SUMMIT PROPERTIES INC, 10-K, 1999-03-16

SUMMIT PROPERTIES INC
10-K, 1999-03-16
REAL ESTATE INVESTMENT TRUSTS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 1998 Commission file number 1-12792

SUMMIT PROPERTIES INC.
(Exact name of registrant as specified in its charter)

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

<TABLE>
<CAPTION>
MARYLAND 56-1857807
<S> <C>
(State or other jurisdiction of (IRS 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>
<CAPTION>
COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
<S> <C>
(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. Yes [X] No [ ]

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

The aggregate market value of the voting stock held by nonaffiliates of
the Registrant, as of March 11, 1999 was $460,490,478.

The number of shares of the Registrant's Common Stock, par value $.01 per
share, outstanding as of March 11, 1999 was 28,445,268.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 1999 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 herein as portions of Part III of this Form 10-K.
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<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
ITEM PAGE
- --------- -----
<S> <C> <C>
PART I
1. Business ................................................................................. 3
2. Properties ............................................................................... 8
3. Legal Proceedings ........................................................................ 11
4. Submission of Matters to a Vote of Security Holders ...................................... 11
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters .................... 12
6. Selected Financial Data .................................................................. 13
7. Management's Discussion and Analysis of Financial Condition and Results of Operations .... 15
7A. Quantitative and Qualitative Disclosure about Market Risk ................................ 31
8. Financial Statements and Supplementary Data .............................................. 31
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ..... 31
PART III
10. Directors and Executive Officers of the Registrant ....................................... 32
11. Executive Compensation ................................................................... 32
12. Security Ownership of Certain Beneficial Owners and Management ........................... 32
13. Certain Relationships and Related Transactions ........................................... 32
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K .......................... 33
</TABLE>

2
<PAGE>

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, southwestern and mid-atlantic United States. The Company's
current portfolio consists of 66 apartment Communities with 16,631 apartment
homes, including Summit Foxcroft in which the Company has a 75% managing
general partner interest. The Company also has five apartment Communities with
1,370 apartment homes under construction and in lease-up for a total of 18,001
apartment homes.

For the year ended December 31, 1998, the average physical occupancy rate
of the Company's fully stabilized Communities was 93.3%, and the average
monthly rental revenue for these Communities was $763 per occupied apartment
home. In addition, the Company has acquisition Communities, stabilized
development Communities (i.e. stabilized after January 1, 1996) and Communities
in lease-up. A Community is considered to be stabilized at the attainment of
93.0% physical occupancy. A Community which the Company has developed is deemed
fully stabilized when stabilized for the two prior years as of the beginning of
the current year. A Community which the Company has acquired is deemed fully
stabilized when owned by the Company for one year or more as of the beginning
of the current year. In 1998, average physical occupancy rates were 93.8% and
93.1% and average monthly rental revenue was $859 and $927 per occupied
apartment home for acquisition Communities and stabilized development
Communities, respectively. Annual averages for Communities in lease-up are not
meaningful as the Communities are in various stages of construction/lease-up
during the year. The Company also manages approximately 2,800 apartment homes
for unrelated third parties. The Company is a fully integrated organization
with multifamily development, construction, acquisition and management
expertise which employs approximately 650 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 86.2%
economic owner as of December 31, 1998. 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 the following high growth
core markets: Charlotte, North Carolina; Tampa/Sarasota, Florida; Washington,
D.C.; Raleigh/Central, North Carolina; South Florida; Atlanta, Georgia;
Richmond, Virginia; Orlando, Florida; Indianapolis, Indiana; Dallas, Texas;
Austin, Texas and Columbus, Ohio. In keeping with this strategy, the Company
has established city operating offices in Charlotte, North Carolina; Tampa,
Florida; Bethesda, Maryland; Atlanta, Georgia; Fort Lauderdale, Florida;
Dallas, Texas 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 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.

GROWTH STRATEGIES

The Company's objective is to create long term value through four
strategies: maximizing cash flow from existing Communities, targeting major
growth markets, deploying capital strategically and dedication to customer
service.

3
<PAGE>

MAXIMIZING 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. The Company's affluent resident profile, well-trained property
management staff and management information systems support this strategy. For
the year ended December 31, 1998, average rent per occupied apartment home for
the Company's fully stabilized Communities increased 3.3%, and property
operating income from these Communities increased 3.6% for the same period.
Average occupancy, rental revenue and property operating income levels for the
Company's fully stabilized Communities are as follows for the years set forth
below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Average Physical Occupancy (1) ............................... 93.3% 93.2% 93.1%
Average Monthly Rental Revenue per Occupied Apartment Home ... $ 763 $ 717 $ 714
Average Monthly Rental Revenue per Apartment Home Growth Rate 3.3% 2.1% 3.8%
Property Operating Income Growth Rate (2) .................... 3.6% 2.4% 3.1%
Number of Communities (1) .................................... 39 44 32
</TABLE>

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1) The Company also has fourteen acquisition Communities, five stabilized
development Communities (i.e., stabilized after January 1, 1996) and
thirteen Communities in lease-up. In 1998, average physical occupancy rates
were 93.8% and 93.1% and average monthly rental revenue were $859 and $927
per occupied apartment home for acquisition Communities and stabilized
development Communities, respectively. Annual averages for Communities in
lease-up are not meaningful as the Communities were in various stages of
construction/lease-up during the year.

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

TARGETING MAJOR GROWTH MARKETS. The Company's existing portfolio and plans
for growth focus on core markets that are expected to grow at a greater rate
than the national average in population, employment and household formation.
The Company's current high growth core markets are as follows: Charlotte, North
Carolina; Tampa/Sarasota, Florida; Washington, D.C.; Raleigh, North Carolina;
South Florida; Atlanta, Georgia; Richmond, Virginia; Orlando, Florida;
Indianapolis, Indiana; Dallas, Texas; Austin, Texas and Columbus, Ohio. The
Company's strategy provides geographic diversification that protects it against
an economic downturn in any one market, while at the same time benefiting from
a tightly targeted focus on a limited number of attractive markets. By focusing
only on these markets, the Company gains better brand recognition, builds local
expertise and improves operating efficiencies. Within each market there are
numerous housing alternatives that compete with the Communities in attracting
residents. The Communities compete directly with other rental apartments,
condominiums and single-family homes that are available for rent or sale in the
markets in which the Communities are located. In addition, various entities,
including insurance companies, pension and investment funds, partnerships,
investment companies and other multifamily REITs, compete with the Company for
the acquisition of existing properties and the development of new properties,
some of which may have greater resources than the Company. The Company has not
identified any dominant competitor, nor is it currently the dominant
competitor, in its markets.

DEPLOYING CAPITAL STRATEGICALLY. Since its initial public offering in
1994, the Company has increased the size of its property portfolio by almost
150% to 16,631 apartment homes. Development of new Communities has been the
foundation of the Company's growth. Of its 66 completed Communities, 39 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.

The Company maintains an active development program which provides it with
a predictable and consistent stream of new revenues. Focusing on development
allows the Company to build desirable properties that generate premium rents.
It also provides returns which generally exceed those achieved on acquisitions.
The Company's development goal is to provide its residents with a community
that feels like single-family housing, with front yards, open floor plans,
abundant square footage, generous storage and both attached and detached
garages. The Company enters into leases with its residents that include
provisions which are usual and customary for apartment leases, such as the
payment of rent monthly, advance notice in the event of a termination,
provision of a security deposit and the imposition by the Company of a charge
for rent paid after the fifth day of the month. The leases are predominantly
for a term of one year.

4
<PAGE>

The Company employs a combination of local autonomy and centralized
oversight in its development process. Development officers live in their
respective markets, so that critical decision-making is kept local. Development
officers report to a corporate development executive, a process that is
designed to ensure consistency in design, building materials and quality.

The Company utilizes the Construction Company in addition to third-party
general contractors to build its new Communities. Of the 2,133 apartment homes
in development at December 31, 1998, 63% are being built by the Construction
Company, which has resulted in higher quality construction, improved timeliness
and cost savings.

In 1998, the Company completed development of four Communities, adding 973
apartment homes to the Company's portfolio. These four Communities represent a
total investment of approximately $74.4 million. The Communities completed in
1998 are Summit Stonefield, Summit Lake I, Summit Ballantyne II and Summit New
Albany.

As of December 31, 1998, the Company had nine apartment Communities under
construction (five of which are also in lease-up) containing 2,133 apartment
homes, with a budgeted cost of $192.5 million. The following provides summary
information regarding the nine Communities under construction as of December
31, 1998 (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 Fair Lakes I -- Fairfax, VA ............... 370 $ 32,900 $ 30,351 $ 2,549 Q1 1999
Summit Governor's Village -- Chapel Hill, NC ..... 242 16,700 16,518 182 Q1 1999
Summit Doral -- Miami, Florida ................... 260 22,800 16,601 6,199 Q2 1999
Summit Westwood -- Raleigh, NC ................... 354 24,400 18,601 5,799 Q3 1999
Summit Lake II -- Raleigh, NC .................... 144 10,200 7,012 3,188 Q2 1999
Summit Sedgebrook II -- Charlotte, NC ............ 120 7,800 4,409 3,391 Q3 1999
Summit Fair Lakes II -- Fairfax, VA .............. 160 14,200 8,017 6,183 Q3 1999
Summit Largo -- Largo, MD ........................ 217 18,000 4,984 13,016 Q1 2000
Summit Grandview -- Charlotte, NC ................ 266 45,500 3,703 41,797 Q2 2000
Other development and construction costs ......... -- -- 26,949 --
--- -------- -------- -------
2,133 $192,500 $137,145 $82,304
===== ======== ======== =======
</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 rental rates and the period of time necessary to achieve
stabilization, and could result in achieving stabilization later than currently
anticipated.

The Company is also conducting feasibility and other pre-development work
for twelve new Communities. The Company either owns or holds options to
purchase the land for each of these potential developments. 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.

While the Company has emphasized development of new apartment communities
as one of its strategies for growth, it also has successfully capitalized on
expansion opportunities through the strategic acquisition of properties that
meet the Company's investment criteria. The Company has acquired more than
8,612 apartment homes since its formation in 1994. These properties were
successfully acquired at prices below their replacement cost and cumulatively
have achieved a total unleveraged average yield of 9.86% in 1998. Acquisitions
have been concentrated in the Company's targeted core markets in order to
further strengthen brand identity and operational efficiencies. The Company's
extensive local-market knowledge and development expertise give it an advantage
in identifying and underwriting acquisition opportunities which the Company
believes will create shareholder value. The Company acquired the following
Communities in 1998 (dollars in thousands):

5
<PAGE>

<TABLE>
<CAPTION>
ACQUISITION APARTMENT PURCHASE YEAR
COMMUNITY DATE HOMES PRICE BUILT
- -------------------------------------------- ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C>
Summit St. Clair -- Atlanta, GA ............ 3/1/98 336 $ 27,100 1997
Summit Club at Dunwoody -- Atlanta, GA ..... 5/22/98 324 27,400 1997
Summit Lenox -- Atlanta, GA ................ 7/8/98 432 33,800 1965
Ewing Portfolio (1) ........................ 11/4/98 2,465 179,700 1994 to 1998
----- --------
3,557 $268,000
===== ========
</TABLE>

- ---------
(1) Includes four Communities located in Dallas, Texas, two Communities located
in Austin, Texas and one Community in San Antonio, Texas. The purchase of
one of the Communities located in Dallas, Texas was not completed until
December 31, 1998.

During 1998, the Company disposed of eight communities for over $130
million. These Communities did not align with the Company's overall long term
strategic plan and growth objectives. The prices realized for the 1998
dispositions represent a cost of capital below what could have been achieved
through other capital sources, such as common equity. As long as this remains
the case, the Company anticipates continuing to use property sales as a source
of capital.

DEDICATION TO CUSTOMER SERVICE. Pro-active property management has allowed
the Company to maximize cash flow from its portfolio by encouraging local
decision-making and rewarding performance, initiative and innovation. The
Company's localized property management system, with offices strategically
located in seven key cities, gives the Company a distinct advantage in better
responding to the needs of each market. 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 associate 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 associate enters
into a comprehensive training program when he or she is hired. This training
program ensures that associates have a clear understanding of their job
responsibilities, the high standards of performance expected of them and the
Company's operating philosophies. On-going training following each associate's
initial employment period further enhances associate 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 associate turnover.

COMPANY HISTORY

The Company was formed in 1993 to continue and expand the multifamily
development, construction, acquisition, operation, management and leasing
businesses of the predecessor entities through which the Company historically
conducted operations prior to the Initial Offering (as defined below) (the
"Summit Entities"). The Summit Entities were founded by the Company's Chairman
of the Board, William B. McGuire, Jr., in 1972. In 1981, William F. Paulsen
joined the predecessor to 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 (a "REIT")
and completed its initial public offering (the "Initial Offering") of
10,000,000 shares of common stock, par value $0.01 per share (the "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 (the "1995
Offering") of 4,000,000 shares of Common Stock. A second follow-on public
offering (the "1996 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. In
addition, the Company has adopted a dividend reinvestment and stock purchase
program for the sale of up to 2,500,000 shares of Common Stock, pursuant to
which it sells Common Stock from time to time.

