SUMMIT PROPERTIES INC, 10-K, 1997-02-27

SUMMIT PROPERTIES INC
10-K, 1997-02-27
REAL ESTATE INVESTMENT TRUSTS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 1996 Commission file number 1-12792
SUMMIT PROPERTIES INC.

(Exact name of registrant as specified in its charter)
------------------------------

<TABLE>
<S> <C>
MARYLAND 56-1857807
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

212 SOUTH TRYON STREET
SUITE 500
CHARLOTTE, NORTH CAROLINA 28281
(Address of principal executive offices) (Zip Code)
</TABLE>

(704) 334-9905
(Registrant's telephone number, including area code)
------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

<TABLE>
<S> <C>
COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
(Title of each class) (Name of each exchange on which registered)
</TABLE>

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ____

The aggregate market value of the voting stock held by nonaffiliates of the
Registrant, as of February 20, 1997, was $456,616,250.

The number of shares of the Registrant's Common Stock, par value $.01 per
share, outstanding as of February 20, 1997, was 23,072,136.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 1997 Proxy Statement for the Registrant's Annual Meeting of
Stockholders, to be filed with the Securities and Exchange Commission within 120
days after the end of the year covered by this Form 10-K, are incorporated by
reference in Part III, Items 10, 11, 12 and 13, of this Form 10-K.

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<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C> <C>
PART I

1. Business.................................................... 3

2. Properties.................................................. 8

3. Legal Proceedings........................................... 10

4. Submission of Matters to a Vote of Security Holders......... 10

PART II

5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 11

6. Selected Financial Data..................................... 12

7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 14

8. Financial Statements and Supplementary Data................. 25

9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 25

PART III

10. Directors and Executive Officers of the Registrant.......... 26

11. Executive Compensation...................................... 26

12. Security Ownership of Certain Beneficial Owners and
Management................................................ 26

13. Certain Relationships and Related Transactions.............. 26

PART IV

14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 27
</TABLE>

2
<PAGE> 3

PART I

ITEM 1. BUSINESS

THE COMPANY

Summit Properties Inc. ("the Company") is one of the largest developers and
operators of luxury garden apartment communities (the "Communities") in the
southeastern United States. The Company's current portfolio consists of 51
apartment Communities with 11,788 apartment homes, including Summit Foxcroft in
which the Company has a 75% managing general partner interest. The Company also
has nine apartment Communities with 2,716 apartment homes under construction or
in lease-up.

The Communities are located in six states throughout the southeastern United
States, as well as in Delaware, Ohio and Indiana. For the year ended December
31, 1996, the average physical occupancy rate of the Company's stabilized
Communities was 93.3%, and the average monthly rental revenue for these
Communities was $698 per apartment home. A Community is considered to be
stabilized at the earlier of its attainment of 93.0% physical occupancy or one
year from the completion of construction. The Company also manages approximately
7,520 apartment homes for unrelated third parties. The Company is a fully
integrated organization with multifamily development, construction, acquisition
and management expertise which employs approximately 560 individuals.

The Company's business is conducted principally through Summit Properties
Partnership, L.P., a Delaware limited partnership (the "Operating Partnership"),
of which the Company is the sole general partner and an 84.8% economic owner.
The Company's third party management and certain construction and other
businesses are conducted through its subsidiaries, Summit Management Company, a
Maryland corporation (the "Management Company"), and Summit Apartment Builders,
Inc., a Florida corporation (the "Construction Company"). Except where otherwise
explicitly noted, the "Company" shall also hereinafter refer to the Operating
Partnership, the Management Company and the Construction Company.

The Company has chosen to focus its efforts in three high growth regions of the
southeast: the corridor connecting Atlanta, Charlotte and the Raleigh-Durham
area of North Carolina, (the "I-85 Corridor"), central and south Florida and the
Greater Washington, DC/Virginia area. In keeping with this strategy, the Company
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 Company 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.

OPERATING PHILOSOPHY

The Company 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 Company is among the rental
rate leaders in its markets. Although this strategy may result in slightly lower
occupancy rates, the Company believes that the dynamic tension created by this
balancing strategy maximizes operating income at the property level and improves
growth in the Company's cash flow over the long term. Generally, the Company has
found that it is not maximizing property operating income per apartment home
when occupancies are above 95%.

Historically, the Company 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 Company's geographic market focus
and decentralized structure further promote income growth.

Upscale Apartment Communities. Since its inception, the Company has been
dedicated to developing, acquiring and managing upscale apartment communities
designed to satisfy the aesthetic and lifestyle desires

3
<PAGE> 4

of its 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 Company to raise rents
is constrained only by its markets and not the income of its residents. This
resident profile, the Company believes, results in rental growth potential and
risk-adjusted returns that are more favorable than those available in other
classes of apartment communities.

Dedication to Customer Service. The Company has long stressed the importance of
developing strong customer relationships with its residents. The Company's total
commitment to resident satisfaction is further evidenced by its "Sundown Policy"
which mandates a response by the appropriate Company employee to any resident
inquiry or complaint no later than "sundown" of the day on which the inquiry or
complaint was received. The Company has sought to provide its residents with
experienced, well-trained and attentive management staffs. Every Community
employee enters into a comprehensive training program when he or she is hired by
the Company. This training program ensures that employees have a clear
understanding of their job responsibilities, the high standards of performance
expected of them and the Company's operating philosophies. On-going Company
sponsored training following each employee's initial employment period further
enhances employee productivity. The Company 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 Company 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 Company'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 Company 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 communities,
the Company, 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. 93% of the Company's 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 Company 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 Company to gain better brand recognition and improve
operating efficiencies.

Decentralized Organizational Structure. The Company's operational structure
reflects its geographic market focus. The Company'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.

1996 ACTIVITY

As of December 31, 1996, the Company had nine apartment Communities containing
2,716 apartment homes, with a budgeted cost of $201.5 million, under
construction. In 1996 the Company 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.

4
<PAGE> 5

Properties Under Construction. The following provides summary information
regarding the nine Communities under construction as of December 31, 1996
(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 $20,496 $ 3,404 Q2 1997
Summit Russett -- Laurel, MD............ 314 22,100 17,729 4,371 Q2 1997
Summit Stonefield -- Yardley, PA........ 216 18,370 7,893 10,477 Q4 1997
Summit Sedgebrook I -- Charlotte, NC.... 248 15,640 3,520 12,120 Q4 1997
Summit Ballantyne I -- Charlotte, NC.... 246 16,800 4,138 12,662 Q4 1997
Summit Plantation II -- Plantation,
FL.................................... 240 22,000 6,217 15,783 Q4 1997
Summit Lake I -- Raleigh, NC............ 302 19,700 2,805 16,895 Q2 1998
Summit Fair Lakes I -- Fairfax, VA...... 370 32,900 6,790 26,110 Q4 1998
Summit New Albany -- Columbus, OH....... 428 30,100 3,778 26,322 Q1 1999
Other development and construction
costs................................. -- -- 12,791 --
-------- -------- ------- --------
2,716 $201,510 $86,157 $128,144
======== ======== ======= ========
</TABLE>

The Company 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 project,
there are uncertainties and risks associated with the development of the
communities described above. While the Company 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
Company will not experience construction delays due to the unavailability of
materials, weather conditions or other events. Similarly, market conditions at
the time these communities become available for leasing will affect the period
of time necessary to achieve stabilization and could result in achieving
stabilization later than currently anticipated.

GROWTH STRATEGIES

The Company's objective is to increase Funds from Operations per share and
distributions to stockholders through three core strategies: increasing cash
flow from existing Communities, development activity, and acquisitions of
additional Communities.

Increase Cash Flow From Existing Communities. The Company 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 Company is among the rental rate leaders in its markets. Even
though this strategy may result in slightly lower occupancy rates, the Company
believes that the dynamic tension created by this balancing strategy maximizes
operating income at the property level and improves growth in the Company's cash
flow over the long term. The Company's affluent resident profile, well-trained
property management staff and management information systems support this
strategy. For the year ended December 31, 1996, average rent per apartment home
for the Company's Communities that were stabilized during the comparable period
in 1995 increased 3.8%, and property operating income from these Communities
increased 3.1% for the same period. Average occupancy, rental revenue and
property operating

5
<PAGE> 6

income levels for the Company's Communities that were stabilized during the
comparable periods are as follows for the years set forth below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Average Physical Occupancy.................................. 93.1% 94.0% 93.3%
Average Monthly Rental Revenue per Apartment Home........... $ 714 $ 682 $ 650
Average Monthly Rental Revenue per Apartment Home Growth
Rate...................................................... 3.8% 4.9% 5.1%
Property Operating Income Growth Rate (1)................... 3.1% 6.6% 8.8%
Number of Communities....................................... 32 27 27
</TABLE>

(1) Property Operating Income is defined as total rental and other property
revenues less property operating and maintenance expense (excluding
depreciation and amortization).

Development. Development of new communities has been the foundation of the
Company's growth. Since its founding, the Company has developed more than $1
billion of multifamily apartment communities, representing over 20,000 apartment
homes. Of its 51 Communities, 34 have been developed by the Company or its
predecessors. The Company 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 Company plans to continue to capitalize on
its extensive experience and proven reputation as a developer by developing new
Communities.

The Company is also conducting feasibility and other pre-development work for
nine new Communities. The Company either owns or holds options to purchase the
land for each of these potential developments (dollars in millions):

<TABLE>
<CAPTION>
ANTICIPATED
APARTMENT DEVELOPMENT CONSTRUCTION
COMMUNITIES IN PRE-DEVELOPMENT HOMES BUDGETS START
- ----------------------------------------------------- --------- ----------- ------------
<S> <C> <C> <C>
Summit Norcroft II -- Charlotte, NC.................. 54 $ 3.5 1Q97
Summit Governors Village -- Chapel Hill, NC.......... 242 16.8 2Q97
Summit Doral -- Miami, FL............................ 260 22.6 3Q97
Summit Weston -- Raleigh, NC......................... 365 25.1 3Q97
Summit Ballantyne II -- Charlotte, NC................ 154 10.7 1Q98
Summit Sedgebrook II -- Charlotte, NC................ 120 8.1 1Q98
Summit Lake II -- Raleigh, NC........................ 144 9.7 1Q98
Summit Pembroke -- Pembroke Pines, FL................ 300 25.8 1Q98
Summit Fair Lakes II -- Fairfax, VA.................. 160 14.5 4Q98
-------- ---------
1,799 $ 136.8
======== =========
</TABLE>

For each of these potential communities, the Company is only in the
pre-development phase, and there can be no assurance that all or any one of
these communities will be completed. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Development Activity" for a
discussion of uncertainties and risks associated with the Company's development
activity.

Acquisitions. The Company also seeks to grow cash flow by acquiring existing
communities that have prospects for long-term growth in excess of industry
averages. The Company recently hired an acquisition specialist to support its
efforts in this area. The Company has recently acquired the following
Communities (dollars in thousands):

<TABLE>
<CAPTION>
ACQUISITION APARTMENT PURCHASE
COMMUNITY DATE HOMES PRICE
- -------------------------------------------------------- ----------- --------- --------
<S> <C> <C> <C>
Summit Portofino -- Broward County, FL.................. 1/6/97 322 $28,000
Summit Mayfaire -- Raleigh, NC.......................... 1/15/97 144 9,650
Summit Sand Lake -- Orlando, FL......................... 2/20/97 416 26,798
-------- -------
882 $64,448
======== =======
</TABLE>

6
<PAGE> 7

Additionally, the Company has commenced a disposition program targeting those
Communities within its portfolio which do not align with the Company's long term
strategic plan and growth objectives. Currently two such Communities are subject
to Letters of Intent from qualified buyers. A third Community is in the initial
stages of marketing. These three Communities represent 2.5% of the Company's net
real estate assets. The Company does not expect to incur any losses related to
the sale of these Communities.

COMPANY HISTORY

The Company was formed in 1993 to continue and expand the multifamily
development, construction, acquisition, operation, management and leasing
businesses of Summit Properties, and its affiliated entities, which was founded
by the Company's Chairman of the Board, William B. McGuire, Jr., in 1972. In
1981, William F. Paulsen joined the Company as Chief Executive Officer and
shepherded the growth of its multifamily development and management activities.

The Company organized itself as a real estate investment trust and completed its
initial public offering (the "Initial Offering") of 10,000,000 shares of Common
Stock on February 15, 1994 and sold an additional 1,500,000 shares upon exercise
of the underwriters' over-allotment option on March 4, 1994. On June 2, 1995,
the Company completed a follow-on public offering of 4,000,000 shares of Common
Stock. A second follow-on public offering of 5,000,000 shares of the Company's
Common Stock was completed on August 7, 1996, with an additional 750,000 shares
sold upon exercise of the underwriters' over-allotment option on August 12,
1996.

The Company, a Maryland corporation, is a self-administered and self-managed
real estate investment trust (a "REIT"). The Company's Common Stock is listed on
the New York Stock Exchange under the symbol "SMT". The executive offices of the
Company are located at 212 South Tryon Street, Suite 500, Charlotte, North
Carolina 28281. The Company's telephone number is (704) 334-9905 and its
facsimile number is (704) 333-8340. The Company also maintains offices in
Atlanta, Georgia; Tampa, Florida; Reston, Virginia; Ft. Lauderdale, Florida and
Raleigh, North Carolina.

THE OPERATING PARTNERSHIP

The Operating Partnership was formed on January 14, 1994, and is the entity
through which principally all of the Company's business is conducted. The
Company controls the Operating Partnership as the sole general partner and as
the holder of an 84.8% economic and voting interest in the Operating
Partnership. As the sole general partner of the Operating Partnership, the
Company has the exclusive power to manage and conduct the business of the
Operating Partnership, subject to the consent of holders (including the Company)
of 85% of the units of partnership interest ("Units") in connection with a sale,
transfer or other disposition of all or substantially all of the assets of the
Operating Partnership, or any other transaction which would result in the
recognition of a significant taxable gain to the holders of Units. The Company's
general and limited partnership interests in the Operating Partnership entitle
it to share in 84.8% of the cash distributions from, and in the profits and
losses of, the Operating Partnership.

Each Unit of limited partnership interest may be redeemed by the holder thereof
for cash equal to the fair market value of a share of the Company's Common Stock
or, at the option of the Company, an equivalent number of shares of Common
Stock. The Company presently anticipates that it will elect to issue shares of
Common Stock in connection with redemptions of Units rather than paying cash.
With each redemption of Units for Common Stock, the Company's percentage
ownership interest in the Operating Partnership will increase. In addition,
whenever the Company issues shares of Common Stock for cash, the Company will
contribute any net proceeds therefrom to the Operating Partnership and the
Operating Partnership will issue an equivalent number of Units to the Company.

The Operating Partnership cannot be terminated, except in connection with a sale
of all or substantially all of the assets of the Company, for a period of 99
years without a vote of the limited partners of the Operating Partnership.

7
<PAGE> 8

ITEM 2. PROPERTIES

THE COMMUNITIES

The Company owns and manages through the Operating Partnership 51 Communities
consisting of 11,788 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 stabilized Communities was approximately 7.8 years.
The average physical occupancy rate at the stabilized Communities was 93.3% and
94.5% for the years ended December 31, 1996 and 1995, respectively. The average
monthly rental revenue per apartment home at the stabilized Communities during
1996 and 1995 was $698 and $669, respectively.

The Company has targeted ten growth markets located in six states throughout the
Southeastern United States (Florida, Georgia, Maryland, North Carolina, South
Carolina and Virginia) as well as in Delaware, Indiana and Ohio as shown below:

<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 19.1%
Charlotte, North Carolina............................ 12 2,164 18.4
Raleigh/Central North Carolina....................... 9 1,697 14.4
Washington, DC....................................... 5 1,307 11.0
South Florida........................................ 4 1,197 10.2
Other................................................ 4 882 7.5
Atlanta, Georgia..................................... 3 877 7.4
Richmond, Virginia................................... 3 862 7.3
Indianapolis, Indiana................................ 1 314 2.7
Orlando, Florida..................................... 1 240 2.0
---------- -------- ---------
Total...................................... 51 11,788 100.0%
========== ======== =========
</TABLE>

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.

8
<PAGE> 9

The following table highlights certain information regarding the Communities:
<TABLE>
<CAPTION>

AVERAGE AVERAGE AVERAGE
NUMBER OF YEAR APARTMENT OCCUPANCY OCCUPANCY
MARKET AREA/COMMUNITY LOCATION ZIP CODE APARTMENTS COMPLETED SIZE 1996 1995
- ------------------------------ ----------------- -------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ATLANTA
Summit Glen................... Atlanta, GA 30342 242 1992 983 91.9 93.7
Summit Springs................ Norcross, GA 30093 312 1990 934 92.6 95.6
Summit Village................ Marietta, GA 30062 323 1991 984 91.8 95.0
---------- --------- --------- ---------
ATLANTA SUBTOTAL/WEIGHTED AVERAGE.......................... 877 966 92.1 94.9
CHARLOTTE
Summit Arbors................. Charlotte, NC 28202 120 1986 944 94.8 95.8
Summit Charleston............. Charlotte, NC 28212 214 1986 806 93.3 94.7
Summit Creek.................. Charlotte, NC 28210 260 1983 910 92.7 95.7
Summit Crossing............... Charlotte, NC 28210 128 1985 978 96.3 97.6
Summit Fairview............... Charlotte, NC 28226 135 1983 1,036 93.6 94.1
Summit Foxcroft(1)............ Charlotte, NC 28226 156 1979 940 93.4 96.6
Summit Green(2)............... Charlotte, NC 28262 300 1996 1,098 N/A N/A
Summit Hollow................. Charlotte, NC 28226 232 1978 949 94.5 95.3
Summit Norcroft............... Charlotte, NC 28269 162 1991 1,112 94.0 94.6
Summit Radbourne.............. Charlotte, NC 28269 225 1991 1,006 92.0 96.7
Summit Simsbury............... Charlotte, NC 28226 100 1985 874 93.6 95.3
Summit Touchstone............. Charlotte, NC 28226 132 1986 899 94.0 94.8
---------- --------- --------- ---------
CHARLOTTE SUBTOTAL/WEIGHTED AVERAGE........................ 2,164 969 93.7 95.6
INDIANAPOLIS
Summit River Crossing(2)...... Indianapolis, IN 46240 314 1996 1,086 N/A N/A
ORLANDO
Summit Fairways(2)............ Orlando, FL 32779 240 1996 1,304 N/A N/A
RALEIGH/CENTRAL NORTH CAROLINA
Summit Creekside.............. Hickory, NC 28601 118 1981 1,006 96.2 97.6
Summit Eastchester............ High Point, NC 27262 172 1981 947 96.1 97.5
Summit Highland............... Raleigh, NC 27612 172 1987 986 94.5 94.2
Summit Hill I................. Chapel Hill, NC 27514 204 1991 904 93.3 95.4
Summit Hill II(2)............. Chapel Hill, NC 27514 207 1996 1,023 N/A N/A
Summit Oak.................... Goldsboro, NC 27534 100 1982 918 96.7 97.3
Summit Old Town............... Winston-Salem, NC 27106 172 1979 954 90.9 95.5
Summit Sherwood............... Winston-Salem, NC 27106 190 1968 1,028 95.2 95.0
Summit Square................. Durham, NC 27707 362 1990 925 92.1 91.7
---------- --------- --------- ---------
RALEIGH/CENTRAL NORTH CAROLINA
SUBTOTAL/WEIGHTED AVERAGE.................................. 1,697 963 93.9 94.9
RICHMOND
Summit Breckenridge........... Glen Allen, VA 23060 300 1987 928 95.1 95.0
Summit Stony Point............ Richmond, VA 23235 250 1986 1,045 93.2 95.6
Summit Waterford.............. Midlothian, VA 23112 312 1990 995 91.4 95.2
---------- --------- --------- ---------
RICHMOND SUBTOTAL/WEIGHTED AVERAGE......................... 862 986 93.2 95.2
SOUTH FLORIDA
Summit Aventura(2)............ Aventura, FL 33108 379 1995 1,170 N/A N/A
Summit Del Ray................ Delray Beach, FL 33445 252 1993 968 91.5 93.2
Summit Palm Lake.............. W. Palm Beach, FL 33417 304 1992 919 96.7 94.1
Summit Plantation(3).......... Plantation, FL 33324 262 1995 1,283 N/A N/A
---------- --------- --------- ---------
SOUTH FLORIDA SUBTOTAL/WEIGHTED AVERAGE.................... 1,197 1,088 94.3 93.7
TAMPA/SARASOTA
St. Petersburg,
Summit Gateway................ FL 33716 212 1987 828 93.7 94.4
Summit Hampton................ Bradenton, FL 34210 352 1988 933 93.0 94.2
Summit Heron's Run............ Sarasota, FL 34232 274 1990 863 92.5 92.0
Summit Lofts.................. Palm Harbour, FL 33684 200 1990 1,045 90.8 90.7
Summit McIntosh............... Sarasota, FL 34232 212 1990 855 93.9 93.0
Summit Perico................. Bradenton, FL 34209 256 1990 911 93.5 94.4
Summit Providence............. Brandon, FL 33511 444 1991 952 93.0 92.2
Summit Station................ Tampa, FL 33624 230 1990 902 92.6 94.8
Summit Walk................... Tampa, FL 33618 68 1993 1,614 95.9 95.1
---------- --------- --------- ---------
TAMPA/SARASOTA SUBTOTAL/WEIGHTED AVERAGE................... 2,248 936 93.0 93.2

<CAPTION>
AVERAGE AVERAGE
RENT PER RENT PER
APARTMENT APARTMENT
MARKET AREA/COMMUNITY 1996 1995
- ------------------------------ --------- ---------
<S> <C> <C>
ATLANTA
Summit Glen................... $ 847 $ 823
Summit Springs................ 708 673
Summit Village................ 735 705
--------- ---------
ATLANTA SUBTOTAL/WEIGHTED AVER 756 726
CHARLOTTE
Summit Arbors................. 748 692
Summit Charleston............. 581 562
Summit Creek.................. 624 580
Summit Crossing............... 649 609
Summit Fairview............... 726 724
Summit Foxcroft(1)............ 643 600
Summit Green(2)............... N/A N/A
Summit Hollow................. 656 610
Summit Norcroft............... 805 800
Summit Radbourne.............. 786 770
Summit Simsbury............... 734 701
Summit Touchstone............. 677 639
--------- ---------
CHARLOTTE SUBTOTAL/WEIGHTED AV 687 656
INDIANAPOLIS
Summit River Crossing(2)...... N/A N/A
ORLANDO
Summit Fairways(2)............ N/A N/A
RALEIGH/CENTRAL NORTH CAROLINA
Summit Creekside.............. 566 517
Summit Eastchester............ 559 510
Summit Highland............... 703 693
Summit Hill I................. 687 653
Summit Hill II(2)............. N/A N/A
Summit Oak.................... 532 508
Summit Old Town............... 542 500
Summit Sherwood............... 526 487
Summit Square................. 763 745
--------- ---------
RALEIGH/CENTRAL NORTH CAROLINA
SUBTOTAL/WEIGHTED AVERAGE..... 635 604
RICHMOND
Summit Breckenridge........... 706 665
Summit Stony Point............ 724 692
Summit Waterford.............. 685 636
--------- ---------
RICHMOND SUBTOTAL/WEIGHTED AVE 704 662
SOUTH FLORIDA
Summit Aventura(2)............ N/A N/A
Summit Del Ray................ 852 870
Summit Palm Lake.............. 743 713
Summit Plantation(3).......... N/A N/A
--------- ---------
SOUTH FLORIDA SUBTOTAL/WEIGHTE 792 784
TAMPA/SARASOTA
Summit Gateway................ 626 611
Summit Hampton................ 630 598
Summit Heron's Run............ 653 632
Summit Lofts.................. 690 694
Summit McIntosh............... 684 655
Summit Perico................. 657 621
Summit Providence............. 659 658
Summit Station................ 619 594
Summit Walk................... 1,052 1,005
--------- ---------
TAMPA/SARASOTA SUBTOTAL/WEIGHT 663 644
</TABLE>

9
<PAGE> 10
<TABLE>
<CAPTION>

<CAPTION>
AVERAGE AVERAGE
RENT PER RENT PER
APARTMENT APARTMENT
MARKET AREA/COMMUNITY 1996 1995
- ------------------------------ --------- ---------
<S> <C> <C>
WASHINGTON, DC

Summit Belmont................ 622 600
Summit Meadow................. 864 832
Summit Pike Creek............. 800 738
Summit Reston................. 917 866
Summit Windsor................ 681 675
--------- ---------
WASHINGTON, DC SUBTOTAL/WEIGHT 792 753
OTHER
Summit Blue Ash............... 769 735
Summit Park................... 602 575
Summit Beacon Ridge........... 653 632
Summit East Ridge............. 568 544
--------- ---------
OTHER SUBTOTAL/WEIGHTED AVERAG 649 622
--------- ---------
Total Weighted Average........ $ 698 $ 669
========= =========
</TABLE>

(1) Summit Foxcroft is held by a partnership in which the Company is a 75%
managing general partner.

(2) Community was not stabilized for entire period.

(3) Community acquired April 1, 1996.

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.

COMMUNITY MANAGEMENT

Each of the Communities is managed by the Company's property management staff.
The property management team for each Community includes supervision by a
regional vice-president and regional property manager, as well as on-site
management, maintenance personnel and an off-site support staff. Community
management teams perform leasing and rent collection functions and coordinate
resident services. All personnel are extensively trained and experienced and are
encouraged to continue their education through both Company-designed and outside
courses.

ITEM 3. LEGAL PROCEEDINGS

Neither the Company nor any of the Communities is presently subject to any
material litigation nor, to the Company's knowledge, is any litigation
threatened against the Company 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 or financial condition or results of
operations of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE

10
<PAGE> 11

PART II

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

The Company's Common Stock began trading on the New York Stock Exchange (the
"NYSE") on February 8, 1994 under the symbol "SMT". The following table sets
forth the quarterly high and low sales prices per share reported on the NYSE.

<TABLE>
<CAPTION>
1996 1995
------------------ ------------------
QUARTER HIGH LOW HIGH LOW
- -------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
January 1 through March 31........................ $21.25 $19.00 $19.13 $16.25
April 1 through June 30........................... 20.50 18.50 18.00 15.88
July 1 through September 30....................... 20.13 18.00 18.88 16.88
October 1 through December 31..................... 22.50 19.13 19.88 18.13
</TABLE>

On February 20, 1997, the last reported sale price of the Common Stock on the
NYSE was $20.25. On February 14, 1997, there was 409 holders of record of
23,072,136 shares of the Company's Common Stock.

The Company declared a dividend of $.3875 per share of Common Stock for each of
the four quarters in 1996, which was paid on May 15, 1996 for the first quarter,
August 15, 1996 for the second quarter, November 15, 1996 for the third quarter,
and February 14, 1997 for the fourth quarter.

The Company declared a dividend of $.3775 per share of Common Stock for each of
the four quarters in 1995, which was paid on May 15, 1995 for the first quarter,
August 15, 1995 for the second quarter, November 15, 1995 for the third quarter,
and February 14, 1996 for the fourth quarter.

The Company issued 106,330 Units in the Operating Partnership in conjunction
with the purchase of the Summit Sedgebrook land while 9,474 Units in the
Operating Partnership were exchanged for 9,474 shares of the Company's Common
Stock during 1996. Such shares of the Company's Common Stock were issued in
reliance on an exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
In light of the status of each recipient of Common Stock in such transactions as
a high net worth individual, management of the Company believes that it has
obtained sufficient information to reasonably conclude that each recipient of
Common Stock was either an "accredited investor" or, either alone or with his or
her representative, had knowledge and experience in financial and business
matters that he or she was capable of evaluating the merits and risks of owning
shares of the Company's Common Stock.

The Company intends to continue to make regular quarterly dividends to holders
of shares of Common Stock. Future dividends will be declared at the discretion
of the Board of Directors and will depend on actual cash flow of the Company,
its financial condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Internal Revenue Code, and such
other factors as the Board of Directors may deem relevant. The Board of
Directors may modify the Company's dividend policy from time to time.

In March 1995, the Company put in place a dividend reinvestment program under
which holders of Common Stock may elect automatically to reinvest their
dividends in additional shares of Common Stock. To fulfill its obligations under
this program, the Company may either issue additional shares of Common Stock or
repurchase Common Stock in the open market.

11
<PAGE> 12

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected consolidated financial and other
information on a consolidated historical basis for the Company and its
predecessors (the "Summit Entities") as of and for each of the years in the
five-year period ended December 31, 1996. This table should be read in
conjunction with the Consolidated Financial Statements of Summit Properties Inc.
and the Notes thereto included elsewhere herein.

SELECTED FINANCIAL DATA
SUMMIT PROPERTIES INC. (HISTORICAL) (1)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND PROPERTY
INFORMATION)
<S> <C> <C> <C> <C> <C>
OPERATING INFORMATION:
Revenue
Rental..................................... $ 88,864 $ 70,773 $ 54,198 $ 45,561 $ 39,693
Property management(2)..................... -- -- 536 4,102 2,988
Interest and other......................... 5,625 4,221 3,700 3,779 4,393
--------- --------- --------- --------- ---------
Total............................... 94,489 74,994 58,434 53,442 47,074
--------- --------- --------- --------- ---------
Property operating and maintenance expense
(before depreciation and amortization)..... 35,226 28,012 21,502 18,991 17,306
Property management expenses(2).............. -- -- 366 2,799 2,453
Interest expense............................. 17,138 14,802 14,067 26,400 25,925
Depreciation and amortization................ 18,208 15,141 11,700 9,735 9,219
REIT formation costs......................... -- -- 457 -- --
General and administrative expense........... 2,557 1,949 1,756 1,375 1,973
Loss from equity investments................. 173 39 59 -- --
--------- --------- --------- --------- ---------
Total............................... 73,302 59,943 49,907 59,300 56,876
--------- --------- --------- --------- ---------
Income (loss) before extraordinary items and
minority interest of unitholders in
Operating Partnership...................... $ 21,187 $ 15,051 $ 8,527 $ (5,858) $ (9,802)
========= ========= ========= ========= =========
Net income (loss)............................ $ 16,948 $ 11,819 $ 14,032 $ (3,408) $ (9,802)
========= ========= ========= ========= =========
Income per share before extraordinary
items...................................... $ .92 $ .83 $ .64 N/A N/A
========= ========= ========= ========= =========
Net income per share......................... $ .90 $ .80 $ 1.28 N/A N/A
========= ========= ========= ========= =========
Dividends per share.......................... $ 1.55 $ 1.51 $ 1.29 N/A N/A
========= ========= ========= ========= =========
Weighted average shares outstanding.......... 18,915 14,754 10,992 N/A N/A
========= ========= ========= ========= =========
Weighted average shares and units
outstanding................................ 22,941 18,117 13,390 N/A N/A
========= ========= ========= ========= =========

OTHER INFORMATION:
Cash flow provided by (used in):
Operating activities....................... $ 41,176 $ 30,994 $ 17,525 $ 8,712 $ 4,475
Investing activities....................... (103,971) (63,734) (113,741) (2,092) (16,106)
Financing activities....................... 63,579 34,440 88,993 (9,141) 14,123
Funds from Operations(3)..................... $ 39,391 $ 30,148 $ 20,120 $ 3,777 $ (683)
Recurring capital expenditures............... $ 3,291 $ 2,180 $ 1,710 $ 1,050 $ 591
Funds Available for Distribution(4).......... $ 36,100 $ 27,968 $ 18,410 $ 2,727 $ (1,274)
Non-recurring capital expenditures(5)........ $ 2,973 $ 864 -- -- --
Total completed communities (at end of
period).................................... 51 46 32 27 26
Total apartment homes developed(6)........... 1,061 379 -- 320 788
Total apartment homes acquired............... 262 2,025 1,332 -- --
Total apartment homes (at end of
period)(7)................................. 11,788 10,465 8,061 6,729 6,409
Average monthly rental revenue per apartment
home(8).................................... $ 698 $ 669 $ 657 $ 617 $ 576
Average physical occupancy(9)................ 93.3% 94.5% 93.5% 93.1% 93.3%
</TABLE>

12
<PAGE> 13

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation.......................... $704,779 $586,264 $439,025 $317,374 $313,634
Total assets............................ 634,991 533,252 397,945 297,670 309,239
Total long-term debt.................... 309,933 297,010 249,009 315,847 319,916
Stockholders' equity (deficiency)....... 257,214 175,454 115,525 (38,127) (28,825)
</TABLE>

(1) For purposes of the Selected Financial Data, historical information is
presented both for the Company and its predecessors; provided that
historical financial information for its predecessors only includes
information relating to the Communities held by the Company 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 Summit Management Company, which is
accounted for under the equity method of accounting.

(3) The Company generally considers Funds from Operations to be an appropriate
measure of the performance of an equity REIT. Funds from Operations, as
defined by the National Association of Real Estate Investment Trusts
(NAREIT), represents net income (loss) determined in accordance with
generally accepted accounting principles (GAAP), excluding gains or losses
from sales of assets or debt restructuring, plus certain non-cash items,
primarily real estate depreciation, and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for all periods
consisted only of real estate depreciation. Funds from Operations should
not be considered as an alternative to net income (determined in accordance
with GAAP), as an indication of the Company's financial performance, or to
cash flow from operating activities (determined in accordance with GAAP) as
a measure of liquidity. Funds from Operations is calculated as follows
(dollars in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Income (loss) before extraordinary items
and Minority Interest of unitholders
in Operating Partnership.............. $21,187 $15,051 $ 8,527 $(5,858) $(9,802)
Real estate depreciation................ 18,204 15,097 11,593 9,635 9,119
------- ------- ------- ------- -------
Funds from Operations................... $39,391 $30,148 $20,120 $ 3,777 $ (683)
======= ======= ======= ======= =======
</TABLE>

(4) Funds Available for Distribution is defined as Funds from Operations less
recurring capital expenditures.

(5) Represents improvements made in conjunction with acquisitions, construction
of garages and other major non-recurring capital expenditures.

(6) Represents the total number of apartment homes in Communities completed and
owned by the Company during the period.

(7) Represents the total number of apartment homes in Communities completed and
owned by the Company at the end of the period.

(8) Represents the average monthly rental revenue per occupied apartment home at
Communities deemed to have achieved stabilized occupancy on the earlier of
the attainment of 93% physical occupancy or one year after the completion
of construction ("Stabilized Communities").

(9) 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, and reflects only Stabilized
Communities. Physical occupancy has been calculated using the average of
the midweek occupancy that existed during each week of the period.

13
<PAGE> 14

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

This Form 10-K contains forward-looking statements including, without
limitation, statements relating to development activities of the Company within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, as amended. Although the Company believes that
the expectations reflected in such forward-looking statements are based on
reasonable assumptions, the Company'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 section entitled "Development
Activity -- Certain Factors Affecting the Performance of Development
Communities" on page 23 of this Form 10-K.

OVERVIEW

The following discussion should be read in conjunction with the Consolidated
Financial Statements of Summit Properties Inc. and the Notes thereto appearing
elsewhere herein.

As of December 31, 1996, there were 26,434,920 Units outstanding of the
Operating Partnership, of which 22,409,638, or 84.8% were owned by the Company
and 4,025,282, or 15.2% were owned by other partners (including certain officers
and directors of the Company).

FORMATION OF THE COMPANY, THE INITIAL OFFERING AND SUBSEQUENT OFFERINGS

On February 15, 1994, the Company completed the Initial Offering and a business
combination involving entities under varying common ownership. On June 2, 1995,
the Company completed an offering of four million shares of Common Stock (the
"1995 Offering"). On August 7, 1996 the Company 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 net proceeds from the Initial Offering were used by the
Company to acquire a controlling interest in the Operating Partnership, which
was formed 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 Company's predecessors (collectively, "Summit
Entities"). Summit Entities' third party management businesses were transferred
to Summit Management Company (the "Management Company"), in which the Operating
Partnership owns a 1% voting interest and a 99% economic interest. Summit
Apartment Builders, Inc. (the "Construction Company"), which was formed to
perform certain construction services for the Company, is wholly-owned by the
Management Company. The Company's interest in the Management Company and the
Construction Company is accounted for under the equity method of accounting. The
net proceeds from the 1995 and 1996 Offerings were used to repay debt and fund
development costs.

HISTORICAL RESULTS OF OPERATIONS

The Company's net income is generated primarily from the operations of its
apartment communities (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 "stabilized" at the earlier of when it has attained
a

14
<PAGE> 15

physical occupancy level of at least 93% or when construction has been completed
for one year. A summary of the Company's apartment homes for the years ended
December 31, 1996, 1995 and 1994 is as follows:

<TABLE>
<CAPTION>
1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Apartment homes at the beginning of the year................ 11,286 8,061 --
Initial business combination................................ -- -- 6,729
Acquisitions................................................ 262 2,025 1,332
Developments which began rental operations during the
year...................................................... 906 1,200 --
------ ------ -----
Apartment homes at the end of the year...................... 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 (the
"Crosland Acquisition").

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

Income before minority interest of unitholders in the Operating Partnership and
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 COMPANY'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.

15
<PAGE> 16

OPERATING PERFORMANCE OF THE COMPANY'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.

(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.

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 multi-family Communities in the markets in which the Company
operates. In 1997 the Company expects the rate of growth to be similar to the
growth rate in 1996 as the supply of new multi-family Communities continues to
increase balanced by the continued strength of the local economies in which the
Company operates. The Company 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.

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 Company's Florida
markets, caused by the significant storm damages incurred in the past years by
the insurance industry. Included in the building repairs and maintenance cost
was a $148,000 or a 14% increase for replacement of carpets. 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

16
<PAGE> 17

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 COMPANY'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 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.

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

The Company 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 Company'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

17
<PAGE> 18

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 DECEMBER 31,
COMMUNITY HOMES COST COMPLETION STABILIZATION 1996 1996
- --------------------------- --------- ------- ------------ ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Summit Aventura............ 379 $31,255 Q4 1995 Q3 1996 78.8% 97.1%
Summit Hill II............. 207 11,383 Q2 1996 Q3 1996 75.1% 95.7%
Summit Green............... 300 18,552 Q2 1996 Q4 1996 60.1% 94.7%
Summit River Crossing...... 314 19,111 Q3 1996 Q4 1996 48.8% 94.6%
Summit Fairways............ 240 17,668 Q4 1996 Q3 1997 11.1% 48.8%
--------- -------
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 December 31, 1996, the Company had leased: 48.3%, or 170 of the
352 apartment homes at Summit on the River, which opened in May 1996; and 15.0%,
or 47 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.

