Form: 10-K405

Annual report [Sections 13 and 15(d), S-K Item 405]

March 29, 2001

10-K405: Annual report [Sections 13 and 15(d), S-K Item 405]

Published on March 29, 2001



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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

--------------------

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000

Commission file number 1-12672

AVALONBAY COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)

--------------------
Maryland 77-0404318
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

2900 Eisenhower Avenue, Suite 300
Alexandria, Virginia 22314
(Address of principal executive office, including zip code)

(703) 329-6300
(Registrant's telephone number, including area code)
--------------------
Securities registered pursuant to Section 12(b) of the Act:



Common Stock, par value $.01 per share New York Stock Exchange, Pacific Exchange
Preferred Stock Purchase Rights New York Stock Exchange, Pacific Exchange
8.50% Series C Cumulative Redeemable Preferred Stock, New York Stock Exchange, Pacific Exchange
par value $.01 per share
8.00% Series D Cumulative Redeemable Preferred Stock, New York Stock Exchange, Pacific Exchange
par value $.01 per share
9.00% Series F Cumulative Redeemable Preferred Stock, New York Stock Exchange
par value $.01 per share
8.96% Series G Cumulative Redeemable Preferred Stock, New York Stock Exchange
par value $.01 per share
8.70% Series H Cumulative Redeemable Preferred Stock, New York Stock Exchange, Pacific Exchange
par value $.01 per share
(Title of each class) (Name of each exchange on which registered)


Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (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 ninety (90) days.

Yes |X| No |_|

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. |X|

The aggregate market value of the Registrant's Common Stock, par value $.01 per
share, held by nonaffiliates of the Registrant, as of March 1, 2001 was
$3,241,568,243.

The number of shares of the Registrant's Common Stock, par value $.01 per share,
outstanding as of March 1, 2001 was 67,378,263.

Documents Incorporated by Reference

Portions of AvalonBay Communities, Inc.'s Proxy Statement for the 2001 annual
meeting of stockholders, a definitive copy of which will be filed with the SEC
within 120 days after the year end of the year covered by this Form 10-K, are
incorporated by reference herein as portions of Part III of this Form 10-K.

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TABLE OF CONTENTS

PAGE
----
PART I

ITEM 1. BUSINESS .........................................................3

ITEM 2. COMMUNITIES.......................................................8

ITEM 3. LEGAL PROCEEDINGS................................................31

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS..................31

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS....................................32

ITEM 6. SELECTED FINANCIAL DATA..........................................34

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................37

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK............................................53

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................54

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.................54

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT...................54

ITEM 11. EXECUTIVE COMPENSATION...........................................54

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.........................................54

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................54

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND
REPORTS ON FORM 8-K....................................55

SIGNATURES ...................................................................61


PART I

This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Our actual results could differ materially from those set forth in each
forward-looking statement. Certain factors that might cause such a difference
are discussed in this report, including in the section entitled "Forward-Looking
Statements" on page 37 of this Form 10-K.

ITEM 1. BUSINESS

General

AvalonBay is a Maryland corporation that has elected to be treated as a real
estate investment trust, or REIT, for federal income tax purposes. We focus on
the ownership and operation of upscale apartment communities (which generally
command among the highest rents in their submarkets) in high barrier-to-entry
markets of the United States. This is because we believe that the limited new
supply of upscale apartment homes in these markets helps achieve more
predictable growth in cash flows. These barriers-to-entry generally include a
difficult and lengthy entitlement process with local jurisdictions and dense
in-fill locations where zoned and entitled land is in limited supply. Our
markets are located in Northern and Southern California and selected states in
the Mid-Atlantic, Northeast, Midwest and Pacific Northwest regions of the United
States. We believe that we have penetrated substantially all of the high
barrier-to-entry markets of the United States.

As of March 1, 2001, we owned or held a direct or indirect ownership interest in
126 operating apartment communities containing 37,256 apartment homes in twelve
states and the District of Columbia, of which four communities containing 2,211
apartment homes were under redevelopment. In addition to these operating
communities, we also owned 12 communities under construction that will contain
3,484 apartment homes and rights to develop an additional 33 communities that,
if developed as expected, will contain an estimated 9,091 apartment homes. We
generally obtain ownership in an apartment community by developing vacant land
into a new community or by acquiring and either repositioning or redeveloping an
existing community. In selecting sites for development, redevelopment or
acquisition, we favor locations that are near expanding employment centers and
convenient to recreation areas, entertainment, shopping and dining.

Our real estate investments consist of Stable Communities, Developed Communities
and Redeveloped Communities. A description of these segments and other related
information can be found in note ten of the consolidated financial statements
set forth in item 8 of this report.

Our principal operating objectives are to increase long-term stockholder value
by increasing operating cash flow and Funds from Operations (based on a
definition adopted by the Board of Governors of the National Association of Real
Estate Investment Trusts(R) in October 1999). For a description of the meaning
of Funds from Operations and its use and limitation as an operating measure, see
the discussion titled "Funds from Operations" in Item 7 of this report. Our
strategies and goals to achieve these objectives include:

o generating consistent, sustained earnings growth at each community
through increased revenue, by balancing high occupancy with premium
pricing, and increased operating margins from operating expense
management;
o investing selectively in new development, redevelopment and
acquisition communities in markets with growing demand and high
barriers-to-entry;
o selling communities in markets where we have limited market presence
or seek to adjust our market penetration; and
o maintaining a conservative capital structure to provide continuous
access to cost-effective capital.

We believe that we can generally implement these strategies best by developing,
redeveloping, acquiring and managing upscale assets in supply-constrained
markets while maintaining the financial discipline to ensure balance sheet
flexibility.


3

Development Strategy. We carefully select land for development and follow
established procedures that we believe minimize both the cost and the risks of
development. As one of the largest developers of multifamily apartment
communities in high barrier-to-entry markets of the United States, we identify
development opportunities through local market presence and access to local
market information achieved through our regional offices. In addition to our
principal executive offices in Alexandria, Virginia, we also maintain regional
offices and administrative or specialty offices in or near the following cities:

o San Jose, California;
o Wilton, Connecticut;
o Boston, Massachusetts;
o Chicago, Illinois;
o Iselin, New Jersey;
o Minneapolis, Minnesota;
o Newport Beach, California;
o New York, New York; and
o Seattle, Washington.

After selecting a target site, we usually negotiate for the right to acquire the
site either through an option or a long-term conditional contract. Options and
long-term conditional contracts generally enable us to acquire the target site
shortly before the start of construction, which reduces development-related
risks as well as preserves capital. After we acquire land, we generally shift
our focus to construction. Except for certain mid-rise and high-rise apartment
communities where we elect to use third-party general contractors or
construction managers, we act as our own general contractor. We believe this
enables us to achieve higher construction quality, greater control over
construction schedules and significant cost savings. Our development and
property management teams monitor construction progress to ensure high quality
workmanship and a smooth and timely transition into the leasing and operational
phase.

Redevelopment Strategy. When we undertake the redevelopment of a community, our
goal is to generally renovate and/or rebuild an existing community so that our
total investment is significantly below replacement cost and the community is
the highest quality apartment community or best rental value for an upscale
apartment community in its local area. We have established procedures to
minimize both the cost and risks of redevelopment. Our redevelopment teams,
which include key redevelopment, construction and property management personnel,
monitor redevelopment progress. We believe we achieve significant cost savings
by acting as our own general contractor. More importantly, this helps to ensure
high quality design and workmanship and a smooth and timely transition into the
lease-up and restabilization phase.

Disposition Strategy. To increase our concentration of communities in selected
high barrier-to-entry markets, we are selling assets in certain submarkets and
intend to redeploy the proceeds from those sales to develop and redevelop
communities under construction or reconstruction. This disposition strategy acts
as a source of capital because we are able to redeploy the net proceeds from our
dispositions in lieu of raising that amount of capital externally. Under this
program, we solicit competing bids from unrelated parties for these individual
assets and consider the sales price and tax ramifications of each proposal. In
connection with this disposition program, we disposed of a total of nine
communities since January 1, 2000. The net proceeds from the sale of these
assets were approximately $139 million. However, we cannot provide assurance
that we will be able to continue our current disposition strategy or that assets
identified for sale can be sold on terms that are satisfactory to us.

Acquisition Strategy. Our core competencies in development and redevelopment
discussed above allow us to be selective in the acquisitions we target. As of
March 1, 2001 we had acquired seven communities, containing 1,960 apartment
homes, since the beginning of 2000. Six of these communities were acquired in
connection with a forward purchase contract agreed to in 1997 with an
unaffiliated party. The remaining two presale acquisitions provided for under
the 1997 agreement, and one presale commitment provided for under a separate
agreement, are expected to close during the next 24 months for an estimated
aggregate purchase price of $147.3 million. Together, these three communities
are expected to contain 968 apartment homes when completed. We will manage these
communities after acquiring ownership. This expansion is consistent with our
strategy to achieve long-term


4

earnings growth by providing a high quality platform for expansion while also
providing additional economic and geographic diversity. The acquisition of these
presale communities was designed to achieve rapid penetration into markets that
are generally supply constrained and in which we had no significant presence.

Property Management Strategy. We intend to increase operating income through
innovative, proactive property management that will result in higher revenue
with controlled operating expenses from communities.

Our principle strategies to maximize revenue include:

o intense focus on resident satisfaction;
o staggering lease terms based on vacancy exposure by apartment type,
so that lease expirations are better matched to each community's
traffic patterns;
o increasing rents as market conditions permit;
o managing community occupancy for optimal rental revenue levels; and
o applying new technology to optimize revenue from each community.

Controlling operating expenses is another way in which we intend to increase
earnings growth. Growth in our portfolio and the resulting increase in revenue
allows for fixed operating costs to be spread over a larger volume of revenue,
thereby increasing operating margins. We aggressively pursue real estate tax
appeals and control operating expenses as follows:

o record invoices on-site to ensure careful monitoring of budgeted
versus actual expenses;
o purchase supplies in bulk where possible;
o bid third-party contracts on a volume basis;
o strive to retain residents through high levels of service in order
to eliminate the cost of preparing an apartment home for a new
resident and to reduce marketing and vacant apartment utility costs;
o perform turnover work in-house or hire third-parties generally
depending upon the least costly alternative; and
o undertake preventive maintenance regularly to maximize resident
satisfaction and property and equipment life.

On-site property management teams receive bonuses based largely upon the net
operating income produced at their respective communities. We are also pursuing
ancillary services which could provide additional revenue sources. On a limited
basis, we also manage properties for third parties, believing that doing so will
provide information about new markets or provide an acquisition opportunity,
thereby enhancing opportunities for growth.

Technology Strategy. We believe that an innovative management information system
infrastructure will be an important element in managing our future growth. This
is because timely and accurate collection of financial and resident profile data
will enable us to maximize revenue through careful leasing decisions and
financial management. We currently employ a company-wide intranet using a
digital network with high-speed digital lines. This network connects all of our
communities and offices to central servers in Alexandria, Virginia, providing
access to our associates and to AvalonBay's corporate information throughout the
country from all locations.

We have invested in three technology companies in the belief that the
development and application of their technology and services will improve the
operating performance of our real estate holdings. Realeum, Inc. is engaged in
the development of an on-site property management system and leasing automation
system to enable management to capture, review and analyze data to a greater
extent than is possible using existing commercial software. Broadband
Residential Inc. was formed to provide broadband communication services (such as
Internet access and video) to residents of multifamily communities. Viva Group,
Inc. provides a system for renters and property owners to identify each other
and interact and negotiate lease terms over the Internet. Except for a
commitment to lend approximately $700,000 to Broadband Residential if certain
conditions are met, we are not obligated to provide any more capital to any of
these entities, although we may have the opportunity to exercise preemptive
rights that would require us to make further investments. We hold a minority
interest position in each of


5

these entities. The aggregate carrying value of these investments at December
31, 2000 was $3.6 million. To help monitor our investments, Thomas J. Sargeant,
our Executive Vice President and Chief Financial Officer, is a director of
Realeum, Inc. and Richard L. Michaux, our Executive Chairman, is a director of
Broadband Residential. In addition to the three investments described above, we
are a member of Constellation Real Technologies LLC, an entity formed by a
number of real estate investment trusts and real estate operating companies for
the purpose of investing in multi-sector real estate technology opportunities.
Our capital commitment to Constellation Real Technologies is $4.0 million,
although we have made no capital contributions to date.

Financing Strategy. We have consistently maintained, and intend to continue to
maintain, a conservative capital structure, largely comprised of common equity.
At December 31, 2000, our debt-to-total market capitalization (i.e., the
aggregate of the market value of common stock, the liquidation preference of
preferred stock and the principle amount of debt) was 30.9%, and our permanent
long-term floating rate debt, not including borrowings under the unsecured
credit facility, was only 1.2% of total market capitalization. We currently
intend to incur long-term floating rate debt only if after such incurrence
long-term floating rate debt represents less than 10% of total market
capitalization, although that policy may change from time to time.

Currently, we are impacted by a reduction in the availability of cost-effective
capital. Therefore, we cannot assure you that cost-effective capital will be
available to meet future expenditures required to begin planned construction or
reconstruction activity. Before planned construction or reconstruction activity
begins, we intend to arrange adequate capital sources to complete such
undertakings, although we cannot assure you that we will be able to obtain such
financing. During 2000, substantially all of our construction and reconstruction
activities were funded by issuance of unsecured debt securities, asset sales,
through nontaxable like-kind exchanges, and retained operating cash. In the
event that financing cannot be obtained, we may have to abandon planned
development activities, write-off associated pursuit costs and/or forego
reconstruction activity. In such instances, we will not realize the increased
revenues and earnings that we expected from such pursuits, and the related
write-off of costs will increase current period expenses.

We estimate that a portion of our short-term liquidity needs will be met from
retained operating cash and borrowings under our $600,000,000 variable rate
unsecured credit facility. At March 1, 2001, $0 was outstanding, $82,753,000 was
used to provide letters of credit and $517,247,000 was available for borrowing
under the unsecured credit facility.

If required, to meet the balance of our liquidity needs we will need to arrange
additional capacity under our existing unsecured credit facility, sell
additional existing communities and/or issue additional debt or equity
securities. While we believe we have the financial position to expand our
short-term credit capacity and access the capital markets as needed, we cannot
assure you that we will be successful in completing these arrangements, sales or
offerings. The failure to complete these transactions on a cost-effective basis
could have a material adverse impact on our operating results and financial
condition, including the abandonment of deferred development costs and a
resultant charge to earnings.

Inflation and Tax Matters

Substantially all of our leases are for a term of one year or less, which may
enable us to realize increased rents upon renewal of existing leases or the
beginning of new leases. Such short-term leases generally minimize the risk to
us of the adverse effects of inflation, although as a general rule these leases
permit residents to leave at the end of the lease term without penalty. Our
current policy is generally to permit residents to terminate leases upon an
agreed advance written notice and a lease termination payment, as provided for
in the resident's lease. Short-term leases combined with relatively consistent
demand allow rents, and therefore cash flow from the portfolio, to provide an
attractive inflation hedge.

We filed an election with our initial federal income tax return to be taxed as a
REIT under the Internal Revenue Code of 1986, as amended, and intend to maintain
our qualification as a REIT in the future. As a qualified REIT, with limited
exceptions, we will not be taxed under federal and certain state income tax laws
at the corporate level


6

on our net income to the extent net income is distributed to our stockholders.
We expect to make sufficient distributions to avoid income tax at the corporate
level.

Environmental Matters

Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required, in many instances regardless of knowledge or responsibility, to
investigate and remediate the effects of hazardous or toxic substances or
petroleum product releases at such property. The owner or operator may be held
liable to a governmental entity or to third parties for property damage and for
investigation and remediation costs incurred by such parties in connection with
the contamination, which may be substantial. The presence of such substances, or
the failure to properly remediate the contamination, may adversely affect the
owner's ability to borrow against, sell or rent such property. In addition, some
environmental laws create a lien on the contaminated site in favor of the
government for damages and costs it incurs in connection with the contamination.

Certain federal, state and local laws, regulations and ordinances govern the
removal, encapsulation or disturbance of asbestos-containing materials, or ACMs,
when such materials are in poor condition or in the event of construction,
remodeling, renovation or demolition of a building. Such laws may impose
liability for release of ACMs and may provide for third parties to seek recovery
from owners or operators of real properties for personal injury associated with
ACMs. In connection with our ownership and operation of apartment communities,
we potentially may be liable for such costs. We are not aware that any ACMs were
used in connection with the construction of the communities developed by us.
However, we are aware that ACMs were used in connection with the construction of
certain communities acquired by us. We do not anticipate that we will incur any
material liabilities in connection with the presence of ACMs at these
communities. We currently have or intend to implement an operations and
maintenance program for ACMs at each of the communities at which ACMs have been
detected.

All of our stabilized operating communities, and all of the communities that we
are currently developing or redeveloping, have been subjected to at least a
Phase I or similar environmental assessment which generally does not involve
invasive techniques such as soil or ground water sampling. These assessments
have not revealed any environmental conditions that we believe will have a
material adverse effect on our business, assets, financial condition or results
of operations. We are not aware of any other environmental conditions which
would have such a material adverse effect.

However, we are aware that the migration of contamination from an upgradient
landowner near Avalon at Silicon Valley (formerly known as Toscana), a community
owned by us, has affected the groundwater there. The upgradient landowner is
undertaking remedial response actions and a ground water treatment system has
been installed. We expect that the upgradient landowner will take all necessary
remediation actions and ensure the ongoing operation and maintenance of the
ground water treatment system. The upgradient landowner has also provided an
indemnity that runs to current and future owners of the property and upon which
we may be able to rely if environmental liability arises from the groundwater
contamination.

We are also aware that certain communities have lead paint and we are
undertaking or intend to undertake appropriate remediation.

Additionally, prior to 1994, we had occasionally been involved in developing,
managing, leasing and operating various properties for third parties.
Consequently, we may be considered to have been an operator of such properties
and, therefore, potentially liable for removal or remediation costs or other
potential costs which could relate to hazardous or toxic substances. We are not
aware of any material environmental liabilities with respect to properties that
we managed or developed for such third parties.


7

We cannot provide assurance that:

o the environmental assessments identified all potential environmental
liabilities;
o no prior owner created any material environmental condition not
known to us or the consultants who prepared the assessments;
o no environmental liabilities developed since such environmental
assessments were prepared;
o the condition of land or operations in the vicinity of our
communities, such as the presence of underground storage tanks, will
not affect the environmental condition of such communities;
o future uses or conditions, including, without limitation, changes in
applicable environmental laws and regulations, will not result in
the imposition of environmental liability; or
o no environmental liabilities will develop at communities that have
been sold pursuant to our disposition strategy for which we may have
liability.

ITEM 2. COMMUNITIES

Our real estate investments consist of current operating apartment communities,
communities in various stages of development, and land or land options held for
development. The following is a description of each category:

Current Communities are categorized as Established, Other Stabilized, Lease-Up,
or Redevelopment according to the following:

o Established Communities (also known as Same Store Communities) are
communities where a comparison of operating results from the prior
year to the current year is meaningful, as these communities were
owned and had stabilized operating costs as of the beginning of the
prior year. We determine which of our communities fall into the
Established Communities category annually on January 1 of each year
and maintain that classification throughout the year. For the year
2000, the Established Communities were communities that had
stabilized operating costs as of January 1, 1999.
o Other Stabilized Communities are all other completed communities
that have stabilized occupancy and are not undergoing or planning
redevelopment activities. We consider a community to have stabilized
occupancy at the earlier of (i) attainment of 95% occupancy or (ii)
the one-year anniversary of completion of development or
redevelopment. For the year 2000, Other Stabilized Communities
therefore include communities that were either acquired or achieved
stabilization after January 1, 1999 and that were not undergoing or
planning redevelopment activities.
o Lease-Up Communities are communities where construction has been
complete for less than one year and where occupancy has not reached
95%.
o Redevelopment Communities are communities where substantial
redevelopment is in progress or is planned to take place during the
current year. Redevelopment is considered substantial when capital
invested during the reconstruction effort exceeds the lesser of $5
million or 10% of the community's acquisition cost.

Development Communities are communities that are under construction and for
which a final certificate of occupancy has not been received. These communities
may be partially complete and operating.

Development Rights are development opportunities in the early phase of the
development process for which we have an option to acquire land, for which we
are the buyer under a long-term conditional contract to purchase land or where
we own land to develop a new community. We capitalize all related
pre-development costs incurred in pursuit of these new developments.


8

As of December 31, 2000, our communities were classified as follows:

Number of Number of
communities apartment homes
----------- ---------------
Current Communities

Established Communities:
Northern California 24 6,275
Southern California 8 1,855
Mid-Atlantic 17 4,835
Northeast 18 4,773
Midwest 6 1,591
Pacific Northwest 1 264
------ -------
Total Estabilshed 74 19,593

Other Stabilized Communities:
Northern California 9 2,840
Southern California 8 2,920
Mid-Atlantic 3 1,075
Northeast 17 5,101
Midwest 3 1,033
Pacific Northwest 8 2,374
------ -------
Total Other Stabilized 48 15,343

Lease-Up Communities -- --

Redevelopment Communities 4 2,211
------ -------
Total Current Communities 126 37,147
====== =======
Development Communities 12 3,484
====== =======
Development Rights 33 9,091
====== =======

Our holdings under each of the above categories are discussed on the following
pages.

Current Communities

The Current Communities are primarily garden-style apartment communities
consisting of two and three-story buildings in landscaped settings. The Current
Communities, as of March 1, 2001, include 103 garden-style, 15 high-rise and
eight mid-rise apartment communities. The Current Communities offer many
attractive amenities including some or all of the following:

o vaulted ceilings;
o lofts;
o fireplaces;
o patios/decks; and
o modern appliances.

Other features at various communities may include:

o swimming pools;
o fitness centers;
o tennis courts; and
o business centers.


9

We also have an extensive and ongoing maintenance program to keep all
communities and apartment homes substantially free of deferred maintenance and,
where vacant, available for immediate occupancy. We believe that the aesthetic
appeal of our communities and a service oriented property management team
focused on the specific needs of residents enhances market appeal to
discriminating residents. We believe this will ultimately achieve higher rental
rates and occupancy levels while minimizing resident turnover and operating
expenses. These Current Communities are located in the following geographic
markets:



Number of Number of apartment Percentage of total
communities at homes at apartment homes at
-------------------- -------------------- --------------------
1-1-00 3-1-01 1-1-00 3-1-01 1-1-00 3-1-01
------ ------- ------ ------ ------ ------

Northern California 36 30 9,743 8,889 27.0% 23.8%
Oakland-East Bay, CA 8 6 2,278 2,090 6.3% 5.6%
Sacramento, CA 1 -- 302 -- 0.8% 0.0%
San Francisco, CA 9 8 1,991 1,765 5.5% 4.7%
San Jose, CA 18 16 5,172 5,034 14.4% 13.5%

Southern California 18 18 5,816 5,817 16.1% 15.6%
Los Angeles, CA 6 6 2,561 2,561 7.1% 6.9%
Orange County, CA 8 8 2,022 2,022 5.6% 5.4%
San Diego, CA 4 4 1,233 1,234 3.4% 3.3%

Pacific Northwest 5 10 1,376 2,971 3.9% 8.0%
Portland, OR 1 2 279 776 0.8% 2.1%
Seattle, WA 4 8 1,097 2,195 3.1% 5.9%

Northeast 33 36 10,359 11,043 28.8% 29.7%
Boston, MA 9 10 2,580 2,734 7.2% 7.3%
Fairfield County, CT 9 11 2,637 2,960 7.3% 8.0%
Hartford, CT 1 1 932 932 2.6% 2.5%
Long Island, NY 3 3 575 915 1.6% 2.5%
Northern New Jersey 3 3 1,124 1,124 3.1% 3.0%
Central New Jersey 4 3 1,504 1,144 4.2% 3.1%
New York, NY 4 5 1,007 1,234 2.8% 3.3%

Mid-Atlantic 22 20 6,499 5,912 18.1% 15.8%
Baltimore, MD 4 4 1,052 1,054 2.9% 2.8%
Norfolk, VA 2 -- 486 -- 1.4% 0.0%
Richmond, VA 1 -- 268 -- 0.8% 0.0%
Washington, DC 15 16 4,693 4,858 13.0% 13.0%

Midwest 8 9 2,215 2,624 6.2% 7.1%
Chicago, IL 3 4 887 1,296 2.5% 3.5%
Minneapolis, MN 5 5 1,328 1,328 3.7% 3.6%
====== ======= ====== ====== ===== =====
122 123 36,008 37,256 100.0% 100.0%
====== ======= ====== ====== ===== =====


We manage and operate all of the Current Communities. During the year ended
December 31, 2000, we completed construction of 1,209 apartment homes in six
communities for a total cost of $175.2 million. The average age of the Current
Communities, on a weighted average basis according to number of apartment homes,
is 6.7 years.


10

Of the Current Communities, as of March 1, 2001, we own:

o a fee simple, or absolute, ownership interest in 104 operating
communities, one of which is on land subject to a 149 year land
lease;
o a general partnership interest in four partnerships that each own a
fee simple interest in an operating community;
o a general partnership interest in four partnerships structured as
"DownREITs," as described more fully below, that own an aggregate of
16 communities;
o a 100% interest in a senior participating mortgage note secured by
one community, which allows us to share in part of the rental income
or resale proceeds of the community; and
o a membership interest in a limited liability company that holds a
fee simple interest in one Redevelopment community.

We also hold a fee simple ownership interest in eleven of the Development
Communities and a membership interest in a limited liability company that holds
a fee simple interest in one Development Community.

In each of the four partnerships structured as DownREITs, either we or one of
our wholly-owned subsidiaries is the general partner, and there are one or more
limited partners whose interest in the partnership is represented by units of
limited partnership interest. For each DownREIT partnership, limited partners
are entitled to receive distributions before any distribution is made to the
general partner. Although the partnership agreements for each of the DownREITs
are different, generally the distributions paid to the holders of units of
limited partnership interests approximate the current AvalonBay common stock
dividend amount. Each DownREIT partnership has been structured so that it is
unlikely the limited partners will be entitled to a distribution greater than
the initial distribution provided for in the partnership agreement. The holders
of units of limited partnership interest have the right to present each unit of
limited partnership interest for redemption for cash equal to the fair market
value of a share of our common stock on the date of redemption. In lieu of cash,
we may elect to acquire any unit presented for redemption for one share of our
common stock. As of December 31, 2000, there were 671,226 units outstanding. The
DownREIT partnerships are consolidated for financial reporting purposes.


11

Profile of Current and Development Communities
(Dollars in thousands, except per apartment home data)



Approx.
rentable Year of Average
Number of area Completion/ size
City and state homes (Sq. Ft.) Acres Acquisition (Sq. Ft,)
- ---------------------------------------------------- -------------- --------- --------- ----- ----------- ---------

CURRENT COMMUNITIES (5)

NORTHERN CALIFORNIA
Oakland-East Bay, CA
Waterford Hayward, CA 544 451,937 11.1 1985/86 831
Hampton Place Fremont, CA 308 316,072 14.3 1992/94 1,026
Avalon Fremont (formerly Alicante) Fremont, CA 135 130,350 8.0 1992/94 966
Avalon Pleasanton (formerly Hacienda Gardens) Pleasanton, CA 456 377,438 14.7 1988/94 828
Avalon Dublin (formerly Armador Oaks) Dublin, CA 204 179,004 13.0 1989/97 877
Avalon at Willow Creek Fremont, CA 235 197,575 3.5 1985/94 841
Avalon at Union Square (formerly Parc Center at
Union Square) Union City, CA 208 150,140 8.5 1973/96 722

San Francisco, CA
Crowne Ridge San Rafael, CA 254 221,525 21.9 1973/96 872
Avalon at Sunset Towers San Francisco, CA 243 175,511 16.0 1961/96 722
Avalon at Nob Hill (formerly City Heights) San Francisco, CA 185 109,238 1.4 1990/95 590
Avalon at Diamond Heights (formerly Village Square) San Francisco, CA 154 123,080 2.6 1972/94 799
Avalon Towers by the Bay San Francisco, CA 226 243,033 1.0 1999 1,075
Crossbrook Rohnert Park, CA 226 164,219 9.0 1986/94 727
Avalon at Cedar Ridge Daly City, CA 195 141,411 8.0 1975/97 725
Avalon Foster City (formerly Regatta Bay) Foster City, CA 288 222,276 11.0 1973/94 772
Avalon Pacifica (formerly Sea Ridge) Pacifica, CA 220 186,785 7.7 1971/95 849

San Jose, CA
Avalon Silicon Valley (formerly Toscana) Sunnyvale, CA 710 658,591 13.6 1997 928
Avalon at Blossom Hill (formerly Carriage Square) San Jose, CA 324 322,207 7.5 1995 994
Avalon Campbell (formerly Canyon Creek) Campbell, CA 348 326,796 8.0 1995 939
CountryBrook San Jose, CA 360 323,012 14.0 1985/96 897
Avalon at Pruneyard (formerly The Arbors) Campbell, CA 252 197,000 8.5 1966/97 782
Avalon at Creekside Mountain View, CA 294 215,680 13.0 1962/97 734
Avalon at River Oaks (formerly The Fountains
at River Oaks) San Jose, CA 226 210,050 4.0 1990/96 929
Avalon at Parkside (formerly Parkside Commons) Sunnyvale, CA 192 199,353 8.0 1991/96 1,038
San Marino San Jose, CA 248 209,465 11.5 1984/88 845
Avalon Sunnyvale (formerly The Promenade) Sunnyvale, CA 220 159,653 5.0 1987/95 726
Avalon at Foxchase San Jose, CA 396 335,212 12.0 1986/87 844
Fairway Glen San Jose, CA 144 119,492 6.0 1986 830
Avalon Cupertino (formerly Centermark) Cupertino, CA 311 293,328 8.0 1999 943
Avalon on the Alameda San Jose, CA 305 299,722 8.9 1999 983
Avalon Rosewalk San Jose, CA 300 297,696 10.8 1997 992
Avalon Rosewalk II San Jose, CA 156 152,556 5.8 1999 978


Average Rental
Average Economic Rate
Physical Occupancy ------------------ Financial
occupancy ---------------- $ per $ per reporting
City and state at 12/31/00 2000 1999 Apt (1) Sq. Ft. cost (4)
- -------------------------------------------------- -------------- ----------- ---- ---- ------- ------- ---------

CURRENT COMMUNITIES (5)

NORTHERN CALIFORNIA
Oakland-East Bay, CA
Waterford Hayward, CA 97.8% 97.7% 96.0% 1,120 1.32 $ 58,603
Hampton Place Fremont, CA 99.3% 98.7% 97.1% 1,555 1.49 $ 54,586
Avalon Fremont (formerly Alicante) Fremont, CA 99.3% 98.2% 96.2% 1,505 1.53 $ 22,042
Avalon Pleasanton (formerly Hacienda Gardens) Pleasanton, CA 94.5% 97.3% 95.4% 1,294 1.52 $ 59,460
Avalon Dublin (formerly Armador Oaks) Dublin, CA 98.0% 97.8% 95.1% 1,353 1.51 $ 26,715
Avalon at Willow Creek Fremont, CA 98.3% 98.5% 96.2% 1,386 1.62 $ 33,840
Avalon at Union Square (formerly Parc Center at
Union Square) Union City, CA 97.6% 97.3% 97.4% 1,183 1.59 $ 21,630

San Francisco, CA
Crowne Ridge San Rafael, CA 97.2% 97.4% 95.2% 1,400 1.56 $ 30,674
Avalon at Sunset Towers San Francisco, CA 97.9% 98.5% 97.8% 1,486 2.03 $ 28,101
Avalon at Nob Hill (formerly City Heights) San Francisco, CA 99.5% 97.3% 96.7% 1,539 2.54 $ 27,417
Avalon at Diamond Heights (formerly
Village Square) San Francisco, CA 98.7% 98.9% 98.5% 1,501 1.86 $ 24,168
Avalon Towers by the Bay San Francisco, CA 97.8% 97.5% 67.7% (3) 3,169 2.87 $ 66,822
Crossbrook Rohnert Park, CA 99.1% 97.1% 97.7% (2) 977 1.31 $ 19,077
Avalon at Cedar Ridge Daly City, CA 97.4% 97.8% 96.4% 1,470 1.98 $ 25,518
Avalon Foster City (formerly Regatta Bay) Foster City, CA 91.0% 94.8% 92.7% 1,457 1.79 $ 41,052
Avalon Pacifica (formerly Sea Ridge) Pacifica, CA 99.1% 98.3% 97.5% 1,450 1.68 $ 31,073

San Jose, CA
Avalon Silicon Valley (formerly Toscana) Sunnyvale, CA 97.8% 97.9% 94.9% 2,157 2.28 $120,414
Avalon at Blossom Hill (formerly
Carriage Square) San Jose, CA 100.0% 98.1% 94.9% 1,654 1.63 $ 60,708
Avalon Campbell (formerly Canyon Creek) Campbell, CA 98.3% 97.0% 96.4% (2) 1,608 1.66 $ 59,898
CountryBrook San Jose, CA 99.7% 97.4% 96.2% 1,412 1.53 $ 47,707
Avalon at Pruneyard (formerly The Arbors) Campbell, CA 96.8% 97.5% 91.3% 1,360 1.70 $ 31,701
Avalon at Creekside Mountain View, CA 98.3% 89.9% (2) 91.6% (2) 1,551 1.90 (2) $ 42,809
Avalon at River Oaks (formerly The Fountains
at River Oaks) San Jose, CA 100.0% 98.4% 97.1% 1,805 1.91 $ 45,900
Avalon at Parkside (formerly Parkside Commons) Sunnyvale, CA 99.0% 98.1% 96.7% 1,820 1.72 $ 37,679
San Marino San Jose, CA 96.8% 97.7% 96.6% 1,374 1.59 $ 33,560
Avalon Sunnyvale (formerly The Promenade) Sunnyvale, CA 97.3% 98.5% 97.7% 1,459 1.98 $ 34,430
Avalon at Foxchase San Jose, CA 96.9% 97.5% 96.8% 1,322 1.52 $ 58,017
Fairway Glen San Jose, CA 98.6% 98.5% 96.8% 1,263 1.50 $ 17,059
Avalon Cupertino (formerly Centermark) Cupertino, CA 98.1% 98.3% 88.7% (3) 2,014 2.10 $ 49,111
Avalon on the Alameda San Jose, CA 97.7% 96.6% 57.8% (3) 2,026 1.99 $ 56,332
Avalon Rosewalk San Jose, CA 99.3% 98.4% 95.6% 1,665 1.65 $ 56,309
Avalon Rosewalk II San Jose, CA 99.3% 97.3% 76.8% (3) 1,689 1.68 $ 21,768



12

Profile of Current and Development Communities
(Dollars in thousands, except per apartment home data)



Approx.
rentable Year of Average
Number of area Completion/ size
City and state homes (Sq. Ft.) Acres Acquisition (Sq. Ft,)
- ---------------------------------------------------- -------------- --------- --------- ----- ----------- ---------

SOUTHERN CALIFORNIA
Los Angeles, CA
Avalon Woodland Hills (formerly ViewPointe) Woodland Hills, CA 663 592,722 18.2 1989/97 894
Avalon at Media Center (formerly Lakeside) Burbank, CA 748 530,114 14.7 1969/97 709
Avalon Westside Terrace Los Angeles, CA 363 229,296 4.8 1966/97 632
Arbor Heights Hacienda Heights, CA 351 270,129 20.0 1970/97 770
Avalon at Warner Center (formerly Avalon at
Warner Oaks) Woodland Hills, CA 227 191,645 6.8 1979/98 844
TimberWood West Covina, CA 209 190,075 8.4 1972/97 909

Orange County, CA
Avalon Huntington Beach (formerly SunScape) Huntington Beach, CA 400 353,192 16.4 1972/97 883
Avalon at Pacific Bay Huntington Beach, CA 304 268,000 9.7 1971/97 882
Avalon at South Coast (formerly Mill Creek) Costa Mesa, CA 258 208,890 8.9 1973/96 810
Avalon Santa Margarita (formerly Villa Serena) Rancho Santa Margarita, CA 301 229,593 20.0 1990/97 763
Amberway Anaheim, CA 272 205,572 9.9 1983/98 756
Avalon at Laguna Niguel (formerly Laguna Brisas) Laguna Niguel, CA 176 174,848 10.0 1988/98 993
Avalon Newport (formerly Lafayette Place) Costa Mesa, CA 145 120,690 6.6 1956/96 832
Avalon Mission Viejo (formerly Larkspur Canyon) Mission Viejo, CA 166 124,600 7.8 1984/96 751

