SUMMIT PROPERTIES PARTNERSHIP L P, 10-12G/A, 1997-06-30

SUMMIT PROPERTIES PARTNERSHIP L P
10-12G/A, 1997-06-30
OPERATORS OF APARTMENT BUILDINGS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 1997

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM 10/A-2

GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934

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

SUMMIT PROPERTIES PARTNERSHIP, L.P.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 56-1857809
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
212 SOUTH TRYON STREET, 28281
SUITE 500 (Zip Code)
CHARLOTTE, NORTH CAROLINA
(Address of Principal Executive Offices)
(704) 334-9905
(Registrant's telephone number,
including area code)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
</TABLE>

<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE IN WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
- - --------------------------------------------------------------------------------------------
<S> <C>
Not Applicable Not Applicable
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Units of Limited Partnership Interest
(Title of Class)
</TABLE>

================================================================================
<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
Item 1. Business.................................................................. 1
Item 2. Financial Information..................................................... 6
Item 3. Properties................................................................ 24
Item 4. Security Ownership of Certain Beneficial Owners and Management............ 29
Item 5. Directors and Officers.................................................... 29
Item 6. Executive Compensation.................................................... 31
Item 7. Certain Relationships and Related Transactions............................ 35
Item 8. Legal Proceedings......................................................... 35
Item 9. Market Price and Distributions and Related Security Holder Matters........ 35
Item 10. Recent Sales of Unregistered Securities................................... 36
Item 11. Description of Registrant's Securities to be Registered................... 37
Item 12. Indemnification of Directors and Officers................................. 38
Item 13. Financial Statements and Supplementary Data............................... 39
Item 14. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure................................................................ 39
Item 15. Financial Statements and Exhibits......................................... 39
</TABLE>

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<PAGE> 3

ITEM 1. BUSINESS

THE OPERATING PARTNERSHIP

Summit Properties Partnership, L.P. (the "Operating Partnership") is one of
the largest developers and operators of luxury garden apartment communities in
the southeastern United States. The sole general partner of the Operating
Partnership is Summit Properties Inc. ("Summit Properties"), a fully integrated
real estate investment trust ("REIT"). Summit Properties' common stock, par
value $.01 per share (the "Common Stock") is listed on the New York Stock
Exchange under the symbol "SMT." The Operating Partnership manages its
properties and conducts its third party management business through Summit
Management Company (the "Management Company"), in which it owns a 1% voting
interest and a 99% economic interest. The Operating Partnership's development
and construction activities are conducted through Summit Apartment Builders,
Inc. (the "Construction Company"), which is a wholly owned subsidiary of the
Management Company. Unless the context otherwise requires, all references in
this Form 10 to the Operating Partnership shall mean Summit Properties
Partnership, L.P., the Management Company, the Construction Company and their
predecessors on an aggregated basis.

As of March 31, 1997, the Operating Partnership's portfolio consisted of 54
apartment communities (the "Communities") with 12,670 apartment homes, including
Summit Foxcroft in which the Operating Partnership has a 75% managing general
partner interest. Immediately following the initial public offering of Summit
Properties (the "Initial Offering"), the Operating Partnership's portfolio
consisted of 28 Communities with 6,979 apartment homes. During the second
quarter of 1995, the Operating Partnership completed an acquisition of 12
Communities and a 75% interest in another Community, which were owned by The
Crosland Group, Inc. and its affiliates (the "Crosland Acquisition"). The
Crosland Acquisition added a total of 2,025 apartment homes to the Operating
Partnership's portfolio. As of March 31, 1997, the Operating Partnership had ten
apartment communities with 2,770 apartment homes under construction or in
lease-up. The Management Company also manages approximately 5,818 apartment
homes for unrelated third parties. The Operating Partnership is a fully
integrated organization with multifamily development, construction, acquisition
and management expertise which is supported by approximately 560 employees.

The Operating Partnership has chosen to focus its efforts in three high
growth regions of the southeast: the corridor connecting Atlanta, Charlotte and
the Raleigh-Durham area (the "I-85 Corridor"); central and south Florida; and
the greater Washington, DC/Virginia area. In keeping with this strategy, the
Operating Partnership has established city operating offices in Charlotte, North
Carolina, Tampa, Florida, Reston, Virginia, Atlanta, Georgia, Fort Lauderdale,
Florida and Raleigh, North Carolina. These city offices have direct
responsibility for selecting and overseeing new developments and for managing
the Communities in their geographic areas. This decentralized structure enables
corporate management to maintain tight controls and allows the Operating
Partnership to compete effectively in its core markets, while efficiently
allocating development and acquisition capital to those markets that will yield
the highest risk-adjusted return.

The Operating Partnership was organized as a Delaware limited partnership
on January 14, 1994 in connection with the Initial Offering. Its executive
offices are located at 212 South Tryon Street, Suite 500, Charlotte, North
Carolina 28281, its telephone number is (704) 334-9905 and its facsimile number
is (704) 333-8340.

The Operating Partnership was formed to continue and expand the multifamily
apartment community development, construction, operation, management and leasing
activities of the entities through which Summit Properties historically
conducted operations prior to its initial public offering (the "Summit
Entities"). The Summit Entities were founded in 1972 by William B. McGuire, Jr.
and initially focused on the development, construction, acquisition and
syndication of multifamily properties. In 1981, William F. Paulsen joined the
predecessor to Summit Properties as Chief Executive Officer and shepherded the
growth of its multifamily property development and management activities.
<PAGE> 4

OPERATING PHILOSOPHY

The Operating Partnership seeks to maximize the economic return from its
Communities by optimizing the trade-off between increasing rental rates and
maintaining high occupancy levels. Consistent with this strategy, the Operating
Partnership is among the rental rate leaders in its markets. Although this
strategy may result in slightly lower occupancy rates, the Operating Partnership
believes that the dynamic tension created by this balancing strategy maximizes
operating income at the property level and improves growth in the Operating
Partnership's cash flow over the long term. Generally, the Operating Partnership
has found that it is not maximizing property operating income per apartment home
when occupancy levels are above 95%.

Historically, the Operating Partnership has been able to charge market
leading rents to its residents while maintaining high occupancy rates due to:
the upscale features of its Communities, the comprehensive service provided by
its on-site management and its favorable mix of apartment homes. The Operating
Partnership's geographic market focus and decentralized structure further
promote income growth.

Development. As of March 31, 1997, the Operating Partnership had ten
apartment communities containing 2,770 apartment homes under construction. In
1996, the Operating Partnership also completed development of four Communities
containing 1,061 apartment homes and acquired the remaining 75% interest in a
joint venture with 262 apartment homes. Development of new communities has been
the foundation of the Operating Partnership's growth. Collectively, the
Operating Partnership and the Summit Entities have developed more than $1
billion of multifamily apartment communities, representing over 20,000 apartment
homes. Of the Operating Partnership's 54 Communities, 34 have been developed by
the Operating Partnership or the Summit Entities. The Operating Partnership
attributes much of its historical cash flow growth to the quality of the
apartment communities it has developed over the years. Where favorable
opportunities exist, the Operating Partnership plans to continue to capitalize
on its extensive experience and proven reputation as a developer by developing
new communities.

Acquisition. The Operating Partnership also seeks to grow cash flow by
acquiring existing communities that have prospects for long-term growth in
excess of industry averages. The Operating Partnership recently hired an
acquisition specialist to support its efforts in this area. Since January 1,
1997, the Operating Partnership has acquired an aggregate of 882 apartment homes
through the acquisition of Summit Portofino in Broward County, Florida, Summit
Mayfaire in Raleigh, North Carolina, and Summit Sand Lake in Orlando, Florida.
Additionally, the Operating Partnership from time to time will dispose of those
Communities within its portfolio which do not align with the Operating
Partnership's long term strategic plan and growth objective.

Upscale Apartment Communities. Since its inception, the Operating
Partnership has been dedicated to developing, acquiring and managing upscale
apartment communities designed to satisfy the aesthetic and lifestyle desires of
their residents. The Communities are characterized by high-quality construction,
superior architecture and design and extensive resident amenities. The
Communities target middle to upper income professionals who are generally
attracted to these communities because of their interior and exterior ambiance,
floor plan design, community location and amenities. Because these professionals
often can afford to pay higher rents, the ability of the Operating Partnership
to raise rents is constrained only by its markets and not the income of its
residents. The Operating Partnership believes that this resident profile results
in rental growth potential and risk-adjusted returns that are more favorable
than those available in other classes of apartment communities. The Operating
Partnership enters into leases with its residents which include provisions which
are usual and customary for apartment leases, such as the payment of rent
monthly, advance notice in the event of a termination, provision of a security
deposit and the imposition by the Operating Partnership of a charge for rent
paid after the fifth day of the month. The leases are predominantly for a term
of one year.

Dedication to Customer Service. The Operating Partnership has long
stressed the importance of developing strong customer relationships with its
residents. The Operating Partnership's total commitment to resident satisfaction
is further evidenced by its "Sundown Policy" which mandates a response by the
appropriate employee to any resident inquiry or complaint no later than
"sundown" of the day on which the inquiry or complaint was received. The
Operating Partnership has sought to provide its residents with experienced,
well-trained and attentive management staffs. Every Community employee enters
into a

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<PAGE> 5

comprehensive training program when he or she is hired. This training program
ensures that employees have a clear understanding of their job responsibilities,
the high standards of performance expected of them and the Operating
Partnership's operating philosophies. On-going training following each
employee's initial employment period further enhances employee productivity. The
Operating Partnership believes that this training regimen along with a proven
hiring process has produced a higher quality management staff, evidenced by
higher resident satisfaction at the Communities and lower employee turnover.

Mix of Apartment Homes. The Operating Partnership has sought to respond to
the desires of its target customer base by adjusting the unit composition and
features of the Communities. There have been broad demographic changes in the
Operating Partnership's resident mix over the past ten years. Today's renters
are older, more affluent and, accordingly, desire larger apartment homes with
more amenities. The Operating Partnership has responded to these shifts by
developing and acquiring Communities with a greater proportion of large two and
three bedroom units with extensive amenities. Because these features are
generally not present in older apartment properties, the Operating Partnership,
especially through its development activity, believes it is more competitively
positioned to meet the desires of its target renter group than some of its
competitors with older apartment portfolios.

Market Focus. Ninety-three percent of the Operating Partnership's current
portfolio is located in its three core markets: the I-85 Corridor, central and
south Florida and the Greater Washington, DC/Virginia area. This market focus
has enabled the Operating Partnership to capitalize on the stronger than average
growth in population, employment and household formation experienced in these
markets in the past several years. Additionally, it allows the Operating
Partnership to gain better brand recognition and improve operating efficiencies.
The Operating Partnership's property revenue growth rate for 1996 was lower than
in 1995 primarily as a result of a new supply of competing multifamily
communities in the markets in which the Operating Partnership operates. In 1997,
the Operating Partnership expects the supply of new multifamily communities in
its markets to continue to increase. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Operating Performance of the
Operating Partnership's Stabilized Communities."

Within each market there are numerous housing alternatives that compete
with the Communities in attracting residents. The Communities compete directly
with other rental apartments, condominiums and single-family homes that are
available for rent or sale in the markets in which the Communities are located.
In addition, various entities, including insurance companies, pension and
investment funds, partnerships, investment companies and other multifamily
REITs, compete with the Operating Partnership for the acquisition of existing
properties and the development of new properties, some of which may have greater
resources than the Operating Partnership. The Operating Partnership has not
identified any dominant competitor, nor is it currently the dominant competitor,
in its markets.

Decentralized Organizational Structure. The Operating Partnership's
operational structure reflects its geographic market focus. The Operating
Partnership's decentralized format provides each of its six city offices with
operating accountability and control over its respective market area. In
addition, it capitalizes on specific market knowledge which allows for superior
site selection and valuation in connection with the development of new
communities, enhanced asset management and the efficient allocation of capital
to those development opportunities with the greatest potential for financial
performance.

POLICIES WITH RESPECT TO CERTAIN TRANSACTIONS

The Operating Partnership is managed by Summit Properties, in its capacity
as the general partner of the Operating Partnership. The following is a
discussion of certain investment, financing and other policies of Summit
Properties. These policies have been determined by Summit Properties' Board of
Directors and may be amended or revised from time to time by the Board of
Directors without a vote of the stockholders, except that Summit Properties
cannot change its policy of holding its assets and conducting its business only
through the Operating Partnership, the Management Company and the Construction
Company without the consent of the holders of units of limited partnership
interest of the Operating Partnership ("Units") as provided in the partnership
agreement of the Operating Partnership (the "Operating Partnership Agreement").

3
<PAGE> 6

INVESTMENT POLICIES

Summit Properties' investment objectives are to achieve stable cash flow
available for distributions and long-term capital appreciation through increases
in the value of Summit Properties. For a discussion of Summit Properties'
Communities, development communities and its acquisition, development and other
strategic objectives, see "The Operating Partnership" and "The Communities."
Summit Properties' policy is to develop and acquire assets primarily for
generation of current income and appreciation in long-term value.

Summit Properties will develop and acquire income-producing apartment
communities for long-term investment, expand and improve the Communities
presently owned or other properties purchased, or sell such communities or other
properties, in whole or in part, when circumstances warrant. While Summit
Properties intends to diversify in terms of property locations, size and market,
Summit Properties will not have any limit on the amount or percentage of its
assets invested in any one property. Future investments are not limited to any
geographic area or any specific type of property. Equity investments may be
subject to existing mortgage financing and other indebtedness or such financing
or indebtedness as may be incurred in connection with acquiring or refinancing
these investments. Debt service on such financing or indebtedness will have
priority over the Common Stock and any distributions thereon.

Where opportunities exist, Summit Properties also intends to enter into
joint venture investments with third parties. Through the use of this form of
investment, Summit Properties historically has been able to acquire
proportionately greater equity interests in properties relative to its cash
investment.

While Summit Properties emphasizes equity real estate investments, it may,
in the discretion of the Board of Directors, invest in other types of equity
real estate investments, mortgages (including participating or convertible
mortgages), securities of other REITs, other real estate operating companies and
other real estate interests, consistent with its qualification as a REIT. The
investment in securities of other REITs, other concerns engaged in real estate
activities or other issuers is subject to the percentage of ownership
limitations and gross income tests necessary for REIT qualification. Summit
Properties may in the future acquire all or substantially all of the economic
interest in a real estate-related operating business.

FINANCING POLICIES

Summit Properties currently has a policy of incurring debt only if upon
such incurrence the ratio of debt-to-total market capitalization (i.e., the
total consolidated debt of Summit Properties as a percentage of the market value
of outstanding shares of capital stock of Summit Properties including Units)
would continue to be 50% or less. This ratio will fluctuate with changes in the
price of the Common Stock (and the issuance of additional Common Stock, or other
forms of capital stock, if any) and differs from the debt-to-book capitalization
ratio, which is based upon book values. As the debt-to-book capitalization ratio
may not reflect the current income potential of a company's assets and
operations, Summit Properties believes that the debt-to-total market
capitalization ratio provides a more appropriate indication of leverage for a
company whose assets are primarily income-producing real estate.

Summit Properties' Articles of Incorporation and Bylaws do not, however,
limit the amount or percentage of indebtedness that Summit Properties may incur.
In addition, Summit Properties may from time to time modify its debt policy in
light of current economic conditions, relative costs of debt and equity capital,
market values of its Communities, general conditions in the market for debt and
equity securities, fluctuations in the market price of Common Stock, growth
opportunities and other factors. Accordingly, Summit Properties may increase or
decrease its debt-to-total market capitalization ratio beyond the limits
described above. To the extent that the Board of Directors decides to obtain
additional capital, Summit Properties may raise such capital through additional
equity offerings (including offerings of senior securities), debt financing or
retention of cash flow available for distributions (subject to provisions in the
Code concerning taxability of undistributed REIT income), or a combination of
these methods. Existing stockholders have no preemptive right to purchase
securities in any subsequent offering by Summit Properties, and any such
offering could cause a dilution of a stockholder's investment in Summit
Properties. As long as the Operating Partnership is in existence, the net
proceeds of the sale of Common Stock by Summit Properties will be transferred to
the Operating Partnership in exchange for Units in the Operating Partnership.
Summit Properties presently

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anticipates that any additional borrowings would be made through the Operating
Partnership, although Summit Properties might incur indebtedness, the net
proceeds of which would be reloaned to the Operating Partnership. Borrowings may
be unsecured or may be secured by any or all of the assets of Summit Properties,
the Operating Partnership or any existing or new property-owning partnership and
may have full or limited recourse to all or any portion of the assets of Summit
Properties, the Operating Partnership or any existing or new property-owning
partnership. Indebtedness incurred by Summit Properties may be in the form of
bank borrowings, tax-exempt bonds, purchase money obligations to sellers of
apartment communities or other properties, publicly or privately placed debt
instruments or financing from institutional investors or other lenders. The
proceeds from any borrowings by Summit Properties may be used for working
capital, to refinance existing indebtedness and to finance acquisitions,
expansions or development of new communities and other properties, and for the
payment of distributions. Summit Properties has not established any limit on the
number or amount of mortgages that may be placed on any single property or on
its portfolio as a whole.

POLICIES WITH RESPECT TO OTHER TRANSACTIONS

Summit Properties has authority to offer shares of its Common Stock, senior
securities or options to purchase stock in exchange for property and to
repurchase or otherwise acquire its Common Stock or other securities in the open
market or otherwise and may engage in such activities in the future. Summit
Properties expects (but is not obligated) to issue Common Stock to holders of
Units in the Operating Partnership upon exercise of their redemption rights.
During the past three years, Summit Properties and the Operating Partnership
from time to time have issued Common Stock and Units, respectively, in exchange
for property. See "Recent Sales of Unregistered Securities." The Board of
Directors has no present intention of causing Summit Properties to repurchase
any Common Stock. Summit Properties may issue Preferred Stock from time to time,
in one or more series, as authorized by the Board of Directors without the need
for stockholder approval. Summit Properties has not engaged in trading,
underwriting or agency distribution or sale of securities of other issuers other
than the Operating Partnership, nor has Summit Properties invested in the
securities of other issuers other than the Operating Partnership for the
purposes of exercising control, and does not intend to do so. At all times,
Summit Properties intends to make investments in such a manner as to qualify as
a REIT, unless because of circumstances or changes in the Code (or the Treasury
regulations), the Board of Directors determines that it is no longer in the best
interest of Summit Properties to qualify as a REIT. Summit Properties has not
made any loans to third parties, although it may in the future make loans to
third parties, including, without limitation, to joint ventures in which it may
participate. Summit Properties intends to make investments in such a way that it
will not be treated as an investment company under the Investment Company Act of
1940. Summit Properties' policies with respect to such activities may be
reviewed and modified or amended from time to time by Summit Properties' Board
of Directors without a vote of stockholders.

Summit Properties is and the Operating Partnership will be required to file
reports and other information with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Exchange Act of 1934, as amended. In
addition to applicable legal or NYSE requirements, if any, holders of shares of
Common Stock and Units will receive annual reports containing audited financial
statements with a report thereon by the independent certified public accountants
of Summit Properties and the Operating Partnership.

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<PAGE> 8

ITEM 2. FINANCIAL INFORMATION

SELECTED FINANCIAL DATA

The following table sets forth selected financial and other information on
a historical basis for the Operating Partnership and its predecessors, the
Summit Entities, as of and for each of the three months ended March 31, 1997 and
1996 and each of the years in the five-year period ended December 31, 1996. This
table should be read in conjunction with the Financial Statements of Summit
Properties Partnership, L.P. and the Notes thereto included elsewhere herein.

SELECTED FINANCIAL DATA
SUMMIT PROPERTIES PARTNERSHIP, L.P. (HISTORICAL) (1)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)

<CAPTION>
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT AND PROPERTY INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING INFORMATION:
Revenue:
Rental....................... $ 25,780 $ 20,190 $ 88,864 $ 70,773 $ 54,198 $ 45,561 $ 39,693
Property management(2)....... -- -- -- -- 536 4,102 2,988
Interest and other........... 1,469 1,240 5,625 4,221 3,700 3,779 4,393
-------- -------- --------- -------- --------- -------- --------
Total...................... 27,249 21,430 94,489 74,994 58,434 53,442 47,074
-------- -------- --------- -------- --------- -------- --------
Expense:
Property operating and
maintenance expense (before
depreciation and
amortization).............. 9,814 8,124 35,226 28,012 21,502 18,991 17,306
Property management
expenses(2)................ -- -- -- -- 366 2,799 2,453
Interest expense............. 4,550 4,149 17,138 14,802 14,067 26,400 25,925
Depreciation and
amortization............... 5,181 4,130 18,208 15,141 11,700 9,735 9,219
REIT formation costs......... -- -- -- -- 457 -- --
General and administrative
expense.................... 646 625 2,557 1,949 1,756 1,375 1,973
Loss from equity
investments................ 130 165 173 39 59 -- --
-------- -------- --------- -------- --------- -------- --------
Total...................... 20,321 17,193 73,302 59,943 49,907 59,300 56,876
-------- -------- --------- -------- --------- -------- --------
Income (loss) before
extraordinary items.......... $ 6,928 $ 4,237 $ 21,187 $ 15,051 $ 8,527 $ (5,858) $ (9,802)
======== ======== ========= ======== ========= ======== ========
Net income (loss).............. $ 6,928 $ 4,237 $ 20,561 $ 14,512 $ 17,093 $ (3,408) $ (9,802)
======== ======== ========= ======== ========= ======== ========
Income per unit before
extraordinary items.......... $ .26 $ .21 $ .92 $ .83 $ .64 N/A N/A
======== ======== ========= ======== =========
Net income per unit............ $ .26 $ .21 $ .90 $ .80 $ 1.28 N/A N/A
======== ======== ========= ======== =========
Distributions declared per
unit......................... $ .3975 $ .3875 $ 1.55 $ 1.51 $ 1.29 N/A N/A
======== ======== ========= ======== =========
Weighted average units
outstanding.................. 27,057 20,616 22,941 18,117 13,390 N/A N/A
======== ======== ========= ======== =========
OTHER INFORMATION:
Cash flow provided by (used
in):
Operating activities......... $ 14,068 $ 9,236 $ 41,176 $ 30,994 $ 17,525 $ 8,712 $ 4,475
Investing activities......... (55,893) (18,652) (103,971) (63,734) (113,741) (2,092) (16,106)
Financing activities......... 41,538 8,861 63,579 34,440 88,993 (9,141) 14,123
Funds from Operations(3)....... 12,100 8,391 39,391 30,148 20,120 3,777 (683)
Total completed communities (at
end of period)............... 54 46 51 46 32 27 26
Total apartment homes
developed(4)................. -- -- 1,061 379 -- 320 788
Total apartment homes
acquired..................... 882 -- 262 2,025 1,332 -- --
Total apartment homes (at end
of period)(5)................ 12,670 10,465 11,788 10,465 8,061 6,729 6,409
</TABLE>

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<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
-------------------- ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- --------- -------- --------- -------- --------
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation................. $788,172 $607,023 $ 704,779 $586,264 $ 439,025 $317,374 $313,634
Total assets................... 713,414 550,967 635,364 533,609 397,945 297,670 309,239
Total long-term debt........... 368,562 313,720 309,933 297,010 249,009 315,847 319,916
Partners' equity
(deficiency)................. 316,974 215,891 303,416 217,496 138,089 (38,127) (28,825)
</TABLE>

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

(1) For purposes of the Selected Financial Data, historical information is
presented both for the Operating Partnership and, for periods prior to
February 15, 1994, its predecessors; provided that historical financial
information for its predecessors only includes information relating to the
Communities held by the Operating Partnership immediately following the
Initial Offering and the entities which provided property and general
management services for those Communities.

(2) Consists of revenues and expenses from property management services provided
to communities owned by unrelated third parties and by certain predecessor
partnerships prior to the Initial Offering. Since the Initial Offering,
these services have been performed by the Management Company, which is
accounted for under the equity method of accounting.

(3) The White Paper on Funds from Operations approved by the Board of Governors
of the National Association of Real Estate Investment Trusts ("NAREIT") in
March 1995 (the "White Paper") defines Funds from Operations as net income
(loss) (computed in accordance with GAAP), excluding gains (or losses) from
debt restructuring and sales of property, plus real estate related
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. The Operating Partnership believes Funds
from Operations is helpful to investors as a measure of the performance of
the Operating Partnership and Summit Properties because, along with cash
flows from operating activities, financing activities and investing
activities, it provides investors with an understanding of the ability of
the Operating Partnership to incur and service debt and make capital
expenditures. The Operating Partnership and Summit Properties compute Funds
from Operations in accordance with the standards established by the White
Paper, which may differ from the methodology for calculating Funds from
Operations utilized by other equity REITs, and, accordingly, may not be
comparable to such other REITs. Further, Funds from Operations does not
represent amounts available for management's discretionary use because of
needed capital replacement or expansion, debt service obligations, property
acquisitions, development, distributions or other commitments and
uncertainties. Funds from Operations should not be considered as an
alternative to net income (determined in accordance with GAAP) as an
indication of the Operating Partnership's financial performance or to cash
flows from operating activities (determined in accordance with GAAP) as a
measure of the Operating Partnership's liquidity, nor is it indicative of
funds available to fund the Operating Partnership's cash needs, including
its ability to make distributions. Funds from Operations is calculated as
follows (dollars in thousands):

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
----------------- ---------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before
extraordinary items............ $ 6,928 $4,237 $21,187 $15,051 $ 8,527 $(5,858) $(9,802)
Real estate depreciation......... 5,172 4,154 18,204 15,097 11,593 9,635 9,119
------- ------ ------- ------- ------- ------- -------
Funds from Operations............ $12,100 $8,391 $39,391 $30,148 $20,120 $ 3,777 $ (683)
======= ====== ======= ======= ======= ======= =======
</TABLE>

(4) Represents the total number of apartment homes in Communities completed and
owned by the Operating Partnership during the period.

(5) Represents the total number of apartment homes in Communities completed and

owned by the Operating Partnership at the end of the period.

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<PAGE> 10

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Form 10 contains forward-looking statements including, without
limitation, statements relating to development activities of the Operating
Partnership. Although the Operating Partnership believes that the expectations
reflected in such forward-looking statements are based on reasonable
assumptions, the Operating Partnership's actual results and performance of
development communities could differ materially from those set forth in the
forward-looking statements. Certain factors that might cause such a difference
include general economic conditions, local real estate conditions, construction
delays due to unavailability of materials, weather conditions or other delays
and those factors discussed in the last paragraph under the heading "Operating
Performance of the Operating Partnership's Stabilized Communities" and in the
section entitled "Development Activity -- Certain Factors Affecting the
Performance of Development Communities" on pages 10 and 21, respectively, of
this Form 10.

OVERVIEW

The following discussion should be read in conjunction with the Financial
Statements of Summit Properties Partnership, L.P. and the Notes thereto
appearing elsewhere herein.

As of March 31, 1997, there were 27,297,098 Units outstanding, of which
23,078,821, or 84.5% were owned by Summit Properties and 4,218,277, or 15.5%
were owned by other partners (including certain officers and Directors of Summit
Properties).

FORMATION OF THE OPERATING PARTNERSHIP, THE INITIAL OFFERING AND SUBSEQUENT
OFFERINGS

The Operating Partnership was formed on January 14, 1994, to succeed to
interests in a portfolio of 27 Communities, comprising a total of 6,729
apartment homes, to acquire Summit Stony Point comprising 250 apartment homes
and to acquire certain development, construction, management and leasing
businesses of the Summit Entities. On February 15, 1994, Summit Properties
completed its Initial Offering, the proceeds of which were used to acquire a
controlling interest in the Operating Partnership. The Operating Partnership
conducts the business of developing and leasing multifamily apartment
communities for Summit Properties. In connection with the Initial Offering, the
Summit Entities' third party management businesses were transferred to the
Management Company, in which the Operating Partnership owns a 1% voting interest
and a 99% economic interest. The Construction Company, which was formed to
perform certain construction services for the Operating Partnership, is
wholly-owned by the Management Company. The Operating Partnership's interest in
the Management Company and the Construction Company is accounted for under the
equity method of accounting.

On June 2, 1995, Summit Properties completed an offering of four million
shares of Common Stock (the "1995 Offering"). On August 7, 1996, Summit
Properties completed an offering of five million shares of Common Stock and sold
an additional 750,000 shares upon exercise of the underwriters' over-allotment
option on August 12, 1996 (the "1996 Offering"). The proceeds of the 1995 and
1996 Offerings were contributed by Summit Properties to the Operating
Partnership in exchange for Units, and the Operating Partnership used such
proceeds to repay debt and fund development costs.

8
<PAGE> 11

HISTORICAL RESULTS OF OPERATIONS

The Operating Partnership's net income is generated primarily from the
operations of the Communities. The changes in operating results from period to
period reflect changes in existing Community performance as well as increases in
the number of apartment homes due to the acquisition and development of
Communities. Where appropriate, comparisons are made on a "stabilized
Communities," "acquisition Communities" and "Communities in lease-up" basis in
order to adjust for changes in the number of apartment homes. A Community is
deemed to be a "Stabilized" Community at the earlier of when it has attained a
physical occupancy level of at least 93% or when construction has been completed
for one year. A summary of the Operating Partnership's apartment homes for the
three months ended March 31, 1997 and the years ended December 31, 1996, 1995
and 1994 is as follows:

<TABLE>
<CAPTION>
1997 1996 1995 1994
------ ------ ------ -----
<S> <C> <C> <C> <C>
Apartment homes at the beginning of the period.......... 12,454 11,286 8,061 --
Initial business combination............................ -- -- -- 6,729
Acquisitions............................................ 882 262 2,025 1,332
Developments which began rental operations during the
period................................................ -- 906 1,200 --
------ ------ -----
Apartment homes at the end of the period................ 13,336 12,454 11,286 8,061
====== ====== =====
</TABLE>

The 1995 acquisitions were completed in the second quarter and consisted of
twelve apartment communities and a 75% interest in another apartment community,
all of which were owned by The Crosland Group Inc. and its affiliates.

