a Common Share, and dividing by the fair market value of a share on the dividend payable date. Beginning in 2006, Outside Trustees could no longer defer fees earned in 2006 or later in the form of phantom Common Shares, but could defer such fees into another investment under the Deferred Compensation Plan, including our stock. Any phantom Common Shares remaining on account continued to earn additional phantom Common Shares, as described above, until they were settled. Phantom Common Shares were settled based upon the date elected by the Outside Trustee in accordance with the Deferred Compensation Plan. Upon settlement, phantom Common Shares converted to Common Shares on a one-to-one basis. Shares available under the Outside Trustees Plan were used to satisfy this obligation. The Deferred Compensation Plan was terminated in connection with the Merger, and all outstanding RSUs, DEUs and phantom Common Shares deferred pursuant to the Deferred Compensation Plan were exchanged for cash pursuant to the merger agreement, as set forth in the Trustee Compensation Summarybelow.
Trustee Compensation Summary
     Total compensation received by the Archstone-Smith Outside Trustees for the period January 1, 2007 through consummation of the Merger on October 5, 2007 is set forth below:
                                         
                            All Other    
    Fees Earned or   Stock Awards   Option   Compensation    
Trustee(1)   Paid in Cash   ($)(2)   Awards ($)   ($)(3)   Total ($)
 
Mr. Cardwell(4)
  $ 30,840     $ 41,840     $     $     $ 72,680  
Mr. Demeritt
  $ 71,090     $ 32,660     $     $ 201,386     $ 305,136  
Mr. Gerardi
  $ 63,590     $ 56,576     $     $ 255,472     $ 375,638  
Ms. Gillis
  $ 75,317     $ 56,576     $     $ 685,660     $ 817,553  
Mr. Holmes
  $ 70,067     $ 56,576     $     $ 794,796     $ 921,439  
Mr. Kogod(5)
  $     $     $     $     $  
Mr. Polk
  $ 79,590     $ 56,576     $     $ 892,110     $ 1,028,276  
Mr. Richman(4)
  $ 34,590     $ 41,840     $     $ 1,478,482     $ 1,554,912  
Mr. Schweitzer
  $ 89,549     $ 56,576     $     $ 1,132,608     $ 1,278,733  
Mr. Smith(6)
  $     $     $ 189,900     $ 2,382,658     $ 2,572,558  
 
(1)   Mr. Sellers did not receive additional compensation for his service as a Trustee. For information on Mr. Sellers’ compensation, see the Summary Compensation Tablebelow.
 
(2)   Each Outside Trustee was awarded 2,000 RSUs on May 16, 2007, the date of the Archstone-Smith annual shareholder meeting. The value shown above reflects the amount expensed during fiscal year 2007 for grants made to Outside Trustees in 2007 and prior years. The grant date fair value of the May 16, 2007 grant of 2,000 RSUs to each Outside Trustee, computed in accordance with FAS 123R, was $106,100 for each RSU award. All outstanding RSUs were redeemed at $60.75 per RSU in connection with the Merger, and the value of the redemptions is included in the column for “All Other Compensation”.
 
(3)   Includes a payment of $12,000 to Messrs. Schweitzer and Polk for their service on the Board of Directors of Ameriton. Includes amounts paid in connection with the Merger upon redemption of outstanding RSUs, DEUs, options and phantom shares as follows: Mr. Demeritt $201,386; Mr. Gerardi $255,472; Ms. Gillis $685,660; Mr. Holmes $794,796; Mr. Polk $880,110; Mr. Richman $1,478,482; Mr. Schweitzer $1,120,608;

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    and Mr. Smith $2,382,658. Such phantom shares were earned on existing phantom shares on each dividend payable date in 2007, and originally stemmed from the deferral of trustee fees. Because each of these phantom shares was redeemed at $60.75 per phantom share in connection with the Merger, the amounts under this column include the actual amounts paid to the Outside Trustees in connection with the Merger rather than the expensed amounts.
 
(4)   Retired on May 16, 2007.
 
(5)   Mr. Kogod was an employee of ours prior to October 5, 2007. Pursuant to the Shareholders’ Agreement (see Certain Relationships and Transactions — Shareholders’ Agreement”), Mr. Kogod received a salary of $80,769 for his services in 2007.
 
(6)   Mr. Smith was an employee of Archstone-Smith prior to October 5, 2007. Pursuant to the Shareholders’ Agreement (see Certain Relationships and Transactions — Shareholders’ Agreement”), Mr. Smith received a salary of $250,068 for his services in 2007. In addition, pursuant to the terms of the Shareholders’ Agreement, Mr. Smith was awarded 100,000 options on February 23, 2007. All of Mr. Smith’s outstanding options vested and were redeemed in connection with the Merger, which cash payment is included under “All Other Compensation.” The value shown above under “Option Awards” reflects the amount expensed during fiscal year 2007 for options. The grant date fair value of each of the 2007 option awards, calculated under the Black-Scholes-Merton model, included in the “Options Awards” column is set forth below:
                 
Grant Date
  Options Granted   Fair Value
February 23, 2007
    100,000     $ 759,600  
Compensation Discussion and Analysis
Introduction
     As discussed earlier in this report, we and Archstone-Smith completed the Mergers on October 4 and 5, 2007. The following discussion is set forth in three sections. The first section will provide information relating to the historical practices of Archstone-Smith prior to October 5, 2007. The second section will outline what compensation arrangements were made in connection with the Merger. Finally, the third section will discuss compensation arrangements in effect after October 5, 2007.
     When we refer in this discussion to the Compensation Committee, we are referring to the Management Development and Executive Compensation Committee of the Archstone-Smith Board in office prior to completion of the Mergers. After October 5, 2007, “Series I Trust Compensation Committee” refers to the Compensation Committe of Series I Trust. The following table lists the members of the Compensation Committee before the 2007 annual meeting, after the 2007 annual meeting and after the Merger:
         
Before May 16, 2007 Annual Meeting
  After May 16, 2007 Annual Meeting   After October 5, 2007 Merger, members of Series I Trust Compensation Committee
 
       
John C. Schweitzer, Chairman
  John C. Schweitzer, Chairman   David Augarten
 
       
James H. Polk, III
  Stephen R. Demeritt    
 
       
John M. Richman
  Ned S. Holmes    
 
       
 
  James H. Polk, III    

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Compensation Discussion and Analysis Prior to October 5, 2007 Merger
Compensation Policy Objectives and Process
Philosophy
     Prior to the Merger, the Compensation Committee was committed to a compensation philosophy that placed significant emphasis on rewarding our Named Executive Officers on the basis of our success in attaining corporate objectives and/or those officers’ success in attaining individual financial and qualitative performance objectives that advance the overall success of the company. The committee’s compensation philosophy was intended to encourage the Named Executive Officers to aggressively pursue company goals in order to generate better long term returns for Archstone-Smith’s shareholders relative to our peer group of multifamily real estate investment trusts and to reward, and therefore encourage, decisions that caused the company to achieve better overall levels of shareholder returns relative to our peer group. Individual performance goals were different for each of our executive officers, based on their varying job responsibilities. Some of the goals involved standard business objectives that were in place year over year, while others were non-routine-items specific to the company’s business plan for that year. The goals were determined at the beginning of each calendar year by the executive and the Compensation Committee.
     The pre-Merger Archstone-Smith compensation program was designed to:
    attract, reward and retain highly qualified employees.
 
    align shareholder and employee interests.
 
    reward long term career contributions to Archstone-Smith.
 
    emphasize the variable portion of total compensation (cash and equity) as an individual’s level of responsibility increases.
 
    provide fully competitive compensation opportunities consistent with performance.
 
    encourage teamwork.
     The Compensation Committee last conducted a review of its compensation objectives and the levels of compensation for Messrs. Sellers, Freeman and Mueller and Ms. Brower in October 2005, and based on that review, established base salary levels and performance metrics and levels of achievement for incentive awards for Messrs. Sellers, Freeman and Ms. Brower for 2006 through 2008 and Mr. Mueller for 2006, with Mr. Mueller’s 2007 and 2008 levels established in mid-2006. While the performance metrics and levels of achievement for incentive awards were established by the Compensation Committee at such time, the actual grants of RSUs and cash bonus awards based on such metrics were not made by the Compensation Committee until the beginning of each year based on such employee’s and Archstone-Smith’s performance for the prior year. The Compensation Committee chose a three year period in order to focus senior management on building long term value rather than achieving short term results, such as quarterly results, and secondarily, to minimize the frequency with which the Compensation Committee would need to conduct a thorough evaluation and benchmarking analysis. The Compensation Committee believed that three years was a reasonably long period of time to allow measurement of progress without focusing on short term metrics. The Compensation Committee retained FPL Associates to assist it in the review of this three year compensation program. Although Mr. Sellers participated in a majority of the meetings of the Compensation Committee and provided the committee with his thoughts on compensation matters, the final design for the three year compensation program and annual compensation decisions were made solely by the Compensation Committee.
Benchmarking
     As part of its review of the compensation package for Messrs. Sellers, Freeman and Mueller and Ms. Brower, the Compensation Committee examined salaries and incentive compensation paid to equivalent officers at two peer groups. The first peer group consisted of the following eight largest publicly-traded multifamily real estate investment trusts, based on total market capitalization as of June 30, 2005: Apartment Investment and Management Company, Avalon Bay Communities, Inc., BRE Properties, Inc., Camden Property Trust, Equity Residential, Essex Property Trust, Inc., Home Properties, Inc. and United Dominion Realty Trust, Inc. The second peer group consisted of ten real estate companies with total market capitalization as of June 30, 2005 similar to us, and included real estate investment companies that invested in both multifamily and non-multifamily assets. The size-based peer

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group companies were: Apartment Investment and Management Company, Boston Properties, Inc., Developers Diversified Realty Corporation, Equity Residential, Hilton Hotels Corporation, Marriott International, Inc., Kimco Realty Corporation, The Mills Corporation, ProLogis, and Public Storage, Inc. Since most of the companies in the asset-based peer group had a significantly smaller total capitalization than we had prior to the Merger, the Compensation Committee placed a larger emphasis on the compensation paid to equivalent officers at companies in the size-based peer group, where we were in the 66th percentile.
     The combination of base salary and annual cash bonus, and the combination of base salary, annual target level cash bonus and annual target level incentive stock award, were each designed to deliver a base level of total annual cash compensation slightly higher than the median for companies in the size-based peer group, consistent with our size being slightly larger than the median. To the extent that we outperformed the NAREIT Apartment Index, the cash bonus and incentive stock award portions of compensation for certain of the Named Executive Officers increased as described in more detail below and could result in overall compensation being higher than the median for the size-based peer group. If we underperformed the NAREIT Apartment Index, then the annual incentive stock award would be at less than the target amount. The Compensation Committee believed that this approach to compensation fostered achievement by the executives of the company’s objectives.
     Based upon this benchmarking analysis, Mr. Sellers’ base salary and incentive awards at each level of achievement are considerably higher than the amounts for the other Named Executive Officers. As with all other Named Executive Officers included in the benchmarking analysis, the base salary and annual cash bonus amounts set by the Compensation Committee for Mr. Sellers were designed to deliver a base level of total annual compensation slightly higher than the median for companies in the size-based peer group. The Compensation Committee determined that Mr. Sellers’ total compensation was appropriate in light of his central role within the company, including his overall responsibility for developing the company’s strategy, implementation of that strategy and the ultimate performance of the company under his leadership.
Compensation Committee Discretion
     Awards earned under the program could be further adjusted up or down at the discretion of the Compensation Committee based on the quality of the results, extraordinary circumstances, and other subjective factors that the Compensation Committee deemed relevant.
     As discussed below, Mr. Sellers’ cash bonus could be reduced by the Compensation Committee if it determined that he had not fully met his performance goals. A portion of the performance units that Mr. Sellers could earn under the special long term incentive program discussed below were discretionary. Because a portion of the cash bonus for Messrs. Freeman and Mueller and Ms. Brower, and a portion of the annual stock award for Messrs. Sellers, Freeman and Mueller and Ms. Brower were based on achievement of individually-established goals, the Compensation Committee also exercised some discretion in determining the extent to which the specific goals for an officer had been attained or exceeded and, consequently, the determination of the portion of the cash bonus and annual stock award to be made.
Mr. Neely’s Compensation
     Mr. Neely is principally responsible for overseeing the company’s nationwide development activities. His compensation was based upon the extent to which we have the opportunity to evaluate appropriate development opportunities available in our markets, we obtain approvals on those land parcels the company was working to entitle, and we were successful in building high quality properties on time and on budget given variations in the market. Consequently, his compensation program was designed to foster and reward achievement in these areas, although the same objectives regarding compensation and the compensation policies described above are applied by management and the Compensation Committee to Mr. Neely’s compensation.
     Mr. Neely’s base salary and his target cash bonus and target annual RSU award were established annually. No benchmarking was performed with respect to Mr. Neely’s compensation during the past five years. The Compensation Committee believed that an annual evaluation was appropriate because the development goals for the company, and all of the employees reporting to Mr. Neely on those projects, were determined and reviewed on an annual basis. Each year Messrs. Sellers and Freeman reviewed Mr. Neely’s performance of the goals and objectives established for him for the year by Messrs. Sellers and Freeman with respect to the company’s development activities, as well as with respect to personnel development within these areas of the company. Also taken into consideration were events and circumstances that arose during the year, but which had not been anticipated in determining the goals and objectives for the year. Based on this evaluation, Messrs. Sellers and Freeman made a

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recommendation to the Compensation Committee with respect to the base salary to be paid Mr. Neely for the following year and the target bonus and target RSU award for the following year, as well as the actual cash bonus and RSU award to be made for the previous year. The actual cash bonus and RSU award granted to Mr. Neely are included in the Summary Compensation Table or the notes to the Summary Compensation Table, as appropriate.
Elements of Compensation
     Prior to the Merger, the key elements of our executive compensation program consisted of base salary, annual cash and stock incentives and long term incentives. Other forms of potential compensation existing prior to the Merger, including potential change in control/post-employment payments, are discussed in the compensation tables.
Base Salary
     Pre-Merger base salaries were based on an overall assessment of the executive’s responsibilities and contribution to our success. Base salaries were set at a level which, together with the target level annual cash bonus, was sufficient to provide the officer with a competitive level of basic income. As discussed above, the base salary and annual cash bonus were designed to deliver a base level of total annual compensation slightly higher than the median for companies in the size-based peer group. The base salaries established by the Compensation Committee through 2008 were set in 2005 and were based on a number of factors, including: (i) Archstone-Smith’s overall performance and the executive’s responsibilities and contribution to the company’s success, (ii) a comparison of base salaries and cash bonuses of executives who perform similar functions at REITs in the size-based peer group, and (iii) a determination that a base salary and cash bonus at a level slightly higher than the median for the size-based peer group was appropriate for each such executive given our slightly larger size compared to the peer group or a determination that a different level was appropriate based on other factors unique to Archstone-Smith.
Cash Bonus
     Prior to the Merger, our Named Executive Officers were eligible for an annual cash bonus based on their individual and/or our performance. The combination of base salary and cash bonus was paid to provide rewards to these officers for achievement of specific personal and corporate goals during the relevant period of measurement and were not tied to future retention of a given officer, beyond a given calendar year. The description of the factors considered in connection with a determination of base salary also applied to the determination of the cash bonus level.
Long Term Incentive Awards
     Prior to the Merger, our Named Executive Officers were eligible for an annual stock award under Archstone-Smith’s LTIP. These types of awards provide the Named Executive Officers with incentives for achievement by linking these officers to shareholders’ goals through stock ownership and encouraging officer retention through the three year vesting. The incentive stock awards included options coupled with an annual award of DEUs, options without a DEU component, RSUs with a DEU component, and RSUs with a quarterly cash payment instead of a DEU component. From January 1, 2002 through October 5, 2007, Messrs. Sellers, Freeman and Mueller and, from January 1, 2005 through October 5, 2007, Ms. Brower, were also eligible for special long term incentive awards in the form of performance units, which, if earned, were convertible on a one-for-one basis in Archstone-Smith common shares.
Historical Criteria for Awards
     A significant portion of the total compensation for Messrs. Sellers, Freeman and Mueller and Ms. Brower through October 5, 2007 was based on annual and long term performance-based incentive compensation and less on salary and employee benefits, creating the potential for greater variability in the individual’s compensation level from year to year. The mix, level and structure of performance-based incentive elements reflected market industry practices as well as the executive’s role and relative impact on business results consistent with our variable pay-for-performance philosophy. The base salary and target annual cash bonus levels for each named executive officer were set at levels consistent with their executive counterparts at companies within our peer group. The target cash bonus levels were intended to encourage the retention of key executives by providing competitive compensation in immediately available funds, with higher cash bonus levels available to reward superior performance.