San Diego, CA
Avalon at Mission Bay San Diego, CA 564 402,327 5.7 1969/97 713
Avalon at Cortez Hill (formerly Gateway Tower) San Diego, CA 294 224,840 1.2 1973/98 765
Avalon at Mission Ridge (formerly Mission Woods) San Diego, CA 200 208,100 4.0 1960/97 1,041
Avalon at Penasquitos Hills (formerly SummerWalk) San Diego, CA 176 141,120 8.8 1982/97 802

PACIFIC NORTHWEST
Portland, OR
Avalon at Waterhouse Place Beaverton, OR 279 261,464 12.0 1990/97 937
Avalon Palladia Hillsboro, OR 497 586,405 22.6 2000 1,180

Seattle, WA
Avalon at Bear Creek (formerly The Verandas at
Bear Creek) Redmond, WA 264 288,250 22.0 1998 1,092
Avalon Redmond Place (formerly Gallery Place) Redmond, WA 222 206,004 22.0 1991/97 928
Avalon Greenbriar (formerly Avalon Ridge) Renton, WA 421 382,382 20.0 1987/88 908
Avalon RockMeadow Mill Creek, WA 206 240,817 11.5 2000 1,169
Avalon ParcSquare Redmond, WA 124 127,236 1.9 2000 1,026
Avalon WildReed Everett, WA 234 259,080 22.3 2000 1,107
Avalon HighGrove Everett, WA 391 422,482 19.8 2000 1,081

NORTHEAST
Boston, MA
Avalon at Prudential Center Boston, MA 781 747,954 1.0 1968/98 958
Longwood Towers Brookline, MA 334 339,718 4.7 1993 1,017
Avalon Summit Quincy, MA 245 203,848 9.1 1996 832
Avalon at Lexington Lexington, MA 198 231,182 18.0 1994 1,168
Avalon at Faxon Park Quincy, MA 171 175,494 8.3 1998 1,026
Avalon West Westborough, MA 120 147,472 10.1 1996 1,229
Avalon Oaks Wilmington, MA 204 229,748 22.5 1999 1,023
Avalon Essex Peabody, MA 154 173,520 11.1 2000 1,127
Avalon at Center Place Providence, RI 225 231,671 1.2 1997 1,030


Average Rental
Average Economic Rate
Physical Occupancy ------------------ Financial
occupancy ---------------- $ per $ per reporting
City and state at 12/31/00 2000 1999 Apt (1) Sq. Ft. cost (4)
- ----------------------------------------- -------------- ----------- ---- ---- ------- ------- ---------

SOUTHERN CALIFORNIA
Los Angeles, CA
Avalon Woodland Hills
(formerly ViewPointe) Woodland Hills, CA 97.4% 96.1% 94.4% (2) 1,129 1.21 $ 71,142
Avalon at Media Center
(formerly Lakeside) Burbank, CA 86.0% 89.4% (2) 95.8% 904 1.14 (2) $ 63,836
Avalon Westside Terrace Los Angeles, CA 92.8% 92.4% 85.8% (2) 1,081 1.58 $ 37,063
Arbor Heights Hacienda Heights, CA 96.3% 96.2% 80.0% (2) 891 1.11 $ 29,463
Avalon at Warner Center
(formerly Avalon at Warner Oaks) Woodland Hills, CA 99.6% 97.8% 92.4% (2) 1,186 1.37 $ 26,295
TimberWood West Covina, CA 95.7% 96.6% 96.2% 1,045 1.11 $ 14,736

Orange County, CA
Avalon Huntington Beach
(formerly SunScape) Huntington Beach, CA 96.0% 96.1% 95.0% 1,135 1.24 $ 37,017
Avalon at Pacific Bay Huntington Beach, CA 97.7% 96.7% 82.3% (2) 1,091 1.20 $ 31,909
Avalon at South Coast
(formerly Mill Creek) Costa Mesa, CA 96.9% 96.2% 93.8% 1,070 1.27 $ 24,218
Avalon Santa Margarita
(formerly Villa Serena) Rancho Santa Margarita, CA 96.0% 97.3% 97.2% 1,021 1.30 $ 23,560
Amberway Anaheim, CA 92.7% 95.5% 89.1% (2) 887 1.12 $ 21,250
Avalon at Laguna Niguel
(formerly Laguna Brisas) Laguna Niguel, CA 97.2% 95.9% (2) 95.4% (2) 1,051 1.02 (2) $ 20,958
Avalon Newport
(formerly Lafayette Place) Costa Mesa, CA 100.0% 97.2% 94.3% 1,225 1.43 $ 10,088
Avalon Mission Viejo
(formerly Larkspur Canyon) Mission Viejo, CA 97.6% 97.1% 94.7% 1,006 1.30 $ 12,853

San Diego, CA
Avalon at Mission Bay San Diego, CA 95.4% 94.2% (2) 84.8% (2) 1,088 1.44 (2) $ 65,462
Avalon at Cortez Hill
(formerly Gateway Tower) San Diego, CA 74.0% 80.9% (2) 97.3% 982 1.04 (2) $ 29,523
Avalon at Mission Ridge
(formerly Mission Woods) San Diego, CA 97.5% 98.0% 98.2% 1,235 1.16 $ 21,545
Avalon at Penasquitos Hills
(formerly SummerWalk) San Diego, CA 99.4% 97.6% 97.2% 966 1.17 $ 14,148

PACIFIC NORTHWEST
Portland, OR
Avalon at Waterhouse Place Beaverton, OR 98.9% 96.7% 88.2% (2) 767 0.79 (2) $ 20,664
Avalon Palladia Hillsboro, OR 94.4% 94.3% (3) N/A 1,002 0.80 (3) $ 46,653

Seattle, WA
Avalon at Bear Creek
(formerly The Verandas at Bear Creek) Redmond, WA 95.5% 95.5% 88.5% 1,249 1.09 $ 34,382
Avalon Redmond Place
(formerly Gallery Place) Redmond, WA 98.7% 96.4% 91.4% (2) 1,129 1.17 $ 25,962
Avalon Greenbriar
(formerly Avalon Ridge) Renton, WA 92.0% 87.9% (2) 86.9% (2) 750 0.73 (2) $ 35,772
Avalon RockMeadow Mill Creek, WA 96.1% 94.4% (3) N/A 1,178 0.95 (3) $ 24,458
Avalon ParcSquare Redmond, WA 97.6% 96.9% (3) N/A 1,434 1.35 (3) $ 18,932
Avalon WildReed Everett, WA 97.0% 99.9% (3) N/A 907 0.82 (3) $ 22,950
Avalon HighGrove Everett, WA 96.4% 94.5% (3) N/A 978 0.86 (3) $ 39,605

NORTHEAST
Boston, MA
Avalon at Prudential Center Boston, MA 96.1% 98.1% (2) 98.4% 2,232 2.29 (2) $134,369
Longwood Towers Brookline, MA 98.2% 96.6% 98.3% 1,864 1.77 $ 42,059
Avalon Summit Quincy, MA 99.6% 98.3% 96.3% 1,166 1.38 $ 16,469
Avalon at Lexington Lexington, MA 99.5% 98.5% 96.5% 1,769 1.49 $ 15,129
Avalon at Faxon Park Quincy, MA 98.8% 98.0% 96.5% 1,634 1.56 $ 15,155
Avalon West Westborough, MA 98.3% 97.9% 96.7% 1,567 1.25 $ 10,824
Avalon Oaks Wilmington, MA 98.0% 98.3% 64.5% (3) 1,516 1.32 $ 21,147
Avalon Essex Peabody, MA 96.8% 69.8% (3) N/A 1,814 1.12 (3) $ 21,205
Avalon at Center Place Providence, RI 97.0% 97.2% 96.1% 1,916 1.81 $ 27,073



13

Profile of Current and Development Communities
(Dollars in thousands, except per apartment home data)



Approx.
rentable Year of Average
Number of area Completion/ size
City and state homes (Sq. Ft.) Acres Acquisition (Sq. Ft,)
- ---------------------------------------------------- -------------- --------- --------- ----- ----------- ---------

Fairfield-New Haven, CT
Avalon Walk I & II Hamden, CT 764 761,441 38.4 1992/94 996
Avalon Glen Stamford, CT 238 221,828 4.1 1991 932
Avalon Gates Trumbull, CT 340 381,322 37.0 1997 1,122
Avalon Springs Wilton, CT 102 158,259 12.0 1996 1,552
Avalon Valley Danbury,CT 268 297,479 17.1 1999 1,070
Avalon Lake Danbury,CT 135 166,231 32.0 1999 1,184
Avalon Corners Stamford, CT 195 192,174 3.2 2000 986
Avalon Haven North Haven, CT 128 140,107 10.6 2000 1,095

Hartford, CT
Avalon Pavilions Manchester, CT 932 849,680 46.3 1990/92 912

Long Island, NY
Avalon Commons Smithtown, NY 312 363,049 20.6 1997 1,164
Avalon Towers Long Beach, NY 109 124,836 1.3 1995 1,145
Avalon Court Melville, NY 154 193,464 10.8 1997 1,256
Avalon Court North Melville, NY 340 403,640 24.6 2000 1,187

Northern New Jersey
Avalon Cove Jersey City, NJ 504 574,675 11.1 1997 1,140
The Tower at Avalon Cove Jersey City, NJ 269 241,825 2.8 1999 905
Avalon Crest Fort Lee, NJ 351 371,411 13.1 1998 1,058

Central New Jersey
Avalon Watch West Windsor, NJ 512 485,871 64.0 1999 949
Avalon Run East Lawrenceville, NJ 206 265,198 27.0 1996 1,287

New York, NY
Avalon Gardens Nanuet, NY 504 638,439 55.0 1998 1,267
Avalon View Wappingers Falls, NY 288 335,088 41.0 1993 1,164
Avalon Green Elmsford, NY 105 113,538 16.9 1995 1,081
The Avalon Bronxville, NY 110 119,186 1.5 1999 1,085
Avalon Willow Mamaroneck, NY 227 199,945 4.0 2000 881

MID-ATLANTIC
Baltimore, MD
Avalon at Fairway Hills I & II Columbia, MD 720 724,253 42.1 1987/96 1,005
Avalon at Symphony Glen Columbia, MD 174 179,867 10.0 1986 1,034
Avalon Landing Annapolis, MD 158 117,033 13.8 1995 741

Washington, DC
Avalon at Ballston -
Vermont & Quincy Towers Arlington, VA 454 420,242 2.3 1997 926
Avalon Crescent McLean, VA 558 613,426 19.1 1996 1,099
Avalon at Ballston -
Washington Towers Arlington, VA 344 294,786 4.1 1990 857
Avalon at Cameron Court Alexandria, VA 460 467,292 16.0 1998 1,016
AutumnWoods Fairfax, VA 420 355,228 24.2 1996 846
Avalon at Fair Lakes Fairfax, VA 234 285,822 10.0 1998 1,221
Avalon at Dulles Sterling, VA 236 232,632 15.7 1986 986
Avalon at Providence Park Fairfax, VA 141 148,211 4.0 1997 1,051
Avalon at Fox Mill Herndon, VA 165 219,360 12.8 2000 1,329
Avalon at Decoverly Rockville, MD 368 368,446 25.0 1995 1,001


Average Rental
Average Economic Rate
Physical Occupancy ------------------ Financial
occupancy ---------------- $ per $ per reporting
City and state at 12/31/00 2000 1999 Apt (1) Sq. Ft. cost (4)
- ------------------------------- -------------- ----------- ---- ---- ------- ------- ---------

Fairfield-New Haven, CT
Avalon Walk I & II Hamden, CT 99.4% 97.9% 97.3% 1,158 1.14 $ 58,800
Avalon Glen Stamford, CT 97.5% 97.4% 96.0% 1,818 1.90 $ 30,910
Avalon Gates Trumbull, CT 99.1% 98.4% 96.8% 1,449 1.27 $ 35,931
Avalon Springs Wilton, CT 100.0% 99.1% 99.2% 2,507 1.60 $ 16,650
Avalon Valley Danbury,CT 100.0% 99.0% 58.2% (3) 1,430 1.27 $ 25,408
Avalon Lake Danbury,CT 98.5% 99.2% 60.3% (3) 1,550 1.25 $ 16,832
Avalon Corners Stamford, CT 99.5% 92.9% (3) N/A 2,060 1.94 (3) $ 31,356
Avalon Haven North Haven, CT 100.0% 71.8% (3) N/A 1,500 0.98 (3) $ 13,490

Hartford, CT
Avalon Pavilions Manchester, CT 97.1% 97.5% 97.0% 967 1.03 $ 57,619

Long Island, NY
Avalon Commons Smithtown, NY 99.7% 98.8% 98.1% 1,623 1.38 $ 33,308
Avalon Towers Long Beach, NY 99.1% 98.8% 98.5% 2,559 2.21 $ 16,624
Avalon Court Melville, NY 99.6% 99.1% 98.2% 1,873 1.48 $ 18,954
Avalon Court North Melville, NY 99.6% 96.6% (3) N/A 1,934 1.57 (3) $ 40,185

Northern New Jersey
Avalon Cove Jersey City, NJ 99.6% 98.0% 95.3% 2,553 2.20 $ 91,299
The Tower at Avalon Cove Jersey City, NJ 99.6% 98.6% 58.4% (3) 2,349 2.58 $ 49,503
Avalon Crest Fort Lee, NJ 98.3% 96.9% 41.9% (3) 2,148 1.97 $ 55,503

Central New Jersey
Avalon Watch West Windsor, NJ 98.6% 97.9% 97.7% 1,207 1.25 $ 29,131
Avalon Run East Lawrenceville, NJ 98.1% 98.3% 98.0% 1,515 1.16 $ 16,248

New York, NY
Avalon Gardens Nanuet, NY 95.6% 97.1% 98.5% 1,767 1.36 $ 54,171
Avalon View Wappingers Falls, NY 97.2% 98.2% 98.7% 1,160 0.98 $ 18,044
Avalon Green Elmsford, NY 97.1% 98.8% 99.3% 2,221 2.03 $ 12,562
The Avalon Bronxville, NY 100.0% 98.4% 63.3% (3) 2,995 2.72 $ 31,162
Avalon Willow Mamaroneck, NY 96.5% 86.2% (3) N/A 2,188 2.14 (3) $ 46,059

MID-ATLANTIC
Baltimore, MD
Avalon at Fairway Hills I & II Columbia, MD 98.7% 98.0% 97.5% 972 0.95 $ 44,099
Avalon at Symphony Glen Columbia, MD 96.6% 97.7% 97.3% 983 0.93 $ 8,848
Avalon Landing Annapolis, MD 100.0% 97.9% 97.5% 906 1.20 $ 9,542

Washington, DC
Avalon at Ballston -
Vermont & Quincy Towers Arlington, VA 94.9% 97.5% 97.5% 1,286 1.35 $ 46,878
Avalon Crescent McLean, VA 97.0% 98.2% 97.3% 1,561 1.39 $ 57,252
Avalon at Ballston -
Washington Towers Arlington, VA 95.9% 97.6% 97.7% 1,290 1.47 $ 37,100
Avalon at Cameron Court Alexandria, VA 96.5% 97.2% 97.4% 1,453 1.39 $ 43,223
AutumnWoods Fairfax, VA 96.9% 97.7% 98.0% 1,060 1.22 $ 30,806
Avalon at Fair Lakes Fairfax, VA 97.0% 97.6% 97.0% 1,388 1.11 $ 23,461
Avalon at Dulles Sterling, VA 97.5% 98.5% 98.2% 1,031 1.03 $ 11,771
Avalon at Providence Park Fairfax, VA 97.2% 98.2% 98.1% 1,141 1.07 $ 11,243
Avalon at Fox Mill Herndon, VA 98.2% 98.0% (3) N/A 1,591 1.17 (3) $ 19,391
Avalon at Decoverly Rockville, MD 98.1% 97.6% 96.2% 1,183 1.15 $ 31,414



14

Profile of Current and Development Communities
(Dollars in thousands, except per apartment home data)



Approx.
rentable Year of Average
Number of area Completion/ size
City and state homes (Sq. Ft.) Acres Acquisition (Sq. Ft,)
- ---------------------------------------------------- -------------- --------- --------- ----- ----------- ---------

Washington, DC - continued
Avalon Knoll Germantown, MD 300 290,365 26.7 1985 968
Avalon Fields I & II Gaithersburg, MD 288 292,282 9.2 1998 1,050
Avalon Crossing Rockville, MD 132 147,690 5.0 1996 1,119
4100 Massachusetts Avenue Washington, D.C. 308 298,725 2.7 1982 970

MIDWEST
Chicago, IL
Avalon at Danada Farms Wheaton, IL 295 350,606 19.2 1997 1,188
Avalon at West Grove Westmont, IL 400 388,500 17.4 1967 971
Avalon at Stratford Green Bloomingdale, IL 192 237,204 12.7 1997 1,235
200 Arlington Place Arlington Heights, IL 409 346,832 2.8 1987/00 848

Minneapolis, MN
Avalon at Devonshire Bloomington, MN 498 470,762 42.0 1988 945
Avalon at Edinburgh Brooklyn Park, MN 198 222,130 11.3 1992 1,122
Avalon at Town Centre Eagan, MN 248 235,518 18.7 1986 950
Avalon at Town Square Plymouth, MN 160 144,026 8.3 1986 900
Avalon at Woodbury Woodbury, MN 224 287,975 15.0 1999 1,286


DEVELOPMENT COMMUNITIES

Avalon at Florham Park Florham Park, NJ 270 331,560 41.9 N/A 1,228
Avalon at Edgewater Edgewater, NJ 408 405,144 7.1 N/A 993
Avalon Bellevue Bellevue, WA 202 164,226 1.7 N/A 813
Avalon at Arlington Square I Arlington, VA 510 583,950 14.2 N/A 1,145
Avalon on the Sound New Rochelle, NY 412 372,860 2.4 N/A 905
Avalon Estates Hull, MA 162 188,392 55.0 N/A 1,163
Avalon Harbor Stamford, CT 323 336,566 12.1 N/A 1,042
Avalon at Freehold Freehold, NJ 296 317,608 42.3 N/A 1,073
Avalon at Belltown Seattle, WA 100 80,200 0.7 N/A 802
Avalon Towers on the Penensula Mountain View, CA 211 218,392 1.9 N/A 1,035
Avalon at Cahill Park San Jose, CA 218 218,245 3.8 N/A 1,001
Avalon Riverview I Long Island City, NY 372 332,940 1.0 N/A 895


Average Rental
Average Economic Rate
Physical Occupancy ------------------ Financial
occupancy ---------------- $ per $ per reporting
City and state at 12/31/00 2000 1999 Apt (1) Sq. Ft. cost (4)
- ------------------------------- -------------- ----------- ---- ---- ------- ------- ---------

Washington, DC - continued
Avalon Knoll Germantown, MD 99.3% 97.2% 96.5% 941 0.94 $ 8,265
Avalon Fields I & II Gaithersburg, MD 97.5% 97.2% 97.2% 1,181 1.13 $ 22,663
Avalon Crossing Rockville, MD 98.5% 97.8% 97.2% 1,583 1.38 $ 13,890
4100 Massachusetts Avenue Washington, D.C. 98.7% 97.7% 96.9% 1,617 1.63 $ 35,528

MIDWEST
Chicago, IL
Avalon at Danada Farms Wheaton, IL 96.6% 96.1% 93.8% 1,392 1.13 $ 38,169
Avalon at West Grove Westmont, IL 99.0% 97.3% 91.1% (2) 887 0.89 $ 29,393
Avalon at Stratford Green Bloomingdale, IL 99.0% 97.1% 97.4% 1,356 1.07 $ 21,931
200 Arlington Place Arlington Heights, IL 97.1% 97.6% (3) N/A 1,255 1.45 $ 49,255

Minneapolis, MN
Avalon at Devonshire Bloomington, MN 97.0% 96.3% 97.2% 969 0.99 $ 37,173
Avalon at Edinburgh Brooklyn Park, MN 98.0% 94.2% 96.2% 1,103 0.93 $ 18,457
Avalon at Town Centre Eagan, MN 99.2% 98.4% 97.8% 962 1.00 $ 17,983
Avalon at Town Square Plymouth, MN 97.5% 96.4% 98.5% 983 1.05 $ 10,835
Avalon at Woodbury Woodbury, MN 96.9% 95.6% 84.6% (3) 1,196 0.89 $ 25,948


DEVELOPMENT COMMUNITIES

Avalon at Florham Park Florham Park, NJ N/A N/A N/A N/A N/A $ 37,024
Avalon at Edgewater Edgewater, NJ N/A N/A N/A N/A N/A $ 40,968
Avalon Bellevue Bellevue, WA N/A N/A N/A N/A N/A $ 26,694
Avalon at Arlington Square I Arlington, VA N/A N/A N/A N/A N/A $ 40,869
Avalon on the Sound New Rochelle, NY N/A N/A N/A N/A N/A $ 61,505
Avalon Estates Hull, MA N/A N/A N/A N/A N/A $ 18,714
Avalon Harbor Stamford, CT N/A N/A N/A N/A N/A $ 15,327
Avalon at Freehold Freehold, NJ N/A N/A N/A N/A N/A $ 12,105
Avalon at Belltown Seattle, WA N/A N/A N/A N/A N/A $ 8,799
Avalon Towers on the Penensula Mountain View, CA N/A N/A N/A N/A N/A $ 20,407
Avalon at Cahill Park San Jose, CA N/A N/A N/A N/A N/A $ 11,902
Avalon Riverview I Long Island City, NY N/A N/A N/A N/A N/A $ 8,133


(1) For the purpose of this table, Current Communities include only comunities
for which we held fee simple ownership interests or which we held through
DownREIT partnerships.

(2) Represents community which was under redevelopment durring the year,
resulting in lower average ecconomic occupancy and average rental rate per
square foot for the year.

(3) Represents community that completed development or was purchased durring
the year, which could result in lower average ecconomic occupancy and
average rental rate per square foot for the year.

(4) Represents the average rental revenue per occupied apartment home.

(5) Costs are presented in accordance with generally accepted accounting
preinciples. For current Development Communities, cost represents total
costs incurred through December 31, 2000.


15

Profile of Current and Development Communities
(Dollars in thousands, except per apartment home data)



1 BR 2BR 3BR
-------- -------------------- ------------------
Studios /
1/1.5 BA 1/1.5 BA 2/2.5/3 BA 2/2.5 BA 3BA efficiencies Other Total
- -------------------------------------------- -------- -------- ---------- -------- ------- ------------ ----- -----

CURRENT COMMUNITIES (1)

NORTHERN CALIFORNIA
Oakland-East Bay, CA
Waterford 208 -- 336 -- -- -- -- 544
Hampton Place 88 -- 176 -- 44 -- -- 308
Avalon Fremont 42 81 -- -- 12 -- -- 135
Avalon Pleasanton 238 -- 218 -- -- -- -- 456
Avalon Dublin 72 8 60 48 -- -- 16 204
Avalon Willow Creek 99 -- 136 -- -- -- -- 235
Avalon at Union Square 124 84 -- -- -- -- -- 208

San Francisco, CA
Crown Ridge 158 68 24 -- -- 4 -- 254
Avalon at Sunset Towers 183 20 20 -- -- 20 -- 243
Avalon at Nob Hill 114 -- 25 -- -- 46 -- 185
Avalon at Diamond Heights 90 -- 49 15 -- -- -- 154
Avalon Towers by the Bay 103 -- 120 -- 3 -- -- 226
Crossbrook 88 30 108 -- -- -- -- 226
Avalon at Cedar Ridge 117 33 24 -- -- 21 -- 195
Avalon Foster City 124 123 1 -- -- 40 -- 288
Avalon Pacifica 58 106 56 -- -- -- -- 220

San Jose, CA
Avalon Silicon Valley 338 -- 336 18 15 3 -- 710
Avalon at Blossom Hill 90 -- 210 -- 24 -- -- 324
Avalon Campbell 156 -- 180 -- 12 -- -- 348
CountryBrook 108 -- 252 -- -- -- -- 360
Avalon at Pruneyard 212 40 -- -- -- -- -- 252
Avalon at Creekside 158 128 -- -- -- 8 -- 294
Avalon at River Oaks 100 -- 126 -- -- -- -- 226
Avalon at Parkside 60 -- 96 36 -- -- -- 192
San Marino 103 -- 145 -- -- -- -- 248
Avalon Sunnyvale 112 10 54 -- -- 44 -- 220
Avalon at Foxchase 168 -- 228 -- -- -- -- 396
Fairway Glen 60 -- 84 -- -- -- -- 144
Avalon Cupertino 145 -- 152 -- 14 -- -- 311
Avalon on the Alameda 113 -- 164 -- 28 -- -- 305
Avalon Rosewalk 96 -- 192 -- 12 -- -- 300
Avalon Rosewalk II 72 -- 72 -- 12 -- -- 156


Washer & Large Balcony,
dryer storage patio,
Parking hook-ups or Vaulted or walk-in deck or
spaces units ceilings Lofts Fireplaces closet sunroom
- ------------------------------------------------- ------- ----------- -------- ----- ---------- -------- -------

CURRENT COMMUNITIES (1)

NORTHERN CALIFORNIA
Oakland-East Bay, CA
Waterford 876 Some Some None None All All
Hampton Place 570 All Most None Half Most All
Avalon Fremont 260 All Some None Some All All
Avalon Pleasanton 856 All Some None Most All All
Avalon Dublin 427 Most Some None Most All All
Avalon Willow Creek 240 All None None None All All
Avalon at Union Square 210 None None None Most All All

San Francisco, CA
Crown Ridge 377 Some Some None Some None All
Avalon at Sunset Towers 244 None None None None None Some
Avalon at Nob Hill 104 None None None None None Some
Avalon at Diamond Heights 155 None Some None None All All
Avalon Towers by the Bay 235 All Some None Some Half Most
Crossbrook 343 None Half None Some None All
Avalon at Cedar Ridge 258 None None Some None Some All
Avalon Foster City 490 None None None None Most Most
Avalon Pacifica 299 None None None Some Some All

San Jose, CA
Avalon Silicon Valley 1,400 All Some Some Some Most All
Avalon at Blossom Hill 562 All Some None None Most All
Avalon Campbell 588 All Some None None All All
CountryBrook 694 All Some None All None All
Avalon at Pruneyard 395 All None None None None Half
Avalon at Creekside 376 None None None Some None Most
Avalon at River Oaks 354 All None None Most All All
Avalon at Parkside 192 All Some None Half All All
San Marino 436 All Some None None Most All
Avalon Sunnyvale 394 Some None None None All All
Avalon at Foxchase 719 All Some None None Some All
Fairway Glen 226 All Some None None None All
Avalon Cupertino 526 All Some None Some Some All
Avalon on the Alameda 558 All Some None Some All All
Avalon Rosewalk 420 All Some None Some Some All
Avalon Rosewalk II 228 All Some None Some Most All


Non- Homes w/
direct Direct pre-wired
Built-in access access security
bookcases Carports garages garages systems
- ------------------------------------- --------- -------- -------- ------- ---------

CURRENT COMMUNITIES (1)

NORTHERN CALIFORNIA
Oakland-East Bay, CA
Waterford None Yes No No None
Hampton Place None Yes Yes No All
Avalon Fremont None Yes No No All
Avalon Pleasanton None Yes Yes Yes None
Avalon Dublin None No Yes No None
Avalon Willow Creek None Yes No No None
Avalon at Union Square None Yes No No None

San Francisco, CA
Crown Ridge None Yes No Yes None
Avalon at Sunset Towers None No No Yes None
Avalon at Nob Hill Most No Yes No None
Avalon at Diamond Heights None No Yes No None
Avalon Towers by the Bay None No No Yes All
Crossbrook None Yes No Yes None
Avalon at Cedar Ridge None Yes No Yes None
Avalon Foster City None Yes No No None
Avalon Pacifica None Yes Yes No None

San Jose, CA
Avalon Silicon Valley Some No Yes No None
Avalon at Blossom Hill None Yes Yes No All
Avalon Campbell None Yes Yes No All
CountryBrook None Yes Yes No None
Avalon at Pruneyard None Yes Yes No None
Avalon at Creekside None Yes No No None
Avalon at River Oaks None No No Yes None
Avalon at Parkside Some Yes Yes No None
San Marino None Yes No No None
Avalon Sunnyvale None No No Yes None
Avalon at Foxchase None Yes No No None
Fairway Glen None Yes No No Some
Avalon Cupertino Some No Yes No None
Avalon on the Alameda Some No Yes No All
Avalon Rosewalk Most Yes Yes No All
Avalon Rosewalk II Most Yes Yes No All



16

Features and Recreational Amenities - Current and Development Communities




1 BR 2BR 3BR
-------- -------------------- ------------------
Studios /
1/1.5 BA 1/1.5 BA 2/2.5/3 BA 2/2.5 BA 3BA efficiencies Other Total
- -------------------------------------------- -------- -------- ---------- -------- ------- ------------ ----- -----

SOUTHERN CALIFORNIA
Los Angeles, CA
Avalon Woodland Hills 222 -- 441 -- -- -- -- 663
Avalon at Media Center 296 102 117 12 -- 221 -- 748
Avalon Westside Terrace 126 -- 102 -- -- 135 -- 363
Arbor Heights 212 -- 135 2 -- 2 -- 351
Avalon at Warner Center 88 54 65 20 -- -- -- 227
TimberWood 32 50 63 64 -- -- -- 209

Orange County, CA
Avalon Huntington Beach -- 36 324 40 -- -- -- 400
Avalon at Pacific Bay 144 56 104 -- -- -- -- 304
Avalon at South Coast 124 -- 86 -- -- 48 258 403
Avalon Santa Margarita 160 -- 141 -- -- -- -- 301
Amberway 114 48 48 -- -- 62 -- 272
Avalon at Laguna Niguel -- -- 176 -- -- -- -- 176
Avalon Newport 44 54 -- 35 -- 12 -- 145
Avalon Mission Viejo 94 28 44 -- -- -- -- 166

San Diego, CA
Avalon at Mission Bay 270 9 165 -- -- 120 -- 564
Avalon at Cortez Hill 114 -- 83 -- -- 97 -- 294
Avalon at Mission Ridge 18 1 98 83 -- -- -- 200
Avalon at Penasquitos Hills 48 48 80 -- -- -- -- 176

PACIFIC NORTHWEST
Portland, OR
Avalon at Waterhouse Place 99 38 138 4 -- -- -- 279
Avalon Palladia 76 132 213 24 40 -- 12 497

Seattle, WA
Avalon at Bear Creek 55 40 110 59 -- -- -- 264
Avalon Redmond Place 76 44 67 35 -- -- -- 222
Avalon Greenbriar 16 19 217 169 -- -- -- 421
Avalon RockMeadow 28 48 86 28 16 -- -- 206
Avalon ParcSquare 31 26 55 5 7 -- -- 124
Avalon WildReed 36 60 78 60 -- -- -- 234
Avalon HighGrove 84 119 124 56 8 -- -- 391

NORTHEAST
Boston, MA
Avalon at Prudential Center 361 -- 237 -- 23 148 12 781
Longwood Towers 137 53 22 25 -- 78 19 334
Avalon Summit 154 61 28 2 -- -- -- 245
Avalon at Lexington 28 24 90 56 -- -- -- 198
Avalon at Faxon Park 68 -- 75 28 -- -- -- 171
Avalon West 40 -- 55 25 -- -- -- 120
Avalon Oaks 60 24 96 24 -- -- -- 204
Avalon Essex 50 -- 62 -- -- -- 42 154
Avalon at Center Place 103 -- 111 5 -- 6 -- 225


Washer & Large Balcony,
dryer storage patio,
Parking hook-ups or Vaulted or walk-in deck or
spaces units ceilings Lofts Fireplaces closet sunroom
- ------------------------------------------------- ------- ----------- -------- ----- ---------- -------- -------

SOUTHERN CALIFORNIA
Los Angeles, CA
Avalon Woodland Hills 1,300 Some None Some None Most All
Avalon at Media Center 838 Some None None Some Some Some
Avalon Westside Terrace 487 None None None None None All
Arbor Heights 940 All None None None None Half
Avalon at Warner Center 252 All Some None Some Some All
TimberWood 400 Most Half None None All All

Orange County, CA
Avalon Huntington Beach 790 None None None None Most Most
Avalon at Pacific Bay 478 All None None None Half All
Avalon at South Coast Some Half None None Half All
Avalon Santa Margarita 523 All None None None None All
Amberway 454 None Some None None None All
Avalon at Laguna Niguel 335 None Some None All None Most
Avalon Newport 235 Most Some None Some Most Most
Avalon Mission Viejo 250 None None None None None All

San Diego, CA
Avalon at Mission Bay 695 None None None None Some All
Avalon at Cortez Hill 292 None None None None None All
Avalon at Mission Ridge 384 Most None None Most Most Most
Avalon at Penasquitos Hills 176 All None None All Some All

PACIFIC NORTHWEST
Portland, OR
Avalon at Waterhouse Place 445 All None None Most Some All
Avalon Palladia 1,060 All Some Some Most Some All

Seattle, WA
Avalon at Bear Creek 470 All All None Most All All
Avalon Redmond Place 384 All Some None Most All All
Avalon Greenbriar 731 All Some None Most All All
Avalon RockMeadow 308 All Some None Most Most All
Avalon ParcSquare 196 All No None None All All
Avalon WildReed 462 All Some None Most Most All
Avalon HighGrove 713 All Some None Most Most All

NORTHEAST
Boston, MA
Avalon at Prudential Center 142 None None None None Most Some
Longwood Towers 210 Some None None Some Most Some
Avalon Summit 328 None None None None None All
Avalon at Lexington 355 All Some Some Some Most All
Avalon at Faxon Park 287 All Some Some Some All All
Avalon West 145 All Some Some Some All Half
Avalon Oaks 355 All Some Some Some All All
Avalon Essex 259 All None Some Some All All
Avalon at Center Place 345 All None None None Half Some


Non- Homes w/
direct Direct pre-wired
Built-in access access security
bookcases Carports garages garages systems
- ------------------------------------- --------- -------- -------- ------- ---------

SOUTHERN CALIFORNIA
Los Angeles, CA
Avalon Woodland Hills None No No No None
Avalon at Media Center None Yes Yes No None
Avalon Westside Terrace Some No No No None
Arbor Heights None Yes Yes No None
Avalon at Warner Center None Yes No No None
TimberWood None Yes No No None

Orange County, CA
Avalon Huntington Beach None Yes Yes No None
Avalon at Pacific Bay None Yes Yes No None
Avalon at South Coast None Yes Yes No None
Avalon Santa Margarita None Yes Yes No None
Amberway None Yes Yes No None
Avalon at Laguna Niguel None Yes No No None
Avalon Newport Some Yes Yes No None
Avalon Mission Viejo None Yes Yes No None

San Diego, CA
Avalon at Mission Bay None No Yes No None
Avalon at Cortez Hill None No No Yes None
Avalon at Mission Ridge None No Yes No None
Avalon at Penasquitos Hills All Yes No No None

PACIFIC NORTHWEST
Portland, OR
Avalon at Waterhouse Place None Yes Yes No None
Avalon Palladia None Yes Yes Yes Yes

Seattle, WA
Avalon at Bear Creek Some Yes Yes Yes All
Avalon Redmond Place None Yes Yes No None
Avalon Greenbriar Some Yes No No None
Avalon RockMeadow Some Yes Yes Yes Yes
Avalon ParcSquare None No No No Yes
Avalon WildReed Some Yes Yes No Yes
Avalon HighGrove Some Yes Yes Yes Yes

NORTHEAST
Boston, MA
Avalon at Prudential Center None No No No None
Longwood Towers Some No No No Some
Avalon Summit None No Yes No None
Avalon at Lexington None Yes Yes No All
Avalon at Faxon Park None No Yes No All
Avalon West None No Yes Yes All
Avalon Oaks None No Yes No All
Avalon Essex None No Yes Yes All
Avalon at Center Place None No No No None



17

Features and Recreational Amenities - Current and Development Communities



1 BR 2BR 3BR
-------- -------------------- ------------------
Studios /
1/1.5 BA 1/1.5 BA 2/2.5/3 BA 2/2.5 BA 3BA efficiencies Other Total
- -------------------------------------------- -------- -------- ---------- -------- ------- ------------ ----- -----

Fairfield-New Haven, CT
Avalon Walk I & II 272 116 122 74 -- -- 180 764
Avalon Glen 124 -- 114 -- -- -- -- 238
Avalon Gates 122 -- 168 50 -- -- -- 340
Avalon Springs -- -- 70 32 -- -- -- 102
Avalon Valley 106 -- 134 28 -- -- -- 268
Avalon Lake 36 -- 46 -- -- 24 29 135
Avalon Corners 118 -- 77 -- -- -- -- 195
Avalon Haven 44 60 -- 24 -- -- -- 128