On August 12, 1997, the Company completed a $125 million senior unsecured
debt offering. On December 12, 1997, the Company completed an additional $30
million senior unsecured debt offering. The Company has established a program
for the sale of up to $95 million aggregate principal amount of Medium-Term
Notes due nine months or more from the date of issuance (the "MTN Program"). On
July 28, 1998, the Company sold $30 million of notes under the MTN Program. On
October 5, 1998, the Company sold $25 million of notes under the MTN Program.

6
<PAGE>

The Company, a Maryland corporation, is a self-administered and
self-managed REIT. The Company's Common Stock is listed on the New York Stock
Exchange (the "NYSE") 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; Bethesda, Maryland; Ft. Lauderdale, Florida;
Dallas, Texas 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 86.2% economic and voting interest in the Operating
Partnership as of December 31, 1998. 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 certain voting
rights of holders (including the Company) of the units of limited partnership
interest ("Units"), including the consent of holders (including the Company) of
85% of the 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 86.2%
of the cash distributions from, and in the profits and losses of, the Operating
Partnership.

Each Unit 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 from the date of formation without a vote of the limited partners
of the Operating Partnership.

7
<PAGE>

ITEM 2. PROPERTIES

THE COMMUNITIES

The Company owns and operates through the Operating Partnership 66
completed Communities and five Communities which are currently under
construction and in lease-up, for a total of 18,001 apartment homes. Forty-two
of the Communities have been completed since January 1, 1990 and, as of
December 31, 1998, the average age of the completed Communities was
approximately 7 years. The following is a summary of Communities by market:

<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
NUMBER OF APARTMENT APARTMENT
COMMUNITIES HOMES HOMES
------------- ----------- -----------
<S> <C> <C> <C>
Washington, DC ......................... 9 2,543 14.1%
Raleigh/Central North Carolina ......... 11 2,300 12.8%
South Florida .......................... 7 2,019 11.2%
Atlanta, Georgia ....................... 6 2,009 11.2%
Charlotte, North Carolina .............. 12 1,860 10.4%
Tampa/Sarasota, Florida ................ 7 1,574 8.7%
Dallas, Texas .......................... 4 1,359 7.5%
Other non core markets ................. 5 1,098 6.1%
Richmond, Virginia ..................... 3 862 4.8%
Austin, Texas .......................... 2 856 4.8%
Orlando, Florida ....................... 2 656 3.6%
Indianapolis, Indiana .................. 1 314 1.7%
Columbus, Ohio ......................... 1 301 1.7%
San Antonio, Texas ..................... 1 250 1.4%
-- ----- -----
71 18,001 100.0%
== ====== =====
</TABLE>

Other non-core markets consist of two Communities in Greenville, South
Carolina, two Communities in Cincinnati, Ohio, and one Community in Yardley,
Pennsylvania.

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

8
<PAGE>

<TABLE>
<CAPTION>
AVERAGE
NUMBER OF YEAR APARTMENT
MARKET AREA/COMMUNITY LOCATION APARTMENTS COMPLETED SIZE
- --------------------------------------- -------------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
ATLANTA
Summit Glen ........................... Atlanta, GA 242 1992 983
Summit Village ........................ Marietta, GA 323 1991 984
--- ---
ATLANTA WEIGHTED AVERAGE .............. 565 984
CHARLOTTE
Summit Arbors ......................... Charlotte, NC 120 1986 944
Summit Crossing ....................... Charlotte, NC 128 1985 978
Summit Fairview ....................... Charlotte, NC 135 1983 1,036
Summit Foxcroft (4) ................... Charlotte, NC 156 1979 940
Summit Norcroft ....................... Charlotte, NC 162 1991 1,112
Summit Radbourne ...................... Charlotte, NC 225 1991 1,006
Summit Simsbury ....................... Charlotte, NC 100 1985 874
Summit Touchstone ..................... Charlotte, NC 132 1986 899
--- -----
CHARLOTTE WEIGHTED AVERAGE ............ 1,158 982
RALEIGH/CENTRAL NORTH CAROLINA
Summit Creekside ...................... Hickory, NC 118 1981 1,006
Summit Eastchester .................... High Point, NC 172 1981 947
Summit Highland ....................... Raleigh, NC 172 1987 986
Summit Mayfaire ....................... Raleigh, NC 144 1995 1,047
Summit Oak ............................ Goldsboro, NC 100 1982 918
Summit Sherwood ....................... Winston-Salem, NC 190 1968 1,028
Summit Square ......................... Durham, NC 362 1990 925
----- -----
RALEIGH/CENTRAL NORTH CAROLINA
WEIGHTED AVERAGE ..................... 1,258 973
RICHMOND
Summit Breckenridge ................... Glen Allen, VA 300 1987 928
Summit Stony Point .................... Richmond, VA 250 1986 1,045
Summit Waterford ...................... Midlothian, VA 312 1990 995
----- -----
RICHMOND WEIGHTED AVERAGE ............. 862 986
SOUTH FLORIDA
Summit Del Ray ........................ Delray Beach, FL 252 1993 968
Summit Palm Lake ...................... W. Palm Beach, FL 304 1992 919
Summit Plantation I ................... Plantation, FL 262 1995 1,283
----- -----
SOUTH FLORIDA WEIGHTED AVERAGE ........ 818 1,051
TAMPA/SARASOTA
Summit Gateway ........................ St. Petersburg, FL 212 1987 828
Summit Hampton ........................ Bradenton, FL 352 1988 933
Summit Heron's Run .................... Sarasota, FL 274 1990 863
Summit Lofts .......................... Palm Harbour, FL 200 1990 1,045
Summit McIntosh ....................... Sarasota, FL 212 1990 855
Summit Perico ......................... Bradenton, FL 256 1990 911
Summit Walk ........................... Tampa, FL 68 1993 1,614
----- -----
TAMPA/SARASOTA WEIGHTED AVERAGE ....... 1,574 936
WASHINGTON, D.C.
Summit Belmont ........................ Fredricksburg, VA 300 1987 881
Summit Meadow ......................... Columbia, MD 178 1990 1,020
Summit Pike Creek ..................... Newark, DE 264 1988 899
Summit Reston ......................... Reston, VA 418 1987 854
Summit Windsor ........................ Frederick, MD 147 1989 903
----- -----
WASHINGTON, D.C. WEIGHTED AVERAGE ..... 1,307 897
OTHER
Summit Blue Ash ....................... Blue Ash, OH 242 1992 1,158
Summit Park ........................... Forest Park, OH 316 1989 963
Summit Beacon Ridge ................... Greenville, SC 144 1988 1,046
Summit East Ridge ..................... Greenville, SC 180 1986 959
----- -----
OTHER WEIGHTED AVERAGE ................ 882 1,029
----- -----
TOTAL WEIGHTED AVERAGE OF
COMMUNITIES FULLY STABILIZED ......... 8,424 971
----- -----
DEVELOPED COMMUNITIES (7)
Summit Aventura ....................... Aventura, FL 379 1995 1,106
Summit Fairways ....................... Orlando, FL 240 1996 1,302
Summit on the River ................... Atlanta, GA 352 1997 1,103
Summit River Crossing ................. Indianapolis, IN 314 1996 1,060
Summit Russett ........................ Laurel, MD 314 1997 958
----- -----
1,599 1,097

<CAPTION>
MORTGAGE
AVERAGE AVERAGE NOTES
AVERAGE AVERAGE MONTHLY MONTHLY PAYABLE AT
PHYSICAL PHYSICAL RENTAL RENTAL DECEMBER 31,
OCCUPANCY OCCUPANCY REVENUE REVENUE 1998
MARKET AREA/COMMUNITY 1998 (1) 1997 (1) 1998 (2) 1997 (2) (IN THOUSANDS)
- --------------------------------------- ----------- ----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
ATLANTA
Summit Glen ........................... 94.9 92.8 $ 886 $ 838 (3)
Summit Village ........................ 94.2 91.5 747 728 (3)
---- ---- ----- -----
ATLANTA WEIGHTED AVERAGE .............. 94.5 92.0 806 775
CHARLOTTE
Summit Arbors ......................... 96.4 94.7 833 790 --
Summit Crossing ....................... 94.1 93.5 678 664 $4,106
Summit Fairview ....................... 92.1 95.7 797 751 --
Summit Foxcroft (4) ................... 92.2 93.2 686 660 2,663
Summit Norcroft ....................... 93.1 93.2 788 765 (3)
Summit Radbourne ...................... 92.8 93.3 777 773 8,507
Summit Simsbury ....................... 93.7 94.0 776 743 (5)
Summit Touchstone ..................... 93.8 92.3 707 700 (5)
---- ---- ----- -----
CHARLOTTE WEIGHTED AVERAGE ............ 93.4 93.7 755 733
RALEIGH/CENTRAL NORTH CAROLINA
Summit Creekside ...................... 94.9 95.7 612 596 --
Summit Eastchester .................... 94.8 93.7 618 593 --
Summit Highland ....................... 95.0 93.8 712 708 (3)
Summit Mayfaire ....................... 93.2 92.8 783 770 --
Summit Oak ............................ 95.5 96.1 571 551 2,519
Summit Sherwood ....................... 92.3 94.9 594 561 3,274
Summit Square ......................... 91.7 91.8 786 761 (3)
---- ---- ----- -----
RALEIGH/CENTRAL NORTH CAROLINA
WEIGHTED AVERAGE ..................... 93.5 93.6 690 669
RICHMOND
Summit Breckenridge ................... 91.8 95.3 747 742 --
Summit Stony Point .................... 93.8 95.7 786 760 (6)
Summit Waterford ...................... 92.9 93.7 732 705 (3)
---- ---- ----- -----
RICHMOND WEIGHTED AVERAGE ............. 92.8 94.8 753 734
SOUTH FLORIDA
Summit Del Ray ........................ 92.0 94.8 893 852 (3)
Summit Palm Lake ...................... 93.4 95.2 796 764 (3)
Summit Plantation I ................... 92.3 91.7 1,040 1,034 --
---- ---- ----- -----
SOUTH FLORIDA WEIGHTED AVERAGE ........ 92.6 93.9 904 877
TAMPA/SARASOTA
Summit Gateway ........................ 94.9 95.6 671 644 (6)
Summit Hampton ........................ 90.6 89.7 638 625 (6)
Summit Heron's Run .................... 93.7 90.7 697 674 (3)
Summit Lofts .......................... 93.4 93.2 737 689 --
Summit McIntosh ....................... 92.2 89.5 694 696 --
Summit Perico ......................... 90.2 89.2 675 671 (3)
Summit Walk ........................... 92.9 94.5 1,133 1,098 --
---- ---- ----- -----
TAMPA/SARASOTA WEIGHTED AVERAGE ....... 92.3 91.2 700 682
WASHINGTON, D.C.
Summit Belmont ........................ 95.4 94.9 675 633 (6)
Summit Meadow ......................... 94.2 95.4 928 900 (3)
Summit Pike Creek ..................... 94.3 94.1 842 838 (6)
Summit Reston ......................... 93.3 94.0 1,014 965 --
Summit Windsor ........................ 93.6 90.7 725 686 (3)
---- ---- ----- -----
WASHINGTON, D.C. WEIGHTED AVERAGE ..... 94.1 94.0 857 823
OTHER
Summit Blue Ash ....................... 92.7 94.8 883 827 (3)
Summit Park ........................... 92.8 92.0 663 633 --
Summit Beacon Ridge ................... 96.0 93.6 667 657 --
Summit East Ridge ..................... 96.6 95.1 569 565 5,042
---- ---- ----- -----
OTHER WEIGHTED AVERAGE ................ 94.1 93.7 705 676
---- ---- ----- -----
TOTAL WEIGHTED AVERAGE OF
COMMUNITIES FULLY STABILIZED ......... 93.3 93.3 763 739
---- ---- ----- -----
DEVELOPED COMMUNITIES (7)
Summit Aventura ....................... 91.1 91.7 1,076 1,083 --
Summit Fairways ....................... 91.9 81.3 919 891 --
Summit on the River ................... 93.9 71.2 844 792 --
Summit River Crossing ................. 92.5 93.3 863 817 --
Summit Russett ........................ 96.1 58.7 912 883 --
</TABLE>

9
<PAGE>

<TABLE>
<CAPTION>
AVERAGE
NUMBER OF YEAR APARTMENT
MARKET AREA/COMMUNITY LOCATION APARTMENTS COMPLETED SIZE
- ----------------------------------- -------------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
ACQUISITION COMMUNITIES
1997 ACQUISITIONS
Summit Sand Lake .................. Orlando, FL 416 1995 1,035
Summit Portofino .................. Broward County, FL 322 1995 1,307
Summit Windsor II ................. Frederick, MD 306 1988 903
Summit Fair Oaks (8) .............. Fairfax, VA 246 1990 938
--- -----
1,290 1,053
1998 ACQUISITIONS
Summit St. Clair .................. Atlanta, GA 336 1997 969
Summit Club at Dunwoody ........... Atlanta, GA 324 1997 1,007
Summit Lenox ...................... Atlanta, GA 432 1965 963
Summit Belcourt ................... Dallas, TX 180 1994 875
Summit Buena Vista ................ Dallas, TX 467 1996 925
Summit Camino Real ................ Dallas, TX 364 1998 850
Summit Turtle Cove ................ Dallas, TX 348 1996 869
Summit Los Arboles ................ Austin, TX 408 1996 847
Summit Las Palmas (9) ............. Austin, TX 448 1998 890
Summit Turtle Rock ................ San Antonio, TX 250 1995 857
----- -----
3,557 907
----- -----
TOTAL WEIGHTED AVERAGE OF
STABILIZED COMMUNITIES ........... 14,870 977
------ -----
COMMUNITIES IN
LEASE-UP (10)
Summit Ballantyne I ............... Charlotte, NC 246 1997 1,049
Summit Sedgebrook I ............... Charlotte, NC 248 1997 1,017
Summit Norcroft II ................ Charlotte, NC 54 1997 1,168
Summit Ballantyne II .............. Charlotte, NC 154 1998 1,057
Summit Lake I ..................... Raleigh, NC 302 1998 1,048
Summit Governor's Village ......... Raleigh, NC 242 1999 1,134
Summit Westwood ................... Raleigh, NC 354 1999 1,112
Summit Lake II .................... Raleigh, NC 144 1999 1,101
Summit Plantation II .............. Plantation, FL 240 1997 1,173
Summit New Albany ................. Columbus, OH 301 1998 1,235
Summit Stonefield ................. Yardley, PA 216 1998 1,022
Summit Doral ...................... Miami, FL 260 1999 1,172
Summit Fair Lakes I ............... Fairfax, VA 370 1999 996
------ -----
3,131 1,094
------ -----
TOTAL COMMUNITIES ................. 18,001 997
====== =====

- ---------
(1) 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 occupancy that existed on Sunday during
each week of the period.

