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(Mark

One)

x

Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

¨

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

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Owning apartments in protected markets with limited land for new apartment construction, strong employment growth and expensive single-family homes;

•

Generating long-term sustainable growth in cash flow from operations;

•

Creating significant incremental value through the acquisition and development of new apartment properties;

•

Managing our invested capital through the disposition of assets that no longer meet our investment objectives in an effort to maximize long-term value creation, and redeploying that capital into investments in our protected core markets; and

•

Leveraging technology and innovation to improve our customer service delivery, strengthen our brand position and solidify our reputation for operational leadership.

•

We completed the Smith Merger to create the Operating Trust. This transaction represents a dramatic advancement of our investment strategy to concentrate our assets in protected locations in markets where it is very difficult to build new apartments. The strategic combination of these two real estate organizations brings together two of the most respected brands in the apartment industry and creates an exceptional portfolio concentrated in major metropolitan markets with high barriers to entry.

•

In conjunction with the Smith Merger, we moved our accounting group from El Paso, Texas to Denver, Colorado, effectively centralizing our corporate and property accounting functions at our company headquarters. Additionally, we internalized a number of services—including accounts payable, risk management, cash management and internal audit—which had formerly been purchased from Security Capital through an administrative services agreement.

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Concurrent with this sale, we repurchased 2.3 million Common Units from Security Capital at $22.08 per unit. As a result of these transactions, Security Capital liquidated its entire investment in our Common Units and was no longer entitled to Board representation previously associated with its investment. Including this transaction, we have repurchased a total of 25.9 million Common Units since February 1999, representing 18.1% of our outstanding Common Units, at an average price of $21.45 per unit.

•

We facilitated the sale of 29.5 million Common Units owned by Security Capital in an underwritten secondary offering at a price of $23.30 per unit. This transaction was the largest real estate secondary offering in history, and was more than 2 times oversubscribed. Over 40% of the units sold in the offering were to new unitholders.

•

During the year, seven development properties achieved Stabilization in markets that include the Greater Washington, D.C. Metropolitan Area, San Diego and Southeast Florida, representing a Total Expected Investment of $261.7 million and adding a total of 2,868 units to Archstone-Smith’s operating portfolio. These properties exceeded budgeted lease-up absorption levels by an average of 6.8% at rental rates in line with our expectations.

•

We achieved Same-Store revenue growth (including the assets acquired in the Smith Merger) in our high-rise and garden portfolios of 5.7% over the prior year, driven principally by properties in the Greater Washington, D.C. Metropolitan Area, which represents 33.2% of our NOI, Southern California, which represents 11.8% of our NOI, and Boston, which represents 5.1% of our NOI, which produced Same-Store revenue growth of 8.1%, 6.4% and 10.4% respectively.

•

NOI for our Same-Store properties increased 6.5% over 2001, driven principally by Same-Store NOI growth of 10.5% in Washington, D.C., 7.1% in Southern California, and 14.1% in Boston.

•

We completed the disposition of $1.2 billion of communities in secondary, non-core markets, which allowed us to substantially reduce our investments in markets with less attractive growth fundamentals including Austin, Charlotte, Raleigh, Phoenix, Salt Lake City and Atlanta. We also exited the Minneapolis, Indianapolis and Richmond markets during 2001. Proceeds were redeployed into acquisitions and development projects in our core markets and also to reduce debt balances.

•

As of December 31, 2001, we had 10 communities under construction, representing 2,812 units and a Total Expected Investment of $535.7 million, in some of the nation’s most desirable markets, including the Greater Washington, D.C. Metropolitan Area, Los Angeles County and the Greater New York City Metropolitan Area. Of these communities, $358.4 million has already been funded, leaving only $177.3 million remaining to fund.

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We completed pilot testing of Lease Rent OptimizerTM (LRO), the first revenue management tool created for the apartment industry. We developed this product in conjunction with Manugistics, Inc. (NASDAQ: MANU), a global leader in pricing and revenue management products and services. LRO enables us to more precisely forecast and analyze market demand and availability to optimize pricing for our apartments, thereby increasing revenues. The success of the pilot program allowed us to expand the second version of LRO, which was operational at approximately 75 garden communities in 14 markets as of February 28, 2002. We will begin piloting LRO in our high-rise portfolio in the second quarter of 2002. We expect LRO will begin to positively impact our revenue growth in 2003.