Hartford, CT
Avalon Pavilions 472 168 220 72 -- -- -- 932

Long Island, NY
Avalon Commons 128 40 112 32 -- -- -- 312
Avalon Towers -- -- 37 1 3 1 67 109
Avalon Court 34 -- 76 44 -- -- -- 154
Avalon Court North 138 54 118 -- 30 -- -- 340

Northern New Jersey
Avalon Cove 190 -- 190 46 2 -- 76 504
The Tower at Avalon Cove 147 24 74 24 -- -- -- 269
Avalon Crest 96 -- 131 67 -- -- 57 351

Central New Jersey
Avalon Watch 252 36 142 82 -- -- -- 512
Avalon Run East 64 -- 106 36 -- -- -- 206

New York, NY
Avalon Gardens 208 48 144 104 -- -- -- 504
Avalon View 115 47 62 64 -- -- -- 288
Avalon Green 25 24 56 -- -- -- -- 105
The Avalon 55 2 43 10 -- -- -- 110
Avalon Willow 150 77 -- -- -- -- -- 227

MID-ATLANTIC
Baltimore, MD
Avalon at Fairway Hills I & II 283 223 154 60 -- -- -- 720
Avalon at Symphony Glen 86 14 54 20 -- -- -- 174
Avalon Landing 65 18 57 -- -- -- 18 158

Washington, DC
Avalon at Ballston - Vermont & Quincy Towers 333 37 84 -- -- -- -- 454
Avalon Crescent 186 26 346 -- -- -- -- 558
Avalon at Ballston - Washington Towers 205 28 111 -- -- -- -- 344
Avalon at Cameron Court 208 -- 168 -- -- -- 84 460
AutumnWoods 220 72 96 -- -- -- 32 420
Avalon at Fair Lakes 45 12 125 26 26 -- -- 234
Avalon at Dulles 104 40 76 -- 16 -- -- 236
Avalon at Providence Park 19 -- 112 4 -- -- 6 141
Avalon at Fox Mill -- -- 92 73 -- -- -- 165
Avalon at Decoverly 156 -- 104 64 44 -- -- 368


Washer & Large Balcony,
dryer storage patio,
Parking hook-ups or Vaulted or walk-in deck or
spaces units ceilings Lofts Fireplaces closet sunroom
- ------------------------------------------------- ------- ----------- -------- ----- ---------- -------- -------

Fairfield-New Haven, CT
Avalon Walk I & II 1,528 All Some Some Half All All
Avalon Glen 400 Most Some Some Some Half Most
Avalon Gates 580 All Some Some None All All
Avalon Springs 153 All Half Half Most All All
Avalon Valley 626 All Some Some Some All All
Avalon Lake 382 All Some Some Some All All
Avalon Corners 273 All Some Some Some All All
Avalon Haven 256 All None Some Some All All

Hartford, CT
Avalon Pavilions 1,631 All Some Some Some Most All

Long Island, NY
Avalon Commons 538 All Some Some Some All All
Avalon Towers 198 All None None None All Most
Avalon Court 292 All Some Some Some All All
Avalon Court North 818 All Some Most Some All All

Northern New Jersey
Avalon Cove 464 All Some Some Some All Most
The Tower at Avalon Cove 263 All None None None Half Some
Avalon Crest 364 All Some Some Some All All

Central New Jersey
Avalon Watch 768 Most Some None Some All All
Avalon Run East 345 All Some Some Some All All

New York, NY
Avalon Gardens 1,008 All Half Half Some All Most
Avalon View 576 All Some Some Some Most All
Avalon Green 179 All Some Half Some All All
The Avalon 167 All Some Some Some Most Half
Avalon Willow 379 All Some Some None Most All

MID-ATLANTIC
Baltimore, MD
Avalon at Fairway Hills I & II 1,137 All Some None Some Some All
Avalon at Symphony Glen 266 All Some None Most All All
Avalon Landing 257 All None None Most Most All

Washington, DC
Avalon at Ballston - Vermont & Quincy Towers 498 All None None None Most All
Avalon Crescent 662 All Some Some Half Most All
Avalon at Ballston - Washington Towers 415 All None None Some Most All
Avalon at Cameron Court 736 All Some Some Some All Most
AutumnWoods 727 All Some None Some All All
Avalon at Fair Lakes 505 All Half None Half All Most
Avalon at Dulles 493 All Some None Some All All
Avalon at Providence Park 287 All None None Most All All
Avalon at Fox Mill 343 All Most None Most All All
Avalon at Decoverly 584 All Some Some Most Most All


Non- Homes w/
direct Direct pre-wired
Built-in access access security
bookcases Carports garages garages systems
- ------------------------------------- --------- -------- -------- ------- ---------

Fairfield-New Haven, CT
Avalon Walk I & II Some Yes No No Half
Avalon Glen None Yes Yes No Most
Avalon Gates None Yes Yes No All
Avalon Springs None No No Yes All
Avalon Valley None Yes Yes No All
Avalon Lake None No Yes No All
Avalon Corners None No Yes No All
Avalon Haven None Yes Yes No All

Hartford, CT
Avalon Pavilions None Yes No No None

Long Island, NY
Avalon Commons None No Yes No All
Avalon Towers None No No Yes All
Avalon Court None No No Yes All
Avalon Court North None No Yes Yes All

Northern New Jersey
Avalon Cove None No Yes Some All
The Tower at Avalon Cove None No Yes No All
Avalon Crest None No Yes Yes All

Central New Jersey
Avalon Watch None No Yes No None
Avalon Run East None Yes Yes Yes All

New York, NY
Avalon Gardens None Yes Yes Yes All
Avalon View None Yes No No None
Avalon Green None Yes No No All
The Avalon None No Yes No All
Avalon Willow None No Yes Yes All

MID-ATLANTIC
Baltimore, MD
Avalon at Fairway Hills I & II Some No No No None
Avalon at Symphony Glen Half No No No None
Avalon Landing None Yes No No None

Washington, DC
Avalon at Ballston - Vermont & Quincy Towers None No No Yes None
Avalon Crescent Some No Yes Yes All
Avalon at Ballston - Washington Towers None No No Yes None
Avalon at Cameron Court None No Yes Yes All
AutumnWoods Some Yes No No None
Avalon at Fair Lakes None No Yes Yes None
Avalon at Dulles Some No No No None
Avalon at Providence Park None No No No None
Avalon at Fox Mill None No No Yes All
Avalon at Decoverly None No No No None



18

Features and Recreational Amenities - Current and Development Communities



1 BR 2BR 3BR
-------- -------------------- ------------------
Studios /
1/1.5 BA 1/1.5 BA 2/2.5/3 BA 2/2.5 BA 3BA efficiencies Other Total
- -------------------------------------------- -------- -------- ---------- -------- ------- ------------ ----- -----

Washington, DC - continued
Avalon Knoll 136 55 81 28 -- -- -- 300
Avalon Fields I & II 74 32 84 32 -- -- 66 288
Avalon Fields I & II -- 27 105 -- -- -- -- 132
4100 Massachusetts Avenue 160 70 -- 3 -- 27 48 308

MIDWEST
Chicago, IL
Avalon at Danada Farms 80 52 134 29 -- -- -- 295
Avalon at West Grove 200 200 -- -- -- -- -- 400
Avalon at Stratford Green 45 9 108 21 -- -- 9 192
200 Arlington Place 142 89 148 -- -- 30 -- 409

Minneapolis, MN
Avalon at Devonshire 194 -- 304 -- -- -- -- 498
Avalon at Edinburgh 56 -- 114 26 -- 2 -- 198
Avalon at Town Centre 104 -- 111 33 -- -- -- 248
Avalon at Town Square 76 -- 68 12 -- -- 4 160
Avalon at Woodbury 41 -- 147 36 -- -- -- 224

DEVELOPMENT COMMUNITIES

Avalon at Florham Park 46 -- 107 117 -- -- -- 270
Avalon at Edgewater 158 -- 190 60 -- -- -- 408
Avalon Bellevue 110 -- 67 -- -- 25 -- 202
Avalon at Arlington Square I 211 20 226 53 -- -- -- 510
Avalon on the Sound 143 -- 184 22 20 43 -- 412
Avalon Estates 66 16 80 -- -- -- -- 162
Avalon Harbor 159 -- 130 20 -- 14 -- 323
Avalon at Freehold 42 41 176 37 -- -- -- 296
Avalon at Belltown 64 -- 20 -- -- 16 -- 100
Avalon Towers on the Penensula 90 -- 115 -- 6 -- -- 211
Avalon at Cahill Park 118 -- 94 -- 6 -- -- 218
Avalon Riverview I 184 -- 114 -- 31 43 -- 372


Washer & Large Balcony,
dryer storage patio,
Parking hook-ups or Vaulted or walk-in deck or
spaces units ceilings Lofts Fireplaces closet sunroom
- ------------------------------------------------- ------- ----------- -------- ----- ---------- -------- -------

Washington, DC - continued
Avalon Knoll 482 All Some None Half All All
Avalon Fields I & II 443 All Some Some Half All Most
Avalon Fields I & II 224 All Some Some Half All All
4100 Massachusetts Avenue 330 All None None Some Most All

MIDWEST
Chicago, IL
Avalon at Danada Farms 714 All None None Some All Some
Avalon at West Grove 860 None None None None None All
Avalon at Stratford Green 437 All None None Some Most Some
200 Arlington Place 650 All None None None All Some

Minneapolis, MN
Avalon at Devonshire 498 Most Some None Some Most Most
Avalon at Edinburgh 210 All None None Some Some All
Avalon at Town Centre 250 All Some None Some Some All
Avalon at Town Square 162 All Some None Some Some All
Avalon at Woodbury 513 All None None Some Some Some

DEVELOPMENT COMMUNITIES

Avalon at Florham Park 611 All Most None Some All Some
Avalon at Edgewater 872 All None Some Some All All
Avalon Bellevue 304 All None Some Some All All
Avalon at Arlington Square I 949 All Some Some Some All Some
Avalon on the Sound 645 Most None Some None Most Some
Avalon Estates 354 All Some Some Some All All
Avalon Harbor 543 All Some Some Some Most All
Avalon at Freehold 611 All Some Some Some All All
Avalon at Belltown 134 All None None None All Some
Avalon Towers on the Penensula 512 All None None None Most All
Avalon at Cahill Park 283 All Some Some Some Most All
Avalon Riverview I 128 All None None None Most Some


Non- Homes w/
direct Direct pre-wired
Built-in access access security
bookcases Carports garages garages systems
- ------------------------------------- --------- -------- -------- ------- ---------

Washington, DC - continued
Avalon Knoll Some No No No None
Avalon Fields I & II None No Yes No All
Avalon Fields I & II Some No Yes Yes All
4100 Massachusetts Avenue Some No Yes No None

MIDWEST
Chicago, IL
Avalon at Danada Farms Some No No Yes None
Avalon at West Grove None Yes No No None
Avalon at Stratford Green Some No Yes Yes None
200 Arlington Place None No Yes No None

Minneapolis, MN
Avalon at Devonshire Some No Yes Yes None
Avalon at Edinburgh None No Yes No None
Avalon at Town Centre None No Yes No None
Avalon at Town Square None No Yes No None
Avalon at Woodbury None No No Yes None

DEVELOPMENT COMMUNITIES

Avalon at Florham Park None No No Yes All
Avalon at Edgewater None No No Yes Some
Avalon Bellevue None No No No None
Avalon at Arlington Square I Some No No Yes All
Avalon on the Sound None No Yes No Some
Avalon Estates None No Yes Yes All
Avalon Harbor None No No No All
Avalon at Freehold None No Yes No None
Avalon at Belltown None No No No Some
Avalon Towers on the Penensula None No Yes No No
Avalon at Cahill Park None No Yes No No
Avalon Riverview I None No Yes No Some



19

Features and Recreational Amenities - Current and Development Communities

(continued)



Community Building
Buildings entrance entrance Under- Aerobics
w/ security controlled controlled ground dance Picnic
systems access access parking studio Car wash area
- -------------------------------------------- ----------- ---------- ---------- ------- -------- -------- ------

CURRENT COMMUNITIES (1)

NORTHERN CALIFORNIA
Oakland-East Bay, CA
Waterford Some Yes No No No Yes No
Hampton Place All No No No Yes Yes No
Avalon Fremont All No No Yes Yes Yes No
Avalon Pleasanton None No No No No Yes No
Avalon Dublin None No No No No Yes Yes
Avalon Willow Creek Some Yes No No No Yes Yes
Avalon at Union Square None Yes No No No No No

San Francisco, CA
Crown Ridge None No No Yes No No No
Avalon at Sunset Towers All Yes Yes Yes No Yes Yes
Avalon at Nob Hill None Yes Yes Yes No No Yes
Avalon at Diamond Heights None No Yes Yes No No No
Avalon Towers by the Bay None Yes Yes Yes No No No
Crossbrook None No No No No No Yes
Avalon at Cedar Ridge None No No No No No No
Avalon Foster City Some No No No No Yes No
Avalon Pacifica None No No No No No No

San Jose, CA
Avalon Silicon Valley Some Yes Yes Yes Yes No Yes
Avalon at Blossom Hill None Yes Yes No No Yes No
Avalon Campbell Some Yes Yes Yes Yes No Yes
CountryBrook None Yes No No No Yes No
Avalon at Pruneyard None No No No No No Yes
Avalon at Creekside Some No No No No No Yes
Avalon at River Oaks None No No No No No Yes
Avalon at Parkside None No No Yes No No Yes
San Marino None Yes No No No Yes No
Avalon Sunnyvale None No No Yes Yes Yes Yes
Avalon at Foxchase None No No Yes No Yes No
Fairway Glen Some No No No No Yes Yes
Avalon Cupertino None Yes Yes Yes No No No
Avalon on the Alameda All Yes Yes Yes No No No
Avalon Rosewalk None Yes No No Yes No Yes
Avalon Rosewalk II None Yes No No Yes No Yes


Walking / Sauna / Tennis Fitness Sand
jogging Pool whirlpool court Racquetball center volleyball
- --------------------------- --------- ---- --------- ------ ----------- ------- ----------

URRENT COMMUNITIES (1)

NORTHERN CALIFORNIA
Oakland-East Bay, CA
Waterford No Yes Yes No No Yes No
Hampton Place No Yes Yes No No Yes No
Avalon Fremont No Yes Yes No No Yes No
Avalon Pleasanton No Yes Yes No No Yes No
Avalon Dublin No Yes Yes No No Yes Yes
Avalon Willow Creek No Yes Yes No No Yes No
Avalon at Union Square No Yes No No No Yes No

San Francisco, CA
Crown Ridge Yes Yes Yes No No Yes No
Avalon at Sunset Towers No No No No No No No
Avalon at Nob Hill No No No No No Yes No
Avalon at Diamond Heights No Yes Yes No No Yes No
Avalon Towers by the Bay No No Yes No No Yes No
Crossbrook Yes Yes Yes No No Yes No
Avalon at Cedar Ridge No Yes Yes No No Yes No
Avalon Foster City Yes Yes No No No No No
Avalon Pacifica No Yes No No No Yes No

San Jose, CA
Avalon Silicon Valley No Yes Yes Yes No Yes No
Avalon at Blossom Hill No Yes Yes No No Yes No
Avalon Campbell Yes Yes Yes No No Yes Yes
CountryBrook No Yes Yes No No Yes No
Avalon at Pruneyard No Yes Yes No No Yes Yes
Avalon at Creekside Yes Yes No Yes No Yes Yes
Avalon at River Oaks No Yes Yes No No Yes No
Avalon at Parkside No Yes Yes No No Yes No
San Marino No Yes Yes No No Yes No
Avalon Sunnyvale No Yes Yes No No Yes No
Avalon at Foxchase No Yes Yes No No Yes No
Fairway Glen No Yes Yes No No Yes No
Avalon Cupertino No Yes Yes No No Yes No
Avalon on the Alameda No Yes Yes No No Yes No
Avalon Rosewalk Yes Yes Yes No No Yes No
Avalon Rosewalk II Yes Yes Yes No No No No


Indoor
outdoor Clubhouse /
basketball clubroom Business Totlot Concierge
- ------------------------------ ---------- ----------- -------- ------ ---------

URRENT COMMUNITIES (1)

NORTHERN CALIFORNIA
Oakland-East Bay, CA
Waterford Yes No No Yes No
Hampton Place No Yes No No No
Avalon Fremont No Yes No No No
Avalon Pleasanton Yes No Yes Yes No
Avalon Dublin Yes No Yes No No
Avalon Willow Creek No No No No No
Avalon at Union Square No No No No No

San Francisco, CA
Crown Ridge No No Yes No No
Avalon at Sunset Towers No No No No No
Avalon at Nob Hill No No No No Yes
Avalon at Diamond Heights No Yes No No No
Avalon Towers by the Bay No Yes Yes No Yes
Crossbrook No No No Yes No
Avalon at Cedar Ridge No Yes No No No
Avalon Foster City No Yes No Yes No
Avalon Pacifica No No No No No

San Jose, CA
Avalon Silicon Valley Yes Yes Yes Yes Yes
Avalon at Blossom Hill No No Yes No No
Avalon Campbell No No Yes Yes No
CountryBrook No No No No No
Avalon at Pruneyard Yes No Yes No No
Avalon at Creekside Yes Yes Yes No No
Avalon at River Oaks No No Yes No No
Avalon at Parkside Yes Yes Yes Yes No
San Marino No No No Yes No
Avalon Sunnyvale No No Yes Yes No
Avalon at Foxchase No No No No No
Fairway Glen No No No Yes No
Avalon Cupertino No No Yes No No
Avalon on the Alameda No No No No No
Avalon Rosewalk No No Yes No No
Avalon Rosewalk II No No No No No



20

Features and Recreational Amenities - Current and Development Communities

(continued)



Community Building
Buildings entrance entrance Under- Aerobics
w/ security controlled controlled ground dance Picnic
systems access access parking studio Car wash area
- -------------------------------------------- ----------- ---------- ---------- ------- -------- -------- ------

SOUTHERN CALIFORNIA
Los Angeles, CA
Avalon Woodland Hills None Yes No Yes No No Yes
Avalon at Media Center None No No Yes No Yes No
Avalon Westside Terrace None Yes Yes Yes Yes Yes Yes
Arbor Heights None Yes No No Yes No No
Avalon at Warner Center None Yes No Yes No Yes No
TimberWood Some Yes No No Yes No No

Orange County, CA
Avalon Huntington Beach None Yes Yes Yes Yes No No
Avalon at Pacific Bay None Yes No Yes Yes No No
Avalon at South Coast None Yes Yes Yes No No No
Avalon Santa Margarita None No No No Yes No No
Amberway None Yes No No No No No
Avalon at Laguna Niguel None No No No Yes No Yes
Avalon Newport None No No Yes No No No
Avalon Mission Viejo None Yes No Yes No No No

San Diego, CA
Avalon at Mission Bay None Yes Yes Yes No Yes Yes
Avalon at Cortez Hill All Yes Yes Yes No Yes No
Avalon at Mission Ridge Some No No No Yes No No
Avalon at Penasquitos Hills None No No Yes Yes No No

PACIFIC NORTHWEST
Portland, OR
Avalon at Waterhouse Place None No Yes No Yes No No
Avalon Palladia None No Yes Yes Yes No No

Seattle, WA
Avalon at Bear Creek All Yes Yes Yes Yes No No
Avalon Redmond Place None No Yes No Yes No No
Avalon Greenbriar None No Yes No Yes Yes No
Avalon RockMeadow None No Yes Yes Yes No No
Avalon ParcSquare None Yes Yes Yes No Yes Yes
Avalon WildReed None No Yes Yes Yes No No
Avalon HighGrove None No Yes Yes Yes No No

NORTHEAST
Boston, MA
Avalon at Prudential Center None No Yes No No Yes Yes
Longwood Towers None No Yes No Yes No No
Avalon Summit None No No No No Yes No
Avalon at Lexington None No Yes No Yes Yes No
Avalon at Faxon Park None No Yes No Yes Yes No
Avalon West None No Yes No Yes Yes No
Avalon Oaks None No Yes No Yes Yes No
Avalon Essex None No Yes No No Yes No
Avalon at Center Place None Yes Yes No No Yes Yes


Walking / Sauna / Tennis Fitness Sand
jogging Pool whirlpool court Racquetball center volleyball
- --------------------------- --------- ---- --------- ------ ----------- ------- ----------


SOUTHERN CALIFORNIA
Los Angeles, CA
Avalon Woodland Hills No No No No Yes Yes No
Avalon at Media Center No No Yes No Yes No No
Avalon Westside Terrace No No No No Yes Yes Yes
Arbor Heights No No No No Yes Yes No
Avalon at Warner Center No No No No Yes Yes Yes
TimberWood No No No No Yes No No

Orange County, CA
Avalon Huntington Beach No No Yes No Yes Yes No
Avalon at Pacific Bay No No No No Yes Yes No
Avalon at South Coast No Yes No No Yes Yes Yes
Avalon Santa Margarita No No Yes Yes Yes Yes No
Amberway No No No No Yes Yes No
Avalon at Laguna Niguel No No No No Yes Yes No
Avalon Newport No Yes No No Yes Yes No
Avalon Mission Viejo No No No Yes Yes Yes No

San Diego, CA
Avalon at Mission Bay Yes Yes No No Yes Yes Yes
Avalon at Cortez Hill No No No Yes Yes Yes Yes
Avalon at Mission Ridge No No Yes No Yes Yes No
Avalon at Penasquitos Hills No No Yes Yes Yes Yes Yes

PACIFIC NORTHWEST
Portland, OR
Avalon at Waterhouse Place No No Yes Yes Yes Yes No
Avalon Palladia No No Yes Yes Yes Yes No

Seattle, WA
Avalon at Bear Creek No No Yes Yes Yes Yes No
Avalon Redmond Place No Yes No Yes Yes Yes No
Avalon Greenbriar No No Yes No Yes Yes No
Avalon RockMeadow No No Yes No Yes Yes No
Avalon ParcSquare No No No Yes No No No
Avalon WildReed No No Yes Yes Yes Yes No
Avalon HighGrove No No No No Yes Yes No

NORTHEAST
Boston, MA
Avalon at Prudential Center No No Yes No No No No
Longwood Towers Yes No Yes No No No No
Avalon Summit No No Yes No Yes No No
Avalon at Lexington No No Yes No Yes No No
Avalon at Faxon Park No No Yes No Yes Yes No
Avalon West No No Yes No Yes No No
Avalon Oaks No No Yes No Yes Yes No
Avalon Essex No No Yes No Yes Yes No
Avalon at Center Place No Yes Yes No Yes No No


Indoor
outdoor Clubhouse /
basketball clubroom Business Totlot Concierge
- ------------------------------ ---------- ----------- -------- ------ ---------

SOUTHERN CALIFORNIA
Los Angeles, CA
Avalon Woodland Hills No Yes No No No
Avalon at Media Center No Yes No No No
Avalon Westside Terrace No Yes No Yes No
Arbor Heights No Yes No No No
Avalon at Warner Center No Yes No No No
TimberWood No Yes No No No

Orange County, CA
Avalon Huntington Beach No Yes No No No
Avalon at Pacific Bay No Yes No No No
Avalon at South Coast No Yes Yes No No
Avalon Santa Margarita No Yes No No No
Amberway No Yes No No No
Avalon at Laguna Niguel No Yes No No No
Avalon Newport No Yes No No No
Avalon Mission Viejo No Yes No No No

San Diego, CA
Avalon at Mission Bay No Yes Yes Yes No
Avalon at Cortez Hill No Yes No No No
Avalon at Mission Ridge No Yes No No No
Avalon at Penasquitos Hills Yes Yes Yes No No

PACIFIC NORTHWEST
Portland, OR
Avalon at Waterhouse Place No Yes No No No
Avalon Palladia No Yes No No No

Seattle, WA
Avalon at Bear Creek No Yes No No No
Avalon Redmond Place No Yes No No No
Avalon Greenbriar No Yes No Yes No
Avalon RockMeadow No Yes No No No
Avalon ParcSquare No Yes No No No
Avalon WildReed No Yes No No No
Avalon HighGrove No Yes No No No

NORTHEAST
Boston, MA
Avalon at Prudential Center No No No No Yes
Longwood Towers No Yes No No Yes
Avalon Summit No Yes No No No
Avalon at Lexington No Yes No Yes No
Avalon at Faxon Park No Yes No No No
Avalon West No No No Yes No
Avalon Oaks No Yes No No No
Avalon Essex No Yes No No No
Avalon at Center Place No Yes No No Yes



21

Features and Recreational Amenities - Current and Development Communities

(continued)



Community Building
Buildings entrance entrance Under- Aerobics
w/ security controlled controlled ground dance Picnic
systems access access parking studio Car wash area
- -------------------------------------------- ----------- ---------- ---------- ------- -------- -------- ------

Fairfield-New Haven, CT
Avalon Walk I & II None No No No Yes No Yes
Avalon Glen None No Yes Yes No No No
Avalon Gates None Yes No No No No Yes
Avalon Springs All No No No No No Yes
Avalon Valley None No No No No No Yes
Avalon Lake None No No No No No Yes
Avalon Corners All Yes Yes Yes No No Yes
Avalon Haven None No No No No No Yes

Hartford, CT
Avalon Pavilions None No No No Yes No Yes

Long Island, NY
Avalon Commons All No Yes No No No Yes
Avalon Towers All No No Yes No Yes No
Avalon Court All Yes Yes No No No Yes
Avalon Court North All No Yes No No Yes Yes

Northern New Jersey
Avalon Cove All Yes Yes No No No Yes
The Tower at Avalon Cove All No Yes No No No Yes
Avalon Crest All Yes Yes No No No No

Central New Jersey
Avalon Watch None No Yes No No No Yes
Avalon Run East None No No No No No Yes

New York, NY
Avalon Gardens All No No No No No Yes
Avalon View None No No No No No Yes
Avalon Green All No No No No No No
The Avalon All No Yes Yes No No No
Avalon Willow All Yes Yes Yes No No Yes

MID-ATLANTIC
Baltimore, MD
Avalon at Fairway Hills I & II None No No No No Yes Yes
Avalon at Symphony Glen None No No No No Yes Yes
Avalon Landing None No No No No Yes Yes

Washington, DC
Avalon at Ballston - Vermont & Quincy Towers None Yes Yes Yes No No Yes
Avalon Crescent None Yes No No Yes Yes Yes
Avalon at Ballston - Washington Towers None Yes Yes Yes No No Yes
Avalon at Cameron Court All Yes No No Yes Yes Yes
AutumnWoods None No No No No Yes Yes
Avalon at Fair Lakes None Yes No No No Yes Yes
Avalon at Dulles None No No No No Yes No
Avalon at Providence Park None No No No No Yes No
Avalon at Fox Mill None No No No No Yes Yes
Avalon at Decoverly None No No No No Yes Yes


Walking / Sauna / Tennis Fitness Sand
jogging Pool whirlpool court Racquetball center volleyball
- --------------------------- --------- ---- --------- ------ ----------- ------- ----------

Fairfield-New Haven, CT
Avalon Walk I & II Yes Yes No Yes Yes Yes No
Avalon Glen No Yes No No Yes Yes No
Avalon Gates No Yes No No Yes Yes Yes
Avalon Springs Yes Yes No No No Yes No
Avalon Valley No Yes No No No Yes No
Avalon Lake No Yes No No No Yes No
Avalon Corners No Yes No No No Yes No
Avalon Haven No Yes No No No Yes No

Hartford, CT
Avalon Pavilions No Yes No Yes Yes Yes Yes

Long Island, NY
Avalon Commons No Yes No No No Yes No
Avalon Towers No Yes No No No Yes No
Avalon Court No Yes No No No Yes No
Avalon Court North Yes Yes No No Yes Yes No

Northern New Jersey
Avalon Cove Yes Yes No Yes Yes Yes No
The Tower at Avalon Cove Yes Yes No Yes Yes Yes No
Avalon Crest No Yes No No No Yes No

Central New Jersey
Avalon Watch No Yes No Yes Yes Yes No
Avalon Run East Yes Yes No No No Yes No

New York, NY
Avalon Gardens No Yes No Yes Yes Yes Yes
Avalon View No Yes No Yes No Yes No
Avalon Green No Yes No No No No Yes
The Avalon No No No No No Yes No
Avalon Willow No Yes No No Yes Yes No

MID-ATLANTIC
Baltimore, MD
Avalon at Fairway Hills I & II No Yes No Yes Yes Yes No
Avalon at Symphony Glen Yes Yes No No No Yes No
Avalon Landing Yes Yes No No No Yes No

Washington, DC
Avalon at Ballston - Vermont & Quincy Towers No Yes Yes No No Yes No
Avalon Crescent Yes Yes No No No Yes No
Avalon at Ballston - Washington Towers No Yes No Yes No Yes No
Avalon at Cameron Court No Yes Yes No No Yes Yes
AutumnWoods Yes Yes No Yes No Yes Yes
Avalon at Fair Lakes No Yes No Yes No Yes No
Avalon at Dulles Yes Yes Yes Yes No Yes No
Avalon at Providence Park No Yes No No No Yes No
Avalon at Fox Mill No Yes No No No Yes No
Avalon at Decoverly Yes Yes No Yes Yes Yes No


Indoor
outdoor Clubhouse /
basketball clubroom Business Totlot Concierge
- ------------------------------ ---------- ----------- -------- ------ ---------

Fairfield-New Haven, CT
Avalon Walk I & II Yes Yes No Yes No
Avalon Glen No Yes No No Yes
Avalon Gates Yes Yes No Yes No
Avalon Springs No Yes No Yes No
Avalon Valley Yes Yes No Yes No
Avalon Lake No No No No No
Avalon Corners No Yes Yes No Yes
Avalon Haven No Yes No Yes No

Hartford, CT
Avalon Pavilions Yes Yes No Yes No

Long Island, NY
Avalon Commons Yes Yes Yes Yes No
Avalon Towers No Yes No No Yes
Avalon Court No Yes No Yes No
Avalon Court North Yes Yes Yes Yes No

Northern New Jersey
Avalon Cove Yes Yes Yes Yes Yes
The Tower at Avalon Cove Yes Yes Yes Yes Yes
Avalon Crest Yes Yes Yes No No

Central New Jersey
Avalon Watch Yes Yes No Yes No
Avalon Run East No Yes No Yes No

New York, NY
Avalon Gardens Yes Yes Yes Yes Yes
Avalon View Yes Yes No Yes No
Avalon Green No Yes No No No
The Avalon No Yes Yes No Yes
Avalon Willow No Yes Yes No Yes

MID-ATLANTIC
Baltimore, MD
Avalon at Fairway Hills I & II No Yes Yes Yes No
Avalon at Symphony Glen No Yes No Yes No
Avalon Landing No Yes No No No

Washington, DC
Avalon at Ballston - Vermont & Quincy Towers No Yes No No No
Avalon Crescent No Yes Yes Yes Yes
Avalon at Ballston - Washington Towers No Yes No No Ye
Avalon at Cameron Court Yes Yes Yes No No
AutumnWoods Yes Yes No Yes No
Avalon at Fair Lakes No Yes Yes No No
Avalon at Dulles No Yes No No No
Avalon at Providence Park No Yes Yes No No
Avalon at Fox Mill No Yes No Yes No
Avalon at Decoverly Yes Yes No Yes No



22

Features and Recreational Amenities - Current and Development Communities

(continued)



Community Building
Buildings entrance entrance Under- Aerobics
w/ security controlled controlled ground dance Picnic
systems access access parking studio Car wash area
- -------------------------------------------- ----------- ---------- ---------- ------- -------- -------- ------

Washington, DC - continued None No Yes No No Yes Yes
Avalon Knoll All No No No No Yes Yes
Avalon Fields I & II None Yes No No No Yes Yes
Avalon Fields I & II None Yes Yes Yes No No No
4100 Massachusetts Avenue

MIDWEST
Chicago, IL None No No No No No No
Avalon at Danada Farms None No Yes No No No Yes
Avalon at West Grove None No No No No Yes Yes
Avalon at Stratford Green None No Yes No No No No
200 Arlington Place

Minneapolis, MN None No Yes Yes No Yes Yes
Avalon at Devonshire None No Yes Yes No Yes Yes
Avalon at Edinburgh None No Yes Yes No Yes Yes
Avalon at Town Centre None No Yes Yes No Yes Yes
Avalon at Town Square None No No No No No No
Avalon at Woodbury

DEVELOPMENT COMMUNITIES

Avalon at Florham Park None No No No No No No
Avalon at Edgewater All Yes Yes Yes No No No
Avalon Bellevue None No Yes Yes No No No
Avalon at Arlington Square I None No Yes No No No Yes
Avalon on the Sound All Yes Yes No No No Yes
Avalon Estates None No No No No No Yes
Avalon Harbor All Yes Yes Yes No No Yes
Avalon at Freehold None No No No No No Yes
Avalon at Belltown None Yes Yes Yes No No No
Avalon Towers on the Penensula Yes Yes Yes Yes No Yes Yes
Avalon at Cahill Park Yes Yes Yes Yes Yes No No
Avalon Riverview I All Yes Yes No No No Yes


Walking / Sauna / Tennis Fitness Sand
jogging Pool whirlpool court Racquetball center volleyball
- --------------------------- --------- ---- --------- ------ ----------- ------- ----------

Washington, DC - continued Yes Yes No Yes No Yes No
Avalon Knoll No Yes No No No Yes No
Avalon Fields I & II No Yes No No No Yes No
Avalon Fields I & II Yes Yes No No No Yes No
4100 Massachusetts Avenue

MIDWEST
Chicago, IL No Yes No No No Yes No
Avalon at Danada Farms No Yes Yes No Yes Yes No
Avalon at West Grove Yes Yes No No No No No
Avalon at Stratford Green No Yes No No No Yes No
200 Arlington Place

Minneapolis, MN Yes Yes No Yes No Yes No
Avalon at Devonshire Yes Yes Yes No No Yes No
Avalon at Edinburgh Yes Yes Yes Yes No Yes Yes
Avalon at Town Centre Yes Yes Yes Yes No Yes Yes
Avalon at Town Square Yes Yes No No No Yes No
Avalon at Woodbury

DEVELOPMENT COMMUNITIES

Avalon at Florham Park No Yes No No No Yes No
Avalon at Edgewater No Yes No No No Yes No
Avalon Bellevue No No No No No Yes No
Avalon at Arlington Square I No Yes No No No Yes No
Avalon on the Sound Yes Yes No No No Yes No
Avalon Estates Yes Yes Yes No No Yes No
Avalon Harbor Yes Yes No No Yes Yes No
Avalon at Freehold No Yes No No No Yes No
Avalon at Belltown No No No No No Yes No
Avalon Towers on the Penensula No Yes Yes No No Yes No
Avalon at Cahill Park No Yes Yes No No Yes No
Avalon Riverview I Yes No No No No Yes No


Indoor
outdoor Clubhouse /
basketball clubroom Business Totlot Concierge
- ------------------------------ ---------- ----------- -------- ------ ---------

Washington, DC - continued Yes No No Yes No
Avalon Knoll No Yes No Yes No
Avalon Fields I & II No Yes No Yes No
Avalon Fields I & II No Yes No No No
4100 Massachusetts Avenue

MIDWEST
Chicago, IL No Yes Yes No Yes
Avalon at Danada Farms No Yes Yes Yes No
Avalon at West Grove No Yes No No Yes
Avalon at Stratford Green No Yes No No No
200 Arlington Place

Minneapolis, MN No Yes No No No
Avalon at Devonshire No Yes No No No
Avalon at Edinburgh No Yes No Yes No
Avalon at Town Centre No Yes No Yes No
Avalon at Town Square No No No No No
Avalon at Woodbury

DEVELOPMENT COMMUNITIES

Avalon at Florham Park No Yes No No No
Avalon at Edgewater No Yes Yes No Yes
Avalon Bellevue No Yes Yes No Yes
Avalon at Arlington Square I Yes Yes Yes Yes No
Avalon on the Sound Yes Yes Yes No Yes
Avalon Estates No No Yes Yes No
Avalon Harbor Yes Yes Yes No Yes
Avalon at Freehold No Yes Yes Yes No
Avalon at Belltown No Yes No No No
Avalon Towers on the Penensula No No No No Yes
Avalon at Cahill Park No Yes Yes No No
Avalon Riverview I No Yes Yes No Yes



23

Development Communities

As of March 1, 2001, we had twelve Development Communities under construction.
We expect these Development Communities, when completed, to add a total of 3,484
apartment homes to our portfolio for a total capitalized cost, including land
acquisition costs, of approximately $660.8 million. Statements regarding the
future development or performance of the Development Communities are
forward-looking statements. We cannot assure you that:

o we will complete the Development Communities;
o our budgeted costs or estimates of occupancy rates will be realized;
o our schedule of leasing start dates or construction completion dates
will be achieved; or
o future developments will realize returns comparable to our past
developments.

You should carefully review the discussion under "Risks of Development and
Redevelopment" below.