18
<PAGE> 19

OPERATING PERFORMANCE OF SUMMIT MANAGEMENT COMPANY

The operating performance of Summit Management Company and its wholly-owned
subsidiary, Summit Apartment Builders, Inc. 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 Summit
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 Company'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 fees include $2.3 million, $3.3 million and $3.9 million of
fees from third parties for the years ended December 31, 1996, 1995 and 1994,
respectively. Property management fees 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 Company expects third
party management revenue as a percentage of total property management revenues
to continue to decline as revenues from the Company'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 Company's decision to expand its
in-house construction operations in the state of Florida to cover the entire
geographic area in which the Company operates. All of the Construction Company's
income for the years ended December 31, 1996, 1995 and 1994 is from contracts
with the Company, except for the contract to build Summit Plantation (formerly
Plantation Cove). The company owned a 25% interest in the Plantation Cove joint
venture during construction.

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 Company
held a joint venture interest in this Community until April 1, 1996, when the
Company acquired the remaining 75% interest.

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 Company's
1995 acquisitions and an increase in interest expense related to the

19
<PAGE> 20

Communities in lease-up, partially offset by the Company'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 Company's 1994 and 1995
acquisitions and Communities in lease-up in 1995, substantially offset by the
Company'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 the
Company's restricted stock grants and the cost of the Company's 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.

LIQUIDITY AND CAPITAL RESOURCES

In August 1996, the Company completed the sale of an additional 5.75 million
shares of Common Stock with net proceeds of $97.6 million. In addition, in
August 1996, the Company 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 Common Stock and the unsecured debt financing were utilized to fully
repay the outstanding balance under the Company's revolving credit facility and
development loans. The remaining $30.9 million of the proceeds were used to fund
current development.

In November 1996, the Company 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 the Company's credit
rating of BBB- by Standard & Poors Rating Group. The interest rate can be
reduced in the event an upgrade of the Company's unsecured credit rating as
assigned by Standard & Poors Rating Group (which rating must be accompanied by
the comparable senior unsecured bond rating from one of Moody's, Duff & Phelps
or Fitch) as follows:

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

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 Company's outstanding indebtedness at December 31, 1996 totaled $309.9
million. This amount includes approximately $193.3 million in fixed rate
conventional mortgages, $53.8 million of variable rate tax-exempt bonds, $31.0
million of unsecured notes, $9.4 million of tax exempt fixed rate loans, and
$22.4 million under the Unsecured Credit Facility.

20
<PAGE> 21

The Company'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 Company'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 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 development of Communities, higher capital expenditures on existing
properties and an increase in acquisition 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 offering proceeds, partially offset by higher
dividends and distributions to unitholders.

The Company expects to meet its short-term liquidity requirements generally
through its net cash provided by operations and borrowings under the Unsecured
Credit Facility. The Company believes that its net cash provided by operations
will be adequate to meet its operating requirements and to satisfy 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 Company expects to meet its long-term liquidity requirements, such as 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 the Company, or in connection with the
acquisition of land or improved property, through the issuance of Units of the
Operating Partnership.

21
<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
INTEREST DECEMBER 31,
RATE AS OF MATURITY ----------------------
DECEMBER 31, 1996 DATE 1996 1995
----------------- -------- --------- ---------
<S> <C> <C> <C> <C>
FIXED RATE DEBT
MORTGAGE LOAN(1)........................ 5.88% 2/15/01 $122,950 $125,000
MORTGAGE LOAN(1)........................ 7.71% 12/15/05 29,653 30,000
MORTGAGE LOAN(2)........................ 8.00% 9/1/05 8,638 8,712
MORTGAGE NOTES
Summit Hollow I...................... 8.00% 11/1/18 2,286 2,326
Summit Hollow II..................... 7.75% 1/1/29 2,587 2,607
Summit Creekside..................... 8.00% 6/1/22 2,877 2,914
Summit Old Town...................... 8.00% 9/1/20 3,097 3,143
Summit Eastchester................... 8.00% 5/1/21 3,872 3,925
Summit Foxcroft...................... 8.00% 4/1/20 2,788 2,844
Summit Oak........................... 7.75% 12/1/23 2,585 2,615
Summit Sherwood...................... 7.88% 3/1/29 3,329 3,353
Summit Radbourne..................... 9.80% 3/1/02 8,683 8,758
TAX EXEMPT MORTGAGE NOTES
Summit Crossing...................... 6.95% 11/1/25 4,213 4,261
Summit East Ridge.................... 7.25% 12/1/26 5,156 5,207
-------- --------
TOTAL MORTGAGE DEBT............. 202,714 205,665
-------- --------
UNSECURED NOTES
Bank Note............................ 7.85% 8/3/02 16,000 --
Bank Note............................ 7.61% 8/3/00 15,000 --
-------- --------
TOTAL UNSECURED NOTES........... 31,000 --
-------- --------
TOTAL FIXED RATE DEBT........... 233,714 205,665

VARIABLE RATE DEBT
UNSECURED CREDIT FACILITY............... LIBOR + 110 11/18/99 22,357 4,396
TAX EXEMPT BONDS
Summit Belmont....................... 5.60% 4/1/07 11,850 11,900
Summit Hampton....................... 5.60% 6/1/07 12,700 12,800
Summit Pike Creek.................... 5.60% 8/15/20 13,262 13,545
Summit Gateway....................... 5.60% 7/1/07 7,300 7,700
Summit Stony Point................... 5.60% 4/1/29 8,750 8,895
-------- --------
TOTAL TAX EXEMPT BONDS............. 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>

(1) Mortgage Loans secured by fifteen Communities

(2) Mortgage Loan secured by two Communities

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

22
<PAGE> 23

ACQUISITIONS SUBSEQUENT TO YEAR END

The Company acquired three Communities subsequent to December 31, 1996. The
three acquisitions are summarized as follows (dollars in thousands):

<TABLE>
<CAPTION>
FUNDED BY
--------------------------------------
ACQUISITION APARTMENT PURCHASE UNSECURED ISSUANCE ISSUANCE
COMMUNITY DATE HOMES PRICE CREDIT FACILITY OF UNITS OF SHARES
- ------------------------------------ ----------- --------- -------- --------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Summit Portofino -- Broward County,
FL................................ 1/6/97 322 $28,000 $ 21,187 $ 6,813
Summit Mayfaire -- Raleigh, NC...... 1/15/97 144 9,650 9,650 --
Summit Sand Lake -- Orlando, FL..... 2/20/97 416 26,798 2,700 $3,939 4,933
--------- ------- --------------- ------ -------
882 $64,448 $ 33,537 $3,939 $11,746
========= ======= =============== ====== =======
</TABLE>

Concurrently with the purchase of Summit Portofino, the Company sold 315,029
shares of Common Stock to the public for cash. The Company used the net proceeds
of this sale to fund a portion of the purchase price. The Company issued 243,608
shares of Common Stock and 194,495 Units in the Operating Partnership in
conjunction with the purchase of Summit Sand Lake. In addition, the Company
assumed $15.2 million of debt in the purchase of Summit Sand Lake.

DEVELOPMENT ACTIVITY

The Company's developments in process at December 31, 1996 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 $20,496 $ 3,404 Q2 1997
Summit Russett -- Laurel, MD................ 314 22,100 17,729 4,371 Q2 1997
Summit Stonefield -- Yardley, PA............ 216 18,370 7,893 10,477 Q4 1997
Summit Sedgebrook I -- Charlotte, NC........ 248 15,640 3,520 12,120 Q4 1997
Summit Ballantyne I -- Charlotte, NC........ 246 16,800 4,138 12,662 Q4 1997
Summit Plantation II -- Plantation, FL...... 240 22,000 6,217 15,783 Q4 1997
Summit Lake I -- Raleigh, NC................ 302 19,700 2,805 16,895 Q2 1998
Summit Fair Lakes I -- Fairfax, VA.......... 370 32,900 6,790 26,110 Q4 1998
Summit New Albany -- Columbus, OH........... 428 30,100 3,778 26,322 Q1 1999
Other development and construction costs.... -- -- 12,791 --
--------- -------- ------- --------
2,716 $201,510 $86,157 $128,144
========= ======== ======= ========
</TABLE>

In addition, the Company has a commitment to purchase a Community (Summit St.
Claire) currently under construction in Atlanta, Georgia for approximately $27.5
million. The 336 apartment home Community is expected to be purchased, after
reaching rental stabilization, in the fourth quarter of 1998.

Certain Factors Affecting the Performance of Development Communities

The Company 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 Company 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
Company 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

23
<PAGE> 24

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 Company is conducting feasibility
and other pre-development work for nine Communities. The Company 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 Company 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.

CAPITALIZATION OF FIXED ASSETS AND PROPERTY IMPROVEMENTS

The Company 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.

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Acquisition of Communities(1).............................. $ 21,913 $ 82,935 $ 75,921
Construction of Communities(2)............................. 88,064 58,104 26,694
Capitalized interest....................................... 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.................................. 578 153 --
Access gates............................................. 138 -- --
New signage.............................................. 225 -- --
Water meters............................................. 201 -- --
Washer/dryer units....................................... 74 -- --
Major improvements....................................... 1,698 -- --
Improvements at acquisition.............................. -- 706 --
Other.................................................... 59 5 --
-------- -------- --------
Total non-recurring.............................. 2,973 864 --
-------- -------- --------
Recurring capital expenditures:
Exterior painting........................................ 1,131 810 980
Other.................................................... 2,160 1,370 730
-------- -------- --------
Total recurring.................................. 3,291 2,180 1,710
-------- -------- --------
$120,507 $147,193 $106,480
======== ======== ========
</TABLE>

(1) Includes the assumption of $14.3 million, $52.6 million and $9.1 million of
debt in 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 borrowing under the credit facilities. Other additions and
improvements were funded primarily by Community operations and the credit
facilities.

24
<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
Company 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 Company of the adverse effect of inflation.

FUNDS FROM OPERATIONS

The Company generally considers Funds from Operations to be an appropriate
measure of performance of an equity REIT. Funds from Operations, as defined by
the National Association of Real Estate Investment Trusts (NAREIT), represents
net income (loss) determined in accordance with generally accepted accounting
principles (GAAP), excluding gains or losses from sales of assets or debt
restructuring, plus certain non-cash items, primarily real estate depreciation,
and after adjustments for unconsolidated partnerships and joint ventures.
Adjustments for all periods consisted only of real estate depreciation. Funds
Available for Distribution is defined as Funds from Operations less recurring
capital expenditures funded by operations. 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 Company's
financial performance, or to cash flow from operating activities (determined in
accordance with GAAP) as a measure of liquidity.

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

<TABLE>
<CAPTION>
PRO FORMA
1996 1995 1994 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income............................... $ 16,948 $ 11,819 $ 9,271 $ 14,032
Minority Interest of unitholders in
Operating Partnership.................. 3,723 2,793 1,789 1,527
Extraordinary items...................... 516 439 -- (7,032)
Depreciation:
Real estate assets..................... 18,171 15,021 11,702 11,593
Summit Plantation...................... 33 76 -- --
----------- ----------- ----------- -----------
Funds from Operations.................... 39,391 30,148 22,762 20,120
Recurring capital expenditures........... (3,291) (2,180) (1,710) (1,710)
----------- ----------- ----------- -----------
Funds Available for Distribution......... $ 36,100 $ 27,968 $ 21,052 $ 18,410
=========== =========== =========== ===========
Weighted average shares and units
outstanding............................ 22,940,998 18,116,664 14,827,257 13,389,757
=========== =========== =========== ===========
</TABLE>

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

The above Funds from Operations calculations in 1996, 1995, pro-forma 1994 and
historical 1994 reflect changes required by NAREIT for fiscal years beginning in
1996. The primary effect of the changes on the Company's calculation of Funds
from Operations was that amortization of financing cost is no longer added back
in arriving at Funds from Operations. Funds from Operations under the previous
calculation method would have been $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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements and supplementary data are contained on the pages indicated
on the Index to Financial Statements and Supplementary Data on page 30 of this
Report.

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

Not applicable.

25
<PAGE> 26

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

Incorporated herein by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission within 120 days after the
end of the year covered by this Form 10-K with respect to its Annual Meeting of
Stockholders to be held on May 13, 1997.

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

26
<PAGE> 27

PART IV

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

(a) Financial Statements and Financial Statement Schedule

The consolidated financial statements and financial statement schedule of the
Company and its predecessors (Summit Entities) are listed in the Index to
Financial Statements and Supplementary Data on page 30 of this Report.

(b) Reports on Form 8-K

No reports on Form 8-K were filed by the Company during the quarter ended
December 31, 1996.

As noted below, certain of the exhibits required by Item 601 of Regulation S-K
have been filed with previous reports by the Company and are incorporated by
reference herein.

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
1.1**** Underwriting Agreement dated May 25, 1995
1.2*** Underwriting Agreement
3.1* Articles of Incorporation of the Company
3.2* Bylaws of the Company
10.1* Agreement of Limited Partnership of the Operating
Partnership
10.2** Registration Rights Agreement among the Company and the
Continuing Investors
10.3** Articles of Incorporation of the Management Company
10.4** Bylaws of the Management Company
10.5***** Summit Properties Inc. 1996 Non-Qualified Employee Stock
Purchase Plan
10.6* Option and Transfer Agreement among the Management Company,
William F. Paulsen and the Operating Partnership
10.7* Employment Agreement between the Company and William F.
Paulsen
10.8* Employment Agreement between the Company and William B.
McGuire, Jr.
10.9* Employment Agreement between the Company and Raymond V.
Jones
10.10* Employment Agreement between the Company and Keith H.
Kuhlman
10.11* Employment Agreement between the Company and David F. Tufaro
10.12* Employment Agreement between the Company and John C. Moore
10.12.1* Employment Agreement between the Company and Michael G.
Malone
10.12.2** Employment Agreement between the Company and Keith L. Downey
10.12.3** Employment Agreement between the Company and Christopher A.
Hughes
10.14** Omnibus Option Agreement dated as of December 1, 1993 among
the Operating Partnership and the Grantors named therein
10.15* Acquisition Agreement of Stony Point Community
10.16** Indemnification Agreement
10.17** Promissory Note from the Management Company to Old Summit
Management Company
10.18* Letter of Commitment to enter into the Mortgage Loan between
the Operating Partnership and Northwestern Mutual Life
Insurance Company
10.18.1** Promissory Note
10.18.2** Mortgage and Security Agreement and Financing Statement
10.19* Letter of Commitment to enter into the Credit Facility
10.19.1** Revolving Credit Agreement
10.19.2** Mortgage and Security Agreement and Financing Statement
10.20** Lock-Up Agreement
10.21** Assignment, Assumption and Option Agreement for Henderson
Place/McGuire Partners Limited Partnership
10.22** Option Agreement between the Operating Partnership and LMES
Limited Partnership
</TABLE>

27
<PAGE> 28

<TABLE>
<S> <C> <C>
10.23* Waiver of Rescission Rights and Contribution Agreement
10.24* Noncompetition Agreement between the Company and William F.
Paulsen
10.25* Noncompetition Agreement between the Company and William B.
McGuire, Jr.
10.26* Noncompetition Agreement between the Company and Raymond V.
Jones
10.27* Noncompetition Agreement between the Company and Keith H.
Kuhlman
10.28* Noncompetition Agreement between the Company and David F.
Tufaro
10.29* Noncompetition Agreement between the Company and John T.
Gray
10.30* Noncompetition Agreement between the Company and John C.
Moore
10.31* Noncompetition Agreement between the Company and Michael G.
Malone
10.32* Supplemental Representations and Warranties Agreement
10.33** Interest Rate Protection Agreement between the Company and
Morgan Stanley Capital Services Inc.
10.34*** $31,000,000 Loan Agreement from Wachovia Bank of North
Carolina, N.A.
10.35 $150,000,000 Credit Agreement
10.36 Employment Agreement between the Company and William B.
Hamilton
10.37 Noncompetition Agreement between the Company and William B.
Hamilton
21.1* Schedule of Subsidiaries of the Company
27.1 Financial Data Schedule
</TABLE>

* Previously filed as an exhibit to the Registrant's Registration Statement
on Form S-11, commission number 3390706 initially filed with the
Securities and Exchange Commission (the "Commission") on March 28, 1995.

** Previously filed as an exhibit to the Registrant's 1994 Form 10-Q filed
with the Commission on March 18, 1995.

*** Previously filed as an exhibit to the Registrant's 1996 Form 10-Q filed
with the Commission on October 28, 1996.

**** Previously filed as an exhibit to the Registrant's 1995 Form 10-K filed
with the Commission on April 1, 1996.

***** Previously filed as an exhibit to the Registrant's Registration Statement
on Form S-8, commission number 333-78, filed with the Commission on
January 4, 1996.

28
<PAGE> 29

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Summit Properties Inc. certifies that it has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in Charlotte, North Carolina on February 24, 1997.

SUMMIT PROPERTIES INC.

/s/ William F. Paulsen
--------------------------------------
William F. Paulsen,
President and Chief Executive
Officer

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

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>

/s/ WILLIAM B. MCGUIRE, JR. Chairman of the Board of February 24, 1997
- ----------------------------------------------------- Directors
William B. McGuire, Jr.

/s/ WILLIAM F. PAULSEN President, Chief Executive February 24, 1997
- ----------------------------------------------------- Officer and Director
William F. Paulsen (Principal Executive
Officer)

/s/ MICHAEL L. SCHWARZ Chief Financial Officer February 24, 1997
- ----------------------------------------------------- (Principal Financial
Michael L. Schwarz Officer and Principal
Accounting Officer)

Director February 24, 1997
- -----------------------------------------------------
John Crosland, Jr.

Director February 24, 1997
- -----------------------------------------------------
Henry H. Fishkind

/s/ JAMES H. HANCE, JR. Director February 24, 1997
- -----------------------------------------------------
James H. Hance, Jr.

/s/ NELSON SCHWAB, III Director February 24, 1997
- -----------------------------------------------------
Nelson Schwab, III
</TABLE>

29
<PAGE> 30

INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following financial statements of the Company required to be included in
Item 14(a)(1) are listed below:

SUMMIT PROPERTIES INC.

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ 31

Consolidated Balance Sheets as of December 31, 1996 and
1995...................................................... 32

Consolidated Statements of Earnings for the Years Ended
December 31, 1996, 1995 and 1994.......................... 33

Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1996, 1995 and 1994.............. 34

Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994.......................... 35

Notes to Consolidated Financial Statements.................. 36

The following financial statement supplementary data of the
Company required to be included in Item 14(a)(2) is listed
below:

Schedule III -- Real Estate and Accumulated Depreciation.... 47
</TABLE>

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

30
<PAGE> 31

INDEPENDENT AUDITORS' REPORT

Board of Directors
Summit Properties Inc.
Charlotte, North Carolina

We have audited the accompanying consolidated balance sheets of Summit
Properties Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of earnings, stockholders' equity, and cash flows of Summit
Properties Inc. 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 at Item 14. These financial statements and financial statement
schedule are the responsibility of the management of Summit Properties Inc. 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 consolidated financial statements present fairly, in all
material respects, the financial position of Summit Properties Inc. as of
December 31, 1996 and 1995, and the results of operations and cash flows of
Summit Properties Inc. 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.

We consent to the incorporation by reference of the above report in Registration
Statement Nos. 33-90704, 33-90706, and 33-93540 on Form S-3, and Registration
Statement Nos. 33-88202 and 333-78 on Form S-8 of Summit Properties Inc.

DELOITTE & TOUCHE LLP

Charlotte, North Carolina
January 24, 1997
(February 20, 1997 as to Note 13)

31
<PAGE> 32

SUMMIT PROPERTIES INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Real estate assets:
Land and land improvements................................ $102,605 $ 90,336
Buildings and improvements................................ 472,996 399,057
Furniture, fixtures and equipment......................... 43,021 36,336
-------- --------
618,622 525,729
Less: accumulated depreciation............................ (85,651) (67,884)
-------- --------
Operating real estate assets...................... 532,971 457,845
Construction in progress.................................. 86,157 59,300
Investment in real estate joint venture................... -- 1,235
-------- --------
Net real estate assets............................ 619,128 518,380
Cash and cash equivalents................................... 3,665 2,881
Restricted cash............................................. 4,121 4,188
Investment in Summit Management Company..................... 687 590
Deferred financing costs, net of accumulated amortization of
$2,441 and $1,914 in 1996 and 1995........................ 4,675 5,398
Other assets................................................ 2,715 1,815
-------- --------
Total assets................................................ $634,991 $533,252
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable............................................. $309,933 $297,010
Accrued interest payable.................................. 1,318 903
Accounts payable and accrued expenses..................... 7,257 7,850
Dividends and distributions payable....................... 10,244 7,699
Security deposits and prepaid rents....................... 3,196 2,651
-------- --------
Total liabilities................................. 331,948 316,113
-------- --------
Commitments
Minority interest........................................... 45,829 41,685
Stockholders' equity:
Common stock, $.01 par value -- 100,000,000 authorized,
22,409,638 and 16,500,789 shares issued and outstanding
in 1996 and 1995, respectively......................... 224 165
Additional paid-in capital................................ 342,872 247,064
Accumulated deficit....................................... (85,068) (71,775)
Unamortized restricted stock compensation................. (814) --
-------- --------
Total stockholders' equity........................ 257,214 175,454
-------- --------
Total liabilities and stockholders' equity.................. $634,991 $533,252
======== ========
</TABLE>

See notes to consolidated financial statements.

32
<PAGE> 33

SUMMIT PROPERTIES INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Rental............................................ $ 88,864 $ 70,773 $ 54,198
Other property income............................. 4,683 3,356 2,582
Property management............................... -- -- 536
Interest.......................................... 558 461 416
Development and other fees from related parties... 72 112 385
Other income...................................... 312 292 317
----------- ----------- -----------
Total revenues............................ 94,489 74,994 58,434
----------- ----------- -----------
Expenses:
Property operating and maintenance:
Personnel...................................... 8,368 6,640 5,033
Advertising and promotion...................... 1,417 698 504
Utilities...................................... 4,115 3,432 2,782
Building repairs and maintenance............... 7,547 6,116 4,456
Real estate taxes and insurance................ 8,823 6,965 5,552
Depreciation................................... 18,208 15,141 11,700
Property supervision........................... 2,240 1,848 1,430
Other operating expenses....................... 2,716 2,313 1,745
----------- ----------- -----------
53,434 43,153 33,202
Property management............................... -- -- 366
Interest.......................................... 17,138 14,802 14,067
General and administrative........................ 2,557 1,949 1,756
REIT formation costs.............................. -- -- 457
Loss (income) in equity investments:
Summit Management Company...................... 173 80 59
Real estate joint venture...................... -- (41) --
----------- ----------- -----------
Total expenses............................ 73,302 59,943 49,907
----------- ----------- -----------
Income before minority interest of unitholders in
Operating Partnership and extraordinary items..... 21,187 15,051 8,527
Minority interest of unitholders in Operating
Partnership....................................... (3,723) (2,793) (1,527)
----------- ----------- -----------
Income before extraordinary items................... 17,464 12,258 7,000
Extraordinary items, net of minority interest of
unitholders in Operating Partnership.............. (516) (439) 7,032
----------- ----------- -----------
Net income.......................................... $ 16,948 $ 11,819 $ 14,032
=========== =========== ===========
Per share data:
Income before extraordinary items................. $ 0.92 $ 0.83 $ 0.64
=========== =========== ===========
Net income........................................ $ 0.90 $ 0.80 $ 1.28
=========== =========== ===========
Dividends declared................................ $ 1.55 $ 1.51 $ 1.29
=========== =========== ===========
Weighted average shares........................... 18,914,674 14,754,337 10,991,734
=========== =========== ===========
</TABLE>

See notes to consolidated financial statements.

33
<PAGE> 34

SUMMIT PROPERTIES INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
UNAMORTIZED
ADDITIONAL RESTRICTED
COMMON PAID IN ACCUMULATED STOCK
STOCK CAPITAL DEFICIT COMPENSATION TOTAL
------- ----------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993........... $ -- $ (2,006) $(36,121) $(38,127)
Capital distributions.............. -- -- (16,308) (16,308)
Dividends.......................... -- -- (15,987) (15,987)
Proceeds of public offering, net of
underwriting discount and
offering costs.................. 124 199,473 -- 199,597
Purchase of prior owner's
interest........................ -- -- (5,885) (5,885)
Issuance of stock.................. -- 60 -- 60
Adjustment for minority interest of
unitholders in Operating
Partnership..................... -- (21,857) -- (21,857)
Net income......................... -- -- 14,032 14,032
------- -------- -------- ------------ --------
Balance, December 31, 1994........... 124 175,670 (60,269) 115,525
Dividends.......................... -- -- (23,325) (23,325)
Proceeds of public offering, net of
underwriting discount and
offering costs.................. 40 65,897 -- 65,937
Proceeds from Dividend Reinvestment
Plan............................ -- 240 -- 240
Conversion of units to shares...... 1 1,013 -- 1,014
Issuance of stock grants........... -- 28 -- 28
Adjustment for minority interest of
unitholders in Operating
Partnership..................... -- 4,216 -- 4,216
Net income......................... -- -- 11,819 11,819
------- -------- -------- ------------ --------
Balance, December 31, 1995........... 165 247,064 (71,775) 175,454
Dividends.......................... -- -- (30,241) (30,241)
Proceeds of public offering, net of
underwriting discount and
offering costs.................. 58 97,576 -- 97,634
Proceeds from Dividend Reinvestment
and Employee Stock Purchase
Plans........................... -- 1,597 -- 1,597
Conversion of units to shares...... -- 167 -- 167
Exercise of stock options.......... -- 287 -- 287
Issuance of restricted stock
grants.......................... 1 1,015 -- $ (1,016) --
Amortization of restricted stock
grants.......................... -- -- -- 202 202
Adjustment for minority interest of
unitholders in Operating
Partnership..................... -- (4,834) -- -- (4,834)
Net income......................... -- -- 16,948 -- 16,948
------- -------- -------- ------------ --------
Balance, December 31, 1996........... $ 224 $342,872 $(85,068) $ (814) $257,214
======= ======== ======== ============ ========
</TABLE>

See notes to consolidated financial statements.

34
<PAGE> 35

SUMMIT PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
--------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 16,948 $ 11,819 $ 14,032
Adjustments to reconcile net income to net cash provided
by operating activities:
Extraordinary items.................................... 516 439 (7,032)
Loss on equity method investments...................... 173 39 59
Depreciation and amortization.......................... 19,183 15,978 12,542
Decrease (increase) in restricted cash................. 235 575 (239)
Decrease (increase) in other assets.................... (866) (992) 582
Increase (decrease) in accrued interest payable........ 333 (47) (4,388)
Increase in accounts payable and accrued expenses...... 386 209 112
Increase in security deposits and prepaid rents........ 545 181 330
Minority interest of unitholders in Operating
Partnership.......................................... 3,723 2,793 1,527
--------- -------- ---------
Net cash provided by operating activities......... 41,176 30,994 17,525
--------- -------- ---------
Cash flows from investing activities:
Construction of real estate assets and land acquisitions,
net of payables........................................ (87,081) (52,499) (94,249)
Capitalized interest...................................... (4,266) (3,110) (686)
Recurring capital expenditures............................ (3,291) (2,180) (1,710)
Non-recurring capital expenditures........................ (2,973) (864) --
Purchase of Communities................................... (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:............ (103,971) (63,734) (113,741)
--------- -------- ---------
Cash flows from financing activities:
Debt proceeds............................................. 89,359 97,075 193,542
Debt repayments........................................... (90,783) (101,650) (269,021)
Dividends and distributions to unitholders................ (34,000) (26,157) (13,615)
Payment of financing costs................................ (515) (1,033) (5,202)
Offering proceeds, net of underwriters discount and
offering costs......................................... 97,634 65,937 199,597
Proceeds from Dividend Reinvestment and Employee Stock
Purchase Plans......................................... 1,597 268 --
Exercise of stock options................................. 287 -- --
Capital distributions..................................... -- -- (16,308)
--------- -------- ---------
Net cash provided by financing activities......... 63,579 34,440 88,993
--------- -------- ---------
Net increase (decrease) in cash and cash equivalents........ 784 1,700 (7,223)
Cash and cash equivalents, beginning of year................ 2,881 1,181 8,404
--------- -------- ---------
Cash and cash equivalents, end of year...................... $ 3,665 $ 2,881 $ 1,181
========= ======== =========
Supplemental disclosure of cash flow information -- Cash
paid for interest, net of capitalized interest............ $ 15,780 $ 13,762 $ 15,027
========= ======== =========
</TABLE>

See notes to consolidated financial statements.

35
<PAGE> 36

SUMMIT PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND FORMATION OF THE COMPANY

Summit Properties Inc. (the "Company") was initially organized as a Maryland
real estate investment trust on December 1, 1993 under the Maryland Real Estate
Investment Trust Act. The Company became a Maryland corporation under the
General Corporation Law of Maryland on January 13, 1994. On February 15, 1994,
the Company completed an Initial Public Offering ("Initial Offering"). In
connection with the Initial Offering, the Company consummated a business
combination involving the Partnerships (the "Property Partnerships") which owned
the 27 communities (the "Communities") and the affiliated entities which
provided development, construction, management and leasing services to each of
the Communities prior to the Initial Offering (collectively, "Summit Entities").
A portion of the proceeds from the Initial Offering was used to acquire an
economic and voting interest in Summit Properties Partnership, L.P. (the
"Operating Partnership"), which was formed to succeed to substantially all of
the interests of the Property Partnerships in the Communities and the operations
of Summit Entities (the "Formation"). The Company became the sole general
partner and the majority owner of the Operating Partnership upon completion of
the Initial Offering and, accordingly, reports its investment in the Operating
Partnership on a consolidated basis.

In June 1995, the Company completed the sale of 4 million shares of Common
Stock, ("1995 Offering"). In August 1996, the Company completed the sale of 5.75
million shares of Common Stock, ("1996 Offering"). The net proceeds of $65.9
million and $97.6 million from the 1995 and 1996 Offerings, respectively, were
used to repay mortgage debt and to fund current development projects.

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

2. BASIS OF PRESENTATION

For the period after the Initial Offering, the accompanying financial statements
include the consolidated accounts of the Company and the Operating Partnership.
For the period prior to the Initial Offering, the accompanying financial
statements reflect the combined accounts of 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 Partnership 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 Company, 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 Company. Because of the Company'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 consolidated in the Statement of Earnings.

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 or received limited partnership interests
("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.

All significant intercompany accounts and transactions have been eliminated in
consolidation. The financial statements of the Company, for the periods ended
after the Initial Offering, have been adjusted for the minority interest of
unitholders in the Operating Partnership. Since Units can be exchanged for cash,
or at the option of the Company, for shares of Common Stock on a one-for-one
basis, minority interest of unitholders in the Operating Partnership is
calculated based on the weighted average shares of Common Stock and Units
outstanding during the period. For the purposes of this calculation, shares of
Common Stock issued at the date of the Initial Offering in exchange for
interests in entities included in Summit Entities are treated as if such

36
<PAGE> 37

shares were outstanding at the beginning of the period. Shares of Common Stock
issued to the public in the Initial Offering are assumed outstanding from the
date of issuance.

2. 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 as 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 Financial Accounting Standard Board's Statement of Financial Accounting
Standard No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," became effective in 1996. FAS 121
established standards for determining when impairments on long-lived assets have
occurred and how impairment losses should be measured. The new standard had no
impact on the Company's financial statements in 1996.

RENTAL REVENUE RECOGNITION -- The Company leases its residential properties
under operating leases with terms 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.

CASH AND CASH EQUIVALENTS -- For purposes of the statement of cash flows, the
Company 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 consolidated 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 -- Prior to the Formation, the Company's operations were conducted
through a variety of partnerships. 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 consolidated
financial statements for federal, state or local income taxes through February
15, 1994.

The Company elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), commencing with the taxable year ended December
31, 1994. As a result, the Company generally will not be subject to federal and
state income taxation at the corporate level to the extent it distributes
annually at least 95% of its taxable income, as defined in the Code, to its
stockholders and satisfies certain other requirements. Accordingly, no provision
has been made for federal and state income taxes in the accompanying
consolidated financial statements for the period subsequent to February 15,
1994.

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 Company's consolidated financial statements exceeded the tax basis by

37
<PAGE> 38

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 portion of the Company's dividends is deemed as return of capital for
shareholder income tax purposes. The percentage of dividends that was return of
capital was 21%, 26% and 21% for each of the years ended December 31, 1996, 1995
and 1994, respectively.

PER SHARE DATA -- Earnings per share with respect to the Company for the years
ended December 31, 1996, 1995 and 1994 are computed based upon the weighted
average number of shares 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 consolidated in the Summit Entities'
Statement of Earnings. 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, Inc. are not material.

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 Company of its rights to third party management contracts for
$2.5 million, payable over time under a promissory note

38
<PAGE> 39

executed by the Management Company. Corresponding amounts of interest income and
amortization of deferred revenue (included in other income) are included in the
Company's operating results.

The Management Company provides management services to apartment communities in
which executive officers and certain directors of the Company 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
Company or from joint ventures in which the Company has an interest. Income from
contracts with the Company was $529,000, $311,000 and $154,000 for the years
ended December 31, 1996, 1995 and 1994 respectively. The Company has $1.3
million and $978,000 of construction contracts payable to the Construction
Company as of December 31, 1996 and 1995, respectively.

The Company'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>

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 Company has

39
<PAGE> 40

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 Company 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 Company obtained a $150 million unsecured
credit facility (the "Unsecured Credit Facility") on November 18, 1996 to
replace a $50 million secured credit facility. The 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 the Company to
comply with certain affirmative and negative covenants including the
requirements: (i) that the Company 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 Company maintain a debt
service ratio of not less than 1.75 to 1; and (vi) that the Company 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 Company 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.

40
<PAGE> 41

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 Unsecured Notes.
The extraordinary item is net of $110,000 which was allocated to the minority
interest of the unitholders in the Operating Partnership, calculated on the
weighted average number of units outstanding.

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. The extraordinary items are net of $100,000 which was
allocated to the minority interest of the unitholders in the Operating
Partnership, calculated on the weighted average number of units outstanding.

In conjunction with the debt repayment related to the Initial Offering in 1994,
the Company 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. These extraordinary items are net of
$1.5 million which was allocated to the minority interest of the unitholders in
the Operating Partnership, calculated on the weighted average units outstanding.

6. MINORITY INTEREST

Minority interest consists of the following at December 31 (in thousands):

<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Minority interest of unitholders in Operating Partnership... $46,202 $42,042
Minority interest in one operating Community................ (373) (357)
------- -------
$45,829 $41,685
======= =======
</TABLE>

Operating Partnership Units can be exchanged for cash, or at the option of the
Company, for shares of Common Stock on a one-for-one basis. Accordingly,
minority interest of Unitholders in the Operating Partnership is calculated
based on the shares of Common Stock and Units outstanding at December 31, 1996
and 1995, respectively. Operating Partnership Units as a percentage of total
Units and shares outstanding was 15.2% and 19.3% at December 31, 1996 and 1995,
respectively.

7. CROSLAND ACQUISITION

During the second quarter of 1995, the Company 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
Company'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 10-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

41
<PAGE> 42

information is presented as if the Company's 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 share amounts):

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Net revenues................................................ $80,239 $71,298
Income before extraordinary items........................... 12,129 8,965
Net income.................................................. 11,703 8,965
Earnings per share:
Income before extraordinary items......................... .82 .72
Net income................................................ .79 .72
</TABLE>

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

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

The Company has employment agreements with six executive officers. Five of these
agreements will expire on February 15, 1999 unless otherwise extended, and may
be terminated by the officer after giving 180 days prior written notice, without
breaching such agreements. One of these agreements provided for an original term
through February 16, 1996, and has been automatically extended until such time
as terminated pursuant to the terms of such executive officers' employment
agreement.

Each of the executive officers and the Chairman of the Board have
non-competition agreements with the Company which prohibit them, without the
prior written consent of the Board of Directors, from competing with the Company
for a period of the latter of (1) one year from the termination of their
employment with the Company, or (2) any period during which such individuals
receive severance payments.

The Company is obligated to redeem each Unit of interest in the Operating
Partnership at the request of the holder thereof for cash equal to the fair
market value of one share of Common Stock, except that the Company may elect to
acquire each Unit presented for redemption for one share of Common Stock. The
Company presently anticipates that it will elect to issue Common Stock in
connection with such redemption, rather than pay cash.

42
<PAGE> 43

9. EMPLOYEE BENEFIT PLANS

PROFIT SHARING PLAN

The Company has a defined contribution plan pursuant to Section 401(k) of the
Internal Revenue Code which covers all employees with one year or greater
service. The Company's contributions are equal to one-half of each employee's
contribution up to a maximum of 3% of each employee's compensation. Aggregate
contributions 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, the Company established the 1994 Stock Option Plan ("the Plan") under
which 1,000,000 shares of the Company's Common Stock are reserved for issuance.
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 the Company, which vest on 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. The Company applies Accounting
Principal Board Opinion No. 25 and related interpretations in accounting for its
stock options. Accordingly, no compensation cost has been recognized for its
stock options. Had compensation cost for the Company's 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 Company's net income and net income per share for
the years ended December 31, 1996 and 1995 would have changed to the pro forma
amounts indicated below (dollars in thousands except per share amounts):

<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Pro forma net income........................................ $16,898 $11,808
Pro forma net income per share.............................. .89 .80
</TABLE>

43
<PAGE> 44

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 employees.
The Company 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, which was recorded as unamortized
restricted stock compensation and is shown as a separate component of
stockholders' equity. 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 Company 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, the Company established a non-qualified employee stock purchase plan.
The plan allows Company employees to purchase up to $100,000 per year of the
Company's 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 $871,000. An additional 41,493 shares with a
market value of $908,000 were issued in January, 1997 under the plan. The
Company recognized $151,000 of expense in the statement of earnings in the year
ended December 31, 1996 relative to the employee stock purchase plan.

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

B. In 1996 the Company issued 52,086 (net of 3,960 shares issued but
subsequently retired) of restricted stock grants valued at $1.0 million.