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

(3) Collateral for fixed rate mortgage of $146.7 million.

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

(5) Collateral for a fixed rate mortgage of $8.5 million.

(6) Collateral for letters of credit in an aggregate amount of $52.9 million
which serve as collateral for $51.8 million in tax exempt bonds.

(7) Communities that were stabilized in 1998 but were stabilized subsequent to
January 1, 1996.

(8) Summit Fair Oaks was acquired on December 31, 1997 and, accordingly, no
average occupancy or average rent information is available for 1997.

(9) Summit Las Palmas was acquired effective December 31, 1998 and,
accordingly, no average occupancy or average rent information is available
for 1998.

(10) Communities that were in lease-up during 1998. These Communities have and
are leasing at a rate consistent with the Company's expectations. As with
any community in lease-up, there are uncertainties and risks associated
with the Company's communities in lease-up. While the Company has
estimated completion and stabilization budgets and target dates based on
what it believes are reasonable assumptions in light of current
conditions, there can be no assurance

10
<PAGE>

that actual costs will not exceed current budgets or that the Company will
not experience delays in reaching stabilization of such Communities.

Information with respect to total debt secured by thirty-four of the
Company's Communities having an aggregate net book value of $433.5 million as
of December 31, 1998, is as follows (in thousands):

<TABLE>
<CAPTION>
FIXED RATE VARIABLE RATE
------------------- ----------------
<S> <C> <C>
Total principal ..................... $279,801 $51,802
Interest rates range from ........... 6.24% to 9.80% 5.55%(1)
Weighted average interest rate ...... 6.72% 5.55%(1)
Annual debt service ................. $23,656 $ 3,587(2)
</TABLE>

Scheduled annual maturities of secured debt is as follows:

<TABLE>
<S> <C>
1999 ................... $ 6,205
2000 ................... 6,573
2001 ................... 6,803
2002 ................... 15,319
2003 ................... 7,586
Thereafter ............. 289,117
---------
Total .................. $ 331,603
=========
</TABLE>

- ---------
(1) Interest rate as of December 31, 1998.

(2) Annual debt service for variable rate loans represents 1998 costs and
includes letter of credit fees and other bond related costs.

Each Community has many of the following features: swimming pools, tennis
courts, racquetball courts, 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 operated by the Company's property management
staff. The 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

11
<PAGE>

PART II

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

The Company's Common Stock began trading on 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>
1998 1997
----------------------- -----------------------
QUARTER HIGH LOW HIGH LOW
- --------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
January 1 through March 31 ............ $ 22.00 $ 19.75 $ 21.88 $ 19.75
April 1 through June 30 ............... 21.31 18.88 21.00 19.63
July 1 through September 30 ........... 19.56 16.50 22.06 19.50
October 1 through December 31 ......... 19.38 16.81 22.38 19.94
</TABLE>

On March 11, 1999 the last reported sale price of the Common Stock on
the NYSE was $16.69. On March 11, 1999 there were 1,516 holders of record of
28,445,268 shares of the Company's Common Stock.

The Company declared a dividend of $0.4075 per share of Common Stock for
each of the four quarters in 1998, which was paid on May 15, 1998 for the first
quarter, August 14, 1998 for the second quarter, November 16, 1998 for the
third quarter, and February 15, 1999 for the fourth quarter.

The Company declared a dividend of $0.3975 per share of Common Stock for
each of the four quarters in 1997, which was paid on May 15, 1997 for the first
quarter, August 15, 1997 for the second quarter, November 17, 1997 for the
third quarter, and February 14, 1998 for the fourth quarter.

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 connection with the purchase on November 4, 1998 of a portfolio of
multifamily properties in Texas (the "Ewing Portfolio") consisting of seven
Communities located in Dallas, Austin and San Antonio, the Company issued
2,074,615 shares of Common Stock (valued at approximately $37.3 million at the
time of the acquisition) to the sellers of the Ewing Portfolio in partial
consideration of their interest in the Communities. Such shares of Common Stock
were issued in reliance on an exemption from registration under Section 4(2) of
the Securities Act of 1933, as amended (the "Securities Act"), and rules and
regulations promulgated thereunder. In light of information obtained by the
Company in connection with the transaction, management of the Company believes
that the Company may rely on such exemption.

12
<PAGE>

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, Summit Entities, as of and for each of the years in the five-year
period ended December 31, 1998. 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)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994 (1)
------------- ------------- ------------ ------------ ------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND PROPERTY INFORMATION)
<S> <C> <C> <C> <C> <C>
OPERATING INFORMATION:
Revenue
Rental ..................................................... $ 137,660 $ 109,827 $ 88,864 $ 70,773 $ 54,198
Property management (2) .................................... -- -- -- -- 536
Interest and other ......................................... 9,909 6,850 5,625 4,221 3,700
---------- ---------- ---------- --------- ----------
Total ................................................... 147,569 116,677 94,489 74,994 58,434
---------- ---------- ---------- --------- ----------
Property operating and maintenance expense (before
depreciation and amortization) ............................. 51,550 42,032 35,226 28,012 21,502
Property management expenses (2) ............................ -- -- -- -- 366
Interest expense ............................................ 33,506 21,959 17,138 14,802 14,067
Depreciation and amortization ............................... 28,997 22,652 18,208 15,141 11,700
REIT formation costs ........................................ -- -- -- -- 457
General and administrative expense .......................... 3,861 2,740 2,557 1,949 1,756
(Income) loss from equity investments ....................... 328 (274) 173 39 59
---------- ---------- ---------- --------- ----------
Total ................................................... 118,242 89,109 73,302 59,943 49,907
---------- ---------- ---------- --------- ----------
Income before gain on sale of real estate assets,
extraordinary items and minority Interest of unitholders
in Operating Partnership ................................... 29,327 27,568 21,187 15,051 8,527
Gain on sale of real estate assets .......................... 37,148 4,366 -- -- --
---------- ---------- ---------- --------- ----------
Income before extraordinary items and minority interest
of Unitholders in Operating Partnership .................... $ 66,475 $ 31,934 $ 21,187 $ 15,051 $ 8,527
========== ========== ========== ========= ==========
Net income .................................................. $ 56,375 $ 27,116 $ 16,948 $ 11,819 $ 14,032
========== ========== ========== ========= ==========
Income per share before extraordinary items -- basic and
diluted .................................................... $ 2.28 $ 1.17 $ .92 $ .83 $ .64
========== ========== ========== ========= ==========
Net income per share -- basic and diluted ................... $ 2.26 $ 1.17 $ .90 $ .80 $ 1.28
========== ========== ========== ========= ==========
Dividends per share ......................................... $ 1.63 $ 1.59 $ 1.55 $ 1.51 $ 1.29
========== ========== ========== ========= ==========
Weighted average shares outstanding -- basic ................ 24,935 23,146 18,888 14,750 10,992
========== ========== ========== ========= ==========
Weighted average shares and units outstanding -- basic ...... 29,141 27,258 22,914 18,112 13,390
========== ========== ========== ========= ==========
OTHER INFORMATION:
Cash flow provided by (used in):
Operating activities ....................................... $ 63,808 $ 55,947 $ 41,176 $ 30,994 $ 17,525
Investing activities ....................................... (219,170) (175,907) (103,971) (63,734) (113,741)
Financing activities ....................................... 154,636 119,858 63,579 34,440 88,993
Funds from Operations (3) ................................... $ 58,242 $ 50,201 $ 39,391 $ 30,148 $ 20,120
Total completed communities (at end of period) .............. 66 61 51 46 32
Total apartment homes developed (4) ......................... 973 1,454 1,061 379 --
Total apartment homes acquired .............................. 3,557 1,434 262 2,025 1,332
Total apartment homes (at end of period) (5) ................ 16,631 14,462 11,788 10,465 8,061
Ratio of earnings to fixed charges (6) ...................... 2.51 1.93 1.78 1.65 1.52
BALANCE SHEET INFORMATION:
Real estate, before accumulated depreciation ................ $1,206,536 $ 913,033 $ 704,779 $ 586,264 $ 439,025
Total assets ................................................ 1,198,664 825,293 634,991 533,252 397,945
Total long-term debt ........................................ 726,103 474,673 309,933 297,010 249,009
Stockholders' equity ........................................ 358,925 265,839 257,214 175,454 115,525
</TABLE>

13
<PAGE>

- ---------
(1) For purposes of the 1994 Selected Financial Data, historical information is
presented both for the Company and its predecessors, the Summit Entities,
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 the Management Company,
which is accounted for under the equity method of accounting.

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

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Income before gain on sale of real estate assets,
minority interest of unitholders in Operating
Partnership and extraordinary items ............... $29,327 $27,568 $21,187 $15,051 $ 8,527
Real estate depreciation ............................ 28,915 22,633 18,204 15,097 11,593
------- ------- ------- ------- -------
Funds from Operations ............................... $58,242 $50,201 $39,391 $30,148 $20,120
======= ======= ======= ======= =======
</TABLE>

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

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

(6) The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of pre-tax income
from continuing operations (including gains on sale of real estate) plus
fixed charges (excluding capitalized interest). Fixed charges consist of
interest expense (whether expensed or capitalized), the estimated interest
component of rent expense, and the amortization of debt issuance costs. To
date, the Company has not issued any preferred stock; therefore, the
ratios of earnings to combined fixed charges and preferred stock dividend
requirements are the same as the ratios of earnings to fixed charges
presented.

14
<PAGE>

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

This Form 10-K contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including without limitation statements relating
to the operating performance of fully stabilized Communities, estimated net
asset value, development activities of the Company and the implementation of
the Company's plan to address Year 2000 issues. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995, and is including this statement for purposes of complying with these safe
harbor provisions. Forward-looking statements, which are based on certain
assumptions and describe future plans, strategies and expectations of the
Company, are generally identifiable by use of the words "believe," "expect,"
"intend," "anticipate," "estimate," "project" or similar expressions. The
Company's ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. 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
stabilized and development Communities, the estimated net asset value and the
actual costs, progress and expenses with respect to its plan to address Year
2000 issues could differ materially from those set forth in the forward-looking
statements. Factors which could have a material adverse effect on the
operations and future prospects of the Company include, but are not limited to,
changes in: economic conditions generally and the real estate market
specifically, legislative/regulatory changes (including changes to laws
governing the taxation of real estate investment trusts ("REITs"), availability
of capital, interest rates, construction delays due to unavailability of
materials, weather conditions or other delays, competition, supply and demand
for apartment communities in the Company's current and proposed market areas,
expenses of or delays in the identification and upgrade or replacement by the
Company of its non-Year 2000 compliant computer information systems and
computer systems that do not relate to information technology, but include
embedded technology, the Year 2000 compliance of vendors (including vendors of
the Company's computer information systems) or third party service providers
(including the Company's primary bank and payroll processor), generally
accepted accounting principles, policies and guidelines applicable to REITs,
and those factors discussed in the second paragraph under the heading
"Operating Performance of the Company's Fully Stabilized Communities," in the
section entitled "Net Asset Value," in the section entitled "Development
Activity -- Certain Factors Affecting the Performance of Development
Communities," and in the section entitled "Year 2000" on pages 17, 25, 27 and
28 respectively, of this Form 10-K. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements.

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

HISTORICAL RESULTS OF OPERATIONS

The Company's net income is generated primarily from operations of its
Communities. The changes in operating results from period to period reflect
changes in existing Community performance and increases in the number of
apartment homes due to development and acquisition of new Communities. Where
appropriate, comparisons are made on a "fully stabilized Communities,"
"acquisition Communities," "stabilized development 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" when it has attained
a physical occupancy level of at least 93%. A Community which the Company has
acquired is deemed fully stabilized when owned by the Company for one year or
more as of the beginning of the year. A Community which the Company has
developed is deemed "fully stabilized" when stabilized for the two prior years
as of the beginning of the current year. A Community is deemed to be a
"stabilized development" when stabilized as of the beginning of the current
year but not the entire two prior years. All Communities information presented
is before real estate depreciation and amortization expense. Communities'
average physical occupancy presented 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 occupancy that existed on Sunday during
each week of the period. Average monthly rental revenue presented represents
the average monthly net rental revenue per occupied apartment home. The
Company's methodology for calculating average physical occupancy and average
monthly rental revenue may differ from the methodology used by other equity
REITs, and accordingly, may not be comparable to such other REITs.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

Income before minority interest of unitholders in the Operating
Partnership, gain on sale of real estate assets and extraordinary items
increased from 1996 ($21.2 million) to 1997 ($27.6 million) and from 1997 to
1998 ($29.3 million) primarily due to increased property operating income at
stabilized Communities, as well as new sources of income associated

15
<PAGE>

with acquisition Communities and Communities in lease-up, partially offset by a
decrease in property income due to the disposal of certain Communities and an
increase in depreciation and interest expense.