Results of Operations for the Three Months Ended March 31, 1997 and 1996

For the three months ended March 31, 1997, net income increased $2.7
million to $6.9 million, from $4.2 million for the three months ended March 31,
1996.

OPERATING PERFORMANCE OF THE OPERATING PARTNERSHIP'S PORTFOLIO OF COMMUNITIES

The operating performance of the Communities for the three months ended
March 31, 1997 and 1996 is summarized below (dollars in thousands):

<TABLE>
<CAPTION>
1997 1996 % CHANGE
------- ------- --------
<S> <C> <C> <C>
Property revenues:
Stabilized communities............................ $20,610 $20,078 2.6%
Acquisition communities........................... 2,495 -- 100.0%
Stabilized development communities................ 3,068 1,126 172.5%
Communities in lease-up........................... 928 -- 100.0%
------- -------
Total property revenues................................ 27,101 21,204 27.8%
------- -------
Property operating and maintenance expense (1):
Stabilized communities............................ 7,739 7,601 1.8%
Acquisition communities........................... 806 -- 100.0%
Stabilized development communities................ 921 523 76.1%
Communities in lease-up........................... 348 -- 100.0%
------- -------
Total property operating and maintenance expense....... 9,814 8,124 20.8%
------- -------
Property operating income.............................. $17,287 $13,080 32.2%
======= =======
Apartment homes, end of period......................... 13,336 11,286 18.2%
======= =======
</TABLE>

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

(1) Before real estate depreciation and amortization expense.

9
<PAGE> 12

OPERATING PERFORMANCE OF THE OPERATING PARTNERSHIP'S STABILIZED COMMUNITIES

The operating performance of the 46 Communities, containing 10,086 apartment
homes, stabilized during the entire period in each of the three months ended
March 31, 1997 and 1996 is summarized below (dollars in thousands except average
monthly rental revenue):

<TABLE>
<CAPTION>
1997 1996 % CHANGE
------- ------- --------
<S> <C> <C> <C>
Property revenues:
Rental............................................ $19,684 $19,148 2.8%
Other............................................. 926 930 -0.4%
------- -------
Total property revenues................................ 20,610 20,078 2.6%
------- -------
Property operating and maintenance expense(1):
Personnel......................................... 1,732 1,904 -9.0%
Advertising and promotion......................... 240 192 25.0%
Utilities......................................... 928 906 2.4%
Building repairs and maintenance.................. 1,667 1,540 8.2%
Real estate taxes and insurance................... 2,037 1,985 2.6%
Property supervision.............................. 514 499 3.0%
Other operating expense........................... 621 575 8.0%
------- -------
Total property operating and maintenance expense....... 7,739 7,601 1.8%
------- -------
Property operating income.............................. $12,871 $12,477 3.2%
======= =======
Average physical occupancy(2).......................... 93.1% 93.2% -0.1%
======= =======
Average monthly rental revenue(3)...................... $ 709 $ 692 2.5%
======= =======
Number of apartment homes.............................. 10,086 10,086
======= =======
</TABLE>

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

(1) Before real estate depreciation and amortization expense.

(2) Average physical occupancy is defined as the number of apartment homes
occupied divided by the total number of apartment homes contained in the
Communities, expressed as a percentage. Average physical occupancy has been
calculated using the average of the midweek occupancy that existed during
each week of the period.

(3) Represents the average monthly net rental revenue per occupied apartment
home.

The increase in rental revenue from stabilized Communities was primarily
the result of increases in average rental rates. Property operating and
maintenance expense increases were due primarily to an increase in advertising
and promotion, building repair and maintenance offset by a decrease in personnel
expense. Building repairs and maintenance includes a $42,000 or 13.5% increase
in the cost of replacement carpets. As a percentage of total property revenue,
property operating and maintenance expenses decreased from 37.9% in 1996 to
37.5% in 1997.

The 2.6% rate of growth in property revenues was lower than the 5% rate of
growth in property revenues achieved from the first quarter of 1995 compared to
first quarter 1996. The growth rate was lower primarily as a result of a new
supply of competing multi-family Communities and the increase in home
affordability in the markets in which the Operating Partnership operates. The
Operating Partnership expects property growth rates for the remainder of 1997 to
be similar to the first quarter of 1997 as the supply of new multi-family
Communities continues to increase balanced by the continued strength of the
local economies in which the Operating Partnership operates. The Operating
Partnership believes its expectations relative to property revenue growth are
based on reasonable assumptions as to future economic conditions and the
quantity of competitive multi-family Communities in the markets in which the
Company does business. There can be no assurance that actual results will not
differ from these assumptions.

10
<PAGE> 13
OPERATING PERFORMANCE OF THE OPERATING PARTNERSHIP'S ACQUISITION COMMUNITIES

Acquisition communities consist of Summit Plantation (262 apartment homes)
acquired on April 1, 1996, and Summit Mayfaire, Summit Portofino and Summit Sand
Lake acquired in the first quarter of 1997. The operations of these Communities
for the three months ended March 31, 1997 are summarized as follows (dollars in
thousands except average monthly rental revenue):

<TABLE>
<CAPTION>
1997
------
<S> <C>
Property revenues:
Rental revenues........................................................ $2,370
Other property revenue................................................. 125
------
Total property revenues..................................................... 2,495
------
Property operating and maintenance expense (1).............................. 806
------
Property operating income................................................... $1,689
======
Average physical occupancy (2).............................................. 95.2%
======
Average monthly rental revenue (3).......................................... $ 746
======
Number of apartment homes................................................... 1,144
======
</TABLE>

- - ---------------
(1) Before real estate depreciation and amortization expense.

(2) Average physical occupancy is defined as the number of apartment homes
occupied divided by the total number of apartment homes contained in the
communities, expressed as a percentage. Average physical occupancy has been
calculated using the average of the midweek occupancy that existed during
each week of the period.

(3) Represents the average monthly net rental revenue per occupied apartment
home.

The unleveraged yield, defined as property operating income for the three
months ended March 31, 1997 on an annualized basis over total acquisition cost,
was 9.6%.

OPERATING PERFORMANCE OF THE OPERATING PARTNERSHIP'S STABILIZED DEVELOPMENT
COMMUNITIES

The Operating Partnership had four development communities (Summit
Aventura, Summit Hill II, Summit Green, and Summit River Crossing), which were
stabilized during the entire three months ended March 31, 1997 but were still in
lease-up/construction in the three months ended March 31, 1996. The operating
performance of these four Communities for the three months ended March 31, 1997
and 1996 is summarized below (dollars in thousands except average monthly rental
revenue):

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Property revenues:
Rental revenues.............................................. $2,870 $1,042
Other property revenue....................................... 198 84
------ ------
Total property revenues........................................... 3,068 1,126
------ ------
Property operating and maintenance expense (1).................... 921 523
------ ------
Property operating income......................................... $2,147 $ 603
====== ======
Average physical occupancy (2).................................... 93.1% 32.8%
====== ======
Average monthly rental revenue (3)................................ $ 933 $ 903
====== ======
Number of apartment homes......................................... 1,200 1,200
====== ======
</TABLE>

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

(1) Before real estate depreciation, amortization and interest expense.

(3) Represents the average monthly net rental revenue per occupied apartment
home.

11
<PAGE> 14

The unleveraged yield, defined as property operating income for the three
months ended March 31, 1997 on an annualized basis over total development cost,
was 10.7%.

OPERATING PERFORMANCE OF THE OPERATING PARTNERSHIP'S COMMUNITIES IN LEASE-UP

The Operating Partnership had three communities in lease-up in the three
months ended March 31, 1997. A community in lease-up is defined as one which has
commenced rental operations but has not reached stabilization (all communities
in lease-up for the three months ended March 31, 1996 are currently classified
as stabilized development communities). A summary of the three communities in
lease-up as of March 31, 1997 is as follows:

<TABLE>
<CAPTION>
TOTAL ACTUAL/ % LEASED
NUMBER OF ACTUAL/ ANTICIPATED AVERAGE AS OF
APARTMENT ESTIMATED CONSTRUCTION ANTICIPATED OCCUPANCY MARCH 31,
COMMUNITY HOMES COST COMPLETION STABILIZATION 1997 1997
- - --------------------------------- --------- --------- ------------ ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Summit Fairways.................. 240 $17,661 Q4 1996 Q3 1997 57.80% 67.10%
Summit on the River.............. 352 23,900 Q2 1997 Q3 1997 48.90% 57.70%
Summit Russett................... 314 22,100 Q2 1997 Q3 1997 16.80% 43.60%
--- -------
906 $63,661
=== =======
</TABLE>

A total of 382 of the 666 apartment homes had been completed at Summit on
the River and Summit Russett as of March 31, 1997. Property operating loss after
interest expense was $50,000 for the three communities in lease-up.

OPERATING PERFORMANCE OF SUMMIT MANAGEMENT COMPANY

The operating performance of the Management Company and its wholly-owned
subsidiary, the Construction Company, for the three months ended March 31, 1997
and 1996 is summarized below (dollars in thousands):

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Property management revenue.......................................... $1,182 $1,132
Construction Company income.......................................... 192 64
Other management company income...................................... 24 26
------ ------
Total revenue................................................... 1,398 1,222
Property management expenses:
Operating....................................................... 1,031 1,152
Depreciation.................................................... 48 28
Amortization.................................................... 72 69
Interest........................................................ 75 75
------ ------
Total property management expenses.............................. 1,226 1,324
Construction Company expenses........................................ 302 64
------ ------
Total expenses.................................................. 1,528 1,388
------ ------
Net loss of Management Company....................................... $ (130) $ (166)
====== ======
</TABLE>

The increase in property management revenue was the result of higher
revenues for managing the Operating Partnership's Communities offset by a
reduction in the average number of communities managed for third parties during
1997 compared to 1996. Total third party apartment homes managed for third
parties was 5,787 and 7,926 at March 31, 1997 and 1996, respectively. The
Operating Partnership expects third party management revenue as a percentage of
total property management revenues to continue to decline as revenues from the
Operating Partnership's Communities continue to increase.

Property management fees include $474,000 and $568,000 of fees from third
parties in 1997 and 1996, respectively.

Construction Company revenues and expenses increased in 1997 compared to
1996 primarily due to the increased number of construction projects. The
increase in construction projects was a result of the Operating Partnership's
decision to expand its in-house construction operations in the state of Florida
to cover the entire
12
<PAGE> 15

geographic area in which the Operating Partnership operates. All of the
Construction Company's income is from contracts with the Operating Partnership.

OTHER INCOME AND EXPENSES

Interest expense increased $401,000 or 9.7% to $4.5 million for the three
months ended March 31, 1997, from $4.1 million for the same period in 1996,
primarily due to interest on debt related to the communities acquired in 1997
and interest on communities under construction, offset by the Operating
Partnership's repayment of debt in connection with contributions from Summit
Properties from proceeds of the 1996 Offering.

Depreciation expense increased $1.1 million or 25.4% to $5.2 million in
1997 compared to 1996, primarily due to an increase in depreciation expense
related to 1997 and 1996 acquisitions, increased depreciation on Communities
that were in construction in 1996 but completed in 1997 and Communities in
lease-up in 1997.

Results of Operations for the Years Ended December 31, 1996, 1995 and 1994

Income before extraordinary items increased from 1994 ($8.5 million) to
1995 ($15.1 million) and from 1995 to 1996 ($21.2 million) primarily due to
increased property operating income at Stabilized Communities, property
operating income from acquisition Communities and Communities in lease-up.

OPERATING PERFORMANCE OF THE OPERATING PARTNERSHIP'S PORTFOLIO OF COMMUNITIES

The operating performance of the Communities is summarized below (dollars
in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
---------------------------- ----------------------------
1996 1995 % CHANGE 1995 1994 % CHANGE
------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Property revenues:
Stabilized Communities(1).................. $66,974 $64,646 3.6 % $53,566 $50,579 5.9%
Acquisition Communities.................... 16,993 8,716 95.0 % 19,796 6,201 219.2%
Communities in lease-up(2)................. 9,580 767 1,149.0 % 767 -- 100.0%
------- ------- ------- -------
Total property revenues........................ 93,547 74,129 26.2 % 74,129 56,780 30.6%
------- ------- ------- -------
Property operating and maintenance expense(3):
Stabilized Communities..................... 25,302 24,245 4.4 % 20,206 19,277 4.8%
Acquisition Communities.................... 6,444 3,492 84.5 % 7,531 2,225 238.5%
Communities in lease-up.................... 3,480 275 1,165.5 % 275 -- 100.0%
------- ------- ------- -------
Total property operating and maintenance
expense...................................... 35,226 28,012 25.8 % 28,012 21,502 30.3%
------- ------- ------- -------
Property operating income...................... $58,321 $46,117 26.5 % $46,117 $35,278 30.7%
======= ======= ======= =======
Apartment homes, end of period................. 12,454 11,286 10.3 % 11,286 8,061 40.0%
======= ======= ======= =======
</TABLE>

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

(1) Includes Communities which were stabilized during the entire period for each
of the comparable periods presented. The 1995 and 1994 comparison includes
Communities acquired during the initial business combination while the 1996
and 1995 comparison also includes the Communities acquired in 1994.

(2) Includes seven Communities in 1996, of which five had completed construction
as of December 31, 1996. Includes four Communities in 1995, of which one had
completed construction as of December 31, 1995.

(3) Before real estate depreciation and amortization expense.

13
<PAGE> 16

OPERATING PERFORMANCE OF THE OPERATING PARTNERSHIP'S STABILIZED COMMUNITIES

The operating performance of the Communities stabilized during the entire
period in each of the comparable periods presented is summarized below (dollars
in thousands except average monthly rental revenue):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------------- -----------------------------
1996 1995 % CHANGE 1995 1994 % CHANGE
------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Property revenues:
Rental................................. $63,556 $61,613 3.2% $50,971 $48,234 5.7%
Other.................................. 3,418 3,033 12.7% 2,595 2,345 10.7%
------- ------- ------- -------
Total property revenues.................... 66,974 64,646 3.6% 53,566 50,579 5.9%
------- ------- ------- -------
Property operating and maintenance
expense(1):
Personnel.............................. 5,879 5,570 5.5% 4,640 4,520 2.7%
Advertising and promotion.............. 680 561 21.2% 469 452 3.8%
Utilities.............................. 3,041 3,034 0.2% 2,616 2,568 1.9%
Building repairs and maintenance....... 5,657 5,290 6.9% 4,480 3,985 12.4%
Real estate taxes and insurance........ 6,595 6,257 5.4% 5,077 4,931 3.0%
Property supervision................... 1,671 1,602 4.3% 1,326 1,272 4.2%
Other operating expense................ 1,779 1,931 (7.9)% 1,598 1,549 3.2%
------- ------- ------- -------
Total property operating and maintenance
expense.................................. 25,302 24,245 4.4% 20,206 19,277 4.8%
------- ------- ------- -------
Property operating income.................. $41,672 $40,401 3.1% $33,360 $31,302 6.6%
======= ======= ======= =======
Average physical occupancy(2).............. 93.1% 94.3% (1.2)% 94.0% 93.3% 0.8%
======= ======= ======= =======
Average monthly rental revenue(3).......... $ 714 $ 688 3.8% $ 682 $ 650 4.9%
======= ======= ======= =======
Number of apartment homes.................. 8,061 8,061 6,729 6,729
======= ======= ======= =======
</TABLE>

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

(1) Before real estate depreciation and amortization expense.

(3) Represents the average monthly net rental revenue per occupied apartment
home.

Rental and other revenue increased from 1995 to 1996 due to higher rental
rates partially offset by a decrease in occupancy. The 3.6% property revenue
growth rate was lower than the prior year rate of growth primarily as a result
of a new supply of competing multifamily communities in the markets in which the
Operating Partnership operates.

The increase in property operating and maintenance expenses from 1995 to
1996 was primarily due to increased insurance costs ($240,000 or a 40%
increase), higher advertising costs and higher building and repair costs. The
increase in insurance expense was due to higher insurance rates in the Operating
Partnership's Florida markets, caused by the significant storm damage losses
incurred in the past years by the insurance industry. Included in the building
repairs and maintenance cost was $148,000 for replacement of carpets,
representing a 14% increase. Rental and other revenue increased from 1994 to
1995 due to higher rental rates and increased occupancy. The increase in
property operating and maintenance expenses from 1994 to 1995 was due primarily
to building repairs and maintenance expense. Replacement carpets increased
$196,000, or 28.6%, which was a significant component of the building repairs
and maintenance increase. As a percentage of total property revenues, property
operating and maintenance expense was 37.8%, 37.5% and 38.1% for the years ended
December 31, 1996, 1995 and 1994, respectively.

OPERATING PERFORMANCE OF THE OPERATING PARTNERSHIP'S ACQUISITION COMMUNITIES

Acquisition Communities consist of Summit Plantation (262 apartment homes)
in 1996 and the Crosland Acquisition Communities (2,025 apartment homes) in
1995. Acquisition Communities in 1994 consist of five Communities (Summit Stony
Point, Summit Reston, Summit Hill I, Summit Creek and

14
<PAGE> 17

Summit Lofts). The operations of these Communities are summarized as follows
(dollars in thousands except average monthly rental revenue):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------- -----------------------
1996 1995 1995 1994
------- ------ ------- ------
<S> <C> <C> <C> <C>
Property revenues:
Rental.................................... $16,401 $8,467 $19,109 $5,964
Other..................................... 592 249 687 237
------- ------ ------- ------
Total property revenues........................ 16,993 8,716 19,796 6,201
------- ------ ------- ------
Property operating and maintenance
expense(1)................................... 6,444 3,492 7,531 2,225
------- ------ ------- ------
Property operating income...................... $10,549 $5,224 $12,265 $3,976
======= ====== ======= ======
Average physical occupancy(2).................. 94.0% 96.1% 95.5% 94.7%
======= ====== ======= ======
Average monthly rental revenue(3).............. $ 672 $ 592 $ 643 $ 688
======= ====== ======= ======
Number of apartment homes:
1994 Acquisitions......................... -- -- 1,332 1,332
1995 Acquisitions......................... 2,025 2,025 2,025 --
1996 Acquisitions......................... 262 -- -- --
------- ------ ------- ------
Total number of apartment homes................ 2,287 2,025 3,357 1,332
======= ====== ======= ======
</TABLE>

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

(1) Before real estate depreciation and amortization expense.

(3) Represents the average monthly net rental revenue per occupied apartment
home.

The unleveraged yield, defined as property operating income over total
acquisition cost, for the year ended December 31, 1996 on the Crosland
Acquisition Communities was 10.7% compared to an annualized yield of 10.0% for
the period from acquisition (May 16, 1995, except Summit East Ridge which was
acquired June 22, 1995) to December 31, 1995.

As a percentage of total property revenues, property operating and
maintenance expense was 37.9%, 40.1% and 35.9% for the years ended December 31,
1996, 1995 and 1994, respectively.

15
<PAGE> 18

OPERATING PERFORMANCE OF THE OPERATING PARTNERSHIP'S COMMUNITIES IN LEASE-UP

The Operating Partnership had seven communities in lease-up with a total of
2,106 apartment homes during the year ended December 31, 1996. A community in
lease-up is defined as one which has commenced rental operations but has not
achieved stabilization as of the beginning of the period. Five of the seven
communities had completed construction as of December 31, 1996. In order to
evaluate the impact of developments and lease-ups on the Operating Partnership's
operations, the amount of interest expensed on communities in development and
lease-up is presented. The results of operations of these seven communities in
lease-up for the last four quarters, including interest expense incurred during
construction and lease-up, are summarized as follows (dollars in thousands
except average monthly rental revenue):

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------
DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1996 1996 1996 1996
------------ ------------- -------- ---------
<S> <C> <C> <C> <C>
Property revenues:
Rental...................................... $3,317 $2,792 $1,756 $1,042
Other....................................... 241 213 135 84
------ ------ ------ ------
Total property revenues.......................... 3,558 3,005 1,891 1,126
Property operating and maintenance expense(1).... 1,192 1,003 762 523
------ ------ ------ ------
Property operating income........................ 2,366 2,002 1,129 603
Interest expense................................. 1,775 1,400 999 662
------ ------ ------ ------
Property income (loss) after interest expense.... $ 591 $ 602 $ 130 $ (59)
====== ====== ====== ======
Average monthly rental revenue(2)................ $ 873 $ 877 $ 876 $ 889
====== ====== ====== ======
Number of apartment homes completed.............. 1,708 1,526 1,178 870
====== ====== ====== ======
Number of apartment homes leased................. 1,481 1,345 1,041 681
====== ====== ====== ======
Number of apartment homes occupied............... 1,414 1,242 895 539
====== ====== ====== ======
</TABLE>

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

(1) Before real estate depreciation, amortization and interest expense.

(2) Represents the average monthly net rental revenue per occupied apartment
home.

A summary of the five communities (1,440 apartment homes) in lease-up which
had completed construction as of December 31, 1996 is as follows (dollars in
thousands):

<TABLE>
<CAPTION>
% LEASED
NUMBER OF ACTUAL/ AVERAGE AS OF
APARTMENT TOTAL CONSTRUCTION ANTICIPATED OCCUPANCY MARCH 31,
COMMUNITY HOMES COST COMPLETION STABILIZATION 1996 1997
- - ---------------------------- ---------- ------- ------------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Summit Aventura............. 379 $31,255 Q4 1995 Q3 1996 78.8% 97.4%
Summit Hill II.............. 207 11,383 Q2 1996 Q3 1996 75.1% 93.7%
Summit Green................ 300 18,552 Q2 1996 Q4 1996 60.1% 92.7%
Summit River Crossing....... 314 19,111 Q3 1996 Q4 1996 48.8% 96.8%
Summit Fairways............. 240 17,668 Q4 1996 Q3 1997 11.1% 67.1%
----- -------
1,440 $97,969
===== =======
</TABLE>

The remaining communities in lease-up, Summit on the River and Summit
Russett, are still under construction, with completion anticipated in the second
quarter of 1997. As of March 31, 1997, the Operating Partnership had leased:
57.7%, or 203, of the 352 apartment homes at Summit on the River, which opened
in May 1996; and 43.6%, or 137, of the 314 apartment homes at Summit Russett,
which opened in November 1996. These two communities are expected to represent a
total investment upon completion of approximately $46.0 million.

16
<PAGE> 19

OPERATING PERFORMANCE OF SUMMIT MANAGEMENT COMPANY

The operating performance of the Management Company and its wholly-owned
subsidiary, the Construction Company, is summarized below (dollars in
thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------- ---------------------------
1996 1995 % CHANGE 1995 1994 % CHANGE
------ ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Property management revenue................... $4,706 $5,189 (9.3)% $5,189 $5,122 1.3%
Construction Company income................... 529 288 83.7 % 288 264 9.1%
Other Management Company income............... 129 155 (16.8)% 155 149 4.0%
------ ------ ------ ------
Total revenue........................ 5,364 5,632 (4.8)% 5,632 5,535 1.8%
Property management expenses:
Operating................................. 4,407 4,581 (3.8)% 4,581 4,512 1.5%
Depreciation.............................. 110 120 (8.3)% 120 53 126.4%
Amortization.............................. 278 274 1.5 % 274 219 25.1%
Interest.................................. 300 300 0.0 % 300 262 14.5%
------ ------ ------ ------
Total property management expenses... 5,095 5,275 (3.4)% 5,275 5,046 4.5%
Construction Company expenses................. 442 437 1.1 % 437 378 15.6%
------ ------ ------ ------
Total expenses....................... 5,537 5,712 (3.1)% 5,712 5,424 5.3%
------ ------ ------ ------
Net income (loss) of Management Company....... $ (173) $ (80) (116.3)% $ (80) $ 111 (172.1%)
====== ====== ====== ======
</TABLE>

The decrease in property management revenue from 1994 to 1996 was the
result of a reduction in the average number of communities managed for third
parties partially offset by an increase in the average number of the Operating
Partnership's Communities. Total average third party apartment homes under
management were 7,919, 10,927 and 12,362 during each of the years ended December
31, 1996, 1995 and 1994, respectively. The decrease was primarily due to the
termination of the Management Company's contract to manage a portfolio of 4,050
apartment homes effective October 1, 1995. This contract was terminated as a
result of the owner's decision to provide its own property management for these
apartment homes.

Property management revenues include $2.3 million, $3.3 million and $3.9
million of revenues from third parties for the years ended December 31, 1996,
1995 and 1994, respectively. Property management revenues from third parties as
a percentage of total property management revenues were 48.1%, 62.9% and 73.0%
for the years ended December 31, 1996, 1995 and 1994, respectively. The
Operating Partnership expects third party management revenue as a percentage of
total property management revenues to continue to decline as revenues from the
Operating Partnership's Communities continue to increase.

Construction Company revenues and expenses increased in 1996 compared to
1995 primarily due to the increased number of construction projects. The
increase in construction projects was a result of the Operating Partnership's
decision to expand its in-house construction operations in the state of Florida
to cover the entire geographic area in which the Operating Partnership operates.
All of the Construction Company's income for the years ended December 31, 1996,
1995 and 1994 is from contracts with the Operating Partnership, except for the
contract to build Summit Plantation (formerly Plantation Cove). The Operating
Partnership owned a 25% interest in the Plantation Cove joint venture during
construction and subsequently acquired the remaining 75% interest.

OTHER INCOME AND EXPENSES

Interest income increased $97,000 to $558,000 in 1996 compared to 1995,
primarily due to interest earned on the proceeds from the 1996 Offering prior to
using the proceeds to fund development projects.

Development and other fees from related parties decreased in 1995 compared
to 1994, primarily due to the development of Summit Plantation in 1994. The
Operating Partnership held a joint venture interest in this Community until
April 1, 1996, when the Operating Partnership acquired the remaining 75%
interest.

Depreciation expense increased $3.1 million or 20.3% to $18.2 million in
1996 compared to 1995, primarily due to an increase in depreciation expense
related to the Operating Partnership's 1995 acquisitions and increased
depreciation in Communities in lease-up. Depreciation expense increased $3.4
million or 29.4%

17
<PAGE> 20

to $15.1 million in 1995 compared to 1994, primarily due to an increase in
depreciation expense related to the Operating Partnership's 1994 acquisitions
and increased depreciation in Communities in lease-up.

Interest expense increased $2.3 million or 15.8% to $17.1 million in 1996
compared to 1995, primarily due to interest on debt related to the Operating
Partnership's 1995 acquisitions and an increase in interest expense related to
the communities in lease-up, partially offset by the Operating Partnership's
repayment of debt in connection with the 1995 and 1996 Offerings. The 1995 and
1996 Offerings together resulted in aggregate net proceeds of approximately
$163.0 million. Interest expense increased $735,000 or 5.22% in 1995 compared to
1994, primarily due to interest incurred in connection with the Operating
Partnership's 1994 and 1995 acquisitions and communities in lease-up in 1995,
substantially offset by the Operating Partnership's repayment of debt in
connection with the 1995 Offering.

General and administrative expense increased in 1996 compared to 1995 and
in 1995 compared to 1994 primarily due to increased compensation costs and
professional fees. The increase in compensation in 1996 includes the cost of
restricted stock grants and the cost of the employee stock purchase plan. The
Operating Partnership issues a Unit in the Operating Partnership to Summit
Properties for each share of Common Stock issued in conjunction with Summit
Properties' stock option plan and the employee stock purchase plan. As a
percentage of revenues, general and administrative cost was 2.7%, 2.6% and 3.0%
for the years ended December 31, 1996, 1995 and 1994, respectively.

The extraordinary items in 1996 and 1995 resulted primarily from the
write-off of deferred financing costs in conjunction with the repayment of debt
with the proceeds from the 1996 and 1995 Offerings and with the proceeds of the
$31.0 million unsecured debt financing received in August, 1996. The 1994
extraordinary item resulted from debt repayment related to the Initial Offering.
The Operating Partnership incurred prepayment penalties of $4.3 million on
certain mortgage indebtedness, expenses of $2.5 million associated with the
write-off of deferred financing costs related to mortgages satisfied with
proceeds of the Initial Offering, and the write-off of accrued interest and
mortgages payable that was not required to be repaid of $15.4 million.

LIQUIDITY AND CAPITAL RESOURCES

In August 1996, Summit Properties completed the sale of an additional 5.75
million shares of Common Stock resulting in net proceeds of $97.6 million.
Summit Properties then contributed the $97.6 million in net proceeds to the
Operating Partnership in exchange for 5.75 million Units in the Operating
Partnership. In addition, in August 1996, the Operating Partnership obtained
$31.0 million of unsecured debt financing consisting of a $15.0 million
unsecured note with a four-year term and a $16.0 million unsecured note with a
six-year term, which bear interest at 7.61% and 7.85%, respectively.
Approximately $97.7 million of the proceeds from the issuance of Units in the
Operating Partnership and the unsecured debt financing were utilized to fully
repay the outstanding balance under the Operating Partnership's revolving credit
facility and development loans. The remaining $30.9 million of the proceeds were
used to fund current development projects.

In November 1996, the Operating Partnership replaced its $50 million
revolving credit facility with a new unsecured $150 million credit facility (the
"Unsecured Credit Facility"). The Unsecured Credit Facility has a three year
term and currently bears interest at LIBOR + 110 basis points based upon a
current credit rating of BBB- by Standard & Poors Ratings Group. The interest
rate can be reduced in the event of an upgrade of the Operating Partnership's
unsecured credit rating as assigned by Standard & Poors Rating Group (which
rating must be accompanied by the comparable senior unsecured bond rating from
either Moodys Investor Service, Duff & Phelps Credit Rating Co. or Fitch
Investors Service, L.P.) as follows:

<TABLE>
<CAPTION>
CREDIT RATING RATE
---------------------------------------------------------- ------------
<S> <C>
BBB-.................................................... LIBOR + 110
BBB .................................................... LIBOR + 95
BBB+.................................................... LIBOR + 80
</TABLE>

There can be no assurance that the Operating Partnership will be able to
obtain an upgrade of its unsecured credit rating in the future or that it will
be able to maintain its current unsecured credit rating.

18
<PAGE> 21

The Unsecured Credit Facility provides $25 million for general working
capital purposes with the remaining $125 million available to finance new
development and acquisitions.