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Base Salary
     As noted above, base salaries through 2008 for Messrs. Sellers, Freeman and Mueller and Ms. Brower were established as part of a three year program described above, with an adjustment to Mr. Mueller’s base salary made in mid-2006. Also as noted above, Mr. Neely’s base salary is adjusted annually in line with adjustments for our other senior officers.
Annual and Long Term Incentives
     Incentive levels for the annual cash bonuses for Messrs. Freeman, Mueller and Ms. Brower for 2006 and for the annual stock awards for Messrs. Sellers, Freeman and Mueller and Ms. Brower for 2006, were established as part of the three year program described above. The determination of the 2006 annual cash bonus for Mr. Sellers, and Mr. Neely’s 2006 annual cash bonus and annual incentive stock awards, are discussed below.
Cash Bonus and RSU Grants for 2006
     The actual annual cash bonus paid to Messrs. Freeman and Mueller and Ms. Brower for 2006, and the annual RSU awards granted to Messrs. Sellers, Freeman and Mueller and Ms. Brower for 2006, were each based on four criteria: (1) achievement of specific corporate goals articulated in writing at the beginning of each year, (2) Archstone-Smith’s compounded annualized total shareholder return (“TSR”) for the three preceding calendar years, compared to the TSR for companies in the NAREIT Apartment Index for the same period, (3) Archstone-Smith’s funds from operation (“FFO”) growth for the calendar year, compared to the weighted average FFO growth for the companies included in the NAREIT Apartment Index for the same period, and (4) Archstone-Smith’s absolute FFO growth for the year compared to the long term growth targets established by the Compensation Committee and the Board. The Compensation Committee selected the NAREIT Apartment Index as the appropriate peer group index because all of the multifamily real estate investment trusts used by the Compensation Committee for benchmarking were included in this index, it measures performance of real estate investment trusts that invest in multifamily residential apartment projects, and it is weighted based on size of the companies included.
     The Compensation Committee believed that total shareholder return was the most important factor in determining incentive compensation for officers with overall corporate responsibilities since it most effectively aligned the interests of these officers with the interests of the Archstone-Smith shareholders. TSR was determined by comparing our daily TSR on the last trading day of December of the second prior calendar year to our daily TSR on the last trading day of December of the current compensation calendar year (e.g., to determine TSR for 2006, the comparison was December 31, 2003 to December 29, 2006). The Compensation Committee looked at a three year average in order to reduce the impact of one-time events. To the extent that these officers provided a better overall return for our shareholders, compared to the shareholder return of comparable companies in the real estate industry, as measured by the NAREIT Apartment Index, they should be rewarded for those accomplishments. The committee’s use of TSR measured over three years as a metric also focused these officers on long term value creation rather than short term earnings. Because of its importance, 50% of the cash bonus for Messrs. Freeman and Mueller and Ms. Brower and 50% of the RSU grants for Messrs. Sellers, Freeman and Mueller and Ms. Brower for the year was based on this TSR calculation.
     For the cash bonus allocable to this metric for Messrs. Freeman and Mueller and Ms. Brower, three levels of achievement were defined:
         
  Target:   Performance up to the 50th percentile
 
       
  Target Plus:   At or above the 65th percentile
 
       
  High:   At or above the 80th percentile
If our performance was between specified levels, the amount of the cash bonus for the TSR component would equal the interpolated amount based on the actual percentile achieved as compared to the bonus amount for the specified target levels directly above and below the actual percentile achieved (e.g., assuming the bonus based on TSR for the Target level is $100,000 and the bonus for the Target Plus level is $150,000, the actual bonus payout for the TSR component would equal $126,667, if the actual percentile achieved were 58%).

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     The committee believed that Messrs. Sellers, Freeman and Mueller and Ms. Brower should receive an RSU award each year — since these awards aligned the officers’ interests to shareholders’ goals through stock ownership and they encouraged officer retention through the three year vesting — but the amounts should be lower if target performance relative to the NAREIT Apartment Index and the other corporate and individual performance metrics were not achieved. However, since the Compensation Committee did not consider the RSU award to be part of base compensation, it incorporated two lower levels of performance — Threshold and Threshold Plus — so that performance at lower than the target level would result in a lower RSU award.
     For the RSU award allocable to this metric for Messrs. Sellers, Freeman and Mueller and Ms. Brower, the criteria for TSR relative to the NAREIT Apartment Index were as follows:
         
  Threshold:   Up to the 20th percentile
 
       
  Threshold Plus:   At or above the 35th percentile
 
       
  Target:   At or above the 50th percentile
 
       
  Target Plus:   At or above the 65th percentile
 
       
  High:   At or above the 80th percentile
If our performance was between specified levels, the amount of the RSU award for the TSR component would equal the interpolated amount based on the actual percentile achieved as compared to the amount of the RSU award for the specified levels directly above and below the actual percentile achieved (e.g., assuming the RSU award based on TSR for the Target level is $100,000 and the RSU award for the Target Plus level is $150,000, the actual RSU award for the TSR component would equal $126,667, if the actual percentile achieved were 58%). The actual TSR percentile achieved for 2006 awards was the 81st percentile.
     A second measure commonly used in the real estate industry to measure performance is FFO growth. FFO is a non-GAAP measure that is commonly used in the real estate industry to assist investors and analysts in comparing results of real estate companies. FFO adjusts GAAP net earnings to exclude depreciation and gains and losses from the sales of previously depreciated properties. Our calculation of FFO included (i) gains and losses from dispositions of properties acquired or developed by our taxable REIT subsidiaries such as Ameriton, as the fundamental purpose of these entities is to take advantage of short-term investment opportunities, (ii) gains and losses from our international subsidiaries, and (iii) promote incentive fee income resulting from the liquidation of unconsolidated joint ventures, if any. If they related to a disposition, we excluded prepayment penalties and included the cost or benefit of unamortized purchase accounting-related debt adjustments. Our share of the FFO relating to our unconsolidated entities was calculated on the same basis. The Compensation Committee used two measures of FFO growth, each applicable to 15% of the cash bonus for Messrs. Freeman and Mueller and Ms. Brower, and 15% of the RSU award for Messrs. Sellers, Freeman and Mueller and Ms. Brower. First, the Compensation Committee looked at Archstone-Smith’s FFO growth compared to the FFO growth of our peers, using the NAREIT Apartment Index. As with TSR, the Compensation Committee believed that these officers should be rewarded for outperforming our peers in this area. The second FFO measurement looked at Archstone-Smith’s absolute FFO growth for the year compared to the long term growth targets established by the Compensation Committee and the Archstone-Smith Board. To the extent that these officers exceeded the long term FFO growth targets, they were rewarded for that achievement. Like the TSR calculation described above, the FFO growth measurements included Target, Target Plus, and High thresholds for the cash bonus, and Threshold, Threshold Plus, Target, Target Plus and High thresholds for the RSU awards.
     Achievement of the FFO-based performance criteria in any given year depended on a number of factors. However, since the same metrics were used over a three year period, we believe that an analysis of how often the various target levels were achieved during the past three years will provide guidance as to the likelihood that a particular target level would have been met in future years. The charts below set forth in which years each level of achievement was paid for the FFO-based performance metrics for the cash bonus for Messrs. Freeman and Mueller

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and Ms. Brower and the RSU awards for Messrs. Sellers, Freeman and Mueller and Ms. Brower, respectively, during 2004 through 2006:
                         
    Years in which each Achievement Level was Paid  
Cash Bonus Metric   Target     Target Plus     High  
Comparative FFO Growth
    2005, 2006               2004  
Absolute FFO Growth
    2005       2006       2004  
                                         
    Years in which each Achievement Level was Paid  
            Threshold                    
RSU Award Metric   Threshold     Plus     Target     Target Plus     High  
Comparative FFO Growth
    2005       2006                       2004  
Absolute FFO Growth
            2005               2006       2004  
     The final 20% of the cash bonus for Messrs. Freeman and Mueller and Ms. Brower, and the final 20% of the RSU award for Messrs. Sellers, Freeman and Mueller, and Ms. Brower, was determined based on the individual officer’s accomplishment of specific written goals established in cooperation with the Compensation Committee for that officer at the beginning of each calendar year. This portion of each award was designed to award each individual officer to the extent the officer achieves those specific goals. Because many of these goals were not defined by meeting specific financial goals, the committee exercised some discretion in determining the extent to which the specific goals for an officer had been attained and, consequently, the portion of the bonus and RSU award allocated to this metric that was awarded. The Compensation Committee awarded the target amount allocated to this metric provided that the officer had performed at the appropriate level and to the satisfaction of the Committee, including achievement in all material respects of the goals established for that officer. To the extent that an officer’s performance during the year exceeded the goals established for a specific officer, then the committee considered an award at a higher level. The goals for 2006 included, among others, meeting budgeted revenue and growth in net operating income, adding a specific volume of new development transactions to the pipeline, meeting the budget for Ameriton performance, completing the disposition of the majority of our non-core assets during 2006, maintaining a high level of corporate morale, and maintaining an industry-leading position in innovation and continuous improvements in our operating platform - which resulted in the portion of the RSU awards tied to the achievement of each officer’s individual corporate goals at slightly above the target plus level for each of these officers.
     The Compensation Committee believed that the allocation described above created the proper incentives for Messrs. Sellers, Freeman and Mueller and Ms. Brower. A significant portion of the cash bonus and/or RSU award of Messrs. Sellers, Freeman and Mueller and Ms. Brower was based on achievement of individual goals and the ability of the company, under the leadership of these officers, to meet the TSR and FFO growth goals established by the Compensation Committee. Sixty-five percent of the cash bonus for Messrs. Freeman and Mueller and Ms. Brower, and 65% of the RSU award for these officers and for Mr. Sellers, was based on how well our company performed with respect to these metrics compared to other companies in the multifamily real estate industry, as measured by the NAREIT Apartment Index, and, therefore, rewarded these officers based on performance relative to those peer companies.
     Based on the foregoing criteria, the maximum cash bonus that Messrs. Freeman and Mueller and Ms. Brower could earn, subject to the discretion of the Compensation Committee to modify an award for unusual circumstances or extraordinary performance, for each of 2006, 2007 and 2008, prior to any changes made in connection with the Merger, was as follows:
                         
Executive   Target   Target Plus   High
Mr. Freeman
  $ 360,000     $ 480,000     $ 640,000  
Mr. Mueller (2006)
  $ 280,000     $ 420,000     $ 560,000  
Mr. Mueller (2007-2008)
  $ 315,000     $ 475,000     $ 635,000  
Ms. Brower
  $ 180,000     $ 245,000     $ 310,000  

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     The target level was intended to be the minimum amount Messrs. Freeman and Mueller and Ms. Brower would receive as long as he or she was doing a good job in his or her role consistent with the goals agreed to by the Compensation Committee. Messrs. Freeman and Mueller and Ms. Brower could earn above the target level based on the company’s performance under their leadership. The Compensation Committee set the amount for each level of achievement of cash bonus and RSU awards based on the analysis of the compensation levels of similarly situated executive officers in our peer groups provided by FPL Associates in October 2005.
     Based on the foregoing criteria, the RSU award that Messrs. Sellers, Freeman and Mueller and Ms. Brower could earn, subject to the discretion of the Compensation Committee to modify an award for unusual circumstances or extraordinary performance, for each of 2006, 2007 and 2008, prior to any changes made in connection with the Merger, was as follows:
                                         
            Threshold            
Executive   Threshold   Plus   Target   Target Plus   High
Mr. Sellers
  $ 1,207,500     $ 1,811,250     $ 2,415,000     $ 3,018,750     $ 3,622,500  
Mr. Freeman
  $ 525,000     $ 682,500     $ 840,000     $ 997,500     $ 1,155,000  
Mr. Mueller (2006)
  $ 315,000     $ 472,500     $ 630,000     $ 787,500     $ 945,000  
Mr. Mueller (2007-2008)
  $ 355,000     $ 534,000     $ 710,000     $ 890,000     $ 1,070,000  
Ms. Brower
  $ 157,500     $ 210,000     $ 262,500     $ 315,000     $ 367,500  
     Prior to the Merger, the annual cash bonus paid to Mr. Sellers was set at $1,750,000 per year provided he executed in an appropriate and exemplary manner, and to the satisfaction of the Compensation Committee, his managerial responsibilities as the company’s chief executive officer, including developing and executing the company’s strategic plans, overseeing personnel and fostering good morale and retention, succession planning for key positions within the company, providing technology leadership, creating an atmosphere that encourages innovation, maintaining the company’s outstanding development capability, creating value through development activity in our core markets, overseeing our acquisition activity and the repositioning of our portfolio, and creating long term value. The Compensation Committee recognized that the appropriate and exemplary execution of these goals would not necessarily be immediately reflected in the company’s comparative performance metrics, but believed that they were essential to the long term success of the company. Because we expect our chief executive officer to focus on all aspects of the company’s performance, including the cultural and subjective elements of success as well as objective financial performance, the Compensation Committee believed it was appropriate and in the best interests of our company and the Archstone-Smith shareholders to consider all of these elements in determining Mr. Sellers’ total compensation. If the Compensation Committee determined that Mr. Sellers had not fully met these goals, then the committee could reduce the bonus by up to $400,000, for a minimum annual cash bonus of $1,350,000.
     Mr. Neely’s target cash bonus and target annual RSU award was set annually in line with those awarded to our other senior officers. As noted above, the amount actually awarded to him by the Compensation Committee was based on the review of his performance undertaken by Messrs. Sellers and Freeman and their recommendation to the Compensation Committee. Mr. Neely’s target cash bonus for 2006 was $275,000, and his target cash bonus for 2007 was $286,000. The target RSU award for Mr. Neely for 2006 was $500,000 and his target RSU award for 2007 was $650,000. As discussed above, the actual amount of each award was based on Mr. Neely’s performance in overseeing and directing the development activities of the company.