We hold a fee simple ownership interest in 11 of the Development Communities and
a membership interest in a limited liability company that holds a fee simple
interest in one Development Community. The following table presents a summary of
the Development Communities:



Number of Budgeted Estimated Estimated
apartment cost (1) Construction Initial completion stabilization
homes ($ millions) start occupancy (2) date date (3)
--------- ------------ ------------ ------------- ---------- -------------

1. Avalon at Florham Park
Florham Park, NJ 270 $41.0 Q2 1999 Q1 2000 Q2 2001 Q4 2001
2. Avalon at Edgewater
Edgewater, NJ 408 $75.6 Q3 1999 Q3 2001 Q2 2002 Q4 2002
3. Avalon at Bellevue
Bellevue, WA 202 $29.9 Q4 1999 Q1 2001 Q2 2001 Q3 2001
4. Avalon at Arlington Square I
Arlington, VA 510 $69.9 Q4 1999 Q4 2000 Q4 2001 Q3 2002
5. Avalon on the Sound (4)
New Rochelle, NY 412 $92.1 Q4 1999 Q3 2001 Q4 2001 Q3 2002
6. Avalon Estates
Hull, MA 162 $20.4 Q4 1999 Q3 2000 Q2 2001 Q4 2001
7. Avalon at Freehold
Freehold, NY 296 $33.1 Q2 2000 Q1 2001 Q4 2001 Q2 2002
8. Avalon Harbor
Stamford, CT 323 $60.7 Q3 2000 Q1 2002 Q4 2002 Q2 2003
9. Avalon Belltown
Seattle, WA 100 $19.2 Q3 2000 Q4 2001 Q1 2002 Q3 2002
10. Avalon Towers on the Peninsula
Mountain View, CA 211 $65.9 Q3 2000 Q1 2002 Q2 2002 Q4 2002
11. Avalon at Cahill Park
San Jose, CA 218 $50.5 Q4 2000 Q2 2002 Q3 2002 Q1 2003
12. Avalon Riverview I
Long Island City, NY 372 $102.5 Q4 2000 Q2 2002 Q4 2002 Q2 2003
----- ------
Total 3,484 $660.8
===== ======


(1) Total budgeted cost includes all capitalized costs projected to be
incurred to develop the respective Development Community, including land
acquisition costs, construction costs, real estate taxes, capitalized
interest and loan fees, permits, professional fees, allocated development
overhead and other regulatory fees determined in accordance with generally
accepted accounting principles.
(2) Future initial occupancy dates are estimates.
(3) Stabilized operations are defined as the first full quarter of 95% or
greater occupancy after completion of construction.
(4) This community will be developed under a joint venture structure and the
joint venture entity (a limited liability company) has obtained
third-party debt financing. Our equity funding of the total budgeted
costs is expected to be $13.3 million.


24

Redevelopment Communities

As of March 1, 2001, we had four communities under redevelopment. We expect the
total budgeted cost to complete these Redevelopment Communities, including the
cost of acquisition and redevelopment, to be approximately $324.6 million, of
which approximately $73.5 million is the additional capital invested or expected
to be invested above the original purchase cost. Statements regarding the future
redevelopment or performance of the Redevelopment Communities are
forward-looking statements. We have found that the cost to redevelop an existing
apartment community is more difficult to budget and estimate than the cost to
develop a new community. Accordingly, we expect that actual costs may vary from
our budget by a wider range than for a new development community. We cannot
assure you that we will meet our schedules for reconstruction completion, or
that we will meet our budgeted costs, either individually or in the aggregate.
See the discussion under "Risks of Development and Redevelopment" below.

The following presents a summary of Redevelopment Communities:



Budgeted Cost
($ millions)
-------------------------
Number of Estimated
apartment Acquisition Total Reconstruction Reconstruction restabilized
homes cost cost (1) start completion (2) operations (3)
--------- ----------- --------- -------------- -------------- --------------

1. Avalon at Cortez Hill
San Diego, CA 294 $24.4 $33.8 Q1 2000 Q2 2001 Q3 2001
2. Avalon at Media Center
Burbank, CA 748 $55.3 $75.3 Q1 2000 Q1 2002 Q2 2002
3. Avalon at Prudential Center
Boston, MA 781 $133.9 $154.5 Q4 2000 Q4 2002 Q2 2003
4. Avalon Terrace (4)
Stamford, CT 388 $37.5 $61.0 Q4 2000 Q3 2002 Q1 2003
--------- --------- ---------

Total 2,211 $251.1 $324.6
========= ========= =========


(1) Total budgeted cost includes all capitalized costs projected to be
incurred to redevelop the respective Redevelopment Community, including
costs to acquire the community, reconstruction costs, real estate taxes,
capitalized interest and loan fees, permits, professional fees, allocated
redevelopment overhead and other regulatory fees determined in accordance
with generally accepted accounting principles.
(2) Reconstruction completion dates are estimates.
(3) Restabilized operations are defined as the first full quarter of 95% or
greater occupancy after completion of reconstruction.
(4) This community will be developed under a joint venture structure and the
joint venture entity (a limited liability company) has obtained
third-party debt financing on a non-recourse basis. Our equity funding of
the total budgeted costs is expected to be $9.6 million.

Development Rights

As of March 1, 2001, we are considering the development of 33 new apartment
communities on land that is either owned by us or under contract, or for which
we hold a purchase option. These Development Rights range from those beginning
design and architectural planning to those that have completed site plans and
drawings and can begin construction almost immediately. We estimate that the
successful completion of all of these communities would ultimately add 9,091
upscale apartment homes to our portfolio. At December 31, 2000, the cumulative
capitalized costs incurred in pursuit of the 33 Development Rights was
approximately $68.9 million, of which $33.2 was the cost of land acquired in
connection with six of the Development Rights. Substantially all of these
apartment homes will offer features like those offered by the communities we
currently own.

We generally hold Development Rights through options to acquire land, although
one Development Right located in New Canaan, Connecticut is controlled through a
joint venture partnership that owns the land. The properties comprising the
Development Rights are in different stages of the due diligence and regulatory
approval process. The decisions as to which of the Development Rights to pursue,
if any, or to continue to pursue once an investment in a Development Right is
made, are business judgments that we make after we perform financial,
demographic and other analysis. Finally, we currently intend to limit the
percentage of debt used to finance new developments in


25

order to maintain our general historical practice with respect to the proportion
of debt in our capital structure. Therefore, other financing alternatives may be
required to finance the development of those Development Rights scheduled to
start construction after January 1, 2001. Although the development of any
particular Development Right cannot be assured, we believe that the Development
Rights, in the aggregate, present attractive potential opportunities for future
development and growth of our long-term stockholder value.

Statements regarding the future development of the Development Rights are
forward-looking statements. We cannot assure you that:

o we will succeed in obtaining zoning and other necessary governmental
approvals or the financing required to develop these communities, or
that we will decide to develop any particular community; or
o if we undertake construction of any particular community, that we
will complete construction at the total budgeted cost assumed in the
financial projections below.


26

The following presents a summary of the 33 Development Rights we are currently
pursuing:



Total
Estimated budgeted
number costs
Location of homes ($ millions)
--------------------------------- --------- ------------

1. Wilmington, MA 120 $17
2. Washington, D.C. (1) 209 43
3. San Francisco, CA 250 79
4. Lawrence, NJ 312 41
5. New Canaan, CT (1) (2) 104 26
6. North Bethesda, MD 386 46
7. Marlboro, MA 156 20
8. Weymouth, MA 304 36
9. Seattle, WA 152 44
10. Westborough, MA 280 34
11. Arlington II, VA (1) 332 43
12. Darien, CT (1) 189 37
13. Washington, D.C. 144 29
14. Orange, CT (1) 168 18
15. Hingham, MA 270 42
16. San Francisco, CA 303 94
17. Andover, MA 140 21
18. Newton, MA 299 54
19. Wilton, CT 113 23
20. Oakland, CA (1) 178 36
21. North Potomac, MD 520 61
22. Danbury, CT 244 29
23. Los Angeles, CA 309 53
24. Cohasset, MA 240 34
25. Bellevue, WA 330 63
26. Coram, NY 450 61
27. Greenburgh - II, NY 500 83
28. Greenburgh - III, NY 266 44
29. Bedford, MA 144 19
30. New Rochelle, NY Phase II and III 588 137
31. Stratford, CT 182 21
32. Milford, CT 370 43
33. Long Island City, NY Phase II and III 539 162
----- ------
Totals 9,091 $1,593
===== ======


(1) Land is owned, but construction has not yet begun.
(2) The land currently is owned by a limited partnership in which we are a
majority partner. It is currently anticipated that the land seller will
retain a minority limited partner interest.

Risks of Development and Redevelopment

We intend to continue to pursue the development and redevelopment of apartment
home communities. Our development and redevelopment activities may be exposed to
the following:

o we may abandon opportunities we have already begun to explore based
on further review of, or changes in, financial, demographic,
environmental or other factors;
o we may encounter liquidity constraints, including the unavailability
of financing on favorable terms for the development or redevelopment
of a community;
o we may be unable to obtain, or we may experience delays in
obtaining, all necessary zoning, land-use, building, occupancy, and
other required governmental permits and authorizations;


27

o we may incur construction or reconstruction costs for a community
that exceed our original estimates due to increased materials, labor
or other expenses, which could make completion or redevelopment of
the community uneconomical;
o occupancy rates and rents at a newly completed or redevelopment
community may fluctuate depending on a number of factors, including
market and general economic conditions, and may not be sufficient to
make the community profitable; and
o we may be unable to complete construction and lease-up on schedule,
resulting in increased debt service expense and construction costs.

The occurrence of any of the events described above could adversely affect our
ability to achieve our projected yields on communities under development or
redevelopment and could affect our payment of distributions to our stockholders.

Construction costs are projected by us based on market conditions prevailing in
the community's market at the time our budgets are prepared and reflect changes
to those market conditions that we anticipated at that time. Although we attempt
to anticipate changes in market conditions, we cannot predict with certainty
what those changes will be. Construction costs have been increasing and, for
some of our Development Communities, the total construction costs have been or
are expected to be higher than the original budget. Total budgeted cost includes
all capitalized costs projected to be incurred to develop the respective
Development or Redevelopment Community, including:

o land and/or property acquisition costs;
o construction or reconstruction costs;
o real estate taxes;
o capitalized interest;
o loan fees;
o permits;
o professional fees;
o allocated development or redevelopment overhead; and
o other regulatory fees determined in accordance with generally
accepted accounting principles.

We believe that, in the aggregate, we will still achieve our targeted projected
yield (i.e., return on invested capital) for those communities experiencing
costs in excess of the original budget because of increases in prevailing market
rents. We believe that we could experience similar increases in construction
costs and market rents with respect to other development communities resulting
in total construction costs that exceed original budgets. Likewise, costs to
redevelop communities that have been acquired have, in some cases, exceeded our
original estimates and similar increases in costs may be experienced in the
future. We cannot assure you that market rents in effect at the time new
development communities or redeveloped communities complete lease-up will be
sufficient to fully offset the effects of any increased construction or
reconstruction costs.

Capitalized Interest

In accordance with generally accepted accounting principles, we capitalize
interest expense during construction or reconstruction until an apartment home
obtains a certificate of occupancy. Thereafter, the interest allocated to that
completed apartment home within the community is expensed. Capitalized interest
during the years ended December 31, 2000 and 1999 totaled $18,328,000 and
$21,888,000, respectively.


28

Acquisition Activities and Other Recent Developments

Acquisitions of Existing Communities. We have acquired seven communities
containing 1,960 apartment homes since January 1, 2000 for an acquisition price
of approximately $252,400,000. Six of the communities were acquired pursuant to
a forward purchase contract agreed to in 1997 with an unaffiliated party.

Sales of Existing Communities. We seek to increase our geographical
concentration in selected high barrier-to-entry markets where we believe we can:

o apply sufficient market and management presence to enhance revenue
growth;
o reduce operating expenses; and
o leverage management talent.

To achieve this increased concentration, we are selling assets in certain
submarkets and intend to redeploy the proceeds from those sales to develop and
redevelop communities currently under construction or reconstruction. Pending
such redeployment, we will generally use the proceeds from the sale of these
communities to reduce amounts outstanding under our variable rate unsecured
credit facility. On occasion, we will set aside the proceeds from the sale of
communities into a cash escrow account to facilitate a nontaxable like-kind
exchange transaction. Accordingly, we sold nine communities, totaling 2,158
apartment homes, since January 1, 2000. Net proceeds from the sales of these
assets totaled $138,924,000.

Land Acquisitions and Leases for New Developments. We carefully select land for
development and follow established procedures that we believe minimize both the
cost and the risks of development. During 2000, we acquired the following land
parcels for future development:



Estimated
Number Budgeted
Gross of apartment cost (1) Date Construction Construction
acres homes ($ millions) Acquired start (2) completion (2)
------- ------------ ------------ ------------- ------------ --------------

1. Avalon at Freehold 70.0 296 $33.1 May 2000 Q2 2000 Q4 2001
Freehold, NJ
2. Avalon Harbor 15.1 323 $60.7 May 2000 Q3 2000 Q4 2002
Stamford, CT
3. Avalon Belltown 0.7 100 $19.2 July 2000 Q3 2000 Q1 2002
Seattle, WA
4. Avalon Riverview I (3) 1.0 372 $102.5 September 2000 Q4 2000 Q4 2002
Long Island City, NY
5. Ellington 0.5 209 $42.9 July 2000 Q2 2001 Q4 2002
Washington, D.C.
6. Mission Bay (3) 1.4 250 $79.2 December 2000 Q1 2001 Q1 2003
San Francisco, CA
7. Avalon Hollow 32.0 189 $36.5 January 2000 Q2 2001 Q4 2002
Darien, CT
8. Avalon at Lake Merrit 2.1 178 $36.0 August 2000 Q4 2001 Q1 2003
Oakland, CA
----- ----- ------
Total 122.8 1,917 $410.1
===== ===== ======


(1) Total budgeted cost includes all capitalized costs projected to be
incurred to develop the respective Development Community, including land
acquisition costs, construction costs, real estate taxes, capitalized
interest and loan fees, permits, professional fees allocated development
overhead and other regulatory fees determined in accordance with generally
accepted accounting principles.
(2) Future construction start and completion dates are estimates.
(3) Community will be developed on land being leased from an unrelated third
party.


29

Natural Disasters

Many of our West Coast communities are located in the general vicinity of active
earthquake faults. In July 1998, we obtained a seismic risk analysis from an
engineering firm which estimated the probable maximum loss (PML) for each of the
63 West Coast communities that we owned at that time and for each of the four
West Coast communities under development at that time. To establish a PML, the
engineers define a severe earthquake event for the applicable geographic area.
The PML is the building damage and business interruption loss that is estimated
to have only a 10% probability of being exceeded in a fifty year period in the
event of such an earthquake. Because a significant number of our communities are
located in the San Francisco Bay Area, the engineers' analysis assumed an
earthquake on the Hayward Fault with a Richter Scale magnitude of 7.1. Based on
this earthquake scenario, the engineers determined the PML at that time to be
$113 million for the 60 West Coast communities that we owned at that time and
the five West Coast communities then under development. The actual aggregate PML
could be higher or lower as a result of variations in soil classifications and
structural vulnerabilities. For each community, the engineers' analysis
calculated an individual PML as a percentage of the community's replacement cost
and projected revenues. We cannot assure you that:

o an earthquake would not cause damage or losses greater than the PML
assessments indicate;
o future PML levels will not be higher than the current PML levels
described above for our communities located on the West Coast; or
o acquisitions or developments after July 1998 will not have PML
assessments indicating the possibility of greater damage or losses
than currently indicated.

In November 2000, we renewed our earthquake insurance, both for physical damage
and lost revenue, with respect to all communities we owned at that time and all
of the communities then under development. For any single occurrence, we have in
place with respect to communities located in California $75 million of coverage
with a five percent deductible. The five percent deductible is subject to a
minimum of $100,000 per occurrence. Earthquake coverage outside of California is
subject to a $200 million limit and a $25,000 deductible per occurrence. In
addition, our general liability and property insurance program provides coverage
for public liability and fire damage. In the event an uninsured disaster or a
loss in excess of insured limits were to occur, we could lose our capital
invested in the affected community, as well as anticipated future revenue from
that community. We would also continue to be obligated to repay any mortgage
indebtedness or other obligations related to the community. Any such loss could
materially and adversely affect our business and our financial condition and
results of operations.

In February 2001, an earthquake occurred in the Pacific Northwest. We believe
that no material damage occurred at any of our properties but we are continuing
to finalize our evaluation. Any damage that was sustained would be covered by
the insurance described above, subject to a $25,000 deductible.

Americans with Disabilities Act

The apartment communities we own and any apartment communities that we acquire
must comply with Title III of the Americans with Disabilities Act to the extent
that such properties are "public accommodations" and/or "commercial facilities"
as defined by the Americans with Disabilities Act. Compliance with the Americans
with Disabilities Act requirements could require removal of structural barriers
to handicapped access in certain public areas of our properties where such
removal is readily achievable. The Americans with Disabilities Act does not,
however, consider residential properties, such as apartment communities, to be
public accommodations or commercial facilities, except to the extent portions of
such facilities, such as leasing offices, are open to the public. We believe our
properties comply in all material respects with all present requirements under
the Americans with Disabilities Act and applicable state laws. Noncompliance
could result in imposition of fines or an award of damages to private litigants.


30

ITEM 3. LEGAL PROCEEDINGS

AvalonBay is from time to time subject to claims and administrative proceedings
arising in the ordinary course of business. Some of these claims and proceedings
are expected to be covered by liability insurance. The following matter, for
which we believe we have meritorious defenses and are therefore vigorously
defending against, is not covered by liability insurance. However, outstanding
litigation matters, individually and in the aggregate, including the matter
described below, are not expected to have a material adverse effect on our
business or financial condition.

AvalonBay is currently involved in litigation with York Hunter Construction,
Inc. and National Union Fire Insurance Company. The action arises from our
October 1999 termination of York Hunter as construction manager under a contract
relating to construction of the Avalon Willow community in Mamaroneck, New York,
because of alleged failures and deficiencies by York Hunter and its
subcontractors in performing under the contract. York Hunter initiated the
litigation in October 1999, by filing a complaint against us and other
defendants claiming more than $15 million in damages. We have filed
counterclaims against York Hunter, seeking more than $9 million in compensatory
damages, including lost rental income and costs to complete the community, and
approximately $14 million in damages arising from a willful exaggeration of
lien. We have also filed a claim against National Union Fire Insurance, which
furnished construction and performance bonds to us on behalf of York Hunter. We
believe that we have meritorious defenses against all of York Hunter's claims
and are vigorously contesting those claims. We also intend to pursue our
counterclaims against York Hunter and National Union Fire Insurance
aggressively. During 2000, this litigation was removed from the United States
District Court for the Southern District of New York to the Supreme Court of the
State of New York, County of Westchester. A trial date has not been set.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS

No matter was submitted to a vote of our security holders during the fourth
quarter of 2000.


31

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is traded on the New York Stock Exchange (NYSE) and the Pacific
Exchange (PCX) under the ticker symbol AVB. The following table sets forth the
quarterly high and low sales prices per share of our common stock on the NYSE
for the years 2000 and 1999, as reported by the NYSE. On March 1, 2001, there
were 864 holders of record of an aggregate of 67,378,263 shares of our
outstanding common stock.



2000 1999
--------------------------------------- -----------------------------------------
Sales Price Dividends Sales Price Dividends
-------------------------- --------------------------
High Low declared High Low declared
------------ ------------ ----------- ------------ ------------ -------------

Quarter ended March 31 $36.688 $32.625 $ 0.56 $34.313 $30.813 $ 0.51

Quarter ended June 30 $43.125 $36.125 $ 0.56 $37.000 $31.000 $ 0.51

Quarter ended September 30 $48.250 $42.000 $ 0.56 $35.875 $32.563 $ 0.52

Quarter ended December 31 $50.625 $44.000 $ 0.56 $35.000 $30.875 $ 0.52


We expect to continue our policy of paying regular quarterly cash dividends.
However, dividend distributions will be declared at the discretion of the Board
of Directors and will depend on actual cash from operations, our financial
condition, capital requirements, the annual distribution requirements under the
REIT provisions of the Internal Revenue Code and other factors as the Board of
Directors may consider relevant. The Board of Directors may modify our dividend
policy from time to time.

We have an optional Dividend Reinvestment and Stock Purchase Plan (DRIP) which
provides a simple and convenient method for stockholders to invest cash
dividends and optional cash payments in shares of our common stock. All holders
of capital stock are eligible to participate in the DRIP, including stockholders
whose shares are held in the name of a nominee or broker. These participants in
the DRIP may purchase additional shares of common stock by:

o having the cash dividends on all or part of their shares of common
stock and preferred stock automatically reinvested;
o receiving directly, as usual, their cash dividends, if and when
declared, on their shares of capital stock and investing in the DRIP
by making cash payments of not less than $100 or more than $100,000,
or such larger amount as we may approve, per quarter; and/or
o investing both their cash dividends and such optional cash payments
in shares of common stock.

Common stock acquired pursuant to the DRIP with reinvested dividends may be
purchased at a price per share equal to 97% of the closing price on the NYSE for
such shares of common stock on the applicable investment date. Common stock
purchased with optional cash payments of up to $100,000 per calendar quarter may
be purchased at a price per share equal to 100% of the last reported sale price
for a share of common stock as reported by the NYSE on the applicable investment
date. In addition, common stock purchased with optional cash payments in excess
of $100,000 per calendar quarter pursuant to a Request for Waiver may be
purchased at a price per share equal to 100% of the average of the daily high
and low sales prices of our common stock on the NYSE for the ten trading days
immediately preceding the applicable investment date. Generally, no brokerage
commissions, fees or service charges are paid by participants in connection with
purchases under the DRIP. Stockholders who do not participate in the DRIP
continue to receive cash dividends as declared.

During the three months ended December 31, 2000, the Company issued 157,542
shares of common stock in exchange for units of limited partnership held by
limited partners of DownREIT partnership subsidiaries of the Company.
Specifically, the Company issued 99,576 shares of common stock in exchange for
units in Avalon


32

DownREIT V, L.P., and 57,966 shares of common stock in exchange for units in Bay
Pacific Northwest, L.P. These shares were issued in reliance on an exemption
from registration under Section 4 (2) of the Securities Act of 1933. The Company
is relying on the exemption based upon factual representations received from the
limited partners who received these shares.


33

ITEM 6. SELECTED FINANCIAL DATA

The following table provides historical consolidated financial, operating and
other data for AvalonBay Communities, Inc. You should read the table with our
consolidated financial statements and the notes included in this report. Dollars
in thousands, except per share information.



Years ended
----------------------------------------------------------------------------
12-31-00 12-31-99 12-31-98 12-31-97 12-31-96
------------ ------------ ------------ ------------ ------------

Revenue:
Rental income $ 571,943 $ 504,567 $ 369,945 $ 169,442 $ 123,354
Management fees 1,051 1,176 1,377 1,029 1,439
Other income 401 236 81 633 420
------------ ------------ ------------ ------------ ------------
Total revenue 573,395 505,979 371,403 171,104 125,213
------------ ------------ ------------ ------------ ------------

Expenses:
Operating expenses, excluding property taxes 142,664 135,517 104,346 47,279 36,941
Property taxes 46,958 42,701 31,775 14,429 10,583
Interest expense 83,609 74,699 54,650 16,977 9,545
Depreciation and amortization 122,610 109,759 77,374 29,113 20,956
General and administrative 13,013 9,592 9,124 5,093 3,438
Non-recurring items -- 16,782 -- -- --
------------ ------------ ------------ ------------ ------------
Total expenses 408,854 389,050 277,269 112,891 81,463
------------ ------------ ------------ ------------ ------------

Equity in income of
unconsolidated joint ventures 2,428 2,867 2,638 5,689 1,025
Interest income 4,764 7,362 3,508 1,346 887
Minority interest in consolidated partnerships (1,908) (1,975) (1,770) 174 495
------------ ------------ ------------ ------------ ------------
Income before gain on sale of
communities and extraordinary item 169,825 125,183 98,510 65,422 46,157
Gain on sale of communities 40,779 47,093 25,270 677 7,850
------------ ------------ ------------ ------------ ------------
Income before extraordinary item 210,604 172,276 123,780 66,099 54,007
Extraordinary item -- -- (245) (1,183) (2,356)
------------ ------------ ------------ ------------ ------------
Net income 210,604 172,276 123,535 64,916 51,651
Dividends attributable to preferred stock (39,779) (39,779) (28,132) (19,656) (10,422)
------------ ------------ ------------ ------------ ------------
Net income available to common
stockholders $ 170,825 $ 132,497 $ 95,403 $ 45,260 $ 41,229
============ ============ ============ ============ ============

Per Common Share and Share Information:

Per common share - basic
Income before extraordinary item $ 2.58 $ 2.05 $ 1.89 $ 1.64 $ 1.85
(net of preferred dividends)
Extraordinary item $ -- $ -- $ -- $ (0.04) $ (0.10)
Net income available to common stockholders $ 2.58 $ 2.05 $ 1.89 $ 1.60 $ 1.75
Weighted average common shares outstanding 66,309,707 64,724,799 50,387,258 28,244,845 23,617,161

Per common share - diluted
Income before extraordinary item $ 2.53 $ 2.03 $ 1.88 $ 1.63 $ 1.84
(net of preferred dividends)
Extraordinary item $ -- $ -- $ -- $ (0.04) $ (0.10)
Net income available to common stockholders $ 2.53 $ 2.03 $ 1.88 $ 1.59 $ 1.74
Weighted average common shares and units 68,140,998 66,110,664 51,771,247 28,431,823 23,691,447
outstanding

Cash dividends declared $ 2.24 $ 2.06 $ 2.04 $ 2.00 $ 1.94



34



Years ended
-----------------------------------------------------------------------
12-31-00 12-31-99 12-31-98 12-31-97 12-31-96
----------- ----------- ----------- ----------- -----------

Other Information:
Net income $ 210,604 $ 172,276 $ 123,535 $ 64,916 $ 51,651
Depreciation and amortization 122,610 109,759 77,374 29,113 20,956
Interest expense 83,609 74,699 54,650 16,977 9,545
Interest income (4,764) (7,362) (3,508) (1,346) (887)
Non-recurring items -- 16,782 -- -- --
Gain on sale of communities (40,779) (47,093) (25,270) (677) (7,850)
Extraordinary item -- -- 245 1,183 2,356
----------- ----------- ----------- ----------- -----------
Gross EBITDA (1) $ 371,280 $ 319,061 $ 227,026 $ 110,166 $ 75,771
=========== =========== =========== =========== ===========

Funds from Operations - Clarified Definition (2) $ 252,013 $ 196,058 $ 148,487 $ 73,525 $ 54,622
Funds from Operations - Original Definition (2) $ 252,013 $ 212,840 $ 148,487 $ 73,525 $ 54,622
Number of Current Communities 126 122 127 64 46
Number of apartment homes 37,147 36,008 37,911 19,318 13,822

Balance Sheet Information:
Real estate, before
accumulated depreciation $ 4,535,969 $ 4,266,426 $ 4,006,456 $ 1,534,986 $ 1,081,906
Total assets $ 4,397,255 $ 4,154,662 $ 4,005,013 $ 1,529,703 $ 1,082,771
Notes payable and unsecured credit facilities $ 1,729,924 $ 1,593,647 $ 1,484,371 $ 506,129 $ 310,606

Cash Flow Information:
Net cash flows provided by operating activities $ 294,818 $ 250,066 $ 193,478 $ 93,649 $ 65,841
Net cash flows used in investing activities $ (282,584) $ (264,619) $ (617,685) $ (421,420) $ (261,033)
Net cash flows provided by financing activities $ 37,379 $ 13,284 $ 426,375 $ 320,252 $ 207,632


Notes to Selected Financial Data

(1) Gross EBITDA represents earnings before interest, income taxes,
depreciation and amortization, non-recurring items, gain on sale of
communities and extraordinary items. Gross EBITDA is relevant to an
understanding of the economics of AvalonBay because it indicates cash flow
available from operations to service fixed obligations. Gross EBITDA
should not be considered as an alternative to operating income (as
determined in accordance with generally accepted accounting principles, or
"GAAP"), as an indicator of our operating performance, or to cash flows
from operating activities (as determined in accordance with GAAP) as a
measure of liquidity. Our calculation of gross EBITDA may not be
comparable to gross EBITDA as calculated by other companies.

(2) We generally consider Funds from Operations, or FFO, to be an appropriate
measure of our operating performance because it helps investors understand
our ability to incur and service debt and to make capital expenditures. We
believe that to gain a clear understanding of our operating results, FFO
should be examined with net income as presented in the Consolidated
Statements of Operations included elsewhere in this report. FFO is
determined based on a definition adopted by the Board of Governors of the
National Association of Real Estate Investment Trusts(R) and is defined
as:

o net income or loss computed in accordance with GAAP, except
that excluded from net income or loss are gains or losses on
sales of property and extraordinary (as defined by GAAP) gains
and losses on debt restructuring;
o plus depreciation of real estate assets; and
o after adjustments for unconsolidated partnerships and joint
ventures.

FFO does not represent cash generated from operating activities in
accordance with GAAP. Therefore it should not be considered as an
alternative to net income as an indication of performance. FFO should also


35

not be considered an alternative to net cash flows from operating
activities as determined by generally accepted accounting principles as a
measure of liquidity. Additionally, it is not necessarily indicative of
cash available to fund cash needs. Further, FFO as calculated by other
REITs may not be comparable to our calculation of FFO.

FFO previously reported for the year ended December 31, 1999 excluded the
effect on net income of a non-recurring restructuring charge of $16,076
and Year 2000 remediation costs of $706, in conformance with the NAREIT
definition of FFO calculations then in effect, or the original definition.
NAREIT issued a White Paper dated October 1999 that clarified the
definition of FFO and the treatment of certain non-recurring charges. The
clarified definition includes the effect on net income of non-recurring
charges in the calculation of FFO. Although we believe the comparison of
FFO using the original definition represents a better guide to investors
of comparable operations and growth between years, both FFO calculations
are presented below:



Years ended
-------------------------------------------------------------
12-31-00 12-31-99 12-31-98 12-31-97 12-31-96
--------- --------- --------- --------- ---------

Net income available to common stockholders $ 170,825 $ 132,497 $ 95,403 $ 45,260 41,229
Depreciation (real estate related) 119,416 107,928 75,614 27,360 18,566
Joint venture adjustments 792 751 725 399 321
Minority interest 1,759 1,975 1,770 -- --
Gain on sale of communities (40,779) (47,093) (25,270) (677) (7,850)

Extraordinary items -- -- 245 1,183 2,356
--------- --------- --------- --------- ---------

Funds from Operations - Clarified Definition $ 252,013 $ 196,058 $ 148,487 $ 73,525 $ 54,622
Non-recurring items -- 16,782 -- -- --
--------- --------- --------- --------- ---------
Funds from Operations - Original Definition $ 252,013 $ 212,840 $ 148,487 $ 73,525 $ 54,622
========= ========= ========= ========= =========

Net cash provided by operating activities $ 294,818 $ 250,066 $ 193,478 $ 93,649 $ 65,841
========= ========= ========= ========= =========
Net cash used in investing activities $(282,584) $(264,619) $(617,685) $(421,420) $(261,033)
========= ========= ========= ========= =========
Net cash provided by financing activities $ 37,379 $ 13,284 $ 426,375 $ 320,252 $ 207,632
========= ========= ========= ========= =========


(3) Current Communities consist of all communities other than those which are
still under construction and have not received a final certificate of
occupancy.


36

ITEM 7. MANAGMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Forward-Looking Statements

This Form 10-K, including the notes to the Company's consolidated financial
statements, contains "forward-looking statements" as that term is defined under
the Private Securities Litigation Reform Act of 1995. You can identify
forward-looking statements by our use of the words "believe," "expect,"
"anticipate," "intend," "estimate," "assume," "project," and other similar
expressions in this Form 10-K, that predict or indicate future events and trends
or that do not relate to historical matters. In addition, information concerning
the following are forward-looking statements:

o the timing and cost of completion of apartment communities under
construction, reconstruction, development or redevelopment;
o the timing of lease-up and occupancy of apartment communities;
o the pursuit of land on which we are considering future development;
o cost, yield and earnings estimates; and
o the development, implementation and use of management information
systems.

We cannot assure the future results or outcomes of the matters described in
these statements; rather, these statements merely reflect our current
expectations of the approximate outcomes of the matters discussed. You should
not rely on forward-looking statements since they involve known and unknown
risks, uncertainties and other factors, some of which are beyond our control.
These risks, uncertainties and other factors may cause our actual results,
performance or achievements to differ materially from the anticipated future
results, performance or achievements expressed or implied by these
forward-looking statements. Some of the factors that could cause our actual
results, performance or achievements to differ materially from those expressed
or implied by these forward-looking statements include, but are not limited to,
the following:

o we may be unsuccessful in managing our current growth in the number
of apartment communities and the related growth of our business
operations;
o our previous or possible future expansion into new geographic market
areas may not produce financial results that are consistent with our
historical performance;
o we may fail to secure development opportunities due to an inability
to reach agreements with third parties or to obtain desired zoning
and other local approvals;
o we may abandon development opportunities for a number of reasons,
including changes in local market conditions which make development
less desirable, increases in costs of development and increases in
the cost of capital;
o construction costs of a community may exceed our original estimates;
o we may not complete construction and lease-up of communities under
development or redevelopment on schedule, resulting in increased
interest expense, construction costs and reduced rental revenues;
o occupancy rates and market rents may be adversely affected by local
economic and market conditions which are beyond our control;
o financing may not be available on favorable terms and our cash flow
from operations and access to cost-effective capital may be
insufficient for the development of our pipeline and could limit our
pursuit of opportunities;
o our cash flow may be insufficient to meet required payments of
principal and interest, and we may be unable to refinance existing
indebtedness or the terms of such refinancing may not be as
favorable as the terms of existing indebtedness; and


37

o software applications and ancillary services being developed by
companies in which we have invested may be unsuccessful in achieving
their business plans or unsuccessful in obtaining additional
funding, which could lead to a partial or complete loss of the
investment in these companies.

You should read our consolidated financial statements and notes for the year
ended December 31, 2000 included in this report in conjunction with the
following discussion. You should also carefully review the section in Item 2 of
this report that is captioned "Risks of Development and Redevelopment." These
forward-looking statements represent our estimates and assumptions only as of
the date of this report. We do not undertake to update these forward-looking
statements, and you should not rely upon them after the date of this report.

Business Description and Community Information

AvalonBay is a Maryland corporation that has elected to be treated as a real
estate investment trust, or REIT, for federal income tax purposes. We focus on
the ownership and operation of upscale apartment communities (which generally
command among the highest rents in their submarkets) in high barrier-to-entry
markets of the United States. This is because we believe that the limited new
supply of upscale apartment homes in these markets helps achieve more
predictable growth in cash flows. These barriers-to-entry generally include a
difficult and lengthy entitlement process with local jurisdictions and dense
in-fill locations where zoned and entitled land is in limited supply. Our
markets are located in Northern and Southern California and selected states in
the Mid-Atlantic, Northeast, Midwest and Pacific Northwest regions of the United
States.

We are a fully-integrated real estate organization with in-house expertise in
the following areas:

o development and redevelopment;
o construction and reconstruction;
o leasing and management;
o acquisition and disposition;
o financing;
o marketing; and
o information technologies.

With our expertise and in-house capabilities, we believe we are well-positioned
to continue to pursue opportunities to develop and acquire upscale apartment
homes in our target markets. Our ability to pursue attractive opportunities,
however, may be constrained by capital market conditions that limit the
availability of cost-effective capital to finance these activities. We have
limited our acquisition activity as compared to prior years due to these capital
constraints, and we expect to direct most of our invested capital to new
developments and redevelopments, rather than acquisitions, for the foreseeable
future. See "Liquidity and Capital Resources" and "Future Financing and Capital
Needs."

We believe apartment communities present an attractive investment opportunity
compared to other real estate investments because a broad potential resident
base results in relatively stable demand during all phases of a real estate
cycle. We intend to pursue appropriate new investments, including new
developments, redevelopments and acquisitions of communities, subject to the
availability of cost-effective capital. We intend to pursue these investments in
markets where constraints to new supply exist and where new household formations
have outpaced multifamily permit activity in recent years.


38

Our real estate investments consist of current operating apartment communities,
communities in various stages of development, and land or land options held for
development. Our current operating communities are further distinguished as
Established, Other Stabilized, Lease-Up or Redevelopment. A description of these
categories and other related information is set forth above in Item 2.