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,
---------------------------------- ----------------------------------
1998 1997 % CHANGE 1997 1996 % CHANGE
---------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Property revenues:
Stabilized Communities (1) ........................ $ 74,018 $ 72,013 2.8% $ 81,668 $80,296 1.7%
Acquisition Communities (2) ....................... 23,709 8,137 191.4% 12,467 2,250 454.1%
Stabilized Development Communities ................ 17,269 14,509 19.0% 12,375 8,762 41.2%
Communities in lease-up ........................... 14,865 2,293 548.3% 8,977 818 997.4%
Community sold .................................... 15,795 19,054 (17.1%) 519 1,421 (63.5%)
-------- -------- -------- -------
Total property revenues ............................. 145,656 116,006 25.6% 116,006 93,547 24.0%
-------- -------- -------- -------
Property operating and maintenance expense:
Stabilized Communities ............................ 27,081 26,720 1.4% 30,709 30,555 0.5%
Acquisition Communities ........................... 8,063 2,829 185.0% 4,336 606 615.5%
Stabilized Development Communities ................ 5,769 4,503 28.1% 3,955 3,069 28.9%
Communities in lease-up ........................... 4,761 955 398.5% 2,821 411 586.4%
Community sold .................................... 5,876 7,025 (16.4%) 211 585 (63.9%)
-------- -------- -------- -------
Total property operating and maintenance expense 51,550 42,032 22.6% 42,032 35,226 19.3%
-------- -------- -------- -------
Property operating income ........................... $ 94,106 $ 73,974 27.2% $ 73,974 $58,321 26.8%
======== ======== ======== =======
Apartment homes, end of period ...................... 18,001 14,980 20.2% 14,980 12,454 20.3%
======== ======== ======== =======
</TABLE>

- ---------
(1) Includes Communities which were stabilized during the entire period for
each of the comparable periods presented.

(2) The 1998 and 1997 comparison includes the Communities acquired in 1998 and
1997. The 1997 and 1996 comparison includes Communities acquired in 1997
and 1996.

A summary of the Company's apartment homes for the years ended December 31,
1998, 1997 and 1996 is as follows:

<TABLE>
<CAPTION>
1998 1997 1996
----------- ---------- ---------
<S> <C> <C> <C>
Apartment homes completed or in construction and lease-up:
At the beginning of the year ................................... 14,980 12,454 11,286
Acquisitions ................................................... 3,557 1,434 262
Developments which began rental operations during the year ..... 1,825 1,306 906
Sale of apartment homes ........................................ (2,361) (214) --
------ ------ ------
At the end of the year ......................................... 18,001 14,980 12,454
====== ====== ======
Completed apartment homes at the end of the year ................ 16,631 14,462 11,788
====== ====== ======
</TABLE>

16
<PAGE>

OPERATING PERFORMANCE OF THE COMPANY'S FULLY STABILIZED COMMUNITIES

The operating performance of the Communities stabilized during the entire
period in both 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,
------------------------------------ -------------------------------------
1998 1997 % CHANGE 1997 1996 % CHANGE
------------ ------------ ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Property revenues:
Rental .............................................. $ 70,111 $ 68,558 2.3% $ 77,788 $ 76,443 1.8%
Other ............................................... 3,907 3,455 13.1% 3,880 3,853 0.7%
-------- -------- -------- --------
Total property revenues .............................. 74,018 72,013 2.8% 81,668 80,296 1.7%
-------- -------- -------- --------
Property operating and maintenance expense:
Personnel ........................................... 5,911 5,882 0.5% 6,905 7,289 (5.3%)
Advertising and promotion ........................... 1,057 1,030 2.6% 1,085 866 25.3%
Utilities ........................................... 3,216 3,123 3.0% 3,657 3,567 2.5%
Building repairs and maintenance .................... 5,821 5,977 (2.6%) 6,967 6,997 (0.4%)
Real estate taxes and insurance ..................... 7,058 6,849 3.1% 7,676 7,609 0.9%
Property supervision ................................ 1,772 1,739 1.9% 2,043 2,001 2.1%
Other operating expense ............................. 2,246 2,120 5.9% 2,376 2,226 6.7%
-------- -------- -------- --------
Total property operating and maintenance expense ..... 27,081 26,720 1.4% 30,709 30,555 0.5%
-------- -------- -------- --------
Property operating income ............................ $ 46,937 $ 45,293 3.6% $ 50,959 $ 49,741 2.4%
======== ======== ======== ========
Average physical occupancy ........................... 93.3% 93.3% 0.0% 93.2% 93.3% (0.1%)
======== ======== ======== ========
Average monthly rental revenue ....................... $ 763 $ 739 3.3% $ 717 $ 702 2.1%
======== ======== ======== ========
Number of apartment homes ............................ 8,424 8,424 9,872 9,872
======== ======== ======== ========
Number of apartment communities ...................... 39 39 44 44
======== ======== ======== ========
</TABLE>

Rental and other revenue increased from 1997 to 1998 due to higher rental
rates. The 2.8% property revenue growth rate was higher than the prior year
rate of growth primarily as a result of a stronger demand in the markets in
which the Company operates. The higher growth rate was especially noticeable in
the Sarasota and Atlanta markets. In 1999 the Company expects the rate of
growth to be similar to the growth rate in 1998 given the current health of the
national economy as well as a decline in apartment permit issuance in some of
the Company's larger markets. 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. However, there can be no
assurance that actual results will not differ from these assumptions, which
could result in a lower property revenue growth rate.

Property operating and maintenance expenses were relatively stable from
1997 to 1998 increasing by 1.4%. As a percentage of total property revenues,
property operating and maintenance expense decreased to 36.6% from 37.1% for
the years ended December 31, 1998 and 1997, respectively.

Rental and other revenue increased from 1996 to 1997 due to higher rental
rates offset by decreased occupancy. Property operating and maintenance
expenses were relatively stable from 1996 to 1997. As a percentage of total
property revenues, property operating and maintenance expenses decreased to
37.6% from 38.1% for the years ended December 31, 1997 and 1996, respectively.

OPERATING PERFORMANCE OF THE COMPANY'S ACQUISITION COMMUNITIES

Acquisition communities for the year ended December 31, 1998 consist of
the following: Summit Portofino, Summit Sand Lake, Summit Windsor II and Summit
Fair Oaks acquired in 1997 (1,290 units); and Summit St. Clair, Summit Club at
Dunwoody, Summit at Lenox and six communities (2,017 units) which were owned by
Ewing Industries and its affiliates in 1998 (a total of 3,109 units). Summit
Mayfaire (144 units), which was acquired effective January 1, 1997, is
considered a fully stabilized community in the 1998 and 1997 comparison and
therefore is not included in such comparison. Summit Fair Oaks (246 units) was
acquired on December 31, 1997, and accordingly, had no 1997 operations. Summit
Las Palmas, also acquired from Ewing Industries, was acquired effective
December 31, 1998, and, accordingly, its rental operations for 1998 are not
reflected in the Company's financial statements. Summit Plantation (262 units)
was acquired on April 1, 1996

17
<PAGE>

and is considered a fully stabilized community in the 1998 and 1997 comparison
and therefore is not included in such comparisons. 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,
------------------------ ------------------------
1998 1997 1997 1996
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Property revenues:
Rental .................................... $ 22,514 $ 7,564 $ 11,686 $ 2,134
Other ..................................... 1,195 573 781 116
-------- ------- -------- -------
Total property revenues .................... 23,709 8,137 12,467 2,250
Property operating and maintenance expense . 8,063 2,829 4,336 606
-------- ------- -------- -------
Property operating income .................. $ 15,646 $ 5,308 $ 8,131 $ 1,644
======== ======= ======== =======
Average physical occupancy ................. 93.8% 92.5% 92.4% 93.1%
======== ======= ======== =======
Average monthly rental revenue ............. $ 859 $ 813 $ 847 $ 993
======== ======= ======== =======
Number of apartment homes:
1996 Acquisitions ......................... -- -- 262 262
1997 Acquisitions ......................... 1,290 1,044 1,188 --
1998 Acquisitions ......................... 3,109 -- -- --
-------- ------- -------- -------
Total number of apartment homes ............ 4,399 1,044 1,450 262
======== ======= ======== =======
</TABLE>

The decrease in the average monthly rental revenue for the year ended
December 31, 1997 as compared to the corresponding period in 1996 is
attributable to lower average monthly rental revenue on the 1997 acquisition
Communities in comparison to the 1996 acquisition Community. Average monthly
rental revenue for the years ended December 31, 1998 and 1997 for the 1997
acquisitions alone was $834 and $813, respectively.

The unleveraged yield on investment for acquisition Communities, defined
as property operating income on an annualized basis divided by total
acquisition cost, for the year ended December 31, 1998 was 9.12%.

OPERATING PERFORMANCE OF THE COMPANY'S STABILIZED DEVELOPMENT COMMUNITIES

The Company had five Communities with 1,599 apartment homes (Summit
Aventura, Summit River Crossing, Summit Fairways, Summit on the River and
Summit Russett) which were stabilized during the entire year ended December 31,
1998 but were stabilized subsequent to January 1, 1996. The year ended December
31, 1997 and 1996 comparison represents 1,200 apartment homes (Summit Aventura,
Summit River Crossing, Summit Hill II and Summit Green). The operating
performance of these stabilized development Communities is summarized below
(dollars in thousands except average monthly rental revenue):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------- ------------------------
1998 1997 1997 1996
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Property revenues:
Rental ................................... $ 16,024 $ 13,402 $ 11,580 $ 8,183
Other .................................... 1,245 1,107 795 579
-------- -------- -------- -------
Total property revenues ................... 17,269 14,509 12,375 8,762
Property operating and maintenance expense 5,769 4,503 3,955 3,069
-------- -------- -------- -------
Property operating income ................. $ 11,500 $ 10,006 $ 8,420 $ 5,693
======== ======== ======== =======
Average physical occupancy ................ 93.1% 79.5% 92.0% 65.6%
======== ======== ======== =======
Average monthly rental revenue ............ $ 927 $ 898 $ 883 $ 871
======== ======== ======== =======
Number of apartment homes ................. 1,599 1,599 1,200 1,200
======== ======== ======== =======
</TABLE>

The unleveraged yield on stabilized development Communities, defined as
property operating income divided by total development cost, for the year ended
December 31, 1998 was 10.05%.

18
<PAGE>

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

The Company had thirteen Communities in lease-up during the year ended
December 31, 1998. A Community in lease-up is defined as one that has commenced
rental operations but was not stabilized as of the beginning of the current
year. The following is a summary of the thirteen Communities in lease-up during
1998 (dollars in thousands):

<TABLE>
<CAPTION>
TOTAL ACTUAL/
NUMBER OF ACTUAL/ ANTICIPATED
APARTMENT ESTIMATED CONSTRUCTION
COMMUNITY HOMES COST COMPLETION
- ---------------------------------------------------- ----------- ----------- --------------
<S> <C> <C> <C>
Summit Ballantyne I -- Charlotte, NC (1) ........... 246 $ 16,380 Q4 1997
Summit Sedgebrook I -- Charlotte, NC (1) ........... 248 16,330 Q4 1997
Summit Plantation II -- Plantation, FL (1) ......... 240 21,240 Q4 1997
Summit Norcroft II -- Charlotte, NC (1) ............ 54 3,500 Q4 1997
Summit Stonefield -- Yardley, PA (1) ............... 216 19,650 Q1 1998
Summit Lake I -- Raleigh, NC (1) ................... 302 20,170 Q2 1998
Summit Ballantyne II -- Charlotte, NC .............. 154 10,227 Q4 1998
Summit New Albany I -- Fairfax, VA ................. 301 24,339 Q4 1998
Summit Fair Lakes I -- Fairfax, VA (2) ............. 370 32,900 Q1 1999
Summit Governor's Village -- Chapel Hill, NC (2) 242 16,700 Q1 1999
Summit Doral -- Miami , FL (2) ..................... 260 22,800 Q2 1999
Summit Westwood -- Raleigh, NC (2) ................. 354 24,400 Q3 1999
Summit Lake II -- Raleigh, NC (2)(3) ............... 144 10,200 Q2 1999
--- --------
3,131 $238,836
===== ========

<CAPTION>
% LEASED
ACTUAL/ AVERAGE AS OF
ANTICIPATED OCCUPANCY DECEMBER 31,
COMMUNITY STABILIZATION 1998 1998
- ---------------------------------------------------- --------------- ----------- -------------
<S> <C> <C> <C>
Summit Ballantyne I -- Charlotte, NC (1) ........... Q3 1998 83.60% 86.60%
Summit Sedgebrook I -- Charlotte, NC (1) ........... Q3 1998 83.34% 95.20%
Summit Plantation II -- Plantation, FL (1) ......... Q3 1998 87.91% 96.60%
Summit Norcroft II -- Charlotte, NC (1) ............ Q1 1998 91.89% 92.10%
Summit Stonefield -- Yardley, PA (1) ............... Q1 1998 96.80% 99.10%
Summit Lake I -- Raleigh, NC (1) ................... Q3 1998 73.31% 96.00%
Summit Ballantyne II -- Charlotte, NC .............. Q1 1999 46.10% 89.60%
Summit New Albany I -- Fairfax, VA ................. Q3 1999 27.75% 53.50%
Summit Fair Lakes I -- Fairfax, VA (2) ............. Q2 1999 20.26% 52.20%
Summit Governor's Village -- Chapel Hill, NC (2) Q2 1999 28.31% 57.40%
Summit Doral -- Miami , FL (2) ..................... Q3 1999 7.95% 17.30%
Summit Westwood -- Raleigh, NC (2) ................. Q4 1999 13.67% 22.60%
Summit Lake II -- Raleigh, NC (2)(3) ............... Q3 1999 N/A N/A
</TABLE>

- ---------
(1) These properties stabilized during 1998. The unleveraged yield on these six
Communities after reaching stabilization, defined as annualized property
operating income divided by total development cost, for the year ended
December 31, 1998 was 10.46%.