The Operating Partnership's outstanding indebtedness at March 31, 1997
totaled $368.6 million. This amount includes approximately $207.7 million in
fixed rate conventional mortgages, $53.6 million of variable rate tax-exempt
bonds, $31.0 million of unsecured notes, $9.3 million of tax exempt fixed rate
loans, and $67.0 million under the Unsecured Credit Facility.

The Operating Partnership's outstanding indebtedness had an average
maturity of 8.7 years as of December 31, 1996. The aggregate maturities of all
outstanding debt as of December 31, 1996 for each of the years ended after
December 31, 1996 were as follows (in thousands):

<TABLE>
<S> <C>
1997........................................................... $ 4,620
1998........................................................... 4,902
1999........................................................... 27,563
2000........................................................... 20,501
2001........................................................... 114,262
Thereafter..................................................... 138,085
--------
$309,933
========
</TABLE>

Of the significant maturities in the above table, $22.4 million relates to
the expiration of the Unsecured Credit Facility in 1999, $15.0 million and $16.0
million relate to the unsecured notes that mature in 2000 and 2002,
respectively; and $111.4 million relates to a mortgage loan balloon payment in
2001.

The Operating Partnership's net cash provided by operating activities
increased from $31.0 million for the year ended December 31, 1995 to $41.2
million for the same period in 1996 primarily due to a $12.2 million increase in
property operating income, offset by a $2.3 million increase in interest
expense. The increase in interest expense was small relative to the increase in
property operating income due to the retirement of debt with the proceeds from
the 1995 and 1996 Offerings. Net cash provided by operating activities increased
from $9.2 million for the three months ended March 31, 1996 to $14.1 million for
the same period in 1997 primarily due to a $4.2 million increase in property
operating income.

Net cash used in investing activities increased from $63.7 million for the
year ended December 31, 1995 to $104.0 million for the same period in 1996 due
to an increase in the development of Communities, higher capital expenditures on
existing properties and an increase in the number of acquisition Communities.
Net cash used in investing activities increased from $18.7 million for the three
months ended March 31, 1996 to $55.9 million for the same period in 1997
primarily due to an increase in the acquisition of communities.

Net cash provided by financing activities increased from $34.4 million for
the year ended December 31, 1995 to $63.6 million for the same period in 1996,
primarily due to an increase in Summit Properties' offering proceeds contributed
to the Operating Partnership, partially offset by distributions to unitholders.
Net cash provided by financing activities increased from $8.9 million for the
three months ended March 31, 1996 to $41.5 million for the same period in 1997,
primarily due to an increase in debt proceeds and an increase in Summit
Properties' offering proceeds contributed to the Operating Partnership offset by
higher distributions to unitholders.

The Operating Partnership expects to meet its short-term liquidity
requirements (i.e., liquidity requirements arising within 12 months) generally
through its net cash provided by operations and borrowings under the Unsecured
Credit Facility. The Operating Partnership believes that its net cash provided
by operations will be adequate to meet its operating requirements and to satisfy
Summit Properties' applicable REIT dividend payment requirements in both the
short-term and in the long-term. Improvements and renovations at existing
Communities are expected to also be funded from property operations.

The Operating Partnership expects to meet its long-term liquidity
requirements (i.e., liquidity requirements arising after 12 months), such as
current and future developments, debt maturities, acquisitions, renovations and
other non-recurring capital expenditures, with borrowings under its Unsecured
Credit Facility, through the issuance of long-term secured and unsecured debt
securities and additional equity securities of Summit Properties which will then
be contributed to the Operating Partnership, or in connection with the
acquisition of land or improved property, through the issuance of Units of the
Operating Partnership.

19
<PAGE> 22

The following table sets forth certain information regarding debt financing
as of December 31, 1996 and 1995 (dollars in thousands):

<TABLE>
<CAPTION>
PRINCIPAL
OUTSTANDING PRINCIPAL OUTSTANDING
INTEREST MARCH 31, DECEMBER 31,
RATE AS OF MATURITY ----------- ---------------------
MARCH 31, 1997 DATE 1997(1) 1996 1995
-------------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
FIXED RATE DEBT
MORTGAGE LOAN(2)(3)........... 5.88% 2/15/01 $122,297 $122,950 $125,000
MORTGAGE LOAN(2)(3)........... 7.71% 12/15/05 29,538 29,653 30,000
MORTGAGE LOAN(4).............. 8.00% 9/1/05 8,618 8,638 8,712
MORTGAGE NOTES
Summit Hollow I.......... 8.00% 11/1/18 2,276 2,286 2,326
Summit Hollow II......... 7.75% 1/1/29 2,582 2,587 2,607
Summit Creekside......... 8.00% 6/1/22 2,867 2,877 2,914
Summit Old Town.......... 8.00% 9/1/20 3,085 3,097 3,143
Summit Eastchester....... 8.00% 5/1/21 3,858 3,872 3,925
Summit Foxcroft.......... 8.00% 4/1/20 2,773 2,788 2,844
Summit Oak............... 7.75% 12/1/23 2,577 2,585 2,615
Summit Sherwood.......... 7.88% 3/1/29 3,323 3,329 3,353
Summit Radbourne......... 9.80% 3/1/02 8,663 8,683 8,758
Summit Sand Lake......... 7.88% 2/15/06 15,195 -- --
TAX EXEMPT MORTGAGE NOTES
Summit Crossing.......... 6.95% 11/1/25 4,201 4,213 4,261
Summit East Ridge........ 7.25% 12/1/26 5,142 5,156 5,207
-------- -------- --------
TOTAL MORTGAGE
DEBT.............. 216,995 202,714 205,665
-------- -------- --------
UNSECURED NOTES
Bank Note................ 7.85% 8/3/02 16,000 16,000 --
Bank Note................ 7.61% 8/3/00 15,000 15,000 --
-------- -------- --------
TOTAL UNSECURED
NOTES............. 31,000 31,000 --
-------- -------- --------
TOTAL FIXED RATE
DEBT.............. 247,995 233,714 205,665
VARIABLE RATE DEBT
UNSECURED CREDIT FACILITY..... LIBOR+110 11/18/99 67,005 22,357 4,396
TAX EXEMPT BONDS
Summit Belmont........... 5.00% 4/1/07 11,650 11,850 11,900
Summit Hampton........... 5.00% 6/1/07 12,700 12,700 12,800
Summit Pike Creek........ 5.00% 8/15/20 13,202 13,262 13,545
Summit Gateway........... 5.00% 7/1/07 7,300 7,300 7,700
Summit Stony Point....... 5.00% 4/1/29 8,710 8,750 8,895
-------- -------- --------
TOTAL TAX EXEMPT
BONDS............. 53,562 53,862 54,840
DEVELOPMENT LOANS REPAID IN
1996........................ -- -- 32,109
-------- -------- --------
TOTAL VARIABLE RATE
DEBT................... 120,567 76,219 91,345
-------- -------- --------
TOTAL OUTSTANDING
INDEBTEDNESS...... $368,562 $309,933 $297,010
======== ======== ========
</TABLE>

- - ---------------
(1) With the exception of the Mortgage Loans referred to in note 3 below, all of
the secured debt can be prepaid at any time. Prepayment of such debt is
generally subject to penalty or premium; however, the tax exempt mortgage
notes can be prepaid at any time without penalty or premium.

(2) Mortgage Loans secured by the following Communities:

Summit Glen Summit Blue Ash Summit Heron's Run
Summit Springs Summit Square Summit Perico
Summit Village Summit Waterford Summit Providence
Summit Charleston Summit Del Ray Summit Meadow
Summit Norcroft Summit Palm Lake Summit Windsor

(3) The Operating Partnership may elect to extend the maturity of each of these
Mortgage Loans for a period of up to two years by providing six months'
written notice. These Mortgage Loans generally may not be prepaid in whole
or in part during their original term, but may be prepaid in whole or in
part at any time during applicable extension periods, if any, without
premium or penalty.

(4) Mortgage Loan secured by Summit Simsbury and Summit Touchstone Communities.

20
<PAGE> 23

The London Interbank Offered Rate (LIBOR) at March 31, 1997 was 5.79%.

On May 14, 1997, the Operating Partnership sold Summit Charleston, a 214
apartment home community located in Charlotte, North Carolina for $9.5 million.
The gain on the sale was approximately $4.3 million. Proceeds from the sale will
be used to fund future acquisitions.

DEVELOPMENT ACTIVITY

The Operating Partnership's developments in process at March 31, 1997 are
summarized as follows (dollars in thousands):

<TABLE>
<CAPTION>
TOTAL ESTIMATED ANTICIPATED
APARTMENT ESTIMATED COST TO COST TO CONSTRUCTION
COMMUNITY HOMES COSTS DATE COMPLETE COMPLETION
- - ------------------------------------------------ ---------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Summit on the River -- Atlanta, GA.............. 352 $ 23,900 $ 21,979 $ 1,921 Q2 1997
Summit Russett -- Laurel, MD.................... 314 22,100 19,894 2,206 Q2 1997
Summit Stonefield -- Yardley, PA................ 216 18,400 9,696 8,704 Q4 1997
Summit Norcroft II-Charlotte, NC................ 54 3,750 623 3,127 Q4 1997
Summit Sedgebrook I -- Charlotte, NC............ 248 15,600 6,545 9,055 Q4 1997
Summit Ballantyne I -- Charlotte, NC............ 246 16,800 6,706 10,094 Q4 1997
Summit Plantation II -- Plantation, FL.......... 240 22,000 9,335 12,665 Q4 1997
Summit Lake I -- Raleigh, NC.................... 302 19,700 4,405 15,295 Q2 1998
Summit Fair Lakes I -- Fairfax, VA.............. 370 32,900 7,074 25,826 Q4 1998
Summit New Albany -- Columbus, OH............... 428 30,100 4,065 26,035 Q1 1999
Other development and construction costs........ -- -- 13,246 --
----- -------- ------- --------
2,770 $205,250 $103,568 $114,928
===== ======== ======= ========
</TABLE>

In addition, the Operating Partnership has a commitment to purchase a
community (Summit St. Claire) currently under construction in Atlanta, Georgia
for approximately $27.5 million, subject to adjustment based on the percentage
of apartment homes leased as of the date of acquisition. The 336 apartment home
community is expected to be purchased, after reaching rental stabilization which
is currently expected in the fourth quarter of 1998.

Estimated costs to complete the development communities and the purchase
commitment for Summit St. Claire represent substantially all of the Operating
Partnership's material commitments for capital expenditures.

Certain Factors Affecting the Performance of Development Communities

The Operating Partnership is optimistic about the operating prospects of
the communities under construction even with the increased supply of newly
constructed apartment homes of comparable quality in many of its markets. As
with any development community, there are uncertainties and risks associated
with the development of the communities described above. While the Operating
Partnership has prepared development budgets and has estimated completion and
stabilization target dates based on what it believes are reasonable assumptions
in light of current conditions, there can be no assurance that actual costs will
not exceed current budgets or that the Operating Partnership will not experience
construction delays due to the unavailability of materials, weather conditions
or other events.

Other development risks include the possibility of incurring additional
cost or liability resulting from defects in construction materials and the
possibility that financing may not be available on favorable terms, or at all,
to pursue or complete development activities. Similarly, market conditions at
the time these communities become available for leasing will affect the rental
rates that may be charged and the period of time necessary to achieve
stabilization, which could make one or more of the development communities
unprofitable or result in achieving stabilization later than currently
anticipated. In addition, the Operating Partnership is conducting feasibility
and other pre-development work for eight additional communities. The Operating
Partnership could abandon the development of any one or more of these potential
communities in the event that it determines that market conditions do not
support development, financing is not available on favorable terms or other
circumstances prevent development. Similarly, there can be no assurance that if
the Operating Partnership does pursue one or more of these potential communities
that it will be able to complete construction within the currently estimated
development budgets or that construction can be started at the time currently
anticipated.

21
<PAGE> 24

CAPITALIZATION OF FIXED ASSETS AND PROPERTY IMPROVEMENTS

The Operating Partnership has established a policy of capitalizing those
expenditures relating to acquiring new assets, materially enhancing the value of
an existing asset, or substantially extending the useful life of an existing
asset. All expenditures necessary to maintain a community in ordinary operating
condition (including replacement carpets) are expensed as incurred.

The Operating Partnership has a capital expenditure replacement program
whereby various physical components are replaced as to maintain the Communities
in normal operating condition. Certain physical components may be replaced other
than at regular inspection intervals when extraordinary wear has occurred. The
Operating Partnership also makes capital expenditures for new physical
components if these expenditures will produce sufficient revenue enhancements as
to achieve acceptable returns on invested capital. There are concurrently no
material commitments relative to renovation or improvements at existing
facilities.

Capitalized expenditures for the three months ended March 31, 1997 and 1996
and the years ended December 31, 1996, 1995 and 1994 are summarized as follows
(dollars in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------
1997 1996 1996 1995 1994
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Acquisition of Communities(1)......... $65,170 $ 0 $ 21,913 $ 82,935 $ 75,921
Construction of Communities(2)........ 15,506 18,970 88,064 58,104 26,694
Capitalized interest.................. 1,340 970 4,266 3,110 686
Cost of acquiring existing Communities
in conjunction with the initial
business combination................ -- -- -- -- 1,469
Non-recurring capital expenditures:
Construction of garages.......... 3 473 578 153 --
Access gates..................... -- -- 138 -- --
New signage...................... 48 -- 225 -- --
Water meters..................... -- -- 201 -- --
Washer/dryer units............... -- -- 74 -- --
Major improvements............... 871 -- 1,698 -- --
Improvements at acquisition...... -- 189 -- 706 --
Other............................ -- 59 59 5 --
------- ------- -------- -------- --------
Total non-recurring......... 922 721 2,973 864 --
------- ------- -------- -------- --------
Recurring capital expenditures:
Exterior painting................ 105 123 1,131 810 980
Other............................ 350 438 2,160 1,370 730
------- ------- -------- -------- --------
Total recurring............. 455 561 3,291 2,180 1,710
------- ------- -------- -------- --------
$83,393 $21,222 $120,507 $147,193 $106,480
======= ======= ======== ======== ========
</TABLE>

- - ---------------
(1) Includes the issuance of Units in the Operating Partnership with a value of
$8.9 million and assumption of debt of $15.2 million in the three months
ended March 31, 1997. Includes the assumption of $14.3 million, $52.6
million and $9.1 million of debt in years ended 1996, 1995 and 1994
respectively. In addition, includes conversion of equity investment into
fixed assets of $1.2 million in conjunction with the purchase of Summit
Plantation in 1996 and the issuance of 1.5 million Units of the Operating
Partnership with a value of $26.2 million in 1995.

(2) Includes the issuance of $2.1 million, $896,000 and $735,000 of Units in the
Operating Partnership for the acquisition of land in 1996, 1995 and 1994,
respectively.

Construction of communities was funded primarily by development loans,
equity offering proceeds and borrowings under the Operating Partnership's credit
facilities. Other additions and improvements were funded primarily by the
Operating Partnership's operations and credit facilities.

ENVIRONMENTAL MATTERS

The Operating Partnership believes, based on internal reviews and
environmental site assessments performed by consultants, that there are no
material environmental conditions that require remediation.

22
<PAGE> 25

INFLATION

Substantially all of the leases at the Communities are for a term of one
year or less, which, coupled with the relatively high occupancy rates, may
enable the Operating Partnership to seek increased rents upon renewal of
existing leases or commencement of new leases. The short-term nature of these
leases generally serves to reduce the risk to the Operating Partnership of the
adverse effect of inflation.

FUNDS FROM OPERATIONS

The White Paper on Funds from Operations approved by the Board of Governors
of NAREIT in March 1995 defines Funds from Operations as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of property, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. The Operating Partnership and Summit Properties compute Funds from
Operations in accordance with the standards established by the White Paper,
which may differ from the methodology for calculating Funds from Operations
utilized by other equity REITs, and, accordingly, may not be comparable to such
other REITs. Funds Available for Distribution is defined as Funds from
Operations less capital expenditures funded by operations (recurring capital
expenditures). The Operating Partnership's and Summit Properties' methodology
for calculating Funds Available for Distribution may differ from the methodology
for calculating Funds Available for Distribution utilized by other REITs, and,
accordingly, may not be comparable to other REITs. Funds from Operations and
Funds Available for Distribution do not represent amounts available for
management's discretionary use because of needed capital replacement or
expansion, debt service obligations, property acquisitions, development and
distributions, or other commitments and uncertainties. Funds from Operations and
Funds Available for Distribution should not be considered as an alternative to
net income (determined in accordance with GAAP) as an indication of the
Operating Partnership's financial performance or to cash flows from operating
activities (determined in accordance with GAAP) as a measure of the Operating
Partnership's liquidity, nor are they indicative of funds available to fund the
Operating Partnership's cash needs, including its ability to make distributions.
The Operating Partnership believes Funds from Operations and Funds Available for
Distribution are helpful to investors as measures of the performance of the
Operating Partnership and Summit Properties because, along with cash flows from
operating activities, financing activities and investing activities, they
provide investors with an understanding of the ability of the Operating
Partnership and Summit Properties to incur and service debt and make capital
expenditures.

Funds from Operations and Funds Available for Distribution are calculated
as follows (dollars in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED DECEMBER 31,
MARCH 31, 1997 ----------------------------------------------------
------------------------ PRO FORMA
1997 1996 1996 1995 1994(1) 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net income........... $6,928 $4,237 $20,561 $14,512 $11,060 $17,093
Extraordinary
items.............. -- -- 626 539 -- (8,566)
Depreciation:
Real estate
assets........ 5,172 4,121 18,171 15,021 11,702 11,593
Summit
Plantation.... -- 33 33 76 -- --
---------- ---------- ---------- ---------- ---------- ----------
Funds from
Operations......... 12,100 8,391 39,391 30,148 22,762 20,120
Recurring capital
expenditures(2).... (455) (561) (3,291) (2,180) (1,710) (1,710)
---------- ---------- ---------- ---------- ---------- ----------
Funds Available for
Distribution....... $11,645 $7,830 $36,100 $27,968 $21,052 $18,410
---------- ---------- ---------- ---------- ---------- ----------
Weighted average
units
outstanding........ 27,057,351 20,615,923 22,940,998 18,116,664 14,827,257 13,389,757
========== ========== ========== ========== ========== ==========
</TABLE>

- - ---------------
(1) The Pro Forma 1994 information is presented as if the Initial Offering had
occurred as of January 1, 1994.

(2) Recurring capital expenditures are expected to be funded from operations and
consist primarily of exterior painting, new appliances, vinyl, blinds, tile,
and wallpaper. In contrast, non-recurring capital expenditures, such as
major improvements, new garages and access gates, are expected to be funded
by financing activities and are therefore not included in the calculation of
Funds Available for Distribution.

23
<PAGE> 26

The above Funds from Operations calculations reflect changes required by
NAREIT for fiscal years beginning in 1996. The primary effect of the changes on
the Operating Partnership's calculation of Funds from Operations was that
amortization of financing costs is no longer added back in calculating Funds
from Operations. Funds from Operations under the previous calculation method
would have been $12.3 million and $8.7 million in the three months ended March
31, 1997 and 1996, respectively, and $40.5 million, $31.4 million, $23.9 million
and $21.3 million for the years ended December 31, 1996, 1995, pro-forma 1994
and historical 1994, respectively.

ITEM 3. PROPERTIES

THE COMMUNITIES

As of March 31, 1997, the Operating Partnership owned and managed 54
completed Communities and two Communities in construction and lease-up
consisting of 13,336 luxury garden apartment homes. Twenty-six of the
Communities have been completed since January 1, 1990 and, as of December 31,
1996, the average age of the completed Communities was approximately 7.8 years.
The communities which were developed have leased or are leasing at a rate
consistent with the Operating Partnership's expectations. As with any community
in lease-up, there are uncertainties and risks associated with the Operating
Partnership's communities in lease-up. While the Operating Partnership has
estimated completion and stabilization target dates based on what it believes
are reasonable assumptions in light of current conditions, there can be no
assurance that actual costs will not exceed current budgets or that the
Operating Partnership will not experience delays in reaching stabilization of
such communities.

<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
NUMBER OF APARTMENT APARTMENT
CITY OR REGION COMMUNITIES HOMES HOMES
- - ------------------------------------------------------------ ---------- ---------- -----------
<S> <C> <C> <C>
Tampa/Sarasota, Florida..................................... 9 2,248 16.9%
Charlotte, North Carolina................................... 12 2,164 16.2
Raleigh/Central North Carolina.............................. 10 1,841 13.8
Washington, D.C............................................. 6 1,621 12.2
South Florida............................................... 5 1,519 11.4
Atlanta, Georgia............................................ 4 1,229 9.2
Richmond, Virginia.......................................... 3 862 6.5
Orlando, Florida............................................ 2 656 4.9
Blue Ash/Forest Park, Ohio.................................. 2 558 4.1
Greenville, South Carolina.................................. 2 324 2.4
Indianapolis, Indiana....................................... 1 314 2.4
--
------ -----
Total............................................. 56 13,336 100.0%
== ====== =====
</TABLE>

24
<PAGE> 27

All of the Communities target middle to upper income apartment renters as
customers and have amenities, unit sizes and unit mixes consistent with the
desires of this resident population. The Communities are owned in fee simple and
are located in six states throughout the southeastern United States (Florida,
Georgia, Maryland, North Carolina, South Carolina and Virginia) as well as in
Delaware, Ohio and Indiana. The following table highlights certain information
regarding the Communities:

<TABLE>
<CAPTION>
AVERAGE AVERAGE AVERAGE
MARKET AREA/ NUMBER OF YEAR APARTMENT OCCUPANCY OCCUPANCY
COMMUNITY LOCATION APARTMENTS COMPLETED SIZE 1996 1995
- - -------------------------------------- --------------------- ---------- ---------- ---------- ----------- -----------
COMMUNITIES STABILIZED IN BOTH 1996 AND 1995
- - --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ATLANTA
Summit Glen........................... Atlanta, GA 242 1992 983 91.9 93.7
Summit Springs........................ Norcross, GA 312 1990 934 92.6 95.6
Summit Village........................ Marietta, GA 323 1991 984 91.8 95.0
----- ----- ---- ----
ATLANTA WEIGHTED AVERAGE 877 966 92.1 94.9
CHARLOTTE
Summit Arbors......................... Charlotte, NC 120 1986 944 94.8 95.8
Summit Charleston..................... Charlotte, NC 214 1986 806 93.3 94.7
Summit Creek.......................... Charlotte, NC 260 1983 910 92.7 95.7
Summit Crossing....................... Charlotte, NC 128 1985 978 96.3 97.6
Summit Fairview....................... Charlotte, NC 135 1983 1,036 93.6 94.1
Summit Foxcroft(1).................... Charlotte, NC 156 1979 940 93.4 96.6
Summit Hollow......................... Charlotte, NC 232 1978 949 94.5 95.3
Summit Norcroft....................... Charlotte, NC 162 1991 1,112 94.0 94.6
Summit Radbourne...................... Charlotte, NC 225 1991 1,006 92.0 96.7
Summit Simsbury....................... Charlotte, NC 100 1985 874 93.6 95.3
Summit Touchstone..................... Charlotte, NC 132 1986 899 94.0 94.8
----- ----- ---- ----
CHARLOTTE WEIGHTED AVERAGE 1,864 948 93.7 95.6
RALEIGH/CENTRAL NORTH CAROLINA
Summit Creekside...................... Hickory, NC 118 1981 1,006 96.2 97.6
Summit Eastchester.................... High Point, NC 172 1981 947 96.1 97.5
Summit Highland....................... Raleigh, NC 172 1987 986 94.5 94.2
Summit Hill I......................... Chapel Hill, NC 204 1991 904 93.3 95.4
Summit Oak............................ Goldsboro, NC 100 1982 918 96.7 97.3
Summit Old Town....................... Winston-Salem, NC 172 1979 954 90.9 95.5
Summit Sherwood....................... Winston-Salem, NC 190 1968 1,028 95.2 95.0
Summit Square......................... Durham, NC 362 1990 925 92.1 91.7
----- ----- ---- ----
RALEIGH/CENTRAL NORTH CAROLINA WEIGHTED AVERAGE 1,490 954 93.9 94.9

<CAPTION>
MORTGAGE
NOTES
AVERAGE AVERAGE PAYABLE AT
RENT PER RENT PER DECEMBER 31,
MARKET AREA/ APARTMENT APARTMENT 1996
COMMUNITY 1996 1995 (IN THOUSANDS)
- - -------------------------------------- ---------- ---------- ---------------
COMMUNITIES STABILIZED IN BOTH 1996 AN
- - --------------------------------------
<S> <C> <C> <C>
ATLANTA
Summit Glen........................... $847 $823 (5)
Summit Springs........................ 708 673 (5)
Summit Village........................ 735 705 (5)
---- ----
ATLANTA WEIGHTED AVERAGE 756 726
CHARLOTTE
Summit Arbors......................... 748 692 --
Summit Charleston..................... 581 562 (6)
Summit Creek.......................... 624 580 --
Summit Crossing....................... 649 609 $4,213
Summit Fairview....................... 726 724 --
Summit Foxcroft(1).................... 643 600 2,788
Summit Hollow......................... 656 610 4,873
Summit Norcroft....................... 805 800 (5)
Summit Radbourne...................... 786 770 8,683
Summit Simsbury....................... 734 701 (7)
Summit Touchstone..................... 677 639 (7)
---- ----
CHARLOTTE WEIGHTED AVERAGE 687 656
RALEIGH/CENTRAL NORTH CAROLINA
Summit Creekside...................... 566 517 2,877
Summit Eastchester.................... 559 510 3,872
Summit Highland....................... 703 693 (6)
Summit Hill I......................... 687 653 --
Summit Oak............................ 532 508 2,585
Summit Old Town....................... 542 500 3,097
Summit Sherwood....................... 526 487 3,329
Summit Square......................... 763 745 (5)
---- ----
RALEIGH/CENTRAL NORTH CAROLINA WEIGHTE 635 604
</TABLE>

25
<PAGE> 28

<TABLE>
<CAPTION>
AVERAGE AVERAGE
MARKET AREA/ NUMBER OF YEAR APARTMENT AVERAGE AVERAGE RENT PER
COMMUNITY LOCATION APARTMENTS COMPLETED SIZE OCCUPANCY 1996 OCCUPANCY 1995 APARTMENT 1996
- - ------------------- --------------------- ---------- ---------- ---------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
RICHMOND
Summit
Beckenridge....... Glen Allen, VA 300 1987 928 95.1 95.0 706
Summit Stony
Point............. Richmond, VA 250 1986 1,045 93.2 95.6 724
Summit Waterford... Midlothian, VA 312 1990 995 91.4 95.2 685
---- ---- ---- ------
RICHMOND WEIGHTED AVERAGE 862 986 93.2 95.2 704
SOUTH FLORIDA
Summit Del Ray..... Delray Beach, FL 252 1993 968 91.5 93.2 852
Summit Palm Lake... W. Palm Beach, FL 304 1992 919 96.7 94.1 743
---- ---- ---- ------
SOUTH FLORIDA WEIGHTED AVERAGE 556 941 94.3 93.7 792
TAMPA/SARASOTA
Summit Gateway..... St. Petersburg, FL 212 1987 828 93.7 94.4 626
Summit Hampton..... Bradenton, FL 352 1988 933 93.0 94.2 630
Summit Heron's
Run............... Sarasota, FL 274 1990 863 92.5 92.0 653
Summit Lofts....... Palm Harbour, FL 200 1990 1,045 90.8 90.7 690
Summit McIntosh.... Sarasota, FL 212 1990 855 93.9 93.0 684
Summit Perico...... Bradenton, FL 256 1990 911 93.5 94.4 657
Summit
Providence........ Brandon, FL 444 1991 952 93.0 92.2 659
Summit Station..... Tampa, FL 230 1990 902 92.6 94.8 619
Summit Walk........ Tampa, FL 68 1993 1,614 95.9 95.1 1,052
---- ---- ---- ------
TAMPA/SARASOTA WEIGHTED AVERAGE 2,248 936 93.0 93.2 663
WASHINGTON, D.C.
Summit Belmont..... Fredricksburg, VA 300 1987 881 90.2 93.9 622
Summit Meadow...... Columbia, MD 178 1990 1,020 93.6 94.8 864
Summit Pike
Creek............. Newark, DE 264 1988 899 95.8 94.3 800
Summit Reston...... Reston, VA 418 1987 854 93.9 95.5 917
Summit Windsor..... Frederick, MD 147 1989 911 92.7 93.7 681
---- ---- ---- ------
WASHINGTON, D.C. WEIGHTED AVERAGE 1,307 898 93.2 94.6 792
OTHER
Summit Blue Ash.... Blue Ash, OH 242 1992 1,158 95.6 97.0 769
Summit Park........ Forest Park, OH 316 1989 963 91.7 94.7 602
Summit Beacon
Ridge............. Greenville, SC 144 1988 1,046 91.9 95.4 653
Summit East
Ridge............. Greenville, SC 180 1986 959 92.0 93.5 568
---- ---- ---- ------
OTHER WEIGHTED AVERAGE 882 1,029 92.9 95.2 649
---- ---- ---- ------

<CAPTION>
MORTGAGE
AVERAGE NOTES PAYABLE AT
MARKET AREA/ RENT PER DECEMBER 31,
COMMUNITY APARTMENT 1995 1996 (IN THOUSANDS)
- - ------------------- ---------------- ---------------------
<S> <C> <C>
RICHMOND
Summit
Beckenridge....... 665 --
Summit Stony
Point............. 692 (9)
Summit Waterford... 636 (5)
------
RICHMOND WEIGHTED AVERAGE 662
SOUTH FLORIDA
Summit Del Ray..... 870 (5)
Summit Palm Lake... 713 (5)
------
SOUTH FLORIDA WEIGHED AVERAGE 784
TAMPA/SARASOTA
Summit Gateway..... 611 (9)
Summit Hampton..... 598 (9)
Summit Heron's
Run............... 632 (5)
Summit Lofts....... 694 --
Summit McIntosh.... 655 --
Summit Perico...... 621 (5)
Summit
Providence........ 658 (5)
Summit Station..... 594 --
Summit Walk........ 1,005 --
------
TAMPA/SARASOTA WEIGHTED AVERAGE 644
WASHINGTON, D.C.
Summit Belmont..... 600 (9)
Summit Meadow...... 832 (5)
Summit Pike
Creek............. 738 (9)
Summit Reston...... 866 --
Summit Windsor..... 675 (5)
------
WASHINGTON, D.C. WEIGHTED AVERAGE 753
OTHER
Summit Blue Ash.... 735 (5)
Summit Park........ 575 --
Summit Beacon
Ridge............. 632 --
Summit East
Ridge............. 544 5,156
------
OTHER WEIGHTED AVERAGE 622
------
</TABLE>

26
<PAGE> 29

<CAPTION>
MORTGAGE
AVERAGE NOTES PAYABLE AT
MARKET AREA/ RENT PER DECEMBER 31,
COMMUNITY APARTMENT 1995 1996 (IN THOUSANDS)
- - ------------------- ---------------- ---------------------
<S> <C> <C>
TOTAL WEIGHTED AVERAGE OF COMMUNITIES
STABILIZED IN 1996 AND 1995 627
DEVELOPED COMMUNITIES(2)
Summit Fairways.... N/A --
Summit Aventura.... 989 --
Summit Green....... 826 --
Summit Hill II..... 857 --
Summit River
Crossing......... 726 --
ACQUISITION COMMUNITIES
Summit
Mayfaire(3)...... N/A --
Summit Sand
Lake(3).......... N/A (8)
Summit
Plantation(4).... N/A --
Summit
Portofino(3)..... N/A --
TOTAL WEIGHTED AVERAGE OF COMPLETED
COMMUNITIES
COMMUNITIES IN CONSTRUCTION AND LEASE-UP
Summit on the
River............ N/A --
Summit Russett..... N/A --
TOTAL COMMUNITIES
<FN>
- - ---------------
(1) Summit Foxcroft is held by a partnership in which the Operating Partnership is a 75% managing general partner.
(2) The Communities are currently stabilized but were not stabilized in both 1995 and 1996.
(3) Community acquired in 1997.
(4) Community acquired April 1, 1996.
(5) Collateral for fixed rate mortgages of $153 million.
(6) Summit Charleston was sold on May 14, 1997. This community served as collateral for fixed rate mortgages of $152.6 million.
Summit Highland replaced Summit Charleston as collateral for such mortgages.
(7) Collateral for a fixed rate mortgage of $8.6 million.
(8) Community acquired in 1997. A fixed rate mortgage of $15.2 million was assumed at date of purchase.
(9) Collateral for letters of credit in an aggregate amount of $55.6 million which serve as collateral for $53.9 million in tax
exempt bonds.