At December 31, 2000, we had positioned our portfolio of Stabilized Communities
(or, all Established Communities and Other Stabilized Communities), excluding
communities owned by unconsolidated joint ventures, to an average physical
occupancy level of 97.6%. Our strategy is to maximize total rental revenue
through management of rental rates and occupancy levels. Our strategy of
maximizing total rental revenue could lead to lower occupancy levels. Given the
current high occupancy level of our portfolio, we believe that any rental
revenue and net income gains from our Established Communities would be achieved
primarily through higher rental rates and the lower average operating costs per
apartment home that result from economies of scale due to national and regional
growth of our portfolio. See "Property Management Strategy" in Item 1 of this
report for further discussion of our strategy.

Recent Developments

Sales of Existing Communities. We seek to increase our geographical
concentration in selected high barrier-to-entry markets where we believe we can:

o apply sufficient market and management presence to enhance revenue
growth;
o reduce operating expenses; and
o leverage management talent.

To effect this increased concentration, we are selling assets in certain
submarkets and intend to redeploy the proceeds from those sales to develop and
redevelop communities currently under construction or reconstruction. Pending
such redeployment, we will generally use the proceeds from the sale of these
communities to reduce amounts outstanding under our variable rate unsecured
credit facility. We sold the following communities during 1999 and 2000:



Number of Apartment Net
communities homes proceeds
----------------------- ------------------- -------------------
1999

Communities sold 16 4,464 $ 255,618,000
Participating mortgage note sold N/A N/A $ 25,300,000

2000
Communities sold 8 1,932 $ 124,392,000


Since January 1, 2001, we have sold one additional community containing 226
apartment homes in connection with our capital redeployment strategy. The net
proceeds from the sale of this community were approximately $14,532,000. We
intend to dispose of additional assets as described more fully under "Future
Financing and Capital Needs."

Development, Redevelopment and Acquisition Activities. We began the development
of six new communities during 2000. These communities are expected to contain a
total of 1,520 apartment homes upon completion, and the total investment,
including land acquisition costs, is projected to be approximately $331,900,000.
Also, we completed the development of six new communities containing a total of
1,209 apartment homes for a total investment of $175,200,000.

We also acquired three land parcels during 2000 on which construction has not
yet commenced and entered into a land lease agreement on a fourth parcel. We
expect to develop four new communities containing a


39

total of 826 apartment homes on these parcels. The total investment in these
communities, including land acquisition costs of $19,170,000, is projected to be
approximately $195,000,000. In addition, we continue to hold three parcels of
land purchased prior to January 2000 and expect to develop three new communities
containing 604 apartment homes on these parcels.

We completed the redevelopment of four communities containing 1,455 apartment
homes during 2000 for a total investment in redevelopment (i.e. excluding
acquisition costs) of $40,300,000.

As of March 1, 2001, we had acquired seven communities, containing 1,960
apartment homes, since the beginning of 2000 for approximately $252,400,000. We
acquired six of these communities in connection with a forward purchase
agreement signed in 1997 with an unaffiliated party.

The development and redevelopment of communities involves risks that the
investment will fail to perform in accordance with expectations. See "Risks of
Development and Redevelopment" in Item 2 of this report for our discussion of
these and other risks inherent in developing or redeveloping communities.


40

Results of Operations and Funds from Operations

A comparison of our operating results for the years ended December 31, 2000 and
December 31, 1999 as well as a comparison of our operating results for the years
ended December 31, 1999 and December 31, 1998 follows:



2000 1999 $ Change % Change 1999 1998 $ Change % Change
--------- --------- --------- -------- --------- --------- --------- --------

Revenue:
Rental income $ 571,943 $ 504,567 $ 67,376 13.4% $ 504,567 $ 369,945 $ 134,622 36.4%
Management fees 1,051 1,176 (125) (10.6%) 1,176 1,377 (201) (14.6%)
Other income 401 236 165 69.9% 236 81 155 191.4%
--------- --------- --------- ------- --------- --------- --------- ------
Total revenue 573,395 505,979 67,416 13.3% 505,979 371,403 134,576 36.2%
--------- --------- --------- ------- --------- --------- --------- ------

Expenses:
Operating expenses, excluding
property taxes 142,664 135,517 7,147 5.3% 135,517 104,346 31,171 29.9%
Property taxes 46,958 42,701 4,257 10.0% 42,701 31,775 10,926 34.4%
--------- --------- --------- ------- --------- --------- --------- ------
Total operating expenses 189,622 178,218 11,404 6.4% 178,218 136,121 42,097 30.9%
--------- --------- --------- ------- --------- --------- --------- ------

Net Operating Income 383,773 327,761 56,012 17.1% 327,761 235,282 92,479 39.3%

Other Expenses:
Interest expense 83,609 74,699 8,910 11.9% 74,699 54,650 20,049 36.7%
Depreciation and amortization 122,610 109,759 12,851 11.7% 109,759 77,374 32,385 41.9%
General and administrative 13,013 9,592 3,421 35.7% 9,592 9,124 468 5.1%
Non-recurring charges -- 16,782 (16,782) -- 16,782 -- 16,782 --
--------- --------- --------- ------- --------- --------- --------- ------
Total other expenses 219,232 210,832 8,400 4.0% 210,832 141,148 69,684 49.4%
--------- --------- --------- ------- --------- --------- --------- ------

Equity in income of unconsolidated
joint ventures 2,428 2,867 (439) (15.3%) 2,867 2,638 229 8.7%
Interest income 4,764 7,362 (2,598) (35.3%) 7,362 3,508 3,854 109.9%
Minority interest in consolidated
partnerships (1,908) (1,975) 67 3.4% (1,975) (1,770) (205) (11.6%)
--------- --------- --------- ------- --------- --------- --------- ------

Income before gain on sale of
communities and extraordinary item 169,825 125,183 44,642 35.7% 125,183 98,510 26,673 27.1%
Gain on sale of communities 40,779 47,093 (6,314) (13.4%) 47,093 25,270 21,823 86.4%
--------- --------- --------- ------- --------- --------- --------- ------

Income before extraordinary item 210,604 172,276 38,328 22.2% 172,276 123,780 48,496 39.2%
Extraordinary item -- -- -- -- -- (245) 245 --
--------- --------- --------- ------- --------- --------- --------- ------

Net income 210,604 172,276 38,328 22.2% 172,276 123,535 48,741 39.5%
Dividends attributable to preferred --
stock (39,779) (39,779) -- -- (39,779) (28,132) (11,647) (41.4%)
--------- --------- --------- ------- --------- --------- --------- ------

Net income available to common
stockholders $ 170,825 $ 132,497 $ 38,328 28.9% $ 132,497 $ 95,403 $ 37,094 38.9%
========= ========= ========= ======= ========= ========= ========= ======


Comparison of Year Ended December 31, 2000 to Year Ended December 31, 1999

Net income available to common stockholders increased $38,328,000 (28.9%) to
$170,825,000 for the year ended December 31, 2000 compared to $132,497,000 for
the preceding year. Excluding non-recurring charges and gain on sale of
communities, net income available to common stockholders increased by
$27,860,000 for the year ended December 31, 2000 compared to the preceding year.
The increase in net income, as adjusted, for the year ended December 31, 2000 is
primarily attributable to additional operating


41

income from newly developed and redeveloped communities as well as growth in
operating income from Established Communities.

As discussed in "Recent Developments - Sales of Existing Communities" and
"Future Financing and Capital Needs," we have funded a significant portion of
our development and redevelopment activities since 1998 through the sale of
assets in certain markets where we have a limited presence. The short-term
effect of a sale of a community is that net operating income will be negatively
impacted because that community's contribution to net operating income has been
eliminated and the development or redevelopment community in which the proceeds
from the sale are being invested is not yet complete. Interest expense will also
decrease as the proceeds from the sale of communities are initially used to
repay amounts outstanding on our unsecured credit facility. The historical
effect of this strategy has been that net operating income attributable to newly
developed and redeveloped communities is higher than net operating income of
assets identified for sale. We have generated approximately $405 million in net
proceeds from the sale of assets during 1999 and 2000, which represents
approximately 10% of our total real estate assets as of December 31, 2000.

The increase in net operating income of $56,012,000 for the year ended December
31, 2000 as compared to 1999 is attributable to:

o an increase of $50,254,000 related to communities where development
activities, redevelopment activities or acquisitions were completed
subsequent to January 1, 1999;
o an increase of $22,162,000 related to Established Communities;
o a decrease of $19,629,000 related to communities sold subsequent to
January 1, 1999; and
o an increase of $3,225,000 related to all other communities.

Depreciation expense is impacted by the timing of asset sales and the completion
of development or redevelopment activities. Gain on sale of communities is
impacted by the number of assets sold in a given period and the carrying value
of those assets.

Rental income increases are primarily the result of our disposition and capital
redeployment strategy discussed above and improved operating results related to
Established Communities.

Overall Portfolio - The increase in rental income ($67,376,000 or 13.4%)
is primarily due to an increase in the weighted average number of occupied
apartment homes as well as an increase in the weighted average monthly
rental income per occupied apartment home. The weighted average number of
occupied apartment homes increased from 33,726 apartment homes for the
year ended December 31, 1999 to 34,470 apartment homes for the year ended
December 31, 2000 primarily as a result of development, redevelopment and
acquisitions of new communities, offset by the sale of communities in 1999
and 2000. For the year ended December 31, 2000, the weighted average
monthly revenue per occupied apartment home increased $139 (11.2%) to
$1,381 compared to $1,242 for the preceding year.

Established Communities - Rental revenue increases ($25,911,000 or 8.9%)
are due to market conditions that allowed for higher average rents and
higher economic occupancy levels. For the year ended December 31, 2000,
weighted average monthly revenue per occupied apartment home increased $99
(7.8%) to $1,376 compared to $1,277 for the preceding year. The average
economic occupancy increased from 96.6% for the year ended December 31,
1999 to 97.7% for the year ended December 31, 2000. Rental income from
Established Communities in our Northern California region, which accounted
for 34.1% of all Established Community rental income in 2000, increased by
12.4% from the preceding year.


42

Management fees decreases ($125,000 or 10.6%) are primarily due to a decline in
the number of communities that we manage for third-parties.

Operating expenses, excluding property taxes increases ($7,147,000 or 5.3%) are
primarily a result of our disposition and capital redeployment strategy
discussed above, and an increase in expense related to Established Communities.
Maintenance, insurance and other costs associated with Development and
Redevelopment Communities are expensed as communities move from the initial
construction and lease-up phase to the stabilized operating phase.

Established Communities - Higher operating expenses, excluding property
taxes ($2,754,000 or 4.7%) are primarily the result of higher payroll,
insurance, redecorating, and maintenance costs offset by lower utility and
marketing costs.

Property tax increases ($4,257,000 or 10.0%) are primarily the result of our
disposition and capital redeployment strategy discussed above and an increase in
operating expense related to Established Communities. Property taxes on
Development and Redevelopment Communities are expensed as communities move from
the initial construction and lease-up phase to the stabilized operating phase.

Established Communities - property tax increases ($1,005,000 or 4.1%) are
primarily a result of an adjustment in 1999 to eliminate accrued but
unassessed taxes related to previously renovated communities. In addition,
payments were made during 2000 in resolution of a dispute over property
tax calculations from 1997 to present for one of our communities in the
Northeast region.

Interest expense increases ($8,910,000 or 11.9%) are primarily attributable to
the $136 million increase in total debt from December 31, 1999 to December 31,
2000, an increase in short-term interest rates in 2000 and a decrease in
capitalized interest. Interest expense also increased from the issuance of
unsecured notes, which reflects our strategy to mitigate the risk of floating
rate debt by repaying floating rate debt under our unsecured credit facility
(with relatively lower current interest rates) with fixed rate unsecured debt
that has a higher current interest rate and a longer term to maturity.

General and administrative increases ($3,421,000 or 35.7%) are primarily
attributable to an increase in consulting costs as well as compensation expense
for a senior officer, whose salary was expensed in 2000 but capitalized in 1999
while he served the company in a different capacity. Cost savings attained from
a management reorganization in the first quarter of 1999 partially offset the
increase in expense.

Equity in income of unconsolidated joint ventures represents our share of net
income or loss from joint ventures.

Interest income decreases ($2,598,000 or 35.3%) are primarily from a decrease in
interest from participating mortgage notes, including the Fairlane Woods
participating mortgage note sold in the fourth quarter of 1999.

Gain on sale of communities decreases ($6,314,000 or 13.4%) are due to a
decrease in the number and asset value of communities sold during 2000 as
compared to 1999.

Comparison of Year Ended December 31, 1999 to Year Ended December 31, 1998

Net income available to common stockholders increased $37,094,000 (38.9%) to
$132,497,000 for the year ended December 31, 1999 compared to $95,403,000 for
the preceding year. Excluding non-recurring charges, gain on sale of communities
and extraordinary items, net income available to common stockholders increased
by $31,808,000 for the year ended December 31, 1999 compared to the preceding
year. The increase in net income, as adjusted, for the year ended December 31,
1999 is primarily


43

attributable to additional operating income from communities gained from the
merger of Avalon Properties and Bay Apartment Communities during June 1998.
Additional operating income from newly developed or redeveloped communities and
growth in operating income from Established Communities also contributed to the
increase in net income.

Rental income increases are primarily attributable to revenue from additional
communities gained from the merger and secondarily the result of our disposition
and capital redeployment strategy discussed above, and improved operating
results related to Established Communities.

Overall Portfolio - The increase in rental income ($134,622,000 or 36.4%)
is primarily due to an increase in the weighted average number of occupied
apartment homes from 28,333 apartment homes for the year ended December
31, 1998 to 33,726 apartment homes for the year ended December 31, 1999.
This increase is primarily a result of apartment homes from additional
communities gained from the merger being part of the portfolio for all of
1999 as well as the development, redevelopment and acquisition of new
communities. The increase was partially offset by the sale of communities
in 1998 and 1999. For the year ended December 31, 1999, the weighted
average monthly revenue per occupied apartment home increased $160 (14.8%)
to $1,242 compared to $1,082.

Established Communities, on a pro forma basis, assuming the merger had
occurred on January 1, 1998 - Rental revenue increased $10,114,000 (4.1%)
for the year ended December 31, 1999 compared to the preceding year. The
increase is due to market conditions that allowed for higher average rents
that were partially offset by lower economic occupancy levels. For the
year ended December 31, 1999, weighted average monthly revenue per
occupied apartment home increased $52 (4.4%) to $1,226 compared to $1,174
for the preceding year. The average economic occupancy decreased from
96.9% for the year ended December 31, 1998 to 96.6% for the year ended
December 31, 1999. Rental income increases from Established Communities in
our Northern California region, which accounted for 37.4% of all
Established Community rental income in 1999, were significantly less than
other regions. During late 1998 and much of 1999, the Northern California
sub-markets dependent on Silicon Valley employment softened. These
sub-markets experienced reduced rental rate growth and occupancy declines
as compared to other Northern California sub-markets and our other markets
as a whole.

Management fees decreases ($201,000 or 14.6%) are primarily due to a decline in
the number of communities that we manage for third parties.

Operating expense, excluding property taxes increases ($31,171,000 or 29.9%) are
primarily due to operating expenses from additional communities gained from the
merger and secondarily the result of our disposition and capital redeployment
strategy discussed above and improved operating results related to Established
communities. Maintenance, insurance and other costs associated with Development
and Redevelopment Communities are expensed as communities move from the initial
construction and lease-up phase to the stabilized operating phase.

Established Communities, on a pro forma basis, assuming the merger had
occurred on January 1, 1998 - Operating expenses, excluding property taxes
increased $1,821,000 (3.7%) to $50,912,000 for the year ended December 31,
1999 compared to $49,091,000 for the preceding year. The net changes are
the result of higher redecorating, maintenance, payroll and administrative
costs offset by lower utility, marketing, and insurance costs.

Property tax increases ($10,926,000 or 34.4%) are primarily due to expenses from
additional communities gained from the merger and secondarily the result of our
disposition and capital redeployment strategy discussed above and improved
operating results related to Established Communities. Property taxes on


44

Development and Redevelopment Communities are expensed as communities move from
the initial construction and lease-up phase to the stabilized operating phase.

Established Communities, on a pro forma basis, assuming the merger had
occurred on January 1, 1998 - Property taxes decreased $30,000 (0.1%) to
$21,197,000 for the year ended December 31, 1999 compared to $21,227,000
for the preceding year. The decrease is primarily a result of revised base
year tax assessments for previously renovated communities, which resulted
in supplemental taxes that were lower than those originally projected.

Interest expense increases ($20,049,000 or 36.7%) are primarily attributable to
approximately $600 million of debt assumed in connection with the merger, offset
by an increase in capitalized interest.

Depreciation expense is impacted by the timing of asset sales and the completion
of development or redevelopment activities.

General and administrative increases ($468,000 or 5.1%) are primarily due to
additional overhead from the combination of the two companies and related
organizational structures, partially offset by a reorganization in February 1999
that reduced the management structure of the merged company.

Equity in income of unconsolidated joint ventures represents our share of net
income from joint ventures.

Interest income increases ($3,854,000 or 109.9%) are primarily from an increase
in interest from participating mortgage notes, including the Fairlane Woods
participating mortgage note acquired in the third quarter of 1998. The Fairlane
Woods promissory note was sold in the fourth quarter of 1999.

Gain on sale of communities increases ($21,823,000 or 86.4%) are due to an
increase in the number and asset value of communities sold during 1999 as
compared to 1998 as a result of the disposition strategy we implemented in the
third quarter of 1998.

Funds from Operations

We consider Funds from Operations, or FFO, to be an appropriate measure of our
operating performance because it helps investors understand our ability to incur
and service debt and to make capital expenditures. We believe that to understand
our operating results, FFO should be examined with net income as presented in
the Consolidated Statements of Operations included elsewhere in this report. FFO
for 2000 is determined based on a definition adopted by the Board of Governors
of the National Association of Real Estate Investment Trusts(R) (NAREIT) in
October 1999, and is defined as:

o net income or loss computed in accordance with generally accepted
accounting principles (GAAP), except that excluded from net income
or loss are gains or losses on sales of property and extraordinary
(as defined by GAAP) gains or losses on debt restructuring;
o plus depreciation of real estate assets; and
o after adjustments for unconsolidated partnerships and joint
ventures.

FFO does not represent cash generated from operating activities in accordance
with GAAP. Therefore it should not be considered an alternative to net income as
an indication of our performance. FFO should also not be considered an
alternative to net cash flows from operating activities as determined by GAAP as
a measure of liquidity. Additionally, it is not necessarily indicative of cash
available to fund cash needs. Further, FFO as calculated by other REITs may not
be comparable to our calculation of FFO.


45

For the year ended December 31, 2000, FFO increased to $252,013,000 from
$196,058,000 for the comparable period of the preceding year. This increase is
primarily attributable to additional operating income from newly developed and
redeveloped communities as well as growth in operating income from Established
Communities.

FFO previously reported for the year ended December 31, 1999 excluded the effect
on net income of a non-recurring restructuring charge of $16,076,000, and Year
2000 remediation costs of $706,000 in conformance with the NAREIT definition of
FFO calculations then in effect, or the original definition. NAREIT issued a
White Paper dated October 1999 that clarified the definition of FFO and the
treatment of certain non-recurring charges. The clarified definition includes
the effect on net income of non-recurring charges in the calculation of FFO.
Although we believe the comparison of FFO using the original definition
represents a better guide to investors of comparable operations and growth
between years, both FFO calculations are presented below for the years ended
December 31, 2000 and 1999 (dollars in thousands):



Years ended
----------------------
2000 1999
--------- ---------

Net income $ 210,604 $ 172,276
Preferred dividends (39,779) (39,779)
Depreciation - real estate assets 119,416 107,928
Joint venture adjustments 792 751
Minority interest expense 1,759 1,975
Gain on sale of communities (40,779) (47,093)
--------- ---------

Funds from Operations - Clarified Definition (1) $ 252,013 $ 196,058
Non-recurring charges (2) -- 16,782
--------- ---------

Funds from Operations - Original Definition (3) $ 252,013 $ 212,840
========= =========

Net cash provided by operating activities $ 294,818 $ 250,066
========= =========
Net cash used in investing activities $(282,584) $(264,619)
========= =========
Net cash provided by financing activities $ 37,379 $ 13,284
========= =========


(1) Represents FFO calculated in accordance with NAREIT's October 1999 White
Paper on FFO. Our calculation of FFO in accordance with NAREIT's clarified
definition of FFO includes the effect on earnings of non-recurring charges
for certain management and other organizational changes and Year 2000
remediation costs.
(2) Consists of $16,076 related to management and other organizational changes
announced during durring 1998 and $706 for Year 2000 remediation costs.
Previously, the effect on earnings of non-recurring charges for certain
management and other organizational changes and Year 2000 remediation
costs were excluded from the calculation of FFO.
(3) FFO calculated based on NAREIT's definition of FFO prior to the issuance
of the October 1999 White Paper on FFO.

Capitalization of Fixed Assets and Community Improvements

Our policy with respect to capital expenditures is generally to capitalize only
non-recurring expenditures. We capitalize improvements and upgrades only if the
item:

o exceeds $15,000;
o extends the useful life of the asset; and
o is not related to making an apartment home ready for the next
resident.


46

Under this policy, virtually all capitalized costs are non-recurring, as
recurring make-ready costs are expensed as incurred. Recurring make-ready costs
include the following:

o carpet and appliance replacements;
o floor coverings;
o interior painting; and
o other redecorating costs.

We capitalize purchases of personal property, such as computers and furniture,
only if the item is a new addition and the item exceeds $2,500. We generally
expense purchases of personal property made for replacement purposes. The
application of these policies for the year ended December 31, 2000 resulted in
non-revenue generating capitalized expenditures for Stabilized Communities of
approximately $225 per apartment home. For the year ended December 31, 2000, we
charged to maintenance expense, including carpet and appliance replacements,
related to Stabilized Communities approximately $1,145 per apartment home. We
anticipate that capitalized costs per apartment home will gradually rise as the
average age of our communities increases.

Liquidity and Capital Resources

Liquidity. The primary source of liquidity is our cash flows from operations.
Operating cash flows have historically been determined by:

o the number of apartment homes;
o rental rates;
o occupancy levels; and
o our expenses with respect to these apartment homes.

The timing, source and amount of cash flows provided by financing activities and
used in investing activities are sensitive to the capital markets environment,
particularly to changes in interest rates that are charged to us as changes in
interest rates affect our decision as to whether to issue debt securities,
borrow money and invest in real estate. Thus, changes in the capital markets
environment may affect our plans for the undertaking of construction and
development as well as acquisition activity.

Cash and cash equivalents increased $49,613,000 to $57,234,000 for the year
ended December 31, 2000 compared to a decrease in cash and cash equivalents of
$1,269,000 to $7,621,000 for the year ended December 31, 1999.

o Net cash provided by operating activities totaled $294,818,000 for
the year ended December 31, 2000, an increase of $44,752,000
provided over the same period of 1999. The increase was primarily
attributable to additional operating income from newly developed and
redeveloped communities as well as growth in operating income from
Established Communities.
o Net cash used in investing activities totaled $282,584,000 for the
year ended December 31, 2000, an increase of $17,965,000 used over
the same period of 1999. The increase was primarily due to a
reduction in the proceeds from the sale of communities.
o Net cash provided by financing activities totaled $37,379,000 for
the year ended December 31, 2000, an increase of $24,095,000 over
the same period of 1999. The increase is primarily due to increased
sales of unsecured notes partially offset by additional dividends
paid and increased repayments of the unsecured credit facility.


47

Cash and cash equivalents decreased $1,269,000 to $7,621,000 for the year ended
December 31, 1999 compared to an increase of $2,168,000 to $8,890,000 for the
year ended December 31, 1998.

o Net cash provided by operating activities totaled $250,066,000 for
the year ended December 31, 1999, an increase of $56,588,000
provided over the same period of 1998. The increase was primarily
due to an increase in operating income from additional communities
gained from the merger, and additional operating income from newly
developed and redeveloped communities as well as growth in operating
income from Established Communities.
o Net cash used in investing activities totaled $264,619,000 for the
year ended December 31, 1999, a decrease of $353,066,000 used over
the same period of 1998. The decrease in expenditures reflected
increased sales of communities and decreased acquisitions, offset by
increased construction and reconstruction activity. The decrease in
acquisitions was attributable to a shift in our investment focus
away from acquisitions and towards development opportunities that
offer higher projected yields, primarily in response to the lack of
available properties that met our increased yield requirements and
the decrease in availability of cost-effective capital.
o Net cash provided by financing activities totaled $13,284,000 for
the year ended December 31, 1999, a decrease of $413,091,000 over
the same period of 1998. The decrease was primarily due to our
development activities increasingly being funded through the sale of
existing communities as opposed to incurring debt or selling equity.
This resulted in a reduction in the sale of unsecured notes as well
as a reduction of outstanding amounts under our unsecured credit
facility as proceeds from the sale of communities are initially used
to repay amounts outstanding on our unsecured credit facility. Also,
dividends paid increased as a result of additional common and
preferred shares issued in connection with the merger.

We regularly review our short and long-term liquidity needs and the adequacy of
Funds from Operations, as defined above, and other expected liquidity sources to
meet these needs. We believe our principal short-term liquidity needs are to
fund:

o normal recurring operating expenses;
o debt service payments;
o the distributions required with respect to preferred stock;
o the minimum dividend payments required to maintain our REIT
qualification under the Internal Revenue Code of 1986; and
o development and redevelopment activity in which we are currently
engaged.

We anticipate that we can fully satisfy these needs from a combination of cash
flows provided by operating activities and capacity under our unsecured credit
facility.

We believe our principle long-term liquidity needs are the repayment of medium
and long-term debt. We anticipate that no significant portion of the principal
of any indebtedness will be repaid prior to maturity. If we do not have funds on
hand sufficient to repay our indebtedness, it will be necessary for us to
refinance this debt. This refinancing may be accomplished through additional
debt financing, which may be collateralized by mortgages on individual
communities or groups of communities, by uncollateralized private or public debt
offerings or by additional equity offerings. We also anticipate having
significant retained cash flow in each year such that some or all of any debt
maturity can be satisfied from retained cash. Although we believe we will have
the capacity to meet our long-term liquidity needs, we cannot assure you that
additional debt financing or debt or equity offerings will be available or, if
available, that they will be on terms we consider satisfactory.


48

Capital Resources. We intend to match the long-term nature of our real estate
assets with long-term cost- effective capital to the extent permitted by
prevailing market conditions. We have raised approximately $625 million in
capital market offerings since January 1999:

Date Description of Offerings
------------------------ --------------------------------

January 1999 $125 million medium-term notes
July 1999 $150 million medium-term notes
July 2000 $150 million medium-term notes
December 2000 $200 million medium-term notes

We follow a focused strategy to help facilitate uninterrupted access to capital.
This strategy includes:

o hiring, training and retaining associates with a strong resident
service focus, which should lead to higher rents, lower turnover and
reduced operating costs;
o managing, acquiring and developing upscale communities in locations
where the availability of zoned and entitled land is limited to
provide consistent, sustained earnings growth;
o operating in markets with growing demand, as measured by household
formation and job growth, and high barriers-to-entry. We believe
these characteristics generally combine to provide a favorable
demand-supply balance, which we believe will create a favorable
environment for future rental rate growth while protecting existing
and new communities from new supply. We expect this strategy to
result in a high level of quality to the revenue stream;
o maintaining a conservative capital structure, largely comprised of
equity, and with modest, cost-effective leverage. We generally avoid
secured debt except in order to obtain low cost, tax-exempt debt. We
believe such a structure promotes an environment where current
credit rating levels can be maintained;
o following accounting practices that provide a high level of quality
to reported earnings; and
o providing timely, accurate and detailed disclosures to the
investment community.

We believe these strategies provide a disciplined approach to capital access to
help position us to fund portfolio growth.

Capital market conditions over the past several years have limited our access to
cost-effective capital. See "Future Financing and Capital Needs" for a
discussion of our response to the current capital markets environment. The
following is a discussion of specific capital transactions, arrangements and
agreements.

Variable Rate Unsecured Credit Facility

Our unsecured revolving credit facility is furnished by a consortium of banks
and provides $600,000,000 in short-term credit. We pay these banks an annual
facility fee of $900,000 in equal quarterly installments. The unsecured credit
facility bears interest at varying levels tied to the London Interbank Offered
Rate (LIBOR) based on ratings levels achieved on our unsecured notes and on a
maturity selected by us. The current stated pricing is LIBOR plus 0.60% per
annum. The unsecured credit facility matures in July 2001, however there are two
one-year extension options, the first at our sole discretion and the second with
the consent of the consortium of banks. Therefore, we may extend the maturity to
at least July 2002. A competitive bid option is available for borrowings of up
to $400,000,000. This option allows banks that are part of the lender consortium
to bid to provide us loans at a rate that is lower than the stated pricing
provided by the unsecured credit facility. The competitive bid option may result
in lower pricing if market conditions allow. Pricing under the competitive bid
option resulted in average pricing of LIBOR plus 0.50% for balances most
recently placed under the competitive bid option. At March 1, 2001, $0 was
outstanding, $82,753,000 was used to provide letters of credit and $517,247,000
was available for


49

borrowing under the unsecured credit facility. We intend to use borrowings under
the unsecured credit facility for:

o capital expenditures;
o construction, development, reconstruction and redevelopment costs;
o acquisitions;
o credit enhancement for tax-exempt bonds; and
o working capital purposes.

Interest Rate Protection Agreements

We are not a party to any long-term interest rate agreements, other than
interest rate protection and swap agreements on approximately $177 million of
our variable rate tax-exempt indebtedness. We intend, however, to evaluate the
need for long-term interest rate protection agreements as interest rate market
conditions dictate, and we have engaged a consultant to assist in managing our
interest rate risks and exposure.

Financing Commitments and Transactions Completed

In July 2000, we issued $150,000,000 of unsecured medium-term notes. The notes
have a coupon rate of 8.25% and will mature on July 15, 2008. We used the net
proceeds of approximately $148,989,000 to repay amounts outstanding under our
unsecured credit facility.

In December 2000, we issued $200,000,000 of unsecured medium-term notes. The
notes have a coupon rate of 7.50% and will mature on December 15, 2010. We used
the net proceeds of approximately $197,242,000 to repay amounts outstanding
under our unsecured credit facility, with the excess proceeds invested in cash
equivalents.

Future Financing and Capital Needs

As of December 31, 2000, we had 16 new communities under construction either by
us or by unaffiliated third parties with whom we have entered into forward
purchase commitments. As of December 31, 2000, a total estimated cost of
$419,914,000 remained to be invested in these communities. In addition, we had
four other communities under reconstruction, for which an estimated $33,559,000
remained to be invested as of December 31, 2000.

Substantially all of the capital expenditures necessary to complete the
communities currently under construction and reconstruction will be funded from:

o the remaining capacity under our $600,000,000 unsecured credit
facility;
o the net proceeds from sales of existing communities;
o retained operating cash; and/or
o the issuance of debt or equity securities.

We expect to continue to fund deferred development costs related to future
developments from retained operating cash and borrowings under the unsecured
credit facility. We believe these sources of capital will be adequate to take
the proposed communities to the point in the development cycle where
construction can begin.

We have observed and been impacted by a reduction in the availability of
cost-effective capital since the third quarter of 1998. While the capital market
environment has improved during 2000, we cannot assure


50

you that cost-effective capital will be available to meet future expenditures
required to begin planned reconstruction activity or the construction of the
Development Rights. Before planned reconstruction activity or the construction
of a Development Right begins, we intend to arrange adequate financing to
complete these undertakings, although we cannot assure you that we will be able
to obtain such financing. In the event that financing cannot be obtained, we may
have to abandon Development Rights, write-off associated pursuit costs and/or
forego reconstruction activity. In such instances, we will not realize the
increased revenues and earnings that we expected from such pursuits, and the
related write-off of costs will increase current period expenses.

Our liquidity could be adversely impacted by expanding development activities
and/or reduced capital (as compared to prior years) available from asset sales.
To meet the balance of our liquidity needs under such conditions, we would need
to arrange additional capacity under our existing unsecured credit facility,
sell additional existing communities and/or issue additional debt or equity
securities. While we believe we have the financial position to expand our
short-term credit capacity and support our capital markets activity, we cannot
assure you that we will be successful in completing these arrangements, sales or
offerings. The failure to complete these transactions on a cost-effective basis
could have a material adverse impact on our operating results and financial
condition, including the abandonment of deferred development costs and a
resultant charge to earnings.

To increase our concentration of communities in selected high barrier-to-entry
markets, we are selling assets in certain submarkets and redeploying the
proceeds. Under our disposition program, we solicit competing bids from
unrelated parties for these individual assets and consider the sales price and
tax ramifications of each proposal. We have disposed of nine communities since
January 1, 2000 for net proceeds of approximately $138,924,000. We intend to
actively seek buyers for the remaining communities held for sale. However, we
cannot assure you that these assets can be sold on terms that we consider
satisfactory.

The remaining assets that we have identified for disposition include land,
buildings and improvements and furniture, fixtures and equipment. Total real
estate, net of accumulated depreciation, of all communities identified for sale
at December 31, 2000 totaled $208,118,000. Certain individual assets are secured
by mortgage indebtedness which may be assumed by the purchaser or repaid from
our net sales proceeds. Our Consolidated Statements of Operations include net
income from the communities held for sale of $11,568,000 and $9,171,000 for the
years ended December 31, 2000 and 1999, respectively.

Because the proceeds from the sale of communities are used initially to reduce
borrowings under our unsecured credit facility, the immediate effect of a sale
of a community is to have a negative effect on Funds from Operations. This is
because the yield on a community that is sold exceeds the interest rate on the
borrowings that are repaid from such net proceeds. Therefore, changes in the
number and timing of dispositions, and the redeployment of the resulting net
proceeds, may have a material and adverse effect on our Funds from Operations.