(2) These properties are included in the Construction in Progress category at
December 31, 1998.

(3) Summit Lake II started leasing apartments for January, 1999 move-ins.

OPERATING PERFORMANCE OF SUMMIT MANAGEMENT COMPANY

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------------- ------------------------------
1998 1997 % CHANGE 1997 1996 % CHANGE
---------- --------- ------------ --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue ....................................... $6,396 $6,102 4.8% $6,102 $5,364 13.8%
Expenses:
Operating .................................... 5,893 5,039 16.9% 5,039 4,849 3.9%
Depreciation ................................. 244 185 31.9% 185 110 68.2%
Amortization ................................. 286 304 ( 5.9%) 304 278 9.4%
Interest ..................................... 300 300 0.0% 300 300 0.0%
------ ------ ------ ------
Total expenses ............................... 6,723 5,828 15.4% 5,828 5,537 5.3%
------ ------ ------ ------
Net income (loss) of Summit Management Company ($ 327) $ 274 -219.3% $ 274 ($ 173) 258.4%
====== ====== ====== ======
</TABLE>

The change in revenue was a result of higher revenues from managing the
Company's Communities and higher revenues from construction activity, offset by
lower revenues for managing third party Communities in each of the years 1996
compared to 1997 and 1997 compared to 1998. The change in operating expenses
was a result of higher construction activity and higher costs of managing the
Communities in the years 1998 compared to 1997.

Total average third party apartment homes under management were 3,310,
5,164 and 7,919 during the years ended December 31, 1998, 1997 and 1996,
respectively. The decrease from 1997 to 1998 was primarily due to the
terminations of the Management Company contracts to manage two portfolios of
1,383 and 667 apartment homes, respectively. The contract to manage the 1,383
apartment home portfolio was terminated as a result of the portfolio changing
ownership. The

19
<PAGE>

decrease from 1996 to 1997 was primarily due to the termination of the
Management Company's contract to manage a portfolio of 1,422 apartment homes
effective December 31, 1996. The contract was terminated as a result of the
apartment portfolio changing ownership.

Property management fees include $1.2 million, $1.7 million and $2.3
million of fees from third parties for the years ended December 31, 1998, 1997
and 1996, respectively. Property management fees from third parties as a
percentage of total property management revenues were 23.3%, 35.2% and 48.1%
for the years ended December 31, 1998, 1997 and 1996, 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 1998 compared to
1997 and in 1997 compared to 1996 primarily as 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, 1998, 1997 and
1996 is from contracts with the Company. The Construction Company is currently
building 63% of the Company's apartment homes under construction.

OTHER INCOME AND EXPENSES

Interest income increased by $672,000 to $1.1 million in 1998 compared to
1997, primarily due to interest earned on proceeds from property sales placed
in escrow in accordance with like-kind exchange income tax regulations.
Interest income decreased by $166,000 to $392,000 in 1997 compared to 1996,
primarily due to interest earned in 1996 on the proceeds from a common stock
offering prior to using the proceeds to fund development activity.

Other income increased $570,000 to $849,000 in 1998 compared to 1997,
primarily as a result of an incentive fee earned in connection with a property
that the Company had developed and managed for a third party.

Depreciation expense increased $6.3 million or 28.0% to $29.0 million in
1998 compared to 1997, primarily due to depreciation expense related to the
Company's 1997 and 1998 acquisitions and increased depreciation of Communities
in lease-up. Depreciation expense increased $4.4 million or 24.4% to $22.7
million in 1997 compared to 1996 due to an increase in depreciation expense
related to the 1997 acquisitions and Communities in lease-up.

Interest expense, including amortization of deferred financing costs,
increased by $11.5 million for the year ended December 31, 1998 compared to the
year ended December 31, 1997. The increase was primarily the result of an
increase of $174.8 million in the Company's average indebtedness outstanding
and an increase in the effective interest rate of .04% (6.68% to 6.72%).
Interest expense, including amortization of deferred financing costs increased
by $4.8 million for the year ended December 31, 1997 compared to the year ended
December 31, 1996. The increase was primarily the result of an increase of
$84.9 million in the Company's average indebtedness outstanding and an increase
in the effective interest rate of .24% (6.44% to 6.68%), respectively.

General and administrative expense has remained relatively stable as a
percentage of total revenues. As a percentage of total revenues, general and
administrative expenses were 2.6%, 2.3% and 2.7% in 1998, 1997 and 1996,
respectively.

The $37.1 million gain on sale of assets in 1998 resulted from the
disposition of eight communities. The Company retained a 25% interest in five
of these communities. The eight communities disposed of were:

<TABLE>
<CAPTION>
COMMUNITY LOCATION
- ------------------------ ------------------
<S> <C>
Summit Creek Charlotte, NC
Summit Hollow I & II Charlotte, NC
Summit Green Charlotte, NC
Summit Hill I & II Raleigh, NC
Summit Old Town Winston Salem, NC
Summit Springs Norcross, GA
Summit Providence Bradenton, FL
Summit Station Tampa, FL
</TABLE>

The Communities disposed of in 1998 were part of the Company's plan to
dispose of assets that no longer meet its growth objectives, to make desired
changes in the number of apartment homes in each of the Company's markets, or
that are located in smaller markets. The Company believes that by concentrating
its efforts and capital in large growth markets it will gain a competitive
advantage as it improves operational efficiencies, builds a more significant
brand name and improves market knowledge. Also, by disposing of assets that no
longer meet the Company's long-term growth objectives,

20
<PAGE>

capital is provided to fund the development of new, higher growth assets. The
$4.4 million gain on sale of assets in 1997 resulted from the sale of a
community formerly known as Summit Charleston in May 1997.

The extraordinary items in the year ended December 31, 1998 resulted from
the write-off of deferred financing costs in conjunction with the replacement
by the Company of its prior unsecured credit facility with the Unsecured Credit
Facility (as hereafter defined) and prepayment penalties incurred on six
mortgage notes which were repaid during the period. The extraordinary items in
1996 resulted primarily from the write-off of deferred financing costs in
conjunction with the repayment of debt with the proceeds from a 1996 common
stock offering and with the proceeds of the $31.0 million unsecured debt
financing received in August 1996.

LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY

The Company's net cash provided by operating activities increased from
$55.9 million for the year ended December 31, 1997 to $63.8 million for the
same period in 1998, primarily due to a $20.1 million increase in property
operating income offset by a $13.8 million increase in interest paid. The
increase in interest paid was primarily due to an increase in the average
indebtedness outstanding.

Net cash used in investing activities increased from $175.9 million for
the year ended December 31, 1997 to $219.2 million for the same period in 1998
due to an increase in the acquisition of Communities and an increase in the
construction of Communities, partially offset by higher proceeds from the
disposition of Communities. In 1998, the Company acquired ten apartment
Communities containing 3,557 apartment homes for a total cost of $268.0 million
which included the issuance of $8.4 million worth of Units, the issuance of
$37.3 million worth of shares of Common Stock and the assumption of $92.8
million in mortgage debt. In addition, the Company funded $128.4 million in
development costs and $10.1 million in capital improvements in 1998. The Company
had total net cash proceeds of $130.6 million related to the disposition of
Communities, of which $116.5 million was deposited with a qualified
intermediary. Approximately $30.2 million of funds deposited with a qualified
intermediary were used to fund the purchase of a Community and fund development
costs. The remaining $86.3 million in proceeds from the sales are being held in
escrow in accordance with like-kind exchange income tax rules and regulations to
fund future developments.

Net cash provided by financing activities increased from $119.9 million
for the year ended December 31, 1997 to $154.6 million for the same period in
1998, primarily due to an increase in equity proceeds from the Company's
dividend reinvestment and stock purchase plan (the "Plan") and an increase in
net borrowings from the Company's credit facility offset by a higher repayment
of debt, lower borrowings on unsecured bonds, the issuance of notes receivable
from employees, the payment of higher dividends and distributions to
shareholders and unitholders and a decrease in public stock issuance. Financing
activities in 1998 included $131.3 million in net borrowings from the Company's
credit facility and $45.9 million in net proceeds from the Plan. Dividend
reinvestment and stock purchase proceeds increased from 1997 primarily due to
the replacement of the prior dividend reinvestment plan with the Plan which
allows direct stock purchases by non-shareholders. These cash inflows were
offset by $46.8 million of dividends and distributions and the repayment of
mortgage debt of $27.4 million. Mortgage debt repayment included $23.2 million
for the prepayment of six mortgage notes.

The ratio of earnings to fixed charges was 2.51 to 1 for the year ended
December 31, 1998 compared to 1.93 to 1 for the year ended December 31, 1997.
The increase is primarily due to an increase in the gain on real estate assets
offset by increased interest charges as discussed in "Historical Results of
Operations -- Other Income and Expenses" above.

The Company has elected to be taxed as a Real Estate Investment Trust
("REIT") under Sections 856 and 860 of the Internal Revenue Code of 1986, as
amended. REITs are subject to a number of organizational and operational
requirements, including a requirement that they currently distribute 95% of
their ordinary taxable income. As a REIT, the Company generally will not be
subject to federal income tax on net income to the extent taxable income is
distributed.

The Company's outstanding indebtedness at December 31, 1998 totaled $726.1
million. This amount includes approximately $270.7 million in fixed rate
conventional mortgages, $51.8 million of variable rate tax-exempt bonds, $241.0
million of unsecured notes, $9.1 million of tax-exempt fixed rate loans, and
$153.5 million under the Unsecured Credit Facility (as hereinafter defined).

The Company expects to meet its short-term liquidity requirements (i.e.,
liquidity requirements arising within 12 months) including recurring capital
expenditures relating to maintaining its existing properties, generally through
its working capital, net cash provided by operating activities and borrowings
under its line of credit. The Company considers its cash provided by operating
activities to be adequate to meet operating requirements and payments of
dividends and distributions.

21
<PAGE>

The Company expects to meet its long-term liquidity requirements (i.e.,
liquidity requirements arising after 12 months), such as scheduled mortgage
debt maturities, property acquisitions, financing of construction and
development activities and other non-recurring capital improvements, through
the issuance of unsecured notes and equity securities, from undistributed Funds
from Operations (see page 30), from proceeds received from the disposition of
certain properties, and in connection with the acquisition of land or improved
property through the issuance of Units.

LINE OF CREDIT

The Company obtained a new syndicated unsecured line of credit (the
"Unsecured Credit Facility") in the amount of $175 million in March, 1998 which
replaced the existing $150 million credit facility. The Unsecured Credit
Facility was increased in December, 1998 to $200 million. The Unsecured Credit
Facility provides funds for new development, acquisitions and general working
capital purposes. The Unsecured Credit Facility has a three year term with two
one-year extension options and will initially bear interest at LIBOR+90 basis
points based upon the Company's current credit rating of BBB- by Standard &
Poor's Rating Services and Baa3 by Moody's Investors Service. The interest rate
will be reduced in the event an upgrade of the Company's unsecured credit
rating is obtained. The Unsecured Credit Facility also provides a bid option
sub-facility equal to a maximum of fifty percent of the total facility ($100
million). This sub-facility provides the Company with the option to place
borrowings in fixed LIBOR contracts up to 180 days. Upon proper notifications,
all lenders participating in the Unsecured Credit Facility may, but are not
obligated to, participate in a competitive bid auction for these fixed LIBOR
contracts.

MORTGAGE NOTES

On September 23, 1998, the Company consolidated and renewed two mortgage
loans which had a $147.2 million balance. The original loans matured in
February 2001 ($118.3 million at 5.88%) and December 2005 ($28.9 million at
7.71%). The consolidation and renewal combined the two mortgage loans into one
loan at an interest rate equal to the existing weighted average interest rate
of the two previous mortgage loans (6.24%) up to February 2001. As of February
2001, the rate of interest on the loan will increase to 6.76% until the loan
matures in October, 2008.