</TABLE>

27
<PAGE> 30

Information with respect to total debt secured by 32 of the Operating
Partnership's properties having an aggregate net book value of $297.8 million as
of December 31, 1996, is as follows (dollars in thousands):

<TABLE>
<CAPTION>
FIXED RATE VARIABLE RATE
---------------- -------------
<S> <C> <C> <C>
Total principal balance.............................. $202,714 $53,862
Interest rates range from............................ 5.88% to 9.80% 5.6%
Weighted average interest rate....................... 6.69% 5.6%
Annual debt service(1)............................... $ 16,920 $ 3,695
Scheduled annual maturities:
1997................................................. $ 4,620
1998................................................. 4,902
1999................................................. 5,205
2000................................................. 5,501
2001(2).............................................. 114,262
Thereafter........................................... 122,086
--------
Total................................................ $256,576
========
</TABLE>

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

(1) Annual debt service for variable rate loans represents 1996 costs and
includes letter of credit fees and other bond related costs.

(2) Year 2001 maturities include a $111.4 million balloon payment on the 5.88%
fixed rate Mortgage Loan from The Northwestern Mutual Life Insurance
Company.

Each Community has many of the following features: swimming pools, tennis,
racquetball and volleyball courts, saunas, whirlpools, fitness facilities,
picnic areas, large clubhouses and convenient parking facilities. Most of the
apartment homes offer amenities that include spacious open living areas,
sunrooms, patios or balconies, sunken living rooms, fireplaces, built-in shelves
or entertainment centers, large storage areas or walk-in closets, vaulted
ceilings, ceiling fans and separate in-home laundry facilities or laundry
hook-ups. In addition to these physical amenities, each Community has its own
highly trained and experienced on-site management and maintenance staff to
ensure that courteous and responsive service is provided to its residents.

28
<PAGE> 31

ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of Units for (i)
Directors, the Chief Executive Officer and the other four most highly
compensated executive officers of Summit Properties (together with the Chief
Executive Officer, the "Named Executive Officers"), (ii) the Directors and Named
Executive Officers of Summit Properties as a group and (iii) each limited
partner of the Operating Partnership that the Operating Partnership believes
holds more than a 5% beneficial interest in the Operating Partnership. Unless
otherwise indicated in the footnotes, all of such interests are owned directly,
and the indicated person has sole voting and investment power. The information
in the following table was provided by the unitholders listed and reflects their
beneficial ownership known by the Operating Partnership and Summit Properties on
March 31, 1997.

<TABLE>
<CAPTION>
NUMBER
OF UNITS
NAME AND BUSINESS ADDRESS BENEFICIALLY PERCENT OF
OF BENEFICIAL OWNER* OWNED ALL UNITS
-------------------------------------------------- ------------ ----------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
William B. McGuire, Jr............................ 620,313 2.272%
William F. Paulsen................................ 596,045 2.184%
Raymond V. Jones.................................. 274,526 1.006%
David F. Tufaro................................... 206,388 **
John T. Gray...................................... 695 **
Michael L. Schwarz................................ -- --
Henry H. Fishkind................................. -- --
James H. Hance, Jr................................ -- --
Nelson Schwab III................................. -- --
John Crosland, Jr................................. 1,152,723*** 4.223%
ALL DIRECTORS AND NAMED EXECUTIVE OFFICERS AS A
GROUP (10 PERSONS).............................. 2,850,690 10.443%
5% HOLDERS
Summit Properties Inc............................. 23,078,821 84.546%
</TABLE>

- - ---------------
* The business address of each person is: c/o Summit Properties Inc., 212
South Tryon Street, Suite 500, Charlotte, NC, 28281.

** Less than one percent.

*** The indicated ownership includes (a) 307,311 Units owned by JMJ Associates
Limited Partnership, a limited partnership in which Mr. Crosland owns a 33%
equity interest and indirectly serves as the general partner, (b) 387,646
Units owned by The Crosland Group, Inc., a corporation in which Mr. Crosland
owns a 57.1673% equity interest (the "Crosland Group"), (c) 51,101 Units
owned by Crosland-Erwin & Associates, No. VI, a general partnership in which
the Crosland Group owns a 87% equity interest, (d) 108,554 Units, 86,125
Units and 91,162 Units owned by Westbury Place Associates, Westbury Woods
Associates and Westbury Park Associates, respectively, each a limited
partnership with respect to which Mr. Crosland serves as co-general partner,
(e) 2,381 Units owned by Crosland Investors, Inc., a corporation in which
Mr. Crosland owns a 57.20% equity interest and (f) 11,566 shares owned by
the John Crosland, Sr. Trust, a trust with respect to which Mr. Crosland
serves as co-trustee, as to all of which Mr. Crosland disclaims beneficial
interest. Mr. Crosland owns 106,877 Units directly.

ITEM 5. DIRECTORS AND OFFICERS

The Operating Partnership is managed by Summit Properties, in its capacity
as the general partner of the Operating Partnership. Consequently, the Operating
Partnership has no directors or executive officers. This Item 5 reflects
information with respect to the directors and executive officers of Summit
Properties.

Directors

JAMES H. HANCE, JR. Mr. Hance has been a director since 1994. He is a Vice
Chairman and the Chief Financial Officer of NationsBank Corporation, where he is
responsible for NationsBanc Services Company, which performs NationsBank
Corporation's operations functions, the Management Services Group, and
NationsBank Corporation's finance group. He also has responsibility for
NationsBank's non-bank consumer and commercial credit companies, NationsCredit
Consumer Corporation and NationsCredit Commercial Corporation, and serves as
Managing Director of several of NationsBank's banks and subsidiaries. Mr. Hance

29
<PAGE> 32

is the Vice Chairman of the Board of Trustees of Presbyterian Health Services
Corporation. He also is a Member of the Board of Visitors of the Duke University
School of Business and the Washington University National Council for the John
M. Olin School of Business. He is on the Board of Directors of Caraustar
Industries, Inc., Family Dollar Stores, Inc. and Lance, Inc. Additionally, Mr.
Hance is a certified public accountant, a 1988 International Business Fellow,
former Chairman of the Charlotte Chamber of Commerce and is the vice chairman of
the Board of Trustees of the Charlotte Country Day School. Mr. Hance is 52 years
old.

HENRY H. FISHKIND. Dr. Fishkind has been a director since 1994. He is the
President of Fishkind & Associates, Inc., a private consulting firm based in
Orlando, Florida that he founded in 1988. Dr. Fishkind is a member of the Board
of Directors of Engle Homes. Dr. Fishkind served on the Florida Governor's
Economic Advisory Board from 1979 to 1981. He is 47 years old.

NELSON SCHWAB III. Mr. Schwab has been a director since 1994. He is a
Managing Director of Carousel Capital, a merchant banking firm based in
Charlotte, North Carolina specializing in middle market acquisitions. Mr. Schwab
is a Member of the Board of Directors of First Union National Bank of North
Carolina, Silver Dollar City, Inc., Griffin Corporation and Burlington
Industries. He served as the Chairman of the Carolinas Partnership and the
Charlotte Chamber of Commerce. Mr. Schwab is 52 years old.

JOHN CROSLAND, JR. Mr. Crosland has been a director since 1995. He has
been Chairman and Chief Executive Officer of The Crosland Group, Inc., a fully
diversified real estate development company, since 1971. Mr. Crosland is a
member of the Board of Directors of First Union National Bank of North Carolina,
Fox Ridge Homes and Writer Corporation. He has been active in the home-building
industry holding office at local, state and national levels. From 1977 to 1989
he served as Chairman of the North Carolina Housing Finance Agency. Among his
diverse civic involvement, Mr. Crosland was a founder and first Chairman of
Charlotte's Habitat for Humanity; currently serves on the Habitat for Humanity
International Affiliates Advisory Committee; was 1996 Chairman of the Davidson
College Board of Visitors and is a member of the Davidson Board of Trustees. Mr.
Crosland was honored by the home building industry by being named 1985 Builder
of the Year by Professional Builder Magazine and has been inducted into both the
National and North Carolina Housing Halls of Fame. Mr. Crosland is 68 years old.

WILLIAM B. MCGUIRE, JR. Mr. McGuire is the Chairman of the Board. Prior to
the formation of Summit Properties, Mr. McGuire served as a senior partner of
the predecessor to Summit Properties and as a general partner of each of the
partnerships which transferred Communities to the Operating Partnership when it
was formed. Mr. McGuire founded McGuire Properties, Inc., the predecessor to
Summit Properties, in 1972. He has been active in the following professional and
community organizations: Residential, Multifamily and Urban Development Mixed
Use Councils of the Urban Land Institute; Charlotte Advisory Board of
NationsBank of North Carolina, N.A.; and the Board of Governors of The Charlotte
City Club. He was a Trustee of the North Carolina Nature Conservancy; a Founder
and Director of Habitat for Humanity of Charlotte; and the Founder and President
of The Neighborhood Medical Clinic. Mr. McGuire is 52 years old.

WILLIAM F. PAULSEN. Mr. Paulsen is the President and Chief Executive
Officer and a director. Prior to the formation of Summit Properties, Mr. Paulsen
was a senior partner and the Chief Executive Officer of the predecessor to
Summit Properties and a general partner of each of the partnerships which
transferred Communities to the Operating Partnership when it was formed. Mr.
Paulsen joined the predecessor to Summit Properties in 1982. He was selected as
North Carolina Entrepreneur of the Year in 1990. In addition to his
responsibilities with Summit Properties, Mr. Paulsen is a full Member and
Residential Council Member of the Urban Land Institute. He is a Member of the
Board of Directors of The Beach Company, a real estate investment company
specializing primarily in commercial and resort development in the southeastern
United States and is a trustee of The Asheville School. Mr. Paulsen also served
as a Vice President of the Charlotte Apartment Association. He is 50 years old.

Executive Officers Who Are Not Directors

RAYMOND V. JONES. Mr. Jones is the Executive Vice President/Development
and Construction. Prior to the formation of Summit Properties, Mr. Jones served
as regional partner for the Charlotte division of the

30
<PAGE> 33

predecessor to Summit Properties, as well as a general partner of several of the
partnerships which transferred Communities to the Operating Partnership when it
was formed. Mr. Jones is a member of the Board of Directors and Chairman of the
Charlotte Mecklenburg Housing Partnership, a non-profit venture organized to
provide low income housing. Additionally, he is a member of the Board of
Directors of Golf Trust of America, Inc. a recently formed real estate
investment trust listed on the American Stock Exchange. He also served as
President of the Charlotte Apartment Association and the Apartment Association
of North Carolina. Mr. Jones is 49 years old.

MICHAEL L. SCHWARZ. Mr. Schwarz is an Executive Vice President and Chief
Financial Officer. Prior to joining Summit Properties in 1994, Mr. Schwarz was a
co-founder and spent five years as the Senior Vice President and Chief Financial
Officer of Industrial Developments International, Inc., a developer of
industrial real estate. He is a certified public accountant. Mr. Schwarz served
as the Chairman of the Board of The Study Hall of Emmaus House, a non-profit
educational facility serving inner-city youths. Mr. Schwarz is 36 years old.

WILLIAM B. HAMILTON. Mr. Hamilton was hired by Summit Properties in
December 1996 to assume the positions of Executive Vice President/Property
Management of Summit Properties and President of Summit Management Company, the
Operating Partnership's management subsidiary. Prior to joining Summit
Properties, Mr. Hamilton spent one year as a Senior Vice President with Insignia
Management Group in Atlanta, Georgia where he was responsible for property and
asset management for 50,000 multifamily apartments. For the four years
immediately prior thereto, Mr. Hamilton was the President of NPI Property
Management Corporation, where his management portfolio consisted of 31,000
multifamily apartments. Mr. Hamilton's experience in the property and asset
management field for multifamily apartments has spanned more than 20 years. Mr.
Hamilton has been designated a certified property manager by the Institute of
Real Estate Management and a Certified Apartment Supervisor by the National
Apartment Association. Mr. Hamilton is 49 years old.

DAVID F. TUFARO. Mr. Tufaro is an Executive Vice President and Chief
Investment Officer. Prior to the formation of Summit Properties, Mr. Tufaro
served as regional partner for the Baltimore division of the predecessor to
Summit Properties, as well as a general partner of several of the partnerships
which transferred Communities to the Operating Partnership when it was formed.
Mr. Tufaro currently serves as President of the Board of Directors of the
Baltimore Corporation for Housing Partnerships, a non-profit housing sponsor for
low income families, and is President of the Board of Directors of the Roland
Park Community Foundation. Mr. Tufaro is 50 years old.

JOHN T. GRAY. Mr. Gray was the Executive Vice President/Property
Management of Summit Properties and the President of Summit Management Company,
the Operating Partnership's management subsidiary, until his departure from
Summit Properties in January 1997. Prior to the formation of Summit Properties,
Mr. Gray was President of Old Summit Management Company, as well as a general
partner of several of the partnerships which transferred Communities to the
Operating Partnership when it was formed. From the formation of Old Summit
Management Company in 1985 until his depature, he was responsible for the
leasing, management and maintenance of the Communities, as well as all
residential properties managed for related and unrelated third parties. Mr. Gray
is 41 years old.

ITEM 6. EXECUTIVE COMPENSATION

The Operating Partnership is managed by Summit Properties, in its capacity
as the general partner of the Operating Partnership. Consequently, the Operating
Partnership has no directors or executive officers and pays no compensation. The
information provided in this Item 6 reflects compensation paid to the Directors
and executive officers of Summit Properties.

DIRECTOR COMPENSATION

Directors of Summit Properties who are also employees receive no additional
compensation for their services as directors. Non-employee Directors of Summit
Properties (the "Independent Directors") received an annual director's fee of
$12,000 in 1996. Each Independent Director also receives $1,000 for each regular

31
<PAGE> 34

meeting of the Board of Directors attended, $1,000 for each special meeting of
the Board of Directors attended, $250 for each committee meeting attended if
held concurrently with a Board of Directors regular or special meeting and $500
for each committee meeting attended if not held concurrently with a Board of
Directors regular or special meeting. Under the Summit Properties 1994 Stock
Option Plan, following each annual meeting of stockholders, each Independent
Director also receives a non-qualified option to purchase 2,000 shares of Common
Stock of Summit Properties ("Common Stock") at a price equal to the market price
of the Common Stock on the date of grant.

EXECUTIVE COMPENSATION

Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to the Named Executive Officers, whose
compensation exceeded $100,000 during the fiscal year ended December 31, 1996.
Because Summit Properties completed its Initial Offering on February 15, 1994,
amounts paid during 1994 reflect only the portion of the year following
completion of the Initial Offering.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL -------------------------
COMPENSATION RESTRICTED SECURITIES
------------------ STOCK UNDERLYING ALL OTHER
SALARY BONUS AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($) ($) (#) ($)(2)
- - --------------------------------- ---- ------- ------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
William F. Paulsen............... 1996 232,875 0 231,075(3) 0 4,750
President and Chief Executive 1995 232,875 72,491 0 0 4,620
Officer 1994 225,000 33,840 0 40,000 3,653
Raymond V. Jones................. 1996 165,000 60,000 154,050(4) 0 4,750
Executive Vice President/ 1995 155,250 100,359 0 0 4,620
Development and Construction 1994 150,000 22,560 0 27,000 3,131
Michael L. Schwarz............... 1996 155,250 38,812 0 0 4,750
Executive Vice President and 1995 155,250 63,414 0 30,000 0
Chief Financial Officer 1994 150,000 39,420 0 27,000 0
David F. Tufaro.................. 1996 155,250 43,112 154,050(5) 0 4,750
Executive Vice President and 1995 155,250 40,000 0 0 4,130
Chief Investment Officer 1994 150,000 22,560 0 27,000 1,666
John T. Gray..................... 1996 155,250 23,250 0 0 4,750
Executive Vice President/ 1995 155,250 59,533 0 30,000 4,192
Property Management and 1994 150,000 26,280 0 27,000 3,553
President of Summit Management
Company
</TABLE>

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

(1) Includes amounts deferred under Summit Properties' 401(k) plan. Under the
plan, employees generally are permitted to invest up to 17% of their salary
on a pre-tax basis, subject to a statutory maximum.

(2) Amounts represent matching contributions made by Summit Properties to the
Named Executive Officer's account under Summit Properties' 401(k) plan.

(3) Mr. Paulsen received an award of 11,700 shares of restricted stock on
January 12, 1996 under the Summit Properties 1994 Stock Option and Incentive
Plan that vest over a five year period. The value of vested and unvested
shares of such restricted stock as of December 31, 1996 was $258,862. Twenty
percent (20%) of the shares of restricted stock vested on the date of the
grant and twenty percent (20%) will vest on January 1st of each of the next
four years. Dividends will be paid on the shares of restricted stock.

(4) Mr. Jones received an award of 7,800 shares of restricted stock on January
12, 1996 under the Summit Properties 1994 Stock Option and Incentive Plan
that vest over a five year period. The value of vested and unvested shares
of such restricted stock as of December 31, 1996 was $172,575. Twenty
percent (20%) of the shares of restricted stock vested on the date of the
grant and twenty percent (20%) will vest on January 1st of each of the next
four years. Dividends will be paid on the shares of restricted stock.

(5) Mr. Tufaro received an award of 7,800 shares of restricted stock on January
12, 1996 under the Summit Properties 1994 Stock Option and Incentive Plan
that vest over a five year period. The value of vested and unvested shares
of such restricted stock as of

32
<PAGE> 35

December 31, 1996 was $172,575. Twenty percent (20%) of the shares of
restricted stock vested on the date of the grant and twenty percent (20%)
will vest on January 1st of each of the next four years. Dividends will be
paid on the shares of restricted stock.

Option Grants in Fiscal Year 1996. No options have been or will be granted
to executive officers of Summit Properties with respect to the fiscal year ended
December 31, 1996.

Option Exercises and Year-End Holdings. The following table sets forth the
aggregated number of options to purchase shares of Common Stock exercised in
1996 and the value of options to purchase shares of Common Stock held on
December 31, 1996 by the Named Executive Officers.

AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996 AND
FISCAL YEAR-END 1996 OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FISCAL OPTIONS AT FISCAL
ACQUIRED ON VALUE YEAR-END(#) YEAR-END($)(1)
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - ------------------------------ ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
William F. Paulsen............ 0 0 40,000/0 125,000/0
Raymond V. Jones.............. 0 0 27,000/0 84,375/0
David F. Tufaro............... 0 0 27,000/0 84,375/0
John T. Gray.................. 0 0 39,000/18,000 144,315/89,910
Michael L. Schwarz............ 0 0 39,000/18,000 144,315/89,910
</TABLE>

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

(1) Based on a closing price of $22.125 per share of Common Stock on December
31, 1996, the last 1996 trading day for Summit Properties' Common Stock.

EMPLOYMENT AND NONCOMPETITION AGREEMENTS

Summit Properties has entered into employment agreements (the "Employment
Agreements") with each of Messrs. Paulsen, Jones, Tufaro, Gray, Schwarz and
Hamilton. The employment agreement with Mr. Gray has terminated as a result of
his departure from Summit Properties in January 1997. The agreements with
Messrs. Paulsen, Jones and Tufaro will expire on February 15, 1999 unless
otherwise extended, although these officers can resign at any time after giving
180 days' prior written notice, without breaching such agreements. The agreement
with Mr. Schwarz had an original term through February 16, 1996, and has been
automatically extended until such time as terminated pursuant to the terms of
such agreement. Mr. Hamilton's agreement will expire on December 5, 1998 unless
otherwise extended pursuant to the terms of the agreement. The Employment
Agreements provide that the officers will be paid the base salaries set forth
next to their names in the Summary Compensation Table above, which amounts may
be increased or decreased (subject to certain limitations) at the discretion of
Summit Properties' Compensation Committee, plus any other amounts the
Compensation Committee, in its discretion, determines to award. The Employment
Agreements also provide for certain severance benefits. If the employment of
Messrs. Paulsen, Jones or Tufaro is terminated by either Summit Properties
without "cause" or by the employee for "cause" (as defined in the Employment
Agreements) during the original term of the Employment Agreement, the terminated
employee will be entitled to receive as severance an amount equal to his base
salary, as in effect on the date of termination, through the remainder of his
original term of employment under his Employment Agreement, payable over time.
If the employment of Mr. Hamilton is terminated by Summit Properties without
"cause" or by Mr. Hamilton for "cause" (as defined in the Employment Agreement),
Mr. Hamilton will be entitled to receive as severance an amount equal to his
base salary as in effect on the date of termination for a period of twelve
months, payable over time, if such termination occurs during the original term
of his Employment Agreement, or for a period of six months, payable over time,
if such termination occurs subsequent to the original term of his Employment
Agreement. Upon the termination of the employment of Messrs. Paulsen, Jones or
Tufaro by reason of death or disability, his estate or he, as the case may be,
will be entitled to receive a payment equal to his base salary, as in effect on
the date of termination, through the remainder of his original term of
employment under his Employment Agreement, except that in the case of
termination by reason of disability the amount of such benefit shall be offset
by the proceeds of any

33
<PAGE> 36

disability plan awards provided by Summit Properties. Upon the termination of
the employment of Mr. Hamilton by reason of death or disability, his estate or
he, as the case may be, will be entitled to receive a payment equal to his base
salary, as in effect on the date of termination, for a period of twelve months,
except that in the case of termination by reason of disability the amount of
such benefit shall be offset by the proceeds of any disability plan awards
provided by Summit Properties. The Employment Agreements provide that if any of
Messrs. Paulsen, Jones, Tufaro or Hamilton are terminated by Summit Properties
for "cause" or if they voluntarily terminate their employment (as defined in the
Employment Agreements), no severance amount will be payable. If the employment
of any of Messrs. Paulsen, Jones, Schwarz or Tufaro is terminated for any reason
after the original term of his employment, no severance amount will be payable.

Each of these officers also entered into noncompetition agreements (the
"Noncompetition Agreements") with Summit Properties. These agreements (except
for the agreements with Mr. Schwarz and Mr. Hamilton), subject to certain
limited exceptions, prohibit such individuals from engaging, directly or
indirectly, during the noncompetition period (the "Noncompetition Period") in
any business which engages or attempts to engage in, directly or indirectly, the
acquisition, development, construction, operation, management or leasing of any
multifamily apartment residential real estate property within a 30 mile radius
of any property that Summit Properties owns, operates or manages or that Summit
Properties has undertaken to acquire, develop, construct, operate, manage or
lease. The Noncompetition Period is the period beginning on the date of
termination of employment and ending on the latest of (i) one year from the
termination of their employment with Summit Properties or (ii) the date on which
the severance amounts described above cease. Prior to their termination of
employment, subject to certain limited exceptions, the Noncompetition Agreements
prohibit all of the executive officers from engaging in any businesses other
than those of Summit Properties without the prior written consent of the Board
of Directors of Summit Properties (or in the case of Mr. Schwarz and Mr.
Hamilton, without the prior written consent of the President of Summit
Properties). The Noncompetition Agreements with each of the officers also
prohibit such officers for certain periods after their termination from Summit
Properties from hiring certain key employees of Summit Properties or
participating in any efforts to persuade such employees to leave Summit
Properties and from engaging in any manner, directly or indirectly, in any
business which engages or attempts to engage in the acquisition, development,
construction, operation, management or leasing of any of Summit Properties' then
existing communities or development or acquisition opportunities. Under the
Noncompetition Agreements, such officers are prohibited from disclosing trade
secrets and, for certain periods, other confidential information of Summit
Properties.

SEVERANCE AGREEMENTS

On January 2, 1997, Summit Properties entered into Severance Agreements
with each of Messrs. Paulsen, Jones, Schwarz, Hamilton and McGuire (the
"Severance Agreements"). The Severance Agreements provide for the payment of
severance benefits of up to three times such officer's annual base salary and
cash bonus in the event of the termination of the officer's employment under
certain circumstances following certain "change in control" or "combination
transactions" involving a consolidation or merger. The benefits payable under
the terms of the Severance Agreements are subject to reduction by the amount of
any severance benefits payable under applicable Employment Agreements.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Summit Properties' Compensation Committee consists of Messrs. Fishkind,
Hance, Schwab and Crosland. None of these individuals has served as an officer
of Summit Properties. Messrs. Hance, Schwab and Crosland serve as officers and
directors of lending institutions that have provided financing and related
services to the Operating Partnership. James H. Hance, Jr. is a Vice Chairman
and the Chief Financial Officer of NationsBank Corporation ("NationsBank") and
Nelson Schwab III and John Crosland, Jr. are members of the Board of Directors
of First Union National Bank of North Carolina ("First Union"). NationsBank and
First Union have provided the Operating Partnership with credit enhancements on
certain of its communities financed with tax-exempt bonds. First Union is also
the joint provider of the Operating Partnership's $150 million unsecured credit
facility. In connection with the development of Summit Norcroft II, the
Operating Partnership purchased a parcel of land in August 1996 from an
affiliate of Mr. Crosland for a purchase price of $378,000.

34
<PAGE> 37

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Operating Partnership is managed by Summit Properties, in its capacity
as the general partner of the Operating Partnership. As discussed above, Messrs.
Hance and Schwab serve as officers and directors of lending institutions that
have provided financing and related services to the Operating Partnership. James
H. Hance, Jr. is a Vice Chairman and the Chief Financial Officer of NationsBank,
and Nelson Schwab III is a member of the Board of Directors of First Union. Both
NationsBank and First Union provided the Operating Partnership with credit
enhancements on certain of its Communities financed with tax-exempt bonds. First
Union is also the joint provider of the Operating Partnership's $150 million
unsecured credit facility. In connection with the development of Summit Norcroft
II, the Operating Partnership purchased a parcel of land in August 1996 from an
affiliate of Mr. Crosland for a purchase price of $378,000.

ITEM 8. LEGAL PROCEEDINGS

Neither the Operating Partnership nor any of the Communities is presently
subject to any material litigation nor, to the Operating Partnership's
knowledge, is any litigation threatened against the Operating Partnership or any
of the Communities, other than routine actions for negligence or other claims
and administrative proceedings arising in the ordinary course of business, some
of which are expected to be covered by liability insurance and all of which
collectively are not expected to have a material adverse effect on the business,
financial condition or results of operations of the Operating Partnership.

ITEM 9. MARKET PRICE AND DISTRIBUTIONS AND RELATED SECURITY HOLDER MATTERS

There is no established public trading market for the Units. As of March
31, 1997, there were 113 holders of record of Units.

The Operating Partnership increased its annualized distributions to
unitholders to $1.59 per share from $1.55 in the first quarter of 1997. The
Operating Partnership expects any future increases in its distributions to be
made at levels that allow it to achieve a conservative payout ratio. The
Operating Partnership currently intends to make regular quarterly distributions
to unitholders. Any future distributions will be declared at the discretion of
the Board of Directors of Summit Properties and will depend on actual cash flow
of the Operating Partnership, its financial condition, capital requirements, the
annual distribution requirements under the REIT provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), and such other factors as the
Board of Directors may deem relevant.