•

Through the implementation of a dynamic, real-time online recruiting software program, we have virtually eliminated our reliance on traditional classified newspaper advertising and, because applicants complete an online questionnaire that pre-screens for relevant job skills, streamline our overall recruiting efforts. Archstone-Smith Operating Trust is the first real estate company to provide real-time job postings on our corporate web site.

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We increased our total credit facility capacity from $680 million to $800 million in connection with the Smith Merger. As a result of this increased capacity and the cash generated by the $1.2 billion of dispositions in 2001, we had total available line of credit capacity at year-end of $611.4 million. Additionally, we held more than $120 million in cash in tax-deferred exchange escrow accounts at December 31, 2001. We believe that our cash balances and unused line of credit capacity position us very well to capitalize on investment opportunities in 2002.

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We paid distributions of $1.64 per Common Unit in 2001, a 6.5% increase over Common Unit distributions paid in 2000. We also announced our anticipated 2002 distribution level of $1.70 per unit, a 3.7% increase over the 2001 level. Including the announced increase, our annual distribution per unit has increased 166% since 1991.

1.

Dispositions and Capital Redeployment.    In 1995, roughly 85% of our portfolio was concentrated in Texas, Arizona and New Mexico, all of which are markets with ample available land, minimal constraints against new development and inexpensive single-family homes. At that time, we articulated a strategy that still guides our decisions today: to build a national apartment portfolio in protected locations in major metropolitan areas. To execute this strategy, we sold virtually all the assets we owned at the time and effectively repositioned our disposition proceeds into our new long-term markets. As a result, today over 80% of our portfolio is located in the Greater Washington, D.C. Metropolitan Area, Southern California, the San Francisco Bay Area, Chicago, Southeast Florida, Boston and Seattle. We believe that concentrating our portfolio in protected markets improves our core growth rate and long-term business fundamentals.

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3.

Acquisitions.    Since 1992, we have completed approximately $3.4 billion in acquisitions (excluding mergers). In 2001, we acquired $232.5 million of operating communities, representing a total of 1,954 units, which were funded with disposition proceeds through tax-deferred exchanges. We focus our acquisition activity on assets in highly desirable residential locations with minimal competition and strong, long-term growth prospects. Our locally based acquisition infrastructure often allows us to identify attractive opportunities before they are made available to the general market, which generally results in advantageous pricing.

4.

Redevelopment.    Our redevelopment strategy is to reposition well-located assets through the intelligent deployment of capital into renovations including upgrades to interiors, exteriors, leasing offices, landscaping and amenities. In addition, we have invested in revenue-enhancing capital expenditures such as building garages/carports and additional storage facilities, and also expense-reducing expenditures such as water sub-metering systems and xeriscaping.

•

Archstone’s unconditional Seal of Service™ guarantees and Charles E. Smith Residential’s SmithAdvantage™ program emulate successful customer service programs from other industries with prominent brands to create customer loyalty and trust, while establishing the service benchmark for the apartment industry. The Seal of Service™ features five unconditional guarantees, which have contributed positively to our customer-focused operations. For example, through the Archstone Relocation Guarantee, approximately 2,780 residents transferred to other Archstone communities throughout the country in 2001—representing a 6.9% increase over 2000 and allowing us to retain an estimated $32 million in incremental rental revenue.

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SmithAdvantage™ is a collection of conveniences designed to improve customer relationships. The program includes resident incentives, activities, out-of-town excursions, discounts and personal concierge services. In 2001, Smith Residential launched an online version of this program, SmithAdvantage.com. This online service includes web pages customized to each specific property and puts the SmithAdvantage™ at residents’ fingertips, and also allows them to review account balances, search for local restaurants, fitness facilities and entertainment ideas, and make service requests with a few clicks of the mouse. SmithAdvantage.com will roll out to the rest of the Charles E. Smith portfolio in 2002.

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Lease Rent Optimizer, the apartment industry’s first revenue management software, enables us to more precisely forecast and analyze market demand and availability to optimize pricing for our apartments. This product also creates a new kind of flexibility that has never been seen in the apartment industry. In this new marketplace, we accommodate customers’ move-in dates and lease term needs—rather than have the customer conform to our requirements. Our unwavering commitment to meet our customer’s needs builds the enduring relationships that build the Archstone brand, which improves our overall business.

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(1)

Total market capitalization is as of December 31, 2001.