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Performance Units — Special Long Term Incentive Program for 2006
     The table set forth below identifies the number of performance units awarded under our Special Long Term Incentive Program to Messrs. Sellers, Freeman and Mueller and Ms. Brower for the 2006-2008 performance period. As noted above, Mr. Neely was not a participant in this program. Under the terms of the Special Long Term Incentive Program, the actual number of performance units awarded to each executive that would vest would have been determined by the Compensation Committee in January or February 2009, based upon certain performance measures tied to Total Shareholder Return and, in the case of Mr. Sellers, individual performance criteria, as described in the Proxy Statement of Archstone-Smith filed with the SEC on April 11, 2007. However, as discussed below under “Compensation Related to the October 5, 2007 Merger,” the Compensation Committee determined that all of these units should vest at the Merger.
         
    Performance Units
    Awarded for
Name   2006-2008 (#)
Mr. Sellers
    170,908  
Mr. Freeman
    50,633  
Mr. Mueller
    39,878  
Ms. Brower
    15,000  
Other Compensation Features
Change in Control Arrangements
     On August 12, 2002, we entered into change in control agreements with each of the Named Executive Officers other than Mr. Neely, with whom we entered into such an agreement on December 8, 2003. Each change in control agreement had a term of one year, which is automatically renewed unless the Board elected to terminate it. To avoid an unintended windfall to management upon a friendly change in control, the Named Executive Officers would each be entitled to a payment only if there was a change in control and thereafter the Named Executive Officer’s employment was terminated without cause or for good reason during a protected period. All of the change in control agreements were amended on August 3, 2007 to clarify how the cash bonus calculation was to be made in the event of a change in control. In addition, the change in control agreements for Messrs. Sellers and Mueller and Ms. Brower were amended to provide that a material adverse change in their title or the nature or scope of their authority, duties or responsibilities by virtue of the fact that Archstone-Smith was not a public company would be deemed a termination without cause. The protections of all of the change in control agreements came into force as a result of the Merger. Mr. Freeman’s change in control agreement terminated upon his retirement on December 31, 2007. In lieu of the amounts due to Mr. Freeman under his change in control agreement, he was entitled to the amounts set forth in his separation and general release agreement, as amended. See “Post-Employment Payments.” Ms. Brower’s retirement on December 31, 2007 resulted in a full payment under her change in control agreement. Mr. Sellers’ change in control agreement was superseded by his employment agreement (see discussion immediately below). For more detailed information on the conditions to payments and regarding the payments that could be made under each change in control agreement, see “Post-Employment Payments” below.
Employment Agreements
     Prior to the Mergers, we did not have employment agreements with any of our employees. In connection with the Mergers, we entered into an employment agreement with Mr. Sellers, which is described below in “Compensation Discussion and Analysis after October 5, 2007; Other Compensation Features; Employment Agreement with R. Scot Sellers”.
Deferred Compensation
     Each of our Named Executive Officers is eligible to participate in our 401(k) Plan.
     Under the 401(k) Plan, each employee, including the Named Executive Officers, could contribute up to $15,000 of his or her salary in 2006 and up to $15,500 of his or her salary in 2007. Contributions equal to 6% of a contributing employee’s salary (not to exceed $15,000), including contributions by the Named Executive Officers, receive a matching contribution by Archstone-Smith in Common Shares prior to October 5, 2007 and in cash

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thereafter. Each year, we test the 401(k) Plan to ensure that our highly compensated employees, which include all of the Named Executive Officers, do not receive more benefits than our non-highly compensated employees. If the benefits to the highly compensated employees exceed the benefits to the non-highly compensated employees by more than 2%, then a portion of the contributions made by the highly compensated employees is returned to those highly compensated employees until the benefits meet the test. These excess contributions are returned to the employee.
     Under the Deferred Compensation Plan, which terminated at the time of the Merger, the Named Executive Officers could elect to defer payment of up to 75 percent of their base salary, 90 percent of their cash bonuses and certain amounts which could not be contributed to our 401(k) Plan due to limitations of the Internal Revenue Code. The minimum deferral for any calendar year was generally $5,000. The Deferred Compensation Plan was funded into a “rabbi trust” and participants in the Deferred Compensation Plan were treated as our unsecured general creditors. Each of our Named Executive Officers participated in the Deferred Compensation Plan.
     Amounts deferred under the Deferred Compensation Plan earned a rate of return based on a hypothetical investment in investment choices selected by the Named Executive Officer from alternatives we provided. Although we were not required to do so, our Deferred Compensation Plan did actually invest in the selected investments. Any actual investment we made, in our discretion, was treated as part of our general assets.
     Participants in the Deferred Compensation Plan received payment of deferred amounts as of the date selected by the participant, which generally had to be at least three years after the date on which the amount would otherwise have been payable to the individual. (This did not apply to settlements of RSUs or DEUs deferred into the Deferred Compensation Plan, which are described below.) All amounts were paid upon a participant’s termination of employment (although delayed payment could be provided in certain cases). Payments were made in the form of a lump sum or installments over a period not exceeding 5 years (15 years in the case of a participant whose employment terminates after the sum of his or her age and years of service equals at least 55). If the value of a participant’s account balance was less than $10,000, it was paid in a lump sum. Payment prior to the deferred date elected by a participant (or prior to termination of employment) was permitted only in limited circumstances. Except as described below (or as discussed above with respect to Outside Trustees), all payments from the Deferred Compensation Plan were made in cash.
     Certain benefits under the Deferred Compensation Plan were potentially subject to Section 409A of the Internal Revenue Code. We intended to administer the plan in a manner that complied with section 409A and to amend the plan as and when needed in order to conform to the requirements of Section 409A, all as set forth in applicable IRS guidance when issued.
     Prior to 2002, a Named Executive Officer receiving an award of RSUs under the LTIP could elect to defer settlement of such RSUs to a future date so that upon vesting, the RSUs would remain deferred under the Deferred Compensation Plan rather than being settled in the form of Common Shares. Such deferred RSUs would continue to earn DEUs in accordance with a formula applicable to the award under the LTIP. Options granted to Senior Executive Officers prior to 2000 also earned DEUs. DEUs thus earned also earned DEUs in accordance with the LTIP. Upon the settlement date selected by the Named Executive Officer in accordance with the Deferred Compensation Plan, the RSUs and/or DEUs would convert to Common Shares on a one-to-one basis. Common Shares available under the LTIP Plan were used to satisfy this obligation. With respect to awards granted after January 1, 2002, an individual receiving an award of RSUs could either elect to defer the vesting of such units as described above, or upon vesting elect to have the cash value of the RSUs deferred into the Deferred Compensation Plan.
Compensation Related to the October 5, 2007 Merger
     The Merger Agreement included several provisions, all approved and/or ratified by the Compensation Committee, relating to payments that would be made to certain of our officers and employees, including the Named Executive Officers, in connection with the Merger.
Vesting of all Outstanding Options, RSUs and DEUs
     In connection with the Mergers each outstanding share option held by all officers and employees, including the Named Executive Officers, became fully vested and exercisable and was exchanged for a cash payment equal to

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the product of the number of shares subject to the option and the excess, if any, of the common share merger consideration over the exercise price of the option. Further, each RSU and DEU held by the Named Executive Officers became fully vested and was exchanged for the common share merger consideration.
Grant of Cash Awards in Lieu of RSU Awards
     Pursuant to the terms of the three-year compensation plan, the same criteria described under "Historical Criteria for Awardswere to apply to cash and annual RSU awards for 2007 and 2008. The Compensation Committee typically made annual awards of RSUs to the Named Executive Officers at the beginning of each fiscal year in consideration of an employee’s and our performance for the prior fiscal year. As a result of the Merger, which closed in the third quarter of 2007, the full year’s performance of Archstone-Smith would not have been available to calculate the awards, and Archstone-Smith would no longer be a public company after the Merger. Because of these considerations, the Merger Agreement provided that the Named Executive Officers, other than Mr. Freeman who was to be compensated in accordance with the terms of his separation and general release agreement, would receive the cash equivalent of the RSU awards for 2007, based on 75% of such officer’s award of RSUs for the 2006 fiscal year. Since Archstone-Smith would not be a public company at December 31, 2007, there was no basis for determining the award that these officers would have been entitled to under the then-existing compensation program. Therefore, the Compensation Committee determined that the best way to approximate the value created during 2007 was to make the same award as was made in 2006. This award was intended to compensate these officers on a pro rated basis for 2007 performance prior to the Merger and was paid as of the Merger date.
     The cash awards our executive officers received upon the consummation of the Merger, in lieu of an RSU grant for 2007, are as follows:
         
Executive Officers   Amount of Cash Award
R. Scot Sellers
  $ 2,454,962  
Charles E. Mueller, Jr.
    637,273  
Caroline Brower
    256,931  
Alfred G. Neely
    487,484  
     Pursuant to his separation and general release agreement, Mr. Freeman was entitled to receive a cash award in lieu of a 2007 RSU award for the same reasons described above for the other Named Executive Officers.
Cash Payment to Holders of certain RSUs, Share Options and DEUs
     Archstone-Smith employees who were granted RSUs, share options with a DEU feature and DEUs prior to 2006 earned and were entitled to receive DEUs on such awards based on amounts equal to, and to correspond with, the dividends that Archstone-Smith paid to its common shareholders. The DEUs earned for each year had typically been credited in January of the year following the year in which dividends have been paid. As the Mergers were scheduled to close prior to the end of 2007, the Merger Agreement provided that each of our employees holding restricted share units, share options and dividend equivalent units that would otherwise have been entitled to a DEU award on January 1, 2008 would receive a cash payment on the Archstone-Smith Merger date equal to the value of the dividend equivalent units that such individual would have earned based on the dividends that we paid in the first and second quarters of 2007. Such cash payments to our Named Executive Officers were as follows:
         
Executive Officers   Amount of Cash Payment
R. Scot Sellers
  $ 85,205  
J. Lindsay Freeman
    139,906  
Charles E. Mueller, Jr.
    57,733  
Caroline Brower
    15,379  
Alfred G. Neely
    22,397  

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Performance Units
     The Merger Agreement provided that each of the performance units granted to each Named Executive Officer would vest immediately prior to the closing of the Archstone-Smith Merger and was to be considered a Common Share of Archstone-Smith. As a result, each Named Executive Officer received the cash merger consideration for each such Common Share. The table below sets forth the number of performance units previously awarded to each Named Executive Officer that vested in connection with the Archstone-Smith Merger and the compensation received for those performance units.
                 
    Performance Units    
    Awarded for   Compensation Received
Name   2006-2008 (#)   at Merger
Mr. Sellers
    170,908     $ 10,382,661  
Mr. Freeman
    50,633     $ 3,075,955  
Mr. Mueller
    39,878     $ 2,422,589  
Ms. Brower
    15,000     $ 1,730,464  
Compensation Discussion and Analysis After October 5, 2007
Compensation Objectives, Elements Of Compensation, Criteria For Award
     As a newly-formed private company, the Series I Trust Compensation Committee intends to continue the existing compensation philosophy of rewarding contributions to our success, but measuring our success in terms of a privately owned enterprise. For the period following the Merger through December 31, 2007, the Series I Trust Compensation Committee, other than with respect to Mr. Sellers, generally continued the compensation for our Named Executive Officers at the same levels as were in place prior to the Merger. Where compensation would historically have been based on our 2007 performance, the Series I Trust Compensation Committee either used 2006 awards as a basis for making a 2007 award or approved awards based on the discretionary review of a particular officer’s performance during 2007. The Series I Trust Compensation Committee decisions with respect to base salary, cash bonuses, and incentive compensation with respect to our Named Executive Officers for the period following the Merger through December 31, 2007 are set forth below.
Base Salary
     With the exception of Mr. Mueller, the base salaries of each Named Executive Officer was continued at the same level as before the Merger. Effective October 5, 2007, the salary for Mr. Mueller was increased to $500,000 per year. This raise was in recognition of the fact that Mr. Mueller was increasingly taking on additional responsibilities as he prepared to take on the role of Chief Operating Officer on January 1, 2008.
Cash Bonuses
     Mr. Sellers was not awarded a cash bonus for 2007 in accordance with the terms of his employment agreement. Since Archstone-Smith would not be a public company at December 31, 2007, there was no basis for determining the cash bonus that Mr. Freeman would have been entitled to under the then-existing compensation program. Therefore, the Series I Trust Compensation Committee determined that the best way to approximate the value created during 2007 was to award the same cash bonus as was made in 2006. With respect to Mr. Mueller, his cash bonus of $606,475 was determined following a review of his performance by Mr. Augarten and Mr. Sellers. Mr. Mueller’s bonus was based on the significant role he played in negotiating the Merger Agreement and overseeing the overall transaction, as well as his oversight of the integration process after completion of the Mergers. A cash bonus equal to the High amount was awarded to Ms. Brower in accordance with the terms of her change in control agreement. A cash bonus of $436,000, which was $150,000 over the target bonus amount for 2007 of $286,000, was awarded to Mr. Neely based on a review of his 2007 performance undertaken by Messrs. Augarten, Sellers and Freeman. Mr. Neely’s bonus was based on his excellent accomplishments with respect to our development projects during 2007.