MEDIUM-TERM NOTES

The Company has established a program for the sale of up to $95 million
aggregate principal amount of Medium-Term Notes due nine months or more from
the date of issuance (the "MTN Program"). On July 28, 1998, the Company sold
$30 million of notes under the MTN Program. Such notes are due on July 30, 2001
and bear interest at 6.75% per year. On October 5, 1998, the Company sold $25
million of notes under the MTN Program. Such notes are due on October 5, 2000
and bear interest at 6.71% per year. Proceeds from the notes issued in both
July and October, 1998 were used to reduce the Unsecured Credit Facility.

SENIOR UNSECURED DEBT OFFERINGS

On August 12, 1997, the Company completed a $125 million senior unsecured
debt offering comprised of three tranches. The first tranche, $25 million of
6.80% Notes due August 15, 2002, was priced at 99.940% to yield 6.81%, or 73
basis points over the rate on US Treasury securities with a comparable maturity
(the "2002 Notes"). The second tranche, $50 million of 6.95% Notes due August
15, 2004, was priced at 99.764% to yield 6.99% or 81 basis points over the rate
on US Treasury securities with a comparable maturity (the "2004 Notes"). The
third tranche, $50 million of 7.20% Notes due August 15, 2007, was priced at
99.830% to yield 7.22% or 104 basis points over the rate on US Treasury
securities with a comparable maturity (the "2007 Notes" and together with the
2002 Notes and the 2004 Notes, the "August 1997 Notes"). The proceeds from the
August 1997 Notes were used to pay down the Company's unsecured line of credit.

On December 17, 1997, the Company completed a $30 million senior unsecured
debt offering of 6.625% Notes due December 15, 2003. The Notes were priced at
99.786% to yield 6.67%, or 95 basis points over the rate of US Treasury
securities with a comparable maturity (the "December 1997 Notes"). The proceeds
of the December 1997 Notes were used to pay down the Company's unsecured line
of credit.

In August 1996, the Company obtained $31.0 million of unsecured debt
financing from a bank 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.

22
<PAGE>

MARKET RISK

The fair market value of long-term fixed rate debt is subject to changes
in interest rates. Generally, the fair market value of fixed interest rate debt
will increase as interest rates fall and decrease as interest rates rise. The
estimated fair value of the Company's total fixed rate long-term debt at
December 31, 1998 was $521.0 million. A 1% increase from prevailing interest
rates at December 31, 1998 would result in a decrease in fair value of
long-term debt by approximately $25.7 million. Fair values were determined from
quoted market prices, where available, and from information received from
investment bankers using current interest rates considering credit ratings and
remaining terms to maturity.

COMMON STOCK OFFERING

In August 1996, the Company completed the sale of 5.75 million shares of
Common Stock with net proceeds of $97.6 million. Approximately $97.6 million of
the aggregate proceeds from the issuance of Common Stock and the $31 million
unsecured bank debt financing were utilized to fully repay the outstanding
balances under the Company's unsecured line of credit and development loans.
The remaining $30.9 million of the proceeds were used to fund current
development.

23
<PAGE>

SCHEDULE OF DEBT

The following table sets forth certain information regarding debt
financing as of December 31, 1998 and 1997 (dollars in thousands):

<TABLE>
<CAPTION>
PRINCIPAL OUTSTANDING
DECEMBER 31,
INTEREST -----------------------
RATE AS OF
DECEMBER 31, 1998 MATURITY DATE (1) 1998 1997
------------------ ------------------ ----------- -----------
FIXED RATE DEBT
- ------------------------------------------
<S> <C> <C> <C> <C>
MORTGAGE LOAN (2) ....................... 6.24% 8/15/08 $146,740 $149,593
MORTGAGE LOAN (3) ....................... 8.00% 9/1/05 8,470 8,557
MORTGAGE NOTES
Summit Foxcroft ....................... 8.00% 4/1/20 2,663 2,728
Summit Oak ............................ 7.75% 12/1/23 2,519 2,553
Summit Sherwood ....................... 7.88% 3/1/29 3,274 3,303
Summit Radbourne ...................... 9.80% 3/1/02 8,507 8,599
Summit Sand Lake ...................... 7.88% 2/15/06 14,679 14,985
Summit Buena Vista .................... 6.75% 1/15/07 25,779 --
Summit Belcourt ....................... 6.75% 12/1/05 9,708 --
Summit Turtle Cove .................... 6.75% 6/1/06 17,073 --
Summit Turtle Rock .................... 6.75% 11/1/05 11,001 --
Summit Los Arboles .................... 6.75% 12/1/05 20,240 --
Mortgage Notes paid in 1998 ........... -- 14,508
TAX EXEMPT MORTGAGE NOTES
Summit Crossing ....................... 6.95% 11/1/25 4,106 4,162
Summit East Ridge ..................... 7.25% 12/1/26 5,042 5,100
-------- --------
TOTAL MORTGAGE DEBT .................. 279,801 214,088
UNSECURED NOTES
6.71 % Medium Term Notes due 2000 ..... 6.71% 10/5/00 25,000 --
6.75 % Medium Term Notes due 2001 ..... 6.75% 7/30/01 30,000 --
6.80 % Notes due 2002 ................. 6.80% 8/15/02 25,000 25,000
6.63 % Notes due 2003 ................. 6.63% 12/15/03 30,000 30,000
6.95 % Notes due 2004 ................. 6.95% 8/15/04 50,000 50,000
7.20 % Notes due 2007 ................. 7.20% 8/15/07 50,000 50,000
Bank Note ............................. 7.85% 8/3/02 16,000 16,000
Bank Note ............................. 7.61% 8/3/00 15,000 15,000
-------- --------
TOTAL UNSECURED NOTES ................ 241,000 186,000
-------- --------
TOTAL FIXED RATE DEBT ................ 520,801 400,088
VARIABLE RATE DEBT
- -------------------------------------------
UNSECURED CREDIT FACILITY ............... LIBOR +90 3/27/01 153,500 21,733
TAX EXEMPT BONDS (4)
Summit Belmont ........................ 5.55% 4/1/07 11,445 11,650
Summit Hampton ........................ 5.55% 6/1/07 12,260 12,490
Summit Pike Creek ..................... 5.55% 8/15/20 12,767 13,022
Summit Gateway ........................ 5.55% 7/1/07 6,900 7,100
Summit Stony Point .................... 5.55% 4/1/29 8,430 8,590
-------- --------
TOTAL TAX EXEMPT BONDS ............... 51,802 52,852
-------- --------
TOTAL VARIABLE RATE DEBT ............. 205,302 74,585
-------- --------
TOTAL OUTSTANDING INDEBTEDNESS ....... $726,103 $474,673
======== ========
</TABLE>

- ---------
(1) With the exception of the Mortgage Loan referred to in Note 2 below, which
has a $146.7 million balance at December 31, 1998, all the secured debt
can be prepaid at any time. Such Mortgage Loan can be prepaid after
February 15, 2001. Prepayment of all such secured debt is generally
subject to penalty or premium; however, the tax exempt mortgage notes can
be prepaid at any time without penalty or premium.

24
<PAGE>

(2) Mortgage Loan secured by the following Communities:

<TABLE>
<S> <C> <C> <C>
Summit Glen Summit Blue Ash Summit Heron's Run
Summit St. Clair Summit Square Summit Perico
Summit Village Summit Waterford Summit Meadow
Summit Highland Summit Del Ray Summit Windsor I
Summit Norcroft I Summit Palm Lake Summit Windsor II
</TABLE>

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

(4) The tax exempt bonds (the "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 are enhanced by letters of credit from a financial institution (the
"Credit Enhancements"), each of which Credit Enhancements will terminate
prior to the maturity dates of the related Bonds. In the event such Credit
Enhancements are not renewed or replaced upon termination, the related
loan obligations will be accelerated.

The LIBOR rate at December 31, 1998 was 5.63%.

The Company's outstanding indebtedness (excluding the Unsecured Credit
Facility) had an average maturity of 8.1 years as of December 31, 1998. The
aggregate maturities of all outstanding debt (excluding the Unsecured Credit
Facility) as of December 31, 1998 for each of the years ended after December
31, 1998 are as follows (in thousands):

<TABLE>
<S> <C>
1999 ............... $ 6,205
2000 ............... 46,574
2001 ............... 36,803
2002 ............... 56,319
2003 ............... 37,586
Thereafter ......... 389,116
--------
Total .............. $572,603
========
</TABLE>

Of the significant maturities in the above table, $15.0 million and $16.0
million relate to the unsecured bank notes that mature in 2000 and 2002,
respectively; $25 million relates to unsecured notes due in 2000; $30 million
relates to unsecured notes due in 2001 and $25 million relates to unsecured
notes due in 2002.

NET ASSET VALUE

The Company's estimate of net asset value is based on the sum of: 1) the
estimated fair market value of stabilized properties determined by applying
current market capitalization rates (for recent purchases and sales of
comparable properties) to projected cash flows, 2) the cost of any properties
acquired during the period under consideration, 3) construction in progress
adjusted to estimated fair market value, 4) the implied value of any below
market debt (assumable under certain terms and conditions) and 5) other assets
including cash and cash equivalents, less total liabilities divided by the
weighted average number of common shares and operating partnership units
outstanding during the period under consideration. Using this methodology,
management's current estimate of net asset value is $23.23 per share as of
December 31, 1998. The Company's estimate of net asset value will vary
depending on current market conditions.

ACQUISITIONS AND DISPOSITIONS

On April 1, 1996, the Company acquired its joint venture partner's
interest in Summit Plantation (formerly Plantation Cove), a 262 apartment
community located in Plantation, Florida. The Company paid $6.4 million in cash
for the remaining 75% interest in the joint venture.

During the year ended December 31, 1997, the Company completed the
acquisition of five Communities: Summit Portofino, purchased on January 6,
1997: Summit Mayfaire, purchased on January 15, 1997: Summit Sand Lake
purchased on February 20, 1997: Summit Windsor II, purchased on July 18, 1997:
and Summit Fair Oaks, purchased on December 31, 1997 (the "1997 Acquisitions').
The 1997 Acquisitions added a total of 1,434 apartment homes to the Company's
portfolio. Total purchase price for the 1997 Acquisitions was $104.5 million
which consisted of $15.2 million in assumed debt, 243,608 shares of Common
Stock (valued at $4.9 million) issued to the seller, 194,495 Units (valued at
$3.9 million) issued to the seller and $78.9 million of cash. Concurrently with
the purchase of Summit Portofino, the Company sold 315,029 shares of Common
Stock to the public for cash to fund part of the purchase. The Summit Windsor
II purchase was

25
<PAGE>

partially funded by the proceeds from the sale of a property formerly know as
Summit Charleston in May, 1997. The property formerly known as Summit
Charleston was sold for $9.5 million and a gain on the sale of approximately
$4.4 million was recognized.

The Company completed the acquisition of three Communities located in
Atlanta, Georgia in 1998: Summit St. Clair, purchased effective March 1, 1998,
Summit Club at Dunwoody, purchased effective May 22, 1998, and Summit at Lenox,
purchased effective July 8, 1998 (the "Atlanta Acquisitions"). The Atlanta
Acquisitions added a total of 1,092 apartment homes to the Company's portfolio
at an aggregate purchase price of $88.3 million. The Atlanta Acquisitions were
financed with the issuance of 259,871 Units (valued at $5.2 million) and the
assumption of $8.8 million of mortgage debt. The balance of the purchase price
was paid in cash.

On May 18, 1998, the Company sold a Community in Brandon, Florida formerly
known as Summit Providence for net proceeds of $23.9 million. A gain on the
sale of $8.7 million was recognized. Proceeds from the sale were used to
partially fund the acquisition of Summit Club at Dunwoody.

On October 23, 1998, the Company sold a Community in Atlanta, Georgia
formerly known as Summit Springs for $17.5 million. The Company recognized a
gain of approximately $6.0 million on the sale.

On November 2, 1998, the Company sold a Community in Winston Salem, North
Carolina, formerly known as Summit Old Town, for $7.5 million. The Company
recognized a gain of approximately $2.3 million from the sale.

On November 4, 1998, the Company acquired a portfolio of multifamily
properties in Texas (the "Ewing Portfolio") through a merger with Ewing
Industries, a private developer of luxury apartment homes. The Ewing Portfolio
consists of 2,465 apartment homes in seven Communities located in Dallas,
Austin and San Antonio. The acquisition of the Ewing Portfolio was effected
pursuant to an Agreement and Plan of Reorganization dated as of October 31,
1998 (the "Merger Agreement") among the Company, affiliates of the Company
including the Operating Partnership, Ewing Industries, Inc., an Ohio
corporation ("Ewing Industries"), affiliates of Ewing, and their respective
partners, shareholders and members (together with Ewing Industries, "Ewing").
Pursuant to the Merger Agreement, the acquisition was funded through (i) the
issuance to Ewing of 1,008,988 shares of Common Stock of the Company and
141,921 Units, valued at $20.7 million in the aggregate, (ii) the assumption of
$84.0 million in long-term fixed-rate mortgage indebtedness, (iii) the payment
of $50.6 million in cash and (iv) receipt of $3.8 million of credit for
customary prorations and reserves. A portion of the consideration was deferred
until stabilization of one Community (Summit Las Palmas) which was in lease-up
at the time of the acquisition of the Ewing Portfolio. The Summit Las Palmas
purchase was closed on December 31, 1998 with the additional consideration of
(i) 1,065,627 shares of Common Stock and 36,629 Units valued at $19.8 million
in aggregate and (ii) cash in the amount of approximately $600,000.