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We may not achieve the expected cost savings and operating efficiencies from the Smith Merger, including the potential inability to realize economies of scale;

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The Charles E. Smith Division and garden community portfolios may not perform as well as currently anticipated;

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The concentration of our properties in a few identified markets increases our exposure to the economic conditions of those markets;

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We may experience difficulties and incur expenses related to the retention of Smith Residential employees; and

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We may not effectively merge and integrate Smith Residential’s operations.

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(1)

Based on NOI for the fourth quarter of each calendar year, excluding NOI from communities disposed of during the period. For 2001, includes an entire quarter of NOI for the assets acquired in the Smith Merger.

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(1)

Represents the percentage leased as of December 31, 2001. For communities in Lease-Up, the percentage leased is based on leased units divided by total number of units in the community (completed and under construction) as of December 31, 2001. A “N/A” indicates markets with communities under construction where Lease-Up has not yet commenced.

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(i)

The proposed amendment to Archstone’s amended and restated Declaration of Trust, with 98,190,916 Common Shares voted in favor, 396,866 Common Shares voted against, and 266,945 Common Shares abstained. There were no broker non-votes;

(ii)

The reorganization of Archstone into an UPREIT structure, with 97,984,097 Common Shares voted in favor, 646,754 Common Shares voted against, and 215,303 Common Shares abstained. There were no broker non-votes; and

(iii)

The merger agreement among Archstone, Archstone-Smith, Smith Residential and Smith Partnership and the transactions contemplated thereby, including the merger of Smith Residential with Archstone-Smith and the merger of Smith Partnership into Archstone, with 98,152,938 Common Shares voted in favor, 430,141 Common Shares voted against, and 263,076 Common Shares abstained. There were no broker non-votes.

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(1)

In October 2001, Archstone reorganized into an UPREIT structure and was renamed Archstone-Smith Operating Trust. The selected financial data and accompanying text has been recast as if the company was an UPREIT for all periods presented.

(2)

Non-recurring expenses in 2001 include approximately $5.3 million of integration costs associated with the Smith Merger, $12.2 million in non-cash write-offs of investments in service and technology related companies and $2.7 million in provision for possible loss on real estate investments. Non-recurring expenses during 2000 and 1999 relate to provisions for possible loss on real estate investments. Non-recurring expenses in 1998 include $1.1 million in integration costs associated with the Atlantic Merger and $1.1 million associated with the introduction of Archstone-Smith’s national branding strategy. Both are included within the “other expense” category in the Operating Trust’s Statement of Earnings for 1998. In 1997, the non-recurring expense represents the impact of a one-time, non-cash charge of $71.7 million associated with the costs incurred in acquiring Archstone-Smith’s REIT and property management companies from Security Capital.

(3)

All of the outstanding Series B Preferred Units were redeemed on May 7, 2001. During 2001, cash distributions of $0.79 per unit were paid of the period from January 1, 2001 to May 7, 2001.

(4)

During the fourth quarter 2001, the Operating Trust paid approximately $5.8 million of distributions on the Series H, I, J, K and L preferred units that were declared by Smith Residential prior to the Smith Merger.

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The Operating Trust acquired Smith Partnership’s assets and assumed their debt and other liabilities upon consummation of the Smith Merger.

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Smith Residential’s common shareholders received 1.975 Common Shares in exchange for each surrendered share of common stock and Smith Residential’s preferred shareholders received one Archstone-Smith preferred share for each surrendered preferred share.

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Smith Partnership’s common unit holders received 1.975 A-1 Common Units in exchange for each surrendered common unit and Smith Partnership’s preferred unit holders received one Operating Trust preferred unit for each surrendered preferred unit.

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(i)

We own a highly desirable portfolio of well-located apartments in protected markets across the United States. Approximately 80% of our NOI comes from the Greater Washington, D.C. Metropolitan Area, Southern California, San Francisco Bay Area, Boston, Chicago, Southeast Florida and Seattle. These are all markets that we believe will perform very well over the long term because of the difficulty of adding new supply;

(ii)

We have significant “in-house” high-rise development and management capabilities, which will allow us to expand the high-rise business on the west coast and the Greater New York City Area;

(iii)

We are organized in a more typical UPREIT structure, which we believe will enhance our ability to acquire assets using tax deferred acquisition currency;

(iv)