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Incentive Grants
     No incentive stock awards were made to any of the Named Executive Officers as part of their 2007 compensation. They did receive cash compensation in connection with the Merger with respect to a portion of the RSU award that they could have earned for 2007 as discussed above. In addition, each Named Executive Officer, other than Mr. Freeman who was to be compensated in accordance with the terms of his separation and general release agreement, as amended, was paid in January, 2008, an amount equal to 25% of such officer’s award of RSUs for the 2006 fiscal year. As with the cash payments in lieu of RSU awards made in connection with the Merger, this payment was intended to approximate the value created during 2007 by making the same award as was made in 2006. Mr. Freeman received $1,071,788 in lieu of an RSU award for 2007 pursuant to his separation and general release agreement, as amended. These amounts are included in the Summary Compensation Table below.
Performance Units
     As part of his employment agreement, the Series I Trust Compensation Committee awarded Mr. Sellers (a) 4,800 Class C Units in Tishman Speyer Archstone-Smith Multifamily Participants, L.L.C, an affiliate of the Venture, and (b) 100 non-voting units in each of three affiliates of the Venture with an aggregate value of approximately $11.25 million as of October 5, 2007 (see Other Compensation Features; Employment Agreement with R. Scot Sellersand Grant of Plan Based Awards”).
Other Compensation Features
Change in Control Agreements
     Mr. Mueller amended his change in control agreement on January 4, 2008 to clarify the circumstances under which Mr. Mueller may terminate employment and receive the severance payments provided for in the agreement, revise the severance payments that Mr. Mueller would be entitled to pursuant to the terms of the agreement, and confirm Mr. Mueller’s post-Merger compensation as described below. Mr. Sellers’ employment agreement described immediately below superseded his change in control agreement, other than the provision regarding the calculation of any gross-up payment due.
Employment Agreement with R. Scot Sellers
     With the exception of Mr. Sellers, we do not have employment agreements with any of our Named Executive Officers or with any of our other employees. We entered into an employment agreement with Mr. Sellers on October 5, 2007. The Series I Trust Compensation Committee determined that an employment agreement would assist in retaining Mr. Sellers, whose continued service as chief executive officer was deemed crucial to the successful implementation of its post-merger strategy and goals. The employment agreement supersedes Mr. Sellers’ change in control employment agreement, other than the provision regarding the calculation of any gross-up payment due.
     Pursuant to the employment agreement, Mr. Sellers agreed to continue to serve as our Chief Executive Officer following the Merger. The initial term of Mr. Sellers’ employment agreement will end on December 31, 2010, but will automatically be extended for consecutive one year periods upon the expiration of the initial term (or any extension thereof) unless either party provides no less than 90 days notice of its intention not to renew. Mr. Sellers is entitled to an initial annual base salary of $750,000. Assuming he is employed on the last day of the fiscal year to which the guaranteed bonus relates, Mr. Sellers is guaranteed a bonus of $4.0 million for the fiscal year ending December 31, 2008 and $2.0 million for each subsequent fiscal year, and will be entitled to an additional incremental bonus of up to $3.125 million per year based on the achievement of certain equity raising milestones. Mr. Sellers will have the right to reinvest up to 50% of his annual guaranteed bonus into phantom interests in affiliates/subsidiaries of the Venture including the Junior Mezz Borrower.
     Mr. Sellers’ base salary remained unchanged after the Mergers. The Series I Trust Compensation Committee divided the annual cash bonus into two parts. The first part, a guaranteed minimum cash bonus, was set at a level slightly higher than was in effect prior to the Mergers to take into account the increased responsibilities

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Mr. Sellers would have as the chief executive officer of Successor. The second part of the bonus, which is based on the achievement of certain equity raising milestones, and the equity awards discussed below, are designed to align Mr. Sellers’ interest with those of other investors in the Venture.
     Termination payments to Mr. Sellers depend upon the timing and circumstances of any termination of his employment, and generally include the payment of (i) certain “accrued obligations,” (ii) any vested benefits, and (iii) amounts based upon Mr. Sellers’ base salary and bonuses he earned, or otherwise would in the future be entitled to receive, depending on the timing of such termination. Certain payments are contingent on Mr. Sellers’ execution and non-revocation of a release of claims against us and certain of our affiliates. In the event that any payments made in connection with the Mergers subject Mr. Sellers to a “golden parachute” excise tax, Mr. Sellers will be made whole for such excise tax. Mr. Sellers is subject to one-year or two-year (depending on the date of termination) post-termination non-solicit and non-hire covenants and a one-year post-termination non-competition covenant. These termination payments are described in greater detail in Change in Control and Post-Termination Arrangements with Mr. Sellers.”
     In connection with his entry into the employment agreement, and in addition to Mr. Sellers’ $4.1 million investment in Governance GP, Mr. Sellers purchased 21.75 non-voting Class A Units of Junior Mezz Borrower for an aggregate purchase price of $2,290,444. The Non-voting Class A Units are fully vested as of the date of purchase.
     In connection with his entry into the employment agreement, Mr. Sellers was also granted non-voting equity interests in three affiliates of the Venture with an aggregate value of approximately $11.25 million as of October 5, 2007. Mr. Sellers’ equity interests in the three affiliates cliff vest in full on October 5, 2010, subject to earlier vesting in full upon a termination of his employment without “cause” or for “good reason” or certain liquidations or dissolutions of the granting entity.
     Mr. Sellers was also granted 4,800 Class C Units in Tishman Speyer Archstone-Smith Multifamily Participants, L.L.C, an affiliate of the Venture. The value of these units depends on the return on investments generated by partners in the Venture (other than partners which are affiliates of the Venture’s sponsor), and they generally have no value unless such partners achieve an 8% gross IRR. The Class C Units granted to Mr. Sellers generally vest ratably on each of the first seven anniversaries of October 5, 2007, provided, that vesting accelerates upon a certain changes in control of Fund GP and Fund II GP upon the Lehman Sponsor or the Tishman Speyer Sponsor selling all or substantially all of their limited partner interests in the Venture and/or certain other affiliates thereof and certain liquidations or dissolutions of the granting entity. In the event of a termination of Mr. Sellers’ employment without “cause” or for “good reason” (each as defined, and in accordance with the procedures described, in Mr. Sellers’ employment agreement), the Class C Units that would have vested in the one-year period following the date of termination of his employment will immediately vest upon such termination. All Class C Units that are not vested upon termination of employment will be forfeited, subject to any prior vesting or acceleration. An additional 3,200 Class C Units are currently reserved for future grant to other of our employees.

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POST-EMPLOYMENT PAYMENTS
     The first table below discloses the potential payments that would be provided to each Named Executive Officer other than Mr. Sellers in the event of a termination of employment or a change in control of the Company on December 31, 2007. Payments are listed for Mr. Freeman only in the “Termination without change in control” section of the table since he was not entitled to any change in control protection after his retirement on December 31, 2007, and the amounts given are the actual amounts accrued or paid to him, which amounts are included in the “Summary Compensation Table” under “All Other Compensation”. Payments listed for Ms. Brower in the “Change in control and termination without cause within protected period” section of the table reflect actual amounts accrued or paid to her based on the change of control as a result of the Merger and her deemed termination “without cause” upon her retirement on December 31, 2007, which amounts are included in the “Summary Compensation Table” under “All Other Compensation”. The second table discloses the potential payments that would be provided to Mr. Sellers in the event of a termination of employment or a change in control of the Company on December 31, 2007, which payments are based on the terms of our employment agreement with Mr. Sellers.
                                     
Event   Consideration   Mr. Freeman   Mr. Mueller   Ms. Brower   Mr. Neely
Termination without change in control, with or without cause, or upon death or disability
  Cash severance                        
 
  Accrued bonus and long term compensation                        
 
  Unvested equity awards                        
 
  401(k) account balance   $ 291,146     $ 281,046     $ 234,784     $ 572,953  
 
  Health care benefits                        
 
  Excise tax gross-up                        
 
  Outplacement services                        
 
  Personal benefits                        
 
       Total:   $ 291,146     $ 281,046     $ 234,784     $ 572,953  
Change in control and termination without cause within protected period
  Cash severance         $ 2,270,000     $ 1,290,000     $ 390,000  
 
  Accrued bonus and long term compensation           606,475       310,000       436,000  
 
  Unvested equity awards (1)                        
 
  401(k) account balance           281,046       234,784       572,953  
 
  Health care benefits (2)           32,532       8,960       14,609  
 
  Excise tax gross-up                        
 
  Outplacement services           15,000             10,000  
 
  Personal benefits (3)           8,054             6,471  
 
        Total:         $ 3,213,107     $ 1,843,744     $ 1,430,033  
 
(1)   All unvested options, RSUs and DEUs vested and were redeemed in connection with the Merger. As a result, none of these NEOs held unvested equity awards at December 31, 2007.
 
(2)   This amount includes medical insurance, disability income protection, life insurance coverage and death benefits during the applicable protected period for each Named Executive Officer, valued at the incremental cost to us of providing such benefits.
 
(3)   None of these Named Executive Officers received personal benefits in excess of $10,000 in 2007. For purposes of calculating the personal benefits, we used the approximate value of the personal benefits received in 2007 multiplied by the Multiple.

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Event   Consideration   Mr. Sellers
Termination by Company without cause or by Mr. Sellers for good reason, without change in control
  Accrued obligations (1)   $ 0  
 
  Severance amount   $ 5,500,000  
 
  Unvested equity awards   $ 11,250,000  
 
  401(k) account balance   $ 287,626  
 
  Excise tax gross-up   $ 0  
 
 
        Total:   $ 17,037,626  
Death or disability
  Accrued obligations (1)   $ 0  
 
  401(k) account balance   $ 287,626  
 
  Excise tax gross-up   $ 0  
 
 
        Total:   $ 287,626  
Termination by Company without cause or by Mr. Sellers for good reason, with a change in control
  Accrued obligations (1)   $ 0  
 
  Severance amount   $ 5,500,000  
 
  Unvested equity awards   $ 11,250,000  
 
  401(k) account balance   $ 287,626  
 
  Excise tax gross-up   $ 0  
 
 
        Total:   $ 17,037,626  
Termination by Company for cause or by Mr. Sellers without good reason
  Accrued obligations,
excluding prorated annual
cash bonus (1)
  $ 0  
 
  401(k) account balance   $ 287,626  
 
 
        Total:   $ 287,626  
 
(1)   Accrued obligations are defined as the sum of the following amounts: (a) annual base salary through the date of termination, (b) any unpaid guaranteed bonus and any unpaid incremental annual bonus earned for any fiscal year ended prior to the fiscal year in which the date of termination occurs, (c) prorated guaranteed annual cash bonus from January 1 through the date of termination, (d) reimbursed of expenses incurred, and (e) all other compensation and benefits under any compensation or benefit plan. The foregoing table assumes that Mr. Sellers’ last paycheck in 2007 covered the period ending on December 31, 2007.

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     We entered into a severance and release agreement with Mr. Freeman in 2007. We will pay Mr. Freeman a base salary of $450,000 for the period from January 1, 2008 through December 31, 2008, in consideration for which Mr. Freeman will be available as a consultant and advisor to us upon our request. There will be no written consulting agreement relating to these services. Mr. Freeman will not be eligible for any cash bonus for his services performed during 2008, but was paid $554,000 in January, 2008 as a cash bonus for 2007, $1,071,788 in lieu of an RSU award for 2007 and $1,000,000 in January, 2008 for remaining employed through December 31, 2007. We will provide Mr. Freeman with health insurance coverage, at a cost to us of $142 per month, in accordance with our policy for full-time employees.
Change in Control Arrangement with Messrs. Mueller and Neely and Ms. Brower
     Except with respect to Mr. Sellers (see "Compensation Discussion and Analysis after October 5, 2007; Other Compensation Features; Employment Agreement with R. Scot Sellers"), we have not entered into an employment contract with any Named Executive Officer, nor are our Named Executive Officers subject to our Severance Plan. Upon a termination of employment, whether voluntary or involuntary (but excluding a termination following a change in control, which is discussed below) or the result of retirement, death or disability, we have no contractual obligation to give a Named Executive Officer anything over and above what he or she has contributed previously to accounts under the 401(k) Plan (including vested matching contributions) and earnings on the amounts contributed. As of December 31, 2007, the value of the currently vested accounts for each Named Executive Officer is included in the table above.
     As noted above, we entered into change in control agreements with each of the Named Executive Officers. The Named Executive Officers would each be entitled to a payment only if there is both a change in control and thereafter the Named Executive Officer’s employment is terminated, or effectively terminated, without cause, as more fully described below. Mr. Sellers’ employment agreement (see "Compensation Discussion and Analysis after October 5, 2007; Other Compensation Features; Employment Agreement with R. Scot Sellers") superseded and replaced any benefit to which he would be entitled under his change in control agreement in connection with the Merger, other than the provisions regarding the calculation of any gross-up payment due. Mr. Freeman’s change in control agreement terminated upon his retirement on December 31, 2007. A severance payment was made to Ms. Brower following her deemed termination “without cause” upon her retirement on December 31, 2007.
     Under these agreements, a “change in control” occurred if the Archstone-Smith shareholders approved (a) the merger of Archstone-Smith or of Archstone with or into another entity, (b) the sale by Archstone of substantially all of its assets, or (c) a plan of liquidation of either Archstone-Smith or Archstone and, following the consummation of the approved transaction, the original shareholders of Archstone-Smith did not constitute 75% of the shareholders of the resulting entity. A change of control also occurred if (i) a third party acquired over 25% of the outstanding Common Shares of Archstone-Smith, other than in a transaction where Archstone-Smith issued the shares to such third party, or (ii) there was a change in a majority of the trustees of Archstone-Smith during any period of two consecutive years, other than as a result of the election, or nomination for election by Archstone-Smith’s shareholders, of a person whose nomination was approved by a two-thirds majority of the Trustees who were in office at the beginning of such two year period. A “change in control” occurred as a result of the Merger.
     A protective period has been established for each of our Named Executive Officers: twenty-four (24) months in the case of Mr. Mueller and Ms. Brower, and twelve (12) months in the case of Mr. Neely. The applicable protective period was set based on the officer’s level of responsibility. During the protective period, if the Named Executive Officer’s employment is terminated without cause, other than as a result of the officer’s death or disability, or if the officer resigns as a result of, among other matters, a material adverse change in the nature or scope of the officer’s duties or authority, then the officer will be entitled to receive a lump-sum payment. Mr. Mueller and Ms. Brower’s change in control agreements also provide that a change in their duties as a result of our not being a public company would constitute a termination without cause. In addition, the officer will be entitled to the continuation during the applicable protective period following the date of termination of medical insurance, disability income protection, life insurance and death benefits, and perquisites, or personal benefits, equivalent to those available to the officer on the date of termination. The terminated officer will also receive outplacement services of up to $15,000 in the case of Mr. Mueller and Ms. Brower, and $10,000 in the case of Mr. Neely.