C. On April 1, 1996, the Company acquired its joint venture partner's
interest in the Summit Plantation (formerly Plantation Cove) apartment
community. The Company paid $6.4 million in cash for the remaining 75%
interest in this joint venture, which is now owned entirely by the
Company. 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)
Minority interest........................................... (1,215)
--------
Net cash paid............................................... $ 6,360
========
</TABLE>

44
<PAGE> 45

D. In the second quarter of 1995, the Company completed its Crosland
Acquisition. The Company 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................................................ 93
Debt assumed................................................ (52,576)
Current liabilities assumed................................. (996)
Minority interest........................................... 388
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 Company 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 Company 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 Company accrued a dividend and 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 Company issued 45,359 Units of interest in the Operating Partnership
(valued at $896,000) for the purchase of land in 1995.

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

11. 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
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 Company 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.

45
<PAGE> 46

12. GEOGRAPHIC CONCENTRATION

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

<TABLE>
<CAPTION>
NUMBER APARTMENT
OF HOMES --
APARTMENT % % 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>

13. SUBSEQUENT EVENTS

On January 6, 1997, the Company 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, the Company sold 315,029 shares of Common Stock to the public
for cash to fund a portion of the purchase.

On January 15, 1997, the Company 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 Company 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 Company
issued the seller 243,608 shares of Common Stock and 194,495 Units in the
Operating Partnership, assumed $15.2 million in debt and paid the remaining $2.7
million balance in cash.

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 minority interest of unitholders in
Operating Partnership and extraordinary items........... 4,237 4,345 5,740 6,865
Minority interest of unitholders in Operating
Partnership............................................. (828) (850) (974) (1,071)
Extraordinary items....................................... -- -- (516) --
Net income................................................ 3,409 3,495 4,250 5,794
Income per share:
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 minority interest of unitholders in
Operating Partnership and extraordinary items........... 2,804 3,345 4,479 4,423
Minority interest of unitholders in Operating
Partnership............................................. (458) (635) (846) (854)
Extraordinary items....................................... -- (63) -- (376)
Net income................................................ 2,346 2,647 3,633 3,193
Income per share:
Income before extraordinary items....................... 0.19 0.20 0.22 0.22
Net income.............................................. 0.19 0.19 0.22 0.19
</TABLE>

46
<PAGE> 47

SUMMIT PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION SCHEDULE III
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

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
</TABLE>

47
<PAGE> 48
<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>
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
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
======= ======== ======== ======== ======== ========

DEPRECIABLE
ACCUMULATED DATE OF DATE LIVES
COMMUNITY DEPRECIATION CONSTRUCTION ACQUIRED YEARS
--------- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C>
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
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
---------
$ (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 $55.6 million of letter of credit which serves as collateral
for $53.9 million in tax exempt bonds.

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

(6) Includes furniture, fixtures and equipment.

48
<PAGE> 49

SCHEDULE III

SUMMIT PROPERTIES INC.
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
-------- -------- --------
93,329 117,065 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.

<PAGE> 1

$150,000,000 CREDIT AGREEMENT

BY AND AMONG

SUMMIT PROPERTIES PARTNERSHIP, L.P.
AS THE BORROWER

AND

FIRST UNION NATIONAL BANK OF NORTH CAROLINA
AS A LENDER

AND

WACHOVIA BANK OF NORTH CAROLINA, N.A.
AS A LENDER

AND

FIRST UNION NATIONAL BANK OF NORTH CAROLINA
AS THE AGENT

NOVEMBER 18, 1996

<PAGE> 2

TABLE OF CONTENTS

SECTION 1. DEFINITIONS..........................................................................................1

SECTION 2. REVOLVING WORKING CAPITAL CREDIT FACILITY..........................................................14
Section 2.1. The Revolving Working Capital Credit Facility.....................................14
Section 2.1.1. Revolving Working Capital Loans...................................................14
Section 2.1.2. Use of Proceeds...................................................................14
Section 2.1.3. The Borrower's Account............................................................14
Section 2.1.4. Advance Request...................................................................15
Section 2.1.5. Revolving Working Capital Credit Notes............................................15
Section 2.1.6. Payment of Principal..............................................................15
Section 2.1.7. Interest Rate and Payment of Interest.............................................15
Section 2.1.8. Termination; Renewal..............................................................16
Section 2.2. Interest..........................................................................16
Section 2.2.1. Calculation of Interest...........................................................16
Section 2.2.2. Usury.............................................................................17
Section 2.3. Unutilized Revolving Working Capital Facility Fee.................................17
Section 2.4. General Terms Applicable to the Revolving Working Capital Credit Facility.........17
Section 2.4.1. Late Payment......................................................................17
Section 2.4.2. Overdue Payments..................................................................17
Section 2.4.3. Manner and Time of Payments by the Borrower.......................................18
Section 2.4.4. Increased Costs and Capital Adequacy..............................................18
Section 2.4.5. Prepayments of the Revolving Working Capital Facility.............................20

SECTION 2A. PROJECT ADVANCE FACILITY..........................................................................20
Section 2A.1. The Project Advance Facility......................................................20
Section 2A.1.1. Project Advance Loans.............................................................20
Section 2A.1.2. Use of Proceeds...................................................................21
Section 2A.1.3. The Borrower's Account............................................................21
Section 2A.1.4. Advance Request; Project Advance Facility Access Fee..............................21
Section 2A.1.5. Project Advance Notes.............................................................22
Section 2A.1.6. Payment of Principal..............................................................22
Section 2A.1.7. Interest Rate and Payment of Interest.............................................22
Section 2A.1.8. Termination.......................................................................23
Section 2A.2. Interest..........................................................................23
Section 2A.2.1. Calculation of Interest...........................................................23
Section 2A.2.2. Usury.............................................................................23
Section 2A.3. General Terms Applicable to the Project Advance Facility..........................23
Section 2A.3.1. Late Payment......................................................................23
Section 2A.3.2. Overdue Payments..................................................................23
Section 2A.3.3. Manner and Time of Payments by the Borrower.......................................23
Section 2A.3.4. Increased Costs and Capital Adequacy..............................................24
Section 2A.3.5. Prepayments of the Project Advance Facility.......................................25

SECTION 3. REPRESENTATIONS AND WARRANTIES......................................................................26
Section 3.1. Existence of Borrower.............................................................26
</TABLE>

<PAGE> 3

<TABLE>
<S> <C> <C>
Section 3.2. Existence of General Partner; Status as a REIT....................................26
Section 3.3. Affiliates........................................................................26
Section 3.4. Authority.........................................................................26
Section 3.5. Binding Obligations...............................................................27
Section 3.6. Noncontravention..................................................................27
Section 3.7. Permits...........................................................................27
Section 3.8. No Consents.......................................................................27
Section 3.9. Financial Statements..............................................................27
Section 3.10. Financial Information.............................................................28
Section 3.11. Brokers...........................................................................28
Section 3.12. Use of Proceeds...................................................................28
Section 3.13. Statutory Compliance..............................................................28
Section 3.14. Commitments.......................................................................29
Section 3.15. Events of Default.................................................................29
Section 3.16. Other Defaults....................................................................29
Section 3.17. Taxes.............................................................................29
Section 3.18. Solvency..........................................................................29
Section 3.19. Capitalization....................................................................29
Section 3.20. Litigation........................................................................29
Section 3.21. Title to Properties...............................................................30
Section 3.22. Labor Relations...................................................................30
Section 3.23. Guarantees........................................................................30
Section 3.24. ERISA.............................................................................30
Section 3.25. Environmental Protection..........................................................30
Section 3.26. NYSE Listing......................................................................31
Section 3.27. Registration Documents............................................................31
Section 3.28. Materiality.......................................................................31

SECTION 4. CONDITIONS TO OBLIGATION OF THE BANKS...............................................................31
Section 4.1. Representations and Warranties True...............................................32
Section 4.2. Delivery of Documents.............................................................32
Section 4.3. Opinion of Counsel................................................................33
Section 4.4. Payment of Fees...................................................................33
Section 4.5. Commitment Fee....................................................................33
Section 4.6. Legal Matters.....................................................................33
Section 4.7. No Adverse Change.................................................................33

SECTION 5. CONDITIONS TO MAKING ADVANCES.......................................................................33
Section 5.1. Notice of Borrowing...............................................................33
Section 5.2. No Adverse Change.................................................................33
Section 5.3. Truth of Representations and Warranties...........................................33
Section 5.4. No Event of Default...............................................................34
Section 5.5. Payment of Fees...................................................................34
Section 5.6. Partnership and Corporate Action..................................................34
Section 5.7. Legal Matters.....................................................................34
Section 5.8. Special Conditions Precedent With Respect to Advances Under
the Project Advance Facility......................................................34

SECTION 6. AFFIRMATIVE COVENANTS OF BORROWER...................................................................35
Section 6.1. Financial Statements and Reporting Requirements...................................35
Section 6.2. Hazard and Liability Insurance....................................................36
Section 6.3. Maintenance of Existence..........................................................36
Section 6.4. REIT Status.......................................................................37
Section 6.5. Preservation of Properties........................................................37
Section 6.6. Taxes and other Assessments.......................................................37
</TABLE>

<PAGE> 4

<TABLE>
<S> <C> <C>
Section 6.7. Inspection........................................................................37
Section 6.8. Notices...........................................................................38
Section 6.9. Litigation........................................................................38
Section 6.10. Maintenance of Books and Records..................................................38
Section 6.11. Maintenance of Permits............................................................38
Section 6.12. Use of Proceeds...................................................................38
Section 6.13. Payment of Indebtedness...........................................................38
Section 6.14. Estoppel Certificate..............................................................39
Section 6.15. Additional Offices................................................................39
Section 6.16. Compliance with Laws..............................................................39
Section 6.17. ERISA.............................................................................39
Section 6.18. Compliance with Environmental Laws................................................39
Section 6.19. NYSE Listing......................................................................40
Section 6.20. Loans in Excess of Commitment Amount..............................................41
Section 6.21. Business of the Borrower..........................................................41
Section 6.22. Deposit Accounts..................................................................41
Section 6.23. Notification of Significant Transactions..........................................41

SECTION 7. NEGATIVE COVENANTS..................................................................................41
Section 7.1. Leases............................................................................41
Section 7.2. Dividends.........................................................................41
Section 7.3. Capital Expenditures..............................................................42
Section 7.4. ERISA.............................................................................42
Section 7.5. Change Name or Location...........................................................42
Section 7.6. Contracts.........................................................................42
Section 7.7. Compliance with Environmental Laws................................................42
Section 7.8. Fiscal Year.......................................................................43
Section 7.9. REIT Acquisitions.................................................................43
Section 7.10. No Mergers or Consolidations......................................................43
Section 7.11. Unconsolidated Affiliate Indebtedness.............................................43
Section 7.12. No Additional Recourse Debt.......................................................43

SECTION 8. FINANCIAL COVENANTS.................................................................................43
Section 8.1.1. Consolidated Total Debt to Market Capitalization..................................43
Section 8.1.2. Adjusted Funds Flow to Consolidated Total Debt....................................44
Section 8.1.3. Maximum Unsecured Consolidated Total Debt.........................................44
Section 8.1.4. Maximum Secured Debt..............................................................44
Section 8.1.5. Maximum Secured Recourse Debt.....................................................44
Section 8.2. Establishment of Covenants........................................................44

SECTION 9. DEFAULT.............................................................................................44
Section 9.1. Events of Default.................................................................44

SECTION 10. REMEDIES..........................................................................................47
Section 10.1. Remedies..........................................................................47
Section 10.2. Distribution of Proceeds..........................................................48

SECTION 11. ASSIGNMENT........................................................................................48
Section 11.1. No Assignment or Delegation by the Borrower.......................................48
Section 11.2. Participation and Assignment by the Banks.........................................48

SECTION 12. THE AGENT.........................................................................................48
Section 12.1. Appointment.......................................................................48
Section 12.2. Delegation of Duties..............................................................48
Section 12.3. Exculpatory Provisions............................................................49
Section 12.4. Reliance by Agent.................................................................49
</TABLE>

iii

<PAGE> 5

<TABLE>
<S> <C> <C>
Section 12.5. Notice of Default.................................................................49
Section 12.6. Non-Reliance on the Agent and Other Banks.........................................50
Section 12.7. Indemnification...................................................................50
Section 12.8. The Agent in Its Individual Capacity..............................................50
Section 12.9. Resignation of Agent; Successor Agents............................................51

SECTION 13. MISCELLANEOUS.....................................................................................51
Section 13.1. Waivers...........................................................................51
Section 13.2. Notices...........................................................................52
Section 13.3. Fees and Expenses.................................................................53
Section 13.4. Term of Agreement.................................................................54
Section 13.5. Taxes.............................................................................54
Section 13.6. Schedules and Exhibits............................................................54
Section 13.7. Governing Law; Consent to Jurisdiction............................................54
Section 13.8. Survival of Representations.......................................................54
Section 13.9. Amendments........................................................................55
Section 13.10. Counterparts......................................................................55
Section 13.11. No Agency Relationship............................................................55
Section 13.12. Severability......................................................................55
Section 13.13. Headings..........................................................................55
Section 13.14. Reinstatement.....................................................................55
Section 13.15. Interpretation and Construction...................................................55
Section 13.16. Relation to Other Documents.......................................................56
Section 13.17. Indemnification...................................................................56
Section 13.18. Arbitration. ....................................................................56
Section 13.19. Preservation and Limitation of Remedies...........................................57
</TABLE>

<PAGE> 6

TABLE OF EXHIBITS
-----------------

Exhibit A-1 Form of Advance Request under Revolving Working
Capital Credit Facility

Exhibit A-2 Form of Advance Request Under Project Advance
Facility

Exhibit B Form of Report of Chief Financial Officer
Schedule A to Exhibit B -- Financial Covenants and
Secured Quarterly Reporting

Exhibit C-1 Form of FUNB Revolving Working Capital Credit Note

Exhibit C-2 Form of Wachovia Revolving Working Capital Credit
Note

Exhibit C-3 Form of FUNB Project Advance Note

Exhibit C-4 Form of Wachovia Project Advance Note

Exhibit D-1 Form of FUNB Guaranty Agreement

Exhibit D-2 Form of Wachovia Guaranty Agreement

Exhibit E Form of Opinion Letter

Exhibit F Bond-Financed Communities

Exhibit G Proportionate Share for Each Bank

<PAGE> 7

CREDIT AGREEMENT
----------------

THIS CREDIT AGREEMENT (the "Agreement") is made as of this 18th day of
November, 1996 by and among SUMMIT PROPERTIES PARTNERSHIP, L.P., a Delaware
limited partnership with its principal office in Charlotte, North Carolina,
doing business in North Carolina as Summit Properties Partnership, Limited
Partnership ("Borrower"), FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a
national banking association with its principal office located in Charlotte,
North Carolina ("FUNB"), WACHOVIA BANK OF NORTH CAROLINA, N.A., a national
banking association with its principal office located in Winston-Salem, North
Carolina ("Wachovia"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a
national banking association with its principal office located in Charlotte,
North Carolina, as agent pursuant to SECTION 12 (in such capacity, "Agent").

SECTION 1. DEFINITIONS

All capitalized terms used in this Agreement, the Notes or the Other
Documents, or in any certificate, report or other document, instrument or
agreement executed or delivered pursuant thereto (unless otherwise indicated
therein) shall have the meanings provided below.

SECTION 1.1. "AAA" shall have the meaning ascribed to that term in
SECTION 13.18.

SECTION 1.2. "Adjusted Funds Flow" means, with respect to any given
period of time, Funds from Operations for this period plus interest expense and
amortization of financing costs charged to earnings in this period.

SECTION 1.3 "Advance" means any advance under the Aggregate Credit
Facility.

SECTION 1.4. "Advance Request" has the meaning ascribed to it in
SECTION 2.1.4. or 2A.1.4., as applicable.

SECTION 1.5. "Affiliate" means any Person (i) which directly or
indirectly controls, or is controlled by, or is under common control with,
another Person or any Affiliate of such other Person; (ii) which directly or
indirectly beneficially owns or holds ten percent (10%) or more of any class of
voting stock of such other Person or any Affiliate of such other Person; or
(iii) ten percent (10%) or more of the voting stock or partnership interest of
which is directly or indirectly beneficially owned or held by such other Person
or any Affiliate of such other Person. The term "control" (and its correlative
meanings "controlled by" and "under common control with") as used in this
SECTION 1.5. means the possession, directly or indirectly, of the power to
direct, or cause the direction of the management and policies of a Person,
whether through ownership of voting stock, partnership interests, by contract or
otherwise.

<PAGE> 8

SECTION 1.6. "Agent" shall have the meaning ascribed to it in the
Preamble hereof of, or if applicable, SECTION 12.

SECTION 1.7. "Aggregate Credit Facility" means, collectively, the
Revolving Working Capital Credit Facility and the Project Advance Facility.

SECTION 1.8. "Agreement" means this Credit Agreement and shall include
any and all amendments, modifications and supplements hereto.

SECTION 1.9. "Annualized Basis" means, with respect to financial
information, the most recent calendar quarter's result multiplied by four (4).

SECTION 1.10 "Arbitration Rules" has the meaning ascribed to it in
SECTION 13.18. hereof.

SECTION 1.11. "Bank" shall mean FUNB, Wachovia, and any other financial
institution now or hereafter a party to this Agreement. "Banks" shall mean
collectively each entity constituting a Bank under this Agreement.

SECTION 1.12. "Bond-Financed Communities" means the Borrower's
multi-family apartment projects financed with tax exempt bonds as described in
EXHIBIT F and any additional projects that will be similarly financed.

SECTION 1.13. "Borrower" has the meaning ascribed to it in the Preamble
hereof.

SECTION 1.14. "Borrower's Account" has the meaning ascribed to it in
SECTION 2.1.3. hereof.

SECTION 1.15. "Business Day" means any day in which dealings in foreign
currencies and exchange between banks may be carried on in the place where the
Eurodollar Office is located and in Charlotte, North Carolina, other than a
Saturday, Sunday, legal holiday or other day on which banks in the State of
North Carolina are required or permitted by law to close.

SECTION 1.16. "Closing Date" means the date of this Agreement or any
earlier date acceptable to the Borrower and the Bank.

SECTION 1.17. "Code" means the Internal Revenue Code of 1986 and the
rules and regulations promulgated thereunder, collectively, as the same may from
time to time be supplemented or amended and remain in effect.

SECTION 1.18. "Combined Revolving Loans" means all Revolving Working
Capital Loans requested by the Borrower and made by the Banks under this
Agreement.

2
<PAGE> 9

SECTION 1.19. "Consolidated" or "consolidated" means, with reference to
any term defined in this Agreement, that term as applied to the accounts of the
Borrower and its Affiliates, as the case may be, consolidated in accordance with
GAAP.

SECTION 1.20. "Consolidated Net Operating Income from Unencumbered
Assets" means, on an Annualized Basis, the Borrower's consolidated Operating
Income from the Unencumbered Properties minus consolidated Operating Expenses
with respect to the Unencumbered Properties.

SECTION 1.21. "Consolidated Total Debt" means, subject to SECTION 7.11,
as of any date for which the amount thereof shall be determined, all
Indebtedness of the Borrower and its Affiliates as of such date on a
consolidated basis; provided, however, that to the extent any Indebtedness of an
Affiliate which is a joint venture between the Borrower (or the General Partner
or any Affiliate of the Borrower) and an unrelated third party, Consolidated
Total Debt will only include the Borrower's (or the General Partner's or the
Affiliate's, as applicable) proportionate share thereof.

SECTION 1.22. "Controlled Group" means all trades or businesses
(whether or not incorporated) under common control that, together with the
Borrower, are treated as a single employer under Section 414(b) or 414(c) of the
Code or Section 4001 of ERISA.

SECTION 1.23. "Debtor Relief Laws" means any applicable Laws pertaining
to liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
insolvency, reorganization, receivership, composition, extension or adjustment
of debt, or similar Laws, domestic or foreign, affecting the rights or remedies
of creditors generally, in effect from time to time.

SECTION 1.24. "Default" means an Event of Default or event or condition
that, but for the lapse of time, the giving of notice, or both, would constitute
an Event of Default.

SECTION 1.25. "Default Rate" has the meaning ascribed to it in SECTION
2.4.2. hereof.

SECTION 1.26. "Disputes" shall have the meaning ascribed to that term
in SECTION 13.18.

SECTION 1.27. "Dividend" or "Dividends" means the payment of any
dividend or other distribution in respect of the capital stock of a corporation
or equity interest in a partnership, as applicable, in cash or other property
(excepting distribution in the form of such stock or equity interest) or the
redemption or acquisition of any capital stock or security of a corporation or
equity interest or security of a partnership, as applicable (exclusive of any
conversion of such an equity interest in Borrower into stock of the General
Partner).

3
<PAGE> 10

SECTION 1.28. "Encumbrance" or "Encumbrances" means any security
interest, mortgage, pledge, lien, claim, charge, encumbrance, title retention
agreement, lessor's interest under a financing lease or any analogous
arrangements in any Property, intended as, or having the effect of, security
which (a) secures indebtedness for borrowed money or other consensual financing
arrangements; (b) exceeds $1,000,000 per Property; or (c) exceeds $25,000 per
Property and remains undischarged, unsatisfied or not fully released for a
period of 270 days.

SECTION 1.29 "Environmental Assurances" has the meaning ascribed to it
in SECTION 6.18. hereof.

SECTION 1.30. "Environmental Laws" means any and all laws, statutes,
ordinances, rules, regulations, orders, or determinations of any Federal, state
or local governmental body, instrumentality or agency pertaining to the
environment, including without limitation, the Clean Water Act, the Clean Air
Act, as amended, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), and as may be further amended (all
together herein called "CERCLA"), the Federal Water Pollution Control
Amendments, the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), the Hazardous Materials Transportation Act of 1975, as amended, the
Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, and any comparable or similar environmental laws of any state in which
the Borrower or any of its Affiliates maintains business premises. Likewise, the
terms "hazardous substance," "release," and "threatened release" herein
referenced in connection with Environmental Laws shall have the meanings
specified in CERCLA and the terms "solid waste" and "dispose" (or "disposed")
shall have the meanings specified in RCRA; provided, however, in the event
either CERCLA or RCRA is amended so as to broaden the meaning of any term
defined therein, such broader meaning shall apply subsequent to the effective
date of such amendment, and provided further that, to the extent the laws of any
state which are applicable to a specific Property and which establish a meaning
for "hazardous substance," "release," "solid waste" or "disposal" which is
broader than that specified in either CERCLA or RCRA, such broader meaning shall
apply with respect to such Property.

SECTION 1.31. "Equipment" means all of the machinery, equipment, office
machinery, furniture, fixtures, tools, materials, storage and handling
equipment, computer equipment and hardware, including central processing units,
terminals, drives, memory units, printers, keyboards, screens, peripherals and
input or output devices, automotive equipment, trucks, motor vehicles and other
equipment of every kind and nature located at any Property.

SECTION 1.32. "ERISA" means the Employee Retirement Income Security Act
of 1974 and the rules and regulations promulgated

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<PAGE> 11

thereunder, collectively, as the same may from time to time be supplemented or
amended and remain in effect.

SECTION 1.33. "Eurodollar Office" means, initially, the office of the
Agent in Charlotte, North Carolina and thereafter such other office or offices
of the Agent or its affiliate (as designated from time to time by notice from
the Agent) through which the LIBOR Rate is determined. A Eurodollar Office may
be, at the option of the Agent, either a domestic or a foreign office.

SECTION 1.34. "Event of Default" has the meaning ascribed to it in
SECTION 9.1. hereof.

SECTION 1.35. "Excess Debt" means, as of any date, the amount by which
the then Outstanding Amount under (a) either the Revolving Working Capital Loans
or (b) either of the Project Advance Loans by any Bank exceeds the original
principal amount of the associated Revolving Working Capital Credit Note or the
Project Advance Note for that Bank on such date.

SECTION 1.36. "Extension Notice" has the meaning ascribed to it in
SECTION 2.1.8. hereof.

SECTION 1.37. "Financial Statement" or "Financial Statements" means, as
of any date, or with respect to any period, as applicable, a financial report or
reports consisting of (i) a balance sheet; (ii) an income statement; (iii) a
statement of cash flow; (iv) a statement of retained earnings (if prepared by
the Borrower); and (v) changes in stockholders' equity.

SECTION 1.38. "FUNB" means First Union National Bank of North Carolina,
in its capacity as a Bank.

SECTION 1.39. "FUNB Guaranty" shall mean the guaranty by the Guarantor
of the Borrower's obligations to FUNB as the Agent and as a Bank under this
Agreement, the Notes and/or the other Loan Documents, as such guaranty may be
amended, modified, extended, renewed, substituted or replaced. A form of the
FUNB Guaranty is attached as EXHIBIT D-1.

SECTION 1.40. "FUNB Project Advance Note" shall have the meaning
ascribed to that term in SECTION 2A.1.5 hereof.

SECTION 1.41. "FUNB Revolving Working Capital Credit Note" shall have
the meaning ascribed to that term in SECTION 2.1.5 hereof.

SECTION 1.42. "Funds From Operations" means net income (computed in
accordance with GAAP), excluding gains (or losses) from debt restructuring and
sales of property, plus depreciation of real property, and after adjustments for
unconsolidated entities in which the Borrower holds an interest.

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<PAGE> 12

SECTION 1.43. "GAAP" means generally accepted accounting principles,
applied on a consistent basis.

SECTION 1.44. "General Partner" means Summit Properties Inc., a
Maryland corporation doing business in North Carolina as "Summit Properties Real
Estate, Inc.", the sole general partner of Borrower.

SECTION 1.45. "Guarantees" means, as applied to the Borrower and its
Affiliates, all guarantees, endorsements or other contingent or surety
obligations with respect to obligations of any other Person (except those made
to any Affiliate if the inclusion thereof would cause the underlying obligation
to have been included more than once in this definition), whether or not
reflected on the balance sheet of the Borrower or its Affiliates, including any
obligation to furnish funds, directly or indirectly (whether by virtue of
partnership arrangements, by agreement to keep-well or otherwise), through the
purchase of goods, supplies or services, or by way of stock purchase, capital
contribution, advance or loan, or to enter into a contract for any of the
foregoing, for the purpose of payment of obligations of any other Person; but
excluding from this definition of Guarantees any surety obligations not directly
related to a construction loan (for example, this definition of Guarantees
excludes surety obligations given to governmental authorities to bond completion
of infrastructure work) and checks or other negotiable instruments payable at
sight and endorsed in the process of deposit or collection in the ordinary
course of business.

SECTION 1.46. "Guarantor" means the General Partner.

SECTION 1.47. "Hazardous Materials" means (i) any chemical, compound,
material, mixture or substance that is now or hereafter defined as or included
in the definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous waste", "restricted hazardous waste", or "toxic
substances" or terms of similar import under any Environmental Laws; (ii) any
oil, petroleum or petroleum derived substance, any drilling fluids, produced
waters and other wastes associated with the exploration, development or
production of crude oil, any flammable substances or explosives, any radioactive
materials, any hazardous wastes or substances, any toxic wastes or substances or
any other materials or pollutants which (a) could pose a hazard to human health
or the environment or (b) could cause any of any properties or assets of the
Borrower or its Affiliates to be in violation of any Environmental Laws; (iii)
asbestos in any form, urea formaldehyde foam insulation, electrical equipment
which contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty (50) parts per million; (iv) to the extent
prohibited or required to be mitigated by any Environmental Laws, lead in paint,
plaster or other accessible materials and (v) any other chemical, material or
substance, exposure to, or disposal of, which is now or hereafter prohibited,
limited or regulated by

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<PAGE> 13

any Federal, state or local governmental body, instrumentality or agency.

SECTION 1.48. "Improvements" means all improvements now or later to be
located on the Properties.

SECTION 1.49. "Indebtedness" means, as applied to the Borrower and its
Affiliates, (i) all obligations for borrowed money or other extensions of credit
whether secured or unsecured, absolute or contingent, including, without
limitation, unmatured reimbursement obligations with respect to letters of
credit or Guarantees issued for the account of or on behalf of the Borrower and
its Affiliates and all obligations representing the deferred purchase price of
property (but excluding accruals and accounts payable arising in the ordinary
course of business); (ii) all obligations evidenced by bonds, notes, debentures
or other similar instruments; (iii) all obligations secured by any Encumbrances
on property and units owned or acquired by the Borrower or any of its Affiliates
whether or not the obligations secured thereby shall have been assumed; (iv)
that portion of all obligations arising under capital leases that is required to
be capitalized on the consolidated balance sheet of the Borrower and its
Affiliates; (v) all Guarantees; and (vi) all obligations that are immediately
due and payable out of the proceeds of or production from Properties and assets
now or hereafter owned or acquired by the Borrower or any of its Affiliates (but
excluding accruals and accounts payable arising in the ordinary course of
business). The calculation of the foregoing shall be made so as not to include
any obligation more than once in the definition of Indebtedness.

SECTION 1.50. "Indemnitee" shall have the meaning ascribed to that term
in SECTION 13.17.

SECTION 1.51. "Interest Period" means, with respect to each Loan, the
period commencing on the date of the making or continuation of such Loan and
ending one (1) month thereafter; provided, however, that:

(i) any Interest Period (other than an Interest Period determined
pursuant to clause (iii) below) that would otherwise end on a
day that is not a Business Day shall be extended to the next
succeeding Business Day unless such Business Day falls in the
next calendar month, in which case such Interest Period shall
end on the immediately preceding Business Day;

(ii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (iii) below, end on
the last Business Day of a calendar month; and

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<PAGE> 14

(iii) any Interest Period that would otherwise end after the
Maturity Date shall end on the Maturity Date.

SECTION 1.52. "Interest Rate" means the LIBOR Rate.

SECTION 1.53. "Investment Grade Credit Rating" means a credit rating
for the senior unsecured debt of the Borrower from (a) Standard & Poor's Ratings
Group, a Division of McGraw-Hill, Inc., of "BBB-" or better; (b) Moody's
Investors Service, Inc. of "Baa3" or better; (c) Duff & Phelps Credit Rating Co.
of "BBB-" or better, or (d) Fitch Investors Service, Inc. of "BBB-" or better.

SECTION 1.54. "IRS" shall mean the United States Internal Revenue
Service.

SECTION 1.55. "Land" or "Lands" means the real estate portion of any
Property.

SECTION 1.56. "Law" or "Laws" means all constitutions, treaties,
statutes, laws, ordinances, codes, regulations, rules, orders, decisions, writs,
injunctions, or decrees of the United States of America or any other Tribunal,
now in effect and as hereafter amended, issued, promulgated, or otherwise coming
into effect.

SECTION 1.57. "Legal Requirements" means all Laws, and all recorded or
unrecorded agreements, covenants, restrictions, easements or conditions
(including any requirement of any insurance or surety company or any board of
fire underwriters), as now in effect and as hereafter amended, issued,
promulgated, or otherwise coming into effect.

SECTION 1.58. "Lender" shall have the same meaning as the term "Bank".

SECTION 1.59. "Lenders" shall have the same meaning as the term
"Banks".

SECTION 1.60. "LIBOR Base" means the rate per annum (rounded upwards,
if necessary, to the nearest 1/16 of 1%) shown on the display referred to as the
"LIBOR page" (or any display substituted therefor) of the Reuters U.S. Domestic
Money Service transmitted through the Reuters monitor system as being the
respective rates at which U.S. dollar deposits in the approximate amount of
Outstanding Amount would be offered by the principal London offices of each of
the banks named thereon to major banks in the London interbank Eurodollar market
where the Eurodollar Office is located at the Relevant Local Time for delivery
on the first Business Day of each calendar month for a thirty day period of
time. The LIBOR Base shall be adjusted automatically as of the first business
day of each calendar month.

SECTION 1.61. "LIBOR Increment" shall have a meaning which varies based
on (a) the senior unsecured bond rating of Borrower

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<PAGE> 15

as assigned by Standard and Poor's Ratings Group, a Division of McGraw-Hill,
Inc. (which rating must be accompanied by the comparable senior unsecured bond
rating from one of Moody's Investors Service, Inc., Duff & Phelps Credit Rating
Co. or Fitch Investors Service, Inc. and (b) the year of calculation as follows:

(A) During the First or Second Loan Year:

Borrower's Senior Unsecured Bond Rating LIBOR + Applicable Margin
--------------------------------------- -------------------------
BBB+ LIBOR + 80 basis points
BBB LIBOR + 95 basis points
BBB- LIBOR + 110 basis points
Unrated or Non-Investment Grade LIBOR + 135 basis points

(B) Thereafter:

Borrower's Senior Unsecured Bond Rating LIBOR + Applicable Margin
--------------------------------------- -------------------------
BBB+ LIBOR + 95 basis points
BBB LIBOR + 110 basis points
BBB- LIBOR + 125 basis points
Unrated or Non-Investment Grade LIBOR + 150 basis points

In the event the senior unsecured bond rating of Borrower assigned by Standard
and Poor's Ratings Group, a Division of McGraw-Hill, Inc., differs from the
comparable senior unsecured bond rating of Borrower assigned by one of Moody's
Investors Service, Inc., Duff & Phelps Credit Rating Co. or Fitch Investors
Service, Inc., then in such event, the senior unsecured bond rating of Borrower
assigned by Standard and Poor's shall be used to determine the applicable
interest rate margins over LIBOR.

SECTION 1.62. "LIBOR Rate" means, with respect to each Interest Period,
the rate per annum equal to the sum of:

(A) the LIBOR Base for each calendar month in such Interest
Period; plus

(B) the LIBOR Increment.

SECTION 1.63. "Litigation" means any proceeding, claim, suit, action,
case or investigation by, before or involving any Tribunal.

SECTION 1.64. "Loan" means any Revolving Working Capital Loan or
Project Advance Loan.

SECTION 1.65. "Loans" means, collectively and individually, the
Revolving Loans and the Project Advance Loans.

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<PAGE> 16

SECTION 1.66. "Loan Documents" means, collectively and individually,
this Agreement, the Notes, the Guaranties and the Other Documents.

SECTION 1.67. "Loan Year" means any period of twelve (12) months ending
on an anniversary date of this Agreement.

SECTION 1.68. "Market Capitalization" shall mean the sum of (i)
Consolidated Total Debt plus (ii) the product of (a) the market price, as listed
on the New York Stock Exchange, of the capital stock of the General Partner,
determined either at the date of the calculation of market capitalization or at
the date of the Public Offering, whichever is greater, and (b) both (1) the
number of issued and outstanding shares of capital stock of the General Partner
and (2) the number of limited partnership units of the Borrower owned by each of
the limited partners of the Borrower.

SECTION 1.69. "Material Adverse Effect" means an effect resulting from
any circumstance or event of whatever nature (including any adverse
determination in any Litigation) which does, or could reasonably be expected to,
materially and adversely (i) impair the validity or enforceability of any Loan
Document, (ii) impair the ability of the Borrower or any of its Subsidiaries to
fulfill any material obligation, or (iii) cause a Default.

SECTION 1.70. "Maturity Date" has the meaning ascribed to it in SECTION
2.1.8. hereof.

SECTION 1.71. "Non-Investment Grade" shall mean, with respect to any
applicable credit rating agency, any rating less than an Investment Grade Credit
Rating.

SECTION 1.72. "Notes" means, collectively and individually, the
Wachovia Revolving Working Capital Credit Note, the FUNB Revolving Working
Capital Credit Note, the FUNB Project Advance Note and the Wachovia Project
Advance Note.

SECTION 1.73. "NYSE" has the meaning ascribed to it in SECTION 3.26.
hereof.

SECTION 1.74. "Obligations" means any and all loans, advances,
indebtedness, liabilities, obligations, covenants or duties of the Borrower or
any of its Affiliates to the Bank under this Agreement, the Notes or the Other
Documents.

SECTION 1.75. "Operating Expenses" with respect to one or more income
producing Properties owned by Borrower or its Affiliates means for the
applicable period all cash expenses incurred in connection with or relating to
the operation of such Properties, including maintenance expenses, property
management fees and real estate taxes (but excluding interest, depreciation,
amortization and income taxes).

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<PAGE> 17

SECTION 1.76. "Operating Income" with respect to one or more income
producing Properties owned by Borrower or its Affiliates means for the
applicable period all cash revenues received from such Properties (but excluding
(i) security and other deposits held in reserve or trust and (ii) extraordinary
or non-recurring gains).

SECTION 1.77. "Other Documents" means all other documents, agreements
or instruments now or hereafter executed by the Borrower or any of its the
Affiliates in connection with the Loans as renewed, extended, amended,
supplemented, increased, modified, or replaced.

SECTION 1.78. "Outstanding Amount" means the aggregate outstanding
principal amount, as of the date of determination, of either the (i) Revolving
Working Capital Loans, (ii) Project Advance Loans or (iii) the aggregate of the
Revolving Working Capital Loans and the Project Advance Loans, as applicable.

SECTION 1.79. "PBGC" means the Pension Benefit Guaranty Corporation or
any entity succeeding to all or part of its functions under ERISA.

SECTION 1.80. "Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, limited liability company or other entity of whatever nature, whether
public or private.

SECTION 1.81. "Plan" means, at any time, an employee pension or other
benefit plan that is subject to Title IV of ERISA or subject to the minimum
funding standards under SECTION 412 of the Code and is either (i) maintained by
the Borrower or any member of the Controlled Group for employees of the Borrower
or any member of the Controlled Group or (ii) if such plan is established or
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one (1) employer makes contributions and to
which the Borrower or any member of the Controlled Group is then making or
accruing an obligation to make contributions or has within the preceding five
(5) plan years made contributions.

SECTION 1.82. "Prime Rate" has the meaning ascribed to it in SECTION
2.4.2. hereof.

SECTION 1.83. "Project Advance Commitment Amount" means an amount equal
to the lower of:

(i) One Hundred Twenty-Five Million Dollars ($125,000,000); or

(ii) any lesser amount, including zero, resulting from a
reduction of the Project Advance Commitment Amount in accordance with
SECTION 2.5 or a termination of the Project Advance Commitment Amount
in accordance with SECTION 2A.1.8.

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<PAGE> 18

SECTION 1.84. "Project Advance Facility" shall have the meaning
ascribed to it in SECTION 2A.1. hereof.

SECTION 1.85. "Project Advance Facility Access Fee" shall have the
meaning ascribed to it in SECTION 2A.1.4.

SECTION 1.86. "Project Advance Loan" or "Project Advance Loans" shall
have the meaning ascribed to it in SECTION 2A.1.1 hereof.

SECTION 1.87. "Project Advance Notes" shall mean, collectively and
individually, the FUNB Project Advance Note and the Wachovia Project Advance
Note.

SECTION 1.88. "Project Budget" shall mean a budget prepared by Borrower
showing in reasonable detail all of Borrower's anticipated costs and expenses
relating to a project for which Borrower seeks Advances under the Project
Advance Facility and stating the total amount of Advances the Borrower desires
to obtain under the Project Advance Facility for such project.