The merger of Archstone and Smith Residential brings together what management and the Board believes are the two most respected brands in the apartment industry. The high-rise properties are operated under the Charles E. Smith Residential brand name and all garden communities are operated under the Archstone Communities brand name;

(v)

Archstone-Smith has a larger market capitalization and shareholder base which should provide increased liquidity to Archstone-Smith’s shareholders and to our unitholders;

(vi)

We hope to benefit from enhanced economies of scale resulting from the adoption of best practices, including the elimination of redundant expenses, which in aggregate, are expected to produce identified cost savings of approximately $7-8 million annually, beginning in early to mid 2002; and

(vii)

We have a strong balance sheet that was further enhanced by the addition of $120 million of incremental commitments from four new financial institutions on our unsecured credit facilities, which were received in connection with the closing of the Smith Merger. These new commitments increased the borrowing capacity on our credit facilities from $680 million to $800 million, while retaining the same attractive pricing level of LIBOR plus 65 basis points.

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(i)

The inclusion of the results of operations for the last two months of 2001 for all properties acquired in the Smith Merger, which closed on October 31, 2001;

(ii)

A 6.5% increase in NOI in our Same-Store portfolio, driven by 5.7% Same-Store revenue growth in 2001;

(iii)

An increase in gains on dispositions of depreciated real estate in our non-core markets; and

(iv)

Higher levels of income from unconsolidated entities, including our pro rata share of the results of operations for the last two months of 2001 from CES, SMC and the real estate joint ventures acquired in the Smith Merger.

(i)

The loss of garden community NOI resulting from the success achieved in advancing our investment strategy through our capital recycling program, by disposing of over $1.2 billion of garden communities in non-core markets during 2001;

(ii)

Inclusion of a one-time $9.3 million gain recorded in 2000 associated with the exchange of the Homestead mortgage notes for Common Units and $13.6 million of interest income on these notes recorded during 2000;

(iii)

Write-off of investments in service and technology companies totaling $12.2 million in 2001; and

(iv)

Merger related costs of $5.3 million in 2001.

(i)

Strong operating performance from our garden communities, which produced Same-Store revenue growth of 6.7%;

(ii)

Continued success in the redeployment of capital into protected markets which generally have higher rental rates and stronger operating margins; and

(iii)

A significant increase in gains on dispositions of depreciated real estate in our non-core markets.

(1)

Includes the results of operations for properties acquired in the Smith Merger for the last two months of 2001.

(2)

The units reflected in 2001 include 27,750 units acquired in the Smith Merger on October 31, 2001.

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(i)

The inclusion of approximately $37.9 million of NOI from properties acquired in the Smith Merger generated during the last two months of 2001;

(ii)

The continued successful lease-up and Stabilization of development communities; and

(iii)

Continued improvements in our property level operating margins, and growth on our Same-Store NOI, due primarily to increases in rental revenues from our operating communities and operating efficiencies achieved which contributed to controlled expense growth.

(i)

Lower overall garden community NOI resulting from the success achieved in advancing our investment strategy through our capital recycling program, by disposing of approximately $1.2 billion, $790 million and $590 million of garden communities in non-core markets during 2001, 2000 and 1999, respectively;

(ii)

The impact of a deterioration of general macroeconomic conditions during the latter half of 2001 that negatively affected demand for apartments; and

(iii)

Higher property level insurance costs experienced during the last six months of 2001, subsequent to the renewal of our insurance policies on June 30, 2001.

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(i)

Our equity in the earnings of Ameriton increased from $2.8 million in 2000 to $9.8 million in 2001 including the impact of higher gains on the sale of real estate properties by Ameriton;

(ii)

In connection with the Smith Merger, we acquired a majority of the economic interest in CES and SMC. Our equity in the earnings of these two entities during 2001 was $1.6 million; and

(iii)

Our equity in the earnings of the real estate joint ventures, including interest in the three joint ventures acquired in the Smith Merger, was $2.9 million during 2001 as compared to a loss of $49,000 in 2000.

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(i)

The Smith Merger during 2001 (see Note 1 in our audited financial statements in this Annual Report for more information on assets acquired and liabilities assumed in the Smith Merger);

(ii)

The exchange of Homestead mortgage notes for Common Units in 2000;

(iii)

The assumption of mortgages payable in connection with the acquisition of real estate;

(iv)

The conversion of preferred units into Common Units; and

(v)

The exchange of apartment communities and land for interests in joint ventures (see Note 4 in our audited financial statements in this Annual Report for more information).