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     The severance payment will be equal to a multiple — 2 in the case of Mr. Mueller and Ms. Brower, and 1 in the case of Mr. Neely (the "Multiple") — of base salary for the year in which termination occurs plus the Multiple times the greater of (i) the officer’s target cash bonus for the year in which termination occurs, based on the highest applicable performance targets having been met, or (ii) the actual cash bonus awarded to the officer for the year immediately preceding the year in which termination occurs. Each Named Executive Officer will also receive, if terminated within the protective period, an amount equal to the officer’s unpaid pro-rated salary through the date of termination, the pro-rated target bonus that would be paid to the officer if the highest applicable performance targets were met for the year of termination, and an additional payment required to compensate the officer for any excise taxes imposed upon the severance payments made under the officer’s agreement.
Change in Control and Post-Termination Arrangements with Mr. Sellers
     Termination payments to Mr. Sellers are made pursuant to the terms and conditions of his employment agreement dated as of October 5, 2007. Depending upon the timing and circumstances of any termination of his employment, as explained in more detail below, he is generally entitled to (i) amounts earned but unpaid, (ii) any vested benefits, and (iii) amounts based upon Mr. Sellers’ base salary and bonuses he earned, or otherwise would in the future be entitled to receive, depending on the timing of such termination.
     If Mr. Sellers is terminated without cause or resigns for good reason prior to December 31, 2010, Mr. Sellers would receive a lump sum cash payment, to the extent not previously paid, equal to (A) the “Accrued Obligations,” which consist of (i) his base salary through the date of termination, (ii) any unpaid guaranteed bonus and any unpaid incremental bonus for any prior fiscal year, (iii) a pro-rated guaranteed bonus for the year in which the termination occurs; (iv) any unpaid or unreimbursed expenses, and (v) benefits owed pursuant to any benefits plan; plus (B) the lesser of (i) the sum of (1) two times his base salary, (2) $4.0 million and (3) two times his incremental bonus, based on the achievement of certain equity raising milestones as of the termination date, and (ii) the sum of (1) one times his base salary, (2) $2.0 million, (3) his incremental bonus, based on the achievement of certain equity raising milestones as of the termination date, and (4) the remaining base salary, guaranteed bonus and incremental bonus, based on the achievement of certain equity raising milestones as of the termination date, to which Mr. Sellers would have been entitled through December 31, 2010, had he remained employed through such date.
     If Mr. Sellers is terminated without cause or resigns for good reason on or after December 31, 2010, Mr. Sellers would receive a lump sum cash payment equal to (A) the Accrued Obligations; plus (B) the sum of (i) one times his base salary, (ii) $2.0 million, and (iii) his incremental bonus, based on the achievement of certain equity raising milestones through October 5, 2008.
     Notwithstanding the above, if Mr. Sellers is terminated without cause or resigns for good reason after a change in control, Mr. Sellers would receive a lump sum cash payment equal to (A) the Accrued Obligations; plus (B) the sum of (i) two times his base salary, (ii) $4.0 million and (iii) two times his incremental bonus, based on the achievement of certain equity raising milestones as of the termination date. Under Mr. Sellers’ agreement, a “change in control” generally occurs if Tishman Speyer and/or Lehman execute one or more sales of their interests such that neither maintains a controlling interest in the Venture following the transactions.
     Upon a change in control, Mr. Sellers is also entitled to acceleration of the vesting of all of his Class C Units in Tishman Speyer Archstone-Smith Multifamily Participants, L.L.C. or, if no change in control occurs and he is terminated by the Company without cause or he terminates his employment for good reason, acceleration of the vesting of the Class C Units that would have vested during the one year period following termination. Upon a termination of his employment without cause or for good reason, or upon certain liquidations or dissolutions of the granting entity, Mr. Sellers unvested non-voting equity interests in three affiliates of the Venture would immediately vest.
     If Mr. Sellers terminates his employment without good reason or the Company terminates him for cause, Mr. Sellers would receive a lump sum cash payment, to the extent not previously paid, equal to (i) his base salary through the date of termination, and (ii) any unpaid guaranteed bonus and any unpaid incremental bonus for any prior fiscal year. Any unvested equity awards would be forfeited. Under Mr. Sellers’ agreement, “cause” generally includes (i) willful and continued failure by Mr. Sellers to substantially perform his duties, (ii) willful conduct that is injurious to the Company monetarily or otherwise, and (iii) conduct involving serious moral turpitude. Under Mr. Sellers’ agreement “good reason” generally includes (i) a material adverse change in Mr. Sellers’ title or position,

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including the duties he performs, (ii) a reduction or the failure to pay Mr. Sellers’ base salary, guaranteed bonus or incremental bonus, (iii) the failure of the Company to grant or settle an equity award on previously determined terms, and (iv) the relocation of the Company’s offices to a location more than five miles from its current location.
     If Mr. Sellers is disabled or upon his death, he or his estate, respectively, would receive a lump sum cash payment, to the extent not previously paid, equal to the Accrued Obligations.
     Certain payments are contingent on Mr. Sellers’ execution and non-revocation of a release of claims against us and certain of our affiliates. Mr. Sellers is subject to one-year or two-year (depending on the date of termination) post-termination non-solicit and non-hire covenants and a one-year post-termination non-competition covenant.
TAX IMPLICATIONS OF COMPENSATION
     In making compensation decisions, the Archstone-Smith Compensation Committee took into account the applicability of and the limitations imposed by Section 162(m) of the Internal Revenue Code on the deductibility of compensation paid to certain executives to the extent such compensation exceeds $1 million per executive. The law exempts compensation paid under plans that relate compensation to performance. Although our plans were designed to relate compensation to performance, certain elements of the plans may not meet the tax law’s requirements because they allowed the Archstone-Smith Compensation Committee to exercise discretion in setting compensation.
2006 AND 2007 EXECUTIVE COMPENSATION
     The following table sets forth the information required by Item 402 of Regulation S-K, promulgated by the SEC. The amounts shown represent a summary of all compensation paid to our Named Executive Officers for the fiscal years ended December 31, 2007 and 2006. The cash bonuses awarded to the Named Executive Officer on February 23, 2007 (as part of 2006 compensation) and January 4, 2008 (as part of 2007 compensation), are included in the Summary Compensation Table below, under the “Bonus” or “Non-Equity Incentive Plan Compensation” column, as appropriate. The basis for making both the RSU awards and the cash bonus awards to these officers is detailed in Notes (1), (2) and (3) to this table.

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SUMMARY COMPENSATION TABLE
                                                         
                                    Non-Equity        
                            Stock   Incentive Plan   All Other    
Name and Principal           Salary   Bonus   Awards   Compensation   Compensation   Total
        Position   Year   ($)   ($)(1)   ($)(2)   ($)(3)   ($)(4)   ($)
R. Scot Sellers, Chief Executive Officer
    2007     $ 750,000           $ 2,358,945           $ 35,636,045     $ 36,386,045  
 
    2006     $ 750,000     $ 1,750,000     $ 2,937,500           $ 602,034     $ 6,039,534  
 
                                                       
J. Lindsay Freeman, Chief Operating Officer
    2007     $ 450,000     $ 1,554,000     $ 772,257           $ 16,977,924     $ 18,981,924  
 
    2006     $ 450,000           $ 969,572     $ 554,000     $ 409,738     $ 2,383,310  
 
                                                       
Charles E. Mueller, Jr.
Chief Financial Officer
    2007     $ 446,493     $ 606,475     $ 614,827           $ 11,354,320     $ 12,407,288  
 
    2006     $ 380,000           $ 765,536     $ 475,300     $ 212,690     $ 1,833,526  
 
                                                       
Caroline Brower, General Counsel
    2007     $ 335,000     $ 310,000     $ 244,967           $ 5,885,582     $ 6,530,582  
 
    2006     $ 335,000           $ 304,933     $ 276,075     $ 90,721     $ 1,006,729  
 
                                                       
Alfred G. Neely, President – Charles E. Smith Residential Division & Chief Development Officer
    2007     $ 390,000     $ 436,000     $ 475,005           $ 3,455,939     $ 4,281,939  
 
    2006     $ 375,000     $ 412,500     $ 550,012           $ 102,185     $ 1,439,697  
 
(1)   Includes amounts earned in 2007 that were paid in 2008 and 2006 that were paid in 2007, as applicable. Under the terms of his employment agreement, Mr. Sellers was not paid a cash bonus for 2007. The 2006 bonus amount for Mr. Sellers was based on the Compensation Committee’s determination that he had executed his managerial responsibilities as the company’s chief executive officer in an appropriate and exemplary manner. The 2007 cash bonus for Mr. Freeman was awarded at the same level as his 2006 cash bonus. The bonus for Mr. Mueller was awarded based on the significant role he played in negotiating the Merger Agreement and overseeing the overall transaction, as well as his oversight of the integration process after completion of the Merger. Ms. Brower was awarded a bonus at the High amount under the pre-Merger compensation program in accordance with the terms of her change in control agreement. Mr. Neely was awarded a 2007 cash bonus of $436,000, which is $150,000 over the target amount, and he was awarded a 2006 cash bonus of $412,500, or $137,500 over the target amount, based in each year on his excellent accomplishments with respect to the Company’s development projects.
 
(2)   Consists of the compensation expense recognized by the company in the applicable year related to long-term equity incentive awards computed in accordance with FAS 123R. The amounts include the expense recorded in the applicable year relating to the amortization of awards made in earlier years as well as the expense relating to the amortization of awards granted in such year. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For more information on this calculation, see note 11. The expense amounts shown for 2007 cover the expense taken from January 1, 2007 through the Merger on October 5, 2007. The cash received by each Named Executive Officer upon the redemption of all outstanding stock awards is included in the “All Other Compensation” column and, for purposes of calculating Total Compensation, we have not included the amounts for 2007 in the Stock Awards column to avoid double counting those payments.
 
(3)   Includes amounts earned in 2006 that were paid in 2007. Bonus amounts for 2006 for Messrs. Freeman and Mueller and Ms. Brower were based on our achieving TSR placing us in the 81st percentile, compared to the NAREIT Apartment Index, FFO growth relative to the NAREIT Apartment Index that resulted in an award at the target amount, and absolute FFO growth slightly above the target plus amount.

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(4)   Personal benefits paid on behalf of Mr. Sellers during 2007 in the amount of $273,903, which included (a) $266,142 in legal fees for counsel to represent him in the negotiation of his employment agreement, (b) $540 for parking, (c) $3,915 for supplemental disability insurance, (d) $490 for personal use of a cellphone, and (e) $432 for personal use of a country club membership. In accordance with Mr. Freeman’s severance and release agreement, we paid him $1,071,788 in lieu of an RSU award for 2007; this amount is equal to the RSU award made to Mr. Freeman for 2006. For Ms. Brower, this amount includes $1,290,000, which was paid to her in 2008 as a severance amount due under her change in control agreement. In addition, this amount also includes the following amounts:
2006 Amounts
                                         
    401(k)           Quarterly Cash        
    Company           Payments on   DEUs Earned    
     Officer   Match   Life Insurance   RSUs (a)   (b)   TOTAL
Mr. Sellers
  $ 4,537     $ 810     $ 119,307     $ 477,380     $ 602,034  
Mr. Freeman
  $ 4,537     $ 3,564     $ 60,992     $ 340,645     $ 409,738  
Mr. Mueller
  $ 4,537     $ 540     $ 31,120     $ 176,493     $ 212,690  
Ms. Brower
  $ 4,537     $ 2,322     $ 12,380     $ 71,482     $ 90,721  
Mr. Neely
  $ 4,537     $ 3,564     $ 24,814     $ 69,270     $ 102,185  
 
(a)   Quarterly cash payments equal in amount to the dividend paid on Archstone-Smith Common Shares were earned on outstanding RSUs granted in 2006.
 
(b)   DEUs were earned on January 1, 2007 on outstanding RSUs granted prior to 2006, DEUs previously earned and options granted between 1997 and 1999 as follows:
                                 
            DEUs earned on   DEUs earned    
    DEUs earned on Vested   Unvested RSUs   on Vested   Total DEUs
     Officer   RSUs and DEUs (#)   and DEUs (#)   Options (#)   earned (#)
Mr. Sellers
    6,650       1,020       531       8,201  
Mr. Freeman
    4,729       333       790       5,852  
Mr. Mueller
    2,765       267             3,032  
Ms. Brower
    372       105       751       1,228  
Mr. Neely
    988       202             1,190  

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2007 Amounts
                                                 
                            Cash        
                    Quarterly   Award in        
    401(k)           Cash   Lieu of        
    Company   Life   Payments   2007 RSU   Merger-Related    
     Officer   Match   Insurance   on RSUs (a)   Grant (b)   Compensation (c)   TOTAL
Mr. Sellers
  $ 6,750     $ 1,242     $ 112,587     $ 818,321     $ 34,423,242     $ 35,362,142  
Mr. Freeman
    6,750       3,564       48,270             15,847,552       15,906,136  
Mr. Mueller
    6,750       540       29,304       212,424       11,105,302       11,354,320  
Ms. Brower
    6,750       2,322       9,581       85,644       4,491,318       4,595,615  
Mr. Neely
    6,750       3,564       18,638       162,516       3,264,471       3,455,939  
 
(a)   Two quarterly cash payments, equal in amount to the dividend paid on Archstone-Smith Common Shares, were earned in February and May, 2007 on outstanding RSUs granted in 2007.
 
(b)   This amount equals 25% of the 2006 RSU award made to the Named Executive Officer.
 
(c)   Amounts include the following:
                                                         
    Performance                   Share   Cash in lieu   Cash in lieu    
    Unit   RSU   DEU   Option   of 2007   of 2007    
     Officer   Cashout(a)   Cashout(a)   Cashout(a)   Cashout(a)   RSUs(b)   DEUs(a)(c)   TOTAL
Mr. Sellers
  $ 10,382,661     $ 13,137,066     $ 140,136     $ 8,223,212     $ 2,454,962     $ 85,205     $ 34,423,242  
Mr. Freeman
  $ 3,075,955     $ 10,910,457     $ 1,721,234                 $ 139,906     $ 15,847,552  
Mr. Mueller
  $ 2,422,589     $ 5,810,981     $ 31,537     $ 2,145,189     $ 637,273     $ 57,733     $ 11,105,302  
Ms. Brower
  $ 1,730,464     $ 823,588     $ 391,503     $ 1,273,453     $ 256,931     $ 15,379     $ 4,491,318  
Mr. Neely
        $ 2,447,435     $ 307,155           $ 487,484     $ 22,397     $ 3,264,471  
 
(a)   Payments were calculated as follows: (i) $60.75 for each vested and unvested RSU, DEU, and performance unit outstanding on October 4, 2007, and (ii) $60.75 less the strike price for each share option outstanding on October 4, 2007.
 
(b)   This amount equals 75% of the 2006 RSU award made to the Named Executive Officer.
 
(c)   This amount represents the value of DEUs that would have been earned on the deemed 2007 RSU award.
GRANTS OF PLAN BASED AWARDS
     The following table sets forth information with respect to plan-based awards granted in or for 2007 to the Named Executive Officers. The “Estimated Possible Payouts under Non-Equity Incentive Plan Awards” column in the table reflects the target, target plus and high amounts that Messrs. Freeman and Mueller and Ms. Brower were eligible to earn as an annual cash bonus for 2007. The “Estimated Possible Payouts under Equity Incentive Plan Awards” column in the table reflects the threshold, target and high amounts that Messrs. Sellers, Freeman and Mueller and Ms. Brower were eligible to earn as an annual RSU award for 2007. See Compensation Discussion and Analysis – Historical Criteria for Awards – Annual and Long Term Incentives – Cash Bonus and RSU Grants for 2006.” The “All Other Stock Awards” column reflects the RSUs awarded on February 23, 2007 as part of each officer’s compensation for 2006. Information regarding the performance units awarded under our special long-term incentive program on October 4, 2005 is included in Compensation Discussion and Analysis – Historical Criteria for Awards – Annual and Long Term Incentives – Performance Units–Special Long Term Incentive Program.”