51

Debt Maturities

The following table details debt maturities for the next five years, excluding
the unsecured credit facility:



(Dollars in thousands)

All-In Principal Balance Outstanding Scheduled Maturities
interest maturity ---------- ----------- -------- ---------- ----------
Community rate (1) date 12-31-99 12-31-00 2001 2002 2003
- ----------------------------------------- --------- --------- ---------- ----------- -------- ---------- ----------

Tax-Exempt Bonds
Fixed Rate
Avalon at Foxchase I 5.88% Nov-2007 $ 16,800 $ 16,800 $ -- $ -- $ --
Avalon at Foxchase II 5.88% Nov-2007 9,600 9,600 -- -- --
Fairway Glen 5.88% Nov-2007 9,580 9,580 -- -- --
CountryBrook 7.87% Mar-2012 19,264 18,934 357 386 417
Waterford 5.88% Aug-2014 33,100 33,100 -- -- --
Avalon at Mountain View 5.88% Mar-2017 18,300 18,300 -- -- --
Avalon at Dulles 7.04% Jul-2024 12,360 12,360 -- -- --
Avalon at Symphony Glen 7.00% Jul-2024 9,780 9,780 -- -- --
Avalon View 7.55% Aug-2024 18,795 18,465 350 373 397
Avalon at Lexington 6.56% Feb-2025 14,602 14,347 271 288 307
Avalon at Nob Hill 5.80% Jun-2025 20,263 20,013 268 288 308
Avalon at Mission Viejo 5.50% Jun-2025 7,445 7,354 98 105 112
Avalon Campbell 6.48% Jun-2025 37,535 36,981 594 637 684
Avalon Pacifica 6.48% Jun-2025 17,026 16,775 270 289 310
Barrington Hills 6.48% Jun-2025 12,843 -- (2) -- -- --
Crossbrook 6.48% Jun-2025 8,273 8,156 126 136 146
Avalon Knoll 6.95% Jun-2026 13,580 13,393 200 214 230
Avalon Landing 6.85% Jun-2026 6,721 6,626 101 108 116
Avalon Fields 7.05% May-2027 11,756 11,609 157 169 180
Avalon West 7.73% Dec-2036 8,632 8,579 57 61 65
---------- ----------- -------- ---------- ----------
306,255 290,752 2,849 3,054 3,272
Variable Rate
Avalon Devonshire Dec-2025 27,305 27,305 -- -- --
Avalon at Fairway Hills I Jun-2026 11,500 11,500 -- -- --
Avalon at Laguna Niguel Mar-2009 10,400 10,400 -- -- --
Avalon Greenbriar May-2026 18,755 18,755 -- -- --
---------- ----------- -------- ---------- ----------
67,960 67,960 -- -- --
Conventional Loans:
Fixed Rate
$100 Million unsecured notes 7.375% Sep-2002 100,000 100,000 -- 100,000 --
$50 Million unsecured notes 6.25% Jan-2003 50,000 50,000 -- -- 50,000
$100 Million unsecured notes 6.50% Jul-2003 100,000 100,000 -- -- 100,000
$125 Million medium-term notes 6.58% Feb-2004 125,000 125,000 -- -- --
$100 Million unsecured notes 6.625% Jan-2005 100,000 100,000 -- -- --
$50 Million unsecured notes 6.50% Jan-2005 50,000 50,000 -- -- --
$150 Million unsecured notes 6.80% Jul-2006 150,000 150,000 -- -- --
$110 Million unsecured notes 6.875% Dec-2007 110,000 110,000 -- -- --
$50 Million unsecured notes 6.625% Jan-2008 50,000 50,000 -- -- --
$150 Million medium-term notes 8.25% Jul-2008 -- 150,000 -- -- --
$150 Million medium-term notes 7.50% Aug-2009 150,000 150,000 -- -- --
$200 Million medium-term notes 7.50% Dec-2010 -- 200,000 -- -- --
Avalon Redmond Place 7.31% May-2001 11,272 11,042 11,042 -- --
Avalon Pines 8.00% Dec-2003 5,226 -- (2) -- -- --
Avalon at Pruneyard 7.25% May-2004 12,870 12,870 -- -- --
Govenor's Square 7.65% Aug-2004 13,923 -- (2) -- -- --
Avalon Walk II 8.93% Aug-2004 12,541 12,300 264 288 315
---------- ----------- -------- ---------- ----------
1,040,832 1,371,212 11,306 100,288 150,315

Variable Rate-None -- -- -- -- --
---------- ----------- -------- ---------- ----------

Total indebtedness - excluding unsecured credit facility $1,415,047 $ 1,729,924 $ 14,155 $ 103,342 $ 153,587
========== =========== ======== ========== ==========


(Dollars in thousands)

Scheduled Maturities
---------- ---------- ----------
Community 2004 2005 Thereafter
- ------------------------------------------ ---------- ---------- ----------

Tax-Exempt Bonds
Fixed Rate
Avalon at Foxchase I $ -- $ -- $ 16,800
Avalon at Foxchase II -- -- 9,600
Fairway Glen -- -- 9,580
CountryBrook 451 488 16,835
Waterford -- -- 33,100
Avalon at Mountain View -- -- 18,300
Avalon at Dulles -- -- 12,360
Avalon at Symphony Glen -- -- 9,780
Avalon View 425 455 16,465
Avalon at Lexington 326 347 12,808
Avalon at Nob Hill 331 355 18,463
Avalon at Mission Viejo 121 129 6,789
Avalon Campbell 733 786 33,547
Avalon Pacifica 332 356 15,218
Barrington Hills -- -- --
Crossbrook 157 169 7,422
Avalon Knoll 246 263 12,240
Avalon Landing 124 132 6,045
Avalon Fields 193 207 10,703
Avalon West 70 75 8,251
---------- ---------- ----------
3,509 3,762 274,306
Variable Rate
Avalon Devonshire -- -- 27,305
Avalon at Fairway Hills I -- -- 11,500
Avalon at Laguna Niguel -- -- 10,400
Avalon Greenbriar -- -- 18,755
---------- ---------- ----------
-- -- 67,960
Conventional Loans:
Fixed Rate
$100 Million unsecured notes -- -- --
$50 Million unsecured notes -- -- --
$100 Million unsecured notes -- -- --
$125 Million medium-term notes 125,000 -- --
$100 Million unsecured notes -- 100,000 --
$50 Million unsecured notes -- 50,000 --
$150 Million unsecured notes -- -- 150,000
$110 Million unsecured notes -- -- 110,000
$50 Million unsecured notes -- -- 50,000
$150 Million medium-term notes -- -- 150,000
$150 Million medium-term notes -- -- 150,000
$200 Million medium-term notes -- -- 200,000
Avalon Redmond Place -- -- --
Avalon Pines -- -- --
Avalon at Pruneyard 12,870 -- --
Govenor's Square -- -- --
Avalon Walk II 11,433 -- --
---------- ---------- ----------
149,303 150,000 810,000

Variable Rate-None -- -- --
---------- ---------- ----------
Total indebtedness - excluding unsecured credit facility $ 152,812 $ 153,762 $1,152,266
========== ========== ==========


(1) Includes credit enhancement fees, facility fees, trustees, etc.
(2) The remaining loan balance was repaid in connection with the disposition
of the property during 2000.

Inflation

Substantially all of our leases are for a term of one year or less. This may
enable us to realize increased rents upon renewal of existing leases or the
beginning of new leases. Short-term leases generally minimize our risk from the
adverse effects of inflation, although these leases generally permit residents
to leave at the end of the lease term without penalty. We believe that
short-term leases, combined with relatively consistent demand, results in rents
and cash flow which provide an attractive inflation hedge.


52

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain financial market risks, the most predominant being
fluctuations in interest rates. Interest rate fluctuations are monitored by us
as an integral part of our overall risk management program, which recognizes the
unpredictability of financial markets and seeks to reduce the potentially
adverse effect on our results of operations. The effect of interest rate
fluctuations historically has been small relative to other factors affecting
operating results, such as rental rates and occupancy. The specific market risks
and the potential impact on our operating results are described below.

Our operating results are affected by changes in interest rates as a result of
borrowings under our variable rate unsecured credit facility as well as
outstanding bonds with variable interest rates. We had $67,960,000 and
$246,560,000 in variable rate debt (including mortgage notes payable and the
unsecured credit facility) outstanding as of December 31, 2000 and 1999,
respectively. If interest rates on the variable rate debt had been 100 basis
points higher throughout 2000 and 1999, our annual interest costs would have
increased by approximately $2,500,000 and $3,300,000, respectively, based on
balances outstanding during the applicable years.

We currently use interest rate swap agreements to reduce the impact of interest
rate fluctuations on certain variable rate indebtedness. Under swap agreements,

o we agree to pay to a counterparty the interest that would have been
incurred on a fixed principal amount at a fixed interest rate
(generally, the interest rate on a particular treasury bond on the
date the agreement is entered into, plus a fixed increment), and
o the counterparty agrees to pay to us the interest that would have
been incurred on the same principal amount at an assumed floating
interest rate tied to a particular market index.

As of December 31, 2000, the effect of swap agreements is to fix the interest
rate on approximately $177 million of our variable rate tax-exempt debt.
Furthermore, swap agreements fix the interest rate on approximately $23 million
of unconsolidated variable rate debt as of December 31, 2000. The swap
agreements were not electively entered into by us but, rather, were a
requirement of either the bond issuer or the credit enhancement provider related
to certain of our tax-exempt bond financings. Because the counterparties
providing the swap agreements are major financial institutions with AAA credit
ratings by the Standard & Poor's Ratings Group and the interest rates fixed by
the swap agreements are significantly higher than current market rates for such
agreements, we do not believe there is exposure at this time to a default by a
counterparty provider.


53


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The response to this Item 8 is included as a separate section of this Annual
Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

Information pertaining to directors and executive officers of the registrant is
incorporated herein by reference to the registrant's Proxy Statement to be filed
with the Securities and Exchange Commission within 120 days after the end of the
year covered by this Form 10-K with respect to the Annual Meeting of
Stockholders to be held on May 8, 2001.

ITEM 11. EXECUTIVE COMPENSATION

Information pertaining to executive compensation is incorporated herein by
reference to the registrant's Proxy Statement to be filed with the Securities
and Exchange Commission within 120 days after the end of the year covered by
this Form 10-K with respect to the Annual Meeting of Stockholders to be held on
May 8, 2001.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information pertaining to security ownership of management and certain
beneficial owners of the registrant's Common Stock is incorporated herein by
reference to the registrant's Proxy Statement to be filed with the Securities
and Exchange Commission within 120 days after the end of the year covered by
this Form 10-K with respect to the Annual Meeting of Stockholders to be held on
May 8, 2001.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information pertaining to certain relationships and related transactions is
incorporated herein by reference to the registrant's Proxy Statement to be filed
with the Securities and Exchange Commission within 120 days after the end of the
year covered by this Form 10-K with respect to the Annual Meeting of
Stockholders to be held on May 8, 2001.


54

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

14(a)(1) Financial Statements

Index to Financial Statements

Consolidated Financial Statements and Financial Statement Schedule:

Report of Independent Accountants F-1

Consolidated Balance Sheets as of December 31, 2000 and 1999 F-2

Consolidated Statements of Operations for
the years ended December 31, 2000, 1999 and 1998 F-3

Consolidated Statements of Stockholders' Equity for
the years ended December 31, 2000, 1999 and 1998 F-4

Consolidated Statements of Cash Flows for
the years ended December 31, 2000, 1999 and 1998 F-5

Notes to Consolidated Financial Statements F-6

14(a)(2) Financial Statement Schedule

Schedule III - Real Estate and Accumulated Depreciation F-28

14(a)(3) Exhibits

The exhibits listed on the accompanying Index to Exhibits are filed as a part of
this report.

14(b) Reports on Form 8-K

On October 23, 2000, the Company filed a Report on Form 8-K for the purpose of
furnishing, under Item 9 thereof, information that AvalonBay intended to present
to current and prospective stockholders and other persons and institutions.


55

INDEX TO EXHIBITS

EXHIBIT
NO. DESCRIPTION

1.1 -- Distribution Agreement, dated December 21, 1998, among the
Company and the Agents, including Administrative Procedures,
relating to the MTNs. (Incorporated by reference to Exhibit
4.4 to the Company's Current Report on Form 8-K filed on
December 21, 1998.)

1.2 -- First Amendment, dated as of June 27, 2000, to Distribution
Agreement, dated December 21, 1998, among the Company and the
Agents. (Incorporated by reference to Exhibit 1.2 to the
Company's Current Report on Form 8-K filed on July 11, 2000.)

3(i).1 -- Articles of Amendment and Restatement of Articles of
Incorporation of AvalonBay Communities, Inc. (the "Company"),
dated as of June 4, 1998. (Incorporated by reference to
Exhibit 3(i).1 to Form 10-Q of the Company filed August 14,
1998.)

3(i).2 -- Articles of Amendment, dated as of October 2, 1998.
(Incorporated by reference to Exhibit 3.1(ii) to Form 8-K of
the Company filed on October 6, 1998.)

3(i).3 -- Articles Supplementary, dated as of October 13, 1998, relating
to the 8.70% Series H Cumulative Redeemable Preferred Stock.
(Incorporated by reference to Exhibit 1 to Form 8-A of the
Company filed October 14, 1998.)

3(ii).1 -- Bylaws of the Company, as amended and restated, dated as of
July 24, 1998. (Incorporated by reference to Exhibit 3(ii).1
to Form 10-Q of the Company filed August 14, 1998.)

3(ii).2 -- Amendment to Bylaws of the Company, dated February 10, 1999.
(Incorporated by reference to Exhibit 3(ii).2 to Form 10-K of
the Company filed March 31, 1999.)

3(ii).3 -- Amendment to Bylaws of the Company, dated May 5, 1999.
(Incorporated by reference to Exhibit 3(ii).3 to Form 10-Q of
the Company filed on August 16, 1999.)

4.1 -- Indenture of Avalon Properties, Inc. (hereinafter referred to
as "Avalon Properties") dated as of September 18, 1995.
(Incorporated by reference to Form 8-K of Avalon Properties
dated September 18, 1995.)

4.2 -- First Supplemental Indenture of Avalon Properties dated as of
September 18, 1995. (Incorporated by reference to Avalon
Properties' Current Report on Form 8-K dated September 18,
1995.)

4.3 -- Second Supplemental Indenture of Avalon Properties dated as of
December 16, 1997. (Incorporated by reference to Avalon
Properties' Current Report on Form 8-K filed January 26,
1998.)

4.4 -- Third Supplemental Indenture of Avalon Properties dated as of
January 22, 1998. (Incorporated by reference to Avalon
Properties' Current Report on Form 8-K filed on January 26,
1998.)

4.5 -- Indenture, dated as of January 16, 1998, between the Company
and State Street Bank and Trust Company, as Trustee.
(Incorporated by reference to Exhibit 4.1 to Form 8-K of the
Company filed on January 21, 1998.)


56

EXHIBIT
NO. DESCRIPTION

4.6 -- First Supplemental Indenture, dated as of January 20, 1998,
between the Company and the Trustee. (Incorporated by
reference to Exhibit 4.2 to Form 8-K of the Company filed on
January 21, 1998.)

4.7 -- Second Supplemental Indenture, dated as of July 7, 1998,
between the Company and the Trustee. (Incorporated by
reference to Exhibit 4.2 to Form 8-K of the Company filed on
July 9, 1998.)

4.8 -- Third Supplemental Indenture, dated as of December 21, 1998
between the Company and the Trustee, including forms of
Floating Rate Note and Fixed Rate Note (Incorporated by
reference to Exhibit 4.4 to Form 8-K filed on December 21,
1998.)

4.9 -- Amended and Restated Third Supplemental Indenture, dated as of
July 10, 2000 between the Company and the Trustee, including
forms of Floating Rate Note and Fixed Rate Note. (Incorporated
by reference to Exhibit 4.4 to the Company's Current Report on
Form 8-K filed on July 11, 2000.)

4.10 -- Dividend Reinvestment and Stock Purchase Plan of the Company
filed September 14, 1999. (Incorporated by reference to Form
S-3 of the Company, File No. 333-87063.)

4.11 -- Amendment to the Company's Dividend Reinvestment and Stock
Purchase Plan filed on December 17, 1999. (Incorporated by
reference to the Prospectus Supplement filed pursuant to Rule
424(b)(2) of the Securities Act of 1933 on December 17, 1999.)

4.12 -- Shareholder Rights Agreement, dated March 9, 1998 (the "Rights
Agreement"), between the Company and First Union National Bank
(as successor to American Stock Transfer and Trust Company) as
Rights Agent (including the form of Rights Certificate as
Exhibit B). (Incorporated by reference to Exhibit 4.1 to Form
8-A of the Company filed March 11, 1998.)

4.13 -- Amendment No. 1 to the Rights Agreement, dated as of February
28, 2000, between the Company and the Rights Agent.
(Incorporated by reference to Exhibit 4.2 to Form 8-A/A of the
Company filed February 28, 2000.)

10.1+ -- Employment Agreement, dated as of March 9, 1998, between the
Company and Richard L. Michaux (Incorporated by reference to
Exhibit 10.1 to Form 10-Q of the Company filed August 14,
1998) and Amendment, dated as of July 30, 1999, to Employment
Agreement, dated as of March 9, 1998, between the Company and
Richard L. Michaux. (Incorporated by reference to Exhibit 10.1
to Form 10-Q of the Company filed on August 16, 1999.)

10.2+ -- Employment Agreement, dated as of March 9, 1998, between the
Company and Robert H. Slater (Incorporated by reference to
Exhibit 10.3 to Form 10-Q of the Company filed August 14,
1998) and Amendment, dated as of July 30, 1999, to Employment
Agreement, dated as of March 9, 1998, between the Company and
Robert H. Slater. (Incorporated by reference to Exhibit 10.3
to Form 10-Q of the Company filed on August 16, 1999.)

10.3+ -- Employment Agreement, dated as of March 9, 1998, between the
Company and Thomas J. Sargeant. (Incorporated by reference to
Exhibit 10.4 to Form 10-Q of the Company filed August 14,
1998.)


57

EXHIBIT
NO. DESCRIPTION

10.4+ -- Employment Agreement, dated as of March 9, 1998, between the
Company and Bryce Blair (Incorporated by reference to Exhibit
10.5 to Form 10-Q of the Company filed August 14, 1998) and
Amendment, dated as of July 30, 1999, to Employment Agreement,
dated as of March 9, 1998, between the Company and Bryce
Blair. (Incorporated by reference to Exhibit 10.2 to Form 10-Q
of the Company filed on August 16, 1999.)

10.5+ -- Employment Agreement, dated as of February 26, 2001, between
the Company and Timothy J. Naughton. (Filed herewith.)

10.6+ -- Letters of clarification, dated as of July 30, 1999, to the
Employment Agreements of Messrs. Michaux, Blair and Slater.
(Incorporated by reference to Exhibit 10.4 to Form 10-Q of the
Company filed on August 16, 1999.)

10.7+ -- Letter agreement regarding departure, dated as of August 26,
1999, by and between the Company and Debra L. Shotwell
(Incorporated by reference to Exhibit 10.41 to Form 10-K of
the Company filed on March 10, 2000) and Employment Agreement,
dated as of March 9, 1998, between the Company and Debra L.
Shotwell. (Incorporated by reference to Exhibit 10.5 to Form
10-Q of the Company filed May 15, 1998.)

10.8+ -- Letter Agreement regarding departure, dated February 26, 2001,
by and between the Company and Robert H. Slater. (Filed
herewith.)

10.9+ -- Separation Agreement, dated as of April 15, 1999, by and
between the Company and Jeffrey B. Van Horn (Incorporated by
reference to Exhibit 10.5 to Form 10-Q of the Company filed on
August 16, 1999) and Employment Agreement, dated as of March
9, 1998, between the Company and Jeffrey B. Van Horn.
(Incorporated by reference to Exhibit 10.2 to Form 10-Q of the
Company filed May 15, 1998.)

10.10+ -- Separation Agreement, dated as of May 27, 1999, by and between
the Company and Charles H. Berman (Incorporated by reference
to Exhibit 10.6 to Form 10-Q of the Company filed on August
16, 1999) and Employment Agreement, dated as of March 9, 1998,
between the Company and Charles H. Berman. (Incorporated by
reference to Exhibit 10.2 to Form 10-Q of the Company filed
August 14, 1998.)

10.11+ -- Mutual Release and Separation Agreement, dated as of March 24,
2000, between the Company and Gilbert M. Meyer. (Incorporated
by reference to Exhibit 10.1 to Form 10-Q of the Company filed
on May 15, 2000.)

10.12+ -- Retirement Agreement, dated as of March 24, 2000, between the
Company and Gilbert M. Meyer. (Incorporated by reference to
Exhibit 10.2 to Form 10-Q of the Company filed on May 15,
2000.)

10.13+ -- Consulting Agreement, dated as of March 24, 2000, between the
Company and Gilbert M. Meyer. (Incorporated by reference to
Exhibit 10.3 to Form 10-Q of the Company filed on May 15,
2000.)

10.14+ -- Avalon Properties, Inc. 1993 Stock Option and Incentive Plan.
(Filed herewith.)

10.15+ -- Avalon Properties, Inc. 1995 Equity Incentive Plan. (Filed
herewith.)


58

EXHIBIT
NO. DESCRIPTION

10.16+ -- Amendment, dated May 6, 1999, to the Avalon Properties Amended
and Restated 1995 Equity Incentive Plan. (Incorporated by
reference to Exhibit 10.7 to Form 10-Q of the Company filed on
August 16, 1999.)

10.17+ -- AvalonBay Communities, Inc. 1994 Stock Incentive Plan, as
amended and restated on April 13, 1998, and subsequently
amended on July 24, 1998 (incorporated by reference to Exhibit
10.1 to the Company's Form 10-Q filed November 16, 1998) and
amendment thereto, dated May 6, 1999 (Incorporated by
reference to Exhibit 10.8 to Form 10-Q of the Company filed on
August 16, 1999).

10.18+ -- 1996 Non-Qualified Employee Stock Purchase Plan, dated June
26, 1997, as amended and restated. (Incorporated by reference
to Exhibit 99.1 to Post-effective Amendment No. 1 to Form S-8
of the Company filed June 26, 1997, File No. 333-16837.)

10.19+ -- 1996 Non-Qualified Employee Stock Purchase Plan - Plan
Information Statement dated June 26, 1997. (Incorporated by
reference to Exhibit 99.2 to Form S-8 of the company, File No.
333-16837.)

10.20 -- Registration Rights Agreement, dated as of September 23, 1997,
between the Company and certain defined Holders of units of
limited partnership interests in Bay Pacific Northwest, L.P.
(Incorporated by reference to Exhibit 10.2 to Form 8-K of the
Company filed October 28, 1997.)

10.21 -- Form of Agreement of Limited Partnership of Bay Countrybrook,
L.P., by and among Bay GP, Inc., the Company and certain other
defined Persons. (Incorporated by reference to Exhibit 10.5 to
Form 8-K/A of the Company filed July 5, 1996.)

10.22 -- Agreement of Limited Partnership of Bay Pacific Northwest,
L.P. dated as of September 12, 1997, between the Company and
certain other defined Persons. (Incorporated by reference to
Exhibit 10.1 to Form 8-K of the Company filed October 28,
1997.)

10.23+ -- Promissory Note and Pledge and Security Agreement between the
Company and Samuel B. Fuller, dated June 15, 2000. (Filed
herewith.)

10.24 -- Indemnification Agreements between the Company and the
Directors of the Company (Incorporated by reference to Exhibit
10.39 to Form 10-K of the Company filed on March 31, 1999.)

10.25+ -- The Company's Officer Severance Plan. (Incorporated by
reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K filed on July 11, 2000.)

12.1 -- Statements re: Computation of Ratios.

21.1 -- Schedule of Subsidiaries of the Company.

23.1 -- Consent of Arthur Andersen LLP.


59


- ----------------
+ Management contract or compensatory plan or arrangement required to be filed
or incorporated by reference as an exhibit to this Form 10-K pursuant to Item
14(c) of Form 10-K.


60

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

AVALONBAY COMMUNITIES, INC.

Date: March 21, 2001 By: /s/ RICHARD L. MICHAUX
---------------------------------------
Richard L. Michaux, Executive Chairman
of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Date: March 21, 2001 By: /s/ RICHARD L. MICHAUX
---------------------------------------
Richard L. Michaux, Executive Chairman
of the Board, Director (Principal
Executive Officer)

Date: March 21, 2001 By: /s/ THOMAS J. SARGEANT
---------------------------------------
Thomas J. Sargeant, Chief Financial
Officer and Executive VP (Principal
Financial and Accounting Officer)

Date: March 21, 2001 By: /s/ BRUCE A. CHOATE
---------------------------------------
Bruce A. Choate, Director

Date: March 21, 2001 By: /s/ MICHAEL A. FUTTERMAN
---------------------------------------
Michael A. Futterman, Director

Date: March 21, 2001 By: /s/ JOHN J. HEALY, JR.
---------------------------------------
John J. Healy, Jr., Director

Date: March 21, 2001 By: /s/ GILBERT M. MEYER
---------------------------------------
Gilbert M. Meyer, Director

Date: March 21, 2001 By: /s/ BRENDA J. MIXSON
---------------------------------------
Brenda J. Mixson, Director

Date: March 21, 2001 By: /s/ LANCE R. PRIMIS
---------------------------------------
Lance R. Primis, Director

Date: March 21, 2001 By: /s/ ALLAN D. SCHUSTER
---------------------------------------
Allan D. Schuster, Director


61


Report of Independent Public Accountants

To the Board of Directors and Stockholders of
AvalonBay Communities, Inc.:

We have audited the accompanying consolidated balance sheets of AvalonBay
Communities, Inc. (a Maryland corporation, the "Company") and subsidiaries as of
December 31, 2000 and 1999, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years
ended December 31, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the 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 financial statements referred to above present
fairly, in all material respects, the financial position of AvalonBay
Communities, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the three years
ended December 31, 2000 in conformity with accounting principles generally
accepted in the United States.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The Schedule of Real Estate and Accumulated
Depreciation is presented for purposes of complying with the rules of the
Securities and Exchange Commission and is not a required part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in our audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.


/S/ ARTHUR ANDERSEN LLP

Vienna, Virginia
January 17, 2001


F-1

AVALONBAY COMMUNITIES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)



12-31-00 12-31-99
----------- -----------

ASSETS
Real estate:
Land $ 742,863 $ 663,007
Buildings and improvements 3,047,560 2,942,866
Furniture, fixtures and equipment 98,880 82,467
----------- -----------
3,889,303 3,688,340
Less accumulated depreciation (316,045) (206,962)
----------- -----------
Net operating real estate 3,573,258 3,481,378
Construction in progress (including land) 418,583 395,187
Communities held for sale 208,118 164,758
----------- -----------
Total real estate, net 4,199,959 4,041,323

Cash and cash equivalents 57,234 7,621
Cash in escrow 16,733 8,801
Resident security deposits 18,281 14,113
Investments in unconsolidated real estate joint ventures 12,215 8,101
Deferred financing costs, net 15,265 14,056
Deferred development costs 16,359 12,938
Participating mortgage notes 21,483 21,483
Prepaid expenses and other assets 39,696 26,226
----------- -----------
Total assets $ 4,397,225 $ 4,154,662
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Unsecured notes $ 1,335,000 $ 985,000
Variable rate unsecured credit facility -- 178,600
Mortgage notes payable 394,924 430,047
Dividends payable 47,572 44,139
Payables for construction 19,997 18,874
Accrued expenses and other liabilities 46,771 40,226
Accrued interest payable 32,829 28,134
Resident security deposits 28,138 23,980
----------- -----------
Total liabilities 1,905,231 1,749,000
----------- -----------

Minority interest of unitholders in consolidated partnerships 49,501 35,377

Commitments and contingencies

Stockholders' equity:
Preferred stock, $.01 par value; $25 liquidation value; 50,000,000
shares authorized at both December 31, 2000 and 1999; 18,322,700
shares outstanding at both
December 31, 2000 and 1999 183 183
Common stock, $.01 par value; 140,000,000 shares authorized at both December 31, 2000
and 1999; 67,191,542 and 65,758,009 shares both issued and outstanding at
December 31, 2000 and 1999, respectively 672 658
Additional paid-in capital 2,493,033 2,442,510
Deferred compensation (3,550) (3,559)
Dividends in excess of accumulated earnings (47,845) (69,507)
----------- -----------
Total stockholders' equity 2,442,493 2,370,285
----------- -----------

Total liabilities and stockholders' equity $ 4,397,225 $ 4,154,662
=========== ===========


See accompanying notes to consolidated financial statements.


F-2

AVALONBAY COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)



Year ended
-------------------------------------
12-31-00 12-31-99 12-31-98
--------- --------- ---------

Revenue:
Rental income $ 571,943 $ 504,567 $ 369,945
Management fees 1,051 1,176 1,377
Other income 401 236 81
--------- --------- ---------
Total revenue 573,395 505,979 371,403
--------- --------- ---------

Expenses:
Operating expenses, excluding property taxes 142,664 135,517 104,346
Property taxes 46,958 42,701 31,775
Interest expense 83,609 74,699 54,650
Depreciation and amortization 122,610 109,759 77,374
General and administrative 13,013 9,592 9,124
Non-recurring charges -- 16,782 --
--------- --------- ---------
Total expenses 408,854 389,050 277,269
--------- --------- ---------

Equity in income of unconsolidated joint ventures 2,428 2,867 2,638
Interest income 4,764 7,362 3,508
Minority interest in consolidated partnerships (1,908) (1,975) (1,770)
--------- --------- ---------

Income before gain on sale of communities and extraordinary item 169,825 125,183 98,510
Gain on sale of communities 40,779 47,093 25,270
--------- --------- ---------
Income before extraordinary item 210,604 172,276 123,780
Extraordinary item -- -- (245)
--------- --------- ---------

Net income 210,604 172,276 123,535
Dividends attributable to preferred stock (39,779) (39,779) (28,132)
--------- --------- ---------

Net income available to common stockholders $ 170,825 $ 132,497 $ 95,403
========= ========= =========

Per common share - basic

Income before extraordinary item (net of preferred dividends) $ 2.58 $ 2.05 $ 1.89
Extraordinary item -- -- --
--------- --------- ---------
Income available to common stockholders $ 2.58 $ 2.05 $ 1.89
========= ========= =========

Per common share - diluted

Income before extraordinary item (net of preferred dividends) $ 2.53 $ 2.03 $ 1.88
Extraordinary item -- -- --
--------- --------- ---------
Income available to common stockholders $ 2.53 $ 2.03 $ 1.88
========= ========= =========


See accompanying notes to consolidated financial statements.


F-3

AVALONBAY COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except share data)



Shares issued Amount
---------------------- ---------------------------
Preferred Common Preferred Common
Stock Stock Stock Stock
--------- ------ -------- ---------

Balance at 12-31-97 8,755,000 32,249,577 $ 88 $ 322

Net income -- -- -- --
Dividends declared to common
and preferred stockholders -- -- -- --
Issuance of Common Stock,
net of offering costs -- 1,273,554 -- 13
Issuance of Preferred Stock, net of
offering costs 4,000,000 -- 40 --
Stock acquired in connection with the
Merger of Bay and Avalon 6,922,786 29,008,909 69 290
Conversion of Preferred Stock to
Common Stock (1,355,086) 1,355,086 (14) 14
Amortization of deferred compensation -- -- -- --
----------- ----------- ----------- -----------

Balance at 12-31-98 18,322,700 63,887,126 183 639

Net income -- -- -- --
Dividends declared to common
and preferred stockholders -- -- -- --
Issuance of Common Stock -- 1,870,883 -- 19
Amortization of deferred compensation -- -- -- --
----------- ----------- ----------- -----------

Balance at 12-31-99 18,322,700 65,758,009 183 658

Net income -- -- -- --
Dividends declared to common
and preferred stockholders -- -- -- --
Issuance of Common Stock -- 1,433,533 -- 14
Amortization of deferred compensation -- -- -- --
----------- ----------- ----------- -----------

Balance at 12-31-00 18,322,700 67,191,542 $ 183 $ 672
=========== =========== =========== ===========


Dividends in
Additional excess of
paid-in Deferred accumulated Stockholders'
capital compensation earning equity
----------- ------------ -------------- ------------

Balance at 12-31-97 $ 987,638 $ (3,265) $ (23,773) $ 961,010

Net income -- -- 123,535 123,535
Dividends declared to common
and preferred stockholders -- -- (167,878) (167,878)
Issuance of Common Stock,
net of offering costs 45,267 (4,346) -- 40,934
Issuance of Preferred Stock, net of
offering costs 96,195 -- -- 96,235
Stock acquired in connection with the
Merger of Bay and Avalon 1,256,987 -- -- 1,257,346
Conversion of Preferred Stock to
Common Stock -- -- -- --
Amortization of deferred compensation -- 3,255 -- 3,255
----------- ----------- ----------- -----------

Balance at 12-31-98 2,386,087 (4,356) (68,116) 2,314,437

Net income -- -- 172,276 172,276
Dividends declared to common
and preferred stockholders -- -- (173,667) (173,667)
Issuance of Common Stock 56,423 (3,167) -- 53,275
Amortization of deferred compensation -- 3,964 -- 3,964
----------- ----------- ----------- -----------

Balance at 12-31-99 2,442,510 (3,559) (69,507) 2,370,285

Net income -- -- 210,604 210,604
Dividends declared to common
and preferred stockholders -- -- (188,942) (188,942)
Issuance of Common Stock 50,523 (3,408) -- 47,129
Amortization of deferred compensation -- 3,417 -- 3,417
----------- ----------- ----------- -----------

Balance at 12-31-00 $ 2,493,033 $ (3,550) $ (47,845) $ 2,442,493
=========== =========== =========== ===========


See accompanying notes to consolidated financial statements.


F-4

AVALONBAY COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)



For the year ended
---------------------------------------
12-31-00 12-31-99 12-31-98
--------- --------- ---------

Cash flows from operating activities:
Net income $ 210,604 $ 172,276 $ 123,535
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization 122,610 109,759 77,374
Amortization of deferred compensation 3,417 3,964 3,255
Decrease (increase) in investments in unconsolidated
real estate joint ventures 1,280 (1,510) 1,139
Income allocated to minority interest in consolidated
partnerships 1,908 1,975 1,770
Gain on sale of communities (40,779) (47,093) (25,270)
Extraordinary item -- -- 245
Decrease (increase) in cash in operating escrows 1,144 (348) 2,172
Increase in resident security deposits, accrued interest
receivable on participating mortgage notes, prepaid
expenses and other assets (21,059) (310) (14,383)
Increase in accrued expenses, other liabilities and accrued
interest payable 15,693 11,353 23,641
--------- --------- ---------
Net cash provided by operating activities 294,818 250,066 193,478
--------- --------- ---------

Cash flows used in investing activities:
Purchase and development of real estate (432,408) (516,261) (713,200)
Proceeds from sale of communities, net of selling costs 124,392 255,618 118,025
Sale (acquisition) of participating mortgage note -- 25,300 (24,000)
Increase (decrease) in construction payables 1,123 (29,276) 26,052
Increase in cash in investing escrows (9,076) -- --
Proceeds received from real estate joint venture partner 33,385 -- --
Merger costs and related activities -- -- (24,562)
--------- --------- ---------
Net cash used in investing activities (282,584) (264,619) (617,685)
--------- --------- ---------

Cash flows from financing activities:
Proceeds from sale of unsecured notes 350,000 275,000 350,000
Issuance of common and preferred stock, net of offering costs 36,203 53,275 137,169
Dividends paid (185,509) (172,333) (126,247)
Net borrowings under (repayments of) unsecured credit facilities (178,600) (150,400) 75,695
Repayments of notes payable (3,429) (3,934) (2,391)
Payment of deferred financing costs (4,428) (3,654) (4,435)
Contributions from (distributions to) minority partners 23,142 (3,425) (3,416)
Refinancings of notes payable -- 18,755 --
--------- --------- ---------
Net cash provided by financing activities 37,379 13,284 426,375
--------- --------- ---------

Net increase (decrease) in cash and cash equivalents 49,613 (1,269) 2,168

Cash and cash equivalents, beginning of year 7,621 8,890 6,722
--------- --------- ---------

Cash and cash equivalents, end of year $ 57,234 $ 7,621 $ 8,890
========= ========= =========

Cash paid during period for interest, net of amount capitalized $ 72,712 $ 60,705 $ 31,405
========= ========= =========


See accompanying notes to consolidated financial statements.


F-5

Supplemental disclosures of non-cash investing and financing activities (dollars
in thousands):

During the year ended December 31, 2000:

o 1,520 units of limited partnership in DownREIT partnerships, valued
at $60, were issued in connection with an acquisition for cash and
units pursuant to a forward purchase contract agreed to in 1997 with
an unaffiliated party.
o 304,602 units of limited partnership in DownREIT partnerships,
valued at $10,926, were redeemed for an equal number of shares of
the Company's common stock.
o Real estate assets valued at $5,394 were contributed to a limited
liability company in exchange for a 25% membership interest.
o Common and preferred dividends declared but not paid totaled
$47,572.

During the year ended December 31, 1999:

o 117,178 units of limited partnership in DownREIT partnerships,
valued at $4,614, were issued in connection with an acquisition for
cash and units pursuant to a forward purchase contract agreed to in
1997 with an unaffiliated party.
o 22,623 units of limited partnership in DownREIT partnerships, valued
at $868, were redeemed for an equal number of shares of the
Company's common stock.
o Common and preferred dividends declared but not paid totaled
$44,139.

During the year ended December 31, 1998:

o Avalon Properties, Inc. ("Avalon") merged into Bay Apartment
Communities ("Bay"), whereupon Avalon ceased to exist and Bay
legally succeeded to all of the assets and liabilities of Avalon. In
these financial statements, the merger was accounted for under the
purchase method of accounting. Bay, as the surviving legal entity,
adopted the historical financial statements of Avalon, and therefore
the historical financial statements for Avalon are presented prior
to the merger. Bay's assets were recorded in the historical
financial statements of Avalon, as of the date of the merger, at an
amount equal to Bay's debt outstanding at that time plus the value
of capital stock retained by the Bay stockholders, which
approximates fair value. As a result, the financial statements
presented reflect that, in connection with the merger, the following
was assumed or acquired: debt of $604,663; net other liabilities of
$25,239; cash and cash equivalents of $1,419; and minority interest
of $9,020.
o The Company assumed $10,400 of debt and issued 104,222 units of
limited partnership in DownREIT partnerships, valued at $3,851, in
connection with acquisitions.
o 6,818 units of limited partnership in DownREIT partnerships, valued
at $173, were redeemed for an equal number of shares of the
Company's common stock.
o 950,064 shares of Series A Preferred Stock and 405,022 shares of
Series B Preferred Stock were converted into an aggregate of
1,355,086 shares of Common Stock.
o Common and preferred dividends declared but not paid totaled
$43,323.


F-6

AVALONBAY COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

1. Organization and Significant Accounting Policies

Organization and Recent Developments

AvalonBay Communities, Inc. (the "Company," which term is often used to refer to
AvalonBay Communities, Inc. together with its subsidiaries) is a Maryland
corporation that has elected to be taxed as a real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended. The Company
focuses on the ownership and operation of upscale apartment communities in high
barrier-to-entry markets of the United States. These markets include Northern
and Southern California and selected markets in the Mid-Atlantic, Northeast,
Midwest and Pacific Northwest regions of the country.

At December 31, 2000, the Company owned or held a direct or indirect ownership
interest in 126 operating apartment communities containing 37,147 apartment
homes in twelve states and the District of Columbia, of which four communities
containing 2,211 apartment homes were under reconstruction. The Company also
owned twelve communities with 3,484 apartment homes under construction and
rights to develop an additional 33 communities that, if developed as expected,
will contain an estimated 9,091 apartment homes.