The following table sets forth the quarterly distributions per Unit
declared by the Operating Partnership during the periods noted:

<TABLE>
<CAPTION>
CALENDAR PERIOD DISTRIBUTION
------------------------------------------------------------ ------------
<S> <C>
1995:
First Quarter............................................. $.3775
Second Quarter............................................ $.3775
Third Quarter............................................. $.3775
Fourth Quarter............................................ $.3775
1996:
First Quarter............................................. $.3875
Second Quarter............................................ $.3875
Third Quarter............................................. $.3875
Fourth Quarter............................................ $.3875
1997:
First Quarter............................................. $.3975
</TABLE>

35
<PAGE> 38

ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES

During the past three years, the Operating Partnership has issued Units in
private placements in reliance on the exemption from registration under Section
4(2) of the Securities Act in the amounts and for the consideration set forth
below:

- In October 1994, the Operating Partnership issued an aggregate of 38,500
Units (valued at approximately $735,000 at the time of the acquisition)
to the seller of the land for Summit River Crossing in consideration of
its interest in the property.

- In connection with the Crosland Acquisition in May 1995, the Operating
Partnership issued an aggregate of 1,485,998 Units (valued at
approximately $26.2 million at the time of the acquisition) to the
sellers of the Crosland Acquisition Communities in consideration of their
interests in such properties.

- In June 1995, the Operating Partnership issued 4,000,000 Units to Summit
Properties in exchange for a cash contribution of approximately $65.9
million.

- In December 1995, the Operating Partnership issued an aggregate of 45,359
Units (valued at approximately $896,000 at the time of the acquisition)
to the seller of the land for Summit Ballantyne in consideration of its
interest in the property.

- In January 1996, the Operating Partnership issued an aggregate of 106,330
Units (valued at approximately $2.1 million at the time of the
acquisition) to the sellers of the land for Summit Sedgebrook in
consideration of their interest in the property.

- In August 1996, the Operating Partnership issued 5,750,000 Units to
Summit Properties in exchange for a cash contribution of approximately
$97.6 million.

- In January 1997, the Operating Partnership issued 315,029 Units to Summit
Properties in exchange for a cash contribution of approximately $6.8
million.

- In connection with the purchase of Summit Sand Lake in February 1997, the
Operating Partnership issued (a) an aggregate of 194,495 Units (valued at
approximately $3.9 million at the time of the acquisition) to the sellers
of Summit Sand Lake in partial consideration of their interest in the
property and (b) 243,608 Units to Summit Properties in exchange for
Summit Properties' interest in the property, which was acquired through
the issuance of 243,608 shares of Common Stock.

- From time to time, Summit Properties has issued an aggregate of 59,527
shares of Common Stock pursuant to its Dividend Reinvestment Plan. Summit
Properties has contributed the proceeds (approximately $1.0 million) of
these sales to the Operating Partnership in consideration of an aggregate
of 59,527 Units.

- From time to time, Summit Properties has issued an aggregate of 85,856
shares of Common Stock pursuant to its 1996 Non-Qualified Employee Stock
Purchase Plan. Summit Properties has contributed the proceeds
(approximately $1.8 million) of these sales to the Operating Partnership
in consideration of an aggregate of 85,856 Units.

- From time to time, Summit Properties has issued an aggregate of 54,073
shares of Common Stock upon the exercise of stock options. Summit
Properties has contributed the proceeds (approximately $1.0 million) of
these sales to the Operating Partnership in consideration of an aggregate
of 54,073 Units.

- From time to time, Summit Properties has issued an aggregate of 72,939
shares of Common Stock in connection with restricted stock awards. Each
time a share of Common Stock is issued in connection with such an award,
the Operating Partnership issues a Unit to Summit Properties;
consequently, 72,939 Units have been issued to Summit Properties to date.

- From time to time, Summit Properties has issued an aggregate of 4,501
shares of Common Stock in connection with unrestricted stock awards. Each
time a share of Common Stock is issued in connection

36
<PAGE> 39

with such an award, the Operating Partnership issues a Unit to Summit
Properties; consequently, 4,501 Units have been issued to Summit
Properties to date.

ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED

GENERAL

The following description is only a summary of certain provisions of the
Operating Partnership Agreement and is subject to, and qualified in its entirety
by, the Operating Partnership Agreement, a copy of which has been filed with the
Commission.

VOTING RIGHTS

Under the Operating Partnership Agreement, the Operating Partnership's
limited partners (the "Limited Partners") do not have voting rights relating to
the operation and management of the Operating Partnership except in connection
with certain amendments to the Operating Partnership Agreement.

TRANSFERABILITY OF INTERESTS

Summit Properties may not transfer any of its general partner interest or
withdraw as the general partner of the Operating Partnership (the "General
Partner"), or transfer any of its Units, unless Limited Partners (other than
Summit Properties) holding a majority of Units consent to such transfer or
withdrawal or such transfer is to an entity which is wholly-owned by Summit
Properties and is a "qualified REIT subsidiary" under the Code.

The Limited Partners generally may transfer their interests in the
Operating Partnership, in whole or in part, without the consent of the General
Partner. No Limited Partner has the right to substitute a transferee as a
Limited Partner in his place without the consent of the General Partner, which
consent may be withheld in the sole discretion of the General Partner.

ISSUANCE OF ADDITIONAL UNITS

The Operating Partnership is authorized to issue Units and other
partnership interests to its partners or to other persons for such consideration
and on such terms and conditions as Summit Properties, as the General Partner,
in its sole discretion, may deem appropriate.

REDEMPTION RIGHTS; PREEMPTIVE RIGHTS

Pursuant to the Operating Partnership Agreement, the Limited Partners have
redemption rights which, subject to certain limitations, enable them to cause
the Operating Partnership to redeem each Unit for cash equal to the value of a
share of Common Stock of Summit Properties or, at Summit Properties' election,
Summit Properties may purchase each Unit offered for redemption for cash or one
share of Common Stock of Summit Properties (the "Redemption Rights"). In
connection with any capital contribution made to the Operating Partnership, the
Limited Partners (other than Summit Properties) have the right to contribute to
the Operating Partnership an amount equal to or less than their then-existing
percentage interest in such capital contribution.

MANAGEMENT LIABILITY AND INDEMNIFICATION

The Operating Partnership Agreement generally provides that the General
Partner will incur no liability to the Operating Partnership or any Limited
Partner for losses sustained or liabilities incurred as a result of errors in
judgment or of any act or omission if the General Partner acted in good faith.
In addition, the General Partner is not responsible for any misconduct or
negligence on the part of its agents provided the General Partner appointed such
agents in good faith. The Operating Partnership Agreement also provides for
indemnification of the General Partner, the Directors and officers of the
General Partner, and such other persons as the General Partner may from time to
time designate, against any and all losses, claims, damages, liabilities, joint
or several expense (including reasonable legal fees and expenses), judgments,
fines, settlements and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil,

37
<PAGE> 40

criminal, administrative or investigative, that relate to the operations of the
Operating Partnership in which such person may be involved.

AMENDMENT

Amendments to the Operating Partnership Agreement may be proposed by the
General Partner or by Limited Partners (other than Summit Properties) holding
twenty percent (20%) or more of the partnership interests. Certain amendments
that would, among other things, convert a Limited Partner's interest to a
General Partner interest, modify the limited liability of a Limited Partner in a
manner adverse to such Limited Partner, alter rights of a Limited Partner to
receive distributions or allocations, alter or modify the Redemption Rights in a
manner adverse to a Limited Partner, or cause the termination of the Operating
Partnership prior to the expiration of the term of the Operating Partnership
Agreement, require the consent of each Limited Partner adversely affected by
such amendment.

MANAGEMENT FEES AND EXPENSES

Summit Properties may not be compensated for its services as General
Partner. However, Summit Properties may be reimbursed for all expenses that it
incurs relating to the ownership and operation of, or for the benefit of, the
Operating Partnership.

DISTRIBUTIONS AND ALLOCATIONS

The Operating Partnership Agreement provides that the Operating Partnership
will distribute all available cash (as defined in the Operating Partnership
Agreement) on at least a quarterly basis, in amounts determined by the General
Partner in its sole discretion, to the partners in accordance with their
respective percentage interests in the Operating Partnership. Upon liquidation
of the Operating Partnership, after payment of, or adequate provision for, debts
and obligations of the Operating Partnership, including any partner loans, any
remaining assets of the Operating Partnership will be distributed to all
partners with positive capital accounts in accordance with their respective
positive capital account balances.

Profit and loss of the Operating Partnership for each fiscal year of the
Operating Partnership generally will be allocated among the partners in
accordance with their respective interests in the Operating Partnership. Taxable
income and loss will be allocated in the same manner, subject to compliance with
the provisions of Code sections 704(b) and 704(c) and Treasury Regulations
promulgated thereunder.

TERM

The Operating Partnership will continue until December 31, 2093, or until
sooner dissolved upon (i) withdrawal of the General Partner (unless the Limited
Partners elect to continue the Operating Partnership), (ii) through December 31,
2053, an election to dissolve the Operating Partnership made by the General
Partner with the consent of the Limited Partners (including Summit Properties)
holding 85% of the limited partner interests in the Operating Partnership, (iii)
on or after January 1, 2054, an election to dissolve the Operating Partnership
made by the General Partner in its sole and absolute discretion, (iv) entry of a
decree of judicial dissolution, (v) the sale of all or substantially all of the
assets of the Operating Partnership, or (vi) a final and non-appealable judgment
ruling the General Partner bankrupt or insolvent (unless the Limited Partners
elect to continue the Operating Partnership prior to the entry of such order or
judgment).

TAX MATTERS

Pursuant to the Operating Partnership Agreement, the General Partner will
be the tax matters partner of the Operating Partnership and, as such, will have
authority to handle tax audits and to make tax elections under the Code on
behalf of the Operating Partnership.

ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Operating Partnership is managed by Summit Properties, which serves as
general partner of the Operating Partnership.

38
<PAGE> 41

Summit Properties' Articles of Incorporation and Bylaws limit the liability
of Summit Properties' Directors and officers to Summit Properties and its
stockholders to the fullest extent permitted from time to time by Maryland law.
Maryland law presently permits the liability of directors and officers to a
corporation or its stockholders for money damages to be limited, except (i) to
the extent that it is proved that the director or officer actually received an
improper benefit or profit; or (ii) if a judgment or other final adjudication is
entered in a proceeding based on a finding that the director's or officer's
action or failure to act was the result of active and deliberate dishonesty and
was material to the cause of action adjudicated in the proceeding. This
provision does not limit the ability of Summit Properties or its stockholders to
obtain other relief, such as an injunction or rescission.

Summit Properties' Articles of Incorporation and Bylaws also require Summit
Properties to indemnify its Directors, officers and certain other parties to the
fullest extent permitted from time to time by Maryland law. Maryland law permits
a corporation to indemnify its directors, officers and certain other parties
against judgements, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which they may be
made a party by reason of their service to or at the request of the corporation,
unless it is established that (i) the act or omission was committed in bad faith
or was the result of active and deliberate dishonesty; (ii) the indemnified
party actually received an improper personal benefit; or (iii) in the case of
any criminal proceeding, the indemnified party had reasonable cause to believe
that the act or omission was unlawful.

Pursuant to the authority granted in Summit Properties' Articles of
Incorporation and Bylaws, Summit Properties and its affiliate the Operating
Partnership have entered into indemnification agreements with each of Summit
Properties' Directors and executive officers. The indemnification agreements
require, among other matters, that Summit Properties indemnify its executive
officers and Directors to the fullest extent permitted by law and advance to
such officers and Directors all related expenses, subject to reimbursement if it
is subsequently determined that indemnification is not permitted. Summit
Properties must also indemnify and advance all expenses incurred by such
officers and Directors seeking to enforce their rights under the indemnification
agreements and may cover such officers and Directors under the Summit
Properties' directors' and officers' liability insurance. Although the form of
indemnification agreement offers substantially the same scope of coverage
afforded by law, it provides assurance to Directors and officers that
indemnification will be available, because, as a contract, it cannot be modified
unilaterally in the future by the Board of Directors or the Stockholders to
eliminate the rights it provides.

ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See "Index to Financial Statements and Supplementary Data" on page F-1 of
this Form 10.

ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not Applicable.

ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS

(a)Financial Statements and Financial Statement Schedules

See "Index to Financial Statements and Supplementary Data" on page F-1
of this Form 10.

39
<PAGE> 42

(b) Exhibits

<TABLE>
<S> <C>
3.1 Agreement of Limited Partnership of the Operating Partnership, as amended(5)
10.1 Option and Transfer Agreement among the Management Company, William F. Paulsen
and the Operating Partnership(1)
10.2 Letter of Commitment to enter into the Mortgage Loan between the Operating
Partnership and The Northwestern Mutual Life Insurance Company(1)
10.2.1 Promissory Note(2)
10.2.2 Mortgage and Security Agreement and Financing Statement(2)
10.3 $31,000,000 Loan Agreement from Wachovia Bank of North Carolina, N.A.(3)
10.4 $150,000,000 Credit Agreement(4)
12.1 Calculation of Ratios of Earnings to Fixed Charges(5)
21.1 List of Subsidiaries(5)
23.1 Consent of Reznick Fedder & Silverman
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Arthur Andersen LLP
23.4 Consent of Reznick Fedder & Silverman
27.1 Financial Data Schedule(5)
</TABLE>

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

(1) Previously filed as an exhibit to Summit Properties' Registration Statement
on Form S-11, File Number 33-72454.

(2) Previously filed as an exhibit to Summit Properties' Annual Report on Form
10-K for the fiscal year ended December 31, 1993.

(3) Previously filed as an exhibit to Summit Properties' Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1996.

(4) Previously filed as an exhibit to Summit Properties' Annual Report on Form
10-K for the fiscal year ended December 31, 1996.

(5) Previously filed as an exhibit to this Registration Statement.

40
<PAGE> 43

INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

SUMMIT PROPERTIES PARTNERSHIP, L.P.:

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Balance Sheets as of March 31, 1997 (Unaudited), December 31, 1996 and 1995........... F-3
Statements of Earnings for the Three Months Ended March 31, 1997 and 1996 (Unaudited),
and the Years Ended December 31, 1996, 1995 and 1994................................ F-4
Statements of Partners' Equity for the Three Months Ended March 31, 1997 (Unaudited),
and the Years Ended December 31, 1996, 1995 and 1994................................ F-5
Statements of Cash Flows for the Three Months Ended March 31, 1997 and 1996
(Unaudited), and the Years Ended December 31, 1996, 1995 and 1994................... F-6
Notes to Financial Statements......................................................... F-7
The following financial statement supplementary data of the Operating Partnership
required to be included is listed below:
Schedule III -- Real Estate and Accumulated Depreciation.............................. F-19
</TABLE>

All other schedules are omitted because they are not applicable or not required.

ACQUISITIONS:

<TABLE>
<S> <C>
Portofino Place, Ltd. (currently Summit Portofino): Financial Statements for the Years
Ended December 31, 1996 and 1995 and Independent Auditors' Report................... F-22
Summit Mayfaire Apartments: Historical Summary of Revenues and Direct Operating
Expenses for the Year Ended December 31, 1996 and Independent Auditors' Report...... F-32
Sand Lake Joint Venture (currently Summit Sand Lake): Financial Statements as of
December 31, 1996 and Report of Independent Certified Public Accountants............ F-36
Summit American Associates (currently Summit Plantation): Financial Statements for the
Year Ended December 31, 1995 and Independent Auditors' Report....................... F-45
Summit Properties Partnership, L.P. Pro Forma Condensed Consolidated Statement of
Earnings for the Three Months Ended March 31, 1997.................................. F-54
Summit Properties Partnership, L.P. Pro Forma Condensed Consolidated Statement of
Earnings for the Year Ended December 31, 1996....................................... F-56
</TABLE>

F-1
<PAGE> 44

INDEPENDENT AUDITORS' REPORT

Board of Directors
Summit Properties Inc.
Charlotte, North Carolina

We have audited the accompanying balance sheets of Summit Properties
Partnership, L.P. as of December 31, 1996 and 1995, and the related statements
of earnings, partners' equity, and cash flows of Summit Properties Partnership,
L.P. and Predecessors (Summit Entities -- see Note 1), as more fully described
in Note 1, for each of the three years in the period ended December 31, 1996.
Our audits also included the financial statement schedule listed in the Index on
page F-1. These financial statements and financial statement schedule are the
responsibility of the management of Summit Properties Partnership, L.P. and
Predecessors. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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, such financial statements present fairly, in all material
respects, the financial position of Summit Properties Partnership, L.P. as of
December 31, 1996 and 1995, and the results of operations and cash flows of
Summit Properties Partnership, L.P. and Predecessors for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

/s/ Deloitte & Touche LLP
- - -------------------------
DELOITTE & TOUCHE LLP

Charlotte, North Carolina
March 24, 1997

F-2
<PAGE> 45

SUMMIT PROPERTIES PARTNERSHIP, L.P.

BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------
1997 1996 1995
------------ -------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Real estate assets:
Land and land improvements........................... $111,565 $102,605 $ 90,336
Buildings and improvements........................... 526,963 472,996 399,057
Furniture, fixtures and equipment.................... 46,076 43,021 36,336
-------- -------- --------
684,604 618,622 525,729
Less: accumulated depreciation....................... (90,832) (85,651) (67,884)
-------- -------- --------
Operating real estate assets.................... 593,772 532,971 457,845
Construction in progress............................. 103,568 86,157 59,300
Investment in real estate joint venture.............. -- -- 1,235
-------- -------- --------
Net real estate assets.......................... 697,340 619,128 518,380
Cash and cash equivalents................................. 3,378 3,665 2,881
Restricted cash........................................... 4,809 4,121 4,188
Investment in Summit Management Company................... 554 687 590
Deferred financing costs, net of accumulated amortization
of $2,685, $2,441 and $1,914 in 1997, 1996 and 1995..... 4,436 4,675 5,398
Other assets.............................................. 2,897 3,088 2,172
-------- -------- --------
Total assets.............................................. $713,414 $635,364 $533,609
======== ======== ========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Notes payable........................................ $368,562 $309,933 $297,010
Accrued interest payable............................. 1,700 1,318 903
Accounts payable and accrued expenses................ 11,736 7,257 7,850
Distributions payable................................ 10,757 10,244 7,699
Security deposits and prepaid rents.................. 3,685 3,196 2,651
-------- -------- --------
Total liabilities............................... 396,440 331,948 316,113
-------- -------- --------
Commitments
Partners' equity:
Operating units issued and outstanding 27,297,098,
26,434,920 and 20,433,793
General partner -- outstanding 272,971, 264,349 and
204,338......................................... 3,901 3,766 2,718
Limited partners -- outstanding 27,024,127,
26,170,571 and 20,229,455....................... 313,073 299,650 214,778
-------- -------- --------
Total partners' equity.......................... 316,974 303,416 217,496
-------- -------- --------
Total liabilities and partners' equity.................... $713,414 $635,364 $533,609
======== ======== ========
</TABLE>

See notes to financial statements.

F-3
<PAGE> 46

SUMMIT PROPERTIES PARTNERSHIP, L.P.

STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------------- -------------------------------------------
1997 1996 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental............................ $ 25,780 $ 20,190 $ 88,864 $ 70,773 $ 54,198
Other property income............. 1,321 1,014 4,683 3,356 2,582
Property management............... -- -- -- -- 536
Interest.......................... 76 76 558 461 416
Development and other fees from
related parties................. -- 72 72 112 385
Other income...................... 72 78 312 292 317
----------- ----------- ----------- ----------- -----------
Total revenues........... 27,249 21,430 94,489 74,994 58,434
----------- ----------- ----------- ----------- -----------
Expenses:
Property operating and
maintenance:
Personnel.................... 2,166 2,005 8,368 6,640 5,033
Advertising and promotion.... 380 286 1,417 698 504
Utilities.................... 1,167 979 4,115 3,432 2,782
Building repairs and
maintenance................ 1,943 1,550 7,547 6,116 4,456
Real estate taxes and
insurance.................. 2,695 2,177 8,823 6,965 5,552
Depreciation................. 5,181 4,130 18,208 15,141 11,700
Property supervision......... 662 504 2,240 1,848 1,430
Other operating expenses..... 801 623 2,716 2,313 1,745
----------- ----------- ----------- ----------- -----------
14,995 12,254 53,434 43,153 33,202
Property management............... -- -- -- -- 366
Interest.......................... 4,550 4,149 17,138 14,802 14,067
General and administrative........ 646 625 2,557 1,949 1,756
REIT formation costs.............. -- -- -- -- 457
Loss (income) in equity
investments:
Summit Management Company.... 130 166 173 80 59
Real estate joint venture.... -- (1) -- (41) --
----------- ----------- ----------- ----------- -----------
Total expenses........... 20,321 17,193 73,302 59,943 49,907
----------- ----------- ----------- ----------- -----------
Income before extraordinary items..... 6,928 4,237 21,187 15,051 8,527
Extraordinary items................... -- -- (626) (539) 8,566
----------- ----------- ----------- ----------- -----------
Net income............................ 6,928 4,237 20,561 14,512 17,093
Net income allocated to general
partner............................. (69) (42) (206) (145) (171)
----------- ----------- ----------- ----------- -----------
Net income allocated to limited
partners............................ $ 6,859 $ 4,195 $ 20,355 $ 14,367 $ 16,922
=========== =========== =========== =========== ===========
Per unit data:
Income before extraordinary
items........................... $ 0.26 $ 0.21 $ 0.92 $ 0.83 $ 0.64
=========== =========== =========== =========== ===========
Net income........................ $ 0.26 $ 0.21 $ 0.90 $ 0.80 $ 1.28
=========== =========== =========== =========== ===========
Distributions declared............ $ 0.40 $ 0.39 $ 1.55 $ 1.51 $ 1.29
=========== =========== =========== =========== ===========
Weighted average units............ 27,057,351 20,615,923 22,940,998 18,116,664 13,389,757
=========== =========== =========== =========== ===========
</TABLE>

See notes to financial statements.

F-4
<PAGE> 47

SUMMIT PROPERTIES PARTNERSHIP, L.P.

STATEMENTS OF PARTNERS' EQUITY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------- -------- --------
<S> <C> <C> <C>
Balance, December 31, 1993................................... $(38,127) $(38,127)
Capital distributions................................... (16,308) (16,308)
Distributions........................................... $ (191) (18,885) (19,076)
Contributions from Summit Properties related to:
Proceeds from public offering...................... 1,996 197,601 199,597
Issuance of stock grants........................... 1 59 60
Purchase of prior owner's interest...................... (59) (5,826) (5,885)
Contributions related to land acquisition............... 7 728 735
Net income.............................................. 171 16,922 17,093
------- -------- --------
Balance, December 31, 1994................................... 1,925 136,164 138,089
Distributions........................................... (284) (28,112) (28,396)
Contributions from Summit Properties related to:
Proceeds from public offering...................... 659 65,278 65,937
Proceeds from Dividend Reinvestment Plan........... 2 238 240
Issuance of stock grants........................... -- 28 28
Contributions related to property acquisitions.......... 262 25,928 26,190
Contributions related to land acquisition............... 9 887 896
Net income.............................................. 145 14,367 14,512
------- -------- --------
Balance, December 31, 1995................................... 2,718 214,778 217,496
Distributions........................................... (365) (36,096) (36,461)
Contributions from Summit Properties related to:
Proceeds from public offering...................... 976 96,658 97,634
Proceeds from Dividend Reinvestment and Employee
Stock Purchase Plans............................. 16 1,581 1,597
Exercise of stock options.......................... 3 284 287
Amortization of restricted stock................... 2 200 202
Contributions related to land acquisition............... 210 1,890 2,100
Net income.............................................. 206 20,355 20,561
------- -------- --------
Balance, December 31, 1996................................... 3,766 299,650 303,416
Distributions........................................... (109) (10,795) (10,904)
Contributions from Summit Properties related to:
Proceeds from public offering...................... 68 6,744 6,812
Issuance of stock related to acquisitions.......... 49 4,885 4,934
Proceeds from Dividend Reinvestment and Employee
Stock Purchase Plans............................. 11 1,046 1,057
Exercise of stock options.......................... 7 711 718
Amortization of restricted stock................... 1 73 74
Contributions related to land acquisition............... 39 3,900 3,939
Net income.............................................. 69 6,859 6,928
------- -------- --------
Balance, March 31, 1997 (unaudited).......................... $ 3,901 $313,073 $316,974
======= ======== ========
</TABLE>

See notes to financial statements.

F-5
<PAGE> 48

SUMMIT PROPERTIES PARTNERSHIP, L.P.

STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------- ------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................. $ 6,928 4,237 $ 20,561 $ 14,512 $ 17,093
Adjustments to reconcile net income to
net cash provided by operating
activities:
Extraordinary items.................. -- -- 626 539 (8,566)
Loss on equity method investments.... 130 165 173 39 59
Depreciation and amortization........ 5,437 4,377 19,183 15,978 12,542
Decrease (increase) in restricted
cash.............................. (688) (30) 235 575 (239)
Decrease (increase) in other
assets............................ 324 (1,023) (866) (992) 582
Increase (decrease) in accrued
interest payable.................. 365 26 333 (47) (4,388)
Increase in accounts payable and
accrued expenses.................. 1,528 1,431 386 209 112
Increase in security deposits and
prepaid rents..................... 44 53 545 181 330
-------- -------- --------- --------- ---------
Net cash provided by
operating activities....... 14,068 9,236 41,176 30,994 17,525
-------- -------- --------- --------- ---------
Cash flows from investing activities:
Construction of real estate assets and
land acquisitions, net of payables... (12,768) (16,400) (87,081) (52,499) (94,249)
Capitalized interest................... (1,340) (970) (4,266) (3,110) (686)
Recurring capital expenditures......... (455) (561) (3,291) (2,180) (1,710)
Non-recurring capital expenditures..... (922) (721) (2,973) (864) --
Purchase of Communities................ (40,408) -- (6,360) (5,081) --
Purchase of non-continuing investors'
interests............................ -- -- -- -- (20,834)
Investment in Summit Management
Company.............................. -- -- -- -- (260)
Proceeds from investments.............. -- -- -- -- 3,998
-------- -------- --------- --------- ---------
Net cash used in investing
activities................. (55,893) (18,652) (103,971) (63,734) (113,741)
-------- -------- --------- --------- ---------
Cash flows from financing activities:
Debt proceeds.......................... 44,648 17,284 89,359 97,075 193,542
Debt repayments........................ (1,245) (574) (90,783) (101,650) (269,021)
Distributions to unitholders........... (10,447) (7,747) (34,000) (26,157) (13,615)
Payment of financing costs............. (5) (108) (515) (1,033) (5,202)
Contributions from Summit Properties
related to:
Proceeds from public offering........ 6,812 (138) 97,634 65,937 199,597
Proceeds from Dividend Reinvestment
and Employee Stock Purchase
Plans............................. 1,057 144 1,597 268 --
Exercise of stock options............ 718 -- 287 -- --
Capital distributions.................. -- -- -- -- (16,308)
-------- -------- --------- --------- ---------
Net cash provided by
financing activities....... 41,538 8,861 63,579 34,440 88,993
-------- -------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents............................... (287) (555) 784 1,700 (7,223)
Cash and cash equivalents, beginning of
year...................................... 3,665 2,881 2,881 1,181 8,404
-------- -------- --------- --------- ---------
Cash and cash equivalents, end of year...... 3,378 $ 2,326 $ 3,665 $ 2,881 $ 1,181
======== ======== ========= ========= =========
Supplemental disclosure of cash flow
information:
Cash paid for interest, net of capitalized
interest.................................. $ 3,939 $ 3,848 $ 15,780 $ 13,762 $ 15,027
======== ======== ========= ========= =========
</TABLE>

See notes to financial statements.

F-6
<PAGE> 49

SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND FORMATION OF THE OPERATING PARTNERSHIP

Summit Properties Partnership, L.P. (the "Operating Partnership"), a
Delaware limited partnership, was formed on January 14, 1994 to conduct the
business of developing, leasing and managing multifamily apartment communities
for Summit Properties Inc. ("Summit Properties"). On February 15, 1994, Summit
Properties completed an initial public offering ("Initial Offering"). In
connection with the Initial Offering, the Operating Partnership consummated a
business combination involving the partnerships (the "Property Partnerships")
which owned the 27 communities acquired in connection with the Initial Offering
and the affiliated entities which provided development, construction, management
and leasing services to each of those communities prior to the Initial Offering
(collectively, the "Summit Entities"). A portion of the proceeds from the
Initial Offering was used by Summit Properties to acquire an economic and voting
interest in the Operating Partnership, which was formed to succeed to
substantially all of the interests of the Property Partnerships in the 27
communities and the operations of the Summit Entities (the "Formation"). Summit
Properties became the sole general partner and the majority owner of the
Operating Partnership upon completion of the Initial Offering. Summit Properties
is a self-administered and self-managed equity real estate investment trust
("REIT").

In June 1995, Summit Properties completed the sale of 4 million shares of
Common Stock (the "1995 Offering"). In August 1996, Summit Properties completed
the sale of 5.75 million shares of Common Stock (the "1996 Offering"). The net
proceeds of $65.9 million and $97.6 million from the 1995 and 1996 Offerings,
respectively, were contributed to the Operating Partnership in exchange for
units of limited partnership interest in the Operating Partnership ("Units"),
and the Operating Partnership used the proceeds to repay mortgage debt and to
fund current development projects.

Net income per Unit on a pro forma basis for the years ended December 31,
1996 and 1995 would not have changed materially assuming the 1996 Offering and
the 1995 Offering had occurred on January 1, 1996 and 1995, respectively.

Summit Properties conducts all of its business through the Operating
Partnership and its subsidiaries. Summit Properties holds 84.8% of the
outstanding partnership interests of the Operating Partnership, consisting of a
1% general partner interest and an 83.8% limited partner interest. The Operating
Partnership is obligated to redeem each Unit at the request of the holder for
cash equal to the fair market value of one share of Common Stock, except that
Summit Properties may elect to acquire each Unit presented for redemption for
cash or one share of Common Stock. Summit Properties has issued Common Stock in
connection with all redemptions to date. With each redemption of outstanding
Units for Summit Properties' Common Stock, Summit Properties' percentage
ownership interest in the Operating Partnership will increase. In addition,
whenever Summit Properties issues shares of Common Stock, Summit Properties will
contribute any net proceeds therefrom to the Operating Partnership and the
Operating Partnership will issue an equivalent number of Units to Summit
Properties.