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                                                            All Other    
            Estimated Possible Payouts Under Non-   Estimated Possible Payouts Under   Stock Awards:    
            Equity Incentive Plan Awards(1)   Equity Incentive Plan Awards(1)   Number of   Grant Date
            Threshold   Target   Maximum   Threshold   Target   Maximum   Shares of Stock   Fair Value of
     Name   Grant Date   ($)   ($)   ($)   ($)   ($)   ($)   or Units (#)(2)   Award ($)(3)
Mr. Sellers
                                  1,207,500       2,415,000       3,622,500                  
 
    2/23/07                                                       68,567       3,125,284  
 
    10/5/07                                                       4,800         (4)   
 
    10/5/07                                                       100         (4)   
 
    10/5/07                                                       100         (4)   
 
    10/5/07                                                       100         (4)   
 
                                                                       
Mr. Freeman
          360,000       480,000       640,000       525,000       840,000       1,155,000                  
 
    2/23/07                                                       22,492       1,025,185  
 
                                                                       
Mr. Mueller
          315,000       475,000       635,000       355,000       710,000       1,070,000                  
 
    2/23/07                                                       17,885       815,198  
 
                                                                       
Ms. Brower
          180,000       245,000       310,000       157,500       262,500       367,500                  
 
    2/23/07                                                       7,115       324,302  
 
                                                                       
Mr. Neely
    2/23/07                                                       14,261       650,016  
 
(1)   These columns consist of the potential annual cash bonus awards and annual stock awards under our Long Term Incentive Plan for fiscal 2007 pursuant to the performance levels established by the Compensation Committee in October 2005 and, for Mr. Mueller, in mid-2006. For cash awards, the “Threshold,” “Target,” and “Maximum” columns represent the amounts payable when the “Target,” “Target Plus,” and “High” performance, respectively, is met, as described in Compensation Discussion & Analysis — Historical Criteria for Awards – Annual and Long Term Incentives – Cash Bonus and RSU Grants for 2006.” For stock awards, the “Threshold,” “Target,” and “Maximum” columns represent the amounts payable when the “Threshold,” “Target,” and “High” performance, respectively, is met, as described in Compensation Discussion & Analysis — Historical Criteria for Awards – Annual and Long Term Incentives – Cash Bonus and RSU Grants for 2006.” Two additional performance levels, Threshold Plus, and Target Plus, for the stock awards are not reflected in this table, but are described in Compensation Discussion & Analysis — Historical Criteria for Awards – Annual and Long Term Incentives – Cash Bonus and RSU Grants for 2006.” Actual cash bonus amounts received for fiscal 2007 are discussed in Compensation Discussion & Analysis After October 5, 2007 – Compensation Objectives, Elements of Compensation, Criteria for Award.” The Named Executives Officers received cash payments in lieu of 2007 RSU awards, which are discussed in Compensation Related to the October 5, 2007 Merger” and “Compensation Discussion & Analysis After October 5, 2007 – Compensation Objectives, Elements of Compensation, Criteria for Award.
 
(2)   Reflects the RSU awards made on February 3, 2007 pursuant to the Company’s Long Term Incentive Plan for performance in 2006. The Compensation Committee approved the performance levels for these awards on October 4, 2005. These RSU awards were to vest ratably on December 4, 2007, December 4, 2008 and December 4, 2009. All RSUs vested in connection with the Merger and the holders received $60.75 per RSU.
 
(3)   Through 2006, the grant date fair value on grants made under the Long-Term Incentive Plan was defined as the closing price of Archstone-Smith Common Shares on the New York Stock Exchange on the business day immediately preceding the grant date. Beginning January 1, 2007, the grant date fair value was defined as the closing price of Archstone-Smith Common Shares on the New York Stock Exchange on the date of grant. The relevant closing price for grants made on February 23, 2007 was $53.05.
 
(4)      Pursuant to his employment agreement, Mr. Sellers was awarded 4,800 Class C Units in Tishman Speyer Archstone-Smith Multifamily Participants, L.L.C, an affiliate of the Venture, and 100 Class B Units in each of Tishman Speyer Archstone-Smith Junior Mezz Borrower, L.P., Tishman Speyer Archstone-Smith Parallel Guarantor, L.P., Tishman Speyer Archstone-Smith Parallel Guarantor, I L.P., and Tishman Speyer Archstone-Smith Parallel Guarantor II, L.P. The Class B Units and Class C Units were issued on October 5, 2007. There is no public market for these units, which has made it difficult for the company to complete as of the filing date the calculations required to establish a grant date fair value. Furthermore, such units were issued by the Venture or affiliates rather than Archstone.

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth information with respect to outstanding equity awards held by the Named Executive Officers as of December 31, 2007:
                                                         
    Option Awards     Stock Awards  
                            Number                     Equity Incentive  
                            of Shares             Equity Incentive     Plan Awards:  
    Number of                     or Units             Plan Awards:     Market or Payout  
    Securities                     of Stock     Market value     Number of     value of  
    Underlying                     that have     of Shares or     Unearned Shares,     Unearned Shares,  
    Unexercised     Option     Option     Not     Units of Stock     Units or Other     Units or Other  
    Options (#)     Exercise     Expiration     Vested     that have not     Rights that have     Rights that have  
Officer   Exercisable     Price ($)     Date     (#)     Vested ($)     not Vested (#)     not Vested ($)  
Mr. Sellers 
                                            4,800         (1)
Mr. Sellers 
                                            100         (1)
Mr. Sellers 
                                            100         (1)
Mr. Sellers 
                                            100         (1)
 
(1)   Pursuant to his employment agreement, Mr. Sellers was awarded 4,800 Class C Units in Tishman Speyer Archstone-Smith Multifamily Participants, L.L.C, an affiliate of the Venture, and 100 Class B Units in each of Tishman Speyer Archstone-Smith Junior Mezz Borrower, L.P., Tishman Speyer Archstone-Smith Parallel Guarantor, L.P., Tishman Speyer Archstone-Smith Parallel Guarantor, I L.P., and Tishman Speyer Archstone-Smith Parallel Guarantor II, L.P. The Class B Units and Class C Units were issued on October 5, 2007. There is no public market for these units, which has made it difficult for the company to complete as of the filing date the calculations required to establish a grant date fair value. Furthermore, such units were issued by the Venture or affiliates rather than Archstone.

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OPTION EXERCISES AND STOCK VESTED
The following table sets forth information with respect to the exercise of stock options during 2007, and the vesting of restricted stock as of December 31, 2007 by the Named Executive Officers.
                                 
    Option Awards   Stock Awards
    Number of Shares   Value Realized on   Number of Shares    
    Acquired on   Exercise   Acquired on Vesting   Value Realized on
Officer   Exercise (#)(1)   ($)(1)   (#)(2)   Vesting ($)(2)
Mr. Sellers
    218,354     $ 8,223,212       302,380     $ 18,369,585  
Mr. Freeman
                94,421     $ 5,736,076  
Mr. Mueller
    56,962     $ 2,145,189       74,355     $ 4,517,066  
Ms. Brower
    32,761     $ 1,273,453       28,762     $ 1,747,292  
Mr. Neely
                40,679     $ 2,471,256  
 
(1)   The share options included in this column became fully vested in connection with the Merger; valuation is based on the product of the number of shares subject to the option and the excess, if any, of $60.75 per share, over the exercise price per share of the option.
 
(2)   This column includes the value of all performance units, RSUs and DEUs that were vested, or became fully vested, in connection with the Merger. The amounts paid for performance units is described above in Compensation Related to October 5, 2007 Merger.” The valuation included in the table below for RSUs and DEUs is based on a redemption price of $60.75 per RSU or DEU.
                                 
Officer   RSUs   DEUs   Total RSU/DEUs   Value Realized
Mr. Sellers
    130,377       995       131,372     $ 7,980,872  
Mr. Freeman
    42,693       1,095       43,788     $ 2,660,109  
Mr. Mueller
    33,958       519       34,477     $ 2,094,486  
Ms. Brower
    13,557       205       13,762     $ 836,013  
Mr. Neely
    40,287       392       40,679     $ 2,471,256  
    The foregoing table also includes the following DEUs that became vested on January 1, 2007, with the values indicated based on the December 29, 2006 closing price of Archstone-Smith Common Shares of $58.21: Mr. Mueller, 701 units, valued at $40,781; Ms. Brower, 10,190 units valued at $593,160; and Mr. Neely, 901 units valued at $52,437.

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NON-QUALIFIED DEFERRED COMPENSATION
     As described in more detail in Compensation Discussion and Analysis Prior to October 5, 2007 Merger — Other Compensation Features – Deferred Compensation”, our Named Executive Officers could elect to participate in our Deferred Compensation Plan until the Merger, at which time the Deferred Compensation Plan was terminated. The Named Executive Officers could elect to defer payment of up to 75 percent of base salary, 90 percent of cash bonuses and certain amounts which could not be contributed to our 401(k) Plan due to Internal Revenue Code limitations. We did not match contributions made by any employee, including the Named Executive Officers, to the Deferred Compensation Plan. Deferrals could be made to the Deferred Compensation Plan from cash compensation paid in the form of current base salary, annual cash bonuses, and excess 401(k) Plan contributions. In addition, RSUs and DEUs that had been awarded to a Named Executive Officer could, upon vesting, be deferred to the Deferred Compensation Plan either in the form of RSUs and DEUs or the cash equivalent. Cash equivalents are subject to FICA taxation prior to transfer into the Deferred Compensation Plan. All amounts deferred represent cash compensation earned in 2007 and DEUs which vested in 2007. The following table sets forth information with respect to non-qualified deferred compensation of the Named Executive Officers as of December 31, 2007.
                                                                         
    Executive Contributions in           Aggregate Earnings in           Aggregate Balance at Last FYE ($)
    Last FY ($)           Last FY ($)   Aggregate   Aggregate   Aggregate    
    Deferred   Deferred   Registrant   Deferred   Deferred   Withdrawals/   Deferred   Deferred   Aggregate
    Stock   Cash   Contributions in   Stock   Cash   Distributions   Stock   Cash   Balance of
     Name   Awards(1)   Amounts(2)   Last FY ($)   Awards(1)   Amounts(3)   ($)(4)   Awards   Amounts   all Deferrals
Mr. Sellers
        $ 5,328     $ 0           $ 1,036,980     $ 12,717,612     $ 0     $ 0     $ 0  
Mr. Freeman
              $ 0           $ 145,075       2,632,060     $ 0     $ 0     $ 0  
Mr. Mueller
              $ 0           $ 123,629       1,221,215     $ 0     $ 0     $ 0  
Ms. Brower
        $ 105,017     $ 0           $ 115,101       1,827,023     $ 0     $ 0     $ 0  
Mr. Neely
        $ 38,623     $ 0           $ 59,353       646,056     $ 0     $ 0     $ 0  
 
(1)   None of the Named Executive Officers deferred any RSUs or DEUs into the Deferred Compensation Plan during 2007.
 
(2)   This column includes amounts deferred by Mr. Sellers from the refund of excess 401(k) contributions; by Ms. Brower from her salary, cash bonus, the quarterly cash settlement of RSUs, and the refund of excess 401(k) contributions; and Mr. Neely from his salary, quarterly cash payments on RSUs, and the refund of excess 401(k) contributions. All of the foregoing amounts are included in the Summary Compensation Table under “All Other Compensation”.
 
(3)   Includes earnings or losses on mutual fund investments.
 
(4)   Withdrawals for 2007 represent the amounts paid to each Named Executive Officer in connection with the termination of the Deferred Compensation Plan as of the Merger on October 5, 2007.

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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
     The members of the Compensation Committee and the Series I Trust Compensation Committee are set forth under “Compensation Discussion and Analysis – Introduction.” The Series I Trust Compensation Committee consists of Mr. Augarten. Mr. Augarten has not served as an officer of the Company or any of its subsidiaries. Except as described under “Certain Relationships and Related Transactions,” no member of the Series I Trust Compensation Committee or the Compensation Committee prior to the Merger, has or had any other business relationship or affiliation with the Company or any of its subsidiaries (other than his or her service as a Trustee).
COMPENSATION COMMITTEE REPORT
     Series I Trust Compensation Committee, has reviewed and discussed with management the Compensation Discussion and Analysis. Based on that review and discussion, the Series I Trust Board approved the inclusion of the Compensation and Discussion Analysis in the Company’s Annual Report for 2007.
David Augarten
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
     None of our securities are authorized for issuance in connection with any equity compensation plan.
     None of the Trustees of Series I Trust and none of our executive officers hold any of our securities. The following table sets forth, as of March 20, 2008, the beneficial ownership of Common Units for each person known to us to have been the beneficial owner of more than five percent of the outstanding Common Units. The address for each of the listed beneficial owners is 9200 E. Panorama Circle, Englewood, Colorado. All of the Common Units are pledged as collateral for the Tranche A Term Loan and the Tranche B Term Loan.
                 
    Number of Common Units   Percentage of all
Name of Beneficial Owner   Beneficially Owned   Common Units
Series I Trust
    7,444,435       18.81 %
Series II LLC
    25,202,745       63.70 %
Series III LLC
    6,917,971       17.49 %
 
               
TOTAL
    39,565,151       100 %
 
               
     See “Item 11. Executive Compensation” for information regarding change of control provisions.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Shareholders’ Agreement
     In connection with our merger with the Smith Partnership in 2001, we entered into a Shareholders’ Agreement with Robert H. Smith and Robert P. Kogod, pursuant to which Robert H. Smith, Robert P. Kogod and Ernest A. Gerardi, Jr. became members of the Archstone-Smith Board. In accordance with the Shareholders’ Agreement, throughout Mr. Smith’s employment with us he was entitled to receive an annual minimum salary of $300,000 and an annual minimum bonus of $150,000. Throughout Mr. Kogod’s employment with us he was entitled to receive an annual minimum salary of $100,000. In addition, during each year of his employment with us, Mr. Smith was entitled to receive options to purchase not less than 100,000 of our Common Shares. The Shareholders’ Agreement terminated on October 5, 2007.
Related Party Transaction Policy
     The Archstone-Smith Board adopted a written policy for the approval of all “related person” transactions that remain applicable to us. Under this policy, “related persons” include trustees, executive officers, immediate family members of trustees and executive officers, certain entities in which a trustee, executive officer, or one of the immediate family members is employed, is a principal or owns a controlling interest, charities in which a trustee, executive officer or one of the immediate family members is employed or is on the managing board, and