On December 16, 1998, the Company (i) sold five communities (the "Sold
Communities") to Hollow Creek, LLC, a newly-formed North Carolina limited
liability company for approximately $68 million and (ii) contributed two
communities with an approximate fair market value of $22 million (together with
the Sold Communities, the "Joint Venture Communities") to Station Hill, LLC., a
newly-formed North Carolina limited liability company (the "LLC"). On the same
date, Hollow Creek, LLC contributed the Sold Communities to the LLC. The LLC is
a joint venture limited liability company, the membership of which is comprised
of the Company and a wholly owned subsidiary of a major financial services
company (the "Joint Venture Member"). The disposition was effected pursuant to
a Real Estate Sale Agreement dated November 20, 1998 between the Operating
Partnership and the Joint Venture Member and pursuant to the Operating
Agreement of the LLC, also dated November 20, 1998. The Company's net
contribution to the LLC (approximately $5.6 million) represents a 25 percent
equity interest in the LLC. In addition, the Company is the managing member of
the LLC and will also retain management of the Joint Venture Communities
through a management agreement with the LLC. The cash flow of the LLC will be
distributed pro rata to each member based on its equity contribution until
certain economic benchmarks are achieved, at which point the Company will
receive an escalated portion of the cash flow and residual interest. The LLC
has obtained five separate mortgages totaling $70,150,000 from Fannie Mae.
These mortgages have a ten-year maturity and a 6.70% interest rate. The
proceeds of the mortgages were distributed on a pro rata basis to the LLC's two
members. The Joint Venture Communities involved in the transaction were Summit
Green, Summit Hollow I and II and Summit Creek in Charlotte, North Carolina;
Summit Hill I and II in Raleigh, North Carolina and Summit Station in Tampa,
Florida. The Joint Venture Communities include a total of 1,433 apartment
homes. The Company recognized a gain of approximately $20.2 million on the
disposition. The gain is net of a $5.6 million elimination of gain relative to
the Company's retained portion of the joint venture. The elimination of the
gain reduced the Company's investment in the joint venture to zero at the
initial joint venture formation.

26
<PAGE>

Proceeds from the sale of Summit Springs, Summit Old Town and the Sold
Communities, were put in escrow with a qualified intermediary in accordance
with like-kind exchange income tax rules and regulations. These proceeds will
be used to fund future developments.

At December 31, 1998, the Company had six apartment communities for sale
with a net book value of approximately $52.5 million. The Company does not
anticipate incurring a loss on any individual apartment Community sale.
Proceeds from the sale of the Communities will be used to fund future
development. The six apartment communities held for sale represented
approximately 6% of property operating income for the Company for the year
ended December 31, 1998.

DEVELOPMENT ACTIVITY

The Company's developments in process at December 31, 1998 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 Fair Lakes I -- Fairfax, VA (1) ............... 370 $ 32,900 $ 30,351 $ 2,549 Q1 1999
Summit Governor's Village -- Chapel Hill, NC (1) ..... 242 16,700 16,518 182 Q1 1999
Summit Doral -- Miami, Florida (1) ................... 260 22,800 16,601 6,199 Q2 1999
Summit Westwood -- Raleigh, NC (1) ................... 354 24,400 18,601 5,799 Q3 1999
Summit Lake II -- Raleigh, NC (1) .................... 144 10,200 7,012 3,188 Q2 1999
Summit Sedgebrook II -- Charlotte, NC ................ 120 7,800 4,409 3,391 Q3 1999
Summit Fair Lakes II -- Fairfax, VA .................. 160 14,200 8,017 6,183 Q3 1999
Summit Largo -- Largo, MD ............................ 217 18,000 4,984 13,016 Q1 2000
Summit Grandview -- Charlotte, NC .................... 266 45,500 3,703 41,797 Q2 2000
Other development and construction costs (2) ......... -- -- 26,949 --
--- -------- -------- -------
2,133 $192,500 $137,145 $82,304
===== ======== ======== =======
</TABLE>

- ---------
(1) These communities were in lease-up at December 31, 1998.

(2) Consists primarily of land held for development and other predevelopment
costs.

Estimated cost to complete the development Communities represents
substantially all of the Company's material commitments for capital
expenditures at December 31, 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 material and the
possibility that financing may not be available on favorable terms, or at all,
to pursue or complete development activities. Similarly, market conditions at
the time these communities become available for leasing will affect the rental
rates that may be charged and the period of time necessary to achieve
stabilization, which could make one or more of the development Communities
unprofitable or result in achieving stabilization later than currently
anticipated. In addition, the Company is conducting feasibility and other
pre-development work for twelve potential 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.

27
<PAGE>

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.

YEAR 2000

YEAR 2000 INFORMATION AND READINESS DISCLOSURE ACT

The Company supports the exchange of information relating to the Year 2000
issue and designates the following information as the Year 2000 Readiness
Disclosure within the meaning of the Year 2000 Information and Readiness
Disclosure Act. Information set forth herein regarding the Year 2000 compliance
of non-Company products and services are "republications" under the Year 2000
Information and Readiness Disclosure Act and are based on information supplied
by other companies about the products and services they offer. The Company has
not independently verified the contents of these republications and takes no
responsibility for the accuracy or completeness of information contained in
such republications.

INTRODUCTION

The Securities and Exchange Commission has asked all public companies to
provide disclosure regarding their Year 2000 readiness. The term "Year 2000
issue" is a general term used to describe various problems that may result from
the improper processing by computer systems of dates after 1999. These problems
arise from the inability of some hardware and software to distinguish dates
before the year 2000 from dates in and after the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations. The
Year 2000 issue affects virtually all companies and all organizations.

The Company's efforts to address its Year 2000 issues are focused in the
following three areas: (i) reviewing and taking any necessary steps to attempt
to correct the Company's computer information systems (i.e., software
applications and hardware platforms), (ii) evaluating and making any necessary
modifications to other computer systems that do not relate to information
technology but include embedded technology, such as telecommunications,
security, HVAC, elevator, fire and safety systems, and (iii) communicating with
certain significant third-party service providers to determine whether there
will be any interruption in their systems that could affect the Company.

THE COMPANY'S STATE OF READINESS

The Company has developed a four phase plan to address its Year 2000
issues (its "Year 2000 Plan"). The four phases are (i) Awareness, (ii)
Assessment, (iii) Remediation and Implementation and (iv) Testing.

AWARENESS

The Company has made the relevant employees, including its property
managers, aware of the Year 2000 issue and collected information from such
employees regarding systems that the Company anticipates may be affected.
Management will oversee the Company's progress with respect to the
implementation of its Year 2000 Plan. In addition, the Year 2000 Plan will be
subject to review of the Audit Committee of the Board of Directors.

ASSESSMENT

The Company has substantially completed an assessment of its standard
computer information systems and is now taking the further necessary steps to
make its core computer information systems, in those situations in which the
Company is required to do so, Year 2000 compliant. See "Remediation and
Implementation" below. The Company is in the process of attempting to obtain
written verification from vendors to the effect that the Company's other (i.e.,
non-core) standard computer information systems acquired from such vendors
correctly distinguish dates before the year 2000 from dates in and after the
year 2000. The Company expects that it will receive such verifications, or a
commitment from the relevant vendors to provide a solution, by no later than
April 30, 1999.

In addition, the Company is currently evaluating and assessing its other
computer systems that do not relate to information technology but include
embedded technology, such as telecommunications, security, HVAC, elevator, fire
and safety systems, and expects that its assessment will be completed by the
second quarter of 1999. The Company is aware that such systems contain embedded
chips that are difficult to identify and test and may require complete
replacement because they

28
<PAGE>

cannot be repaired. Failure of the Company to identify or remediate any
embedded chips (either on an individual or aggregate basis) on which
significant business operations depend, such as phone systems, could have a
material adverse impact on the Company's business, financial condition and
results of operations.

The Company rents apartments in its Communities to individuals and does
not have a single customer or group of customers who rents a significant number
of apartments. The Company's primary purchases are building-related products
(e.g., carpets, paint and blinds) and services (e.g., lawn care services), all
of which are available from numerous suppliers. The Company's primary financial
service providers are its primary bank and payroll processor. The primary bank
has provided written verification to the Company that it will be Year 2000
compliant. The Company implemented the payroll processor Year 2000 upgrade in
the fourth quarter of 1998. For the foregoing reasons, the Company does not
believe that there is a significant risk related to the failure of residents,
vendors or third-party goods or service providers to prepare for the Year 2000;
however, the costs and timing of third-party Year 2000 compliance is not within
the Company's control and no assurances can be given with respect to the cost
or timing of such efforts or the potential effects of any failure to comply.

REMEDIATION AND IMPLEMENTATION

The Company's primary uses of software systems are its corporate
accounting and property management software. The Company's corporate accounting
system is widely used in the real estate industry. A version upgrade, installed
in the second quarter of 1998, is designed to be Year 2000 compliant. The
Company completed the replacement of its current property management software
in October 1998 with a new software system that is also designed to be Year
2000 compliant. This new software is also widely used in the real estate
industry. The Company has received written verification from the vendors of
each of the corporate accounting and management systems that the relevant
software is Year 2000 compliant. The Company had previously planned both the
upgrade of the corporate accounting system and implementation of the new
property management system, and such changes would have been undertaken without
regard to Year 2000 remediation issues. Accordingly, the Company has not
deferred any planned information or software projects due to such Year 2000
projects, and the Company is not treating the costs of the above-referenced
changes as Year 2000-related expenses.

TESTING

To attempt to confirm that its computer systems are Year 2000 compliant,
the Company expects to perform limited testing of its computer information
systems and its other computer systems that do not relate to information
technology but include embedded technology; however, unless Year 2000 issues
arise in the course of its limited testing, the Company will rely on the
written verification received from each vendor of its computer systems that the
relevant system is Year 2000 compliant. Nevertheless, there can be no assurance
that the computer systems on which the Company's business relies will correctly
distinguish dates before the year 2000 from dates in and after the year 2000.
Any such failures could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company began
testing in the fourth quarter of 1998 and expects that its testing will be
complete by March 31, 1999.

COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES

Based on current information from its review to date, the Company budgeted
$500,000 for the cost of repairing, updating and replacing its standard
computer information systems. Because the Company's Year 2000 assessment is
ongoing and additional funds may be required as a result of future findings,
the Company's current budget amounts may increase as a result of unanticipated
delays or preparedness issues. While the Company's efforts to address its Year
2000 issues will involve additional costs, the Company believes, based on
available information, that these costs will not have a material adverse effect
on its business, financial condition or results of operations. The Company
expects to fund the costs of addressing the Year 2000 issue from cash flows
resulting from operations. While the Company believes that it will be Year 2000
compliant by December 31, 1999, if these efforts are not completed on time, or
if the costs associated with updating or replacing the Company's computer
systems exceeds the Company's estimates, the Year 2000 issue could have a
material adverse effect on the Company's business, financial condition and
results of operations.

RISKS PRESENTED BY YEAR 2000 ISSUES

The Company is still in the process of evaluating potential disruptions or
complications that might result from Year 2000-related problems; however, at
this time the Company has not identified any specific business functions that
are likely to suffer material disruption as a result of Year-2000 related
events. It is possible, however, that the Company may identify business
functions in the future that are specifically at risk of Year 2000 disruption.
The absence of any such determination as of the date of this report represents
only the Company's current status of evaluating potential Year-2000 related
problems and facts presently known to the Company, and should not be construed
to mean that there is no risk of Year-2000 related

29
<PAGE>

disruption. Moreover, due to the unique and pervasive nature of the Year 2000
issue, it is not possible to anticipate each of the wide variety of Year 2000
events, particularly outside of the Company, that might arise in a worst case
scenario which might have a material adverse impact on the Company's business,
financial condition and results of operations.

THE COMPANY'S CONTINGENCY PLANS

The Company intends to develop contingency plans for significant business
risks identified by the Company that might result from Year-2000 related
events. Because the Company has not yet identified any specific business
function that will be materially at risk of significant Year-2000 related
disruptions, and because a full assessment of the Company's risk from potential
Year 2000 failures is still in process, the Company has not yet developed
detailed contingency plans specific to Year 2000 problems. In the event that
the Company concludes that one or more contingency plans are required,
development of such contingency plans is currently scheduled to occur no later
than June 30, 1999 or as otherwise appropriate.