During the year ended December 31, 2000:

o The Company acquired six communities containing 1,627 apartment
homes for an acquisition price of approximately $200,500. Five of
the communities were acquired pursuant to a forward purchase
contract agreed to in 1997 with an unaffiliated party.
o The Company completed development of six communities, containing
1,209 apartment homes for a total investment of approximately
$168,700.
o The Company completed redevelopment of four communities, containing
1,455 apartment homes for a total investment in redevelopment (i.e.,
excluding acquisition costs) of $40,300.

As further discussed in Note 7, "Communities Held for Sale", the Company has
adopted a strategy of funding a portion of the Company's development and
redevelopment activities with the proceeds available from the disposition of
certain assets in markets that do not meet the Company's long-term strategic
direction. In connection with this strategy, the Company sold eight communities
in 2000 containing 1,932 apartment homes for net proceeds of approximately
$124,392. During 1999, the Company sold 16 communities containing 4,464
apartment homes and a participating mortgage note secured by a community for net
proceeds of approximately $280,918.

The Company is the surviving corporation from the merger (the "Merger") of Bay
Apartment Communities, Inc. ("Bay") and Avalon Properties, Inc. ("Avalon") on
June 4, 1998, where Avalon shareholders received a 0.7683 share of common stock
of the Company for each share owned of Avalon common stock. The Merger was
accounted for under the purchase method of accounting, with the historical
financial statements for Avalon presented prior to the Merger. At that time,
Avalon ceased to legally exist, and Bay as the surviving legal entity adopted
the historical financial statements of Avalon. Consequently, Bay's assets were
recorded in the historical financial statements of Avalon at an amount equal to
Bay's debt outstanding at that time plus the value of capital stock retained by
the Bay stockholders, which approximates fair value. In connection with the
Merger, the Company changed its name from Bay Apartment Communities, Inc. to
AvalonBay Communities, Inc.


F-7

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned partnerships and certain joint venture partnerships
in addition to subsidiary partnerships structured as DownREITs. All intercompany
balances and transactions have been eliminated in consolidation.

In each of the partnerships structured as DownREITs, either the Company or one
of the Company's wholly-owned subsidiaries is the general partner, and there are
one or more limited partners whose interest in the partnership is represented by
units of limited partnership interest. For each DownREIT partnership, limited
partners are entitled to receive distributions before any distribution is made
to the general partner. Although the partnership agreements for each of the
DownREITs are different, generally the distributions per unit paid to the
holders of units of limited partnership interests approximate the Company's
current common stock dividend per share. Each DownREIT partnership has been
structured so that it is unlikely the limited partners will be entitled to a
distribution greater than the initial distribution provided for in the
partnership agreement. The holders of units of limited partnership interest have
the right to present each unit of limited partnership interest for redemption
for cash equal to the fair market value of a share of the Company's common stock
on the date of redemption. In lieu of a cash redemption of a limited partner's
unit, the Company may elect to acquire any unit presented for redemption for one
share of common stock.

The Company has minority interest investments in three technology companies.
Realeum, Inc. ("Realeum"), Broadband Residential ("Broadband"), and Viva Group,
Inc. ("Viva") are involved in the development and deployment of property
management and leasing automation systems, broadband communications services for
multifamily communities, and web based leasing software, respectively. The
Company accounts for these unconsolidated entities in accordance with Accounting
Principles Board ("APB") Opinion No. 18, "The Equity Method of Accounting for
Investments in Common Stock." The Company applies the equity method of
accounting to its investments in Realeum and the cost method of accounting to
its investments in Broadband and Viva. As of December 31, 2000, the aggregate
investment in Realeum, BroadBand and Viva is $3,600.

Revenue Recognition

Rental income related to leases is recognized when due from residents. In
accordance with the Company's standard lease terms, rental payments are
generally due on a monthly basis.

Real Estate

Significant expenditures which improve or extend the life of an asset are
capitalized. The operating real estate assets are stated at cost and consist of
land, buildings and improvements, furniture, fixtures and equipment, and other
costs incurred during their development, redevelopment and acquisition.
Expenditures for maintenance and repairs are charged to operations as incurred.

The capitalization of costs during the development of assets (including interest
and related loan fees, property taxes and other direct and indirect costs)
begins when active development commences and ends when the asset is delivered
and a final certificate of occupancy is issued. Cost capitalization during
redevelopment of apartment homes (including interest and related loan fees,
property taxes and other direct and indirect costs) begins when an apartment
home is taken out-of-service for redevelopment and ends when the apartment home
redevelopment is completed and the apartment home is placed in-service. The
accompanying consolidated financial statements include a charge to expense for
unrecoverable deferred development costs related to pre-development communities
that are unlikely to be developed.

Depreciation is calculated on buildings and improvements using the straight-line
method over their estimated useful lives, which range from seven to thirty
years. Furniture, fixtures and equipment are generally depreciated using the
straight-line method over their estimated useful lives, which range from three
years (primarily computer related equipment) to seven years.


F-8

Lease terms for apartment homes are generally one year or less. Rental income
and operating costs incurred during the initial lease-up or post-redevelopment
lease-up period are fully recognized as they accrue.

If there is an event or change in circumstance that indicates an impairment in
the value of a community, the Company's policy is to assess any impairment in
value by making a comparison of the current and projected operating cash flows
of the community over its remaining useful life, on an undiscounted basis, to
the carrying amount of the community. If such carrying amounts are in excess of
the estimated projected operating cash flows of the community, the Company would
recognize an impairment loss equivalent to an amount required to adjust the
carrying amount to its estimated fair market value. The Company has not
recognized an impairment loss in 2000, 1999 or 1998 on any of its real estate.

Income Taxes

The Company elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended, for the year ended December 31, 1994 and has not revoked such
election. A corporate REIT is a legal entity which holds real estate interests
and, if certain conditions are met (including but not limited to the payment of
a minimum level of dividends to stockholders), the payment of federal and state
income taxes at the corporate level is avoided or reduced. Management believes
that all such conditions for the avoidance of taxes have been met for the
periods presented. Accordingly, no provision for federal and state income taxes
has been made.

The following summarizes the tax components of the Company's common and
preferred dividends declared for the years ended December 31, 2000, 1999 and
1998:



% of common dividends
declared for:
--------------------------------------------------------------------------------

(AvalonBay, (Avalon, prior (Bay, prior to
(AvalonBay) (AvalonBay) post Merger) to Merger) Merger)(1)
2000 1999 1998 1998 1998
----------- ----------- --------------------- ------------- -------------

Ordinary income 86% 76% 77% 56% 77%
20% rate gain 9% 11% 9% -- 9%
Unrecapturedss.1250 gain 5% 13% 14% -- 14%
Non-taxable return of capital -- -- -- 44% --


% of common dividends
declared for:
--------------------------------------------------------------------------------

(AvalonBay, (Avalon, prior (Bay, prior to
(AvalonBay) (AvalonBay) post Merger) to Merger) Merger)(1)
2000 1999 1998 1998 1998
----------- ----------- --------------------- ------------- -------------

Ordinary income 86% 76% 100% 100% 100%
20% rate gain 9% 11% -- -- --
Unrecapturedss.1250 gain 5% 13% -- -- --
Non-taxable return of capital -- -- -- -- --


(1) Information presented for Bay for periods prior to June 4, 1998 is
unaudited.


F-9

Deferred Financing Costs

Deferred financing costs include fees and costs incurred to obtain debt
financing and are amortized on a straight-line basis, which approximates the
effective interest method, over the shorter of the term of the loan or the
related credit enhancement facility, if applicable. Unamortized financing costs
are written-off when debt is retired before the maturity date. Accumulated
amortization on deferred financing costs were $8,200 and $7,156 on December 31,
2000 and 1999, respectively.

Cash, Cash Equivalent and Cash in Escrow

Cash and cash equivalents include all cash and liquid investments with an
original maturity of three months or less from the date acquired. The majority
of the Company's cash, cash equivalents, and cash in escrows is held at major
commercial banks.

Earnings per Common Share

In accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings per Share", basic earnings per share for the years
ended December 31, 2000, 1999 and 1998 is computed by dividing earnings
available to common shares (net income less preferred stock dividends) by the
weighted average number of shares outstanding during the period. Other
potentially dilutive common shares, and the related impact to earnings, are
considered when calculating earnings per share on a diluted basis. The Company's
earnings per common share for the years ended December 31, 2000, 1999 and 1998
are as follows:



Year ended
-----------------------------------------
12-31-00 12-31-99 12-31-98
----------- ----------- -----------

Basic and Diluted shares outstanding

Weighted average common shares - basic 66,309,707 64,724,799 50,387,258

Weighted average DownREIT units outstanding 861,755 933,122 725,948

Effect of dilutive securities 969,536 452,743 658,041
----------- ----------- -----------
Weighted average common shares and DownREIT units - diluted 68,140,998 66,110,664 51,771,247
=========== =========== ===========
Calculation of Earnings per Share - Basic

Net income available to common stockholders $ 170,825 $ 132,497 $ 95,403
=========== =========== ===========
Weighted average common shares - basic 66,309,707 64,724,799 50,387,258
=========== =========== ===========
Earnings per common share - basic $ 2.58 $ 2.05 $ 1.89
=========== =========== ===========
Calculation of Earnings per Share - Diluted

Net income available to common stockholders $ 170,825 $ 132,497 $ 95,403

Add: Minority interest of DownREIT unitholders
in consolidated partnerships 1,759 1,975 1,770
=========== =========== ===========
Adjusted net income available to common stockholders $ 172,584 $ 134,472 $ 97,173
=========== =========== ===========
Weighted average common shares and DownREIT units - diluted 68,140,998 66,110,664 51,771,247
=========== =========== ===========
Earnings per common share - diluted $ 2.53 $ 2.03 $ 1.88
=========== =========== ===========


Certain options to purchase shares of common stock in the amount of 7,500,
2,282,192 and 2,643,190 were outstanding during 2000, 1999 and 1998,
respectively, but were not included in the computation of diluted earnings per
share because the options' exercise prices were greater than the average market
price of the common shares.


F-10

Non-recurring Charges

In February 1999, the Company announced certain management changes including (i)
the departure of three senior officers who became entitled to severance benefits
in accordance with the terms of their employment agreements with the Company
dated as of March 9, 1998 and (ii) elimination of duplicate accounting functions
and related employee departures. The Company recorded a non-recurring charge of
$16,076 in the first quarter of 1999 related to the expected costs associated
with this management realignment and certain related organizational adjustments.
The non-recurring charge consisted of $15,476 in severance benefits, $250
related to costs to eliminate duplicate accounting functions and $350 in legal
fees. As of December 31, 1999, the Company had a remaining liability of
approximately $1,555 relating to these charges. All payments were made prior to
December 31, 2000.

The non-recurring charge also includes Year 2000 remediation costs of $706 that
were incurred for the year ended December 31, 1999.

Recently Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as
amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of SFAS No. 133," and SFAS No. 138,
"Accounting for Certain Instruments and Certain Hedging Activities, an amendment
of Statement 133," is effective for the Company on January 1, 2001. SFAS No.
133, as amended, establishes accounting and reporting standards requiring that
every derivative instrument be recorded on the balance sheet as either an asset
or liability measured at its fair value. SFAS No. 133 also requires that a
change in the derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. For the Company's cash flow hedge
transactions, changes in the fair value of the derivative instrument will be
reported in other comprehensive income. The ineffective portion of all hedges
will be recognized in current period earnings. The Company adopted SFAS No. 133
on January 1, 2001 and recorded a cumulative effect adjustment of approximately
a $6 million gain in accumulated other comprehensive income to recognize all
derivative instruments at fair value. The Company does not expect a material
impact of adoption on its earnings.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." SAB No.
101 provides guidance on applying generally accepted accounting principles to
revenue recognition issues in financial statements. The Company adopted SAB No.
101 effective with the March 31, 2000 reporting period, as required, and the
adoption did not have a material effect on the Company's consolidated financial
statements.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles ("GAAP") requires management to make certain estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of revenue and
expenses during the reporting periods. Actual results could differ from those
estimates.

Reclassifications

Certain reclassifications have been made to amounts in prior years' financial
statements to conform with current year presentations.

2. Merger Between Bay and Avalon

As discussed in Note 1, the Company is the surviving corporation from the Merger
of Bay and Avalon on June 4, 1998. The following unaudited pro forma information
has been prepared as if the Merger and related transactions had


F-11

occurred on January 1, 1998. The pro forma financial information is presented
for informational purposes only and is not necessarily indicative of what actual
results would have been had the Merger been consummated on January 1, 1998, nor
does it purport to represent the results of operations for future periods.

Year ended
(Unaudited)
-----------
12-31-98

Pro forma total revenue $449,085
========

Pro forma net income available
to common stockholders $111,114
========

Per common share:
Pro forma net income - basic $ 1.74
========
Pro forma net income - diluted $ 1.73
========


3. Interest Capitalized

Capitalized interest associated with communities under development or
redevelopment totaled $18,328, $21,888, and $14,724 for the years ended December
31, 2000, 1999 and 1998, respectively.

4. Mortgage Notes Payable, Unsecured Notes and Unsecured Credit Facility

The Company's mortgage notes payable, unsecured notes and unsecured credit
facility are summarized as follows:



12-31-00 12-31-99
---------- ----------

Fixed rate unsecured notes $1,335,000 $ 985,000
Fixed rate mortgage notes payable (conventional and tax-exempt) 326,964 362,087
Variable rate mortgage notes payable (tax-exempt) 67,960 67,960
---------- ----------
Total mortgage notes payable and unsecured notes 1,729,924 1,415,047

Variable rate unsecured credit facility -- 178,600
---------- ----------
Total mortgage notes payable, unsecured notes and unsecured credit facility $1,729,924 $1,593,647
========== ==========


Mortgage notes payable are collateralized by certain apartment communities and
mature at various dates from May 2001 through December 2036. The weighted
average interest rate of the Company's variable rate notes and unsecured credit
facility was 5.6% at December 31, 2000. The weighted average interest rate of
the Company's fixed rate notes (conventional and tax-exempt) was 7.0% and 6.9%
at December 31, 2000 and 1999, respectively.


F-12



The maturity schedule for the Company's unsecured notes consists of the
following:

Year of
maturity Principal Interest rate
-------- --------- -------------

2002 $ 100,000 7.375%

2003 $ 50,000 6.250%
$ 100,000 6.500%

2004 $ 125,000 6.580%

2005 $ 100,000 6.625%
$ 50,000 6.500%

2006 $ 150,000 6.800%

2007 $ 110,000 6.875%

2008 $ 50,000 6.625%
$ 150,000 8.250%

2009 $ 150,000 7.500%

2010 $ 200,000 7.500%

The Company's unsecured notes contain a number of financial and other covenants
with which the Company must comply, including, but not limited to, limits on the
aggregate amount of total and secured indebtedness the Company may have on a
consolidated basis and limits on the Company's required debt service payments.

Scheduled maturities of notes payable and unsecured notes are as follows for the
years ending December 31:

Year of Scheduled
maturity maturity
-------- --------

2001 $ 14,155
2002 103,342
2003 153,587
2004 152,812
2005 153,762
Thereafter 1,152,266
-----------
Total $ 1,729,924
===========

The Company has a $600,000 variable rate unsecured credit facility (the
"unsecured credit facility") with Morgan Guaranty Trust Company of New York,
Union Bank of Switzerland and Fleet National Bank serving as co-agents for a
syndicate of commercial banks. The unsecured credit facility bears interest at a
spread over the London Interbank Offered Rate ("LIBOR") based on rating levels
achieved on the Company's unsecured notes and on a maturity selected by the
Company. The current stated pricing is LIBOR plus 0.6% per annum (7.2% at
December 31, 2000). In addition, the unsecured credit facility includes a
competitive bid option (which allows banks that are part of the lender
consortium to bid to make loans to the Company at a rate that is lower than the
stated rate provided by the unsecured credit facility) for up to $400,000. The
Company is subject to certain customary covenants under the unsecured credit
facility, including, but not limited to, maintaining certain maximum leverage
ratios, a minimum fixed charges coverage ratio, minimum unencumbered assets and
equity levels and restrictions on paying dividends in amounts that exceed 95% of
the Company's Funds from Operations, as defined therein. The unsecured credit
facility matures in July 2001 and has two, one-year extension options. The first
extension is at the Company's sole election and the second extension requires
the banks' consent.


F-13

5. Stockholders' Equity

As of both December 31, 2000 and 1999, the Company had authorized for issuance
140,000,000 and 50,000,000 of Common and Preferred Stock, respectively.
Dividends on all series of issued Preferred Stock are cumulative from the date
of original issue and are payable quarterly in arrears on or before the 15th day
of each month as stated in the table below. None of the series of Preferred
Stock are redeemable prior to the date stated in the table below, but on or
after the stated date, may be redeemed for cash at the option of the Company in
whole or in part at a redemption price of $25 per share, plus all accrued and
unpaid dividends, if any. The series of Preferred Stock have no stated maturity
and are not subject to any sinking fund or mandatory redemptions. In addition,
the series of Preferred Stock are not convertible into any other securities of
the Company and may be redeemed solely from proceeds of other capital stock of
the Company, which may include shares of other series of preferred stock.



Shares outstanding Payable Annual Liquidation Non-redeemable
Series December 31, 2000 quarterly rate preference prior to
- ------ ------------------ ----------------------- ------ ----------- --------------

C 2,300,000 March, June, September, 8.50% $25 June 20, 2002
December

D 3,267,700 March, June, September, 8.00% $25 December 15, 2002
December

F 4,455,000 February, May, August, 9.00% $25 February 15, 2001
November

G 4,300,000 February, May, August, 8.96% $25 October 15, 2001
November

H 4,000,000 March, June, September, 8.70% $25 October 15, 2008
December


The Company also has 1,000,000 shares of Series E Junior Participating
Cumulative Preferred Stock authorized for issuance pursuant to the Company's
Shareholder Rights Agreement. As of December 31, 2000, there were no shares of
Series E Preferred Stock outstanding.

6. Investments in Unconsolidated Real Estate Joint Ventures

The Company accounts for investments in unconsolidated real estate entities in
accordance with APB Opinion No. 18, "The Equity Method of Accounting for
Investments in Common Stock." The Company applies the equity method of
accounting to an investment in an entity if it has the ability to significantly
influence that entity. All other unconsolidated real estate investments are
recorded under the cost method of accounting.

At December 31, 2000, the Company's investments in unconsolidated real estate
joint ventures consisted of:

o a 50% limited liability company membership interest in a limited
liability company that owns the Falkland Chase community;
o a 49% general partnership interest in a partnership that owns the
Avalon Run community;
o a 50% limited liability company membership interest in a limited
liability company that owns the Avalon Grove community;
o a 25% limited liability company membership interest in a limited
liability company that owns the Avalon Terrace community.


F-14

The following is a combined summary of the financial position of these joint
ventures as of the dates presented.

(Unaudited)
----------------------
12-31-00 12-31-99
-------- --------
Assets:
Real estate, net $132,832 $ 94,644
Other assets 10,400 4,874
-------- --------

Total assets $143,232 $ 99,518
======== ========
Liabilities and partners' equity:
Mortgage notes payable $ 48,400 $ 26,000
Other liabilities 8,656 5,915
Partners' equity 86,176 67,603
-------- --------

Total liabilities and partners' equity $143,232 $ 99,518
======== ========

The following is a combined summary of the operating results of these joint
ventures for the years presented:

Year ended
(Unaudited)
------------------------------------
12-31-00 12-31-99 12-31-98
-------- -------- --------

Rental income $ 22,222 $ 20,781 $ 19,799
Other income 57 26 26
Operating and other expenses (6,110) (5,657) (5,591)
Mortgage interest expense (1,107) (773) (833)
Depreciation and amortization (3,202) (3,091) (3,044)
-------- -------- --------

Net income $ 11,860 $ 11,286 $ 10,357
======== ======== ========

The Company also holds a 25% limited liability company membership interest in
Avalon on the Sound, which is presented on a consolidated basis in the financial
statements in accordance with GAAP.

7. Communities Held for Sale

The Company has adopted a strategy of funding a portion of the Company's
development and redevelopment activities with the proceeds available from the
disposition of certain assets in markets that do not meet its long-term
strategic direction. In connection with this strategy, the Company solicits
competing bids from unrelated parties for individual assets, and considers the
sales price and tax ramifications of each proposal. In 1998, the Company sold
seven communities with a total of 2,039 apartment homes in connection with this
strategy. Similarly, the Company sold sixteen communities with a total of 4,464
apartment homes and a participating mortgage note secured by a community in
1999.


F-15

The communities sold during 2000 and the respective sales price and net proceeds
are summarized below:



Period Apartment Gross sales Net
Communities Location of sale homes Debt price proceeds
- -------------------------- ------------------ ------- --------- -------- ----------- --------

Avalon Chase Marlton, NJ 1Q00 360 $ -- $ 29,700 $ 29,325
Avalon Pines Virginia Beach, VA 2Q00 174 5,177 11,000 5,354
Avalon Birches Chesapeake, VA 2Q00 312 -- 21,000 20,773
Glen Creek Morgan Hill, CA 3Q00 138 -- 19,050 18,780
Avalon Woods Richmond, VA 3Q00 268 -- 12,100 11,814
Governor's Square Sacramento, CA 3Q00 302 13,848 30,250 15,347
Avalon Westhaven Seattle, WA 4Q00 190 -- 12,625 12,126
Barrington Hills Hayward,CA 4Q00 188 12,669 24,360 10,873

-------- -------- -------- --------
Total of all 2000 asset sales 1,932 $ 31,694 $160,085 $124,392
======== ======== ======== ========

Total of all 1999 asset sales 4,464 $ 29,645 $316,512 $280,918
======== ======== ======== ========

Total of all 1998 asset sales 2,039 $ 50,030 $126,200 $ 73,900
======== ======== ======== ========


The following unaudited pro forma information has been prepared as if the
communities sold in connection with the disposition strategy during 2000 and
1999 had been sold as of January 1, 1999. The pro forma financial information is
presented for informational purposes only and is not necessarily indicative of
what actual results would have been had the dispositions occurred as of January
1, 1999, nor does it purport to represent the results of operations for future
periods.

Year ended Year ended
12-31-00 12-31-99
(Unaudited) (Unaudited)
----------- -----------

Pro forma revenue $ 562,894 $ 463,905
=========== ===========
Pro forma net income available
to common stockholders $ 127,347 $ 71,459
=========== ===========

Per common share:
Pro forma net income - basic $ 1.92 $ 1.10
=========== ===========
Pro forma net income - diluted $ 1.89 $ 1.08
=========== ===========

Management intends to market additional communities for sale. However, there can
be no assurance that such assets will be sold, or that such sales will prove to
be beneficial to the Company. The assets targeted for sale include land,
buildings and improvements and furniture, fixtures and equipment, and are
recorded at the lower of cost or fair value less estimated selling costs. The
Company has not determined a need to recognize a write-down in its real estate
to arrive at net realizable value, although there can be no assurance that the
Company can sell these assets for amounts that equal or exceed its estimates of
net realizable value. At December 31, 2000 and 1999, total real estate, net of
accumulated depreciation, subject to sale totaled $208,118 and $164,758,
respectively. Certain individual assets are secured by mortgage indebtedness
which may be assumed by the purchaser or repaid by the Company from the net
sales proceeds.

The Company's consolidated statements of operations include net income of the
communities held for sale at December 31, 2000 of $11,568, $9,171, and $6,417
for the years ended December 31, 2000, 1999 and 1998, respectively.


F-16

8. Commitments and Contingencies

Presale Commitments

The Company occasionally enters into forward purchase commitments with unrelated
third parties, which allows the Company to purchase communities upon completion
of construction. As of December 31, 2000, the Company has an agreement to
purchase four communities with an estimated 1,301 homes for an aggregate
purchase price of approximately $199,200. The Company expects these acquisitions
to close at different times through 2002. However, there can be no assurance
that such acquisitions will be consummated on the terms currently contemplated
or at all, or on the schedule currently contemplated. As of December 31, 2000,
the Company had provided interim construction financing of $123,400 for these
communities, leaving the remaining balance to fund under these commitments of
$75,800.

Insured Fire at Development Community

During 2000, a fire occurred at one of the Company's development communities,
which was under construction and unoccupied at the time. The book value of the
destroyed assets was reduced to zero from a balance of approximately $13,900 at
the time of the fire. The Company has property damage and business interruption
insurance and is currently preparing its insurance claim for the cost of
replacing the destroyed assets as well as for business interruption losses. At
December 31, 2000, the Company had a remaining insurance receivable balance of
$6,900 which was equal to the value of the destroyed assets less insurance
recoveries of $7,000. The Company does not anticipate this event will have a
material adverse impact on the financial condition or results of operations of
the Company.

Employment Agreements and Arrangements

The Company has employment agreements with four executive officers that it
entered into in 1998. In addition, during 2000 and 2001, four other senior
officers entered into employment agreements, which are generally similar in
structure to those entered into in 1998 but which do not provide for the same
level of severance payments. The employment agreements provide for severance
payments in the event of a termination of employment (except for a termination
by the Company with cause or a voluntary termination by the employee). The
initial term of these agreements ends on dates that vary between June 2001 and
February 2004. The employment agreements provide for one-year automatic renewals
after the initial term unless an advance notice of non-renewal is provided by
either party. Upon a change in control, the agreements provide for an automatic
extension of up to three years. The employment agreements provide for base
salary and incentive compensation in the form of cash awards, stock options and
stock grants subject to the discretion of, and attainment of performance goals
established by, the Compensation Committee of the Board of Directors.

The 1998 employment agreements also provide that base salary may be increased
during the initial term in amounts determined by the Compensation Committee, and
that during any renewal term base salary increases will be equal to the greater
of 5% of the prior year's base salary, a factor based on increases in the
consumer price index, or an amount determined at the discretion of the
Compensation Committee.

In May 2000, a senior executive of the Company retired from his management
position. Upon retirement, the former officer entered into a three year
consulting and non-compete agreement under which the company is paying him an
annual fee of approximately $1,400.

During the fourth quarter of 1999, the Company adopted an Officer Severance
Program (the "Program") for the benefit of those officers of the Company who do
not have employment agreements. Under the Program, in the event an officer who
is not otherwise covered by a severance arrangement is terminated without cause
in connection with a change in control (as defined) of the Company, such officer
will generally receive a cash lump sum payment equal to the amount of such
officer's base salary and cash bonus.


F-17

Legal Contingencies

The Company is subject to various legal proceedings and claims that arise in the
ordinary course of business. These matters are generally covered by insurance.
While the resolution of these matters cannot be predicted with certainty,
Management believes the final outcome of such matters will not have a material
adverse effect on the financial position or results of operations of the
Company.

9. Value of Financial Instruments

The Company has historically used interest rate swap agreements (the "Swap
Agreements") to reduce the impact of interest rate fluctuations on its variable
rate tax-exempt bonds. The Company has not entered into any interest rate hedge
agreements or treasury locks for its conventional unsecured debt. The Swap
Agreements are not held for trading or other speculative purposes. As of
December 31, 2000, the effect of these Swap Agreements is to fix $176,659 of the
Company's tax-exempt debt at an average interest rate of 6.1% with an average
maturity of six years.

The off-balance sheet risk in these contracts includes the risk of a
counterparty not performing under the terms of the contract. The counterparties
to these contracts are major financial institutions with AAA credit ratings by
the Standard & Poor's Ratings Group. The Company monitors the credit ratings of
counterparties and the amount of the Company's debt subject to swap agreements
with any one party. Therefore, the Company believes the likelihood of realizing
material losses from counterparty nonperformance is remote.

Cash and cash equivalent balances are held with various financial institutions
and may at times exceed the applicable Federal Deposit Insurance Corporation
limit. The Company monitors credit ratings of these financial institutions and
the concentration of cash and cash equivalent balances with any one financial
institution and believes the likelihood of realizing material losses from the
excess of cash and cash equivalent balances over insurance limits is remote.

The following estimated fair values of financial instruments were determined by
management using available market information and established valuation
methodologies, including discounted cash flows. Accordingly, the estimates
presented are not necessarily indicative of the amounts the Company could
realize on disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.

o Cash equivalents, rents receivable, accounts payable and accrued
expenses, and other liabilities are carried at their face amounts,
which reasonably approximate their fair values.
o The Company's unsecured credit facility with an aggregate carrying
value of $0 and $178,600 at December 31, 2000 and 1999,
respectively, approximates fair value.
o Bond indebtedness and notes payable with an aggregate carrying value
of $1,729,924 and $1,415,047 had an estimated aggregate fair value
of $1,765,402 and $1,346,288 at December 31, 2000 and 1999,
respectively.

10. Segment Reporting

The Company's reportable operating segments include Stable Communities,
Developed Communities and Redeveloped Communities:

o Stable Communities are communities that have attained stabilized
occupancy levels and operating costs since the beginning of the
prior calendar year or were acquired as stabilized after the
beginning of the previous calendar year and remained stabilized
throughout the end of the current calendar year. Stable Communities
do not include


F-18

communities where planned redevelopment or development activities
have not yet commenced. The primary financial measure for this
business segment is Net Operating Income ("NOI"), which represents
total revenue less operating expenses and property taxes.
o Developed Communities are communities which completed development
and attained stabilized occupancy and expense levels during the
prior calendar year of presentation. The primary financial measure
for this business segment is Operating Yield (defined as NOI divided
by total capitalized costs).
o Redeveloped Communities are communities that completed redevelopment
and attained stabilized occupancy and expense levels during the
prior calendar year of presentation. The primary financial measure
for this business segment is Operating Yield.

Other communities owned by the Company which are not included in the above
segments are communities that were under development, redevelopment or lease-up
at any point in time during the applicable calendar year. The primary
performance measure for these assets depends on the stage of development or
redevelopment of the community. While under development or redevelopment,
Management monitors actual construction costs against budgeted costs as well as
economic occupancy. While under lease-up, the primary performance measures for
these assets are projected Operating Yield as defined above, lease-up pace
compared to budget and rent levels compared to budget.

Net Operating Income for each community is generally equal to that community's
contribution to Funds from Operations ("FFO"), except that interest expense
related to indebtedness secured by an individual community and depreciation and
amortization on non-real estate assets are not included in the community's NOI
although such expenses decrease the Company's consolidated net income and FFO.

The segments are classified based on the individual community's status as of the
beginning of the given calendar year. Therefore, each year the composition of
communities within each business segment is adjusted. Accordingly, the amounts
between years are not directly comparable.

The accounting policies applicable to the operating segments described above are
the same as those described in the summary of significant accounting policies.


F-19



Stable Developed Redeveloped
Communities Communities Communities Other Total
----------- ----------- ----------- ---------- ----------

For the year ended December 31, 2000

Total, All Segments
Total revenue $ 315,773 $ 101,166 $ 35,895 $ 118,242 $ 571,076
Net Operating Income $ 229,121 $ 76,374 $ 23,620 $ 80,960 $ 410,075
Gross real estate $2,154,702 $ 711,307 $ 293,142 $1,089,171 $4,248,322

Operating Yield 10.6% 10.7% 8.1%

Non-allocated operations

Total revenue $ -- $ -- $ -- $ 2,319 $ 2,319
Net Operating Income $ -- $ -- $ -- $ 1,809 $ 1,809
Gross real estate $ -- $ -- $ -- $ 287,647 $ 287,647

Total, AvalonBay

Total revenue $ 315,773 $ 101,166 $ 35,895 $ 120,561 $ 573,395
Net Operating Income $ 229,121 $ 76,374 $ 23,620 $ 82,769 $ 411,884
Gross real estate $2,154,702 $ 711,307 $ 293,142 $1,376,818 $4,535,969

For the year ended December 31, 1999

Total, All Segments

Total revenue $ 346,021 $ 32,898 $ 29,340 $ 95,681 $ 503,940
Net Operating Income $ 240,945 $ 24,631 $ 21,016 $ 62,167 $ 348,759

Gross real estate $2,362,197 $ 225,841 $ 232,765 $1,105,835 $3,926,638

Operating Yield 10.2% 10.9% 9.0%

Non-allocated operations

Total revenue $ -- $ -- $ -- $ 2,039 $ 2,039
Net Operating Income $ -- $ -- $ -- $ 1,788 $ 1,788

Gross real estate $ -- $ -- $ -- $ 339,788 $ 339,788

Total, AvalonBay

Total revenue $ 346,021 $ 32,898 $ 29,340 $ 97,720 $ 505,979
Net Operating Income $ 240,945 $ 24,631 $ 21,016 $ 63,955 $ 350,547

Gross real estate $2,362,197 $ 225,841 $ 232,765 $1,445,623 $4,266,426

For the year ended December 31, 1998

Total, All Segments

Total revenue $ 266,371 $ 13,032 $ 5,907 $ 83,927 $ 369,237
Net Operating Income $ 183,799 $ 9,572 $ 3,744 $ 54,516 $ 251,631
Gross real estate $2,488,123 $ 77,655 $ 41,271 $1,261,922 $3,868,971

Operating Yield (1) N/A N/A N/A

Non-allocated operations

Total revenue $ -- $ -- $ -- $ 2,166 $ 2,166
Net Operating Income $ -- $ -- $ -- $ 1,915 $ 1,915

Gross real estate $ -- $ -- $ -- $ 137,485 $ 137,485

Total, AvalonBay

Total revenue $ 266,371 $ 13,032 $ 5,907 $ 86,093 $ 371,403
Net Operating Income $ 183,799 $ 9,572 $ 3,744 $ 56,431 $ 253,546

Gross real estate $2,488,123 $ 77,655 $ 41,271 $1,399,407 $4,006,456


(1) Operating Yield for the year ended December 31, 1998 is not
comparable to the years ended December 31, 2000 and 1999 due to the
effects of the merger of Avalon into Bay during 1998.


F-20

Operating expenses as reflected on the Consolidated Statements of Operations
include $28,111, $22,786 and $18,264 for the years ended December 31, 2000, 1999
and 1998, respectively, of property management overhead costs that are not
allocated to individual communities. These costs are not reflected in NOI as
shown in the above tables. The amount reflected for "Communities held for sale"
on the Consolidated Balance Sheets is net of $19,965 and $18,141 of accumulated
depreciation as of December 31, 2000 and 1999, respectively.

In June 1998, the Company completed the Merger. For comparative purposes, the
1998 segment information for the Company is presented below on a pro forma basis
(unaudited) assuming the Merger had occurred as of January 1, 1998.



Stable Developed Redeveloped
Communities Communities Communities Other Total
----------- ----------- ----------- ---------- ----------

For the year ended December 31, 1998
Total revenue $ 254,213 $ 51,570 $ 24,173 $ 116,837 $ 446,793
Net Operating Income $ 173,570 $ 38,895 $ 16,950 $ 75,404 $ 304,819
Gross real estate $2,107,129 $ 277,958 $ 221,961 $1,279,957 $3,887,005


11. Stock-Based Compensation Plans

The Company has adopted the 1994 Stock Incentive Plan, as amended and restated
(the "1994 Plan"), for the purpose of encouraging and enabling the Company's
officers, associates and directors to acquire a proprietary interest in the
Company and as a means of aligning management and stockholder interests and as a
retention incentive for key associates. Individuals who are eligible to
participate in the 1994 Plan include officers, other associates, outside
directors and other key persons of the Company and its subsidiaries who are
responsible for or contribute to the management, growth or profitability of the
Company and its subsidiaries. The 1994 Plan authorizes (i) the grant of stock
options that qualify as incentive stock options under Section 422 of the
Internal Revenue Code, (ii) the grant of stock options that do not so qualify,
(iii) grants of shares of restricted and unrestricted Common Stock, (iv) grants
of deferred stock awards, (v) performance share awards entitling the recipient
to acquire shares of Common Stock and (vi) dividend equivalent rights.

Under the 1994 Plan, a maximum of 2,500,000 shares of Common Stock, plus 9.9% of
any net increase in the total number of shares of Common Stock actually
outstanding from time to time after April 13, 1998, may be issued.
Notwithstanding the foregoing, the maximum number of shares of stock for which
Incentive Stock Options may be issued under the 1994 Plan shall not exceed
2,500,000 and no awards shall be granted under the 1994 Plan after April 13,
2008. For purposes of this limitation, shares of Common Stock which are
forfeited, canceled and reacquired by the Company, satisfied without the
issuance of Common Stock or otherwise terminated (other than by exercise) shall
be added back to the shares of Common Stock available for issuance under the
1994 Plan. Stock Options with respect to no more than 300,000 shares of stock
may be granted to any one individual participant during any one calendar year
period. Options granted to officers and employees under the 1994 Plan vest over
periods determined by the Compensation Committee of the Board of Directors and
expire ten years from the date of grant. Options granted to non-employee
directors under the 1994 Plan are subject to accelerated vesting under certain
limited circumstances and become exercisable on the first anniversary of the
date of grant and expire ten years from the date of grant. Restricted stock
granted to officers and employees under the 1994 Plan vest over periods
determined by the Compensation Committee of the Board of Directors which is
generally four years, with 20% vesting immediately on the grant date and the
remaining 80% vesting equally over the next four years from the date of grant.
Restricted stock granted to non-employee directors vests 20% on the date of
issuance and 20% on each of the first four anniversaries of the date of
issuance.