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(1)

See Note 8 in our audited financial statements in this Annual Report for more information on minority interests.

(2)

Series I Preferred Units have a par value of $100,000 per unit.

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(a)

Financial Statements and Schedule:

1.

Financial Statements

2.

Financial Statement Schedule:

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Exhibits

(b)

Reports on Form 8-K:

(c)

Exhibits:

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(i)

In October 2001, Archstone was reorganized into an UPREIT structure. To facilitate this reorganization, Archstone formed a wholly owned subsidiary named Archstone-Smith. Archstone-Smith then formed a wholly owned subsidiary that was renamed Archstone-Smith Operating Trust. Archstone was merged with and into the Operating Trust, and became a wholly owned subsidiary of Archstone-Smith. The Operating Trust is the successor entity to Archstone and Archstone-Smith is the successor registrant to Archstone;

(ii)

Smith Partnership then merged with and into the Operating Trust, with the Operating Trust remaining as the successor entity; and

(iii)

Finally, Smith Residential merged with and into Archstone-Smith, who remains the majority owner of the Operating Trust.

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(1)

2001 includes $5.3 million in merger related costs and $14.9 million in provision for loss on investments. Both 2000 and 2001 include extraordinary items related to early extinguishments of debt.

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(1)

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

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(1)

Unit information is based on management’s estimates and has not been audited or reviewed by our independent auditors.

(2)

The Operating Trust’s investment as of December 31, 2001 and December 31, 2000 for development communities Under Control was $4.9 million and $5.9 million, respectively, and are reflected on the “Other assets” caption of the Operating Trust’s Balance Sheets.

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(1)

Includes an allocation of the aggregate Smith Merger purchase price based on our estimate of the fair value of these entities as of the merger closing date.

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(1)

Reflects the formation of two joint ventures. One of the joint ventures formed in May includes two operating communities sold to the joint venture by Ameriton or its affiliates. The fair value and net book value related to these communities were $40.9 million and $33.9 million, respectively. In accordance with GAAP, no gain was recognized by Archstone-Smith on these two transactions.

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(1)

Represents a fixed rate for the long-term unsecured notes and a variable rate for the unsecured tax-exempt bonds.

(2)

Includes the effect of fair value hedges, loan cost amortization and other ongoing fees and expenses, where applicable.

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(1)

The average annual principal payments due from 2007 to 2028 are $111.8 million per year.

(1)

All of the outstanding Series B Preferred Units were redeemed on May 7, 2001. The cash distribution paid for the period from January 1, 2001 to May 7th, 2001 was $0.79 per unit.

(2)

Units were issued in August 1999. The annualized distribution level is $2.19 per unit.

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(1)

The distribution is calculated as the higher of the annual distribution rate per unit, or the distribution on Common Units as if converted. The distribution reflected here is the actual distribution that would be paid based on the current Common Unit distribution.

(2)

During 2001, 2000 and 1999 approximately 152,000, 399,000 and 965,000 of Series A Preferred Units were converted into approximately 205,000, 538,000 and 1,300,000 Common Shares, respectively.

(3)

Series A, H, J, K and L may be redeemed for cash at our option, in whole or in part, at the redemption price equal to the liquidation value.

(1)

Series C, D, and I Preferred Units may be redeemed for cash at our option, in whole or in part, at a redemption price equal to the liquidation price per share, plus accrued and unpaid distribution, if any, on or after the redemption dates indicated

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(1)

The units are redeemable, at our option, in whole or in part, at the liquidation preference plus unpaid distributions on or after the dates indicated here.

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“ACL” refers to Archstone-Smith Communities Limited Partnership

(2)

“ACL II” refers to Archstone-Smith Communities Limited Partnership II

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(1)

In January 1999, we began using accelerated depreciable lives for tax purposes. This change resulted in higher depreciation expense on newly acquired assets for tax purposes relative to GAAP. This was partially offset by the Smith Merger in 2001 as GAAP depreciation expense for the Smith assets was based on fair value and tax depreciation was based on a lower historical tax basis.

(2)

The negative tax adjustment during 1999 and 2000 was due to certain gains which were included in GAAP earnings but were deferred through 1031 exchanges for tax purposes and therefore excluded from taxable net earnings. This was offset during 2001 as certain taxable gains were deferred according to GAAP (see Note 4).

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(17)    Subsequent

Events

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