SECTION 1.89. "Property" or "Properties" shall mean, as the content may
require, the real estate of the Borrower and its Affiliates, now owned or
hereafter acquired, together with all buildings and improvements thereon.

SECTION 1.90. "Proportionate Share" shall mean, with respect to any
Bank, the share shown in EXHIBIT G for that Bank.

SECTION 1.91. "Qualification" means, with respect to any report of
independent public accountants covering any Financial Statements of the Borrower
and its Affiliates a qualification to such report (such as a "subject to" or
"except for" statement therein) (i) resulting from a limitation on the scope of
examination of the Financial Statements or the underlying data so as to not
constitute an audit thereof; (ii) as to the capability of the Person whose
Financial Statements are certified to continue operations as a going concern; or
(iii) which could be eliminated by changes in the Financial Statements or notes
thereto covered by such report (such as, by the creation of or increase in a
reserve or a decrease in the carrying value of assets) and which if so
eliminated by the making of any such change and after giving effect thereto
would constitute of Event of Default; provided, however, that none of the
following shall constitute a Qualification: (a) a consistency exception relating
to a change in accounting principles with which the independent public
accountants for the Person whose Financial Statements are being examined have
concurred, (b) a qualification relating to the outcome or disposition of any
uncertainty, including but not limited to threatened litigation, pending
litigation being contested in good faith, pending or threatened claims or other
contingencies, the impact of which litigation, claims, contingencies or
uncertainties cannot be determined with sufficient certainty to permit
certification in such Financial Statements, or (c) a "going concern"
exception/qualification that

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<PAGE> 19

relates solely to and is based solely on the approaching maturity of an existing
debt.

SECTION 1.92. "REIT" means a "real estate investment trust," as such
term is defined in SECTION 856 of the Code.

SECTION 1.93. "Release" means any release, emission, disposal,
leaching, or migration into the environment of any Hazardous Materials
(including, without limitation, the abandonment or disposal of any barrels,
containers, or other closed receptacles containing any Hazardous Materials), or
into or out of any property owned, occupied or used by the Borrower or any of
its Affiliates.

SECTION 1.94. "Relevant Local Time" means 10:00 a.m. local time in the
place where the Eurodollar Office is located.

SECTION 1.95. "Reportable Event" means any of the events described in
SECTION 4043(b) of ERISA.

SECTION 1.96. "Reserve Demand" shall have the meaning ascribed to it in
SECTION 2.4.4(b)(i).

SECTION 1.97. "Revolving Working Capital Credit Commitment Amount"
means an amount equal to the lower of:

(i) Twenty-Five Million Dollars ($25,000,000); or

(ii) any lesser amount, including zero, resulting from a
reduction of the Revolving Working Capital Commitment Amount in
accordance with SECTION 2.5 or a termination of the Revolving Working
Capital Commitment Amount in accordance with SECTION 2.1.8.

SECTION 1.98. "Revolving Working Capital Facility" has the meaning
ascribed to it in SECTION 2.1. hereof.

SECTION 1.99. "Revolving Working Capital Credit Notes" shall mean,
collectively and individually, the FUNB Revolving Working Capital Credit Note
and the Wachovia Revolving Working Capital Credit Note.

SECTION 1.100. "Revolving Working Capital Loan" or "Revolving Working
Capital Loans" means any loan or advance which the Borrower requests pursuant to
SECTION 2.1.1.

SECTION 1.101. "SEC" means the United States Securities and Exchange
Commission or any successor agency or body.

SECTION 1.102. "Secured Debt" means, subject to SECTION 7.11, any
Indebtedness of the Borrower or any Affiliate of the Borrower which is secured,
in whole or in part, by an Encumbrance upon any asset of the Borrower or the
Affiliate, as applicable.

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<PAGE> 20

SECTION 1.103. "Secured Recourse Debt" means, subject to SECTION 7.11,
any Secured Debt of the Borrower or any Affiliate of Borrower and pursuant to
which the applicable creditor has recourse for any payment of principal and/or
interest against the Borrower or any of its Affiliates or any asset thereof
other than to foreclose upon the assets securing the Indebtedness in question,
but not including Indebtedness secured by the Bond-Financed Communities.

SECTION 1.104. "Solvent" means, when used with respect to any Person,
that as of the date as to which the Person's solvency is to be determined:

(a) it has sufficient capital to conduct its business; and

(b) it is able to meet its debts as they mature.

SECTION 1.105. "Summit Entities" has the meaning ascribed to it in
SECTION 3.9. hereof.

SECTION 1.106. "Tax" and "Taxes" have the meaning ascribed to them in
SECTION 13.5. hereof.

SECTION 1.107. "Total Assets" means, as of any given time, the sum of
(i) the aggregate book value of the Borrower's completed income producing real
estate assets at that time, exclusive of any accumulated depreciation or
amortization of any real property or improvements, plus (ii) seventy-five
percent (75%) of the actual cost incurred by the Borrower for properties under
development in accordance with this Agreement, for land acquired in compliance
with this Agreement, and for other land owned by Borrower, plus (iii) all other
tangible assets of the Borrower and the Guarantor.

SECTION 1.108. "Tribunal" means any state, commonwealth, country,
municipal, federal foreign, territorial or other governmental body, court,
administrative department, commission, board, bureau, district, authority,
agency, or instrumentality, or any arbitration authority.

SECTION 1.109. "Unconsolidated Affiliate" has the meaning ascribed to
it in SECTION 7.11. hereof.

SECTION 1.110. "Unconsolidated Affiliate Indebtedness" has the meaning
ascribed to it in SECTION 7.11. hereof.

SECTION 1.111. "Unencumbered Properties" means, at any given time, all
Properties not subject to any Encumbrance at the applicable time.

SECTION 1.112. "Unsecured Consolidated Total Debt" means all
Consolidated Total Debt which is not (a) Indebtedness secured by a Bond Financed
Community; or (b) Secured Recourse Debt.

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<PAGE> 21

SECTION 1.113. "Unutilized Project Advance Fee" shall have the meaning
ascribed to it in SECTION 2A.3.

SECTION 1.114. "Unutilized Revolving Working Capital Facility Fee"
shall have the meaning ascribed to that term in SECTION 2.3.

SECTION 1.115. "Unutilized Revolving Working Capital Facility Fee
Payment Date" shall have the meaning ascribed to that term in SECTION 2.3.

SECTION 1.116. "Wachovia" shall mean Wachovia Bank of North Carolina,
N.A., as a Bank.

SECTION 1.117. "Wachovia Guaranty" shall mean the guaranty by the
Guarantor of the Borrower's obligations to Wachovia under this Agreement, the
Notes and/or the other Loan Documents, as such guaranty may be amended,
modified, extended, renewed, substituted or replaced. A form of the Wachovia
Guaranty is attached as EXHIBIT D-2.

SECTION 1.118. "Wachovia Project Advance Note" shall have the meaning
ascribed to that term in SECTION 2A.1.5 hereof.

SECTION 1.119. "Wachovia Revolving Working Capital Credit Note" shall
have the meaning ascribed to that term in SECTION 2.1.5 hereof.

SECTION 2. REVOLVING WORKING CAPITAL CREDIT FACILITY

SECTION 2.1. The Revolving Working Capital Credit Facility. A revolving
working capital credit facility (the "Revolving Working Capital Credit
Facility") is hereby established as follows:

SECTION 2.1.1. Revolving Working Capital Loans. Upon the execution of
this Agreement, each Bank agrees to extend to the Borrower a line of credit, so
that as long as no Event of Default has occurred and is continuing, the Bank
agrees to lend to the Borrower, and the Borrower may borrow, repay and reborrow,
on a revolving basis, in one (1) or more revolving working capital loan (each,
individually and collectively with all other Revolving Working Capital Loans, a
"Revolving Working Capital Loan") from time to time during the period commencing
after the Closing Date and continuing through the close of business on the
Maturity Date, amounts which are at least ONE HUNDRED THOUSAND DOLLARS
($100,000.00) and an integral multiple of TWENTY-FIVE THOUSAND DOLLARS
($25,000.00) and which do not exceed (after giving effect to all amounts
requested) in the aggregate at any one time outstanding the product obtained by
multiplying (a) that Bank's Proportionate Share by (b) the Revolving Working
Capital Commitment Amount in effect from time to time. Notwithstanding any
provision of this Agreement to the contrary, all Revolving Working Capital Loans
made by any Bank to the Borrower shall constitute one obligation of the Borrower
to that Bank.

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<PAGE> 22

SECTION 2.1.2. Use of Proceeds. The proceeds from the Revolving Working
Capital Loans shall be used by the Borrower solely for (a) the Borrower's
working capital needs, (b) the payment of distributions to the partners of
Borrower and the payment of Dividends to the shareholders of the General Partner
to the extent permitted under SECTION 7.2, and (c) the payment of third party
out-of-pocket costs and expenses of the Borrower in connection with the
negotiation and execution of this Agreement.

SECTION 2.1.3. The Borrower's Account. Each Advance under this SECTION
2 shall be recorded in an account on the books of the applicable Bank bearing
the Borrower's name (each, a "Borrower's Account"). There shall also be recorded
in the Borrower's Accounts all prepayments and payments made by the Borrower in
respect of the outstanding balance of the Revolving Working Capital Loans made
by that Bank and other appropriate debits and credits as herein provided. Each
Bank shall render and send to the Agent, which shall then render and send to the
Borrower, on a monthly basis a statement of the Borrower's Account showing the
respective outstanding principal balance of the Revolving Working Capital
Loan(s), together with interest and other appropriate debits and credits as of
the date of the statement. The statement of the Borrower's Accounts shall be
considered correct in all respects and accepted by and be conclusively binding
upon the Borrower unless the Borrower makes specific written objection thereto
within thirty (30) days after the date the statement of the relevant Borrower's
Account is sent. Notwithstanding the foregoing provisions of this Section, no
failure on the part of any Bank or the Agent to comply with the provisions of
this Section shall relieve the Borrower of its obligation to pay all sums due
under this Agreement.

SECTION 2.1.4. Advance Request. At least one (1) Business Day before
the requested date of each Advance, the Borrower shall deliver to the Agent an
Advance Request in the form of EXHIBIT A-1 ("Advance Request"), duly executed on
the Borrower's behalf, specifying the amount of the Advance, and all supporting
documentation required by this Agreement for the Agent to confirm the request.
The Agent shall promptly deliver each Advance Request to each Bank. The Banks
shall not be required to make Advances more frequently than once per week and
shall, only upon satisfaction of all conditions of this Agreement (including,
but not limited to, the provisions of SECTION 5.), make the requested Advance to
the Borrower on a Business Day within one (1) Business Day after submission of
the Advance Request from the Borrower to the Agent.

No Advance shall be made unless at the time thereof no Default shall exist.

SECTION 2.1.5. Revolving Working Capital Credit Notes. On the Closing
Date, the Borrower shall issue to FUNB a promissory note executed in
substantially the form attached hereto as EXHIBIT C-1 (the "FUNB Revolving
Working Capital Credit Note"), with all blanks therein appropriately completed.
The FUNB

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<PAGE> 23

Revolving Working Capital Credit Note shall evidence the obligation of the
Borrower to repay to FUNB all Revolving Working Capital Loans made by FUNB to
the Borrower or any Affiliate. On the Closing Date, the Borrower shall issue to
Wachovia a promissory note executed in substantially the form attached hereto as
EXHIBIT C-2 (the "Wachovia Revolving Working Capital Credit Note"), with all
blanks therein appropriately completed. The Wachovia Revolving Working Capital
Credit Note shall evidence the obligation of the Borrower to repay to Wachovia
all Revolving Working Capital Loans made by Wachovia to the Borrower or any
Affiliate.

SECTION 2.1.6. Payment of Principal. The aggregate unpaid principal
amount of all Revolving Working Capital Loans, together with accrued and unpaid
interest thereon, as evidenced by the Revolving Working Capital Credit Notes,
shall, unless sooner accelerated following the occurrence of an Event of
Default, be repaid by the Borrower on the Maturity Date. Any Excess Debt shall
be immediately due and payable.

SECTION 2.1.7. Interest Rate and Payment of Interest. Each Revolving
Working Capital Loan shall bear interest on the outstanding principal amount
thereof, for each Interest Period applicable thereto, at a rate per annum equal
to the LIBOR Rate. The Agent shall endeavor to send to the Borrower, no later
than three (3) Business Days prior to the first day of each calendar month
hereafter, a statement for all interest due and payable under the Revolving
Working Capital Facility for the applicable Interest Period; provided, however,
that no failure on the part of the Agent to timely deliver such a billing
statement shall relieve the Borrower of its obligation to pay all sums due under
this Agreement. Interest shall be payable in arrears on the first day of the
first calendar month following the applicable Interest Period, on the first day
of each successive month thereafter, for so long as any amount of principal
remains outstanding, and when such Revolving Working Capital Loan is due
(whether at maturity, by reason of acceleration or otherwise); provided, if the
first Revolving Working Capital Loan requested by the Borrower under this
Agreement is advanced to the Borrower after the fifteenth (15th) day of the
month, the Borrower's first payment of interest shall not be due until the first
day of the second calendar month following such first Revolving Working Capital
Loan.

SECTION 2.1.8. Termination; Extension; Renewal.

(a) The Revolving Working Capital Loans and the Banks' obligation to
lend thereunder shall terminate on June 30, 1997 (as the same may be extended or
accelerated, the "Maturity Date"), at which time all of the sums due and owing
under the Loans shall be immediately due and payable; provided, however, that if
the Borrower has obtained by June 30, 1997 an Investment Grade Credit Rating,
and no Event of Default shall have occurred and be continuing, then the Borrower
may unilaterally extend the Maturity Date to September 30, 1999, by the delivery
to the Bank

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<PAGE> 24

not later than June 30, 1997, of a written notice of election to extend the
Maturity Date (the "Extension Notice"); and it is further provided, however,
that notwithstanding any provision of this Agreement to the contrary, that if
the Borrower obtains an Investment Grade Credit Rating and (i) loses or
otherwise fails to maintain this Investment Grade Credit Rating, and (ii) fails
to reinstate this Investment Grade Credit Rating within one hundred eighty (180)
days after its loss, the Maturity Date shall be one hundred eighty (180) days
after the date upon which the Borrower initially lost, or otherwise failed to
maintain, its Investment Grade Credit Rating.

(b) Upon the written request of Borrower, which written request must be
delivered prior to the first anniversary of the date hereof, the Banks may
consider renewing the Aggregate Credit Facility for one (1) additional year,
which consideration shall be made in the sole and absolute discretion of the
Banks and shall be based upon information provided to the Banks and the Agent by
the Borrower in connection with the request. If the Banks, in their sole and
absolute discretion, extend the Aggregate Credit Facility for an additional
year, the Borrower may request an additional one (1) year extension so long as
the request is made by the Borrower in writing not later than the second
anniversary date hereof. All decisions to renew or extend the term of the
Aggregate Credit Facility shall be made in the sole and absolute discretion of
the Banks. Should the Banks decide to renew or extend the Aggregate Credit
Facility, the Borrower shall pay to the Agent for the account of the Banks a
renewal/extension fee equal to five (5) basis points of the maximum possible
balance of the Aggregate Credit Facility at the time of each renewal or
extension of the Aggregate Credit Facility by the Banks.

SECTION 2.2. Interest.

SECTION 2.2.1. Calculation of Interest. Interest hereunder shall accrue
on the basis of a three hundred sixty (360) day year, and shall be calculated
according to the actual number of days elapsed during each accrual period.

SECTION 2.2.2. Usury. If the rate of interest payable by the Borrower
under this Agreement, the Notes or the other Loan Documents shall be or become
usurious or otherwise unlawful under laws applicable thereto, the Interest Rate
shall be reduced to the maximum lawful rate and any amount paid by the Borrower
in excess of the maximum lawful rate shall be considered a payment in reduction
of principal or, at the sole election of the Bank in question, shall be returned
to the Borrower.

SECTION 2.3. Unutilized Revolving Working Capital Facility Fee. In
consideration of the Banks' commitment to extend the Revolving Working Capital
Loans, the Borrower hereby agrees to pay an unutilized revolving working capital
facility fee (the "Unutilized Revolving Working Capital Facility Fee") on each
Unutilized Revolving Working Capital Facility Fee Payment Date in

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<PAGE> 25

an amount equal to 0.05% (however in no event will the Unutilized Revolving
Working Capital Facility Fee exceed 0.2% per annum) of the daily average over
the immediately preceding calendar quarter of the difference of (a) the
Revolving Working Capital Credit Commitment Amount in effect on each day in the
applicable calendar quarter minus (b) the outstanding balance of the Revolving
Working Capital Loans as of 5:00 p.m. on each day in the applicable calendar
quarter. "Unutilized Revolving Working Capital Facility Fee Payment Date" shall
mean the fifteenth (15th) day of each successive January, April, July and
October hereafter and, if the Banks' commitment to extend Revolving Working
Capital Loans upon satisfaction of all conditions hereunder shall have expired
or terminated prior to a scheduled Unutilized Revolving Working Capital Facility
Fee Payment Date, the fifteenth (15th) day after the Bank's commitment shall
have so expired or terminated. If the Bank's commitment shall have so expired or
terminated, the Unutilized Revolving Working Capital Facility Fee shall be
pro-rated to the date of such expiration or termination. The Agent shall
endeavor to send to the Borrower, no later than three (3) Business Days prior to
each Unutilized Revolving Working Capital Facility Fee Payment Date, a statement
of the applicable Unutilized Revolving Working Capital Facility Fee due and
payable; provided, however, that no failure on the part of the Agent to timely
deliver such a billing statement shall relieve the Borrower of its obligation to
pay the same upon receipt of such a billing statement.

SECTION 2.4. General Terms Applicable to the Revolving Working Capital
Credit Facility.

SECTION 2.4.1. Late Payment. Any payment of interest with respect to
the Revolving Working Capital Loans which is not made within fifteen (15) days
of the date specified for payment shall bear a late fee equal to four percent
(4%) of the amount of the payment then due. The imposition or collection of a
late fee shall not affect the right of the Agent or any Bank to exercise any of
its rights and remedies if an Event of Default has occurred.

SECTION 2.4.2. Overdue Payments. Overdue principal (whether at
maturity, by reason of acceleration or otherwise) and, to the extent permitted
by applicable law, overdue interest and fees or any other amounts payable
hereunder or under the Revolving Working Capital Credit Notes, shall bear
interest from and including the due date thereof until paid, compounded monthly
and payable on demand, at a rate per annum (the "Default Rate") equal to five
percentage points (5%) above the rate of interest then announced from time to
time by FUNB as its prime rate of interest (the "Prime Rate"), which interest
shall be compounded monthly and payable on demand.

SECTION 2.4.3. Manner and Time of Payments by the Borrower. All
payments made by the Borrower hereunder on account of principal, interest, and
fees and expenses shall be made in United States funds on their respective due
dates to the Agent in

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<PAGE> 26

immediately available funds in Charlotte, North Carolina not later than 12:00
p.m. (Charlotte time) at the head office of the Agent or at such other address
as the Agent may from time to time specify in writing, and the Agent shall then
immediately remit such funds to the Banks entitled thereto. Each such payment
will be applied, first, on account of fees and expenses which may be due and
payable hereunder, second, on account of the interest then due and owing, and
third, on account of the principal then due and owing, if any.

SECTION 2.4.4. Increased Costs, Capital Adequacy and Prepayment Costs.

(a) If any change in any law, regulation, order, decree, treaty,
directive or bulletin or in the interpretation or application thereof after the
date hereof by any court or administrative or governmental authority charged
with the administration thereof, or if any compliance by the Agent or any Bank
with any request or directive (whether or not having the force of law) from any
central bank or monetary authority or other governmental authority, agency or
instrumentality enacted or adopted after the date hereof, shall in any such
case:

(i) impose, modify or deem applicable any reserve, special deposit
or similar requirement against any credit extended by the
Agent or any Bank or any Affiliate of the Agent or any Bank
under this Agreement; or

(ii) impose on the Agent or any Bank or any parent bank holding
company any other condition regarding this Agreement and the
result of any event referred to in the preceding clause (i) or
in this clause (ii) above shall be to increase the cost to the
Agent or any Bank or such holding company of issuing, funding
or maintaining the Revolving Working Capital Loans (which
increase in cost shall be determined by the reasonable
allocation by the Agent or any Bank of the aggregate of such
cost increases resulting from such event),

then, upon written demand by Agent or any Bank, the Borrower shall pay to the
Agent and the applicable Bank from time to time as specified by the Agent or the
applicable Bank, additional amounts which shall be sufficient to compensate the
Agent and the applicable Bank for such increased cost from the date of such
change. A certificate as to such increased cost incurred by the Agent or any
Bank as a result of any event mentioned in clause (i) or (ii) above prepared in
reasonable detail (which shall include the method employed in determining the
allocation of such costs to the Borrower) and otherwise in accordance with this
subsection (a), submitted by the Agent or any Bank, as applicable (and signed by
an authorized officer of the Agent or the

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<PAGE> 27

applicable Bank) to the Borrower, shall be conclusive evidence, absent manifest
error, as to the amount thereof.

(b) (i) In addition to the foregoing, if any change in any domestic or
foreign law, regulation, order, decree, treaty, directive or bulletin or in the
interpretation or application thereof after the date hereof by any court or
administrative or governmental authority charged with the administration
thereof, or if the compliance by the Agent or any Bank with any request or
directive (whether or not having the force of law) from any central bank or
monetary authority or other governmental authority, agency or instrumentality
enacted or adopted after the date hereof, shall in any such case:

(A) subject the Agent or any Bank to any new or additional tax
or change in any tax (exclusive of rate changes) with respect to the
Revolving Working Capital Credit Notes or the Revolving Working Capital
Loans, or change the basis of taxation of payments to the Agent or any
Bank of principal, unutilized line fee, interest, premium, or any other
amount payable under the Revolving Working Capital Credit Notes; or

(B) impose, modify or hold applicable or change any reserve
(including, without limitation, basic, supplemental, marginal and
emergency reserves) on an industry-wide special deposit, capital
adequacy, compulsory loan or similar requirement against assets held
by, or deposits or other liabilities in or for the account of, advances
or other credit extended by, or any other acquisition of funds for
loans by (including, without limitation, all Eurocurrency funding by
all "Eurocurrency liabilities" as defined in Regulation D of the Board
of Governors of the Federal Reserve System, as amended) any office of
the Agent or any Bank; or

and the result of any of the foregoing is to increase the cost to the Agent or
any Bank of making, renewing or maintaining advances or extensions of credit at
the LIBOR Rate or to reduce any amount receivable thereon at the LIBOR Rate
then, in any such case, the Borrower shall promptly pay the Agent or the
applicable Bank, upon written demand (the "Reserve Demand"), such amounts as
will compensate the Agent or the applicable Bank for such additional cost or
reduced amount receivable.

(ii) If the Agent or any Bank becomes entitled to claim any additional
amounts payable pursuant to this subsection (b), it shall promptly notify the
Borrower of such entitlement. A certificate as to any additional amounts payable
pursuant to the foregoing submitted by the Agent or any Bank, as applicable (and
signed by an authorized officer of the Agent or the applicable Bank), to the
Borrower shall, absent manifest error, be conclusive.

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<PAGE> 28

(c) Borrower shall pay to Banks, immediately upon request, such amounts
as shall, in the conclusive judgment of Banks, compensate Banks for any loss,
cost or expense (including losses in anticipated interest income) incurred by
them as a result of any payment or prepayment (under any circumstances
whatsoever, whether voluntary or involuntary, but excluding principal payments
made at maturity) of any portion of the Revolving Working Capital Loans bearing
interest at the LIBOR Rate on a date other than the last day of the applicable
Interest Period.

(d) Except as otherwise specifically provided in this section, amounts
payable by the Borrower pursuant to this section shall be payable within ten
(10) Business Days of receipt by the Borrower of a certificate described in this
Section.

SECTION 2.4.5. Prepayments of the Revolving Working Capital Facility.
Revolving Working Capital Loans may be prepaid at any time, in whole or in part,
without premium or penalty except as provided in SECTION 2.4.4(c) hereinabove.
Unless applicable law provides otherwise, all payments and prepayments received
by each Bank hereunder, at the option of that Bank, shall be applied in the
following order:

(a) to the then outstanding charges and expenses payable under
this Agreement, plus a premium equal to the costs incurred by the Banks
as provided in SECTION 2.4.4.(c) hereinabove (which charges and
expenses shall be disclosed to the Borrower if requested, such request
not impacting that Bank's right to be reimbursed therefor);

(b) to the then outstanding late charges imposed against the
Borrower in connection with the Revolving Working Capital Loans;

(d) to the outstanding principal amount of the Revolving
Working Capital Loans.

Any and all prepayments shall not affect the obligation, if any, to pay the
regular interest payments required hereunder and to pay the outstanding
principal balance when due, until all Obligations have been paid in full.

SECTION 2.5. Reduction in Aggregate Credit Facility Amount. The
Borrower may upon five (5) prior Business Days' notice to Agent and each Bank
reduce the aggregate amount of the Aggregate Credit Facility in principal
amounts of Five Million Dollars ($5,000,000). All such reductions shall be
irrevocable, shall be in writing, and shall specify whether the reduction is
made in the Project Advance Facility or the Revolving Working Capital Credit
Facility. No reduction in the Aggregate Credit Facility shall entitle the
Borrower to any refund of any commitment fee, Project Advance Facility Access
Fee or Unutilized

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<PAGE> 29

Revolving Working Capital Facility Fee theretofore paid or shall relieve the
Borrower from any liability for any such fee theretofore accrued or due but not
yet paid.

SECTION 2A. PROJECT ADVANCE FACILITY

SECTION 2A.1. The Project Advance Facility. A project advance facility
(the "Project Advance Facility") is hereby established as follows:

SECTION 2A.1.1. Project Advance Loans. Upon the execution of this
Agreement, each Bank agrees to extend to the Borrower project advance loans, so
that as long as no Event of Default has occurred and is continuing, each Bank
agrees to lend to the Borrower, and the Borrower may borrow, repay and, subject
to the limitations of SECTION 5.8, reborrow, on a revolving basis, one (1) or
more project advance loans (each, individually and collectively with all other
Project Advance Loans, a "Project Advance Loan") from time to time during the
period commencing after the Closing Date and continuing through the close of
business on the Maturity Date, amounts which are at least ONE HUNDRED THOUSAND
DOLLARS ($100,000.00) and integral multiples of TWENTY-FIVE THOUSAND DOLLARS
($25,000.00) and which do not exceed (after giving effect to all amounts
requested) in the aggregate at any one time outstanding the product obtained by
multiplying (a) the Bank's Proportionate Share by (b) the Project Advance
Commitment Amount in effect from time to time. Notwithstanding any provision of
this Agreement to the contrary, all Project Advance Loans made by any Bank to
the Borrower shall constitute one obligation of the Borrower to that Bank.

SECTION 2A.1.2. Use of Proceeds. The proceeds from the Project Advance
Loans shall be used by the Borrower solely for the construction of new apartment
projects, the acquisition of additional land for future development associated
with such new projects (e.g., Phase II land) and the acquisition of individual
existing apartment projects, but shall not be used to acquire, directly or
indirectly, (a) another corporation, partnership, limited liability company or
other business entity (other than entities whose sole asset is a project, the
direct acquisition of which would not be prohibited under this Agreement) or (b)
more than one (1) apartment project from any Person during any twelve (12)
consecutive month period.

SECTION 2A.1.3. The Borrower's Account. Each Project Advance Loan shall
be recorded in the Borrower's Account. There shall also be recorded in the
Borrower's Account all prepayments and payments made by the Borrower in respect
of the Project Advance Loan and other appropriate debits and credits as herein
provided. Each Bank shall render and send to the Agent, which shall then render
and send to the Borrower on a monthly basis a statement of the applicable
Borrower's Account showing the respective outstanding principal balance of the
Project Advance Loan(s), together with interest and other appropriate debits and
credits as of the date of the statement. The statement of the

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<PAGE> 30

Borrower's Account shall be considered correct in all respects and accepted by
and be conclusively binding upon the Borrower unless the Borrower makes specific
written objection thereto within thirty (30) days after the date the statement
of the Borrower's Account is sent. Notwithstanding the foregoing provisions of
this Section, no failure on the part of any Bank or the Agent to comply with the
provisions of this Section shall relieve the Borrower of its obligation to pay
all sums due under this Agreement.

SECTION 2A.1.4. Advance Request; Project Advance Facility Access Fee.
At least three (3) Business Days before the requested date of each Advance, the
Borrower shall deliver to the Agent an Advance Request in the form of EXHIBIT
A-2 (the "Advance Request"), duly executed on the Borrower's behalf, specifying
the amount of the Advance, and all supporting documentation required by this
Agreement (including without limitation SECTION 5.8) and otherwise reasonably
necessary for the Agent and the Banks to confirm the request. The Banks shall
not be required to make Advances more frequently than once per calendar month
and shall, only upon satisfaction of all conditions of this Agreement
(including, but not limited to, the provisions of SECTION 5), make the requested
Advance to the Borrower on a Business Day within three (3) Business Days after
submission of the Advance Request.

Borrower shall pay a project advance facility access fee (the "Project Advance
Facility Access Fee") in an amount equal to the greater of:

(a) $125,000 per Loan Year; or

(b) twenty (20) basis points for the total amount of funds
requested for each project as submitted by Borrower in a Project Budget
submitted in accordance with SECTION 5.8 hereinafter. Each Project
Advance Facility Access Fee shall be due and payable with submission of
the Project Budget; provided, however, that all Project Advance
Facility Access Fees paid in a given Loan Year shall be credited
towards the $125,000 annual minimum of aggregate Project Advance
Facility Access Fees paid with respect to that Loan Year. Any annual
deficit in the required amount of Project Advance Facility Access Fees
shall be paid on or before the end of each Loan Year hereafter. Project
Advance Facility Access Fees paid in any given Loan Year in excess of
the minimum payable under subsection (a) above shall be credited
towards the minimum amount payable in subsequent Loan Years, but the
Borrower shall not be entitled to any refund or rebate of the same upon
termination or maturity of the Project Advance Facility.

No Advance shall be made unless at the time thereof no Default shall exist.

SECTION 2A.1.5. Project Advance Notes. On the Closing Date, the
Borrower shall issue to each Bank a promissory note

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<PAGE> 31

executed in substantially the form attached hereto as EXHIBIT C-3 (the "FUNB
Project Advance Note") and EXHIBIT C-4 (the "Wachovia Project Advance Note" and,
collectively and individually with the FUNB Project Advance Note, the "Project
Advance Notes"), with all blanks therein, if any, appropriately completed. The
Project Advance Notes shall evidence the obligation of the Borrower to repay to
the applicable Bank all Project Advance Loans made by that Bank to the Borrower
or any Affiliate.

SECTION 2A.1.6. Payment of Principal. The aggregate unpaid principal
amount of all Project Advance Loans, together with accrued and unpaid interest
thereon, as evidenced by the Project Advance Notes, shall, unless sooner
accelerated by the Bank following the occurrence of an Event of Default, be
repaid by the Borrower on the Maturity Date. Any Excess Debt shall be
immediately due and payable.

SECTION 2A.1.7. Interest Rate and Payment of Interest.

Each Project Advance Loan shall bear interest on the outstanding
principal amount thereof, for each Interest Period applicable thereto, at a rate
per annum equal to the LIBOR Rate. The Agent shall endeavor to send to the
Borrower, no later than three (3) Business Days prior to the first day of each
calendar month hereafter, a statement for all interest due and payable under the
Project Advance Facility for the applicable Interest Period; provided, however,
that no failure on the part of the Agent to timely deliver such a billing
statement shall relieve the Borrower of its obligation to pay all sums due under
this Agreement. Such interest shall be payable in arrears on the first day of
the first calendar month following the applicable Interest Period, on the first
day of each successive month thereafter, for so long as any amount of principal
remains outstanding, and when such Project Advance Loan is due (whether at
maturity, by reason of acceleration or otherwise); provided, if the first
Project Advance Loan requested by the Borrower under this Agreement is advanced
to the Borrower after the fifteenth (15th) day of the month, the Borrower's
first payment of interest shall not be due until the first day of the second
calendar month following such first Project Advance Loan.

SECTION 2A.1.8. Termination. Subject to the provisions of SECTION
2.1.8., the Project Advance Facility and the Bank's obligation to lend
thereunder shall terminate on the Maturity Date, at which time all of the sums
due and owing under the Project Advance Facility shall be immediately due and
payable.

SECTION 2A.2. Interest.

SECTION 2A.2.1. Calculation of Interest. Interest hereunder shall
accrue on the basis of a three hundred sixty (360) day year, and shall be
calculated according to the actual number of days elapsed during each accrual
period.

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SECTION 2A.2.2. Usury. If the rate of interest payable by the Borrower
under this Agreement, the Project Advance Notes or the other Loan Documents
shall be or become usurious or otherwise unlawful under laws applicable thereto,
the interest rate shall be reduced to the maximum lawful rate and any amount
paid by the Borrower in excess of the maximum lawful rate shall be considered a
payment in reduction of principal or, at the sole election of the applicable
Bank, shall be returned to the Borrower.

SECTION 2A.3. General Terms Applicable to the Project Advance Facility.

SECTION 2A.3.1. Late Payment. Any payment of interest with respect to
the Project Advance Loans which is not made within fifteen (15) days of the date
specified for payment shall bear a late fee equal to four percent (4%) of the
amount of the payment then due. The imposition or collection of a late fee shall
not affect the right of the Agent or any Bank to exercise any of its rights and
remedies if an Event of Default has occurred.

SECTION 2A.3.2. Overdue Payments. Overdue principal (whether at
maturity, by reason of acceleration or otherwise) and, to the extent permitted
by applicable law, overdue interest and fees or any other amounts payable
hereunder or under any of the Project Advance Notes, shall bear interest from
and including the due date thereof until paid, compounded monthly and payable on
demand, at the Default Rate, which interest shall be compounded monthly and
payable on demand.

SECTION 2A.3.3. Manner and Time of Payments by the Borrower. All
payments made by the Borrower hereunder on account of principal, interest, and
fees and expenses shall be made in United States funds on their respective due
dates to the Agent in immediately available funds in Charlotte, North Carolina
not later than 12:00 p.m. (Charlotte time) at the head office of the Agent or at
such other address as the Agent may from time to time specify in writing, and
the Agent shall then immediately remit such funds to the Banks entitled thereto.
Each such payment will be applied, first, on account of fees and expenses which
may be due and payable hereunder, second, on account of the interest then due
and owing, and third, on account of the principal then due and owing, if any.

SECTION 2A.3.4. Increased Costs, Capital Adequacy and Prepayment Costs.

(a) If any change in any law, regulation, order, decree, treaty,
directive or bulletin or in the interpretation or application thereof after the
date hereof by any court or administrative or governmental authority charged
with the administration thereof, or if the compliance by the Agent or any Bank
with any request or directive (whether or not having the force of law) from any
central bank or monetary authority or

26
<PAGE> 33

other governmental authority, agency or instrumentality enacted or adopted after
the date hereof, shall in any such case:

(i) impose, modify or deem applicable any reserve,
special deposit or similar requirement against any
credit extended by the Agent or any Bank or any
Affiliate of the same under this Agreement; or

(ii) impose on the Agent or any Bank or its parent bank
holding company any other condition regarding this
Agreement and the result of any event referred to in
the preceding clause (i) or in this clause (ii) above
shall be to increase the cost to the Agent or any
Bank or such holding company of issuing, funding or
maintaining the Project Advance Loans (which increase
in cost shall be determined by the reasonable
allocation by the Agent or any Bank of the aggregate
of such cost increases resulting from such event),

then, upon written demand by the Agent or any Bank, the Borrower shall pay to
the Agent and the applicable Bank from time to time as specified by the Agent or
the applicable Bank, additional amounts which shall be sufficient to compensate
the Agent and the applicable Bank for such increased cost from the date of such
change. A certificate as to such increased cost incurred by the Agent or any
Bank as a result of any event mentioned in clause (i) or (ii) above prepared in
reasonable detail (which shall include the method employed in determining the
allocation of such costs to the Borrower) and otherwise in accordance with this
subsection (a), submitted by the Agent or any Bank, as applicable (and signed by
an authorized officer of the Agent or any applicable Bank) to the Borrower,
shall be conclusive evidence, absent manifest error, as to the amount thereof.

(A) subject the Agent or any Bank to any new or additional tax
or change in any tax (exclusive of rate changes) with respect to the
Notes or the Loans, or change the basis of taxation of payments to the
Agent or any Bank of principal, unutilized line fee, interest, premium,
or any other amount payable under the Notes; or

27
<PAGE> 34

(ii) If the Agent or any Bank becomes entitled to claim any additional
amounts payable pursuant to this subsection (b), it shall promptly notify the
Borrower of such entitlement. A certificate as to any additional amounts payable
pursuant to the foregoing submitted by the Agent or the Bank, as applicable (and
signed by an authorized officer of the Agent or the applicable Bank), to the
Borrower shall, absent manifest error, be conclusive.

(c) Borrower shall pay to Banks, immediately upon request, such amounts
as shall, in the conclusive judgment of Banks, compensate Banks for any loss,
cost or expense (including losses in anticipated interest income) incurred by
them as a result of any payment or prepayment (under any circumstances
whatsoever, whether voluntary or involuntary, but excluding principal payments
made at maturity) of any portion of the Project Advance Loans bearing interest
at the LIBOR Rate on a date other than the last day of the applicable Interest
Period.

SECTION 2A.3.5. Prepayments of the Project Advance Facility. Project
Advance Loans may be prepaid at any time, in whole or in part, without premium
or penalty except as provided in SECTION 2A.3.4.(c) hereinabove. Unless
applicable law provides otherwise, all payments and prepayments received by any
Bank hereunder, at the option of that Bank, shall be applied in the following
order:

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(a) to the then outstanding charges and expenses payable under
this Agreement, plus a premium equal to the costs incurred by the Banks
as provided in SECTION 2A.3.4.(c) hereinabove (which charges shall be
disclosed to the Borrower if requested, such request not impacting that
Bank's right to be reimbursed therefor);

(b) to the then outstanding late charges imposed against the
Borrower in connection with the Project Advance Loan;

(d) to the outstanding principal amount of the Project Advance
Loan.

Any and all prepayments shall not affect the obligation, if any, to pay the
regular interest payments required hereunder, and to pay the outstanding
principal balance when due, until all Obligations have been paid in full.