Distributions to holders of Units are made to enable distributions to be
made to Summit Properties' shareholders under Summit Properties' dividend
policy. Federal income tax laws require Summit Properties, as a REIT, to
distribute 95% of its ordinary taxable income. The Operating Partnership makes
distributions to Summit Properties to enable it to satisfy this requirement.

2. BASIS OF PRESENTATION

For the period after the Initial Offering, the accompanying financial
statements include the accounts of the Operating Partnership. For the period
prior to the Initial Offering, the accompanying financial statements reflect the
combined accounts of the Summit Entities.

In conjunction with the Initial Offering, construction, management and
leasing activities for third parties were transferred to Summit Management
Company (the "Management Company"). The Operating Partner-

F-7
<PAGE> 50

SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

ship has a 99% economic interest in the Management Company but controls only 1%
of the voting stock. The remaining 99% of the voting stock is held by an
executive officer of the Operating Partnership, which stock is subject to
certain restrictions on transfer designed to ensure that the holder of the
Management Company's voting stock will have interests aligned with those of the
Operating Partnership. Because of the Operating Partnership's ability to
exercise significant influence, the Management Company is accounted for on the
equity method of accounting. Prior to the Initial Offering on February 15, 1994,
these activities were included in the Statement of Earnings on a combined basis.

As a result of the Formation, the partners and owners of the entities
comprising the Summit Entities have either retained their existing ownership
interests, received shares of Common Stock of Summit Properties or received
Units in the Operating Partnership. Purchase accounting was applied to the
acquisition of all non-controlled interests in which cash consideration was
paid. The acquisition of all other interests was accounted for as a
reorganization of entities under common control and, accordingly, was reflected
at historical cost in a manner similar to that in pooling of interests
accounting.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REAL ESTATE ASSETS AND DEPRECIATION -- Real estate assets are stated at
depreciated cost reduced for any estimated impairment in value of which there is
none.

Expenditures directly related to the acquisition, development and
improvement of real estate assets are capitalized at cost as land, buildings and
improvements. Improvements are broken down into recurring capital expenditures
and nonrecurring capital expenditures. Nonrecurring capital expenditures
primarily consist of the cost of improvements such as new garages, initial water
meters, major renovations and improvements made in conjunction with
acquisitions. All other improvements are deemed to be recurring capital
expenditures.

Ordinary repairs and maintenance, including carpet replacements and
interior painting, are expensed as incurred; major replacements and betterments
are capitalized and depreciated over their estimated useful lives. Depreciation
is computed on a straight-line basis over the useful lives of the properties
(buildings -- 40 years; land improvements -- 15 years; furniture, fixtures and
equipment -- 5 to 7 years).

The Operating Partnership records its real estate assets at cost less
accumulated depreciation and adjusts carrying value in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of", which
was issued by the Financial Accounting Standards Board in March 1995 and adopted
by the Operating Partnership in 1996. SFAS No. 121 requires that long-lived
assets, such as real estate assets, be reviewed whenever events or changes in
circumstances indicate that the book value of the asset may not be recoverable.
If the sum of the estimated future net cash flows (undiscounted and without
interest charges) from an asset to be held and used is less than the book value
of the asset, an impairment loss must be recognized in the amount of the
difference between book value and fair value as opposed to the difference
between book value and net realizable value under the previous accounting
standard. For long-term assets like apartment communities, the determination of
whether there is an impairment loss is dependent primarily on the Operating
Partnership's estimates on occupancy, rent and expense increases, which involve
numerous assumptions and judgments as to future events over a period of many
years. Assets to be disposed of are reported at the lower of carrying value or
fair value less costs to sell. At December 31, 1996 the Operating Partnership
does not hold any assets that meet the impairment criteria of SFAS No. 121.

RENTAL REVENUE RECOGNITION -- The Operating Partnership leases its
residential properties under operating leases with terms which are generally one
year or less. Rental revenue is recognized on the accrual method of accounting
as earned.

PROPERTY MANAGEMENT -- The Management Company provides property management
services for properties which it does not own. Revenue is recognized when
earned, as the services are provided.

F-8
<PAGE> 51

SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

CASH AND CASH EQUIVALENTS -- For purposes of the statement of cash flows,
the Operating Partnership considers all highly liquid investments purchased with
an original maturity of three months or less to be cash equivalents.

RESTRICTED CASH -- Restricted cash is comprised primarily of resident
security deposits, bond repayment escrows and replacement reserve escrows.

DEFERRED FINANCING COSTS -- Deferred financing costs include fees and costs
incurred to obtain long-term financings and are amortized on the straight-line
method over the terms of the related debt. Such amortization is included in
interest expense in the accompanying statements of earnings.

INTEREST AND REAL ESTATE TAXES -- Interest and real estate taxes incurred
during the construction period are capitalized and depreciated over the lives of
the constructed assets. Interest capitalized was $4.3 million, $3.1 million and
$686,000 for the years ended December 31, 1996, 1995 and 1994, respectively.

INCOME TAXES -- Operations were conducted through a variety of partnerships
prior to the Formation, and through the Operating Partnership subsequent to the
Formation. In accordance with partnership taxation, each partner was responsible
for reporting its share of taxable income or loss. Accordingly, no provision has
been made in the accompanying financial statements for federal, state or local
income taxes.

PER UNIT DATA -- Earnings per Unit with respect to the Operating
Partnership for the years ended December 31, 1996, 1995 and 1994 are computed
based upon the weighted average number of Units outstanding during the period.

ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

4. PROPERTY MANAGEMENT AND RELATED PARTY TRANSACTIONS

In conjunction with the Formation, construction, management and leasing
activities for third parties were transferred to the Management Company, which
is accounted for using the equity method of accounting. Prior to the Formation
on February 15, 1994, these activities were included in the Summit Entities'
Statement of Earnings on a combined basis. The net assets of the Management
Company are not material, therefore no balance sheet information is presented.

The Management Company has a wholly-owned subsidiary, Summit Apartment
Builders, Inc. (the "Construction Company"), which conducts certain construction
activities. The activities of the Construction Company are accounted for on a
consolidated basis with those of the Management Company. The net assets of the
Construction Company are not material.

F-9
<PAGE> 52

SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

A summary of the Management Company operations for the years ended December
31, 1996, 1995, and 1994 is as follows (in thousands):

<TABLE>
<CAPTION>
FEBRUARY 16, JANUARY 1,
1994 TO 1994 TO
TOTAL DECEMBER 31, FEBRUARY 15,
1996 1995 1994 1994 1994
------ ------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Property management fees................... $4,706 $5,189 $5,122 $4,586 $536
Construction company income................ 529 288 264 264 --
Other management company income............ 129 155 149 149 --
------ ------ ------ ------ ----
Total revenues...................... 5,364 5,632 5,535 4,999 536
Property management expenses:
Operating................................ 4,407 4,581 4,512 4,146 366
Depreciation............................. 110 120 53 53 --
Amortization............................. 278 274 219 219 --
Interest................................. 300 300 262 262 --
------ ------ ------ ------ ----
5,095 5,275 5,046 4,680 366
Construction company expenses.............. 442 437 378 378 --
------ ------ ------ ------ ----
Total expenses...................... 5,537 5,712 5,424 5,058 366
------ ------ ------ ------ ----
Net income (loss) of Summit Management
Company.................................. $ (173) $ (80) $ 111 $ (59) $170
====== ====== ====== ====== ====
</TABLE>

Interest and amortization expenses are related to the Management Company's
purchase from the Operating Partnership of its rights to third party management
contracts for $2.5 million, payable over time under a promissory note executed
by the Management Company. Corresponding amounts of interest income and
amortization of deferred revenue (included in other income) are included in the
Operating Partnership's operating results.

The Management Company provides management services to apartment
communities in which executive officers and certain Directors of Summit
Properties are general partners. The Management Company received management fees
of approximately $267,000, $294,000 and $1.0 million for the performance of such
services for the years ended December 31, 1996, 1995 and 1994, respectively.

Property management fees include $2.0 million, $3.0 million and $2.9
million of fees from unrelated third parties in 1996, 1995 and 1994,
respectively.

Construction Company income is earned from construction contracts with the
Operating Partnership or from joint ventures in which the Operating Partnership
has an interest. Income from contracts with the Operating Partnership was
$529,000, $311,000 and $154,000 for the years ended December 31, 1996, 1995 and
1994 respectively. The Operating Partnership had $1.3 million and $978,000 of
construction contracts payable to the Construction Company as of December 31,
1996 and 1995, respectively.

The Operating Partnership's investment in the Management Company as of
December 31, 1996 and 1995, reported on the equity method, includes the
following (in thousands):

<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Equity investment.............................................. $ (32) $ 121
Note receivable................................................ 2,500 2,500
Deferred gain on sale of third party contract rights........... (1,781) (2,031)
------- -------
$ 687 $ 590
======= =======
</TABLE>

F-10
<PAGE> 53

SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. NOTES PAYABLE

Notes payable consist of the following (in thousands):

<TABLE>
<CAPTION>
INTEREST PRINCIPAL OUTSTANDING
RATE AS OF DECEMBER 31,
DECEMBER 31, ----------------------
1996 1996 1995
------------ -------- --------
<S> <C> <C> <C>
FIXED RATE DEBT
Mortgage Loan.................................. 5.88% $122,950 $125,000
Mortgage Loan.................................. 7.71% 29,653 30,000
Mortgage Loan.................................. 8.00% 8,638 8,712
Mortgage Notes................................. 7.75%-9.80% 32,104 32,485
Tax Exempt Mortgage Notes...................... 6.95%-7.25% 9,369 9,468
-------- --------
Total Mortgage Debt....................... 202,714 205,665
Unsecured Note................................. 7.85% 16,000 --
Unsecured Note................................. 7.61% 15,000 --
-------- --------
Total Fixed Rate Debt..................... 233,714 205,665
VARIABLE RATE DEBT
Unsecured Credit Facility...................... LIBOR + 110 22,357 4,396
Tax Exempt Bonds............................... 5.60% 53,862 54,840
Development Loans Repaid in 1996............... -- 32,109
-------- --------
Total Variable Rate Debt.................. 76,219 91,345
-------- --------
Total Outstanding Indebtedness...................... $309,933 $297,010
======== ========
</TABLE>

The London Interbank Offered Rate (LIBOR) at December 31, 1996 was 5.56%.

MORTGAGE LOANS -- The 5.88% fixed rate Mortgage Loan requires monthly
principal and interest payments on a 24-year amortization schedule with a
balloon payment due at maturity in February, 2001. The Operating Partnership has
an option to extend the final maturity date for a period of up to two years at
an interest rate equal to the then current year treasury rate plus a
predetermined spread.

The 7.71% fixed rate Mortgage Loan requires monthly principal and interest
payments on a 25-year amortization schedule with a balloon payment due at
maturity in December, 2005.

The 8.00% Mortgage Loan requires monthly principal and interest payments on
a 30-year amortization schedule with a balloon payment due at maturity in
September, 2005.

MORTGAGE NOTES -- The Mortgage Notes bear interest at fixed rates ranging
from 7.75% to 9.80% and require monthly interest and principal payments over the
life of the notes. The weighted average interest rate and debt maturity at
December 31, 1996 for these nine Mortgage Notes were 8.43% and 20.6 years,
respectively.

TAX EXEMPT MORTGAGE NOTES -- The Tax Exempt Mortgage Notes bear interest at
fixed rates ranging from 6.95% to 7.25% and require monthly interest and
principal payments over the life of the notes. The weighted average interest
rate and debt maturity at December 31, 1996 for these two mortgage notes were
7.12% and 29.5 years, respectively.

UNSECURED NOTES -- In August 1996, the Operating Partnership obtained $31.0
million of unsecured debt financing consisting of a $16.0 million note with a
six-year term and a $15.0 million note with a four-year term (collectively, the
"Unsecured Notes"). The notes require quarterly interest only payments until the
end of the respective terms.

UNSECURED CREDIT FACILITY -- The Operating Partnership obtained a $150
million unsecured credit facility (the "Unsecured Credit Facility") on November
18, 1996 to replace a $50 million secured credit facility. The

F-11
<PAGE> 54

SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Unsecured Credit Facility has a three-year term and currently bears interest at
LIBOR + 110 basis points. The interest rate can be reduced based upon an upgrade
in the Company's unsecured credit rating. The Unsecured Credit Facility provides
$25 million for general working capital purposes with the remainder available to
finance development projects and acquisitions. The Unsecured Credit Facility is
repayable monthly on an interest-only basis with the balance of all principal
and accrued interest due no later than November 18, 1999.

The Unsecured Credit Facility and the Unsecured Notes require Summit
Properties and the Operating Partnership to comply with certain affirmative and
negative covenants including the requirements: (i) that Summit Properties
maintain its qualification as a REIT; (ii) that the ratio of unencumbered assets
to debt equal or exceed 150%; (iii) that the ratio of debt to assets not exceed
60%; (iv) that the maximum secured debt not exceed $350 million or 40% of
assets; (v) that the Operating Partnership maintain a debt service ratio of not
less than 1.75 to 1; and (vi) that the Operating Partnership maintain a ratio of
adjusted funds flow, as defined, to debt of greater than .15 to 1.

VARIABLE RATE TAX EXEMPT BONDS -- The effective interest rate of the
variable rate tax exempt bonds was 4.99% for the year ended December 31, 1996.
These bonds bear interest at various rates set by a remarketing agent at the
demand note index plus 0.50%, set weekly, or the lowest percentage of prime
which allows the resale at a price of par. The bonds contain covenants which
require that the Operating Partnership lease or hold for lease 20% (or 25% under
certain state or local requirements) of the apartment homes for moderate-income
residents. The bonds require maintenance of letters of credit or surety bonds
(credit enhancements) aggregating $55.6 million. The credit enhancements on four
of the five tax exempt bonds ($46.6 million of debt) provide for a principal
amortization schedule which approximates a 25-year term during the term of the
credit enhancement.

Real estate assets with a net book value of $297.8 million serve as
collateral for the various debt agreements.

The aggregate maturities of all debt for each of the years ending December
31 are as follows (in thousands):

<TABLE>
<CAPTION>
FIXED RATE FIXED RATE FIXED RATE TAX EXEMPT UNSECURED
MORTGAGE MORTGAGE UNSECURED VARIABLE CREDIT
LOANS NOTES NOTES RATE BONDS FACILITY TOTAL
----------- ----------- ----------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
1997......................... $ 3,091 $ 519 $ -- $ 1,010 $ -- $ 4,620
1998......................... 3,287 560 -- 1,055 -- 4,902
1999......................... 3,497 604 -- 1,105 22,357 27,563
2000......................... 3,718 653 15,000 1,130 -- 20,501
2001......................... 112,407 705 -- 1,150 -- 114,262
Thereafter................... 35,241 38,432 16,000 48,412 -- 138,085
-------- ------- ------- ------- -------- --------
$161,241 $41,473 $31,000 $53,862 $ 22,357 $309,933
======== ======= ======= ======= ======== ========
</TABLE>

EXTRAORDINARY ITEMS -- The 1996 extraordinary item resulted from the
write-off of deferred financing costs on development loans repaid with the
proceeds from the 1996 Offering and with the proceeds of the $31.0 million of
unsecured notes.

The 1995 extraordinary items resulted from the write-off of deferred
financing costs on variable rate mortgage debt repaid with the proceeds from the
1995 Offering and with the proceeds of the $30 million mortgage loan, and from
the write-off of deferred financing costs related to the refunding of two
variable rate tax exempt bonds.

In conjunction with the debt repayment related to the Initial Offering in
1994, the Operating Partnership incurred prepayment penalties of $4.3 million on
certain mortgage indebtedness, expenses of $2.5 million associated with the
write-off of deferred financing costs related to mortgages satisfied with
proceeds of the

F-12
<PAGE> 55

SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Initial Offering, and the write-off of accrued interest and mortgages payable
that was not required to be repaid of $15.4 million.

6. CROSLAND ACQUISITION

During the second quarter of 1995, the Operating Partnership completed an
acquisition of 12 apartment communities and a 75% interest in another apartment
community, which were owned by The Crosland Group, Inc. and its affiliates (the
"Crosland Acquisition"). The Crosland Acquisition added a total of 2,025
apartments to the Operating Partnership's portfolio and was accounted for using
the purchase method of accounting. The costs of the Crosland Acquisition have
been allocated on the basis of the fair values of the assets acquired and
liabilities assumed (See Note 9-D).

The following summary of unaudited pro forma results of operations presents
information as if the Crosland Acquisition had occurred at the beginning of each
fiscal year. In addition, the year ended December 31, 1994 information is
presented as if the Initial Offering had occurred at the beginning of 1994. The
pro forma information for the years ended December 31, 1995 and 1994 is provided
for informational purposes only and is not indicative of results which would
have occurred or which may occur in the future (in thousands, except per Unit
amounts):

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Net revenues............................................................... $80,239 $71,298
Income before extraordinary items.......................................... 15,358 11,776
Net income................................................................. 14,819 11,776
Earnings per Unit:
Income before extraordinary items........................................ .82 .72
Net income............................................................... .79 .72
</TABLE>

7. COMMITMENTS

The estimated cost to complete nine development projects currently under
construction was approximately $128.1 million at December 31, 1996. Anticipated
construction completion dates of the projects range from the second quarter of
1997 to the first quarter of 1999.

The Operating Partnership has a commitment to purchase a Community being
constructed in Atlanta, Georgia for approximately $27.5 million. The Operating
Partnership expects the purchase to close in the fourth quarter of 1998 after
the Community reaches rental stabilization.

The Operating Partnership rents office space in several locations. Rental
expense for the years ended December 31, 1996, 1995 and 1994 amounted to
$109,000, $125,000 and $123,000 ($376,000 in 1996, $405,000 in 1995 and $377,000
in 1994 including amounts recorded at the Management Company). Future minimum
rental payments for the next five years for those operating leases (including
the Management Company) that have initial or remaining non-cancelable lease
terms in excess of one year are as follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31:
-----------------------------------------------------------------
<S> <C>
1997............................................................. $ 395
1998............................................................. 402
1999............................................................. 407
2000............................................................. 131
2001............................................................. 72
Thereafter....................................................... 2
------
$1,409
======
</TABLE>

F-13
<PAGE> 56

SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

8. EMPLOYEE BENEFIT PLANS

Profit Sharing Plan

The employees of Summit Properties, the Operating Partnership and its
subsidiaries (the "Summit Employees") are participants in Summit Properties'
defined contribution plan pursuant to Section 401(k) of the Internal Revenue
Code which covers all Summit Employees with one year or greater service. The
Operating Partnership's contributions are equal to one-half of each Summit
Employee's contribution up to a maximum of 3% of each Summit Employee's
compensation. Aggregate contributions (including the Management Company) of
approximately $223,000, $191,000 and $189,000 were made for the years ended
December 31, 1996, 1995 and 1994, respectively.

Stock Option Plan

In 1994, Summit Properties established the 1994 Stock Option Plan ("the
Plan") in which the Summit Employees participate. Under the Plan, 1,000,000
shares of Summit Properties' Common Stock are reserved for issuance. The
Operating Partnership must issue a Unit for each share of Common Stock issued
under the Plan. The Plan provides that the option price shall not be less than
the fair market value of the shares at the date of grant. The options vest in
three or five annual installments on the anniversaries of the date of grant,
except for shares granted to independent directors of Summit Properties, which
vest at the date of grant.

A summary of changes in common stock options for the three years ended
December 31, 1996 is as follows:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
-------- -----------------
<S> <C> <C>
YEAR ENDED DECEMBER 1994
Granted........................................................ 482,500 $ 19.13
Forfeited...................................................... (52,600) 19.00
-------
Outstanding at December 31, 1994.......................... 429,900 19.14
YEAR ENDED DECEMBER 1995
Granted........................................................ 130,000 17.13
Forfeited...................................................... (20,800) 19.72
-------
Outstanding at December 31, 1995.......................... 539,100 18.64
YEAR ENDED DECEMBER 1996
Granted........................................................ 28,000 19.30
Exercised...................................................... (15,073) 19.04
Forfeited...................................................... (53,381) 19.22
-------
Outstanding at December 31, 1996.......................... 498,646 18.60
=======
</TABLE>

Exercise prices for options outstanding as of December 31, 1996 ranged from
$17.13 to $20.75. The weighted average remaining contractual life of those
options is 7.5 years.

As of December 31, 1996, 1995 and 1994 options to purchase 283,228, 132,784
and 9,000 shares of Common Stock were exercisable, respectively. The weighted
average exercise price for the shares exercisable as of December 31, 1996, 1995
and 1994 was $18.36, $19.03 and $19.83, respectively.

The estimated weighted average fair value of options granted were $2.10 per
share in 1996 and $1.61 per share in 1995. Summit Properties applies Accounting
Principal Board Opinion No. 25 and related interpretations in measuring
compensation costs for its stock options. Accordingly, no compensation cost has
been recognized for its stock options granted to the Summit Employees. Had
compensation cost for the Summit Properties' stock options been determined based
on the fair value at the grant dates, consistent with the method of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", the Operating Partnership's net income and net income per Unit
for the years ended December 31, 1996

F-14
<PAGE> 57

SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

and 1995 would have changed to the pro forma amounts indicated below (dollars in
thousands except per Unit amounts):

<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Pro forma net income....................................................... $20,501 $14,499
Pro forma net income per Unit.............................................. .89 .80
</TABLE>

The fair value of options granted during 1996 and 1995 were estimated on
the date of grant using the binomial option-pricing model with the following
weighted-average assumptions: dividend yields ranging from 7.80% to 8.82%,
expected volatility of 16%, risk free interest rate of 6.52%, and expected lives
of 10 years.

In addition, the Plan provides for the issuance of stock grants to the
Summit Employees. Summit Properties granted 56,046 shares of restricted stock
grants under the Plan in January, 1996. The market value of the restricted stock
grants, net of shares subsequently retired, totaled $1.0 million. Unearned
compensation is being amortized to expense over the five year vesting period.
Unrestricted stock grants of 1,639 shares were issued in the year ended December
31, 1995. The Operating Partnership recognized $223,000 and $28,000 of expense
in the statement of earnings in the years ended December 31, 1996 and 1995,
respectively, relative to the stock grants.

Employee Stock Purchase Plan

In 1996, Summit Properties established a non-qualified employee stock
purchase plan. The plan allows Summit Employees to purchase up to $100,000 per
year of Summit Properties Common Stock. The price of the shares of the Common
Stock purchased will be the lesser of 85 percent of the closing price of such
shares either on (a) the first day of each six month purchase period, or (b) the
last day of each six month purchase period. Total shares issued under the plan
in 1996 were 44,362 with a market value of approximately $871,000. An additional
41,493 shares with a market value of approximately $908,000 were issued in
January, 1997 under the plan. The Operating Partnership recognized (including
the Management Company) $151,000 of expense in the statement of earnings in the
year ended December 31, 1996 relative to the employee stock purchase plan.

9. SUPPLEMENTAL CASH FLOW INFORMATION

Non-cash investing and financing activities for the years ended December
31, 1996, 1995 and 1994 are as follows:

A. The Operating Partnership issued 106,330 Units, valued at $2.1 million
at issuance, for the purchase of land in the first quarter of 1996.

B. In 1996, Summit Properties awarded 52,086 shares (net of 3,960 shares
issued but subsequently retired) of restricted stock valued at $1.0 million to
Summit Employees.

C. On April 1, 1996, the Operating Partnership acquired its joint venture
partner's interest in the Summit Plantation (formerly Plantation Cove) apartment
community. The Operating Partnership paid $6.4 million in cash for the remaining
75% interest in this joint venture, which is now owned entirely by the Operating
Partnership. The recording of the purchase is summarized as follows (in
thousands):

<TABLE>
<S> <C>
Fixed assets............................................................. $ 21,913
Current assets........................................................... 202
Deferred charges......................................................... 95
Debt assumed............................................................. (14,347)
Current liabilities assumed.............................................. (288)
Investment in real estate joint venture.................................. (1,215)
--------
Net cash paid............................................................ $ 6,360
========
</TABLE>

F-15
<PAGE> 58

SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

D. In the second quarter of 1995, the Operating Partnership completed its
Crosland Acquisition. The Operating Partnership purchased the communities by
assuming debt, issuing approximately 1.5 million Operating Partnership Units,
assuming certain liabilities and current assets, and the payment of cash. The
recording of the purchase is summarized as follows (in thousands):

<TABLE>
<S> <C>
Fixed assets............................................................. $ 82,935
Restricted cash.......................................................... 1,427
Other assets............................................................. 481
Debt assumed............................................................. (52,576)
Current liabilities assumed.............................................. (996)
Value of units issued.................................................... (26,190)
--------
Net cash paid............................................................ $ 5,081
========
</TABLE>

E. A $9.1 million tax-exempt bond was assumed with the purchase of the
Stony Point Community in 1994.

F. The Operating Partnership transferred certain third party property
management contracts to the Management Company in exchange for a promissory note
of $2.5 million in 1994. To record the transaction, the Operating Partnership
recorded the promissory note and included in other liabilities $2.5 million of
deferred revenue to be amortized over the estimated lives of the contracts.

G. The Operating Partnership accrued a distribution payable of $10.2
million, $7.7 million and $5.5 million at December 31, 1996, 1995 and 1994,
respectively.

H. Purchase accounting was applied to the acquisition of non-continuing
investors' interests for which cash consideration was paid resulting in an
increase of $14.9 million in the historical cost basis of the related real
estate assets in 1994.

I. The Operating Partnership issued 45,359 Units (valued at $896,000) for
the purchase of land in 1995.

J. The Operating Partnership issued 38,500 Units (valued at $735,000) for
the purchase of land in 1994.

10. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

The following disclosures of estimated fair value were determined by
management using available market information and appropriate valuation
methodologies. However, considerable judgment is necessary to interpret market
data and develop the related estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that could be
realized upon 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.

Cash and cash equivalents, rents receivable, accounts payable, accrued
expenses, security deposits, other liabilities, tax-exempt bond indebtedness and
the Unsecured Credit Facility are carried at amounts which reasonably
approximate their fair values at December 31, 1996.

Fixed rate mortgage debt and unsecured notes with a carrying value of
$233.7 million has an estimated aggregate fair value of $229.3 million at
December 31, 1996. Rates currently available to the Operating Partnership for
debt with similar terms and maturities were used to estimate the fair value of
this debt.

The fair value estimates presented herein are based on information
available to management as of December 31, 1996. Although management is not
aware of any factors that would significantly affect the estimated fair value
amounts, such amounts have not been comprehensively re-valued for purposes of
these financial statements since that date, and current estimates of fair value
may differ significantly from the amounts presented herein.

F-16
<PAGE> 59

SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

11. GEOGRAPHIC CONCENTRATION

The Operating Partnership's completed Communities are concentrated in three
major markets:

<TABLE>
<CAPTION>
NUMBER OF APARTMENT
APARTMENT HOMES--% % OF
MARKET HOMES OF PORTFOLIO REVENUES
- - ------------------------------------------------------------ --------- ------------ --------
<S> <C> <C> <C>
I-85 Corridor (Raleigh, NC to Atlanta, GA).................. 5,062 43% 42%
Washington, DC/Virginia..................................... 2,169 19% 21%
Central/South Florida....................................... 3,685 31% 31%
Other....................................................... 872 7% 6%
------ --- ---
11,788 100% 100%
====== === ===
</TABLE>

12. INCOME TAXES

Financial Accounting Standard No. 109, "Accounting for Income Taxes"
requires a public enterprise to disclose the aggregate difference in the basis
of its net assets for financial and tax reporting purposes. The carrying value
reported in the Operating Partnership's financial statements exceeded the tax
basis by approximately $24.1 million and $28.5 million, as of December 31, 1996
and 1995, respectively. The change between December 31, 1996 and 1995 was
primarily due to financial depreciation exceeding tax depreciation by
approximately $5.7 million.

A reconciliation of net income as reported for financial and tax reporting
purposes for the years ended December 31, 1996, 1995 and 1994 is as follows (in
thousands):

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Net income for financial reporting purposes..................... $20,561 $14,512 $ 17,093
Excess of financial reporting depreciation over tax
depreciation.................................................. 5,749 5,384 3,901
Nontaxable cancellation of debt income.......................... -- -- (15,547)
Contingent interest expense not deducted for tax purposes....... -- -- 2,020
Loss of Summit Entities prior to formation of Operating
Partnership................................................... -- -- 1,427
Other........................................................... (166) (95) 267
------- ------- -------
Taxable income of the Operating Partnership..................... $26,144 $19,801 $ 9,161
======= ======= =======
</TABLE>

13. SUBSEQUENT EVENTS

On January 6, 1997, the Operating Partnership purchased Summit Portofino
(formerly Portofino Place), a 322 apartment community located in Broward County,
Florida. Summit Portofino, built in 1995, was purchased for $28.0 million in
cash. Concurrently with the purchase, Summit Properties sold 315,029 shares of
Common Stock for cash. Summit Properties contributed the proceeds of the sale of
Common Stock to the Operating Partnership in exchange for Units. The proceeds
were then used to fund a portion of the purchase price.

On January 15, 1997, the Operating Partnership purchased Summit Mayfaire
(formerly The Mayfaire), a 144 apartment community located in Raleigh, North
Carolina. Summit Mayfaire, built in 1995, was purchased for $9.65 million in
cash.

On February 20, 1997, the Operating Partnership purchased Summit Sand Lake
(formerly The Vining at Sand Lake), a 416 apartment community located in
Orlando, Florida. Summit Sand Lake, built in 1995, was purchased for $26.8
million. The Operating Partnership issued 194,495 Units in the Operating
Partnership to the seller, issued 243,608 Units to Summit Properties in exchange
for Summit Properties issuing 243,608 shares of Common Stock to the seller,
assumed $15.2 million in debt and paid the remaining $2.7 million balance in
cash.