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shareholders who held more than 5% of Archstone-Smith’s Common Shares upon conversion of their Units. Other than certain pre-approved transactions described in the policy, any transaction in which we are a participant and in which any related person (other than a shareholder) has a material interest having a value in excess of $120,000 must be reviewed and approved by the Archstone-Smith Board’s Audit Committee (now the Series I Trust Board’s Audit Committee).
Related Party Transactions
     On April 8, 2002, we entered into an Office Space Easement and Cost Sharing Arrangement with CESM, Inc. and others. CESM, Inc. is controlled by, Mr. Smith and Mr. Kogod, who were trustees of Archstone-Smith until October 5, 2007.  During 2007, CESM, Inc. paid to us a total of $23,325 for office services provided by us to CESM, Inc. and $26,607 for certain employee expenses. For that same period, we paid to CESM, Inc. $200,720 for a portion of the rent due for the executive suites that CESM, Inc. leases and that was utilized by Mr. Smith and Mr. Kogod while working for us and $35,771 for certain employee expenses to support Mr. Smith and Mr. Kogod. Messrs. Smith and Kogod ceased to be related persons on October 5, 2007.
     Affiliates of the lenders under the Master Credit Facility, the Fannie Mae Mezzanine Lenders and the Freddie Mac Mezzanine Lenders hold limited partnership interests in the Venture and an affiliate of Lehman Brothers Inc. holds a limited partnership interest in the general partner of the Venture. We have paid fees of approximately $216 million to the Buyer Parties and the lenders under the Master Credit Facility in connection with the Merger. As of December 31, 2007 and March 20, 2008, respectively, there was a total of $5.6 billion and $5.6 billion, respectively, outstanding under the Master Credit Facility, the Fannie Mae Mezzanine loans and the Freddie Mac Mezzanine loans. Through December 31, 2007, we paid $76.8 million in interest and $237.7 million in principal under these facilities. Please refer to “Item 15. Financial Statements – Note 8 – Borrowings” for a description of the terms.
     The lease for our corporate office, which was negotiated prior to the Merger, is with an affiliate of Tishman Speyer. For the period from October 5, 2007 through December 31, 2007 we paid $463,918 in rent to that affiliate.
     We have intercompany transactions with affiliated entities and record a receivable from affiliated entities when they borrow from Archstone or we pay billings on their behalf. We charge interest on balances owned by affiliates to Archstone at the same rate that we are paying and therefore do not recognize any profit from our affiliated entities. As of December 31, 2007, there was an aggregate of $393.8 million outstanding under all such transactions. Furthermore, Archstone’s employees render services for affiliated entities where Archstone is reimbursed based on an estimate of the allocable cost. We also record a payable to our affiliates when we receive funds on the affiliated entity’s behalf or the affiliate pays bills on our behalf. As of December 31, 2007 there was an aggregate of $256.7 million outstanding under such transactions.
     Our Chief Executive Officer has entered into an employment agreement which includes equity awards granted by the Venture or affiliated entities. Please refer to “Item 11. Executive Compensation – Employment Agreement with R. Scot Sellers.”
Pre-Merger Trustee Independence
     The Archstone-Smith Board undertook its annual review of trustee independence in March 2007. In determining independence, the Archstone-Smith Board affirmatively determined whether Trustees had any “material relationship” with Archstone-Smith. When assessing the “materiality” of a Trustee’s relationship with Archstone-Smith, the Board considered, among other things, the independence standards set forth in the New York Stock Exchange corporate governance listing standards (including the special requirements for members of the Audit Committee) and all other relevant facts and circumstances, not merely from the Trustee’s standpoint, but from that of the persons or organizations with which the Trustee had an affiliation, including transactions and relationships between each Trustee or any member of his or her immediate family and Archstone-Smith and its subsidiaries and affiliates, between Trustees or their affiliates and members of Archstone-Smith’s senior management or their affiliates and those items reported under “Certain Relationships and Transactions”. The Board also examined the frequency or regularity of the services underlying any such transactions, whether the services were being carried out at arm’s length in the ordinary course of business and whether the services were being provided substantially on the same terms to Archstone-Smith as those prevailing at the time from unrelated parties for comparable transactions. Material relationships can include certain commercial, banking, industrial, consulting, legal, accounting, charitable and familial relationships. During the Archstone-Smith Board’s review of independence of Trustees, the Board

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examined the relationships each of the Trustees had with Archstone-Smith and any of its affiliates and affirmatively determined, based on that examination and the criteria described above, that each of Ms. Gillis and Messrs. Cardwell, Demeritt, Gerardi, Holmes, Polk, Richman and Schweitzer had no material relationship with Archstone-Smith and each was “independent” in accordance with the applicable corporate governance listing standards of the New York Stock Exchange. The Board also determined that Messrs. Sellers, Smith and Kogod were not “independent”, because of their employment with Archstone-Smith.
Post-Merger Trustee Independence
     Effective as of October 5, 2007, Series I Trust and the Trustee of Series I Trust are not independent.
Item 14. Principal Accounting Fees and Services
     The Audit Committee has selected KPMG LLP, certified public accountants, to serve as the auditors of our books and records for the coming year. KPMG LLP has served as our auditors since 1980.
     The fees billed by KPMG LLP in 2007 and 2006 for services provided to Archstone-Smith were as follows:
                 
    2007     2006  
Audit Fees(1)
  $ 1,735,450     $ 1,459,722  
Audit-Related Fees(2)
    185,000       202,421  
Tax Fees(3)
    341,861       93,508  
All Other Fees(4)
           
 
           
TOTAL
  $ 2,262,311     $ 1,755,651  
 
           
 
(1)   “Audit Fees” are the aggregate fees billed by KPMG LLP for professional services rendered for the audit of Archstone-Smith’s annual financial statements for the years ended December 31, 2007 and December 31, 2006 and the reviews of the financial statements included in Archstone-Smith’s quarterly reports on Form 10-Q during 2007 and 2006. These fees include fees billed in connection with KPMG LLP’s analysis of the effectiveness of our internal controls. “Audit Fees” for 2006 also includes amounts billed relating to our international operations, which totaled $96,622. In addition, “Audit Fees” includes amounts billed for registration statements filed and related comfort letters and consents amounting to $45,490 and $96,300 in 2007 and 2006, respectively.
 
(2)   “Audit-related fees” include fees billed for assurance and related services that are reasonably related to the performance of the audit and not included in the “audit fees” described above, including audits of joint ventures and unconsolidated and consolidated subsidiaries.
 
(3)   “Tax Fees” are fees billed by KPMG LLP in either 2007 or 2006 for tax services, including tax compliance, tax advice or tax planning.
 
(4)   “All Other Fees” are fees billed by KPMG LLP in 2007 or 2006 that are not included in the above classifications.
     All services provided by KPMG LLP in 2007 and 2006 were permissible under applicable laws and regulations and have been, pre-approved by the Archstone-Smith Audit Committee. All audit and permissible non-audit services are pre-approved by the Archstone-Smith Audit Committee or fall within guidelines that have been pre-approved by the Archstone-Smith Audit Committee. In particular, the Archstone-Smith Audit Committee approved the engagement of KPMG LLP for non-audit services, consisting of certain specified tax-related services during 2005, 2006 and 2007, provided that the fees for these services did not exceed $400,000 in the aggregate or $100,000 for any one service.

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Part IV
Item 15. Exhibits and Financial Statement Schedules
(a) Financial Statements and Schedules:
1. Financial Statements
See Index to Financial Statements and Schedules on page 83 of this report, which is incorporated herein by reference.
2. Financial Statement Schedules:
See Schedule III on page 127 of this report, which is incorporated herein by reference.
See Schedule IV on page 129 of this report, which is incorporated herein by reference.
All other schedules have been omitted since the required information is presented in the financial statements and the related notes or is not applicable.
3. Exhibits
See Index to Exhibits on page 142 of this report, which is incorporated herein by reference.
(b) Exhibits:
The Exhibits required by Item 601 of Registration S-K are listed in the Index to Exhibits on page 141 of this Annual Report, which is incorporated herein by reference.
The accompanying notes are an integral part of these consolidated financial statements.

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INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
         
    Page
    84  
    85  
    86  
    87  
    88  
    89  
Report of Independent Registered Public Accounting Firm on Supplementary Information
    126  
Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2007
    127  
Schedule IV – Mortgage Loans on Real Estate as of December 31, 2007
    129  
Signatures
    130  
Index to Exhibits
       
The accompanying notes are an integral part of these consolidated financial statements.

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Report of Independent Registered Public Accounting Firm
The Trustee of Archstone and the Board of Trustees of the Trustee
     We have audited the consolidated balance sheet of Archstone and subsidiaries (Successor) as of December 31, 2007 and the consolidated balance sheet of Archstone-Smith Operating Trust and subsidiaries (Predecessor) as of December 31, 2006, and the related consolidated statements of operations, unitholders’ equity, other common unitholders’ interest, preferred units and comprehensive income (loss) of the Successor for the period October 5, 2007 through December 31, 2007 and of the Predecessor for the period January 1, 2007 through October 4, 2007 and for the years ended December 31, 2006 and 2005, and the related consolidated and combined statement of cash flows of the Successor and the Predecessor for the year ended December 31, 2007 and the related consolidated statements of cash flows of the Predecessor for the years ended December 31, 2006 and 2005. These consolidated and combined financial statements are the responsibility of Archstone and subsidiaries management. Our responsibility is to express an opinion on these consolidated and combined financial statements based on our audits.
     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
     In our opinion, the consolidated and combined financial statements referred to above present fairly, in all material respects, the financial positions of the Successor as of December 31, 2007 and of the Predecessor as of December 31, 2006, and the results of the Successor’s operations for the period October 5, 2007 through December 31, 2007 and the results of the Predecessor’s operations for the period January 1, 2007 through October 4, 2007 and for the years ended December 31, 2006 and 2005, and the cash flows of the Successor and Predecessor for the year ended December 31, 2007 and of the Predecessor for the years ended December 31, 2006 and 2005, in conformity with U.S. Generally Accepted Accounting Principles.
/s/ KPMG LLP
Denver, Colorado
March 31, 2008

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CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data)
                   
    Successor       Predecessor  
    December 31,       December 31,  
    2007       2006  
ASSETS
                 
Real estate
  $ 14,680,182       $ 12,967,709  
Real estate — held for sale
    388,890         219,931  
Less accumulated depreciation
    77,384         957,146  
 
             
 
    14,991,688         12,230,494  
Investments in and advances to unconsolidated entities
    297,113         235,323  
 
             
Net real estate investments
    15,288,801         12,465,817  
Cash and cash equivalents
    22,422         48,655  
Restricted cash
    579,097         319,312  
Due from affiliated entities
    393,841          
Other assets
    870,498         425,343  
 
             
Total assets
  $ 17,154,659       $ 13,259,127  
 
             
 
                 
LIABILITIES AND UNITHOLDERS’ EQUITY
                 
 
                 
Liabilities:
                 
 
                 
Revolving credit facilities
  $ 60,000       $ 84,723  
Long-term Unsecured Debt
            3,339,462  
Long-term Unsecured Debt – held for sale
            16,237  
Term Loan – International
            235,771  
Term loan – domestic
    4,591,822          
Property mortgages payable
    9,194,835         2,743,081  
Property mortgages payable — held for sale
    17,813         33,153  
Due to affiliated entities
    256,666          
Accounts payable
    25,690         71,967  
Accrued expenses and other liabilities
    488,945         432,395  
 
             
Total liabilities
    14,635,771         6,956,789  
 
                 
Series O and other Preferred Units (3,878,131 units, Liquidation value of $61.75 per unit)
    235,944          
Other common unitholders’ interest, at redemption value (A-1 Common Units: 29,514,128 in 2006)
            1,718,017  
 
               
 
                 
Unitholders’ equity (450,000,000 units authorized):
                 
Perpetual Preferred Units (Liquidation value of $103,830 per unit)
    50,000         50,000  
Common unitholders’ equity (39,565,151 units in 2007 and 220,147,167 units in 2006)
    2,635,056         4,530,801  
Accumulated other comprehensive income
    5,906         3,520  
Retained deficit
    (408,018 )        
 
             
Total unitholders’ equity
    2,282,944         4,584,321  
 
             
Total liabilities and unitholders’ equity
  $ 17,154,659       $ 13,259,127  
 
             
The accompanying notes are an integral part of these consolidated financial statements.

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ARCHSTONE
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit amounts)
                                   
    Successor       Predecessor  
    Period from       Period from        
    October 5, 2007       January 1, 2007        
    through       through     Year Ended  
    December 31,       October 4,     December 31,     December 31,  
    2007       2007     2006     2005  
Revenues:
                                 
Rental revenues
  $ 213,777       $ 644,330     $ 682,415     $ 457,825  
Other income
    41,494         45,831       77,410       56,030  
 
                         
 
    255,271         690,161       759,825       513,855  
 
                         
 
                                 
Expenses:
                                 
Rental expenses
    49,024         157,452       163,195       106,657  
Real estate taxes
    27,324         62,263       62,627       41,983  
Depreciation on real estate investments
    162,427         166,896       177,264       115,997  
Interest expense
    255,709         166,528       161,231       75,968  
General and administrative expenses
    24,160         60,605       68,188       58,604  
Other expenses
    4,689         40,768       17,705       53,276  
 
                         
 
    523,333         654,512       650,210       452,485  
 
                         
 
                                 
Earnings (loss) from operations
    (268,062 )       35,649       109,615       61,370  
Income (loss) from unconsolidated entities
    (7,680 )       (5,294 )     36,316       22,432  
Other non-operating income (loss)
    (124,460 )       25,531       2,338       28,807  
 
                         
Net earnings (loss) before discontinued operations
    (400,202 )       55,886       148,269       112,609  
Net earnings (loss) from discontinued operations
    (7,816 )       714,831       686,806       588,895  
 
                         
Net earnings (loss)
    (408,018 )       770,717       835,075       701,504  
 
                               
Preferred Unit Distributions
    -0-         (2,917 )     (3,829 )     (4,572 )
Undeclared and unaccrued Preferred Unit Distributions
    (5,457 )       -0-       -0-       -0-  
 
                         
Net earnings attributable to Common Units — Basic
  $ (413,475 )       767,800       831,246       696,932  
 
                               
Interest on Convertible Debt
              20,216       11,139        
 
                           
Net earnings attributable to Common Units — Diluted
            $ 788,016     $ 842,385     $ 696,932  
 
                           
Weighted average Common Units outstanding:
                                 
Basic
              250,223       248,314       231,642  
 
                           
Diluted
              260,026       253,308       232,608  
 
                           
 
                                 
Net earnings per Common Units — Basic:
                                 
Net earnings before discontinued operations
            $ 0.21     $ 0.58     $ 0.47  
Discontinued operations, net
              2.86       2.77       2.54  
 
                           
Net earnings
            $ 3.07     $ 3.35     $ 3.01  
 
                           
 
                                 
Net earnings per Common Unit — Diluted:
                                 
Net earnings before discontinued operations
            $ 0.21     $ 0.58     $ 0.47  
 
                                 
Discontinued operations, net
              2.82       2.75       2.53  
 
                           
Net earnings
            $ 3.03     $ 3.33     $ 3.00  
 
                           
 
                                 
Distributions paid per Common Unit
            $ 0.9050     $ 1.74     $ 1.73  
 
                           
The accompanying notes are an integral part of these consolidated financial statements.