SECTION 3. REPRESENTATIONS AND WARRANTIES

In order to induce (a) the Agent and the Banks to enter into this
Agreement and (b) the Banks to make the Loans, the Borrower makes the following
representations and warranties to the Agent and to each Bank, which shall be
deemed made as of the date hereof and the Closing Date, and which shall survive
the execution and delivery hereof and each performance hereunder. Except for any
information provided by the Borrower specifically for each Bank's use in
evaluating the approval of the Aggregate Credit Facility, any knowledge acquired
by the Agent or any Bank shall not diminish its right to rely upon such
representations and warranties.

SECTION 3.1. Existence of Borrower. The Borrower is a limited
partnership duly formed, validly existing and in good standing under the laws of
the State of Delaware.

SECTION 3.2. Existence of General Partner; Status as a REIT. The
Borrower's sole general partner, Summit Properties Inc., is a corporation and a
self-directed, self-managed REIT duly incorporated, validly existing and in good
standing under the laws of the State of Maryland and is duly qualified in all
other jurisdictions in which the properties and assets owned, leased or operated
by it, or the nature of the business conducted by it, make such qualification
necessary and where failure to so qualify would have a material adverse effect
on its financial condition or business operations, as applicable.

SECTION 3.3. Affiliates. Each Affiliate of the Borrower is duly
organized, validly existing and in good standing under the laws of its state of
incorporation or organization and is duly qualified in all other jurisdictions
in which the properties and assets owned, leased or operated by it, or the
nature of the business conducted by it, make such qualification necessary and

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where failure to so qualify would have a material adverse effect on their
financial condition or business operations, as applicable. Neither the Borrower
nor the General Partner is engaged in any joint venture, partnership or other
business arrangement with any other Person except as described in the
registration statement, Forms 10-Q and Forms 10-K of the General Partner filed
with the SEC from time to time. Borrower shall provide each Bank with a copy of
all of its filings with the SEC.

SECTION 3.4. Authority. The execution, delivery and performance of this
Agreement, the Notes and the other Loan Documents, the consummation of the
transactions herein and therein contemplated, the fulfillment of and compliance
with the terms and provisions hereof and thereof have been duly authorized by
all necessary partnership and corporate action of the Borrower and the General
Partner, and is within their respective limited partnership and corporate power
and will not result in a violation of their respective Partnership Agreement and
Certificate of Incorporation or Bylaws, if and as amended.

SECTION 3.5. Binding Obligations. This Agreement, the Notes and the
other Loan Documents constitute the legal, valid and binding obligations of the
Borrower enforceable against it in accordance with their respective terms,
except as the same may be limited by bankruptcy or general principles of equity.

SECTION 3.6. Noncontravention. The execution, delivery and performance
by the Borrower of this Agreement, the Notes and the other Loan Documents will
not violate any existing law, ordinance, rule, regulation or order of any
Federal, state or local governmental body, instrumentality or agency or result
in a breach of any of the terms of, or constitute a default under, any material
indenture, mortgage, deed of trust, lease, agreement, document, or instrument to
which it is a party or by which it or any of its properties or assets are bound
or result in or require the imposition of any Encumbrances on any of its
properties or assets, other than mortgages or deeds of trust being repaid in
full with the proceeds of the Aggregate Credit Facility.

SECTION 3.7. Permits. The Borrower possesses all material permits,
authorizations, licenses, approvals, waivers and consents, without unusual
restrictions or limitations, the failure of which to possess would have a
material adverse effect on the Borrower's ability to own and/or lease its
properties and assets and to conduct the business in which it is presently
engaged, all of which are in full force and effect. Each Affiliate of the
Borrower possesses all permits, authorizations, licenses, approvals, waivers and
consents, without unusual restrictions or limitations, the failure of which to
possess would have a material adverse effect on the financial condition or
business operations of the Borrower or the General Partner.

SECTION 3.8. No Consents. The execution, delivery and performance of
this Agreement, the Notes and the other Loan Documents on the Closing Date does
not require any approval,

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<PAGE> 37

consent or waiver under any material agreement, document, or instrument to which
the Borrower or the General Partner is a party or by which either of them or
their properties or assets may be bound or effected. No approval, authorization,
consent, waiver or order of, or registration, application or filing with, any
Federal, state or local governmental body, instrumentality or agency is required
in connection with the transactions contemplated by this Agreement, the Notes or
the other Loan Documents.

SECTION 3.9. Financial Statements. The Borrower has furnished to the
Bank (a) (i) the Borrower's Financial Statements dated as of December 31, 1995
and related footnotes, audited and certified by Deloitte & Touche and (ii) the
Summit Entities' (as defined in the Prospectus) combined annual Financial
Statements dated as of December 31, 1995, all with all related footnotes,
audited and certified by Deloitte & Touche and (b) the quarterly Financial
Statements for the Borrower dated as of September 30, 1996, unaudited. All
Financial Statements of the Borrower, the General Partner, the Summit Entities
and, to the best of the Borrower's knowledge, predecessor owners of any of the
Properties heretofore delivered to the Agent or any Bank present fairly the
financial condition and results of business operations of the Borrower for the
periods indicated in accordance with GAAP. The Borrower has no material direct
or contingent liabilities, liabilities for taxes, unusual commitments or
unrealized or unanticipated losses not disclosed in such Financial Statements
which when taken together would have a material adverse effect on the Borrower
or any Property. Since the date of the latest dated balance sheet included in
the Financial Statements, there has been no material adverse change in the
business operations or financial condition of the Borrower from that set forth
in the balance sheet contained in such Financial Statements, no shares of its
capital stock (or any warrant to purchase, options to acquire or notes
convertible, in whole or in part, into any shares of its capital stock) have
been purchased or acquired by any Person in any manner other than pursuant to
the Public Offering or except as disclosed in the Prospectus or otherwise
disclosed to the Agent and each Bank, nor has the Borrower acquired any real
property, nor has Borrower acquired any personal property out of the ordinary
course of business.

SECTION 3.10. Financial Information. All written data, reports and
information which the Borrower has supplied to the Agent or any Bank or caused
to be so supplied by a third party on its behalf in connection with this
Agreement are complete and accurate in all material respects and contain no
material omission or misstatement except such as have been corrected in a
writing delivered to the Agent and each Bank.

SECTION 3.11. Brokers. No broker or finder has brought about the
obtaining, making or closing of, and no broker's or finder's fees or commissions
will be payable by the Borrower to any Person in connection with, the
transactions contemplated by this Agreement, and the Borrower shall indemnify
and hold the

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Agent and the Banks harmless from and against any and all cost, claim,
liability, damage or expense (including but not limited to reasonable attorneys'
fees) in connection therewith.

SECTION 3.12. Use of Proceeds. The Borrower is not an "investment
company," or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended (15 U.S.C. Sections 80(a)(1) et seq.). The
extension of the Loans, the application of the proceeds and repayment thereof by
the Borrower and the performance of the transactions contemplated by this
Agreement will not violate any provision of said Act, or any rule, regulation or
order issued by the SEC thereunder. The Borrower does not own any margin
security as that term is defined in Regulation U of the Board of Governors of
the Federal Reserve System. None of the proceeds of the Loans will be used, or
have been used, directly or indirectly, for the purpose of reducing or retiring
any Indebtedness which was originally incurred to purchase or carry any margin
security or for any other purpose which might constitute any of the Loans a
"Purpose Credit" within the meaning of said Regulation U or Regulations G or X
of the Federal Reserve Board. The Borrower will not take, or permit any Person
acting on its behalf to take, any action which might cause this Agreement or any
document or instrument delivered pursuant hereto to violate any regulation of
the Federal Reserve Board.

SECTION 3.13. Statutory Compliance. The Borrower and each of its
Affiliates is in material compliance with all material laws, ordinances, rules,
regulations and orders of all Federal, state or local governmental bodies,
instrumentalities or agencies applicable to it, its properties and assets and
the business conducted by it, including, without limitation, (i) the provisions
of the Code (Sections 856 through 860) relating to the organization of REIT's
and their qualification and maintenance as such, (ii) all SEC and state "blue
sky" laws, (iii) ERISA, (iv) the United States Occupational Safety and Health
Act of 1970 and (v) all Environmental Laws, except where noncompliance would not
have a material adverse affect on the Borrower or its Properties.

SECTION 3.14. Commitments. The General Partner has no fixed, contingent
or other obligations to issue any shares, or rights exercisable into shares, of
its capital stock except as set forth in the Prospectus.

SECTION 3.15. Events of Default. No Event of Default, and no event
which, with the lapse of time, the giving of notice, or both, would constitute
an Event of Default, has occurred and/or is continuing.

SECTION 3.16. Other Defaults. Neither the Borrower nor any of its
Affiliates is in material default in the performance, observance or fulfillment
of any of the material obligations, covenants or conditions contained in any
indenture, mortgage, deed of trust, lease, agreement, document or instrument to
which

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it is a party or by which it or its properties and assets are bound.

SECTION 3.17. Taxes. The Borrower and its Affiliates have filed all tax
returns and reports required to be filed by them with any and all Federal, state
or local governmental bodies, instrumentalities or agencies and has paid in
full, or made adequate provisions or established adequate reserves for, the
payment of all taxes, interest, penalties, assessments or deficiencies shown to
be due or claimed to be due on or in respect to such tax returns and reports.

SECTION 3.18. Solvency. The Borrower and each Affiliate of Borrower is
currently Solvent and is not contemplating either the filing of a petition by it
under any Federal or state bankruptcy or insolvency law or the liquidating of
all or a major portion of its properties and assets, and the Borrower has no
knowledge of any Person contemplating the filing of any such petition against it
or any Affiliate of Borrower.

SECTION 3.19. Capitalization. The outstanding shares of capital stock
of the General Partner have been duly issued and are fully-paid and
non-assessable. Except as set forth in the registration statements, Forms 10-Q
and Forms 10-K of the General Partner on file with the SEC, from time to time,
there are outstanding no options, warrants or other securities exercisable or
exchangeable for or convertible into shares of capital stock of the General
Partner.

SECTION 3.20. Litigation. There are no actions, suits, proceedings or
other Litigation by or before any Federal, state or local governmental body,
instrumentality or agency or any arbitration or alternate dispute resolution
proceeding, pending or, to the knowledge of the Borrower or any of its officers,
threatened against the Borrower or any Affiliate of Borrower or their properties
or assets, which if adversely determined, would, together with all other such
litigation and proceedings if similarly determined, have a material adverse
effect on the Borrower or the General Partner, their business operations,
financial condition or otherwise, or materially impair the ability of any of
them to pay, perform or discharge the Obligations.

SECTION 3.21. Title to Properties. Each of the Borrower and its
Affiliates has good and marketable title to all of the properties, assets and
rights of every name and nature now purported to be owned by it, including,
without limitation, such properties, assets and rights as are reflected in the
Financial Statements referred to in SECTION 3.9., free from all Encumbrances
except those Encumbrances disclosed in these Financial Statements, and, except
as so disclosed, free from all defects of title that might materially adversely
affect such properties, assets or rights, taken as a whole. The Borrower's and
each of its Affiliate's properties and assets are sufficient to permit it to
conduct the business in which it is presently

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<PAGE> 40

engaged. The Borrower and each of its Affiliates possesses all trademarks,
service marks, trade names, trade service styles, copyrights and patents that
may be necessary to own its properties and assets and to conduct its business as
it is presently conducted or as it intends to conduct such business hereafter
without any infringement or conflict with the rights of any other Person or any
violation of law or material adverse effect on its financial condition or
business operations.

SECTION 3.22. Labor Relations. The Borrower is not a party to any
collective bargaining or other agreement with any union and there are no
material grievances, disputes or controversies with any union or other
organization of the Borrower's employees, or threats of strikes, work stoppages
or demands by any union or such other organization.

SECTION 3.23. Guarantees. Except as set forth in the Financial
Statements referred to in SECTION 3.9., neither the Borrower nor the General
Partner is a party to any Guarantee or other similar type of agreement, and
neither the Borrower nor the General Partner has offered its endorsement to any
Person which would in any way create a contingent liability (except by
endorsement of negotiable instruments payable at sight for deposit or collection
or similar banking transactions in the Borrower's ordinary course of business).

SECTION 3.24. ERISA. The Borrower and each member of the Controlled
Group have fulfilled their obligations under the minimum funding standards of
ERISA and the Code with respect to each Plan and are in compliance in all
material respects with the applicable provisions of ERISA and the Code, and have
not incurred any liability to the PBGC or a Plan under Title IV of ERISA; and no
"prohibited transaction" or "reportable event" (as such terms are defined in
ERISA) has occurred with respect to any Plan.

SECTION 3.25. Environmental Protection.

(a) The business operations of the Borrower and all its Affiliates
comply in all material respects with all Environmental Laws.

(b) Neither the Borrower nor any of its Affiliates has received (i) any
notice or claim to the effect that it is or may be liable to any Person as a
result of the Release or threatened Release of any Hazardous Materials or (ii)
any letter or request for information under CERCLA or any other Environmental
Laws, and, to the best of the Borrower's knowledge, based upon reasonable
investigation, the operations of the Borrower and its Affiliates are not the
subject of any investigation by a Federal, state or local governmental
instrumentality, body or agency evaluating whether any remedial action is needed
to respond to a Release or threatened Release of any Hazardous Material or
claim, or threatened lawsuit or claim arising under or related to any
Environmental Law.

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<PAGE> 41

(c) The Borrower and each of its Affiliates is not and their respective
properties, assets and operations are not subject to any outstanding written
order or agreement with any Federal, state or local governmental
instrumentality, body or agency or private party respecting any Environmental
Laws.

(d) Neither the Borrower nor any of its Affiliates has filed any notice
under any Environmental Law indicating past or present treatment or disposal of
Hazardous Materials, and all of the operations of the Borrower and its
Affiliates which involve the generation, transportation, treatment, storage or
disposal of Hazardous Materials are in substantial and material compliance with
all Environmental Laws.

(e) To the best of the Borrower's knowledge, based upon reasonable
investigation, no Hazardous Material exists on, under or about any of the
Properties, real or personal, in a manner that could give rise to any claim or
suit against the Borrower or any Affiliate, and neither the Borrower nor any
Affiliate has filed any notice or report of a Release of any Hazardous Materials
that could give rise to any such claim or suit against the Borrower or any
Affiliate.

(f) The representation and warranties in subsection (a) through (e)
above shall be deemed to be made only with respect to matters material to the
financial condition or business operations of the Borrower and the General
Partner.

SECTION 3.26. NYSE Listing. The General Partner's common stock is duly
listed on the New York Stock Exchange ("NYSE") and the General Partner has
timely filed all reports required to be filed by it with the NYSE.

SECTION 3.27. Registration Documents. The registration statements,
Forms 10-Q and Forms 10-K of the General Partner and all amendments or
supplements thereto, as filed from time to time, do not contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein not misleading.

SECTION 3.28. Materiality. Nothing has come to the attention of the
Borrower that causes it to believe that any documents or agreements delivered or
caused to be delivered by it, or any statements made by the Borrower or its
agents or representatives, to the Agent, the Banks or their respective agents or
representatives regarding the transactions contemplated hereby, contains an
untrue statement of a material fact or omits to state a material fact necessary
to make the statements therein not misleading.

SECTION 4. CONDITIONS TO OBLIGATION OF THE BANKS

The Banks shall have no obligation under this Agreement unless and
until they are satisfied, in their collective

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reasonable credit judgment, that all of the following conditions shall have been
fulfilled prior to or on the Closing Date:

SECTION 4.1. Representations and Warranties True. The representations
and warranties contained in SECTION 3 are true and correct, and the Borrower
shall have so certified to the Agent.

SECTION 4.2. Delivery of Documents. The Borrower shall have duly
executed and delivered to the Agent, in form and substance satisfactory to the
Agent and its legal counsel, this Agreement, the Notes, the other Loan Documents
and all further documents as they may request to evidence the obligations of
Borrower and General Partner. In addition, the Agent shall have received or
agreed to waive or delay the receipt of:

SECTION 4.2.1. Copies of all partnership and corporate action taken by
the Borrower and the General Partner to authorize the execution and delivery of
this Agreement, the Notes and the other Loan Documents, together with a
certificate of the General Partner's corporate secretary certifying that the
same are true, correct and complete as of the Closing Date.

SECTION 4.2.2. Copies of the Borrower's and the General Partner's
Certificate of Limited Partnership, Certificate of Incorporation and Bylaws, if
and as amended, together with a certificate of the General Partner's corporate
secretary certifying that the same are true, correct and complete as of the
Closing Date.

SECTION 4.2.3. A certificate(s) issued by the appropriate tax
departments or agencies of North Carolina and Delaware with respect to the
Borrower and North Carolina and Maryland with respect to the General Partner, to
the effect that the Borrower and the General Partner, as applicable, have paid
all income, sales and applicable taxes. This requirement shall be deemed
satisfied if this material shall be dated and delivered within thirty (30) days
of the date hereof.

SECTION 4.2.4. A certificate issued by the offices of the Secretary of
State of the state of the Borrower's and the General Partner's formation to the
effect that each is legally existing and in good standing under the laws of such
state.

SECTION 4.2.5. Certificates issued by the office of the Secretary of
State of North Carolina and Delaware with respect to the Borrower, and North
Carolina and Maryland with respect to the General Partner, to the effect that
such entities are duly qualified and in good standing under the laws of such
states. This requirement shall be deemed satisfied if this material shall be
delivered within thirty (30) days of the date hereof.

SECTION 4.2.6. A certificate of the corporate secretary of the General
Partner certifying to the incumbency and signatures of all officers of the
General Partner who are authorized to

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execute this Agreement, the Notes, the Guaranties and/or the other Loan
Documents for the General Partner on the Borrower's behalf.

SECTION 4.2.7. A guaranty in each of the forms attached as EXHIBIT D-1
and EXHIBIT D-2.

SECTION 4.2.8. The Borrower shall deliver a certificate from its chief
financial officer that the Borrower and the General Partner, after giving effect
to the transactions contemplated by the Agreement, are Solvent on the Closing
Date.

SECTION 4.2.9. Such further documents, instruments and agreements as
the Agent shall reasonably request, all satisfactory in form and substance
satisfactory to the Agent and its legal counsel.

SECTION 4.3. Opinion of Counsel. The Agent shall have received from
legal counsel for the Borrower a letter or letters providing the legal opinions
set forth in EXHIBIT E attached hereto satisfactory in form and substance to the
Agent and the Banks' legal counsel.

SECTION 4.4. Payment of Fees. The Borrower shall have paid any
applicable fees and expenses due to the Agent and the Banks at closing,
including the fees and expenses of legal counsel to the Agent and the Banks.

SECTION 4.5. Commitment Fee. The Borrower shall have paid to the Agent
for the account of the Banks a non-refundable commitment fee in the amount of
$120,000, which shall be due and payable on the Closing Date regardless of
whether or not any Advances are made hereunder.

SECTION 4.6. Legal Matters. All legal matters incident to the
transactions contemplated by this Agreement shall be satisfactory to the Agent,
the Banks and their legal counsel.

SECTION 4.7. No Adverse Change. There has been no material adverse
change in the financial condition or business operations of the Borrower or the
General Partner since the date of the last Financial Statements or other
financial reports delivered to the Agent and the Banks.

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SECTION 5. CONDITIONS TO MAKING ADVANCES

The Banks shall have no obligation to make any Advances unless and
until the Agent is satisfied, in its reasonable discretion, that all of the
following conditions shall have been fulfilled prior to or contemporaneously
with the making of such Advances:

SECTION 5.1. Notice of Borrowing. The Agent shall have received, in a
timely manner, an Advance Request in a form satisfactory to the Agent.

SECTION 5.2. No Adverse Change. No event, circumstance, or condition
shall exist or shall have occurred and be continuing which has a Material
Adverse Effect.

SECTION 5.3. Truth of Representations and Warranties. All of the
representations and warranties set forth in the Advance Request are true and
correct in all material respects as of the date of the requested Advance.

SECTION 5.4. No Event of Default. No event has occurred and is
continuing or would as a result of the Advance occur, which constitutes an Event
of Default.

SECTION 5.5. Payment of Fees. The Borrower shall have paid any fees and
expenses due and payable to the Agent or the Banks, including the reasonable
fees and expenses of the legal counsel of the Agent and the Banks.

SECTION 5.6. Partnership and Corporate Action. To the extent necessary,
the partnership and corporate action referred to in SECTION 4.2.1. shall remain
in full force and effect and the incumbency of officers shall be as stated in
the certificates of incumbency delivered pursuant to SECTION 4.2.6. or as
subsequently reflected in a new certificate of incumbency delivered to the Agent
in connection with the requested Advance.

SECTION 5.7. Legal Matters. All legal matters incident to the
transactions contemplated by this Agreement shall be reasonably satisfactory to
the Agent, the Banks and their legal counsel and no change shall have occurred
in any law or regulation or interpretation thereof which, in the opinion of the
Agent, the Banks or their legal counsel, would make it illegal or against the
policy of any governmental body, agency or instrumentality for the Banks to make
Advance(s).

SECTION 5.8. Special Conditions Precedent With Respect to Advances
Under the Project Advance Facility. In addition to the applicable Project
Advance Facility Access Fee, the Borrower shall deliver to the Agent, at the
time of the initial Advance Request with respect to any given project, for an
Advance under the Project Advance Facility, the following:

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(a) the Project Budget applicable to the apartment project in
question;

(b) a copy of the purchase agreement applicable to the
apartment project in question;

(c) proof of allocation of sufficient funds under the Project
Advance Facility to finance the construction and/or acquisition of the
apartment project in question (funds having been so allocated shall not
be advanced for any other project, acquisition or construction);

(d) written certification by an officer of the General Partner
that the Project Advances requested under the Project Advance Facility
plus other sources of capital identified with the Project Budget are
sufficient to cover all costs contemplated by the Project Budget as
submitted; and

(e) Advances made under the Project Advance Facility with
respect to any given project, even if repaid, may not be readvanced
with respect to that project, provided, however, that funds previously
Advanced under the Project Advance Facility but repaid may be Advanced
with respect to another project(s) upon compliance by the Borrower with
the other terms of this Agreement.

SECTION 6. AFFIRMATIVE COVENANTS OF BORROWER

The Borrower covenants and agrees that from the Closing Date until the
payment and performance in full of the Obligations, unless the Agent and the
Banks otherwise consent in writing:

SECTION 6.1. Financial Statements and Reporting Requirements.

The Borrower shall furnish to the Agent:

(a) as soon as available, but in no event later than one
hundred twenty (120) days after the end of each of its fiscal years,
consolidated and, as to any Affiliate of the Borrower as to which the
Agent shall reasonably request on not less than ninety (90) days'
notice, consolidating, Financial Statements of the Borrower, its
Affiliates and the General Partner for such year, audited and
accompanied by the opinion of independent certified public accountants
acceptable to the Banks. All such Financial Statements and reports
shall be in form and substance acceptable to the Agent. Concurrently
with the delivery of such Financial Statements, the Borrower shall also
deliver a copy of said certified public accountants' management report
and letters (which must not contain any Qualification) and a written
statement by such accountants that, in the making of the audit
necessary for their report and opinion upon such Financial Statements,
they have obtained no knowledge of any Default or, if in the opinion of
such accountants any such Default exists, they

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<PAGE> 46

shall disclose in such written statement the nature and status thereof.

(b) as soon as available, copies of (i) any material reports
submitted to the Borrower by independent public accountants in
connection with any interim review of the accounts of the Borrower or
any of its Affiliates made by such accountants; (ii) all proxy
statements, financial statements and reports as the General Partner
shall send to its stockholders or as the Borrower may file with the SEC
or any similar governmental authority at any time having jurisdiction
over the Borrower or its Affiliates, including Form 10-Q (no later than
sixty (60) days after the end of each fiscal quarter) and Form 10-K (no
later than one hundred twenty (120) days after each fiscal year end);
and (iii) all correspondence to or from the IRS relating to the General
Partner's status as a REIT.

(c) no earlier than April 1 and no later than May 1 of each
year, evidence in form and substance reasonably satisfactory to the
Banks indicating that the General Partner is and has maintained at all
times since its inception its status as a REIT.

(d) within thirty (30) days after the end of each calendar
quarter, a statement detailing the Borrower's use of all proceeds from
the Aggregate Credit Facility.

(e) Within thirty (30) days after the end of each calendar
quarter, operating statements (A) for all Properties combined and for
each Property, (B) for all Unencumbered Properties combined and (C) for
all Bond-Financed Communities combined, which statements shall include:
the respective apartment project name and location; the Borrower's or
General Partner's percentage of ownership interest; leasing status; and
net operating income. All operating statements for a period also shall
include a comparison to the budget for such period and an explanation
of any variances from such budget as well as capital expenditure
information. All budgets shall include projections, on a monthly basis,
of all revenues and expenditures of any kind to be incurred for the
period covered by such budget.

(f) Each March 31, June 30, September 30 and December 31, a
report in substantially the form of EXHIBIT B providing the financial
information set forth therein; certifying then current compliance with
the financial covenants set forth in SECTION 8 and the absence of
Defaults hereunder signed on behalf of the Borrower by the chief
financial officer of the General Partner.

(g) Each June 30 and December 31, narrative and numerical
reports on the Borrower's Properties and development and acquisition
activities for the most recent semiannually period (including without
limitation a breakdown of Unencumbered Properties).

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(h) As soon as the Borrower acquires knowledge of the same,
notice of any Default hereunder.

SECTION 6.2. Hazard and Liability Insurance.

(a) The Borrower and each of its Affiliates shall keep each Property
insured against fire and other hazards (so-called "All Risk Coverage") to the
same extent and covering such risks as is customary in the state for similar
business, but in no event in an aggregate amount less than the full replacement
value thereof. The Borrower shall also maintain public liability coverage
against claims for personal injuries or death, business interruption, worker's
compensation, employment or similar insurance with coverage and in amounts
reasonably satisfactory to the Agent and as may be required by applicable Law.

(b) The Borrower shall maintain (i) All Risk Coverage written on a
builder's risk, completed value, non-reporting form; (ii) flood insurance, if
the Improvements are located in any federally designated "special hazard area";
(iii) commercial general liability insurance and owner's contingent or
protective liability insurance; (iv) employer's liability insurance; (v)
umbrella liability insurance; (vi) rent loss, insurance and (vii) workmen's
compensation insurance.

(c) In the event of any loss or damage in excess of $500,000 to any
Property, the Borrower shall give immediate written notice to the Agent and to
its insurers of such loss or damage and shall promptly file proof of loss with
the insured's insurers.

(d) All Affiliates of Borrower not described in subsections (a) through
(c) above shall maintain casualty and liability insurance as would be customary
and prudent (i) in the state(s) where such operate and (ii) for similar
businesses.

SECTION 6.3. Maintenance of Existence. The Borrower and each of its
Affiliates shall preserve and maintain its respective limited partnership or
corporate existence, rights, franchises and privileges, including its corporate
name, in the state of its formation and qualify and remain qualified as a
foreign limited partnership or corporation in each jurisdiction in which such
qualification is necessary or desirable. The General Partner shall at all times
be self-directed and self-managed.

SECTION 6.4. REIT Status. The General Partner shall maintain its
qualification as a REIT for federal income tax purposes.

SECTION 6.5. Preservation of Properties. The Borrower and each of its
Affiliates shall preserve and maintain each of its Properties in good repair,
working order and operating condition consistent with a first class apartment
project, normal wear and tear excepted, and the Borrower shall immediately
notify the Bank

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of any event causing material loss or unusual depreciation in the value of the
property in question.

SECTION 6.6. Taxes and other Assessments. The Borrower shall pay and
discharge, and maintain adequate reserves for the payment and discharge of, all
taxes, assessments, government charges or levies, or claims for labor, supplies,
rent or other obligations made against it or its properties and assets which, if
unpaid, might become an Encumbrance against the Borrower, any such of its
Affiliates or their properties and assets, except liabilities which are being
contested in good faith in appropriate proceedings, except that the Borrower and
each such of its Affiliates shall pay all such taxes, assessment, government
charges, levies or claims forthwith upon the commencement of proceedings to
foreclose any lien that may have attached as security therefor and provided that
(a) Borrower has notified Agent of the pendency of such proceedings where the
contested portion exceeds $100,000 and of the amount in dispute prior to the
delinquency of the first installment of taxes affected thereby, and (b) the
Borrower shall have paid the uncontested portion of such taxes, charges, fees,
rates and assessments and, if applicable law so provides, posted security or
made partial payment sufficient to prevent any levy upon or transfer with
respect to any Property. The Borrower shall file all federal, state and local
tax returns and other reports that it is required by law to file. The Borrower
shall promptly notify or cause notice to be given to the Agent of any pending or
future audits of its income, sales or other tax returns by the Internal Revenue
Service or by any state in which the Borrower conducts business operations and
the results of each such audit.

SECTION 6.7. Inspection. The Borrower shall permit the Agent, the Banks
and their respective designees, at any time during normal business hours and
upon reasonable prior notice (or if an Event of Default shall have occurred and
is continuing, at any time and without prior notice), to (i) subject to
reasonable rights of tenants, visit and inspect the properties and assets of the
Borrower and its Affiliates (including any Property); (ii) examine and make
copies of and take abstracts from the book and records of the Borrower and its
Affiliates; and (iii) discuss the affairs, finances and accounts of the Borrower
and its Affiliates with its appropriate officers, employees and accountants. In
handling such information the Agent, the Banks and their respective designees
shall exercise the same degree of care that such Person exercises with respect
to its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to SECTION 6.1. hereof except that disclosure of such information may
be made (i) to prospective assignees, transferees or purchasers of an interest
in the Obligations; (ii) as required by law, regulation, rule or order,
subpoena, judicial order or similar order; and (iii) as may be required in
connection with the examination, audit or similar investigation. The Borrower
will cooperate and assist in such inspections, including

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furnishing all plans, shop drawings and specifications in the Borrower's
possession relating to the Improvements.

SECTION 6.8. Notices. The Borrower shall promptly upon becoming aware
of the occurrence of any Event of Default notify the Agent thereof in writing.
The Borrower shall also promptly advise the Agent of:

(a) any labor controversy resulting in or threatening to
result in a strike or work stoppage against the Borrower or its
Affiliates;

(b) any change of independent public accountants together with
the name of the new accountants; or

(c) any other matter which has resulted or may result in a
material adverse change in the Borrower's or its Affiliates', financial
condition or business operations.

SECTION 6.9. Litigation. The Borrower shall promptly inform the Agent
in writing of any action, suit, or proceeding by or before any federal, state or
local governmental instrumentality, body or agency, or arbitration or alternate
dispute resolution proceeding, which might have a material adverse effect upon
its financial condition or business operations.

SECTION 6.10. Maintenance of Books and Records. Each of the Borrower
and its Affiliates shall keep adequate books and records of account, in which
true and complete entries will be made reflecting all of its business and
financial transactions, and such entries will be made in accordance with GAAP
including the maintenance of adequate reserves for depreciation of property, if
such reserves are required by GAAP. Each of the Borrower and its Affiliates
shall maintain copies of all such books and records on-site or at the Borrower's
principal place of business at all times.

SECTION 6.11. Maintenance of Permits. The Borrower and each of its
Affiliates shall obtain and/or maintain in full force and effect all material
permits, authorizations, licenses, approvals, waivers and consents which it
presently possesses and are advisable to maintain or which may become necessary
in the future to conduct its business operations and operate the Properties.

SECTION 6.12. Use of Proceeds. The Borrower will use the proceeds of
the Aggregate Credit Facility solely for the purposes set forth in SECTION
2.1.2. with respect to the Revolving Working Capital Credit Facility and SECTION
2A.1.2 with respect to the Project Advance Facility.

SECTION 6.13. Payment of Indebtedness. The Borrower and each of its
Affiliates shall promptly pay and discharge when due and payable (or within
applicable grace periods) all Indebtedness

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greater than ONE HUNDRED THOUSAND DOLLARS ($100,000.00) due to any Person from
the Borrower or any of its Affiliates, except when the amount thereof is being
contested in good faith by appropriate proceedings and with reserves therefor
being established as a current liability on the books of the Borrower as
required by GAAP.

SECTION 6.14. Estoppel Certificate. The Borrower shall at any time
furnish within ten (10) days of request by the Agent a written statement in such
form as may be required by the Agent stating (i) that the Loan Documents are
valid, binding and enforceable obligations of the Borrower and any applicable of
its Affiliates (except as may be limited by bankruptcy and general principles of
equity); (ii) the outstanding principal balance of the Loans; (iii) the date to
which interest is paid; (iv) that the Loan Documents have not been released,
subordinated or modified; (v) that, to the best of its knowledge, there are no
offsets or defenses against the enforcement of the Loan Documents, and (vi) any
such other matters reasonably requested by the Agent. If any of the foregoing
statements are untrue, the Borrower shall, alternatively, specify the reasons
therefor.

SECTION 6.15. Additional Offices. The chief executive office of the
Borrower and the General Partner shall be located at the address set forth in
SECTION 13.2.

SECTION 6.16. Compliance with Laws. The Borrower and each of its
Affiliates shall comply with the requirements of all applicable material laws,
ordinances, rules, regulations and orders of any federal, state or local
governmental body, instrumentality or agency.

SECTION 6.17. ERISA. The Borrower and the General Partner shall: (i)
make prompt payments of contributions required to meet the minimum funding
standards set forth under ERISA with respect to each and every Plan and,
promptly after the filing thereof, furnish to the Agent copies of each annual
report required to be filed under ERISA in connection with each and every Plan
for each and every Plan year; (ii) notify the Agent immediately of any fact,
including, but not limited to, any "reportable event", arising in connection
with any Plan which might constitute grounds for the termination thereof by the
PBGC or for the appointment by the appropriate United States district court of a
trustee to administer the Plan; (iii) promptly after the issuance thereof,
furnish to the Agent a copy of any notice of any "reportable event" given to the
PBGC with respect to any Plan; (iv) promptly after receipt thereof, furnish to
the Agent copy of any notice received from the PBGC relating to the intention of
the PBGC to terminate any Plan or to appoint a trustee to administer any Plan;
and (v) furnish to the Agent, promptly upon its request therefor, such
additional information concerning each and every Plan as may be reasonably
requested.

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SECTION 6.18. Compliance with Environmental Laws.

(a) The Borrower shall promptly advise the Agent in writing and in
reasonable detail of (i) any Release of any Hazardous Material required to be
reported to any federal, state or local governmental authority, instrumentality
or agency under any applicable Environmental Laws; (ii) any and all written
communications with respect to claims or suits under such laws or any Release of
Hazardous Materials required to be reported to any federal, state or local
governmental authority, instrumentality or agency; (iii) any remedial action
taken by the Borrower, each Affiliate or any other Person in response to (A) any
Hazardous Materials on, under or about the properties or assets of the Borrower
or any Affiliate, the existence of which could give rise to a claim or suit
resulting in a material adverse change of the Borrower's or any Affiliate's
business operations or financial condition, or (B) any claim or suit resulting
in a material adverse change of the Borrower's or any Affiliate's business
operations or financial condition; (iv) the Borrower's discovery of any
occurrence or condition on any real property adjoining or in the vicinity of the
Borrower's or any Affiliate's business premises that could cause such premises
or any part thereof to be classified as "border-zone property" or to be
otherwise subject to any restrictions on the ownership, occupancy,
transferability or use thereof under any Environmental Laws; and (v) any request
for information from any federal, state or local governmental authority,
instrumentality or agency that indicates such authority, instrumentality or
agency is investigating whether the Borrower or any Affiliate may be potentially
responsible for a Release of Hazardous Materials.

(b) The Borrower shall, at its own expense, provide copies of such
documents or information as the Agent may reasonably request in relation to any
matters disclosed pursuant to this section.

(c) The Borrower and each of its Affiliates shall comply with all
Environmental Laws and establish and maintain policies and procedures to ensure
and monitor continued compliance with all Environmental Laws. The Borrower and
each Affiliate shall, to the extent required by any Environmental Law, promptly
take any and all necessary remedial action in connection with the presence,
storage, use, disposal, transportation or Release of any Hazardous Materials on,
under or about its business premises. If the Borrower or any Affiliate
undertakes any remedial action with respect to any Hazardous Materials on, under
or about its business premises, the Borrower and such Affiliate shall conduct
and complete such remedial action in compliance with the policies, orders and
directives of any and all federal, state and local governmental authorities,
instrumentalities or agencies except when and only to the extent that the
Borrower's or such Affiliate's liability for such presence storage, use,
disposal, transportation or discharge of any Hazardous Material is being
contested in good faith.

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(d) The Borrower hereby agrees to indemnify and hold the Agent and the
Banks harmless from and against any and all damages, penalties, fines, claims,
liens, suits, liabilities, costs (including clean-up costs), judgments and
expenses (including attorneys', consultants' or experts' fees and expenses
limited to actual expenses and actual fees incurred based on actual number of
hours worked and normal hourly rates) of every kind and nature suffered by or
asserted against the Agent or any Bank as a direct or indirect result of (i) any
of the representations, warranties and covenants in this Agreement regarding
environmental matters (the "Environmental Assurances") being false or untrue in
any material respect or (ii) the Borrower or any of its Affiliates not complying
with the Environmental Assurances in any material respect, or (iii) any
requirement under any Environmental Laws which requires the elimination or
removal of any Hazardous Materials. The Borrower's obligations hereunder to the
Agent and the Banks shall not be limited to any extent by the term of the Notes,
and, as to any act or occurrence prior to payment in full and satisfaction of
the Notes which gives rise to liability to the Agent or any Bank on account of
the matters set forth herein, shall continue, survive and remain in full force
and effect notwithstanding payment in full and satisfaction of the Notes,
provided, however, that the Borrower's liability under Section 6.18(d)(iii)
shall not apply to Hazardous Materials which were initially introduced in, under
or upon a Property after the Borrower and/or its Affiliates had ceased to be an
owner or operator of the Property.

SECTION 6.19. NYSE Listing. The General Partner's common stock shall at
all times be duly listed on the NYSE and the Borrower and General Partner shall
timely file all reports required to be filed with the NYSE.