F-17
<PAGE> 60

SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Quarterly financial information for the years 1996 and 1995 are as follows
(in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues............................................ $21,430 $23,062 $24,771 $25,226
Income before extraordinary items................... 4,237 4,345 5,740 6,865
Extraordinary items................................. -- -- (626) --
Net income.......................................... 4,237 4,345 5,114 6,865
Income per unit:
Income before extraordinary items.............. 0.21 0.21 0.24 0.26
Net income..................................... 0.21 0.21 0.21 0.26
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues............................................ $15,891 $17,872 $20,267 $20,964
Income before extraordinary items................... 2,804 3,345 4,479 4,423
Extraordinary items................................. -- (78) -- (461)
Net income.......................................... 2,804 3,267 4,479 3,962
Income per unit:
Income before extraordinary items.............. 0.19 0.20 0.22 0.22
Net income..................................... 0.19 0.19 0.22 0.19
</TABLE>

15. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

The following summary of selected unaudited pro forma results of operations
presents information as if the Acquisitions as described in Note 13 and the
Summit Plantation acquisition had occurred at the beginning of the three months
ended March 31, 1997 and 1996. The selected pro forma results are provided for
informational purposes only and are not indicative of results that would have
occurred or which may occur in the future (dollars in thousands, except per unit
amounts):

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net revenues...................................................... $27,871 $24,215
========== ==========
Net income........................................................ $6,937 $4,127
========== ==========
Net income per unit............................................... $0.25 $0.19
========== ==========
Weighted average units............................................ 27,325,244 21,369,055
========== ==========
</TABLE>

F-18
<PAGE> 61

SCHEDULE III
SUMMIT PROPERTIES PARTNERSHIP, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
INITIAL COSTS COSTS CARRIED AT CLOSE OF PERIOD
------------------------------------------ CAPITALIZED ---------------------------------------
BUILDINGS SUBSEQUENT BUILDINGS
RELATED AND TO AND
COMMUNITY ENCUMBRANCES LAND IMPROVEMENTS(6) ACQUISITION LAND IMPROVEMENTS(6) TOTAL(1)
- - -------------------------- ------------ ------- --------------- ----------- -------- --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Atlanta, GA
Summit Glen............. $ (2) $ 3,652 $ -- $ 11,732 $ 3,693 $ 11,691 $ 15,384
Summit Springs.......... (2) 2,575 -- 11,974 2,667 11,882 14,549
Summit Village.......... (2) 3,212 -- 13,132 3,653 12,691 16,344
Charlotte, NC
Summit Arbors........... -- 780 5,066 33 780 5,099 5,879
Summit Charleston....... (2) 1,094 -- 6,129 1,095 6,128 7,223
Summit Creek............ -- 1,430 9,125 154 1,430 9,279 10,709
Summit Crossing......... 4,213 768 5,174 58 768 5,232 6,000
Summit Fairview......... -- 404 -- 4,299 536 4,167 4,703
Summit Foxcroft......... 2,788 925 3,797 178 925 3,975 4,900
Summit Green............ -- 1,970 -- 16,582 1,970 16,582 18,552
Summit Hollow I & II.... 4,873 1,470 7,463 290 1,472 7,751 9,223
Summit Norcroft......... (2) 1,072 -- 7,063 1,253 6,882 8,135
Summit Radbourne........ 8,683 1,395 12,607 53 1,395 12,660 14,055
Summit Simsbury......... (3) 650 4,570 58 650 4,628 5,278
Summit Touchstone....... (3) 766 5,568 77 766 5,645 6,411
Greenville, SC
Summit Beacon Ridge..... -- 1,053 -- 5,691 1,154 5,590 6,744
Summit East Ridge....... 5,156 900 6,303 97 910 6,390 7,300
Indianapolis, IN
Summit River Crossing... -- 2,562 -- 16,549 2,562 16,549 19,111
Ohio
Summit Blue Ash......... (2) 2,033 -- 11,712 2,170 11,575 13,745
Summit Park............. -- 1,680 -- 10,603 1,921 10,362 12,283
Orlando, FL
Summit Fairways......... -- 2,819 -- 14,849 2,819 14,849 17,668
Raleigh/Central, NC Summit
Creekside............... 2,877 414 3,614 35 414 3,649 4,063
Summit Eastchester...... 3,872 912 4,699 124 912 4,823 5,735
Summit Highland......... -- 1,374 -- 6,214 1,374 6,214 7,588
Summit Hill I........... -- 1,224 8,500 27 1,224 8,527 9,751
Summit Hill II.......... -- 1,474 -- 9,909 1,474 9,909 11,383
Summit Oak.............. 2,585 400 3,065 25 400 3,090 3,490
Summit Old Town......... 3,097 774 4,693 64 774 4,757 5,531
Summit Sherwood......... 3,329 1,102 4,863 46 1,106 4,905 6,011
Summit Square........... (2) 2,757 -- 14,986 3,775 13,968 17,743
Richmond, VA
Summit Breckenridge..... -- 812 -- 11,700 812 11,700 12,512
Summit Stony Point...... (4) 1,638 13,041 286 1,638 13,327 14,965
Summit Waterford........ (2) 1,568 -- 14,265 1,949 13,884 15,833

</TABLE>

<TABLE>
<CAPTION>
DEPRECIABLE
ACCUMULATED DATE OF DATE LIVES
COMMUNITY DEPRECIATION CONSTRUCTION ACQUIRED YEARS
- - -------------------------- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C>
Atlanta, GA
Summit Glen............. $ (2,117) 5/90-8/92 4/90 5-40 years
Summit Springs.......... (3,225) 12/88-4/90 12/88 5-40 years
Summit Village.......... (2,921) 9/89-1/91 8/89 5-40 years
Charlotte, NC
Summit Arbors........... (318) 1986(5) 5/95 5-40 years
Summit Charleston....... (2,270) 10/85-12/86 7/85 5-40 years
Summit Creek............ (959) 1983(5) 9/94 5-40 years
Summit Crossing......... (342) 1985(5) 5/95 5-40 years
Summit Fairview......... (1,844) 3/82-3/83 3/82 5-40 years
Summit Foxcroft......... (288) 1979(5) 5/95 5-40 years
Summit Green............ (428) 1/95-6/96 12/94 5-40 years
Summit Hollow I & II.... (552) 1976(5) 5/95 5-40 years
Summit Norcroft......... (1,560) 2/90-3/91 12/89 5-40 years
Summit Radbourne........ (675) 1991(5) 5/95 5-40 years
Summit Simsbury......... (294) 1985(5) 5/95 5-40 years
Summit Touchstone....... (358) 1986(5) 5/95 5-40 years
Greenville, SC
Summit Beacon Ridge..... (1,713) 1/88-7/88 1/88 5-40 years
Summit East Ridge....... (388) 1986(5) 6/95 5-40 years
Indianapolis, IN
Summit River Crossing... (334) 3/95-9/96 10/94 5-40 years
Ohio
Summit Blue Ash......... (1,893) 1/92-5/92 1/91 5-40 years
Summit Park............. (2,998) 4/88-4/89 1/88 5-40 years
Orlando, FL
Summit Fairways......... (100) 9/95-12/96 8/95 5-40 years
Raleigh/Central, NC Summit
Creekside............... (258) 1981(5) 5/95 5-40 years
Summit Eastchester...... (356) 1981(5) 5/95 5-40 years
Summit Highland......... (2,270) 3/86-1/87 11/85 5-40 years
Summit Hill I........... (880) 1991(5) 6/94 5-40 years
Summit Hill II.......... (292) 11/94-6/96 6/94 5-40 years
Summit Oak.............. (220) 1982(5) 5/95 5-40 years
Summit Old Town......... (347) 1979(5) 5/95 5-40 years
Summit Sherwood......... (360) 1968(5) 5/95 5-40 years
Summit Square........... (3,138) 3/89-8/90 2/89 5-40 years
Richmond, VA
Summit Breckenridge..... (4,021) 7/85-5/87 6/85 5-40 years
Summit Stony Point...... (1,568) 1986(5) 2/94 5-40 years
Summit Waterford........ (3,229) 1/89-6/90 11/88 5-40 years
</TABLE>

F-19
<PAGE> 62

SCHEDULE III -- CONTINUED
SUMMIT PROPERTIES PARTNERSHIP, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
INITIAL COSTS COSTS CARRIED AT CLOSE OF PERIOD
------------------------------------------ CAPITALIZED ---------------------------------------
BUILDINGS SUBSEQUENT BUILDINGS
RELATED AND TO AND
COMMUNITY ENCUMBRANCES LAND IMPROVEMENTS(6) ACQUISITION LAND IMPROVEMENTS(6) TOTAL(1)
- - -------------------------- ------------ ------- --------------- ----------- -------- --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
South Florida
Summit Aventura......... -- 6,367 -- 24,923 6,368 24,922 31,290
Summit Del Ray.......... (2) 3,120 -- 14,772 5,402 12,490 17,892
Summit Palm Lake........ (2) 4,949 -- 16,764 5,083 16,630 21,713
Summit Plantation....... -- 3,428 18,485 0 3,428 18,485 21,913
Tampa/Sarasota, FL
Summit Gateway.......... (4) 1,738 -- 10,235 2,256 9,717 11,973
Summit Hampton.......... (4) 2,577 -- 12,009 2,972 11,614 14,586
Summit Heron's Run...... (2) 3,154 -- 10,429 3,192 10,391 13,583
Summit Lofts............ -- 1,800 7,337 582 1,800 7,919 9,719
Summit McIntosh......... -- 1,862 -- 10,047 1,942 9,967 11,909
Summit Perico........... (2) 1,588 -- 11,616 2,174 11,030 13,204
Summit Providence....... (2) 3,043 -- 16,841 3,391 16,493 19,884
Summit Station.......... -- 1,688 -- 10,062 1,989 9,761 11,750
Summit Walk............. -- 568 237 5,392 983 5,214 6,197
Washington, DC
Summit Belmont.......... (4) 974 -- 10,944 984 10,934 11,918
Summit Meadow........... (2) 2,313 -- 8,397 2,539 8,171 10,710
Summit Pike Creek....... (4) 1,132 -- 10,895 1,259 10,768 12,027
Summit Reston........... -- 5,434 26,255 403 5,434 26,658 32,092
Summit Windsor.......... (2) 644 6,297 969 5,972 6,941
------- --------- --------- -------- --------- --------
Total............. $94,038 $ 154,462 $ 369,602 $102,606 $ 515,496 $618,102
======= ========= ========= ======== ========= ========
</TABLE>

<TABLE>

DEPRECIABLE
ACCUMULATED DATE OF DATE LIVES
COMMUNITY DEPRECIATION CONSTRUCTION ACQUIRED YEARS
- - -------------------------- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C>
South Florida
Summit Aventura......... (965) 6/94-12/95 12/93 5-40 years
Summit Del Ray.......... (2,016) 1/92-2/93 1/92 5-40 years
Summit Palm Lake........ (3,196) 3/90-2/92 1/90 5-40 years
Summit Plantation....... (453) 1/94-7/95(5) 4/96 5-40 years
Tampa/Sarasota, FL
Summit Gateway.......... (2,856) 1/86-1/87 12/85 5-40 years
Summit Hampton.......... (4,089) 11/86-3/88 10/86 5-40 years
Summit Heron's Run...... (2,449) 7/89-10/90 6/89 5-40 years
Summit Lofts............ (835) 1990(5) 10/94 5-40 years
Summit McIntosh......... (2,514) 7/89-6/90 1/89 5-40 years
Summit Perico........... (2,687) 1/89-2/90 8/88 5-40 years
Summit Providence....... (4,168) 9/88-2/91 4/88 5-40 years
Summit Station.......... (2,074) 10/89-9/90 9/89 5-40 years
Summit Walk............. (665) 4/92-2/93 4/92 5-40 years
Washington, DC
Summit Belmont.......... (3,621) 1/86-5/87 1/86 5-40 years
Summit Meadow........... (2,025) 8/89-8/90 2/89 5-40 years
Summit Pike Creek....... (3,436) 11/86-2/88 4/86 5-40 years
Summit Reston........... (2,785) 1987(5) 4/94 5-40 years
Summit Windsor.......... (1,681) 8/88-8/89 3/95 5-40 years
--------
Total............. $(85,031)
========
</TABLE>

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

(1) The aggregate cost for federal income tax purposes at December 31, 1996 is
$559.0 million.

(2) Encumbered by fixed rate mortgages of $153 million.

(3) Encumbered by fixed rate mortgage of $8.6 million.

(4) Collateral for letters of credit in an aggregate amount of $55.6 million
which serve as collateral for $53.9 million in tax exempt bonds.

(5) Property purchased by Operating Partnership. Date reflects date construction
completed.

(6) Includes furniture, fixtures and equipment.

F-20
<PAGE> 63

SCHEDULE III

SUMMIT PROPERTIES PARTNERSHIP, L.P.

REAL ESTATE AND ACCUMULATED DEPRECIATION
(DOLLARS IN THOUSANDS)
- - --------------------------------------------------------------------------------

A summary of activity for real estate assets and accumulated depreciation
is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
REAL ESTATE ASSETS (1):
Balance at beginning of year.......................... $524,772 $407,707 $313,698
-------- -------- --------
Acquisitions.......................................... 21,913 82,935 75,921
Improvements.......................................... 4,780 2,560 1,710
Developments.......................................... 66,637 31,570 --
Step-up in basis and other costs related to Initial
Offering............................................ -- -- 16,378
-------- -------- --------
93,330 117,065 94,009
-------- -------- --------
Balance at end of year................................ $618,102 $524,772 $407,707
======== ======== ========
ACCUMULATED DEPRECIATION (1):
Balance at beginning of year.......................... $ 66,978 $ 51,957 $ 40,367
Depreciation.......................................... 18,053 15,021 11,590
-------- -------- --------
Balance at end of year................................ $ 85,031 $ 66,978 $ 51,957
======== ======== ========
</TABLE>

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

(1) Includes only apartment communities and does not include fixed assets used
in property development, construction and management of apartment
communities.

F-21
<PAGE> 64

FINANCIAL STATEMENTS
AND INDEPENDENT AUDITORS' REPORT

PORTOFINO PLACE, LTD.

DECEMBER 31, 1996 AND 1995

F-22
<PAGE> 65

PORTOFINO PLACE, LTD.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT.......................................................... F-24
FINANCIAL STATEMENTS
BALANCE SHEETS...................................................................... F-25
STATEMENTS OF OPERATIONS............................................................ F-26
STATEMENTS OF PARTNERS' EQUITY...................................................... F-27
STATEMENTS OF CASH FLOWS............................................................ F-28
NOTES TO FINANCIAL STATEMENTS....................................................... F-29
</TABLE>

F-23
<PAGE> 66

INDEPENDENT AUDITORS' REPORT

To the Partners
Portofino Place, Ltd.

We have audited the accompanying statements of financial position of
Portofino Place, Ltd. as of December 31, 1996 and 1995, and the related
statements of operations, partners' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly,
in all material respects, the financial position of Portofino Place, Ltd. as of
December 31, 1996 and 1995, and the results of its operations, changes in
partners' equity, and cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ REZNICK FEDDER & SILVERMAN

Bethesda, Maryland
March 3, 1997

F-24
<PAGE> 67

PORTOFINO PLACE, LTD.

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Rental property, less accumulated depreciation.......... $18,919,008 $19,746,437
Cash.................................................... 438,663 597,867
Construction escrow..................................... 12,869 32,869
Cash held for tenant security deposits.................. 240,587 206,878
Accounts receivable
Tenant............................................... 11,715 18,872
Other................................................ 15,762 10,241
Prepaid expenses and deposits........................... 16,049 19,472
Deferred financing and organization costs less
accumulated amortization of $186,631 and $124,421.... 17,472 79,682
----------- -----------
TOTAL ASSETS.................................... $19,672,125 $20,712,318
=========== ===========

LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Construction loans payable.............................. $16,554,000 $16,790,516
Retainage payable....................................... -- 20,000
Accounts payable
Trade................................................ 45,895 40,086
Related party........................................ 26,980 27,472
Interest............................................. 31,531 119,906
Unearned rental income.................................. 18,912 40,799
Tenant security deposits................................ 236,297 241,762
----------- -----------
TOTAL LIABILITIES............................... 16,913,615 17,280,541
PARTNERS' EQUITY.......................................... 2,758,510 3,431,777
----------- -----------
TOTAL LIABILITIES AND PARTNERS' EQUITY.......... $19,672,125 $20,712,318
=========== ===========
</TABLE>

See notes to financial statements

F-25
<PAGE> 68

PORTOFINO PLACE, LTD.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Revenue
Rental............................................................ $3,582,912 $3,266,692
Interest.......................................................... 39,410 50,698
Other............................................................. 154,741 172,209
---------- ----------
Total revenue............................................. 3,777,063 3,489,599
---------- ----------
Expenses
Advertising and promotional....................................... 84,220 80,653
Office operations................................................. 30,932 44,813
Administrative.................................................... 173,644 158,512
Utilities......................................................... 143,090 118,617
Repairs and maintenance........................................... 223,711 144,773
Grounds maintenance............................................... 49,516 47,590
Real estate taxes................................................. 290,114 333,079
Insurance and taxes............................................... 119,765 84,740
Management fees................................................... 146,966 151,763
Interest.......................................................... 1,402,089 1,357,610
Bad debt.......................................................... 13,215 --
Depreciation...................................................... 901,501 852,841
Amortization...................................................... 62,210 62,210
Partnership expenses.............................................. 7,841 --
---------- ----------
Total expenses............................................ 3,648,814 3,437,201
---------- ----------
NET INCOME................................................ $ 128,249 $ 52,398
========== ==========
</TABLE>

See notes to financial statements

F-26
<PAGE> 69

PORTOFINO PLACE, LTD.

STATEMENTS OF PARTNERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------- ----------- -----------
<S> <C> <C> <C>
Partners' equity, December 31, 1994.................... $ 2,425 $ 4,449,503 $ 4,451,928
Distributions to partners.............................. (5,878) (1,066,671) (1,072,549)
Net income............................................. 1,048 51,350 52,398
------- ----------- -----------
Partners' equity (deficit), December 31, 1995.......... (2,405) 3,434,182 3,431,777
Distributions to partners.............................. (3,594) (797,922) (801,516)
Net income............................................. 2,467 125,782 128,249
------- ----------- -----------
Partners' equity (deficit), December 31, 1996.......... $(3,532) $ 2,762,042 $ 2,758,510
======= =========== ===========
</TABLE>

See notes to financial statements

F-27
<PAGE> 70

PORTOFINO PLACE, LTD.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER
31,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income...................................................... $ 128,249 $ 52,398
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization................................ 963,711 915,051
Changes in assets and liabilities that provided (used) cash
Accounts receivable........................................ 1,636 (2,225)
Prepaid expenses and deposits.............................. 3,423 (16,092)
Accounts payable........................................... (83,058) (18,938)
Retainage payable.......................................... (20,000) --
Accrued liabilities........................................ -- 52,232
Unearned rental income..................................... (21,887) 4,129
Tenant security deposits -- net............................ (39,174) 78,546
----------- -----------
Net cash provided by operating activities............... 932,900 1,065,101
----------- -----------
Cash flows from investing activities
Increase in rental property.................................. (74,072) (4,404,642)
Construction escrow.......................................... 20,000 (32,869)
----------- -----------
Net cash used in investing activities................... (54,072) (4,437,511)
----------- -----------
Cash flows from financing activities
Increase (decrease) in construction loans payable............ (236,516) 4,780,687
Distributions to partners.................................... (801,516) (1,072,549)
----------- -----------
Net cash provided by (used in) financing activities..... (1,038,032) 3,708,138
----------- -----------
NET INCREASE (DECREASE) IN CASH......................... (159,204) 335,728
----------- -----------
Cash, beginning of year......................................... 597,867 262,139
----------- -----------
Cash, end of year............................................... $ 438,663 $ 597,867
=========== ===========
Supplemental disclosure of cash flow information
Cash paid during the year for interest, net of interest
capitalized................................................. $ 1,490,464 $ 1,277,567
=========== ===========
</TABLE>

See notes to financial statements

F-28
<PAGE> 71

PORTOFINO PLACE, LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1996

NOTE A -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The partnership was formed as a limited partnership under the laws of the
State of Florida on December 21, 1993, for the purpose of developing and
operating 322 rental housing units located in Broward County, Florida. The
project is comprised of sixteen, two and three story buildings and related
facilities. The partnership will continue until December 21, 2018, unless
dissolved earlier in accordance with the provisions of the partnership
agreement.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

Rental Property

Rental property is carried at cost. Depreciation is provided for in amounts
sufficient to relate the cost of depreciable assets to operations using
accelerated methods over their estimated service lives.

Income Taxes

No provision or benefit for income taxes has been included in these
financial statements since taxable income or loss passes through to, and is
reportable by, the partners individually.

Rental Income

Rental income is recognized as rentals become due. Rental payments received
in advance are deferred until earned. All leases between the partnership and the
tenants of the property are operating leases.

Amortization

Organization and financing costs represent charges incurred in connection
with the formation of the partnership and obtaining construction loans. These
costs are amortized on a straight-line basis over 25 and 3 years, the term of
the partnership agreement and the term of the related loan, respectively.

Allocation of Profit and Loss

The partnership agreement calls for the net loss of the partnership to be
allocated first to the general partner and limited partners until their capital
accounts are reduced to zero; second, to the investor limited partners until
their capital accounts are reduced to zero; and finally, 50% to the general and
limited partners and 50% to the investor limited partners. Net income shall be
allocated to the partners in proportion to and to the extent of the aggregate
net loss from prior years. Any remaining income is distributed according to the
priority distributions as described in the partnership agreement.

F-29
<PAGE> 72

PORTOFINO PLACE, LTD.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1996

NOTE B -- RENTAL PROPERTY

The rental property, at cost, consists of the following at December 31, :

<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Land.............................................. $ 2,750,000 $ 2,750,000
Land improvement.................................. 798,565 783,840
Buildings......................................... 16,066,844 16,066,844
Furniture and fixtures............................ 1,167,763 1,108,416
----------- -----------
20,783,172 20,709,100
Less accumulated depreciation..................... 1,864,164 962,663
----------- -----------
Total rental property, net........................ $18,919,008 $19,746,437
=========== ===========
</TABLE>

NOTE C -- CONSTRUCTION LOANS PAYABLE

The project was financed by initial partner capital contributions and
construction loans. The partnership's available borrowing limits are $12,250,000
and $5,250,000 from two separate lending institutions. The loans' initial
maturity date was December 28, 1995 with a one-year extension option. On
December 27, 1995, the borrower and lenders agreed to extend the maturity date
to December 28, 1996 subject to the terms in the Construction Loan Agreement. On
November 15, 1996, the lender agreed to an additional extension of the
maturities to February 28, 1997. The partnership incurred a nonrefundable
extension fee equal to 0.25% of the outstanding loan balance on the initial
maturity date.

The agreement requires monthly payments of principal and interest. The
interest rate is based on the Eurodollar rate or the prime rate, selected at the
option of the partnership.

The construction loans are collateralized by the rental property, an
assignment of leases and rents, and guarantees by the general partner and a
limited partner.

Construction loans payable at December 31, 1996 and 1995 consist of the
following:

<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Note payable -- bank: with interest due monthly at the
Eurodollar rate on the agreement date, plus 2.5% (7.88%
and 8.44% at December 31, 1996 and 1995), principal due
and payable in full on February 28, 1997. .............. $11,983,560 $11,753,191
Note payable -- bank: with interest due monthly at the
Eurodollar rate on the agreement date, plus 2.5% (7.88%
and 8.44% at December 31, 1996 and 1995), principal due
and payable in full on February 28, 1997. .............. 4,970,440 5,037,325
</TABLE>

Total interest costs incurred on borrowings totaled $1,389,209 and
$1,432,288 for the years ended December 31, 1996 and 1995, of which $74,678 has
been capitalized as part of rental property in 1995. The remaining $1,389,209
and $1,357,610 were expensed during 1996 and 1995.

NOTE D -- DISTRIBUTIONS TO PARTNERS

Under the partnership agreement, the partners are entitled to receive a
return on their capital contributions equal to 10% per annum. The return is
considered a preferential payment of a return on capital and is not guaranteed
by the partnership or any of the partners. The return accrues on a daily basis
and is

F-30
<PAGE> 73

PORTOFINO PLACE, LTD.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31, 1996

distributed monthly to the extent there are available cash flows, as defined. To
the extent there are not sufficient available cash flows, all such unpaid
amounts shall accrue and be deferred until cash flows are available. The
returns distributed to partners totaled $801,516 and $1,072,549 for the years
ended December 31, 1996 and 1995.

NOTE E -- RELATED PARTY TRANSACTIONS

Pursuant to a management agreement, Altman Management Company ("AMC"), an
affiliate of Portofino Place, Ltd. through common ownership, is employed as the
management agent for conducting the rental operations of the partnership. The
management agreement expires December 31, 1997 and is then automatically
renewable on a calendar year basis unless terminated by either party upon 30
days notice. Management fees were calculated at 4% of collected rental income in
1996. AMC earned management fees of $146,966 and $136,763 in 1996 and 1995, of
which $11,980 and $12,472 remained payable at December 31, 1996 and 1995. Upon
achievement of certain rental occupancy requirements, as described in the
management agreement, AMC was entitled to receive up to $15,000 as incentive
management fees. These fees were accrued at December 31, 1995 and were included
in accounts payable -- related party, and as of December 31, 1996, remain
unpaid.

AMC also functions as the paying agent for the insurance costs of the
partnership. Insurance expense is allocated based on the relative value of the
participating properties insured under a single insurance contract.

The partnership has a development fee agreement with Altman Development
Corporation ("ADC"), the general partner, to oversee, monitor and manage the
development of the project for a fixed fee. The development fees of $790,000 are
payable from the construction loan draws. Development fees totaled $60,676
during 1995. ADC also received a monthly site supervision fee of $7,512. Such
fees were $15,025 in 1995.

NOTE F -- CONCENTRATION OF CREDIT RISK

The partnership maintains its cash balances in three banks. The balances
are insured by the Federal Deposit Insurance Corporation up to $100,000 by each
bank. As of December 31, 1996, the uninsured portion of the cash balances held
at two of the banks was $536,966 (which included $300,517 of outstanding checks
and deposits).

NOTE G -- SUBSEQUENT EVENT

On January 6, 1997, the partners of the partnership sold their partnership
interests.

F-31
<PAGE> 74

SUMMIT MAYFAIRE APARTMENTS

HISTORICAL SUMMARY OF REVENUES AND DIRECT
OPERATING EXPENSES FOR THE YEAR ENDED
DECEMBER 31, 1996

F-32
<PAGE> 75

INDEPENDENT AUDITORS' REPORT

Board of Directors
Summit Properties Inc.
Charlotte, North Carolina

We have audited the accompanying Historical Summary of Revenues and Direct
Operating Expenses (the Historical Summary) of Summit Mayfaire Apartments,
formerly The Mayfaire, for the year ended December 31, 1996. This Historical
Summary is the responsibility of Summit Properties Inc.'s management. Our
responsibility is to express an opinion on the Historical Summary based on our
audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Historical Summary is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Historical Summary. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the Historical
Summary. We believe that our audit provides a reasonable basis for our opinion.

The accompanying Historical Summary was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission (for inclusion in Form 8-K of Summit Properties Inc.) as described in
Note 2 to the Historical Summary and is not intended to be a complete
presentation of Summit Mayfaire's revenues and expenses.

In our opinion, such Historical Summary presents fairly, in all material
respects, the revenues and direct operating expenses described in Note 2 to the
Historical Summary of Summit Mayfaire Apartments for the year ended December 31,
1996 in conformity with generally accepted accounting principles.

/s/ Deloitte & Touche LLP
- - -------------------------------
DELOITTE & TOUCHE LLP

March 31, 1997

F-33
<PAGE> 76

SUMMIT MAYFAIRE APARTMENTS

HISTORICAL SUMMARY OF REVENUES AND DIRECT OPERATING EXPENSES (NOTE 2)
YEAR ENDED DECEMBER 31, 1996

<TABLE>
<S> <C>
REVENUES:
Rental income.................................................................. $1,129,527
Other real estate income....................................................... 31,455
----------
Total revenues......................................................... 1,160,982
----------
DIRECT OPERATING EXPENSES:
Personnel...................................................................... 140,807
Utilities...................................................................... 41,879
Repairs and maintenance........................................................ 53,251
Real estate taxes.............................................................. 73,473
Insurance...................................................................... 10,228
Cleaning and decorating........................................................ 25,122
Advertising.................................................................... 14,536
Administration................................................................. 23,401
----------
Total direct operating expenses........................................ 382,697
----------
OPERATING INCOME, EXCLUSIVE OF CERTAIN EXPENSES (Note 2)......................... $ 778,285
==========
</TABLE>

See notes to historical summary.

F-34
<PAGE> 77

SUMMIT MAYFAIRE APARTMENTS

NOTES TO HISTORICAL SUMMARY OF REVENUES AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1996

1. OPERATING PROPERTY

Summit Mayfaire Apartments (the Apartments) is a 144-unit multifamily
residential property located in Raleigh, North Carolina, which was acquired by
Summit Properties Inc. on January 15, 1997.

2. BASIS OF PRESENTATION

The Historical Summary of Revenues and Direct Operating Expenses was
prepared for the purpose of complying with the Rules and Regulations of the
Securities and Exchange Commission (for inclusion in Form 8-K of Summit
Properties Inc.) and has been prepared on the accrual basis of accounting.

The Historical Summary of Revenues and Direct Operating Expenses of the
Apartments exclude the following expenses which would not be comparable to the
proposed future operations of the Apartments:

a) Depreciation of the building and improvements

b) Interest expense

c) Management fee expense

d) Income taxes

Rental income is recognized on the accrual method as earned. Apartment
units are rented under lease agreements with terms of one year or less.

3. MANAGEMENT FEES

Management fees totaling $45,397 were charged by Summit Management Company
(SMC), which functioned as the property manager prior to the acquisition of the
property by SMC's parent, Summit Properties Inc. These expenses were based on
the sum of 2% of cash collections plus 2.9% of net operating income as defined
in the Property Management and Leasing Agreement. SMC will continue to manage
the Apartments in the future. However, this arrangement will not be governed by
a separate management agreement and the basis of the fees charged will be
changed. Accordingly, these expenses have been excluded from the Historical
Summary.