F-21

Information with respect to stock options granted under the 1994 Plan is as
follows:

Weighted
average
exercise price
Shares per share
---------- --------------

Options outstanding, December 31, 1997 (1) 1,070,374 $27.02
Exercised (164,924) 21.71
Granted 1,225,132 36.81
Forfeited (244,500) 35.25
---------- ------
Options outstanding, December 31, 1998 (1) 1,886,082 $32.74
Exercised (311,989) 25.44
Granted 993,084 32.24
Forfeited (533,903) 36.25
---------- ------
Options outstanding, December 31, 1999 2,033,274 $32.63
Exercised (172,376) 34.78
Granted 631,795 34.56
Forfeited (66,736) 33.50
---------- ------
Options outstanding, December 31, 2000 2,425,957 $32.96
========== ======

Options exercisable:

December 31, 1998 656,925 $27.26
========== ======
December 31, 1999 682,110 $30.33
========== ======
December 31, 2000 1,183,551 $32.05
========== ======

(1) Information presented for Bay for periods prior to June 4, 1998 is
unaudited.


F-22

The following table summarizes information concerning currently outstanding and
exercisable options:



Options Outstanding Options Exercisable
- -------------------------------------------------------------------- ------------------------------
Number outstanding Weighted average Weighted Weighted
Exercise as of remaining average Number average
price December 31, 2000 contractual life exercise price exercisable exercise price
- -------------------------------------------------------------------- ------------------------------

$18.38 60,000 4.24 $18.38 60,000 $18.38
19.25 6,000 4.35 19.25 6,000 19.25
19.63 18,800 4.55 19.63 18,800 19.63
20.00 101,300 3.18 20.00 101,300 20.00
20.50 6,000 3.26 20.50 6,000 20.50
23.38 40,000 5.07 23.38 40,000 23.38
25.38 15,000 5.33 25.38 15,000 25.38
27.75 33,700 5.65 27.75 33,700 27.75
31.50 212,184 8.80 31.50 70,657 31.50
32.00 453,067 8.13 32.00 150,871 32.00
32.25 5,333 8.85 32.25 1,776 32.25
32.56 6,667 8.08 32.56 2,220 32.56
33.75 5,834 7.97 33.75 3,892 33.75
33.75 537,701 9.16 33.75 -- --
33.94 10,000 8.01 33.94 3,330 33.94
34.31 10,768 9.11 34.31 -- --
34.38 30,000 6.38 34.38 30,000 34.38
34.63 2,000 8.65 34.63 666 34.63
34.81 1,500 8.49 34.81 500 34.81
35.31 768 8.64 35.31 256 35.31
35.38 4,000 8.69 35.38 1,332 35.38
35.44 4,666 8.69 35.44 1,554 35.44
36.00 60,000 8.36 36.00 60,000 36.00
36.13 70,000 7.44 36.13 70,000 36.13
36.31 352,676 7.42 36.31 235,235 36.31
36.63 122,500 6.06 36.63 117,500 36.63
36.63 25,993 7.56 36.63 17,337 36.63
36.63 4,500 9.25 36.63 -- --
37.94 130,000 7.08 37.94 115,000 37.94
38.81 20,000 6.84 38.81 15,000 38.81
39.63 7,500 6.72 39.63 5,625 39.63
40.50 60,000 9.38 40.50 -- --
41.94 1,500 9.49 41.94 -- --
43.00 3,000 9.54 43.00 -- --
45.94 3,000 9.56 45.94 -- --
- -------------------------------------------------------------------- --------------------------
2,425,957 7.69 $32.96 1,183,551 $32.05
==================================================================== ==========================


Options to purchase 3,123,713, 3,637,724 and 4,488,189 shares of Common Stock
were available for grant under the 1994 Plan at December 31, 2000, 1999 and
1998, respectively.

Before the Merger, Avalon had adopted its 1995 Equity Incentive Plan (the
"Avalon 1995 Incentive Plan"). The Avalon 1995 Incentive Plan authorized the
grant of (i) stock options that qualified as incentive stock options under
Section 422 of the Internal Revenue Code, (ii) stock options that did not so
qualify, (iii) shares of restricted and unrestricted common stock, (iv) shares
of unrestricted common stock and (v) dividend equivalent rights.

Under the Avalon 1995 Incentive Plan, a maximum number of 3,315,054 shares (or
2,546,956 shares as adjusted for the Merger) of common stock were issuable, plus
any shares of common stock represented by awards under Avalon's 1993 Stock
Option and Incentive Plan (the "Avalon 1993 Plan") that were forfeited,
canceled, reacquired by Avalon, satisfied without the issuance of common stock
or otherwise terminated (other than by exercise). Options granted to officers,
non-employee directors and associates under the Avalon 1995 Incentive Plan
generally


F-23

vested over a three-year term, expire ten years from the date of grant and are
exercisable at the market price on the date of grant.

In connection with the Merger, the exercise prices and the number of options
under the Avalon 1995 Incentive Plan and the Avalon 1993 Plan were adjusted to
reflect the equivalent Bay shares and exercise prices based on the 0.7683 share
conversion ratio used in the Merger. Officers, non-employee directors and
associates with Avalon 1995 Incentive Plan options may exercise their adjusted
number of options for the Company's Common Stock at the adjusted exercise price.

Information with respect to stock options granted under the Avalon 1995
Incentive Plan and the Avalon 1993 Plan is as follows:

Weighted
average
exercise price
Shares per share
---------- --------------

Options outstanding, December 31, 1997 1,703,348 $33.01
Exercised (49,375) 36.12
Granted 464,227 37.60
Forfeited (65,946) 38.00
---------- ------
Options outstanding, December 31, 1998 2,052,254 $34.05
Exercised (172,977) 26.97
Granted -- --
Forfeited (50,940) 37.61
---------- ------
Options outstanding, December 31, 1999 1,828,337 $34.63
Exercised (327,582) 28.65
Granted -- --
Forfeited (16,410) 35.84
---------- ------
Options outstanding, December 31, 2000 1,484,345 $35.94
========== ======

Options exercisable:

December 31, 1998 1,014,530 $30.26
========== ======
December 31, 1999 1,268,520 $33.22
========== ======
December 31, 2000 1,313,219 $35.71
========== ======


F-24

The following table summarizes information concerning currently outstanding and
exercisable options under the Avalon 1995 Incentive Plan and the Avalon 1993
Plan:



Options Outstanding Options Exercisable
- -------------------------------------------------------------------- ------------------------------
Number outstanding Weighted average Weighted Weighted
Exercise as of remaining average Number average
price December 31, 2000 contractual life exercise price exercisable exercise price
- -------------------------------------------------------------------- ------------------------------

$26.19 7,683 4.37 $26.19 7,683 $26.19
26.68 211,037 2.86 26.68 211,037 26.68
26.68 3,842 2.86 26.68 3,842 26.68
27.33 11,232 4.35 27.33 11,232 27.33
27.33 2,305 5.04 27.33 2,305 27.33
27.33 1,152 6.95 27.33 1,152 27.33
28.15 7,019 5.48 28.15 7,019 28.15
28.31 15,366 5.36 28.31 15,366 28.31
30.10 2,305 3.37 30.10 2,305 30.10
30.26 1,921 5.69 30.26 1,921 30.26
34.98 5,762 5.96 34.98 5,762 34.98
35.31 15,366 6.36 35.31 15,366 35.31
36.61 29,197 7.41 36.61 19,474 36.61
36.69 1,921 7.32 36.69 1,281 36.69
37.18 3,682 7.36 37.18 2,456 37.18
37.26 128 7.27 37.26 86 37.26
37.58 355,000 7.18 37.58 236,785 37.58
37.66 24,483 6.87 37.66 24,483 37.66
38.15 777,773 6.82 38.15 737,773 38.15
39.29 1,408 6.96 39.29 1,408 39.29
39.70 1,921 6.80 39.70 1,921 39.70
39.86 3,842 7.00 39.86 2,562 39.86
- -------------------------------------------------------------------- --------------------------
1,484,345 6.28 $35.94 1,313,219 $35.71
==================================================================== ==========================


As of June 4, 1998, the date of the Merger, options and other awards ceased to
be granted under the Avalon 1993 Plan or the Avalon 1995 Incentive Plan.
Accordingly, there were no options to purchase shares of Common Stock available
for grant under the Avalon 1995 Incentive Plan at December 31, 2000, 1999 or
1998.

The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its Plans.
Accordingly, no compensation expense has been recognized for the stock option
portion of the stock-based compensation plan.


F-25

Had compensation expense for the Company's stock option plan been determined
based on the fair value at the grant date for awards under the Plan consistent
with the methodology prescribed under SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company's net income and earnings per share would have been
reduced to the following pro forma amounts (unaudited):



Pro Forma
-------------------------------------------
Year ended Year ended Year ended
12-31-00 12-31-99 12-31-98
----------- ----------- -----------

Income before extraordinary item (net of preferred dividends) $ 168,058 $ 130,882 $ 93,066
=========== =========== ===========

Net income available to common stockholders $ 168,058 $ 130,882 $ 92,821
=========== =========== ===========

Per common share - basic
Income before extraordinary item (net of preferred dividends) $ 2.53 $ 2.02 $ 1.84
Extraordinary item -- -- (0.00)
----------- ----------- -----------
Net income available to common stockholders $ 2.53 $ 2.02 $ 1.84
=========== =========== ===========

Per common share - diluted
Income before extraordinary item (net of preferred dividends) $ 2.49 $ 2.01 $ 1.83
Extraordinary item -- -- (0.00)
----------- ----------- -----------
Net income available to common stockholders $ 2.49 $ 2.01 $ 1.83
=========== =========== ===========


The fair value of the options granted during 2000 is estimated at $3.76 per
share on the date of grant using the Black-Scholes option pricing model with the
following assumptions: dividend yield of 6.51%, volatility of 15.93%, risk-free
interest rates of 6.61%, actual number of forfeitures, and an expected life of
approximately 3 years. The fair value of the options granted during 1999 is
estimated at $3.40 per share on the date of grant using the Black-Scholes option
pricing model with the following assumptions: dividend yield of 6.10%,
volatility of 17.04%, risk free interest rates of 5.54%, actual number of
forfeitures, and an expected life of approximately 3 years. The fair value of
the options granted during 1998 is estimated at $3.72 per share on the date of
grant using the Black-Scholes option pricing model with the following
assumptions: dividend yield of 5.96%, volatility of 16.77%, risk free interest
rates of 5.55%, actual number of forfeitures, and an expected life of
approximately 3 years.

In connection with the Merger, the Company adopted the 1996 Non-Qualified
Employee Stock Purchase Plan, as amended and restated (the "1996 ESP Plan"). The
primary purpose of the 1996 ESP Plan is to encourage Common Stock ownership by
eligible directors, officers and associates (the "Participants") in the belief
that such ownership will increase each Participant's interest in the success of
the Company. Until January 1, 2000, the 1996 ESP Plan provided for two purchase
periods per year. A purchase period was a six month period beginning each
January 1 and July 1 and ending each June 30 and December 31, respectively.
Starting January 1, 2000, there is one purchase period per year, which begins
May 1 and ends October 31. Participants may contribute portions of their
compensation during a purchase period and purchase Common Stock at the end
thereof. One million shares of Common Stock are reserved for issuance under the
1996 ESP Plan. Participation in the 1996 ESP Plan entitles each Participant to
purchase Common Stock at a price which is equal to the lesser of 85% of the
closing price for a share of stock on the first day of such purchase period or
85% of the closing price on the last day of such purchase period. The Company
issued 34,055, 35,408 and 23,396 shares under the 1996 ESP Plan for 2000, 1999
and 1998, respectively.


F-26

12. Quarterly Financial Information (Unaudited)

The following summary represents the quarterly results of operations for the
years ended December 31, 2000 and 1999:



Three months ended
---------------------------------------------------
3-31-00 6-30-00 9-30-00 12-31-00
--------- --------- --------- ---------

Total revenue $ 135,088 $ 139,958 $ 146,351 $ 151,998
Net income available to common stockholders $ 37,227 $ 40,712 $ 48,550 $ 44,336
Net income per common share - basic $ 0.57 $ 0.62 $ 0.73 $ 0.66
Net income per common share - diluted $ 0.56 $ 0.61 $ 0.71 $ 0.65

Three months ended
---------------------------------------------------
3-31-99 6-30-99 9-30-99 12-31-99
--------- --------- --------- ---------

Total revenue $ 118,946 $ 123,188 $ 131,108 $ 132,737
Net income available to common stockholders $ 4,955 $ 52,977 $ 24,336 $ 50,229
Net income per common share - basic $ 0.08 $ 0.82 $ 0.38 $ 0.77
Net income per common share - diluted $ 0.08 $ 0.81 $ 0.38 $ 0.76


13. Subsequent Events (Unaudited)

In January 2001, the Company became a member of Constellation Real Technologies
LLC, an entity formed by a number of real estate investment trusts and real
estate operating companies for the purpose of investing in multi-sector real
estate technology opportunities. The Company's capital commitment to
Constellation Real Technologies is $4,000.

In February 2001, the Company announced certain management changes including the
promotion of Bryce Blair to chief executive officer and the departure of another
executive. The Company expects to record a non-recurring charge in the first
quarter of 2001 relating to the departure of this executive of approximately
$2,000.

During February 2001, the Company acquired Avalon Wynhaven pursuant to the terms
of a forward purchase contract agreed to in 1997 with an unaffiliated party.
This community containing 333 apartment homes is located in the Seattle,
Washington area, and was acquired for approximately $51,909.

During February 2001, the Company sold Crossbrook, a 226 apartment home
community located in the San Francisco, California area. The net proceeds of
approximately $14,532 were invested in cash equivalents and will ultimately be
invested in development and redevelopment.


F-27



SCHEDULE III

AVALONBAY COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2000
(Dollars in thousands)



Initial Cost Total Cost
------------------------ -----------------------------------
Building/ Costs Building/
Construction in Subsequent to Construction in
Progress & Acquisition/ Progress &
Land Improvements Construction Land Improvements Total
------- --------------- ------------- ------- --------------- -------
Current Communities
- -------------------

Waterford $11,324 $45,717 $ 1,562 $11,324 $47,279 $ 58,603
Hampton Place 10,746 43,399 441 10,746 43,840 54,586
Avalon Pleasanton 11,610 46,552 1,298 11,610 47,850 59,460
Avalon Dublin 5,276 19,642 1,797 5,276 21,439 26,715
Willow Creek 6,581 26,583 676 6,581 27,259 33,840
Avalon Fremont 4,271 17,282 489 4,271 17,771 22,042
Avalon at Union Square 4,249 16,820 561 4,249 17,381 21,630
Crowne Ridge 5,982 16,885 7,807 5,982 24,692 30,674
Sunset Towers 3,561 21,321 3,219 3,561 24,540 28,101
Avalon at Nob Hill 5,403 21,567 447 5,403 22,014 27,417
Avalon at Diamond Heights 4,726 19,130 312 4,726 19,442 24,168
Avalon Towers by The Bay 9,155 57,630 37 9,155 57,667 66,822
Crossbrook 3,389 12,721 2,967 3,389 15,688 19,077
Avalon at Cedar Ridge 4,230 9,659 11,629 4,230 21,288 25,518
Avalon Foster City 7,852 31,445 1,755 7,852 33,200 41,052
Avalon Pacifica 6,125 24,796 152 6,125 24,948 31,073
Avalon Silicon Valley 20,713 99,304 397 20,713 99,701 120,414
Avalon at Blossom Hill 11,933 48,313 462 11,933 48,775 60,708
Avalon Campbell 11,830 47,828 240 11,830 48,068 59,898
Countrybrook 9,384 34,794 3,529 9,384 38,323 47,707
Avalon at Pruneyard 3,414 15,469 12,818 3,414 28,287 31,701
Creekside 6,546 26,301 9,962 6,546 36,263 42,809
Avalon at River Oaks 8,904 35,126 1,870 8,904 36,996 45,900
Avalon at Parkside 7,406 29,823 450 7,406 30,273 37,679
Avalon Mountain View 9,755 39,393 1,043 9,755 40,436 50,191
San Marino 6,607 26,673 280 6,607 26,953 33,560
Avalon Sunnyvale 6,786 27,388 256 6,786 27,644 34,430
Avalon at Foxchase 11,340 45,532 1,145 11,340 46,677 58,017
Fairway Glen 3,341 13,338 380 3,341 13,718 17,059
Avalon Cupertino 9,099 39,926 86 9,099 40,012 49,111
Avalon on the Alameda 6,119 50,164 49 6,119 50,213 56,332
Avalon Rosewalk I 11,177 44,896 236 11,177 45,132 56,309
Avalon Rosewalk II 4,637 17,131 -- 4,637 17,131 21,768
Avalon Woodland Hills 23,828 40,372 6,942 23,828 47,314 71,142
Avalon at Media Center 22,483 28,104 13,249 22,483 41,353 63,836
Avalon Westside Terrace 5,878 23,708 7,477 5,878 31,185 37,063
Arbor Heights 2,984 17,927 8,552 2,984 26,479 29,463
Avalon at Warner Center 7,045 12,986 6,264 7,045 19,250 26,295
Timberwood 1,210 8,607 4,919 1,210 13,526 14,736
Avalon Huntington Beach 6,663 21,647 8,707 6,663 30,354 37,017
Avalon at Pacifica Bay 4,871 19,745 7,293 4,871 27,038 31,909
Avalon at South Coast 4,709 16,063 3,446 4,709 19,509 24,218
Avalon Santa Margarita 4,607 16,911 2,042 4,607 18,953 23,560
Amberway 10,285 7,249 3,716 10,285 10,965 21,250
Avalon at Laguna Niguel 656 16,588 3,714 656 20,302 20,958

Total Cost, Net Year of
Accumulated of Accumulated Completion/
Depreciation Depreciation Encumbrances Acquisition
------------ --------------- ------------ -----------
Current Communities
- -------------------

Waterford $4,327 $54,276 $33,100 1985/86
Hampton Place 3,963 50,623 -- 1992/94
Avalon Pleasanton 4,409 55,051 -- 1988/94
Avalon Dublin 1,940 24,775 -- 1989/97
Willow Creek 2,469 31,371 -- 1985/94
Avalon Fremont 1,657 20,385 -- 1992/94
Avalon at Union Square 1,578 20,052 -- 1973/96
Crowne Ridge 2,248 28,426 -- 1973/96
Sunset Towers 2,462 25,639 -- 1961/96
Avalon at Nob Hill 1,975 25,442 20,013 1990/95
Avalon at Diamond Heights 1,772 22,396 -- 1972/94
Avalon Towers by The Bay 2,654 64,168 -- 1999
Crossbrook 1,077 18,000 8,156 1986/94
Avalon at Cedar Ridge 2,028 23,490 -- 1975/97
Avalon Foster City 2,951 38,101 -- 1973/94
Avalon Pacifica 2,235 28,838 16,775 1971/95
Avalon Silicon Valley 8,918 111,496 -- 1997
Avalon at Blossom Hill 4,385 56,323 -- 1995
Avalon Campbell 4,296 55,602 36,981 1995
Countrybrook 3,480 44,227 18,934 1985/96
Avalon at Pruneyard 2,231 29,470 12,870 1966/97
Creekside 2,600 40,209 -- 1962/97
Avalon at River Oaks 3,344 42,556 -- 1990/96
Avalon at Parkside 2,693 34,986 -- 1991/96
Avalon Mountain View 3,588 46,603 18,300 1986
San Marino 2,436 31,124 -- 1984/88
Avalon Sunnyvale 2,482 31,948 -- 1987/95
Avalon at Foxchase 4,233 53,784 26,400 1986/87
Fairway Glen 1,259 15,800 9,580 1986
Avalon Cupertino 3,674 45,437 -- 1999
Avalon on the Alameda 2,675 53,657 -- 1999
Avalon Rosewalk I 4,010 52,299 -- 1997
Avalon Rosewalk II 1,037 20,731 -- 1999
Avalon Woodland Hills 4,645 66,497 -- 1989/97
Avalon at Media Center 3,421 60,415 -- 1969/97
Avalon Westside Terrace 2,583 34,480 -- 1966/97
Arbor Heights 2,235 27,228 -- 1970/97
Avalon at Warner Center 1,655 24,640 -- 1979/98
Timberwood 1,286 13,450 -- 1972/97
Avalon Huntington Beach 3,078 33,939 -- 1972/97
Avalon at Pacifica Bay 2,168 29,741 -- 1971/97
Avalon at South Coast 1,837 22,381 -- 1973/96
Avalon Santa Margarita 1,772 21,788 -- 1990/97
Amberway 1,043 20,207 -- 1983/98
Avalon at Laguna Niguel 1,817 19,141 10,400 1988/98



F-28

AVALONBAY COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2000
(Dollars in thousands)



Initial Cost Total Cost
------------------------ -----------------------------------
Building/ Costs Building/
Construction in Subsequent to Construction in
Progress & Acquisition/ Progress &
Land Improvements Construction Land Improvements Total
------- --------------- ------------- ------- --------------- -------

Avalon Newport 1,975 3,814 4,299 1,975 8,113 10,088
Avalon Mission Viejo 2,517 9,257 1,079 2,517 10,336 12,853
Avalon at Mission Bay 9,922 40,633 14,907 9,922 55,540 65,462
Avalon at Cortez Hill 2,768 20,134 6,621 2,768 26,755 29,523
Avalon at Mission Ridge 2,710 10,924 7,911 2,710 18,835 21,545
Avalon at Penasquitos Hills 2,760 9,391 1,997 2,760 11,388 14,148
Waterhouse Place 2,109 13,514 5,041 2,109 18,555 20,664
Avalon at Bear Creek 6,786 27,035 561 6,786 27,596 34,382
Avalon Redmond Place 4,558 17,504 3,900 4,558 21,404 25,962
Avalon Greenbriar 3,808 21,239 10,725 3,808 31,964 35,772
Avalon at Prudential Center 25,811 103,233 5,325 25,811 108,558 134,369
Longwood Towers 4,219 17,729 20,111 4,219 37,840 42,059
Avalon at Center Place -- 26,816 257 -- 27,073 27,073
Avalon Summit 1,743 14,654 72 1,743 14,726 16,469
Avalon at Lexington 2,124 12,599 406 2,124 13,005 15,129
Avalon at Faxon Park 1,136 14,019 -- 1,136 14,019 15,155
Avalon West 943 9,881 -- 943 9,881 10,824
Avalon Oaks 2,129 19,018 -- 2,129 19,018 21,147
Avalon Walk I & II 9,102 48,796 902 9,102 49,698 58,800
Avalon Glen 5,956 23,993 961 5,956 24,954 30,910
Avalon Gates 4,414 31,305 212 4,414 31,517 35,931
Avalon Springs 2,116 14,512 22 2,116 14,534 16,650
Avalon Valley 2,277 22,424 707 2,277 23,131 25,408
Avalon Lake 3,314 13,139 379 3,314 13,518 16,832
Avalon Pavilions 11,256 45,059 1,304 11,256 46,363 57,619
Avalon Commons 4,679 28,552 77 4,679 28,629 33,308
Avalon Towers 3,118 12,709 797 3,118 13,506 16,624
Avalon Court 3,083 15,871 -- 3,083 15,871 18,954
Avalon Cove 8,760 82,356 183 8,760 82,539 91,299
The Tower at Avalon Cove 3,738 45,755 10 3,738 45,765 49,503
Avalon Watch 5,585 22,394 1,153 5,585 23,547 29,132
Avalon Crest 11,468 44,035 -- 11,468 44,035 55,503
Avalon Run East 1,579 14,669 -- 1,579 14,669 16,248
Avalon Gardens 8,428 45,710 33 8,428 45,743 54,171
Avalon View 3,529 14,140 375 3,529 14,515 18,044
Avalon Green 1,820 10,525 217 1,820 10,742 12,562
The Avalon 2,889 28,273 -- 2,889 28,273 31,162
Avalon at Fairway Hills I & II 8,612 34,463 1,024 8,612 35,487 44,099
Avalon at Symphony Glen 1,594 6,384 870 1,594 7,254 8,848
Avalon Landing 1,849 7,409 284 1,849 7,693 9,542
Avalon at Ballston V & Q 9,340 37,360 178 9,340 37,538 46,878
Avalon Crescent 13,851 43,401 -- 13,851 43,401 57,252
Avalon at Ballston Washington 7,291 29,177 632 7,291 29,809 37,100
Avalon at Cameron Court 10,292 32,931 -- 10,292 32,931 43,223
Autumn Woods 6,096 24,400 310 6,096 24,710 30,806
Avalon at Fair Lakes 4,334 19,127 -- 4,334 19,127 23,461
Avalon at Dulles 2,302 9,212 257 2,302 9,469 11,771

Total Cost, Net Year of
Accumulated of Accumulated Completion/
Depreciation Depreciation Encumbrances Acquisition
------------ --------------- ------------ -----------

Avalon Newport 755 9,333 -- 1956/96
Avalon Mission Viejo 965 11,888 7,354 1984/96
Avalon at Mission Bay 4,136 61,326 -- 1969/97
Avalon at Cortez Hill 2,120 27,403 -- 1973/98
Avalon at Mission Ridge 1,721 19,824 -- 1960/97
Avalon at Penasquitos Hills 1,052 13,096 -- 1982/97
Waterhouse Place 1,674 18,990 -- 1990/97
Avalon at Bear Creek 2,494 31,888 -- 1998
Avalon Redmond Place 2,144 23,818 11,042 1991/97
Avalon Greenbriar 2,391 33,381 18,755 1987/88
Avalon at Prudential Center 9,355 125,014 -- 1968/1998
Longwood Towers 5,926 36,133 -- 1993
Avalon at Center Place 3,312 23,761 -- 1997
Avalon Summit 2,378 14,091 -- 1996
Avalon at Lexington 2,784 12,345 14,347 1994
Avalon at Faxon Park 1,411 13,744 -- 1998
Avalon West 1,508 9,316 8,579 1996
Avalon Oaks 1,210 19,937 -- 1999
Avalon Walk I & II 10,600 48,200 12,300 1992/94
Avalon Glen 5,425 25,485 -- 1991
Avalon Gates 3,889 32,042 -- 1997
Avalon Springs 1,906 14,744 -- 1996
Avalon Valley 1,380 24,028 -- 1999
Avalon Lake 791 16,041 -- 1999
Avalon Pavilions 10,719 46,900 -- 1990/92
Avalon Commons 3,398 29,910 -- 1997
Avalon Towers 2,277 14,347 -- 1995
Avalon Court 1,789 17,165 -- 1997
Avalon Cove 10,966 80,333 -- 1997
The Tower at Avalon Cove 2,624 46,879 -- 1999
Avalon Watch 5,618 23,514 -- 1988
Avalon Crest 2,416 53,087 -- 1999
Avalon Run East 2,173 14,075 -- 1996
Avalon Gardens 4,730 49,441 -- 1998
Avalon View 3,374 14,670 18,465 1993
Avalon Green 2,028 10,534 -- 1995
The Avalon 1,262 29,900 -- 1999
Avalon at Fairway Hills I & II 6,048 38,051 11,500 1987/96
Avalon at Symphony Glen 1,705 7,143 9,780 1986
Avalon Landing 1,491 8,051 6,626 1995
Avalon at Ballston V & Q 4,914 41,964 -- 1997
Avalon Crescent 5,468 51,784 -- 1996
Avalon at Ballston Washington 6,663 30,437 -- 1990
Avalon at Cameron Court 3,258 39,965 -- 1998
Autumn Woods 3,416 27,390 -- 1996
Avalon at Fair Lakes 1,975 21,486 -- 1998
Avalon at Dulles 2,284 9,487 12,360 1986



F-29

AVALONBAY COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2000
(Dollars in thousands)



Initial Cost Total Cost
------------------------ -----------------------------------
Building/ Costs Building/
Construction in Subsequent to Construction in
Progress & Acquisition/ Progress &
Land Improvements Construction Land Improvements Total
------- --------------- ------------- ------- --------------- -------

Avalon at Providence Park 2,152 8,907 184 2,152 9,091 11,243
Avalon at Decoverly 6,157 24,800 457 6,157 25,257 31,414
Avalon Knoll 1,528 6,136 601 1,528 6,737 8,265
Avalon Fields I & II 4,047 18,611 5 4,047 18,616 22,663
Avalon Crossing 2,207 11,683 -- 2,207 11,683 13,890
4100 Massachusetts 6,848 27,614 1,066 6,848 28,680 35,528
Avalon at Danada Farms 7,535 30,444 190 7,535 30,634 38,169
Avalon at West Grove 5,149 20,657 3,587 5,149 24,244 29,393
Avalon at Stratford Green 4,326 17,569 36 4,326 17,605 21,931
Avalon at Devonshire 7,250 29,641 282 7,250 29,923 37,173
Avalon at Edinburgh 3,541 14,758 158 3,541 14,916 18,457
Avalon at Town Centre 3,450 14,449 84 3,450 14,533 17,983
Avalon at Town Square 2,099 8,642 94 2,099 8,736 10,835
Avalon Woodbury 5,034 20,857 57 5,034 20,914 25,948
Avalon Corners 6,305 24,179 872 6,305 25,051 31,356
Avalon Court North 6,145 33,049 991 6,145 34,040 40,185
Avalon Willow 6,207 39,852 -- 6,207 39,852 46,059
Avalon at Fox Mill 2,713 16,678 -- 2,713 16,678 19,391
Avalon Essex 5,230 15,483 492 5,230 15,975 21,205
Avalon Haven 1,264 11,762 464 1,264 12,226 13,490
200 Arlington Place 9,728 39,527 -- 9,728 39,527 49,255
Avalon HighGrove 7,569 32,036 -- 7,569 32,036 39,605
Avalon Palladia 9,303 37,350 -- 9,303 37,350 46,653
Avalon ParcSquare 3,789 15,093 50 3,789 15,143 18,932
Avalon Rock Meadow 4,777 19,671 10 4,777 19,681 24,458
Avalon Wild Reed 4,253 18,676 21 4,253 18,697 22,950
------- --------- ------- ------- --------- ---------
717,986 3,060,054 248,473 717,986 3,308,527 4,026,513
------- --------- ------- ------- --------- ---------

Total Cost, Net Year of
Accumulated of Accumulated Completion/
Depreciation Depreciation Encumbrances Acquisition
------------ --------------- ------------ -----------

Avalon at Providence Park 1,094 10,149 -- 1997
Avalon at Decoverly 4,433 26,981 -- 1995
Avalon Knoll 1,911 6,354 13,393 1985
Avalon Fields I & II 2,756 19,907 11,609 1998
Avalon Crossing 1,716 12,174 -- 1996
4100 Massachusetts 6,034 29,494 -- 1982
Avalon at Danada Farms 3,119 35,050 -- 1997
Avalon at West Grove 2,453 26,940 -- 1967
Avalon at Stratford Green 1,797 20,134 -- 1997
Avalon at Devonshire 3,136 34,037 27,305 1988
Avalon at Edinburgh 1,386 17,071 -- 1992
Avalon at Town Centre 1,525 16,458 -- 1986
Avalon at Town Square 919 9,916 -- 1986
Avalon Woodbury 1,065 24,883 -- 1999
Avalon Corners 1,109 30,247 -- 2000
Avalon Court North 1,453 38,732 -- 2000
Avalon Willow 1,981 44,078 -- 2000
Avalon at Fox Mill 772 18,619 -- 2000
Avalon Essex 444 20,761 -- 2000
Avalon Haven 238 13,252 -- 2000
200 Arlington Place -- 49,255 -- 1987/2000
Avalon HighGrove 140 39,465 -- 2000
Avalon Palladia 380 46,273 -- 2000
Avalon ParcSquare 306 18,626 -- 2000
Avalon Rock Meadow 433 24,025 -- 2000
Avalon Wild Reed 331 22,619 -- 2000
------- --------- -------
327,480 3,699,033 394,924
------- --------- -------



F-30

AVALONBAY COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2000
(Dollars in thousands)



Initial Cost Total Cost
-------------------------- -----------------------------------
Building/ Costs Building/
Construction in Subsequent to Construction in
Progress & Acquisition/ Progress &
Land Improvements Construction Land Improvements Total
--------- --------------- ------------- ------- --------------- -------

Development Communities
Avalon at Florham Park 4,092 32,932 -- 4,092 32,932 37,024
Avalon at Edgewater -- 40,968 -- -- 40,968 40,968
Avalon Bellevue -- 26,694 -- -- 26,694 26,694
Avalon at Arlington Square I -- 40,869 -- -- 40,869 40,869
Avalon on the Sound -- 61,505 -- -- 61,505 61,505
Avalon Estates 1,063 17,651 -- 1,063 17,651 18,714
Avalon at Cahill Park -- 11,902 -- -- 11,902 11,902
Avalon at Freehold -- 12,105 -- -- 12,105 12,105
Avalon Belltown -- 8,799 -- -- 8,799 8,799
Avalon Harbor -- 15,327 -- -- 15,327 15,327
Avalon Riverview -- 8,133 -- -- 8,133 8,133
Avalon Towers on the Peninsula -- 20,407 -- -- 20,407 20,407
--------- ----------- --------- --------- ----------- -----------
5,155 297,292 -- 5,155 297,292 302,447
--------- ----------- --------- --------- ----------- -----------

Land held for development 18,297 -- -- 18,297 -- 18,297
Presale communities 37,537 126,780 -- 37,537 126,780 164,317
Corporate 1,571 22,617 207 1,571 22,824 24,395
--------- ----------- --------- --------- ----------- -----------
$ 780,546 $ 3,506,743 $ 248,680 $ 780,546 $ 3,755,423 $ 4,535,969
========= =========== ========= ========= =========== ===========

Total Cost, Net Year of
Accumulated of Accumulated Completion/
Depreciation Depreciation Encumbrances Acquisition
------------ --------------- ------------ -----------

Development Communities
Avalon at Florham Park 275 36,749 -- N/A
Avalon at Edgewater -- 40,968 -- N/A
Avalon Bellevue -- 26,694 -- N/A
Avalon at Arlington Square I -- 40,869 -- N/A
Avalon on the Sound -- 61,505 -- N/A
Avalon Estates 84 18,630 -- N/A
Avalon at Cahill Park -- 11,902 -- N/A
Avalon at Freehold -- 12,105 -- N/A
Avalon Belltown -- 8,799 -- N/A
Avalon Harbor -- 15,327 -- N/A
Avalon Riverview -- 8,133 -- N/A
Avalon Towers on the Peninsula -- 20,407 -- N/A
--------- ----------- ---------
359 302,088 --
--------- ----------- ---------

Land held for development -- 18,297 -- N/A
Presale communities -- 164,317 -- N/A
Corporate 8,171 16,224 -- N/A
--------- ----------- ---------
$ 336,010 $ 4,199,959 $ 394,924
========= =========== =========



F-31

AVALONBAY COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2000
(Dollars in thousands)

Depreciation of AvalonBay Communities, Inc. building, improvements, upgrades and
furniture, fixtures and equipment (FF&E) is calculated over the following useful
lives, on a straight line basis:

Building - 30 years
Improvements, upgrades and FF&E - not to exceed 7 years

The aggregate cost of total real estate for Federal income tax purposes was
approximately $4.5 billion at December 31, 2000.

The changes in total real estate for the years ended December 31, 2000, 1999 and
1998 are as follows:



Years ended December 31,
-----------------------------------------
2000 1999 1998
----------- ----------- -----------

Balance, beginning of period $ 4,266,426 $ 4,006,456 $ 1,534,986
Acquisitions, construction costs and improvements 393,359 519,381 2,622,427
Reclassification to investment in joint ventures -- -- --
Dispositions (123,816) (259,411) (150,957)
----------- ----------- -----------
Balance, end of period $ 4,535,969 $ 4,266,426 $ 4,006,456
=========== =========== ===========


The changes in accumulated depreciation for the years ended December 31, 2000,
1999 and 1998 are as follows:



Years ended December 31,
-----------------------------------------
2000 1999 1998
----------- ----------- -----------

Balance, beginning of period $ 225,103 $ 137,374 $ 69,932
Depreciation for the period 119,416 107,928 75,614
Dispositions (8,509) (20,199) (8,172)
----------- ----------- -----------
Balance, end of period $ 336,010 $ 225,103 $ 137,374
=========== =========== ===========



F-32