SECTION 6.20. Loans in Excess of Commitment Amount. If at any time the
Outstanding Amount shall exceed the Revolving Working Capital Commitment Amount
or the Project Advance Commitment Amount (which event, notwithstanding the
provisions of this section, shall be a Default), the Borrower shall cure the
same immediately after the Agent or any Bank notifies the Borrower of same. The
Borrower may cure the Revolving Working Capital Credit Commitment Amount or the
Project Advance Commitment Amount, as applicable, noncompliance: (i) by reducing
the outstanding principal balance of the relevant Revolving Working Capital Loan
or the Project Advance Loan, as applicable; or (ii) by any other means
acceptable to each Bank, in that Bank's sole and absolute discretion. Any
attempt by the Borrower to effect a cure under subsection (ii) above shall be
subject to the condition that all documents executed in connection therewith be
in form and substance reasonably acceptable to each Bank.

SECTION 6.21. Business of the Borrower. The primary business of the
Borrower and its Affiliates shall be the acquisition, renovation, construction,
management and/or development of multifamily apartment properties in the United
States and activities incidental thereto.

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SECTION 6.22. Deposit Accounts. The Borrower and the General Partner
shall maintain a demand deposit account with each of the Banks, provided the
terms and fees of such accounts are reasonably competitive with similar accounts
at other banks.

SECTION 6.23. Notification of Significant Transactions. The Borrower
shall immediately notify the Agent and each Bank of the sale(s) or other
disposition(s) or purchase(s) of other acquisition(s) of Properties of value
aggregating to $10,000,000 or more in any given calendar year.

SECTION 7. NEGATIVE COVENANTS

The Borrower, covenants and agrees that from the date hereof until the
payment and performance in full of the obligations, unless the Agent and the
Banks otherwise consent in writing:

SECTION 7.1. Leases. Neither the Borrower nor any of its Affiliates
shall during any fiscal year enter into any leases of real or personal property
with respect to any Property other than in the ordinary course of business.

SECTION 7.2. Dividends. The Borrower and the General Partner may pay
Dividends on any class of its capital stock or equity interests, as applicable,
and make any other distribution or payment on account of or in redemption,
retirement or purchase of such capital stock or equity interest, only so long as
(A) the payment of Dividends paid by or payable to the General Partner in any
calendar year does not exceed 100% of the General Partner's share of the
Borrower's Funds From Operations for calendar year 1996 and 90% of the General
Partner's share of the Borrower's Funds From Operations for each calendar year
thereafter; (B) the payment of Dividends to owners of the Borrower other than
the General Partner does not exceed 100% of such non-General Partner owners'
share of the Borrower's Funds From Operations for calendar year 1996 and 90% of
the General Partner's share of the Borrower's Funds From Operations for each
calendar year thereafter; and (C) the General Partner is at all times maintained
and qualified as a REIT.

SECTION 7.3. Capital Expenditures. Neither the Borrower nor any of its
Affiliates shall purchase or agree to purchase, or incur any obligations
(including that portion of the obligations arising under capital leases that is
required to be capitalized on the balance sheet of the Borrower and its
Affiliates) for, any equipment or other property constituting fixed assets other
than in the ordinary course of business if at the time of, or as a result of,
such transaction there exists an Event of Default hereunder.

SECTION 7.4. ERISA. Neither the Borrower nor any member of the
Controlled Group shall permit any plan maintained by it to (i) engage in any
"prohibited transaction" (as defined in Section 4975 of the Code; (ii) incur any
"accumulated funding deficiency"

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(as defined in Section 302 of ERISA) whether or not waived; or (iii) terminate
any Plan in a manner that could result in the imposition of an Encumbrance on
the property and assets of the Borrower or any of its Affiliates pursuant to
Section 4068 of ERISA.

SECTION 7.5. Change Name or Location. Neither the Borrower nor the
General Partner shall change its partnership or corporate name or conduct its
business under any name other than those set forth in the Financial Statements
delivered pursuant to SECTION 3.9 or change its chief executive office or place
of business from the address shown in SECTION 13.2 unless it has given the Agent
at least thirty (30) days prior written notice.

SECTION 7.6. Contracts. Neither the Borrower nor any Affiliate shall
enter into any contract with an Affiliate other than on such terms as would be
contained in an agreement executed at arms' length or better with an unrelated
third party (except for construction and management contracts with Summit
Management Company and Summit Apartment Builders, Inc.).

SECTION 7.7. Compliance with Environmental Laws. The Borrower shall not
and shall not permit any of its Affiliates to (a) use any of the Properties or
any portion thereof for the handling, processing, storage or disposal of any
Hazardous Materials except in compliance with Environmental Laws; (b) except in
compliance with applicable Environmental Laws, cause or permit to be located on
any of the Properties any underground tank or other underground storage
receptacle for Hazardous Materials; (c) generate any Hazardous Material on any
of the Properties, except in compliance with all applicable Environmental Laws;
(d) conduct any activity at any Properties or use any Properties in any manner
so as to cause a Release or threatened Release of Hazardous Materials on, upon
or in the Properties except in compliance with all applicable Environmental
Laws; or (e) otherwise conduct its business operations in a manner that would
result in a violation of any Environmental Law or bring such Properties into
violation of any Environmental Law which might have a material, adverse affect
on the Borrower or the General Partner.

SECTION 7.8. Fiscal Year. The Borrower shall not change its fiscal year
end, except upon thirty (30) days prior written notice to the Agent and the
Banks.

SECTION 7.9. REIT Acquisitions. Other than as disclosed in the
September 30, 1996, Financial Statements referred to in SECTION 3.9, the General
Partner shall acquire no assets or liabilities other than general or limited
partnership interests in the Borrower; provided, the General Partner may acquire
partial ownership of partnerships in which the Borrower owns and continues to
own all the remaining partnership interests in such partnership not owned by the
General Partner.

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SECTION 7.10. No Mergers or Consolidations. Neither the Borrower nor
the General Partner, nor any Affiliate of the Borrower or the General Partner
shall enter into any transaction of merger or consolidation, or acquisition or
disposition of all or substantially all of the assets of any Person (including
without limitation the Borrower, the General Partner or any Affiliate) without
the prior written consent of the Banks, unless (a) (i) the Borrower, the General
Partner or the Affiliate, as applicable, is the surviving entity in the
transaction of merger, acquisition or consolidation, as applicable, (ii) it is
the acquisition of 100% of all equity interests in an entity whose sole asset is
a property the direct acquisition of which would not be prohibited under this
Agreement, or (iii) the merger or consolidation is among Affiliates of Borrower
and the General Partner or results in a merger or consolidation of affiliates
into the Borrower or General Partner; provided, however, the Borrower or the
General Partner must be the surviving entity in any merger or consolidation
involving either of them, and (b) the Borrower is in full compliance, both
before and after giving effect to the transaction, with all of the terms of this
Agreement.

SECTION 7.11. Unconsolidated Affiliate Indebtedness. All Indebtedness
(collectively, "Unconsolidated Affiliate Indebtedness") of Affiliates of the
Borrower whose financial information is not fully consolidated under GAAP with
the Borrower (each, an "Unconsolidated Affiliate") but which, if consolidated,
would have otherwise been included in the definition of "Consolidated Total
Debt", "Secured Debt" or "Secured Recourse Debt", respectively, shall be
included in each applicable definition in an amount equal to (a) aggregate
Unconsolidated Affiliate Indebtedness otherwise satisfying the terms of each
such definition minus (b) the lesser of (i) $30,000,000 or (ii) the aggregate
product obtained by multiplying [A] the percentage of each Unconsolidated
Affiliate in the form of a joint venture owned by Persons other than the
Borrower, the General Partner or other fully consolidated Affiliates of the
Borrower or the General Partner by [B] the Unconsolidated Affiliate Indebtedness
of the applicable Unconsolidated Affiliate.

SECTION 7.12. No Additional Recourse Debt. Neither the Borrower nor the
Guarantor shall incur any Indebtedness pursuant to which any creditor shall have
recourse against the Borrower, the Guarantor, or any Affiliate of the Borrower
or the Guarantor, other than Secured Recourse Debt permitted under SECTION
8.1.5. and Indebtedness secured by one or more of the Bond Financed Communities.

SECTION 8. FINANCIAL COVENANTS

The Borrower covenants and agrees that from the date hereof, until the
payment and performance in full of the Obligations:

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SECTION 8.1.1. Consolidated Total Debt to Market Capitalization. The
ratio of (a) Consolidated Total Debt to (b) Market Capitalization, shall not
exceed 0.60 to 1.00.

SECTION 8.1.2. Adjusted Funds Flow to Consolidated Total Debt. The
ratio of (a) Adjusted Funds Flow for the most recent calendar quarter multiplied
by four (4) to (b) Consolidated Total Debt shall always equal or exceed 0.15 to
1.00.

SECTION 8.1.3. Maximum Unsecured Consolidated Total Debt. The Unsecured
Consolidated Total Debt at any time of Borrower may not exceed an amount equal
to (i) the Consolidated Net Operating Income from Unencumbered Assets for the
most recent calendar quarter multiplied by four (4) divided (ii) by 0.16.

SECTION 8.1.4. Maximum Secured Debt. Secured Debt shall never exceed
(a) forty-five percent (45.0%) of the Borrower's Total Assets for all times
prior to December 31, 1996, or (b) forty percent (40.0%) of the Borrower's Total
Assets at any time thereafter.

SECTION 8.1.5. Maximum Secured Recourse Debt. Secured Recourse Debt
shall not exceed Fifty-Six Million Dollars ($56,000,000) at any time hereafter.

SECTION 8.2. Establishment of Covenants. The Borrower acknowledges that
the foregoing covenants were established by the Borrower and the Banks on the
basis of financial information and forecasts provided to the Banks by the
Borrower in connection with the Bank's evaluation and underwriting of the
Aggregate Credit Facility after leaving a margin in favor of the Borrower which
the Borrower and the Banks have mutually agreed is fair. Accordingly, the
Borrower and the Banks have mutually agreed that the Borrower's failure to
comply with the express terms of any financial covenant shall be deemed material
for the purposes of this Agreement.

SECTION 9. DEFAULT

SECTION 9.1. Events of Default. The occurrence and continuance of any
of the following events after any applicable cure period, if any, shall
constitute a default under this Agreement, the Notes and the other Loan
Documents (an "Event of Default"):

(a) The Borrower shall fail to pay within ten (10) days of the
date when due and payable, whether at the due date thereof or at a date
fixed for prepayment thereof by acceleration thereof or otherwise, (i)
any outstanding principal amount of any Revolving Working Capital Loan
or any Project Advance Loan or any of the Notes; (ii) any amount of
accrued and unpaid interest thereon; or (iii) any fees, expenses or
other amounts payable under this Agreement, the Notes or the other Loan
Documents; or

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(b) The Borrower shall fail to perform any term, covenant or
agreement contained in SECTIONS 6.4., 6.12. or 6.19. of this Agreement;
or

(d) The Borrower shall fail to perform any other term,
covenant or agreement (other than in respect of terms, covenants or
agreements covered elsewhere in this SECTION 9.) and such default shall
continue for thirty (30) days after notice thereof has been sent to the
Borrower by the Agent or any Bank, unless the Borrower shall be
diligently pursuing the cure thereof, but in no event for more than
ninety (90) days; or

(e) Any written representation or warranty of the Borrower,
made in or in connection with this Agreement, the Notes or the other
Loan Documents or in any certificate or report or any other document or
instrument delivered hereunder or thereunder shall prove to have been
false in any material respect upon the date when made or deemed to have
been made and the result of which is materially adverse to the Agent or
any Bank; or

(f) The Borrower or any of its Affiliates shall (A) fail to
pay at maturity (unless disputed in good faith), or within any
applicable period of grace, any obligation to any party (including
without limitation the Agent or any Bank) in excess of One Hundred
Thousand Dollars ($100,000) for borrowed monies or advances, or (B)
fail to observe or perform any term, covenant or agreement evidencing
or securing obligations for borrowed monies or advances, or relating to
such use of real or personal property, the result of which failure is
to permit [i] the holder or holders of such obligations to cause such
obligations to become due prior to its stated maturity or [ii] the
lessor of such real or personal property to terminate the Borrower's or
any Affiliate's use thereof prior to the specified term therefor; or

(g) The Borrower or the General Partner shall (i) apply for or
consent in writing to the appointment of, or the taking of possession
by, a receiver, custodian, trustee, liquidator or similar official of
itself or of all or a substantial part of its properties and assets;
(ii) admit in writing that it cannot generally pay its debts as such
debts become due; (iii) make a general assignment for the benefit of
its creditors; (iv) commence a voluntary case under the Federal
Bankruptcy Code (as now or hereafter in effect); (v) commence any case
or proceeding under any law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or adjustment of debts, or
any other law providing for the relief of debtors; (vi) fail to contest
in a timely or appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the Federal
Bankruptcy Code or other law; (vii) commence any action under the laws
of its jurisdiction of

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incorporation or organization similar to any of the foregoing; or
(viii) take any corporate action for the purpose of authorizing any of
the foregoing; or

(h) A proceeding or case shall be commenced, without the
application or consent of the Borrower or the General Partner in any
court of competent jurisdiction, seeking (i) the liquidation,
reorganization, dissolution, winding up, or composition or readjustment
of its debts; (ii) the appointment of a trustee, receiver, custodian,
liquidator or the like of it or of all or any substantial part of its
properties and assets; or (iii) similar relief in respect of it, under
any law relating to bankruptcy, insolvency, reorganization, winding-up
or composition or adjustment of debts or any other law providing for
the relief of debtors, and such proceeding or case shall continue
undismissed, or unstayed and in effect, for a period of ninety (90)
days or an order for relief shall be entered in an involuntary case
under the Federal Bankruptcy Code, against the Borrower or the General
Partner; or action under the laws of the jurisdiction of incorporation
or organization of the Borrower or the General Partner similar to any
of the foregoing shall be taken with respect to the Borrower or the
General Partner and shall continue unstayed and in effect for any
period of ninety (90) days; or

(i) A final and nonappealable judgment or order for the
payment of money shall be entered against the Borrower or any of its
Affiliates by any court, or a warrant of attachment or execution or
similar process shall be issued or levied against property of the
Borrower or such Affiliates, that in the aggregate for that portion not
fully covered by insurance exceeds $250,000 in value and such judgment,
order, warrant or process shall continue undischarged or unstayed for
thirty (30) days; or

(j) The Borrower shall fail to pay when due an amount or
amounts aggregating in excess of $250,000 that it shall have become
liable to pay to the PBGC or to a plan under Title IV of ERISA; intent
to terminate a plan or plans shall be filed under Title IV of ERISA by
the Borrower, any member of the Controlled Group, any plan
administrator or any combination of the foregoing; the PBGC shall
institute proceedings under Title IV of ERISA to terminate or to cause
a trustee to be appointed to administer any such plan or plans; a
proceeding shall be instituted by a fiduciary of any such plan or plans
against the Borrower and such proceedings shall not have been dismissed
within thirty (30) days thereafter; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree
adjudicating that any such plan or plans must be terminated; or

(k) The Borrower's independent certified public accountants
shall refuse to deliver an opinion with no Qualification with respect
to any Financial Statements required to be delivered under SECTION 6.1.
of this Agreement; or

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(l) (A) If this Agreement, the Notes or any of the other Loan
Documents shall be canceled, terminated, revoked or rescinded otherwise
than in accordance with the terms thereof or with the express prior
written agreement, consent or approval of the Banks; or (B) if any
action at law, in equity or other legal proceeding to cancel, revoke or
rescind this Agreement, the Notes or any of the other Loan Documents
shall be commenced by or on behalf of the Borrower, or any of its
Affiliates or any of their stockholders, and if any such matter under
this clause (B) is not dismissed within ninety (90) days (during which
time the Borrower must be diligently pursuing such dismissal); or

(m) The Borrower or any of its Affiliates shall be indicted
for a federal crime, a punishment for which could include the
forfeiture of any assets of the Borrower or such Affiliates having a
fair market value in excess of $250,000; or

(n) The Borrower shall fail to comply with its obligations set
forth in SECTION 11. hereof; or

(o) An event of default (as defined in the applicable
agreement) occurs and is continuing beyond any applicable notice and
cure period under the Notes or any other Loan Document; or

(p) More than fifty percent (50%) of the members of the
General Partner's board of directors shall resign or be replaced in any
consecutive twelve (12) calendar month period; or

(q) The Borrower shall commence construction of any apartment
project without having arranged funding reasonable satisfactory to the
Agent and the Banks to complete the Project in question.

SECTION 10. REMEDIES

SECTION 10.1. Remedies. If any one or more of the Events of Default
specified in SECTION 9.1(g) or SECTION 9.1(h) shall occur and be continuing, the
obligation of the Banks to make Revolving Working Capital Loans or Project
Advance Loans shall immediately terminate and the unpaid principal amount of the
Loans, together with accrued interest thereon and all other obligations shall
become immediately and automatically due and payable without presentment,
demand, protest or notice of any kind. Upon the occurrence of any other Event of
Default, and at any time thereafter while such Event of Default is continuing,
immediately and automatically, at the Banks' option and upon the Banks' written
declaration to the Borrower:

(a) the Banks' obligations to make Revolving Working Capital
Loans and Project Advance Loans shall terminate;

(b) the unpaid principal amount of the Loans, together with
accrued interest thereon and all other obligations shall become
immediately due and payable without presentment,

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demand, protest or further notice of any kind, all of which are hereby
expressly waived;

(c) the Agent and/or the Banks may exercise all rights of
setoff granted to the Agent or the Banks or any Affiliate thereof
pursuant to this Agreement, including the right of setoff against any
assets (including deposit accounts) of Borrower (or of any of its
Affiliates) in the possession, control or custody of the Agent or the
Banks provided that neither the Agent nor the Banks may exercise such
setoff rights as to deposit accounts solely consisting of tenant
security deposits and to amounts held in trust by the Agent or the
Banks, as applicable, as registrar and transfer agent for distribution
to stockholders; and

(d) the Agent and/or the Banks may exercise any and all other
rights and remedies they have under this Agreement, the Notes or the
other Loan Documents or at law or in equity, and proceed to protect and
enforce its rights by any action at law, in equity or other appropriate
proceeding.

Notwithstanding the foregoing, in the event that the Borrower shall
default in the provisions of SECTION 7.10. or 9.1.(p), but otherwise be in full
compliance with the terms of this Agreement, then the obligation of the Banks to
make Revolving Working Capital Loans and Project Advance Loans shall terminate,
and the unpaid principal amount be due and payable, on the day ninety (90) days
from the initial default under SECTION 7.10. or 9.1.(p), as applicable, IT BEING
EXPRESSLY AGREED, HOWEVER, upon the occurrence of any other Default or Event of
Default before, during or after this ninety (90) day period, that the Banks
shall have during this ninety (90) day period all of their remedies including
without limitation the right to terminate their obligations to make Revolving
Working Capital Loans and Project Advance Loans or to accelerate the outstanding
principal balance thereof.

SECTION 10.2. Distribution of Proceeds. In the event that, following
the occurrence and during the continuance of any Default or Event of Default,
the Agent or the Banks receive any monies in connection with the enforcement of
this Agreement, the Notes or any of the other Loan Documents, such monies shall
be distributed for application as follows:

(a) first, to the payment of, or (as the case may be) the
reimbursement of the Agent and the Banks for, all reasonable costs,
expenses and disbursements (including reasonable attorneys' fees) which
shall have been incurred or sustained in accordance with the terms of
this Agreement by the Agent or the Banks in connection with the
collection of such monies by the Agent or the Banks, for the exercise,
protection or enforcement by the Agent or the Banks of all or any of
the rights, remedies, powers and privileges of the Agent or the Banks
under this Agreement, the Notes or any of the other Loan Documents;

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(b) second, to payment and satisfaction in full (or other
provision for payment in full satisfaction to the Agent and the Banks)
of all of the Obligations; and

SECTION 11. ASSIGNMENT

SECTION 11.1. No Assignment or Delegation by the Borrower. The Borrower
shall not assign or delegate any of its rights or duties under this Agreement.

SECTION 11.2. Participation and Assignment by the Banks. The Banks may
sell total or proportional participations in their rights and interests
hereunder, but no such sale shall release the selling Bank of its duties under
this Agreement. Except as to the sale of participations as herein permitted,
neither Bank shall assign any of its rights, interests or duties under this
Agreement.

SECTION 12. THE AGENT

SECTION 12.1. Appointment. Each of the Banks hereby irrevocably
designates and appoints First Union National Bank of North Carolina as the agent
(the "Agent") of such Bank under this Agreement and the other Loan Documents and
each such Bank irrevocably authorizes the Agent, to take such action on its
behalf under the provisions of this Agreement and the other Loan Documents and
to exercise such powers and perform such duties as are expressly delegated to
the Agent by the terms of this Agreement and such other Loan Documents, together
with such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Agreement or such other Loan
Documents, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein and therein, or any fiduciary relationship with any
Bank, and no implied covenants, functions, responsibilities, duties, obligations
or liabilities shall be read into this Agreement or the other Loan Documents or
otherwise exist against the Agent. To the extent any provision of this Agreement
permits action by the Agent, the Agent shall, subject to the provisions of this
SECTION 12., take such action if directed in writing to do so by any Bank.

SECTION 12.2. Delegation of Duties. The Agent may execute any of its
respective duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by the Agent with reasonable care.

SECTION 12.3. Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-

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in-fact, subsidiaries or affiliates shall be (a) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement or the other Loan Documents (except for its or such Person's own
gross negligence or willful misconduct), or (b) responsible in any manner to any
of the Banks for any recitals, statements, representations or warranties made by
the Borrower or any officer thereof contained in this Agreement or the other
Loan Documents or in any certificate, report, statement or other document
referred to or provided for in, or received by the Agent under or in connection
with, this Agreement or the other Loan Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
the other Loan Documents or for any failure of the Borrower to perform its
obligations hereunder or thereunder. The Agent shall be under no obligation to
any Bank to ascertain or to inquire as to the observance or performance of any
of the agreements contained in, or conditions of, this Agreement, or to inspect
the properties, books or records of the Borrower.

SECTION 12.4. Reliance by Agent. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower), independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement and the
other Loan Documents unless it shall first receive such advice or concurrence of
the Banks as it deems appropriate or it shall first be indemnified to its
satisfaction by the Banks against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action except
for its own gross negligence or willful misconduct. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
and the Notes in accordance with a request of the Banks, and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
the Banks and all future holders of the Notes.

SECTION 12.5. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless it has received notice from a Bank or the Borrower referring to
this Agreement, describing such default or Event of Default and stating that
such notice is a "notice of default". In the event that the Agent receives such
a notice, it shall promptly give notice thereof to the Banks. The Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Banks; provided that unless and until the Agent shall
have received such directions, the Agent may (but shall not be

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obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Banks.

SECTION 12.6. Non-Reliance on the Agent and Other Banks. Each Bank
expressly acknowledges that neither the Agent nor any of its respective
officers, directors, employees, agents, attorneys-in-fact, subsidiaries or
affiliates has made any representations or warranties to it and that no act by
the Agent hereinafter taken, including any review of the affairs of the
Borrower, shall be deemed to constitute any representation or warranty by the
Agent to any Bank. Each Bank represents to the Agent that it has, independently
and without reliance upon the Agent or any other Bank, and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, operations, property, financial and
other condition and creditworthiness of the Borrower and made its own decision
to make its Loans and enter into this Agreement. Each Bank also represents that
it will, independently and without reliance upon the Agent or any other Bank,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Banks by the Agent hereunder
or by the other Loan Documents, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of the Borrower which may come into the possession of the Agent
or any of its respective officers, directors, employees, agents,
attorneys-in-fact, subsidiaries or affiliates.

SECTION 12.7. Indemnification. The Banks agree to indemnify the Agent
in its capacity as such and (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably according to
the respective amounts of the Proportionate Share, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes
or any Obligations) be imposed on, incurred by or asserted against the Agent in
any way relating to or arising out of this Agreement or the other Loan
Documents, or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing; provided that no
Bank shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting

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solely from the Agent's bad faith, gross negligence or willful misconduct. The
agreements in this SECTION 12.7. shall survive the payment of the Notes, any of
the Obligations and all other amounts payable hereunder and the termination of
this Agreement.

SECTION 12.8. The Agent in Its Individual Capacity. The Agent and its
subsidiaries and affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower as though the Agent
were not an Agent hereunder. With respect to any Loan made or renewed by it and
any Note issued to it, the Agent shall have the same rights and powers under
this Agreement and the other Loan Documents as any Bank and may exercise the
same as though it were not an Agent, and the terms "Bank" and "Banks" shall
include the Agent in its individual capacity.

SECTION 12.9. Resignation of Agent; Successor Agents. Subject to the
appointment and acceptance of a successor as provided below, the Agent may
resign at any time by giving thirty (30) days prior notice thereof to the Banks
and the Borrower. Upon any such resignation, the Banks shall have the right to
appoint a successor Agent, as the case may be, which successor, if not Wachovia,
shall have minimum capital and surplus of at least $500,000,000, with the
consent of the Borrower, which shall not be unreasonably withheld or delayed. If
no successor Agent shall have been so appointed by the Banks and shall have
accepted such appointment within fifteen (15) days after the retiring Agent's
giving of notice of resignation, then the retiring Agent, on behalf of the
Banks, shall appoint a successor Agent, which successor shall have minimum
capital and surplus of at least $500,000,000; provided, however, Borrower shall
have the right to approve any such successor agent, which approval shall not be
unreasonably withheld or delayed. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, as the case may be, such successor Agent
shall thereupon succeed to and become vested with all rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation hereunder as Agent, the provisions of this SECTION 12. shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Agent.

SECTION 13. MISCELLANEOUS

SECTION 13.1. Waivers.

SECTION 13.1.1. The Borrower waives presentment, demand, notice,
protest, notice of acceptance, notice of loans made, credit extended, collateral
received or delivered or other action taken in reliance hereon and all other
demands and notices of any description. With respect both to the Obligations and
any collateral now or hereafter securing the Aggregate Credit Facility, the
Borrower assents to any extension or postponement of the time of payment or any
other indulgence, to the addition

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or release of any party or Person primarily or secondarily liable therefor, to
the acceptance of partial payments thereon and the settlement, compromising or
adjusting of any thereof, all in such manner and at such time or times as the
Banks may deem advisable in its sole and absolute discretion. The Agent and the
Banks shall have no duty, other than to act in a commercially reasonable manner,
as to the preservation of rights or remedies against prior parties, or as to the
preservation of any rights and remedies pertaining thereto beyond the safe
custody thereof. Neither the Agent nor the Banks shall be deemed to have waived
any of their respective rights and remedies with respect to the Obligations
unless such waiver shall be in writing and signed by the Banks and the Agent, as
applicable. No delay or omission on the part of the Agent or the Banks in
exercising any right or remedy shall operate as a waiver of such right or remedy
or any other right or remedy. A waiver on any one occasion shall not be
construed as a bar to any subsequent enforcement by the Agent or the Banks. All
rights and remedies of the Agent or the Banks with respect to the Obligations
shall be cumulative and may be exercised singularly or concurrently.

SECTION 13.1.2. The Borrower does hereby waive any claim in tort,
contract or otherwise which the Borrower may now have against the Agent, the
Banks or any of their respective officers, directors, agents, or employees which
may arise out of the relationship among the Borrower, the Agent and the Banks
with respect to the negotiation and documentation of this Credit Agreement. The
Borrower further waives any and all claims, causes of action, losses, damages or
expenses which may arise out of any relationship between the Borrower, the Agent
and the Banks which the Borrower may have as of the Closing Date with respect to
the negotiation and documentation of this Credit Agreement. The Borrower
acknowledges that it makes these waivers and release knowingly, voluntarily and
only after considering the ramifications of this waiver and release with its
attorneys.

SECTION 13.2. Notices. All notices, requests, demands or other
communications required by this Agreement shall be made in writing, and unless
otherwise specifically provided herein, shall be deemed to have been duly given
when delivered by hand or mailed first class mail postage prepaid, or, in the
case of telecopy or facsimile notice, when transmitted, answer back received,
addressed as follows, or to such other address as either party may designate in
writing:

If to the Borrower:

Summit Properties Partnership, L.P.
c/o Summit Properties Inc.
212 S. Tryon Street, Suite 500
Charlotte, North Carolina 28281
Attention: Michael G. Malone, Senior Vice President & General
Counsel

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with a copy to:

Kennedy Covington Lobdell & Hickman, L.L.P.
NationsBank Corporate Center
Suite 4200, 100 N. Tryon Street
Charlotte, North Carolina 28202-4006
Attention: David H. Jones, Esq.

If to Wachovia:

Wachovia Bank of North Carolina, N.A.
400 South Tryon Street
P.O. Box 31608
Charlotte, North Carolina 28231
Attention: Wayne A. Osella, Senior Vice President

with a copy to:

Womble Carlyle Sandridge & Rice, PLLC
Post Office Drawer 84
Winston-Salem, North Carolina 27102
Attention: Kenneth A. Moser, Esq.

If to FUNB:

First Union National Bank of North Carolina
Charlotte Real Estate Group
201 South College Street, CP-18
Charlotte, North Carolina 28288-0146
Attention: Thomas D. Pinchak, Senior Vice President

with a copy to:

Parker Poe Adams & Bernstein L.L.P.
2500 Charlotte Plaza
Charlotte, North Carolina 28244
Attention: W. Samuel Woodard, Esq.

If to Agent:

First Union National Bank of North Carolina
Charlotte Real Estate Group
201 South College Street, CP-18
Charlotte, North Carolina 28288-0146
Attention: Thomas D. Pinchak, Senior Vice President

with a copy to:

Parker Poe Adams & Bernstein L.L.P.
2500 Charlotte Plaza
Charlotte, North Carolina 28244
Attention: W. Samuel Woodard, Esq.

SECTION 13.3. Fees and Expenses. The Borrower will pay on demand all
reasonable legal fees and out-of-pocket expenses

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incurred by the Agent and the Banks in connection with (i) the preparation,
execution and delivery of this Agreement, the Notes or the other Loan Documents;
(ii) the default or collection of the Obligations; or (iii) the exercise,
preservation or enforcement by the Agent or the Banks of any of their respective
rights and remedies thereunder, including, without limitation, reasonable fees
and expenses of outside legal counsel (including those of local counsel when
desirable), accounting, auditing, consulting, brokerage or other similar
professional fees or expenses (such fees being limited to actual fees incurred
based on actual number of hours worked at normal hourly rates), and any fees or
expenses associated with any travel or other costs relating to any examinations
conducted in connection with the Obligations or any collateral now or hereafter
securing the Obligations, and the amount of all such expenses shall, until paid,
bear interest at the rate applicable to principal hereunder (including any
default rate).

SECTION 13.4. Term of Agreement. This Agreement shall continue in force
and effect so long as the Banks have any commitment to make Loans hereunder or
any of the Obligations shall be outstanding.

SECTION 13.5. Taxes.

(a) All payments made by the Borrower on account of this Agreement
shall be made free and clear of, and without deduction for or on account of, any
present or future stamp or other taxes, levies, imposts, duties, charges, fees,
deductions, withholdings, restrictions or conditions of any nature whatsoever
now or hereafter imposed, levied, collected, withheld or assessed by any country
(or by any political subdivision or taxing authority thereof or therein),
excluding income and franchise taxes now or hereafter imposed by the country and
state in which the Agent or any Bank's Eurodollar Office is located or any
political subdivision or taxing authority thereof or therein (each such
non-excluded tax being called a "Tax" and, collectively, "Taxes"). If any Taxes
are required to be withheld from any amounts payable to the Agent or any Bank
pursuant to this Agreement or the other Loan Documents, then the amounts so
payable to the Agent or any Bank shall be increased to the extent necessary to
yield to the Agent or any Bank (after payment of all Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts specified herein.
Whenever any Tax is payable by the Borrower, as promptly as possible thereafter,
the Borrower shall send the Agent or any Bank an original official receipt
showing payment thereof. The Borrower shall indemnify the Agent or any Bank for
any incremental taxes, interest or penalties that may become payable by them as
a consequence of the failure of the Borrower to pay any Taxes or the failure of
the Borrower to deliver to the Agent or any Bank an original official receipt
therefor.

(b) The Borrower shall indemnify the Agent and the Banks for and hold
the Banks harmless from any present or future

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claim of liability for any registration charge or any stamp, excise or similar
taxes, including any interest equalization tax, and any penalties or interest
with respect thereto, that may be imposed by any jurisdiction in connection with
this Agreement.

SECTION 13.6. Schedules and Exhibits. The Schedules and Exhibits which
are attached hereto are and shall constitute a part of this Agreement.

SECTION 13.7. Governing Law; Consent to Jurisdiction. This Agreement,
the Notes and the other Loan Documents, and the rights and obligations of the
parties hereunder and thereunder, shall be governed by and construed and
interpreted in accordance with, the laws of the State of North Carolina. The
Borrower agrees that any suit for the enforcement of this Agreement, the Notes
or the other Loan Documents may be brought in the courts of the State of North
Carolina or any federal court sitting therein and consents to the non-exclusive
jurisdiction of such court and to service of process in any such suit being made
upon the Borrower by mail at the address referred to in SECTION 13.3. hereof.

SECTION 13.8. Survival of Representations. All representations,
warranties, covenants and agreements contained in this Agreement, the Notes or
the other Loan Documents shall survive the Closing Date and continue in full
force and effect until payment and the performance of the Obligations in full.

SECTION 13.9. Amendments. No modification or amendment of this
Agreement, the Notes or the other Loan Documents shall be effective unless same
shall be in writing and signed by all of the parties hereto.

SECTION 13.10. Counterparts. This Agreement may be signed in any number
of counterparts with the same effect as if the signatures hereto and thereto
were upon the same instrument.

SECTION 13.11. No Agency Relationship. Neither the Agent nor the Banks
are the agent or representative of the Borrower nor is the Borrower the agent or
representative of the Banks or the Agent. This Agreement shall not make the
Agent or the Banks liable to any third party, including, but not limited to, the
Borrower's existing shareholders, directors, officers, creditors or any other
party in interest.

SECTION 13.12. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.

SECTION 13.13. Headings. All article, section and subsection headings
in this Agreement, the Notes and the other Loan Documents are included for
convenience of reference only and

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shall not constitute a part of this Agreement, the Notes or the other Loan
Documents for any other purpose.

SECTION 13.14. Reinstatement. This Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any amount
received by the Agent or the Banks in respect of the Obligations is rescinded or
must otherwise be restored or returned by the Agent or the Banks upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or upon the appointment of any intervener or conservator of, or trustee
or similar official for, the Borrower or any substantial part of its properties
or assets, or otherwise, all as though such payments had not been made.

SECTION 13.15. Interpretation and Construction. The following rules
shall apply to the interpretation and construction of this Agreement, the Notes
and the other Loan Documents unless the context requires otherwise: (a) the
singular includes the plural and the plural includes the singular; (b) words
importing any gender include the other genders; (c) references to statutes are
to be construed as including all statutory provisions consolidating, amending or
replacing the statute to which reference is made and all regulations promulgated
pursuant to such statutes; (d) references to "writing" shall include printing,
photocopy, typing, lithography and other means of reproducing words in a
tangible, visible form; (e) the words "including", "includes" and "included"
shall be deemed to be followed by the words "without limitation"; (f) references
to the introductory paragraph, preliminary statements, articles, sections (or
subdivisions of sections), exhibits or schedules are to those of this Agreement
unless otherwise indicated; (g) references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications to such instruments, but only to the extent that such amendments
and other modifications are permitted or not prohibited by the terms of this
Agreement; (h) references to Persons include their respective permitted
successors and assigns; and (i) "or" is not exclusive.

SECTION 13.16. Relation to Other Documents. Nothing in this Agreement
shall be deemed to amend or relieve the Borrower of its obligations under the
Notes or any of the other Loan Documents, and to the extent that the provisions
of any of the other Loan Documents allow the Borrower to take certain actions,
or not take certain actions, with regard for example to the granting of liens,
the transfers of properties or assets, the incurring of indebtedness and similar
matters, the Borrower nevertheless shall be fully bound by the provisions of
this Agreement. If any provisions herein are inconsistent with any provisions of
the other Loan Documents, the provisions herein shall govern (it being agreed
that provisions of the other Loan Documents which may be more favorable than
similar provisions herein shall not for that reason by deemed inconsistent with
the provisions herein).

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SECTION 13.17. Indemnification. The Borrower hereby indemnifies and
holds harmless the Agent, the Banks, their respective officers, agents,
attorneys, directors and employees (each such Person herein referred to as an
"Indemnitee") from and against any and all claims, damages, losses, liabilities,
costs or expenses whatsoever (other than damages caused by the gross negligence
or wilful misconduct of the Indemnitee) which any such Indemnitee may incur (or
which may be claimed against such Indemnitee by any person or entity whatsoever)
by reason of or in connection with this Agreement, the Notes, or any of the
other Loan Documents.

In case any action or proceeding is brought against any Indemnitee in
respect of which indemnity may be sought under this Agreement, such Indemnitee
shall give notice of any such action or proceeding to the Borrower and may
require the Borrower, upon such notice, to assume the defense of the action or
proceeding; provided that failure of any Indemnitee to give such notice shall
not relieve the Borrower from any of its obligations under this Section. Upon
receipt of notice from any such Indemnitee, the Borrower shall resist and defend
such action or proceeding at the Borrower's expense. The obligations of the
Borrower under this Section shall survive payment of the Aggregate Credit
Facility and termination of this Agreement.

SECTION 13.18. Arbitration. Upon demand of any party hereto, whether
made before or after institution of any judicial proceeding, any dispute, claim
or controversy arising out of, connected with or relating to this Agreement, the
Notes or any of the other Loan Documents ("Disputes") between or among parties
to this Agreement shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, claims brought as class actions, claims arising from
documents executed in the future, or claims arising out of or connected with the
transaction reflected by this Agreement, the Notes or any of the other Loan
Documents.

Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in the city in which the office of the
Agent is located. The expedited procedures set forth in Rule 51, et seq., of the
Arbitration Rules shall be applicable to claims of less than $1,000,000. All
applicable statutes of limitation shall apply to any Dispute. A judgment upon
the award may be entered in any court having jurisdiction. The panel from which
all arbitrators are selected shall be comprised of licensed attorneys. The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction, state or federal, of the state where
the hearing will be conducted.

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SECTION 13.19. Preservation and Limitation of Remedies. Notwithstanding
the preceding binding arbitration provisions, the Agent, the Banks and the
Borrower agree to preserve, without diminution, certain remedies that any party
hereto may employ or exercise freely, either along, in conjunction with or
during a Dispute. The Agent, the Banks and the Borrower shall have the right to
proceed in any court of proper jurisdiction or by self-help to exercise or
prosecute the following remedies, as applicable: (i) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and filing an involuntary bankruptcy
proceeding; and (ii) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.