**********

F-35
<PAGE> 78

SAND LAKE JOINT VENTURE

FINANCIAL STATEMENTS

AS OF DECEMBER 31, 1996,

TOGETHER WITH REPORT OF INDEPENDENT

CERTIFIED PUBLIC ACCOUNTANTS

F-36

<PAGE> 79

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners of
Sand Lake Joint Venture:

We have audited the accompanying balance sheet of Sand Lake Joint Venture
(a Florida general partnership) as of December 31, 1996, and the related
statements of income, partners' capital and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sand Lake Joint Venture as
of December 31, 1996, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.

/s/ ARTHUR ANDERSEN LLP

Orlando, Florida,
April 11, 1997

F-37
<PAGE> 80

SAND LAKE JOINT VENTURE
BALANCE SHEET -- DECEMBER 31, 1996

<TABLE>
<S> <C>
ASSETS
Cash.......................................................................... $ 395,961
Cash held in escrow (Note 2).................................................. 301,903
Accounts receivable, net of allowance of $3,340............................... 3,247
Prepaid insurance............................................................. 18,689
-----------
Land, buildings and equipment (Note 2):
Land..................................................................... 3,422,073
Buildings................................................................ 16,080,971
Furniture and equipment.................................................. 816,245
-----------
20,319,289
Less-Accumulated depreciation............................................ (1,074,884)
-----------
19,244,405
-----------
Deferred loan costs, net (Note 2)............................................. 257,207
-----------
$20,221,412
===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses......................................... $ 36,187
Interest payable.............................................................. 56,981
Tenants' security deposits (Note 2)........................................... 190,186
Note payable to related party (Note 4)........................................ 15,267,949
-----------
15,551,303
-----------
Partners' Capital (Notes 1 and 3):
The Northwestern Mutual Life Insurance Company........................... 3,855,830
TCR Sand Lake Limited Partnership........................................ 814,279
-----------
Total partners' capital........................................ 4,670,109
-----------
$20,221,412
===========
</TABLE>

The accompanying notes are an integral part of this balance sheet.

F-38
<PAGE> 81

SAND LAKE JOINT VENTURE
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<S> <C>
Revenues (Note 2):
Rental.................................................................... $3,386,316
Other..................................................................... 195,874
Interest income........................................................... 5,451
----------
Total revenues.................................................. 3,587,641
----------
Operating expenses:
Payroll................................................................... 281,010
Landscaping............................................................... 73,593
Utilities................................................................. 227,673
Maintenance and redecorating.............................................. 100,153
Selling, general and administrative....................................... 73,471
Depreciation and amortization............................................. 512,164
Property taxes (Note 2)................................................... 341,810
Management fees (Note 4).................................................. 136,151
Insurance................................................................. 46,105
Other..................................................................... 16,664
----------
Total operating expenses........................................ 1,808,794
----------
Operating income............................................................... 1,778,847
Interest expense (Note 4)...................................................... 1,218,545
----------
Net income..................................................................... $ 560,302
==========
</TABLE>

The accompanying notes are an integral part of this statement.

F-39
<PAGE> 82

SAND LAKE JOINT VENTURE
STATEMENT OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
TCR SAND THE NORTHWESTERN
LAKE LIMITED MUTUAL LIFE
PARTNERSHIP INSURANCE COMPANY TOTAL
------------ ----------------- ----------
<S> <C> <C> <C>
Partners' capital, December 31, 1995.................. $ 668,775 $4,225,775 $4,894,550
Net income....................................... 280,151 280,151 560,302
Distributions.................................... (134,647) (650,096) (784,743)
--------- ---------- ----------
Partners' capital, December 31, 1996.................. $ 814,279 $3,855,830 $4,670,109
========= ========== ==========
</TABLE>

The accompanying notes are an integral part of this statement.

F-40
<PAGE> 83

SAND LAKE JOINT VENTURE
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<S> <C>
Cash flows from operating activities:
Net income.................................................................. $ 560,302
-----------
Adjustments to reconcile net income to net cash provided by operating
activities-
Depreciation and amortization............................................ 512,164
Changes in assets and liabilities-
Increase in cash held in escrow..................................... (90,241)
Decrease in accounts receivable, net................................ 4,421
Decrease in accrued rental revenue.................................. 40,218
Increase in prepaid insurance....................................... (18,689)
Increase in accounts payable and accrued expenses................... 1,761
Increase in tenants' security deposits.............................. 11,104
-----------
Total adjustments.............................................. 460,738
-----------
Net cash provided by operating activities...................... 1,021,040
-----------
Cash flows from investing activities:
Capital expenditures........................................................ (1,928)
Proceeds from sale of furniture and equipment............................... 6,740
-----------
Net cash provided by investing activities...................... 4,812
-----------
Cash flows from financing activities:
Borrowings from related party............................................... 20,000
Payments on note payable to related party................................... (261,868)
Partner distributions....................................................... (784,743)
-----------
Net cash used in financing activities.......................... (1,026,611)
-----------
Net decrease in cash.......................................................... (759)
Cash, beginning of year....................................................... 396,720
-----------
Cash, end of year............................................................. $ 395,961
===========
Supplemental disclosure of cash flow information:
Cash paid for interest...................................................... $ 1,218,545
</TABLE>

The accompanying notes are an integral part of this statement.

F-41
<PAGE> 84

SAND LAKE JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996

1. ORGANIZATION AND NATURE OF BUSINESS:

Sand Lake Joint Venture (the Partnership), a Florida general partnership,
was formed on December 28, 1993, between The Northwestern Mutual Life Insurance
Company (NML) and TCR Sand Lake Limited Partnership (TCR) (collectively, the
Partners). The primary purpose of the Partnership is to acquire, construct, own,
manage and operate a 416-unit apartment community (the Property) located in
Orlando, Florida. Construction of the Property was completed in December 1994.
The Partnership extends through December 31, 2023, unless terminated sooner as
provided in the Agreement.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Accounting

The Partnership's accounts are presented on the accrual basis of accounting
in accordance with generally accepted accounting principles.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The carrying amounts of the Partnership's current financial assets and
liabilities, including cash and cash held in escrow, accounts receivable,
accounts payable and interest payable, at December 31, 1996, approximate their
fair value due to the short maturity of these instruments. Based on the
borrowing rates currently available to the Partnership for loans with similar
terms and maturities, the fair value of the note payable to related party at
December 31, 1996, is estimated at $14,534,825.

Cash Held in Escrow

The Partnership receives deposits from tenants upon entering into a lease
agreement. These amounts are held in an escrow account, with an offsetting
liability recorded as tenants' security deposits. Additionally, the Partnership
pays a monthly amount to NML for property taxes, which is maintained in an
escrow account until paid by NML.

Land, Buildings, and Furniture and Equipment

The Partnership provides for depreciation on the buildings, furniture and
equipment on a straight-line basis over their estimated useful lives, which
range from 10 to 40 years. In 1996, total depreciation expense was $483,988.
Maintenance and repairs to buildings and equipment which do not extend the
useful life are expensed when incurred. In 1996, total maintenance and
redecorating expense was $100,153.

Interest and property taxes of $265,000 and $37,171, respectively, incurred
while the property was under construction, have been capitalized as a cost of
the property. These costs are being amortized over 40 years, the estimated
useful life of the building.

Deferred Loan Costs

Deferred loan costs are being amortized over the term of the loan. In 1996,
total amortization expense was $28,176.

F-42
<PAGE> 85

SAND LAKE JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Revenue Recognition

Rental revenue is recognized ratably on a straight-line basis over the term
of the lease. Accordingly, rental revenues are accrued for certain leases during
the months of the lease that provide for free or discounted rentals.

Income Taxes

Income taxes have not been recorded in the accompanying financial
statements because they are obligations of the Partners. The tax returns, the
qualification of the Partnership, as such, for tax purposes, and the amount of
distributable partnership income or loss are subject to examination by taxing
authorities. If such examinations result in changes with respect to the
Partnership's qualification or in changes with respect to the income or loss,
the tax liability of the Partners would be changed accordingly.

Allocations of Profit and Loss

The Agreement provides that profits and losses, for financial reporting
purposes, are to be determined in accordance with generally accepted accounting
principles and allocated equally between the Partners.

Long-lived Assets

Effective January 1, 1996, the Partnership adopted Statement of Financial
Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed Of " (SFAS 121). SFAS 121 requires entities
to review the recoverability of long-lived assets whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The implementation of SFAS 121 did not have a material effect on
the accompanying financial statements.

3. PARTNERSHIP MATTERS:

Capital Contributions

Upon execution of the Joint Venture Agreement (the Agreement), the Partners
made an initial capital contribution of $4,417,000 and $860,000, respectively.
Additional contributions, as defined, are required if additional cash in excess
of distributable cash, as defined, is required in order to fund operations, pay
debts and obligations as they mature, or fund the costs of maintenance, repairs
and replacements necessary to keep the Property in the same condition as existed
upon final completion. In accordance with the Agreement, each Partner shall make
equal additional capital contributions if required. No additional capital
contributions were made by the Partners during 1996.

Capital Transaction and Cash Flow Distributions

The Agreement provides that distributable cash, as defined, shall be
distributed as follows: 83.70 percent to NML and 16.30 percent to TCR until each
Partner has received an amount equal to a 9 percent annual noncumulative return
on his initial capital contribution, then to the Partners in accordance with
their respective interests, as defined. The Agreement also provides that all
capital transaction proceeds, as defined, shall be distributed as follows: to
repay principal, interest and other amounts due on the loan, then 83.70 percent
to NML and 16.30 percent to TCR, until each has received an amount equal to its
initial capital contribution, then to the Partners in accordance with their
respective interests, as defined. There were capital transactions and cash flow
distributions in 1996 of $0 and $784,743, respectively. Cash flow distributions
relating to 1996 were recorded and distributed in 1997 in the amount of $166,003
to NML and $151,292 to TCR, in accordance with the Agreement.

F-43
<PAGE> 86

SAND LAKE JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. RELATED PARTY TRANSACTIONS:

The Partnership has a promissory note agreement with NML which accrues
interest at 7.875 percent, payable monthly, maturing on February 15, 2006. As of
December 31, 1996, the amount outstanding under this agreement totaled
$15,267,949. Monthly principal and interest payments in the amount of
approximately $123,000 commenced in July 1995. The note is collateralized by a
mortgage on the Property. In 1996, the Partnership incurred interest expense of
approximately $1,213,000 on this note.

At December 31, 1996, annual maturities were as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- - ------------- ------------
<S> <C>
1997 .................................................. $ 283,000
1998 .................................................. 305,941
1999 .................................................. 330,924
2000 .................................................. 357,693
2001 .................................................. 387,298
Thereafter .................................................. 13,603,093
-----------
$15,267,949
===========
</TABLE>

The Partnership has entered into a management agreement with Florida RS,
Inc. (the Project Manager), an affiliate of TCR, to manage the Property for a
fee based on 4 percent of the gross income of the Property. The Partnership
incurred management fees of $136,151 during 1996.

5. SUBSEQUENT EVENT:

On February 20, 1997, Summit Properties, Inc. (Summit) purchased all of the
joint venture interests in the Partnership from the Partners for $26,800,000,
including the assumption of the mortgage debt of approximately $15,300,000.

F-44
<PAGE> 87

FINANCIAL STATEMENTS
AND INDEPENDENT AUDITORS' REPORT

SUMMIT AMERICAN ASSOCIATES

DECEMBER 31, 1995

F-45
<PAGE> 88

SUMMIT AMERICAN ASSOCIATES

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT.......................................................... F-47
FINANCIAL STATEMENTS
BALANCE SHEET....................................................................... F-48
STATEMENT OF EARNINGS............................................................... F-49
STATEMENT OF PARTNERS' EQUITY....................................................... F-50
STATEMENT OF CASH FLOWS............................................................. F-51
NOTES TO FINANCIAL STATEMENTS....................................................... F-52
</TABLE>

F-46
<PAGE> 89

INDEPENDENT AUDITORS' REPORT

To the Partners
Summit American Associates

We have audited the accompanying balance sheet of Summit American
Associates (a Florida General Partnership), as of December 31, 1995, and the
related statements earnings, of partners' equity and cash flows for the year
ended December 31, 1995. These financial statements are the responsibility of
the project's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Summit American Associates
as of December 31, 1995, and the results of its operations, and its cash flows
for the year ended December 31, 1995, in conformity with generally accepted
accounting principles.

/s/ REZNICK FEDDER & SILVERMAN

Charlotte, North Carolina
January 15, 1996

F-47
<PAGE> 90

SUMMIT AMERICAN ASSOCIATES

BALANCE SHEET

DECEMBER 31, 1995

<TABLE>
<S> <C>
ASSETS
Rental property:
Land and land improvements.................................................... $ 3,023,728
Building and improvements..................................................... 15,322,556
Furniture, fixtures and equipment............................................. 987,049
-----------
19,333,333
Less: accumulated depreciation................................................ (284,072)
-----------
Total rental property................................................. 19,049,261
Cash.......................................................................... 16,954
Restricted cash -- tenants security deposits.................................. 88,486
Prepaid Expenses.............................................................. 145
Other assets
Organization cost, less accumulated amortization of $7,455................. 141,626
Financing fees, less accumulated amortization of $10,227................... 105,670
-----------
Total assets.......................................................... $19,402,142
===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Construction and term loan.................................................... $14,392,143
Accrued interest.............................................................. 94,204
Accounts payable and accrued expenses......................................... 42,362
Security deposits............................................................. 88,486
-----------
Total liabilities..................................................... 14,617,195
Partners' equity................................................................ 4,784,947
-----------
Total liabilities and partners' equity................................ $19,402,142
===========
</TABLE>

See Notes to Financial Statements.

F-48
<PAGE> 91

SUMMIT AMERICAN ASSOCIATES

STATEMENT OF EARNINGS

YEAR ENDED DECEMBER 31, 1995

<TABLE>
<S> <C>
Revenues:
Rental......................................................................... $ 1,502,395
Other property income.......................................................... 88,033
Interest income................................................................ 1,007
----------
$ 1,591,435
----------
Expenses:
Personnel...................................................................... 162,405
Advertising and promotion...................................................... 31,374
Utilities...................................................................... 74,545
Building repairs and maintenance............................................... 86,883
Real estate taxes.............................................................. 38,923
Insurance...................................................................... 8,882
Management fees................................................................ 81,951
Asset Management fee........................................................... 7,942
Depreciation................................................................... 284,072
Amortization................................................................... 17,682
Administrative expense......................................................... 37,710
Legal/Professional fees........................................................ 7,708
Interest expense............................................................... 592,974
Total Expenses......................................................... 1,433,051
----------
Net Income............................................................. $ 158,384
==========
</TABLE>

See Notes to Financial Statements.

F-49
<PAGE> 92

SUMMIT AMERICAN ASSOCIATES

STATEMENT OF PARTNERS' EQUITY

FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
JACARANDA
COVE SUMMIT
ASSOCIATES LTD. PROPERTIES LP TOTAL
--------------- ------------- ----------
<S> <C> <C> <C>
Balance at December 31, 1994............................. $3,626,751 $1,207,933 $4,834,684
Distributions............................................ (156,109) (52,012) (208,121)
Net Income............................................... 118,788 39,596 158,384
---------- ---------- ----------
Balance at December 31, 1995............................. $3,589,430 $1,195,517 $4,784,947
========== ========== ==========
</TABLE>

See Notes to Financial Statements.

F-50
<PAGE> 93

SUMMIT AMERICAN ASSOCIATES

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<S> <C>
Cash flow from operating activities:
Net Income.................................................................... $ 158,384
Adjustments to reconcile not income to net cash provided by operating
activities:
Depreciation............................................................... 284,072
Amortization............................................................... 17,682
Increase in restricted cash................................................ (88,486)
Increase in prepaid expenses............................................... (145)
Increase in accounts payable............................................... 19,140
Increase in accrued expenses............................................... 15,280
Increase in asset management fee........................................... 7,942
Increase in security deposit liability..................................... 88,486
Increase in accrued interest............................................... 94,204
-----------
Net cash used by operating activities................................. 596,559
-----------
Cash flows from investing activities:
Construction of real estate, net of payable................................... (9,887,762)
Decrease in accounts receivable -- related party.............................. 67,219
-----------
Net cash used in investing activities................................. (9,820,543)
-----------
Cash flows from financing activities:
Proceeds from construction and term loan...................................... 9,394,783
Partners' capital distributions............................................... (208,121)
Payment of construction and term loans........................................ (45,000)
-----------
Net cash provided by financing activities............................. 9,141,662
-----------
NET DECREASE IN CASH.................................................. (82,322)
Cash, beginning................................................................. 99,276
-----------
Cash, ending.................................................................... $ 16,854
===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest, net of amount capitalized............. $ 421,866
===========
</TABLE>

See Notes to Financial Statements.

F-51
<PAGE> 94

SUMMIT AMERICAN ASSOCIATES

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1995

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Summit American Associate is a joint venture ("Joint Venture") organized to
construct and operate a 262 unit apartment complex located in Plantation,
Florida. The Joint Venture was organized as a Florida General Partnership.

A summary of the Partnership's significant policies applied in the
preparation of the accompanying financial statements is as follows:

Basis of presentation

The accompanying financial statements have been prepared in accordance with
the accrual method of accounting. Revenues are recognized when earned and
expenses are charged to operations when incurred.

Cash and cash equivalents

For purposes of the statement of cash flows, the Partnership considers all
highly liquid instruments purchased with an original maturity of three months or
less to be cash equivalents.

Income taxes

Partnerships are generally not taxable entities under federal and state
laws. Accordingly, the Joint Venture has not provided for federal or state
income taxes.

Each partner reports his share of the profits and losses of the
Partnership, and federal and state income taxes are computed on each partner's
total income from all sources. The Partnership's income tax returns are subject
to examination by federal and state taxing authorities. If any such examination
results in changes to taxable income, the income tax liability of the partners
for such years could be changed.

Interest and real estate taxes

Interest and real estate taxes incurred during the construction period are
capitalized and depreciated over the lives of the constructed assets. Interest
and property taxes capitalized in the year ended December 31, 1995 were $391,890
and $20,244, respectively.

Use of Estimates

NOTE B -- JOINT VENTURE ORGANIZATION

Each partner is to receive from available cash flow a preferred
distribution equal to their respective capital contributions times the prime
rate plus one-half percent. To the extent the preferred distributions are not
made in any fiscal year, the amount in arrears goes forward until paid. After
payment of the preferred distributions and any preferred distribution in
arrears, non-sale distributions are allocated 40 percent to Summit Properties
Partnership L.P. (SPPLP) and 60 percent to Jacaranda Cove Associates, Ltd. The
Joint Venture's profit/loss is allocated in a manner similar to its cash
distributions.

F-52
<PAGE> 95

SUMMIT AMERICAN ASSOCIATES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE C -- CONSTRUCTION AND TERM LOAN

The construction and term loan bears interest at a variable rate equal to
the adjusted thirty day CD base rate, London Interbank Offered Rate (LIBOR), or
the prime rate. The partnership elected the CD rate, which is the banks
certificate of deposit rate plus 1.75 percent. The interest rate as of December
31, 1995 was 7.60%. The loan was payable on March 31, 1995, with the Joint
Venture having the right to extend the maturity date to June 30, 1998.
Management has chosen to exercise their rights to extend the maturity date to
June 30, 1998. Principal payment of $15,000 and interest at the CD rate are
payable monthly. The loan is collateralized by all assets of the Joint Venture
and guaranteed by SPPLP.

The aggregate principal payments of the construction and term loan for each
of the next five years are as follows:

The carrying amount of the projects long-term debt approximates fair value.

The loan agreement provides for maximum interest rate during the loan as
follows:

<TABLE>
<S> <C>
April 1, 1995 -- October 31, 1995.................... 7.20%
November 1, 1995 -- October 31, 1996................. 7.95%
November 1, 1995 -- October 31, 1997................. 8.70%
November 1, 1997 -- June 30, 1998.................... 9.45%
</TABLE>

NOTE D -- RELATED PARTY TRANSACTIONS

Related party transactions for the year ended December 31, 1995 are as
follows:

<TABLE>
<S> <C>
Construction contract payments to Summit Apartments Builders, Inc. (an
affiliate of SPPLP) December 31, 1995 (total for project
$13,382,876)........................................................... $8,047,136
Credit enhancement fee to SPPLP.......................................... 246,248
Advance received and repaid to SPPLP from Summit American................ 200,000
Management fee to Summit Management Company.............................. 81,951
Development fees paid to SPPLP........................................... 39,375
Development fees paid to American Land Management (an affiliate of
Jacaranda Cove Associates, Ltd.)....................................... 39,375
Interest on advance paid to SPPLP from Summit American................... 7,616
Asset Management fee to SPPLP of which $3,971 is payable at December 31,
1995................................................................... 3,971
Asset Management fee to American Land Management of which $3,971 is
payable at December 31, 1995........................................... 3,971
</TABLE>

F-53
<PAGE> 96

SUMMIT PROPERTIES PARTNERSHIP, L.P.
PRO FORMA CONDENSED STATEMENT OF EARNINGS

THREE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

ACQUISITION
HISTORICAL ACQUISITIONS ADJUSTMENTS PRO FORMA
----------- ------------ ----------- -----------
(A) (B)
<S> <C> <C> <C> <C>
Revenues:
Rental............................. $ 25,780 $565 -- $ 26,345
Other property income.............. 1,321 57 -- 1,378
Interest and other................. 148 -- -- 148
----------- ---- ----- -----------
Total revenues............. 27,249 622 -- 27,871
Expenses:
Property operating and
maintenance..................... 7,119 188 $ 16(C) 7,323
Real estate taxes and insurance.... 2,695 51 -- 2,746
Depreciation....................... 5,181 81 49(D) 5,311
Interest........................... 4,550 163 65(E) 4,778
General and administrative......... 646 -- -- 646
Loss in equity investments......... 130 -- -- 130
----------- ---- ----- -----------
Total expenses............. 20,321 483 130 20,934
----------- ---- ----- -----------
Net income................. $ 6,928 $139 $(130) $ 6,937
=========== ==== ===== ===========
Per unit data:
Net income(F)...................... $ 0.26 $ 0.25
=========== ===========
Weighted average units............. 27,057,351 27,325,244
=========== ===========
</TABLE>

F-54
<PAGE> 97

SUMMIT PROPERTIES PARTNERSHIP, L.P.

NOTES TO PRO FORMA CONDENSED STATEMENT OF EARNINGS

THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
ADJUSTMENTS:
A. Reflects the Summit Properties Partnership, L.P. Statement of Earnings for
the three months ended March 31, 1997.
B. Represents the operations of the Acquisition Communities from January 1,
1997 to their respective dates of acquisition.
C. Property supervision costs adjusted to 2.5% of revenues. The 2.5% estimated
reflects the Operating Partnership's historical costs of property
supervision. Such costs, as a percent of property revenues should not change
significantly with the acquisitions.
D. Includes additional depreciation related to the increase in basis from the
purchases of $49,000.
E. Includes the interest costs on the Sand Lake debt assumed in conjunction
with the purchase and the incremental borrowings to finance the acquisitions
of $65,000. The purchase was assumed to be financed from the Operating
Partnership's credit facility
F. Based upon 27,325,244 weighted average Units issued and outstanding
following the acquisitions.

F-55
<PAGE> 98

SUMMIT PROPERTIES PARTNERSHIP, L.P.

PRO FORMA CONDENSED STATEMENT OF EARNINGS

YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
ACQUISITION
HISTORICAL ACQUISITIONS ADJUSTMENTS PRO FORMA
---------- ------------ ----------- ----------
(A) (B)
<S> <C> <C> <C> <C>
Revenues:
Rental........................... $ 88,864 $8,830 $ 97,694
Other property income............ 4,683 468 5,151
Interest and other............... 942 0 $ (72)(F) 870
---------- ------ ------- ----------
Total revenues........... 94,489 9,298 (72) 103,715
Expenses:
Property operating and
maintenance................... 26,403 2,273 (85)(C) 28,591
Real estate taxes and
insurance..................... 8,823 972 -- 9,795
Depreciation..................... 18,208 1,546 536(D) 20,290
Interest......................... 17,138 3,031 1,172(E),(F) 21,341
General and administrative....... 2,557 0 -- 2,557
Loss in equity investments....... 173 0 --(G) 173
---------- ------ ------- ----------
Total expenses........... 73,302 7,822 1,623 82,747
---------- ------ ------- ----------
Income before extraordinary
items............................ 21,187 1,476 (1,695) 20,968
Extraordinary items................ (626) -- -- (626)
---------- ------ ------- ----------
Net income............... $ 20,561 $1,476 $(1,695) $ 20,342
========== ====== ======= ==========
Per unit data:
Income before extraordinary
items(H)...................... $ 0.92 $ 0.88
========== ==========
Net income(H).................... $ 0.90 $ 0.86
========== ==========
Weighted average units........... 22,940,998 23,694,130
========== ==========
</TABLE>

F-56
<PAGE> 99

SUMMIT PROPERTIES PARTNERSHIP, L.P.

NOTES TO PRO FORMA CONDENSED STATEMENT OF EARNINGS

YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
ADJUSTMENTS:
A. Reflects the Summit Properties Partnership, L.P. Statement of Earnings for
the year ended December 31, 1996.
B. Represents the operations of the Acquisition Communities for the year ended
December 31, 1996 except for Summit Plantation. Represents the operations of
Summit Plantation for the period January 1, 1996 to March 31, 1996 as Summit
Plantation was acquired April 1, 1996.
C. Property supervision costs adjusted to 2.5% of revenues. The 2.5% reflects
the Operating Partnership's historical costs of property supervision. Such
costs, as a percent of property revenues, are not expected to change
significantly with the acquisitions.
D. Includes additional depreciation related to the increase in basis from the
purchases of $536,000.
E. Represents the incremental borrowing cost to finance the acquisitions. Total
pro forma interest expense includes $2.7 million to finance the
acquisitions, $1.2 million related to the Sand Lake note assumed and
$258,000 related to the Summit Plantation note assumed. The purchase of
Summit Plantation was assumed to be financed from the Operating
Partnership's credit facility at a 6.6% interest rate. All other borrowings
to finance the acquisitions were assumed to be at the then current 10 year
treasury rate plus 100 basis points or 7.8%.
F. Includes a reduction of $72,000 in other income and interest expense for
credit enhancement fees charged by the Operating Partnership to Summit
Plantation from January 1, 1996 to March 31, 1996.
G. The Operating Partnership's equity earnings in the Summit Plantation joint
venture from January 1, 1996 to March 31, 1996 were less than $1,000.
H. Based upon 23,694,130 weighted average Units issued and outstanding following
the acquisitions.

F-57
<PAGE> 100

SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this amended registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Charlotte, State of North Carolina on this 30th day of June, 1997.

SUMMIT PROPERTIES PARTNERSHIP, L.P.

By: Summit Properties Inc.
Its: General Partner

By: /s/ WILLIAM F. PAULSEN
----------------------------------
WILLIAM F. PAULSEN
President and Chief Executive
Officer
<PAGE> 101

EXHIBIT INDEX

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

(1) Previously filed as an exhibit to Summit Properties' Registration Statement
on Form S-11, File
Number 33-72454.

(2) Previously filed as an exhibit to Summit Properties' Annual Report on Form
10-K for the fiscal year ended December 31, 1993.

(3) Previously filed as an exhibit to Summit Properties' Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1996.

(4) Previously filed as an exhibit to Summit Properties' Annual Report on Form
10-K for the fiscal year ended December 31, 1996.

(5) Previously filed as an exhibit to this Registration Statement.

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the use of our report dated March 3, 1997, on our audit of
the financial statements of Portofino Place, Ltd. for the years ended December
31, 1996 and 1995, in the Registration Statement of Summit Properties
Partnership, L.P. on Form 10/A-2 (File No. 0-22411), and to all references to
our firm included in or made a part of such Registration Statement, and to the
incorporation by reference of such report in the Registration Statement of
Summit Properties Inc. on Form S-3 (File No. 333-25575).

/s/ REZNICK FEDDER & SILVERMAN

REZNICK FEDDER & SILVERMAN

Bethesda, Maryland

June 30, 1997

<PAGE> 1

EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the use of our report dated March 24, 1997, on our audit of the
balance sheets of Summit Properties Partnership, L.P. ("SPPLP") as of December
31, 1996 and 1995, and the related statements of earnings, partners' equity, and
cash flows of SPPLP and Predecessors for each of the three years in the period
ended December 31, 1996, and our report dated March 31, 1997, on our audit of
the Historical Summary of Revenues and Direct Operating Expenses of Summit
Mayfaire Apartments for the year ended December 31, 1996, in the Registration
Statement of Summit Properties Partnership, L.P. on Form 10/A-2 (File No.
0-22411).

/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP

Charlotte, North Carolina

June 30, 1997

<PAGE> 1

EXHIBIT 23.3

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

As independent certified public accountants, we hereby consent to the use
of our report dated April 11, 1997, included in Registration Statement File No.
0-22411 on Form 10/A-2. It should be noted that we have not audited any
financial statements of Sand Lake Joint Venture subsequent to December 31, 1996,
or performed any audit procedures subsequent to the date of our report.

/s/ ARTHUR ANDERSEN LLP

June 30, 1997

Orlando, Florida

<PAGE> 1

EXHIBIT 23.4

CONSENT OF INDEPENDENT AUDITORS

We consent to the use of our report dated January 15, 1996, on our audit of
the financial statements of Summit American Associates for the year ended
December 31, 1995, in the Registration Statement of Summit Properties
Partnership, L.P. on Form 10/A-2 (File No. 0-22411), and to all references to
our firm included in or made a part of such Registration Statement, and to the
incorporation by reference of such report in the Registration Statement of
Summit Properties Inc. on Form S-3 (File No. 333-25575).

/s/ REZNICK FEDDER & SILVERMAN

REZNICK FEDDER & SILVERMAN

Charlotte, North Carolina

June 30, 1997