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ARCHSTONE
CONSOLIDATED STATEMENTS OF UNITHOLDERS’ EQUITY, OTHER COMMON
UNITHOLDERS’ INTEREST, PREFERRED UNITS AND COMPREHENSIVE INCOME (LOSS)
Years Ended December 31, 2007, 2006 and 2005
(In thousands)
                                                                 
    Perpetual                                                  
    Preferred                                                  
    Units at                     Accumulated             Other              
    Aggregate     Common             Other     Total     Common     Series O        
    Liquidation     Unitholders’     Retained     Comprehensive     Unitholders’     Unitholders’     Preferred        
    Preference     Equity     Deficit     Earnings (Loss)     Equity     Interest     Units     Total  
Balances at December 31, 2004
  $ 69,522     $ 3,638,729           $ (4,425 )   $ 3,703,826     $ 885,400           $ 4,589,226  
Comprehensive income:
                                                               
Net earnings
          616,172                   616,172       85,332             701,504  
Change in fair value of cash flow hedges
                      4,211       4,211                   4,211  
Change in fair value of marketable securities
                      (1,214 )     (1,214 )                 (1,214 )
Foreign currency exchange translation
                      (292 )     (292 )                   (292 )
 
                                                             
Comprehensive income attributable to Common Units
                                                            704,209  
 
                                                             
Preferred Unit distribution
            (4,572 )                 (4,572 )                 (4,572 )
Common Unit distributions
          (353,623 )                 (353,623 )     (43,843 )           (397,466 )
A-1 Common Units converted into A-2 Common Units
          8,415                   8,415       (8,415 )            
A-2 Common Unit repurchases
            (56,495 )                 (56,495 )                 (56,495 )
Preferred Unit repurchases
    (19,522 )                       (19,522 )                 (19,522 )
Exercise of Options
          41,566                   41,566                   41,566  
Issuance of A-1 Common Units under Compensation Plans
          14,670                   14,670                   14,670  
Issuance of A-1 Common Units in exchange for real estate
                                  408,292             408,292  
Issuance of A-2 Common Units
            491,398                   491,398                   491,398  
Adjustment to redemption value
          (93,725 )                 (93,725 )     93,725              
Other, net
          (2,516 )                 (2,516 )                 (2,516 )
 
                                               
Balances at December 31, 2005
  $ 50,000     $ 4,300,019           $ (1,720 )   $ 4,348,299     $ 1,420,491           $ 5,768,790  
Comprehensive income:
                                                               
Net earnings
          727,434                   727,434       107,641             835,075  
Change in fair value of cash flow hedges
                      1,058       1,058                   1,058  
Change in fair value of marketable securities
                      1,638       1,638                   1,638  
Foreign currency exchange translation
                      2,544       2,544                   2,544  
 
                                                             
Comprehensive income attributable to Common Units
                                                            840,315  
 
                                                             
Preferred Unit distribution
            (3,829 )                 (3,829 )                 (3,829 )
Common Unit distributions
          (377,513 )                 (377,513 )     (55,079 )           (432,592 )
A-1 Common Units converted into A-2 Common Units
          143,404                   143,404       (143,404 )            
Issuance of Common Units under Dividend Reinvestment Plan
          27,100                   27,100                   27,100  
Exercise of Options
          27,716                   27,716                   27,716  
Issuance of A-1 Common Units in exchange for real estate
                                  81,401             81,401  
Accrual of equity-classified awards under Compensation Plans
          10,681                   10,681                   10,681  
Adjustment to redemption value
          (306,967 )                 (306,967 )     306,967              
Other, net
          (17,244 )                 (17,244 )                 (17,244 )
 
                                               
Balances at December 31, 2006
  $ 50,000     $ 4,530,801           $ 3,520     $ 4,584,321     $ 1,718,017           $ 6,302,338  
Comprehensive income:
                                                               
Net earnings
          686,371                   686,371       84,346               770,717  
Change in fair value of cash flow hedges
                      (60 )     (60 )                 (60 )
Reclassification adjustment for realized net gains on marketable securities
                      (1,794 )     (1,794 )                 (1,794 )
Change in fair value of marketable securities
                        (14 )     (14 )                 (14 )
Foreign currency exchange translation
                      8,263       8,263                   8,263  
 
                                                             
Comprehensive income attributable to Common Units
                                                            777,112  
 
                                                             
Preferred Unit distribution
          (2,917 )                 (2,917 )                 (2,917 )
Common Unit distributions
          (202,471 )                 (202,471 )     (25,397 )           (227,868 )
A-1 Common Units converted into A-2 Common Units
          55,378                   55,378       (55,378 )            
Issuance of Common Units under Dividend Reinvestment Plan
          20,493                   20,493                   20,493  
Exercise of Options
            11,489                   11,489                       11,489  
Issuance of A-1 Common Units in exchange for real estate
                                  1,067             1,067  
Accrual of equity-classified awards under Compensation Plans
          7,882                   7,882                       7,882  
Adjustment to redemption value
          69,810                   69,810       (69,810 )            
Common Unit Redemptions
                                  (1,416,901 )           (1,416,901 )
Other, net
          9,612                   9,612                   9,612  
 
                                               
Balances at October 4, 2007
  $ 50,000     $ 5,186,448           $ 9,915     $ 5,246,363     $ 235,944           $ 5,482,307  
Reclassification in connection with the Merger
          (2,551,392 )           (9,915 )     (2,561,307 )     (235,944 )     235,944       (2,561,307 )
Comprehensive income:
                                                               
Net loss
                (408,018 )           (408,018 )                 (408,018 )
Foreign currency exchange translation
                      5,906       5,906                   5,906  
 
                                                             
Comprehensive (loss) attributable to Common Units
                                                            (402,112 )
 
                                               
Balances at December 31, 2007
  $ 50,000     $ 2,635,056     $ (408,018 )   $ 5,906     $ 2,282,944     $     $ 235,944     $ 2,518,888  
                   
The accompanying notes are an integral part of these consolidated financial statements.

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ARCHSTONE
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
                           
    Combined          
    Successor and          
    Predecessor       Predecessor  
    Year Ended       Year Ended     Year Ended  
    December       December     December  
    31, 2007       31, 2006     31, 2005  
Operating activities:
                         
Net earnings
  $ 362,699       $ 835,075     $ 701,504  
Adjustments to reconcile net earnings to net cash flow provided by operating activities:
                         
Depreciation and amortization
    389,759         302,495       252,174  
Gains on dispositions of depreciated real estate
    (647,208 )       (602,915 )     (524,684 )
Gains on sale of marketable equity securities
    (1,867 )       (1,673 )     (27,948 )
Provisions for possible loss on investments
    7,490         4,328       9,803  
Gains on sale of International Fund shares
    (13,145 )              
Foreign currency gains on International investments
    (15,221 )              
Unrealized losses on derivatives
    130,176                
Equity in earnings from unconsolidated entities
    16,168         (6,118 )     6,605  
Interest accrued on Mezzanine loans
    (4,587 )       (9,781 )     (5,224 )
Change in other assets
    (199,624 )       (14,786 )     7,132  
Change in accounts payable, accrued expenses and other liabilities
    368,652         49,067       7,663  
Other, net
    18,063         (18,264 )     (13,006 )
 
                   
Net cash flow provided by operating activities
    411,355         537,428       414,019  
 
                   
Investing activities:
                         
Real estate investments, net
    (2,318,291 )       (2,216,598 )     (2,016,573 )
Purchase of DeWAG net of cash acquired of $20,364
            (252,428 )      
Change in investments in unconsolidated entities, net
    (43,464 )       (76,366 )     (10,991 )
Proceeds from disposal of International Fund shares
    98,857                
Change in investment in International Fund
    72,124                
Proceeds from dispositions
    1,995,941         1,888,341       1,538,839  
Change in restricted cash
    198,236         175,962       (375,179 )
Change in notes receivable, net
    (44,051 )       (82,414 )     (98,909 )
Proceeds from notes receivable
    89,300         46,081       36,654  
Other, net
    (33,995 )       11,158       (38,462 )
 
                   
Net cash flow provided by (used in) investing activities
    14,657       (506,264 )     (964,621 )
 
                   
Financing activities:
                         
Proceeds from Long-Term Unsecured Debt
    5,204,448         859,385       695,724  
Payments on Long-Term Unsecured Debt
    (3,552,067 )       (51,250 )     (251,250 )
Principal repayment of mortgages payable, including prepayment penalties
    (1,380,231 )       (324,700 )     (500,963 )
Regularly scheduled principal payments on mortgages payable
    (11,058 )       (12,949 )     (15,067 )
Proceeds from Unsecured Loans – International
    142,657         272,792        
Principal repayments on Unsecured Loans – International
    (378,428 )       (37,021 )      
Proceeds from mortgage notes payable
    9,832,621               33,807  
Proceeds from (payments on) unsecured credit facilities, net
    80,914         (309,855 )     375,578  
Change in amounts due from affiliated entities
    1,191,706                
Change in interest receivable from funds in escrow
    (9,467 )              
Change in restricted cash
    (486,949 )              
Proceeds from issuance of A-2 Common Units, net
                  491,398  
Proceeds from Common Units issued under DRIP and employee stock options
    29,933         57,773       41,566  
Repurchase of Common Units and Preferred Units
    (14,949,328 )             (56,495 )
Repurchase of Series E and F Perpetual Preferred Units
                  (19,522 )
Cash distributions paid on Common Units
    (227,868 )       (432,592 )     (417,267 )
Cash distributions paid on Preferred Units
    (2,916 )       (3,829 )     (4,572 )
Equity Contribution
    4,886,552                
Transaction costs related to the Merger
    (697,040 )              
 
                   
Termination of the Long Term Incentive Plan in connection with the Merger
    (134,626 )              
Other, net
    8,902         (13,901 )     (11,952 )
 
                   
Net cash flow provided by (used in) financing activities
    (452,245 )       3,853       360,985  
 
                   
Net change in cash and cash equivalents
    (26,233 )       35,017       (189,617 )
Cash and cash equivalents at beginning of period
    48,655         13,638       203,255  
 
                   
Cash and cash equivalents at end of period
  $ 22,422       $ 48,655     $ 13,638  
 
                   
These consolidated statements of cash flows combine cash flows from discontinued operations with cash flows from continuing operations. See Note 17 for supplemental information on non-cash investing and financing activities.
The accompanying notes are an integral part of these consolidated financial statements.

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ARCHSTONE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007, 2006 and 2005
(The glossary included in this Annual Report is hereby incorporated by reference)
(1) Description of Business and Summary of Significant Accounting Policies
Business
     Archstone’s business is focused primarily on creating value for our unitholders by acquiring, developing, redeveloping and operating apartments in markets characterized by protected locations with limited land for new housing construction, expensive single-family home prices, and a strong, diversified economic base with significant employment growth potential. As used herein, references to “Archstone,” the “Operating Trust”, “Company,” “company, “we” or “us” refer to Archstone (formerly Archstone-Smith Operating Trust), a Maryland real estate investment trust, organized in 2001.
Consummation of Merger
     As of October 4, 2007 approximately 89.5% of our outstanding Common Units were owned by Archstone-Smith and the remaining 10.5% of the outstanding Common Units were owned by minority interest holders. Archstone-Smith was a publicly traded equity REIT organized under the laws of the State of Maryland.
     On May 29, 2007, Archstone-Smith announced it had signed the Merger Agreement, whereby both Archstone-Smith and Archstone would be acquired by the Buyer Parties. The transactions contemplated by the Merger Agreement were consummated on October 4 and 5, 2007. As a result of the transactions contemplated by the Merger Agreement, the sole trustee of Archstone, effective as of October 5, 2007, is Series I Trust, which along with Series II LLC and Series III LLC owns 100% of Archstone’s outstanding Common Units.
     Under the terms of the Merger Agreement, all outstanding Common Shares of Archstone-Smith were acquired by Series I Trust, Series II LLC and Series III LLC for $60.75 in cash, without interest and less applicable withholding taxes, for each Common Share issued and outstanding immediately prior to the effective time of the Merger. With respect to the outstanding Series I Preferred Shares, the Buyer Parties elected to replace them with substantially identical Series I Preferred Shares of Series I Trust.
     As part of the transaction, Archstone merged on October 4, 2007 with River Trust Acquisition (MD), LLC, a subsidiary of the Buyer Parties. A total of 39.6 million Common Units remain outstanding. Approximately 3.9 million A-1 Common Units, held by less than 300 holders, were converted into newly issued Series O Preferred Units, whereas holders of approximately 22.2 million A-1 Common Units elected to exchange their A-1 Common Units for cash consideration of $60.75 without interest and less applicable withholding taxes. Each Series O Preferred Unit has a redemption price of $60.75 and bears cumulative preferential distributions payable quarterly at an annual rate of 6%. During any period of time after we incur indebtedness in excess of $10 million in principal amount (excluding draws on our line of credit or refinancings of existing indebtedness) and as a result of which our loan to value ratio exceeds 85%, until such time as our loan to value ratio no longer exceeds 85%, the distribution rate on our Series O Preferred Units shall increase from 6% per annum to 8% per annum. The Series O Preferred Units, which have only limited voting rights, are redeemable by the holder or Archstone under certain circumstances. The Series I Preferred Units remain outstanding and unchanged. The Series M Preferred Unit and each Series N-1 and N-2 Preferred Unit was converted into the right to receive one newly issued Series P Preferred Unit, Series Q-1 Preferred Unit and Series Q-2 Preferred Unit, respectively, of Archstone.
     In summary, the total purchase consideration paid by the Buyer Parties for the assets owned by Predecessor immediately prior to the Mergers was $22.1 billion which consisted of cash equity of $4.9 billion (net of capital raising costs), replacement or issuance of Preferred Units of $0.3 billion, borrowings of $15.2 billion in new debt, assumption of $0.9 billion of existing debt and the assumption of trade payables and other accrued liabilities of $0.8 billion. The accrued liabilities included a payment of $0.1 billion related to Predecessor employee stock awards under the LTIP. We incurred $1.0 billion of transaction-related costs that were financed through our borrowings. Although Archstone is the surviving entity, River Trust Acquisition (MD), LLC was viewed as the acquirer for accounting purposes due to the resulting change in control. As such, the total purchase consideration was allocated to the fair value of the net assets acquired through the application of purchase accounting in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations.” The majority of our fair value adjustments pertained to real estate and lease-related intangibles. The financial statements in this Annual Report include the operations of the Predecessor for periods

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prior to the Merger on October 4, 2007 and the Successor for periods after the Merger. In connection with the Merger, through a series of legal transactions, the Buyer Parties caused Predecessor to make certain material distributions to affiliated entities. These assets consisted primarily of communities that are not subject to unitholder tax protection agreements, domestic joint ventures, communities under development and communities formerly owned by Ameriton. Following is a summary of the fair values of assets and liabilities owned by Successor as compared to the fair value attributable to the assets and liabilities distributed to and owned by affiliated entities at October 5, 2007 (in thousands):
                         
            Fair Value Attributable to  
    Aggregate Fair Value     Affiliates     Successor  
Real estate
  $ 18,662,371     $ 3,641,083     $ 15,021,288  
Investment in unconsolidated entities
    1,018,725       550,399       468,326  
Lease and other intangibles
    594,306       91,439       502,867  
Other assets
    1,840,255       116,021       1,724,234  
Intercompany assets (liabilities)
          (12,873 )     12,873  
 
                 
Total assets
  $ 22,115,657     $ 4,386,069     $ 17,729,588  
 
                 
 
                       
Debt
  $ 16,108,709     $ 2,013,815     $ 14,094,894  
Other liabilities
    834,452       120,757       713,695  
Other Preferred Units
    285,944             285,944  
 
                 
 
                       
Net assets at fair value
  $ 4,886,552     $ 2,251,497     $ 2,635,055