The Agent, the Borrower and the Banks agree that they shall not have a
remedy of punitive or exemplary damages against one another in any Dispute and
hereby waive any right or claim to punitive or exemplary damages they have now
or which may arise in the future in connection with any Dispute whether the
Dispute is resolved by arbitration or judicially.

<PAGE> 72

IN WITNESS WHEREOF, the Borrower, the Agent and the Banks have caused
this Agreement to be executed under seal by their respective duly authorized
officers as of the date first set forth above.

BORROWER:

SUMMIT PROPERTIES PARTNERSHIP, L.P.,
doing business in North Carolina as
Summit Properties Partnership,
Limited Partnership [SEAL]

By: SUMMIT PROPERTIES INC., doing business
in North Carolina as Summit Properties Real
Estate, Inc., General Partner

Attest: By:
------------------------- -------------------------------
President
---------------------
By:
----------------------------

Secretary
------------------

[CORPORATE SEAL]

FUNB:

FIRST UNION NATIONAL BANK OF NORTH
CAROLINA

By:
----------------------------------------
Thomas D. Pinchak, Senior Vice President

ATTEST:

- --------------------------------
Assistant Secretary

[BANK SEAL]

WACHOVIA:

WACHOVIA BANK OF NORTH CAROLINA, N.A.

By:
--------------------------------------
Wayne A. Osella, Senior Vice President

ATTEST:

- --------------------------------
Assistant Secretary

[BANK SEAL]

66
<PAGE> 73

AGENT:

FIRST UNION NATIONAL BANK OF NORTH
CAROLINA

By:
----------------------------------------
Thomas D. Pinchak, Senior Vice President

ATTEST:

- --------------------------------
Secretary
- ---------------------

[BANK SEAL]

67
<PAGE> 74

EXHIBIT A-1
-----------

FORM OF ADVANCE REQUEST
UNDER REVOLVING WORKING CAPITAL FACILITY

First Union National Bank of North Carolina
Charlotte Real Estate Group
201 South College Street, CP-18
Charlotte, North Carolina 28288-0146
Attention: Thomas D. Pinchak, Senior Vice President

Re: $150,000,000 Credit Agreement dated as of November 18, 1996
(the "Credit Agreement")/Advance Request under Revolving
Working Capital Facility

Gentlemen:

Pursuant to Section 2.1.4. of the Credit Agreement, the undersigned Borrower
hereby confirms its request made ____________, 19___ for an Advance under the
Revolving Working Capital Credit Facility in the amount of $___________ to be
disbursed on ___________, 19___.

The undersigned hereby represents and warrants that the representations and
warranties contained in the Agreement are true and accurate on the date hereof
and that no Event of Default under the Credit Agreement has occurred and is
continuing or will result from the requested Advance.

BORROWER:

SUMMIT PROPERTIES PARTNERSHIP, L.P.

By: Summit Properties Inc., General Partner

By:
------------------------------------
Title: President
------------------------

68
<PAGE> 75

EXHIBIT A-2
-----------

FORM OF ADVANCE REQUEST
UNDER PROJECT ADVANCE FACILITY

First Union National Bank of North Carolina
Charlotte Real Estate Group
201 South College Street, CP-18
Charlotte, North Carolina 28288-0146
Attention: Thomas D. Pinchak, Senior Vice President

Re: $150,000,000 Credit Agreement dated as of November 18, 1996 (the
"Credit Agreement")/Advance Request under Project Advance Facility for:

--------------------------------------------------------
(insert name of Project)

Gentlemen:

Pursuant to Section 2A.1.4. of the Credit Agreement, the undersigned Borrower
hereby confirms its request made ___________, 19___ for an Advance under the
Project Advance Facility in the amount of $___________ to be disbursed on
___________, 19___.

BORROWER:

SUMMIT PROPERTIES PARTNERSHIP, L.P.

By: Summit Properties Inc., General Partner

By:
---------------------------------------
Title: President
----------------------

69
<PAGE> 76

EXHIBIT B
---------

FORM OF REPORT OF CHIEF FINANCIAL OFFICER

THE UNDERSIGNED BORROWER HEREBY CERTIFIES THAT:

This Report is furnished pursuant to Section 6.1. of the $150,000,000
Credit Agreement dated as of November 18, 1996 (the "Credit Agreement"). Unless
otherwise defined herein, the terms used in this Report have the meanings given
to them in the Credit Agreement.

The figures set forth in Schedule A attached hereto are for determining
compliance by the Borrower with the financial covenants contained in the Credit
Agreement and set forth in such Schedule A and are true and complete as of the
date hereof.

BORROWER:

SUMMIT PROPERTIES PARTNERSHIP, L.P.

By: Summit Properties Inc., General Partner

By:
----------------------------------
Title:
-------------------------------

- -----------------------------
Date

70
<PAGE> 77

SCHEDULE A
----------

EXHIBIT B
---------

FINANCIAL COVENANTS AND SECURED QUARTERLY REPORTING

I. CONSOLIDATED TOTAL DEBT TO MARKET CAPITALIZATION (SECTION 8.1.1)

A. CONSOLIDATED TOTAL DEBT (ITEMIZE) $_______

B. MARKET CAPITALIZATION (SHOW CALCULATION) $_______

Required: .60 or less

Actual: _______

II. ADJUSTED FUNDS FLOW TO CONSOLIDATED TOTAL DEBT (SECTION 8.1.2)

A. ADJUSTED FUNDS FLOW (ITEMIZE) $_________________

B. CONSOLIDATED TOTAL DEBT (ITEMIZE) $_________________

Required: .15 or greater

Actual: ________

III. NET OPERATING INCOME FROM UNENCUMBERED ASSETS DIVIDED BY
.16 TO UNSECURED CONSOLIDATED TOTAL DEBT (SECTION 8.1.3)

A. NET OPERATING INCOME FROM
UNENCUMBERED ASSETS (ITEMIZE) $___________________

B. UNSECURED CONSOLIDATED TOTAL DEBT $___________________

Required: 1.0 or greater

Actual: _________

IV. MAXIMUM SECURED DEBT DIVIDED BY CONSOLIDATED TOTAL ASSETS
(SECTION 8.1.4)

Required: .45 or less*

Actual: ________

(*until December 31, 1996; thereafter must be .40 or less)

V. MAXIMUM SECURED RECOURSE DEBT (SECTION 8.1.5)

A. SECURED RECOURSE DEBT (ITEMIZE) $______________

71
<PAGE> 78

Required: less than $56,000,000

Actual: ________

VI. DIVIDENDS PAID YEAR TO DATE (ITEMIZE) (SECTION 7.2) $__________

VII. FUNDS FROM OPERATION YEAR TO DATE (ITEMIZE) (SECTION 1.42) $__________

VIII. NO DEFAULT. By executing this certificate, the Borrower and the signing
officer certifies to the Agent and the Banks that the Borrower and the
officer know of no Defaults (as this term is defined in the Credit
Agreement pursuant to which this is provided) under the Credit
Agreement.

WITNESS my hand this day of , 19 .
----- --------------- ---

BORROWER:

SUMMIT PROPERTIES PARTNERSHIP, L.P.

By: Summit Properties Inc.

By:
---------------------------------

Title:
------------------------------

72
<PAGE> 79

EXHIBIT C-1
-----------

FORM OF FUNB REVOLVING WORKING CAPITAL CREDIT NOTE

REVOLVING WORKING CAPITAL CREDIT NOTE

$12,500,000 November 18, 1996
Charlotte, North Carolina

FOR VALUE RECEIVED, SUMMIT PROPERTIES PARTNERSHIP, L.P., a Delaware
limited partnership, doing business in North Carolina as Summit Properties
Partnership, Limited Partnership (the "Borrower"), promises to pay to the order
of

FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
association (the "Bank") at its office in Charlotte, North Carolina (or at such
other place or places as the Bank may designate) the principal sum of

TWELVE MILLION FIVE HUNDRED THOUSAND DOLLARS ($12,500,000) or so much as
may have been advanced and be outstanding under the terms and conditions for the
Revolving Working Capital Loans set forth in the $150,000,000 Credit Agreement
dated of even date by and among the Borrower; Wachovia Bank of North Carolina,
N.A.; the Bank, as Agent, and the Bank, as a Bank (the "Credit Agreement"). The
defined terms in the Credit Agreement are used in this Revolving Working Capital
Credit Note (the "Revolving Working Capital Credit Note") with the same meaning.
All of the terms, conditions, and covenants of the Credit Agreement are
expressly made a part of this Revolving Working Capital Credit Note by reference
in the same manner and with the same effect as if set forth herein at length and
any holder of this Revolving Working Capital Credit Note is entitled to the
benefits of and remedies provided in the Credit Agreement and other agreements
by and between the Borrower and the Bank. Interest shall accrue with respect to
the outstanding principal balance under this Revolving Working Capital Credit
Note at the LIBOR Rate as defined by, and as determined from time to time under,
the Credit Agreement, and all principal and interest under this Revolving
Working Capital Credit Note shall be due and payable as provided in the Credit
Agreement.

The Credit Agreement contains provisions with respect to the
acceleration of the maturity of this Revolving Working Capital Credit Note upon
the happening of certain stated events and for prepayments of the principal
hereof prior to maturity, all upon the terms and conditions specified therein.

If payment of the sums due hereunder is accelerated under the terms of
the Credit Agreement, or if any default should occur under the terms of this
Revolving Working Capital Credit

73
<PAGE> 80

Note or the Credit Agreement, the then outstanding principal balance and accrued
but unpaid interest under this Revolving Working Capital Credit Note shall bear
interest at the rate provided for in the Credit Agreement until such principal
and interest have been paid in full. In the event of such acceleration, this
Revolving Working Capital Credit Note shall become immediately due and payable,
without presentation, demand, protest or notice of any kind, all of which are
hereby waived by the Borrower. In the event this Revolving Working Capital
Credit Note is not paid when due at any stated or accelerated maturity, the
Borrower will pay, in addition to principal and interest, all costs of
collection, including reasonable attorneys' fees and related out-of-pocket
expenses actually incurred and determined without reference to any statutory
presumption.

Notwithstanding any other provision contained herein, no provision of
this Revolving Working Capital Credit Note shall require or permit the
collection from the Borrower of interest in excess of the maximum rate or amount
that the Borrower may be required or permitted to pay pursuant to any applicable
law.

IN WITNESS WHEREOF, the Borrower has caused this Revolving Working
Capital Credit Note to be executed as of the day and year first above written,
all pursuant to authority duly granted.

BORROWER:

SUMMIT PROPERTIES PARTNERSHIP,
L.P., doing business in North Carolina as
Summit Properties Partnership, Limited
Partnership

(SEAL)

BY: SUMMIT PROPERTIES INC., doing
business in North Carolina as Summit
Properties Real Estate, Inc.,
General Partner

(SEAL)

ATTEST: By:
------------------------- -----------------------------
Secretary President
--------------- -------------------

[CORPORATE SEAL]

74
<PAGE> 81

EXHIBIT C-2
-----------

FORM OF WACHOVIA REVOLVING WORKING CAPITAL CREDIT NOTE

REVOLVING WORKING CAPITAL CREDIT NOTE

$12,500,000 November 18, 1996
Charlotte, North Carolina

WACHOVIA BANK OF NORTH CAROLINA, N.A., a national banking
association (the "Bank") at its office in Charlotte, North Carolina (or at such
other place or places as the Bank may designate) the principal sum of

TWELVE MILLION FIVE HUNDRED THOUSAND DOLLARS ($12,500,000) or so much
as may have been advanced and be outstanding under the terms and conditions for
the Revolving Working Capital Loans set forth in the $150,000,000 Credit
Agreement dated of even date by and among the Borrower; First Union National
Bank of North Carolina, as Agent; First Union National Bank of North Carolina,
as a Bank, and the Bank (the "Credit Agreement"). The defined terms in the
Credit Agreement are used in this Revolving Working Capital Credit Note (the
"Revolving Working Capital Credit Note") with the same meaning. All of the
terms, conditions, and covenants of the Credit Agreement are expressly made a
part of this Revolving Working Capital Credit Note by reference in the same
manner and with the same effect as if set forth herein at length and any holder
of this Revolving Working Capital Credit Note is entitled to the benefits of and
remedies provided in the Credit Agreement and other agreements by and between
the Borrower and the Bank. Interest shall accrue with respect to the outstanding
principal balance under this Revolving Working Capital Credit Note at the LIBOR
Rate as defined by, and as determined from time to time under, the Credit
Agreement, and all principal and interest under this Revolving Working Capital
Credit Note shall be due and payable as provided in the Credit Agreement.

75
<PAGE> 82

If payment of the sums due hereunder is accelerated under the terms of
the Credit Agreement, or if any default should occur under the terms of this
Revolving Working Capital Credit Note or the Credit Agreement, the then
outstanding principal balance and accrued but unpaid interest under this
Revolving Working Capital Credit Note shall bear interest at the rate provided
for in the Credit Agreement until such principal and interest have been paid in
full. In the event of such acceleration, this Revolving Working Capital Credit
Note shall become immediately due and payable, without presentation, demand,
protest or notice of any kind, all of which are hereby waived by the Borrower.
In the event this Revolving Working Capital Credit Note is not paid when due at
any stated or accelerated maturity, the Borrower will pay, in addition to
principal and interest, all costs of collection, including reasonable attorneys'
fees and related out-of-pocket expenses actually incurred and determined without
reference to any statutory presumption.

IN WITNESS WHEREOF, the Borrower has caused this Revolving Working
Capital Credit Note to be executed as of the day and year first above written,
all pursuant to authority duly granted.

BORROWER:

SUMMIT PROPERTIES PARTNERSHIP,
L.P., doing business in North Carolina as
Summit Properties Partnership, Limited
Partnership

(SEAL)

BY: SUMMIT PROPERTIES INC., doing
business in North Carolina as Summit
Properties Real Estate, Inc.,
General Partner

(SEAL)

ATTEST:

By: By:
------------------------- -----------------------------
Secretary President
--------------- -------------------

[CORPORATE SEAL]

76
<PAGE> 83

EXHIBIT C-3
-----------

FORM OF FUNB PROJECT ADVANCE NOTE

PROJECT ADVANCE NOTE

$62,500,000 November 18, 1996
Charlotte, North Carolina

SIXTY TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($62,500,000) or so
much as may have been advanced and be outstanding under the terms and conditions
for the Project Advance Loans set forth in the $150,000,000 Credit Agreement
dated of even date by and among the Borrower; Wachovia Bank of North Carolina,
N.A.; the Bank, as Agent, and the Bank, as a Bank (the "Credit Agreement"). The
defined terms in the Credit Agreement are used in this Project Advance Note (the
"Project Advance Note") with the same meaning. All of the terms, conditions, and
covenants of the Credit Agreement are expressly made a part of this Project
Advance Note by reference in the same manner and with the same effect as if set
forth herein at length and any holder of this Project Advance Note is entitled
to the benefits of and remedies provided in the Credit Agreement and other
agreements by and between the Borrower and the Bank. Interest shall accrue with
respect to the outstanding principal balance under this Project Advance Note at
the LIBOR Rate as defined by, and as determined from time to time under, the
Credit Agreement, and all principal and interest under this Project Advance Note
shall be due and payable as provided in the Credit Agreement.

The Credit Agreement contains provisions with respect to the
acceleration of the maturity of this Project Advance Note upon the happening of
certain stated events and for prepayments of the principal hereof prior to
maturity, all upon the terms and conditions specified therein.

If payment of the sums due hereunder is accelerated under the terms of
the Credit Agreement, or if any default should

77
<PAGE> 84

occur under the terms of this Project Advance Note or the Credit Agreement, the
then outstanding principal balance and accrued but unpaid interest under this
Project Advance Note shall bear interest at the rate provided for in the Credit
Agreement until such principal and interest have been paid in full. In the event
of such acceleration, this Project Advance Note shall become immediately due and
payable, without presentation, demand, protest or notice of any kind, all of
which are hereby waived by the Borrower. In the event this Project Advance Note
is not paid when due at any stated or accelerated maturity, the Borrower will
pay, in addition to principal and interest, all costs of collection, including
reasonable attorneys' fees and related out-of-pocket expenses actually incurred
and determined without reference to any statutory presumption.

Notwithstanding any other provision contained herein, no provision of
this Project Advance Note shall require or permit the collection from the
Borrower of interest in excess of the maximum rate or amount that the Borrower
may be required or permitted to pay pursuant to any applicable law.

IN WITNESS WHEREOF, the Borrower has caused this Project Advance Note
to be executed as of the day and year first above written, all pursuant to
authority duly granted.

BORROWER:

SUMMIT PROPERTIES PARTNERSHIP,
L.P., doing business in North Carolina as
Summit Properties Partnership, Limited
Partnership

(SEAL)

BY: SUMMIT PROPERTIES INC., doing
business in North Carolina as Summit
Properties Real Estate, Inc.,
General Partner

(SEAL)

ATTEST:

By: By:
------------------------- -----------------------------
Secretary President
--------------- -------------------

[CORPORATE SEAL]

78
<PAGE> 85

EXHIBIT C-4
-----------

FORM OF WACHOVIA PROJECT ADVANCE NOTE

PROJECT ADVANCE NOTE

$62,500,000 November 18, 1996
Charlotte, North Carolina

SIXTY TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($62,500,000) or so
much as may have been advanced and be outstanding under the terms and conditions
for the Project Advance Loans set forth in the $150,000,000 Credit Agreement
dated of even date by and among the Borrower; First Union National Bank of North
Carolina, as Agent; First Union National Bank of North Carolina, as a Bank, and
the Bank (the "Credit Agreement"). The defined terms in the Credit Agreement are
used in this Project Advance Note (the "Project Advance Note") with the same
meaning. All of the terms, conditions, and covenants of the Credit Agreement are
expressly made a part of this Project Advance Note by reference in the same
manner and with the same effect as if set forth herein at length and any holder
of this Project Advance Note is entitled to the benefits of and remedies
provided in the Credit Agreement and other agreements by and between the
Borrower and the Bank. Interest shall accrue with respect to the outstanding
principal balance under this Project Advance Note at the LIBOR Rate as defined
by, and as determined from time to time under, the Credit Agreement, and all
principal and interest under this Project Advance Note shall be due and payable
as provided in the Credit Agreement.

79
<PAGE> 86

If payment of the sums due hereunder is accelerated under the terms of
the Credit Agreement, or if any default should occur under the terms of this
Project Advance Note or the Credit Agreement, the then outstanding principal
balance and accrued but unpaid interest under this Project Advance Note shall
bear interest at the rate provided for in the Credit Agreement until such
principal and interest have been paid in full. In the event of such
acceleration, this Project Advance Note shall become immediately due and
payable, without presentation, demand, protest or notice of any kind, all of
which are hereby waived by the Borrower. In the event this Project Advance Note
is not paid when due at any stated or accelerated maturity, the Borrower will
pay, in addition to principal and interest, all costs of collection, including
reasonable attorneys' fees and related out-of-pocket expenses actually incurred
and determined without reference to any statutory presumption.

IN WITNESS WHEREOF, the Borrower has caused this Project Advance Note
to be executed as of the day and year first above written, all pursuant to
authority duly granted.

BORROWER:

SUMMIT PROPERTIES PARTNERSHIP,
L.P., doing business in North Carolina as
Summit Properties Partnership, Limited
Partnership

(SEAL)

BY: SUMMIT PROPERTIES INC., doing
business in North Carolina as Summit
Properties Real Estate, Inc.,
General Partner

(SEAL)

ATTEST:

By: By:
------------------------- -----------------------------
Secretary President
--------------- -------------------

[CORPORATE SEAL]

80
<PAGE> 87

EXHIBIT D-1
-----------

FORM OF FUNB GUARANTY AGREEMENT

GUARANTY AGREEMENT

THIS GUARANTY AGREEMENT, made and entered into as of this 18th day of
November, 1996 (the "Guaranty"), is given by SUMMIT PROPERTIES INC., a Maryland
corporation, doing business in North Carolina as Summit Properties Real Estate,
Inc. (the "Guarantor") and extended to

FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
association, with its principal offices located in Charlotte, North Carolina
(the "Bank") for the benefit of SUMMIT PROPERTIES PARTNERSHIP, L.P., a Delaware
limited partnership, doing business in North Carolina as Summit Properties
Partnership, Limited Partnership (the "Borrower").

RECITALS:

A. The Bank has agreed to make certain financial accommodations
(collectively, the "Loans") to the Borrower pursuant to the terms and conditions
of the following:

(i) The Project Advance Note dated of even date, made by the
Borrower payable to the Bank in the original face amount of
$62,500,000 (the "Project Advance Note");

(ii) The Revolving Working Capital Credit Note dated of even date,
made by the Borrower payable to the Bank in the original face
amount of $12,500,000 (the "Revolving Working Capital Credit
Note" and, collectively with the Project Advance Note, the
"Notes");

(iii) The $150,000,000 Credit Agreement dated of even date by and
among the Borrower; Wachovia Bank of North Carolina, N.A.; the
Bank, as Agent, and the Bank, as a Bank (the "Credit
Agreement"); and

(iv) The other Loan Documents (as defined in the Credit Agreement).
All of the definitions used in the Credit Agreement are hereby
incorporated herein by reference and shall have the meaning
set forth in the Credit Agreement unless otherwise defined
herein.

B. Without this Guaranty, the Bank would be unwilling to extend and/or
modify the Loans to the Borrower.

81
<PAGE> 88

C. The Guarantor is the sole general partner of the Borrower. The
Guarantor has a vested pecuniary interest in the Borrower. Because of the direct
benefit to the Guarantor from the Loans made by the Bank to the Borrower, the
Guarantor agrees to guarantee to the Bank the obligations of the Borrower to the
Bank as set forth herein.

NOW, THEREFORE, in consideration of the Bank entering into the Credit
Agreement and making (and/or modifying) the Loans to the Borrower, Guarantor
hereby covenants, promises and agrees with Bank as follows:

1. GUARANTY OF PAYMENT.

The Guarantor hereby unconditionally guarantees to the Bank the
payment, when due by acceleration or otherwise, of the Indebtedness. For the
purposes hereof, the term "Indebtedness" shall include any and all current and
future indebtedness of the Borrower to the Bank under any of the Loan Documents,
whether in its capacity as the Bank or as Agent, including without limitation,
all principal, interest, fees and expenses, evidenced by the Notes or arising in
connection with the Loans, whether existing now or arising hereafter, as such
Indebtedness may be modified, extended or renewed from time to time. The
guaranty of the Guarantor as set forth in this Section 1 is a guaranty of
payment and not merely of collection.

2. GUARANTY OF PERFORMANCE.

The Guarantor hereby unconditionally guarantees to the Bank that the
Borrower, or the Guarantor acting for itself or for the Borrower or the
Borrower's Affiliates, shall fully and faithfully perform all of the obligations
under the Loan Documents to be performed by the Guarantor, the Borrower or any
of the Borrower's Affiliates.

3. SUBORDINATION.

All indebtedness of the Borrower to the Guarantor now or hereafter
existing (excluding obligations of the Borrower to distribute monies to the
General Partner), together with any interest thereon, shall be, and such
indebtedness is hereby, deferred, postponed and subordinated to the
Indebtedness.

4. RELEASE OF PARTIES LIABLE, ETC.

That the time or place of payment of the Indebtedness may be changed or
extended, in whole or in part, to a time certain or otherwise, and may be
renewed or accelerated, in whole or in part; that the Borrower may be granted
indulgences generally; that any of the provisions of the Credit Agreement, or
any other documents executed in connection with this transaction, may be
modified, amended or waived; that any party

82
<PAGE> 89

(including the Borrower) liable for the payment thereof may be granted
indulgences or released; and that any deposit balance for the credit of the
Borrower or any other party liable for the payment of the Indebtedness or liable
upon any security therefor may be released, in whole or in part, at, before
and/or after the stated, extended or accelerated maturity of the Indebtedness,
all without notice to or further assent by the Guarantor, who shall remain bound
thereon, notwithstanding any such exchange, compromise, surrender, extension,
renewal, acceleration, modification, indulgence or release.

5. WAIVER OF RIGHTS.

The Guarantor expressly waives: (a) notice of acceptance of this
Guaranty by the Bank and of all extensions of credit to the Borrower by the
Bank; (b) presentment and demand for payment of any of the Indebtedness; (c)
protest and notice of dishonor or of default to the Guarantor or to any other
party with respect to the Indebtedness or with respect to any security
therefore; (d) demand for payment under this Guaranty; (e) any right to assert
against the Bank, as a defense, counterclaim, set-off, or cross-claim any
defense (legal or equitable), set-off, non-compulsory counterclaim or claim
which the Guarantor may now or hereafter have against the Bank or the Borrower,
but such waiver shall not prevent the Guarantor from asserting against the Bank
in a separate action, any claim, action, cause of action, or demand that the
Guarantor might have, whether or not arising out of this Guaranty; and (f) any
right to require the Bank to first proceed to collect any Indebtedness against
the Borrower, including, but not limited to, any rights that the Guarantor may
have under N.C.G.S. 26-7 (or any other provision of the North Carolina General
Statutes).

6. PRIMARY LIABILITY OF THE GUARANTOR.

The Guarantor agrees that this Guaranty may be enforced by the Bank
without the necessity at any time of resorting to or exhausting any other
security or collateral and without the necessity at any time of having recourse
to the Notes or otherwise, and that Guarantor hereby waives the right to require
the Bank to proceed against the Borrower or any co-guarantor or to require the
Bank to pursue any other remedy or enforce any other right. The Guarantor
further agrees that the Guarantor shall have no right of subrogation,
reimbursement or indemnity whatsoever, unless and until all of the Indebtedness
of the Borrower to the Bank has been paid in full. The Guarantor further agrees
that nothing contained herein shall prevent the Bank from suing on the Notes or
from exercising any other rights available to it under any of the Loan
Documents, if neither the Borrower nor the Guarantor timely performs the
obligations of the Borrower thereunder, and the exercise of any of the aforesaid
rights shall not constitute a discharge of any of the Guarantor's obligations

83
<PAGE> 90

hereunder; it being the purpose and intent of the Guarantor that the Guarantor's
obligations hereunder shall be absolute, independent and unconditional under any
and all circumstances. Neither the Guarantor's obligations under this Guaranty
nor any remedy for the enforcement thereof shall be impaired, modified, changed
or released in any manner whatsoever by an impairment, modification, change,
release or limitation or the liability of the Borrower or any co-guarantor or by
reason of the Borrower's or any co-guarantor's bankruptcy or insolvency. The
Guarantor acknowledges that the term "Indebtedness" as used herein includes any
payment made by the Borrower to the Bank and subsequently recovered by the
Borrower or a trustee for the Borrower pursuant to the Borrower's bankruptcy or
insolvency. At any time the Bank is entitled to exercise its remedies hereunder,
it may in its discretion elect to demand payment or performance. In the event
the Bank elects to demand performance, it shall at all times thereafter have the
right to demand payment until all of the Indebtedness has been paid in full. In
the event the Bank elects to demand payment, it shall at all times thereafter
have the right to demand performance until all of the Indebtedness has been paid
in full.

7. SUBROGATION AND SUBORDINATION.

Nothing herein contained shall operate as a release or discharge, in
whole or in part, of any claim of the Guarantor against the Borrower, by
subrogation or otherwise, by reason of any act done or payment made by the
Guarantor pursuant to the provisions of this Guaranty; but all such claims shall
be subordinate to the claims of the Bank under the Loan Documents.

8. ATTORNEYS' FEES AND COSTS OF COLLECTION.

If at any time or times hereafter the Bank employs counsel to pursue
collection, to intervene, to sue for enforcement of the terms hereof or of the
Loan Documents, or to file a petition, complaint, answer, motion or other
pleading in any suit or other proceeding relating to this Guaranty or the Loan
Documents, then in such event, and in the event Bank shall be the prevailing
party in such action, all of the attorneys' fees and court costs relating
thereto shall be an additional liability of the Guarantor to the Bank, payable
on demand (such attorneys' fees being limited to actual fees incurred based on
actual number of hours worked at normal hourly rates).

9. TERM OF GUARANTY; WARRANTIES.

This Guaranty shall continue in full force and effect until the
Indebtedness is fully paid, performed and discharged. This Guaranty covers the
Indebtedness whether presently outstanding or arising subsequent to the date
hereof including all amounts advanced by the Bank in stages or installments. The
Guarantor warrants and represents to the Bank, (i) that

<PAGE> 91

this Guaranty is binding upon and enforceable against the Guarantor, in
accordance with its terms, (ii) that the execution and delivery of this Guaranty
does not violate or constitute a breach of any agreement to which the Guarantor
is a party or of any applicable laws, (iii) that there is no litigation, claim,
action or proceeding pending, or, to the best knowledge of the Guarantor,
threatened against the Guarantor which would materially adversely affect the
financial condition of the Guarantor or its ability to fulfill its obligations
hereunder, and (iv) that all warranties and representations by the Borrower
contained in any of the Loan Documents are true and accurate in every material
respect. Guarantor agrees to promptly inform the Bank of the adverse
determination of any litigation, claim, arbitration action or proceeding against
Guarantor which could materially adversely affect the financial condition of the
Guarantor or its ability to fulfill its obligations hereunder. This Guaranty is
binding on and enforceable against the Guarantor, its successors and assigns.

10. AFFAIRS OF BORROWER.

The Guarantor further represents to the Bank that the Guarantor has
knowledge of the Borrower's financial condition and affairs and represents and
agrees that it will keep so informed while this Guaranty is in force. The
Guarantor agrees that the Bank will have no obligation to investigate the
financial condition or affairs of the Borrower for the benefit of the Guarantor
nor to advise the Guarantor of any fact respecting, or any change in, the
financial condition or affairs of the Borrower which might come to the knowledge
of the Bank at any time, whether or not the Bank knows or believes or has reason
to know or believe that any such fact or change is unknown to the Guarantor or
might (or does) materially increase the risk of the Guarantor as guarantor or
might (or would) affect the willingness of the Guarantor to continue as
guarantor with respect to the Indebtedness.

11. AFFIRMATIVE COVENANTS OF GUARANTOR.

Guarantor shall:

(a) Knowledge of Default, Etc. With reasonable promptness (but
in no event with more than a ten (10) day delay) give written notice to
the Bank (i) of the occurrence of any Event of Default (as defined in
the Credit Agreement), (ii) of an event which would constitute such an
Event of Default but for the requirement that notice be given or time
elapse or both thereunder, (iii) of a monetary default of $100,000 or
more or any other event of default under any other obligation of the
Guarantor, not being contested in good faith and (iv) of any
developments or other information which would have a material adverse
effect on the business, operations or financial condition of the
Guarantor, specifying in each case the nature

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<PAGE> 92

thereof, the period of existence thereof and what action is proposed to
be taken with respect thereto; and

(b) Suits or Other Proceedings. Promptly give the Bank written
notice of any pending or threatened (in writing) action, suit,
arbitration or other proceeding not previously disclosed against or
otherwise adversely affecting the Guarantor involving claims for money
or property valued at $100,000 or more or of any attachment, levy,
execution, other process being instituted against any assets of the
Guarantor pursuant to such claims.

12. NEGATIVE COVENANTS OF GUARANTOR.

Until the payment in full of the Loans and all sums due under the
Credit Agreement, the Guarantor shall not, nor shall the Guarantor enter into
any binding agreement either directly or indirectly to:

(a) Sale of Assets, Etc. Without the prior written consent of
the Bank, sell, assign, lease, discount, transfer or otherwise dispose
of substantial assets of the Guarantor (in liquidation or otherwise)
(excluding sale of stock of the Guarantor) (as used herein,
"substantial assets" are those aggregating to a value of $100,000 or
more), including any capital stock of or partnership interest in any
Affiliate; or

(b) Limitation on Liens. Incur, create, assume or permit to
exist any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind upon any of its assets now owned or hereafter
acquired, including any capital stock or partnership interest of any
Affiliate.

(c) No Further Indebtedness. Incur or assume any Indebtedness
(as used in subsections 12(c) and 12(d) hereto only, the term
"Indebtedness" shall have the meaning ascribed to that term in the
Credit Agreement) of any entity or person other than Borrower and other
than (i) Indebtedness associated with guarantees of letters of credit
or other credit enhancement supporting existing (or refunded existing)
tax exempt bond financing, and (ii) indebtedness associated with
obligations incurred in the ordinary course of business of entities
wholly-owned by the Borrower or by Borrower and General Partner,
collectively, and Summit Financing, Inc., Summit Apartment Builders,
Inc., and Summit Management Company.

(d) No Further Guarantees. Guaranty any Indebtedness of any
entity or person other than Borrower and other than (i) guarantees of
letters of credit or other credit enhancement supporting existing (or
refunded existing) tax exempt bond financing, and (ii) indebtedness
associated with obligations incurred in the ordinary course of business
of entities wholly-owned by the Borrower or by Borrower and

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<PAGE> 93

General Partner, collectively, and Summit Financing, Inc., Summit
Apartment Builders, Inc., and Summit Management Company.

(e) No Further Investment. Make any investment in any entity
or person other than the Borrower or entities wholly-owned by the
Borrower or by Borrower and General Partner, collectively, and Summit
Financing, Inc., Summit Apartment Builders, Inc., and Summit Management
Company and those investments permitted under SECTION 7.9 of the Credit
Agreement.

(f) REIT Status. Fail to maintain its status as a REIT in full
compliance with applicable laws at all times hereafter.

(g) Limitation on Dividends. Declare or pay Dividends in
excess of one hundred percent (100%) of the Guarantor's Funds From
Operations during 1996, and with respect to any given calendar year
thereafter, in excess of 90% of the Guarantor's Funds From Operations
with respect to that year.

(h) Limitation on Merger and Acquisition. Enter into, or allow
Borrower to enter into, a transaction, with regard to Guarantor or
Borrower, of merger, consolidation or acquisition, or dispose of
substantially all of its assets, unless Guarantor or Borrower, as
applicable, is the surviving entity of the transaction of merger,
consolidation or acquisition and all the covenants of this Guaranty and
the other Loan Documents are satisfied both before and after giving
effect to the transaction.

13. ADDITIONAL LIABILITY OF THE GUARANTOR.

If the Guarantor is or becomes liable for any indebtedness owing by the
Borrower to the Bank by endorsement or otherwise than under this Guaranty, such
liability shall not be in any manner impaired or reduced hereby but shall have
all and the same force and effect it would have had if this Guaranty had not
existed and the Guarantor's liability hereunder shall not be in any manner
impaired or reduced thereby.

14. CUMULATIVE RIGHTS.

All rights of the Bank hereunder or otherwise arising under any
documents executed in connection with or as security for the Indebtedness are
separate and cumulative and may be pursued separately, successively or
concurrently, or not pursued, without affecting or limiting any other right of
the Bank and without affecting or impairing the liability of the Guarantor.

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<PAGE> 94

15. USURY.

Notwithstanding any other provisions herein contained, no provision of
this Guaranty shall require or permit the collection from the Guarantor of
interest in excess of the maximum rate or amount that the Guarantor may be
required or permitted to pay pursuant to any applicable law.

16. PRONOUNS; CAPTIONS; SEVERABILITY.

The pronouns used in this instrument shall be construed as masculine,
feminine or neuter as the occasion may require. Captions are for reference only
and in no way limit the terms of this Guaranty. Invalidation of any one or more
of the provisions of this Guaranty shall in no way affect any of the other
provisions hereof, which shall remain in full force and effect.

17. BANK ASSIGNS.

This Guaranty is intended for and shall inure to the benefit of the
Bank and each and every person who shall from time to time be or become another
owner or holder of any of the Indebtedness, and each and every reference herein
to the "Bank" shall include and refer to each and every successor or assignee of
the Bank at any time holding or owning any part of or interest in any part of
the Indebtedness. This Guaranty shall be transferable and negotiable with the
same force and effect, and to the same extent, that the Indebtedness is
transferable and negotiable, it is being understood and stipulated that upon
assignment or transfer by the Bank of any of the Indebtedness the legal holder
or owner of said Indebtedness (or a part thereof or interest therein thus
transferred or assigned by the Bank) shall (except as otherwise stipulated by
the Bank in its assignment) have and may exercise all of the rights granted to
the Bank under this Guaranty to the extent of that part of or interest in the
Indebtedness thus assigned or transferred to said person. The Guarantor
expressly waives notice of transfer or assignment of the Indebtedness, or any
part thereof, or of the right of the Bank hereunder. Failure to give notice will
not effect the liabilities of the Guarantor hereunder.

18. APPLICATION OF PAYMENTS.

The Bank may apply any payment received by it from any source against
that portion of the Indebtedness (principal, interest, court costs, attorneys'
fees or other) in such priority and fashion as it may deem appropriate.

19. DEFINITIONS.

All capitalized terms used in this Guaranty, if not specifically
defined herein, shall have the meaning ascribed to them in the Credit Agreement.

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<PAGE> 95

20. NOTICES.

All notices, requests, demands or other communications required by this
Agreement shall be made in writing, and unless otherwise specifically provided
herein, shall be deemed to have been duly given when delivered by hand or mailed
first class mail postage prepaid, or, in the case of telecopy or facsimile
notice, when transmitted, answer back received, addressed as follows, or to such
other address as either party may designate in writing:

If to the Guarantor:

Summit Properties Inc.
212 S. Tryon Street, Suite 500
Charlotte, North Carolina 28281
Attention: Michael Malone
General Counsel and Executive Vice President

with a copy to:

Kennedy Covington Lobdell & Hickman, L.L.P.
NationsBank Corporate Center
100 N. Tryon Street, Suite 4200
Charlotte, North Carolina 28202-4006
Attention: David H. Jones, Esq.

If to the Bank:

First Union National Bank of North Carolina
Charlotte Real Estate Group
201 South College Street, CP-18
Charlotte, North Carolina 28288-0146
Attention: Thomas D. Pinchak, Senior Vice President

with a copy to:

Parker Poe Adams & Bernstein L.L.P.
2500 Charlotte Plaza
Charlotte, North Carolina 28244
Attention: W. Samuel Woodard, Esq.

Personal delivery to a Guarantor or to any officer, partner, agent or employee
of Bank at its address herein shall constitute receipt. Rejection or other
refusal to accept or inability to deliver because of changed address of which no
notice has been received shall also constitute receipt. Notwithstanding the
foregoing, no notice of change of address shall be effective until the date of
receipt thereof. This section shall not be construed in any way to affect or
impair any waiver of notice or demand herein provided or to require giving of
notice or demand to or upon the Guarantor in any situation or for any reason.

89
<PAGE> 96

21. GOVERNING LAW.

This Guaranty shall be deemed to be a contract made under, and for all
purposes shall be construed in accordance with, the internal laws and judicial
decisions of the State of North Carolina. The Guarantor and the Bank agree that
any dispute arising out of this Guaranty shall be subject to the jurisdiction of
both the state and federal courts in North Carolina. For that purpose, the
Guarantor hereby submits to the jurisdiction of the state and federal courts of
North Carolina. The Guarantor further agrees to accept service of process out of
any of the before mentioned courts in any such dispute by registered or
certified mail addressed to the Guarantor.

22. INDEMNIFICATION.

The Guarantor hereby indemnifies and holds harmless the Bank, its
officers, directors and employees (each such Person herein referred to as an
"Indemnitee") from and against any and all claims, damages, losses, liabilities,
costs or expenses whatsoever (other than damages caused by the gross negligence
or wilful misconduct of the Indemnitee) which any such Indemnitee may incur (or
which may be claimed against such indemnitee by any person or entity whatsoever)
by reason of or in connection with the Loans or the Loan Documents.

In case any action or proceeding is brought against any Indemnitee in
respect of which indemnity may be sought under this Guaranty, such Indemnitee
shall give notice of any such action or proceeding to the Guarantor and may
require the Guarantor, upon such notice, to assume the defense of the action or
proceeding; provided that failure of any Indemnitee to give such notice shall
not relieve the Guarantor from any of its obligations under this Section. Upon
receipt of notice from any such Indemnitee, the Guarantor shall resist and
defend such action or proceeding at the Guarantor's expense. The obligations of
the Guarantor under this Section shall survive the payment of the Loans and the
termination of this Guaranty.

23. ARBITRATION.

Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any dispute, claim or controversy
arising out of, connected with or relating to this Guaranty, the Credit
Agreement or any of the other Loan Documents ("Disputes") between or among
parties to this Guaranty shall be resolved by binding arbitration as provided
herein. Institution of a judicial proceeding by a party does not waive the right
of that party to demand arbitration hereunder. Disputes may include, without
limitation, tort claims, counterclaims, claims brought as class actions, claims
arising from documents executed in the future, or claims arising out of or
connected with the transaction reflected by

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<PAGE> 97

this Guaranty, the Credit Agreement or any of the other Loan Documents.

Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in the city in which the office of the
Bank first stated above is located. The expedited procedures set forth in Rule
51 et seq. of the Arbitration Rules shall be applicable to claims of less than
$1,000,000. All applicable statutes of limitation shall apply to any Dispute. A
judgment upon the award may be entered in any court having jurisdiction. The
panel from which all arbitrators are selected shall be comprised of licensed
attorneys. The single arbitrator selected for expedited procedure shall be a
retired judge from the highest court of general jurisdiction, state or federal,
of the state where the hearing will be conducted.

24. PRESERVATION AND LIMITATION OF REMEDIES.

Notwithstanding the preceding binding arbitration provisions, the Bank
and the Guarantor agree to preserve, without diminution, certain remedies that
any party hereto may employ or exercise freely, either along, in conjunction
with or during a Dispute. The Bank and the Guarantor shall have the right to
proceed in any court of proper jurisdiction or by self-help to exercise or
prosecute the following remedies, as applicable: (i) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and filing an involuntary bankruptcy
proceeding; and (ii) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.

The Guarantor and the Bank agree that they shall not have a remedy of
punitive or exemplary damages against the other in any Dispute and hereby waive
any right or claim to punitive or exemplary damages they have now or which may
arise in the future in connection with any Dispute whether the Dispute is
resolved by arbitration or judicially.

IN WITNESS WHEREOF, the Guarantor has executed this Guaranty under seal
as of the day and year first above written.

GUARANTOR:

SUMMIT PROPERTIES INC., a
Maryland corporation doing
business in North Carolina as

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<PAGE> 98

Summit Properties Real Estate, Inc.

By:
---------------------------------
Name:
--------------------------------
Title:
-------------------------------

ATTEST:

By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------

[CORPORATE SEAL]

92
<PAGE> 99

EXHIBIT D-2
-----------

FORM OF WACHOVIA GUARANTY AGREEMENT

GUARANTY AGREEMENT

WACHOVIA BANK OF NORTH CAROLINA, N.A., a national banking
association, with its principal offices located in Charlotte, North Carolina
(the "Bank") for the benefit of SUMMIT PROPERTIES PARTNERSHIP, L.P., a Delaware
limited partnership, doing business in North Carolina as Summit Properties
Partnership, Limited Partnership (the "Borrower").

RECITALS:

A. The Bank has agreed to make certain financial accommodations
(collectively, the "Loans") to the Borrower pursuant to the terms and conditions
of the following:

(i) The Project Advance Note dated of even date, made by
the Borrower payable to the Bank in the original face
amount of $62,500,000 (the "Project Advance Note");

(ii) The Revolving Working Capital Credit Note dated of
even date, made by the Borrower payable to the Bank
in the original face amount of $12,500,000 (the
"Revolving Working Capital Credit Note" and,
collectively with the Project Advance Note, the
"Notes");

(iii) The $150,000,000 Credit Agreement dated of even date
by and among the Borrower; First Union National Bank
of North Carolina, as Agent; First Union National
Bank of North Carolina, as a Bank, and the Bank (the
"Credit Agreement"); and

(iv) The other Loan Documents (as defined in the Credit
Agreement). All of the definitions used in the Credit
Agreement are hereby incorporated herein by reference
and shall have the meaning set forth in the Credit
Agreement unless otherwise defined herein.

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<PAGE> 100

B. Without this Guaranty, the Bank would be unwilling to extend and/or
modify the Loans to the Borrower.

1. GUARANTY OF PAYMENT.

The Guarantor hereby unconditionally guarantees to the Bank the
payment, when due by acceleration or otherwise, of the Indebtedness. For the
purposes hereof, the term "Indebtedness" shall include any and all current and
future indebtedness of the Borrower to the Bank under any of the Loan Documents,
including without limitation, all principal, interest, fees and expenses,
evidenced by the Notes or arising in connection with the Loans, whether existing
now or arising hereafter, as such Indebtedness may be modified, extended or
renewed from time to time. The guaranty of the Guarantor as set forth in this
Section 1 is a guaranty of payment and not merely of collection.

2. GUARANTY OF PERFORMANCE.

3. SUBORDINATION.

4. RELEASE OF PARTIES LIABLE, ETC.

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<PAGE> 101

or any other documents executed in connection with this transaction, may be
modified, amended or waived; that any party (including the Borrower) liable for
the payment thereof may be granted indulgences or released; and that any deposit
balance for the credit of the Borrower or any other party liable for the payment
of the Indebtedness or liable upon any security therefor may be released, in
whole or in part, at, before and/or after the stated, extended or accelerated
maturity of the Indebtedness, all without notice to or further assent by the
Guarantor, who shall remain bound thereon, notwithstanding any such exchange,
compromise, surrender, extension, renewal, acceleration, modification,
indulgence or release.

5. WAIVER OF RIGHTS.

6. PRIMARY LIABILITY OF THE GUARANTOR.

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<PAGE> 102

the exercise of any of the aforesaid rights shall not constitute a discharge of
any of the Guarantor's obligations hereunder; it being the purpose and intent of
the Guarantor that the Guarantor's obligations hereunder shall be absolute,
independent and unconditional under any and all circumstances. Neither the
Guarantor's obligations under this Guaranty nor any remedy for the enforcement
thereof shall be impaired, modified, changed or released in any manner
whatsoever by an impairment, modification, change, release or limitation or the
liability of the Borrower or any co-guarantor or by reason of the Borrower's or
any co-guarantor's bankruptcy or insolvency. The Guarantor acknowledges that the
term "Indebtedness" as used herein includes any payment made by the Borrower to
the Bank and subsequently recovered by the Borrower or a trustee for the
Borrower pursuant to the Borrower's bankruptcy or insolvency. At any time the
Bank is entitled to exercise its remedies hereunder, it may in its discretion
elect to demand payment or performance. In the event the Bank elects to demand
performance, it shall at all times thereafter have the right to demand payment
until all of the Indebtedness has been paid in full. In the event the Bank
elects to demand payment, it shall at all times thereafter have the right to
demand performance until all of the Indebtedness has been paid in full.

7. SUBROGATION AND SUBORDINATION.

8. ATTORNEYS' FEES AND COSTS OF COLLECTION.

9. TERM OF GUARANTY; WARRANTIES.

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<PAGE> 103

all amounts advanced by the Bank in stages or installments. The Guarantor
warrants and represents to the Bank, (i) that this Guaranty is binding upon and
enforceable against the Guarantor, in accordance with its terms, (ii) that the
execution and delivery of this Guaranty does not violate or constitute a breach
of any agreement to which the Guarantor is a party or of any applicable laws,
(iii) that there is no litigation, claim, action or proceeding pending, or, to
the best knowledge of the Guarantor, threatened against the Guarantor which
would materially adversely affect the financial condition of the Guarantor or
its ability to fulfill its obligations hereunder, and (iv) that all warranties
and representations by the Borrower contained in any of the Loan Documents are
true and accurate in every material respect. Guarantor agrees to promptly inform
the Bank of the adverse determination of any litigation, claim, arbitration
action or proceeding against Guarantor which could materially adversely affect
the financial condition of the Guarantor or its ability to fulfill its
obligations hereunder. This Guaranty is binding on and enforceable against the
Guarantor, its successors and assigns.

10. AFFAIRS OF BORROWER.

11. AFFIRMATIVE COVENANTS OF GUARANTOR.

Guarantor shall:

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<PAGE> 104

adverse effect on the business, operations or financial condition of
the Guarantor, specifying in each case the nature thereof, the period
of existence thereof and what action is proposed to be taken with
respect thereto; and

12. NEGATIVE COVENANTS OF GUARANTOR.

Until the payment in full of the Loans and all sums due under the
Credit Agreement, the Guarantor shall not, nor shall the Guarantor enter into
any binding agreement either directly or indirectly to:

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<PAGE> 105

business of entities wholly-owned by the Borrower or by Borrower and
General Partner, collectively, and Summit Financing, Inc., Summit
Apartment Builders, Inc., and Summit Management Company.

(f) REIT Status. Fail to maintain its status as a REIT in full
compliance with applicable laws at all times hereafter.

13. ADDITIONAL LIABILITY OF THE GUARANTOR.

14. CUMULATIVE RIGHTS.

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<PAGE> 106

15. USURY.

16. PRONOUNS; CAPTIONS; SEVERABILITY.

17. BANK ASSIGNS.

18. APPLICATION OF PAYMENTS.

19. DEFINITIONS.

All capitalized terms used in this Guaranty, if not specifically
defined herein, shall have the meaning ascribed to them in the Credit Agreement.

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<PAGE> 107

20. NOTICES.

If to the Guarantor:

Summit Properties Inc.
212 S. Tryon Street, Suite 500
Charlotte, North Carolina 28281
Attention: Michael Malone
General Counsel and Executive Vice President

with a copy to:

Kennedy Covington Lobdell & Hickman, L.L.P.
NationsBank Corporate Center
100 N. Tryon Street, Suite 4200
Charlotte, North Carolina 28202-4006
Attention: David H. Jones, Esq.

If to the Bank:

Wachovia Bank of North Carolina, N.A.
400 South Tryon Street
P.O. Box 31608
Charlotte, North Carolina 28231
Attention: Mr. Wayne A. Osella

with a copy to:

Womble, Carlyle, Sandridge & Rice, PLLC
200 West Second Street
Winston-Salem, North Carolina 27101
Attention: Kenneth A. Moser, Esq.

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<PAGE> 108

21. GOVERNING LAW.

22. INDEMNIFICATION.

23. ARBITRATION.

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<PAGE> 109

this Guaranty, the Credit Agreement or any of the other Loan Documents.

Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in the city in which the office of the
Bank first stated above is located. The expedited procedures set forth in Rule
51 et seq. of the Arbitration Rules shall be applicable to claims of less than
$1,000,000. All applicable statutes of limitation shall apply to any Dispute. A
judgment upon the award may be entered in any court having jurisdiction. The
panel from which all arbitrators are selected shall be comprised of licensed
attorneys. The single arbitrator selected for expedited procedure shall be a
retired judge from the highest court of general jurisdiction, state or federal,
of the state where the hearing will be conducted.

24. PRESERVATION AND LIMITATION OF REMEDIES.

IN WITNESS WHEREOF, the Guarantor has executed this Guaranty under seal
as of the day and year first above written.

GUARANTOR:

SUMMIT PROPERTIES INC., a
Maryland corporation, doing
business in North Carolina as

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<PAGE> 110

Summit Properties Real Estate, Inc.

By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------

ATTEST:

By:
----------------------------
Name:
--------------------------
Title:
-------------------------

[CORPORATE SEAL]

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<PAGE> 111

EXHIBIT E
---------

FORM OF OPINION LETTER

105
<PAGE> 112

EXHIBIT F
---------

BOND-FINANCED COMMUNITIES

Summit/Belmont Limited Partnership (Fredericksburg, Virginia)

Stony Point/Summit Limited Partnership (Richmond, Virginia)

Hampton/Summit Limited Partnership (Manatee County, Florida)

Macgregor/Summit Limited Partnership (Pinellas County, Florida)

Henderson/McGuire Partners (Limited Partnership) (New Castle County, Delaware)

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<PAGE> 113

EXHIBIT G
---------

PROPORTIONATE SHARE FOR EACH BANK

First Union National Bank of North Carolina 50.00%
-------
Wachovia Bank of North Carolina, N.A 50.00%
-------

Total 100.00%
-------

107

<PAGE> 1

EMPLOYMENT AGREEMENT
--------------------

THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into
on this ____ day of ___________, 1996, ("Effective Date") by and between WILLIAM
B. HAMILTON, an individual resident of the State of Georgia (the "Executive"),
SUMMIT PROPERTIES INC., a Maryland corporation, and SUMMIT MANAGEMENT COMPANY, a
Maryland corporation. Summit Properties Inc. and Summit Management Company are
referred to herein collectively as the "Company";

W I T N E S S E T H:
--------------------

WHEREAS, the Company desires to employ Executive, and Executive desires
to be employed by the Company on the terms and conditions contained in this
Agreement;

NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement,
intending to be legally bound, hereby agree as follows:

SECTION 1.

Employment
----------

Subject to the terms of this Agreement, the Company hereby employs
Executive, and Executive hereby accepts such employment with the Company.
Executive initially shall serve as an officer of the Company in the
capacity(ies) of Executive Vice President, Property Services of Summit
Properties Inc. and President of Summit Management Company and initially shall
have the duties, rights and responsibilities normally associated with such
positions consistent with the Bylaws of Summit Properties Inc. and Summit
Management Company, respectively, together with such other reasonable duties
relating to the operation of the business of the Company and its affiliates as
may be assigned to him from time to time by the Board of Directors of Summit
Properties Inc. (the "Board") or as may otherwise be provided in such Bylaws.
Executive shall devote his full business time, skills and best efforts to
rendering services on behalf of the Company and its affiliates and shall
exercise such care as is customarily required by executives undertaking similar
duties for entities similar to the Company.

<PAGE> 2

SECTION 2.

Compensation; Expenses
----------------------

2.1 Base Salary. Commencing on the Effective Date, the Company shall
pay Executive during the term of Executive's employment under this Agreement, a
base salary equal to $173,000.00 per annum (the "Base Salary"), which amount
shall be subject to adjustment, if any, in accordance with this Section 2.1. The
Compensation Committee of the Board (the "Committee") shall review Executive's
Base Salary on an annual basis, and the Committee upon such review and in its
sole discretion, may increase or decrease Executive's Base Salary by an amount
which the Committee deems appropriate in light of the Company's and Executive's
performance during the period covered by such review; provided, however, that
Executive's Base Salary shall not be reduced below One Hundred Seventy-Three
Thousand Dollars ($173,000) per annum. The Base Salary, less all applicable
withholding taxes, shall be paid to Executive in accordance with the payroll
procedures in effect with respect to officers of the Company.

2.2 Incentive Compensation. In addition to the Base Salary payable to
Executive pursuant to Section 2.1 and any special compensatory arrangements
which the Committee provides for Executive, effective as of the Effective Date,
Executive shall be entitled to participate in any incentive compensation plans
in effect with respect to senior executive officers of the Company, with the
criteria for Executive's participation in such plans to be established by the
Committee in its sole discretion.

2.3. Stock Options. Executive shall be entitled to participate in
employee stock option plans from time to time established for the benefit of
employees of the Company in accordance with the terms and conditions of such
plans.

2.4 Expenses. Executive shall be reimbursed for all reasonable
business-related expenses incurred by Executive at the request of or on behalf
of the Company, including but not limited to reimbursement of those relocation
expenses incurred by Executive as set forth on the attached Exhibit "A" hereto.

2.5. Participation in Employee Benefit Plans. Executive shall be
entitled to participate in such medical, dental, disability, hospitalization,
life insurance, profit sharing and other benefit plans as the Company shall
maintain from time to time for the benefit of executive officers of the Company,
on the

2
<PAGE> 3

terms and subject to the conditions set forth in such plans. In addition, during
the term of this Agreement, Executive shall be entitled to a comprehensive
annual physical performed, at the company's expense, by the physician or medical
group of Executive's choosing.

2.6. Vacation. In addition to Company holidays, Executive shall receive
such paid vacation time each year during the term of this Agreement consistent
with vacation policies of the Company for its executive officers. Said paid
vacation time shall initially be three weeks. Any unused vacation days in any
year may not be carried over to subsequent years, and Executive shall receive no
additional compensation for any unused vacation days.

2.7. Perquisites. Executive shall be entitled to receive such
individual perquisites as are consistent with the Company's policies applicable
to its executive officers.

SECTION 3.

Term of Employment
------------------

3.1. Term of Employment. Unless earlier terminated in accordance with
Section 3.2, the employment of Executive under this Agreement shall commence
as of the Effective Date, and shall continue up to, but not including, the
second anniversary of such date (the "Original Term"). Following the Original
Term, the employment relationship under this Agreement shall automatically
continue unless and until terminated in accordance with Section 3.2.

3.2 Termination. Executive's employment under this Agreement may be
terminated

(a) by the Company upon the death of Executive (which shall be
referred to as a "Death Termination") or total disability of Executive
(total disability meaning the inability of Executive to perform his
normal required services under this Agreement for a period of six
consecutive months during the term of this Agreement by reason of
Executive's mental or physical disability, as determined by the Board
in good faith in its sole discretion) (which shall be referred to as a
"Disability Termination"); or

3
<PAGE> 4

(b) by the Company for "cause," which shall exist only upon
the occurrence of one or more of the following: (i) Executive is
convicted of, pleads guilty to, or confesses to any felony or any act
of fraud, misappropriation or embezzlement which has an immediate and
materially adverse effect on the Company, as determined by the Board in
good faith in its sole discretion, (ii) Executive engages in a
fraudulent act to the material damage or prejudice of the Company or
any affiliate of the Company or in conduct or activities materially
damaging to the property, business or reputation of the Company or any
affiliate of the Company, all as determined by the Board in good faith
in its sole discretion, (iii) any material act or omission by Executive
involving malfeasance or negligence in the performance of Executive's
duties to the Company to the material detriment of the Company, as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of any such act or omission, (iv) failure by
Executive to comply in any material respect with the terms of this
Agreement or any written policies or directives of the Board as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of such failure, or (v) material breach by
Executive of that certain noncompetition agreement between Executive
and the Company of even date herewith (the "Noncompetition Agreement")
as determined by the Board in good faith in its sole discretion (which
shall be referred to individually and collectively as a "For Cause
Termination"); or

(c) by the Company for any reason other than a For Cause
Termination, Death Termination or Disability Termination and after
giving 90 days' prior written notice to Executive (which shall be
referred to as a "No Cause Termination"); or

(d) by Executive voluntarily for any reason other than an
Employee-Initiated Termination (as defined in Section 3.2(e)) at any
time after the Original Term and after giving 90 days' prior written
notice to the Company (which shall be referred to as a "Voluntary
Termination"); or

(e) by Executive for "cause", which shall exist upon the
occurrence of either of the following, provided that in either case the
Board has not corrected such material reduction described below within
thirty (30) days after

4
<PAGE> 5

written notice by Executive of such material reduction: (i) there is a
material reduction in Executive's duties, rights or responsibilities
under this Agreement without his consent, or (ii) there is a material
decrease in the aggregate value of Executive's compensation and
benefits package from the Company without his consent, other than a
reduction in Executive's Base Salary that is permitted under the
provisions of Section 2.1 and other than a reduction in compensation,
including but not limited to a reduction in Base Salary as permitted
under the provisions of Section 2.1, and/or benefits affecting a broad
group of employees of the Company as determined by the Board in good
faith in its sole discretion (which shall be referred to as an
"Employee-Initiated Termination").

SECTION 4.

Result of Termination
---------------------

4.1. For Cause Termination or Termination Following Original Term. If
Executive's employment under this Agreement is terminated as a result of a For
Cause Termination, Executive shall not thereafter be entitled to receive any
Base Salary for periods following such termination; provided, however, that
Executive shall be entitled to receive any Base Salary which may be owed to
Executive but is unpaid as of the date on which Executive's employment is
terminated.

4.2 Termination As Result of No Cause Termination or Employee-Initiated
Termination During Original Term. If Executive's employment under this Agreement
is terminated as a result of a No Cause Termination or an Employee-Initiated
Termination during the Original Term, Executive shall be entitled to receive (i)
any Base Salary which may be owed to Executive but is unpaid as of the date on
which Executive's employment is terminated and (ii) his Base Salary as in effect
on the date of such termination for a twelve month period. If Executive's
employment under this agreement is terminated as a result of a No Cause
termination or an employee initiated termination, subsequent to the Original
Term, Executive shall be entitled to receive (i) any base salary which may be
owed to Executive that was unpaid as of the date on which Executive's employment
is terminated, and (ii) his base salary as in effect on the date of such
termination for a six month period. The payment of such Base Salary pursuant to
clause (ii) of the preceding sentences shall be made at such intervals in
accordance with the Company's payroll procedures in effect from time to time
with respect to

5
<PAGE> 6

officers of the Company but no less frequently than monthly. In addition, in the
event of Executive's death following a No Cause Termination or an
Employee-Initiated Termination, any Base Salary payable to Executive under this
Section 4.2 and not yet paid on the date of Executive's death shall be paid to
Executive's designated beneficiary, if any, or if none, his surviving spouse or,
if none, his estate (collectively, the "Beneficiary"). Such payments shall be
made to the Beneficiary at such times as would otherwise have been payable to
Executive under this Section 4.2; provided, however, that the Company may in its
discretion pay such Base Salary to the Beneficiary in a lump sum payment in an
amount determined in accordance with the methodology set forth in subsection (B)
of Section 4.3.

4.3. Termination as a Result of a Death Termination or a Disability
Termination During Original Term. If Executive's employment under this Agreement
is terminated as a result of a Death Termination or Disability Termination
during the Original Term, (i) Executive (or, in the case of a Death Termination,
Executive's Beneficiary as defined in Section 4.2) shall be entitled to receive
any Base Salary which may be owed to Executive but is unpaid as of that date on
which Executive's employment is terminated, and (ii) Executive (or, in the case
of a Death Termination, Executive's Beneficiary as defined in Section 4.2) shall
receive Executive's Base Salary for a period of twelve months. In addition, the
following provisions shall apply:

(A) If payment of Base Salary is to be made under clause (ii) of
this Section 4.3 due to a Disability Termination, such Base
Salary shall be paid at such intervals in accordance with the
Company's payroll procedures in effect from time to time with
respect to officers of the Company but no less frequently than
monthly, and such Base Salary shall be offset by any amounts
payable to Executive under any long-term disability plan
sponsored by the Company or its affiliates. In the event of
Executive's death following a Disability Termination, any Base
Salary payable to Executive under this Section 4.3 (taking
into account the offset described above, if any) and not yet
paid on the date of Executive's death shall be paid to
Executive's Beneficiary. Such payments shall be made to the
Beneficiary at such times as would otherwise have been payable
to Executive under this subsection (A); provided,

6
<PAGE> 7

however, that the Company may in its discretion pay such Base
Salary to the Beneficiary in a lump sum payment in an amount
determined in accordance with the methodology set forth in
subsection (B) of this Section 4.3.

(B) In the event of a Death Termination, payments to the
Beneficiary shall be made in a single lump sum as soon as
practical after Executive's death. The amount of such lump sum
shall be equal to the present value, determined using a 9%
interest rate, of the total amount of Base Salary payable to
the Beneficiary pursuant to this Section 4.3 and not yet paid
on the date of Executive's death.

4.4. Employee Benefit Plans and Incentive Compensation and Other
Compensatory Arrangements. The benefits, if any, payable to or on behalf of
Executive upon his termination of employment from the Company under any employee
benefit plan or incentive compensation or other compensatory arrangement shall
be governed by the terms and conditions for benefit payments set forth in such
plans and arrangements.

SECTION 5.

Miscellaneous
-------------

5.1. Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon Executive and his executor, administrator, heirs, personal
representative and assigns, and the Company and its successors and assigns;
provided, however, that Executive shall not be entitled to assign or delegate
any of his rights or obligations hereunder without the prior written consent of
Company; and further provided that the Company shall not be entitled to assign
or delegate any of its rights or obligations hereunder except to a corporation,
partnership or other business entity that is, directly or indirectly, controlled
by or under common control with Summit Properties Inc.

5.2. Construction of Agreement. No provision of this Agreement or any
related document shall be construed against or interpreted to the disadvantage
or any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or drafted such
provision.

7
<PAGE> 8

5.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.

5.4. Survival of Agreements. All covenants and agreements made herein
shall survive the execution and delivery of this Agreement and the termination
of Executive's employment hereunder for any reason.

5.5 Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

5.6 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to be given when delivered
personally or mailed first class, registered or certified mail, postage prepaid,
in either case, addressed as follows:

(a) If to Executive:

William B. Hamilton
300 Powers Place
Marietta, GA 30067

(b) If to the Company, addressed to:

Summit Properties Inc.
212 South Tryon Street, Suite 500
Charlotte, North Carolina 28281
Attn: Michael G. Malone

5.7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

5.8. Entire Agreement. This Agreement, together with the Noncompetition
Agreement, constitutes the entire agreement of the parties with respect to the
subject matter hereof and upon the Effective Date, will supersede and replace
all prior agreements, written and oral, between the parties hereto or with
respect to the subject matter hereof other than that letter agreement from
William F. Paulsen to William B. Hamilton dated November 25, 1996 attached
hereto as Exhibit "B". This Agreement

8
<PAGE> 9

may be modified only by a written instrument signed by each of the parties
hereto.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

SUMMIT PROPERTIES INC.

By:______________________________
Name: William F. Paulsen
Title: President

SUMMIT MANAGEMENT COMPANY

By:______________________________
Name: William F. Paulsen
Title: Vice President

Collectively, the "Company"

_____________________________[SEAL]
William B. Hamilton

"Executive"

<PAGE> 1
NONCOMPETITION AGREEMENT

THIS NONCOMPETITION AGREEMENT is entered into as of _____________, 1996
("Effective Date") by and between WILLIAM B. HAMILTON ("Executive"), SUMMIT
PROPERTIES INC., a Maryland corporation, and SUMMIT MANAGEMENT COMPANY, a
Maryland corporation.

WHEREAS, on the date hereof, as a condition to the consummation of the
employment of Executive by the Company, the parties hereto desire to enter into
certain agreements restricting the activities of Executive in an effort to
eliminate potential conflicts of interest that may arise in the future, to
protect the Company's legitimate business interests, i.e., the value of its
business and its good will, and for other business purpose;

NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:

1. Definitions. Capitalized terms used herein shall have the meanings
set forth below:

"Affiliate" means (i) any entity directly or indirectly controlling
(including without limitation an entity for which Executive serves as an
officer, director, employee, consultant or other agent), controlled by, or under
common control with Executive, and (ii) each other entity in which Executive,
directly or indirectly, owns any controlling interest or of which Executive
serves as a general partner.

"Agreement" means this Noncompetition Agreement, including any
amendments hereto made in accordance with paragraph 8(d) hereof.

"Company" means (i) Summit Management Company, (ii) Summit Properties
Inc., (iii) any corporation, partnership or other business entity that is,
directly or indirectly, controlled by or under common control with Summit
Properties Inc. and (iv) their respective successors.

"Company Project" means any Multifamily Property that the Company owns,
operates or manages as of the date of Executive's termination of employment with
the Company or that the Company has in any manner taken steps to acquire,
develop, construct, operate, manage or lease (including without limitation
making market surveys of a site, talking to a owner or his agent

<PAGE> 2

concerning the purchase or joint venture of a site, optioning or contracting to
buy a site or discussions with the owner or his agent regarding managing or
leasing a property) during the twelve (12) month period immediately preceding
Executive's termination of employment with the Company.

"Multifamily Property" means any real property on which multifamily
residential-use development has been constructed or is now or hereafter proposed
to be constructed (for example, and not by way of limitation, a property of the
type managed by the Company).

2. Executive's Obligations While Employed by the Company.

(a) Sole Employment. Subject to the provisions of paragraph 2(b) below,
Executive agrees to devote his full time during the customary business hours of
the Company and give his best efforts to the business of the Company and, during
the period of his employment by the Company, Executive shall not engage in any
manner, whether as an officer, employee, owner, partner, stockholder, director,
consultant or otherwise -- directly or indirectly -- in any business other than
on behalf of the Company without the prior written approval of the President of
Summit Management Company, and Executive shall not accept any other employment
whatsoever from any other person, firm, corporation or entity.

(b) Exceptions. Notwithstanding the provisions of paragraph 2(a) above
to the contrary, Executive may during the term of his employment by the Company
and at any time thereafter (i) acquire an interest in any corporation,
partnership, venture or other business entity so long as (A) any such interest
is a passive investment of Executive not exceeding ten percent (10%) of the
total ownership interest in such entity, (B) such entity does not afford
Executive the power to influence in any material fashion the decision making
processes of the entity in which such interest is held and (C) Executive is not
the sponsor, promoter or similar initiator of such entity.

3. Executive's Obligations Following Termination of Employment with the
Company.

(a) Anti-Pirating of Employees. For a two (2) year period immediately
following the termination of Executive's employment with the Company, Executive
agrees not to hire, directly or indirectly, or entice or participate in any
efforts

2
<PAGE> 3

to entice to leave the Company's employ, any person who was or is a "key
employee" (as hereinafter defined) of the Company at any time during the twelve
(12) month period immediately preceding the termination date of Executive's
employment with the Company. For purposes of this Agreement, "key employee"
means an employee who has an annualized rate of base salary equaling or
exceeding fifty thousand dollars ($50,000).

(b) Anti-Pirating of Company Projects. For a period of one (1) year
immediately following the termination of Executive's employment with the
Company, Executive agrees not to engage in any manner, whether as an officer,
employee, owner, partner, stockholder, director, consultant or otherwise --
directly or indirectly -- in any business which engages or attempts to engage,
directly or indirectly, in the acquisition, development, construction,
operation, management or leasing of any Company Project.

(c) Trade Secrets and Confidential Information. Executive hereby agrees
that he will hold in a fiduciary capacity for the benefit of the Company, and
shall not directly or indirectly use or disclose any Trade Secret, as defined
hereinafter, that Executive may have acquired during the term of his employment
by the Company for so long as such information remains a Trade Secret. The term
"Trade Secret" as used in this Agreement shall mean information including, but
not limited to, technical or nontechnical data, a formula, a pattern, a
compilation, a program, a device, a method, a technique, a drawing, a process,
financial data, financial plans, product plans, or a list of actual or potential
customers or suppliers which:

derives economic value, actual or potential from not being
generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value
from its disclosure or use; and is the subject of reasonable
efforts by the Company to maintain its secrecy.

In addition to the foregoing and not in limitation thereof,
Executive agrees that during the period of his employment by the Company and for
a period of one (1) year thereafter, he will hold in a fiduciary capacity for
the benefit of the Company and shall not directly or indirectly use or disclose,
any Confidential or Proprietary Information, as defined hereinafter, that
Executive may have acquired (whether or not

3
<PAGE> 4

developed or compiled by Executive and whether or not Executive was authorized
to have access to such Information) during the term of, in the course of or as a
result of his employment by the Company. The term "Confidential or Proprietary
Information" as used in this Agreement means any secret, confidential or
proprietary information of the Company not otherwise included in the definition
of "Trade Secret" above. The term "Confidential and Proprietary Information"
does not include information that has become generally available to the public
by the act of one who has the right to disclose such information without
violating any right of the Company.

(d) Exceptions. Notwithstanding any provision of paragraph 3(b) to the
contrary, Executive shall not be restricted at any time after his termination of
employment with the Company from engaging in any activities for which Executive
would not be restricted from performing during the term of his employment with
the Company as set forth in paragraph 2(b) above.

4. Reasonable and Necessary Restrictions. Executive acknowledges that
the restrictions, prohibitions and other provisions hereof, including without
limitation the various periods of restrictions set forth in paragraphs 3(a),
3(b) and 3(c), are reasonable, fair and equitable in scope, terms and duration,
are necessary to protect the legitimate business interests of the Company, and
are a material inducement to the Company to enter into the transactions
contemplated in the recitals hereto. Executive covenants that he will not
challenge the enforceability of this Agreement nor will he raise any equitable
defense to its enforcement.

5. Restrictions In Addition to Employment Agreement. Executive
acknowledges that the restrictions, prohibitions and other provisions hereof
shall be in addition to and not in substitution of the restrictions,
prohibitions and other provisions of that certain employment agreement between
Executive, Summit Properties Inc. and Summit Management Company of even date
herewith, as such agreement shall be amended and supplemented from time to time
(the "Employment Agreement").

6. Specific Performance. Executive acknowledges that the obligations
undertaken by him pursuant to this Agreement are unique and that the Company
likely will have no adequate remedy at law if Executive shall fail to perform
any of his obligations hereunder, and Executive therefore confirms that the
Company's right to specific performance of the terms of this Agreement is
essential to protect the rights and interests of the Company.

4
<PAGE> 5

Accordingly, in addition to any other remedies that the Company may have at law
or in equity, the Company shall have the right to have all obligations,
covenants, agreements and other provisions of this Agreement specifically
performed by Executive, and the Company shall have the right to obtain
preliminary and permanent injunctive relief to secure specific performance and
to prevent a breach or contemplated breach of this Agreement by Executive, and
Executive submits to the jurisdiction of the courts of the State of North
Carolina for this purpose. Said permanent injunctive relief shall have a term
which coincides with the respective periods of Executive's obligations pursuant
to the covenants, agreements and other provisions of this agreement.

7. Operations of Affiliates. Executive agrees that he will refrain from
(i) authorizing any Affiliate to perform or (ii) assisting in any manner any
Affiliate in performing any activities that would be prohibited by the terms of
this Agreement if they were performed by Executive. Notwithstanding anything to
the contrary contained in this paragraph 7 (or in any other paragraph of this
Agreement), Executive shall not be required by the terms of this Agreement to
violate any fiduciary or contractual duty he owes as a director or officer of a
corporation, as a partner of a partnership or as a trustee of a trust, which
position he holds not in violation of this Agreement or the Employment
Agreement.

8. Miscellaneous Provisions.

(a) Binding Effect. Subject to any provisions hereof restricting
assignment, all covenants and agreements in this Agreement by or on behalf of
any of the parties hereto shall bind and inure to the benefit of the respective
successors, assigns, heirs, and personal representatives. None of the parties
hereto may assign any of its rights under this Agreement or attempt to have any
other person or entity assume any of its obligations hereunder.

(b) Severability. If fulfillment of any provision of this Agreement, at
the time such fulfillment shall be due, shall transcend the limit of validity
prescribed by law, then the obligation to be fulfilled shall be reduced to the
limit of such validity; and if any clause or provision contained in this
Agreement operates or would operate to invalidate this Agreement, in whole or in
part, then such clause or provision only shall be held ineffective, as though
not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect.

5
<PAGE> 6

(c) Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto shall be governed
by and construed in accordance with the laws of the State of North Carolina,
not including the choice-of-law rules thereof.

(d) Amendment; Waiver. Except as otherwise expressly provided in this
Agreement, no amendment, modification or discharge of this Agreement shall be
valid or binding unless set forth in writing and duly executed by each of the
parties hereto. Any waiver by any party or consent by any party to any variation
from any provision of this Agreement shall be valid only if in writing and only
in the specific instance in which it is given, and such waiver or consent shall
not be construed as a waiver of any other provision or as a consent with respect
to any similar instance or circumstance.

(e) Headings. Paragraph and subparagraph headings contained in this
Agreement are inserted for convenience of reference only, shall not be deemed to
be a part of this Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.

(f) Pronouns. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the identity
of the person or entity may require.

(g) Arbitration. Any dispute or controversy arising out of or relating
to this Agreement shall be settled finally and exclusively by arbitration in
Charlotte, North Carolina in accordance with the rules of the American
Arbitration Association then in effect. Such arbitration shall be conducted by
an arbitrator(s) appointed by the American Arbitration Association in accordance
with its rules and any finding by such arbitrator(s) shall be final and binding
upon the parties. Judgment upon any award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof, and the parties consent to the
jurisdiction of the courts of the State of North Carolina for this purpose.
Nothing contained in this paragraph 8(g) shall be construed to preclude the
Company from obtaining injunctive or other equitable relief to secure specific
performance or to otherwise prevent a breach or contemplated breach of this
Agreement by Executive as provided in paragraph 6 hereof.

6
<PAGE> 7

(h) Execution in Counterparts. This Agreement may be executed in two or
more counterparts, none of which need contain the signatures of all parties
hereto and each of which shall be deemed an original.

IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first set forth above.

SUMMIT PROPERTIES INC.

By: _____________________________
Name: William F. Paulsen
Title: President

SUMMIT MANAGEMENT COMPANY

By: _____________________________
Name: William F. Paulsen
Title: Vice President

_____________________________[SEAL]
William B. Hamilton

"Executive"

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,665
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 704,779
<DEPRECIATION> 85,651
<TOTAL-ASSETS> 634,991
<CURRENT-LIABILITIES> 0
<BONDS> 309,933
0
0
<COMMON> 224
<OTHER-SE> 302,819
<TOTAL-LIABILITY-AND-EQUITY> 634,991
<SALES> 93,547
<TOTAL-REVENUES> 94,489
<CGS> 0
<TOTAL-COSTS> 35,399
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,138
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</TABLE>