FUNDS FROM OPERATIONS

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

30
<PAGE>

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

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
-------------------------------------------
1998 1997 1996
-------------- -------------- -------------
<S> <C> <C> <C>
Net income .................................................... $ 56,375 $ 27,116 $ 16,948
Extraordinary items, net of minority interest ................. 508 -- 516
Minority interest of Unitholders in Operating Partnership ..... 9,592 4,818 3,723
Net gain on sale of assets .................................... (37,148) (4,366) --
---------- ---------- -----------
Adjusted net income .......................................... 29,327 27,568 21,187
Depreciation:
Real estate assets ........................................... 28,890 22,633 18,171
Real estate joint venture .................................... 25 -- 33
---------- ---------- -----------
Funds from Operations ......................................... 58,242 50,201 39,391
Recurring capital expenditures (1) ........................... (4,607) (4,586) (3,291)
---------- ---------- -----------
Funds Available for Distribution .............................. $ 53,635 $ 45,615 $ 36,100
========== ========== ===========
Non-recurring capital expenditures (2) ........................ ($ 4,995) ($ 4,653) $ 2,973
========== ========== ===========
Cash Flow Provided By (Used In):
Operating Activities ......................................... $ 63,808 $ 55,947 $ 41,176
Investing Activities ......................................... (219,170) (175,907) (103,971)
Financing Activities ......................................... 154,636 119,858 63,579
Weighted average shares and units outstanding -- basic ........ 29,140,931 27,257,637 22,914,068
========== ========== ===========
Weighted average shares and units outstanding -- diluted ...... 29,150,315 27,294,058 22,940,998
========== ========== ===========
</TABLE>

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

(2) Non-recurring capital expenditures include major renovations in the amount
of $1.3 million in 1998 and $3.5 million in 1997; $1 million and $81,000
for water meters in 1998 and 1997, respectively; $25,000 and $83,000 for
new signage in 1998 and 1997, respectively; $561,000 and $239,000 for
fitness centers, key controls and other revenue enhancement items in 1998
and 1997, respectively; $446,000 and $252,000 for access gates and
security fences in 1998 and 1997, respectively; $215,189 and $21,000 for
washer/dryer units in 1998 and 1997, respectively; and $776,000 and
$238,000 for improvement at properties acquired or disposed of in 1998 and
1997, respectively. In addition, 1998 and 1997 included $142,000 and
$250,000, respectively, of capital expenditures for construction of
garages and $191,000 for improvements at Summit Norcroft I done in
conjunction with development of Summit Norcroft II in 1998.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

See "Management Discussion and Analysis of Financial Condition and Results
of Operations -- Market Risk".

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
39 of this Report.

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

Not applicable.

31
<PAGE>

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 11, 1999.

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

32
<PAGE>

PART IV

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

(a) Financial Statements

The consolidated financial statements of the Company are listed in the
Index to Financial Statements on page of this Report.

(b) Reports on Form 8-K

On November 13, 1998, the Company filed a current report on Form 8-K in
connection with the acquisition of properties from Ewing Industries and a form
8-K/A-1 was filed on December 1, 1998 to amend the Form 8-K to include
financial statements, pro forma financial information and certain exhibits.

On December 16, 1998, the Company filed a Current Report on Form 8-K in
connection with the disposition of certain properties. The Form 8-K included
pro forma financial information and certain exhibits.

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>
3.1 Articles of Incorporation of the Company. (Incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-11, Registration No. 33-90706).
3.2 Bylaws of the Company. (Incorporated by reference to Exhibit 3.2 to the Company's Registration
Statement on Form S-11, Registration No. 33-90706).
4.1.1 Indenture dated as of August 7, 1997 between the Operating Partnership and First Union National
Bank, relating to the Operating Partnership's Senior Debt Securities. (Incorporated by reference to
Exhibit 4.1 to the Operating Partnership's Current Report on Form 8-K filed on August 11, 1997, File
No. 000-22411).
4.1.2 Supplemental Indenture No. 1, dated as of August 12, 1997 between the Operating Partnership and
First Union National Bank. (Incorporated by reference to Exhibit 4.1 to the Operating Partnership's
Amended Current Report on Form 8-K/A-1 filed on August 18, 1997, File No. 000-22411).
4.1.3 Supplemental Indenture No. 2, dated as of December 17, 1997 between the Operating Partnership and
First Union National Bank. (Incorporated by reference to Exhibit 4.1 to the Operating Partnership's
Amended Current Report on Form 8-K/A-1 filed on December 17, 1997, File No. 000-22411).
4.1.4 Supplemental Indenture No. 3, dated as of May 29, 1998 between the Operating Partnership and First
Union National Bank. (Incorporated by reference to Exhibit 4.2 to the Operating Partnership's Current
Report on Form 8-K filed on June 2, 1998, File No. 000-22411).
4.2.1 The Operating Partnership's 6.80% Note due 2002, dated August 12, 1997. (Incorporated by reference
to Exhibit 4.2 to the Operating Partnership's Amended Current Report on Form 8-K/A-1 filed on
August 18, 1997, File No. 000-22411).
4.2.2 The Operating Partnership's 6.95% Note due 2004, dated August 12, 1997. (Incorporated by reference
to Exhibit 4.3 to the Operating Partnership's Amended Current Report on Form 8-K/A-1 filed on
August 18, 1997, File No. 000-22411).
4.2.3 The Operating Partnership's 7.20% Note due 2007, dated August 12, 1997. (Incorporated by reference
to Exhibit 4.4 to the Operating Partnership's Amended Current Report on Form 8-K/A-1 filed on
August 18, 1997, File No. 000-22411).
4.2.4 The Operating Partnership's 6.63% Note due 2003, dated December 17, 1997. (Incorporated by
reference to Exhibit 4.2 to the Operating Partnership's Amended Current Report on Form 8-K/A-1 filed
on December 17, 1997, File No. 000-22411).
4.2.5 6.7% Medium Term Note due on October 5, 2000 in principal amount of $25,000,000 issued by the
Operating Partnership on October 5, 1998 (Incorporated by reference to Exhibit 10.1 of the Operating
Partnership's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998, File
No. 000-224111).
4.2.6 6.75% Medium-Term Note due 2001 in principal amount of $30,000,000 issued by the Operating
Partnership on July 28, 1998 (Exhibit 10.2 to the Operating Partnership's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1998, File No. 000-22411).
10.1.1 Agreement of Limited Partnership of the Operating Partnership, as amended. (Incorporated by
reference to Exhibit 3.1 to the Operating Partnership's Registration Statement on Form 10, dated
April 21, 1997, filed pursuant to the Securities Exchange Act of 1934, as amended, File No.
000-22411).
</TABLE>

33
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ----------------------------------------------------------------------------------------------------
<S> <C>
10.1.2 Tenth Amendment to the Agreement of Limited Partnership of the Operating Partnership. (Incorporated
by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1997, File No. 001-12792).
10.1.3 Amendment No. 11 to the Limited Partnership Agreement of the Operating Partnership (Incorporated
by reference to Exhibit 3.1 of the Operating Partnership's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1998, File No. 000-22411)
10.1.4 Amendment No. 12 to the Limited Partnership Agreement of the Operating Partnership (Incorporated
by reference to Exhibit 3.1 of the Operating Partnership's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1998, File No. 000-22411).
10.1.5 Amendment No. 13 to the Limited Partnership Agreement of the Operating Partnership (Incorporated
by reference to Exhibit 3.1 of the Operating Partnership's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1998, File No. 000-22411)
10.2 Articles of Incorporation of Summit Management Company. (Incorporated by reference to Exhibit 10.3
to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No.
001-12792).
10.3 Bylaws of Summit Management Company. (Incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No.
001-12792).
10.4 The Company's 1994 Stock Option and Incentive Plan. (Incorporated by reference to Exhibit 10.6 to
the Company's Registration Statement on Form S-11, Registration No. 33-90706).
10.5 The Company's 1996 Non-Qualified Employee Stock Purchase Plan. (Incorporated by reference to
Exhibit 10.5 to the Company's Registration Statement on Form S-8, Registration No. 333-00078).
10.6 Indemnification Agreement, dated January 29, 1994, among the Company, the Operating Partnership
and the individuals named therein. (Incorporated by reference to Exhibit 10.16 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No. 001-12792).
10.7.1 Employment Agreement between the Company and William F. Paulsen. (Incorporated by reference to
Exhibit 10.7.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, File No. 001-12792).
10.7.2 Employment Agreement between the Company and William B. McGuire, Jr. (Incorporated by reference
to Exhibit 10.7.2 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, File No. 001-12792).
10.7.3 Employment Agreement between the Company and Raymond V. Jones. (Incorporated by reference to
Exhibit 10.7.3 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, File No. 001-12792).
10.7.4 Employment Agreement between the David F. Tufaro. (Incorporated by reference to Exhibit 10.7.4 to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, File No.
001-12792).
10.7.5 Employment Agreement between the Company and John C. Moore. (Incorporated by reference Exhibit
10.7.5 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997,
File No. 001-12792).
10.7.6 Employment Agreement between the Company and Michael G. Malone. (Incorporated by reference
Exhibit 10.7.6 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, File No. 001-12792).
10.7.7 Employment Agreement between the Company and Keith L. Downey. (Incorporated by reference to
Exhibit 10.12.4 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, File No. 001-12792).
10.7.8 Employment Agreement between the Company and Christopher A. Hughes. (Incorporated by reference
to Exhibit 10.12.3 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, File No. 001-12792).
10.7.9 Employment Agreement between the Company and William B. Hamilton. (Incorporated by reference to
Exhibit 10.7.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, File No. 001-12792).
10.7.10 Employment Agreement between the Company and Michael L. Schwarz. (Incorporated by reference to
Exhibit 10.7.10 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, File No. 001-12792).
10.7.11 Employment Agreement between the Company and Steven R. LeBlanc. (filed herewith).
10.8.1 Noncompetition Agreement between the Company and William F. Paulsen. (Incorporated by reference
to Exhibit 10.8.1 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, File No. 001-12792).
</TABLE>

34
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<S> <C>
10.8.2 Noncompetition Agreement between the Company and William B. McGuire, Jr. (Incorporated by
reference to Exhibit 10.8.2 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, File No. 001-12792).
10.8.3 Noncompetition Agreement between the Company and Raymond V. Jones. (Incorporated by reference
to Exhibit 10.8.3 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, File No. 001-12792).
10.8.4 Noncompetition Agreement between the Company and Keith H. Kuhlman. (Incorporated by reference
to Exhibit 10.8.4 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, File No. 001-12792).
10.8.5 Noncompetition Agreement between the Company and David F. Tufaro. (Incorporated by reference to
Exhibit 10.8.5 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, File No. 001-12792).
10.8.6 Noncompetition Agreement between the Company and John T. Gray. (Incorporated by reference to
Exhibit 10.8.6 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, File No. 001-12792).
10.8.7 Noncompetition Agreement between the Company and John C. Moore. (Incorporated by reference to
Exhibit 10.8.7 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, File No. 001-12792).
10.8.8 Noncompetition Agreement between the Company and Michael G. Malone. (Incorporated by reference
to Exhibit 10.8.8 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, File No. 001-12792).
10.8.9 Noncompetition Agreement between the Company and William B. Hamilton. (Incorporated by
reference to Exhibit 10.8.9 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, File No. 001-12792).
10.8.10 Noncompetition Agreement between the Company and Michael L. Schwarz. (Incorporated by reference
to Exhibit 10.8.10 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, File No. 001-12792).
10.8.11 Noncompetition Agreement between the Company and Steven R. LeBlanc. (filed herewith).
10.9.1 Executive Severance Agreement between the Company and William F. Paulsen. (Incorporated by
reference to Exhibit 10.9.1 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, File No. 001-12792).
10.9.2 Executive Severance Agreement between the Company and William B. McGuire, Jr. (Incorporated by
reference to Exhibit 10.9.2 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, File No. 001-12792).
10.9.3 Executive Severance Agreement between the Company and Michael L. Schwarz. (Incorporated by
reference to Exhibit 10.9.3 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, File No. 001-12792).
10.9.4 Executive Severance Agreement between the Company and Raymond V. Jones. (Incorporated by
reference to Exhibit 10.9.4 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, File No. 001-12792).
10.9.5 Executive Severance Agreement between the Company and William B. Hamilton. (Incorporated by
reference to Exhibit 10.9.5 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, File No. 001-12792).
10.9.6 Executive Severance Agreement between the Company and Steven R. LeBlanc. (filed herewith)
10.10 $2,500,000 Promissory Note, dated February 15, 1994 and maturing on February 15, 2004, between
Summit Management Company and Old Summit Management Company. (Incorporated by reference to
Exhibit 10.17 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1993, File No. 001-12792).
10.11 $31,000,000 Loan Agreement, dated July 31, 1996, between the Operating Partnership and Wachovia
Bank of North Carolina, N.A. (Incorporated by reference to Exhibit 10.34 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1996, File No. 001-12792).
10.12.1 Promissory Note and Security Agreement, dated January 28, 1998, between the Company and Michael
L. Schwarz. (Incorporated by reference to Exhibit 10.14.1 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997, File No. 001-12792).
10.12.2 Promissory Note and Security Agreement, dated January 28, 1998, between the Company and William
B. Hamilton. (Incorporated by reference to Exhibit 10.14.2 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997, File No. 001-12792).
10.12.3 Form of Promissory Note and Security Agreement between the Company and the employees named in
the Schedule thereto. (Incorporated by reference to Exhibit 10.14.3 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997, File No. 001-12792).
</TABLE>

35
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------------------------------
<S> <C>
10.12.4 Promissory Note and Security Agreement, dated August 5, 1998, between the Company and Steven R.
LeBlanc. (filed herewith).
10.12.5 Promissory Note, dated as of January 28, 1998, evidencing a loan of $42,258 to Michael L. Schwarz
for the purpose of paying tax liability associated with Restricted Stock Award. (Incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1998, File No. 001-12792).
10.12.6 Promissory Note, dated as of January 30, 1998, evidencing a loan of $361,785 to Michael L. Schwarz
for the purpose of purchasing shares of Common Stock of the Company (Incorporated by reference to
Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1998, File No. 001-12792).
10.12.7 Promissory Note, dated as of January 28, 1998, evidencing a loan of $57,418 to William B. Hamilton
for the purpose of paying tax liability associated with Restricted Stock Award. (Incorporated by
reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1998, File No. 001-12792).
10.12.8 Promissory Note, dated as of January 30, 1998, evidencing a loan of $441,562 to William B. Hamilton
for the purpose of purchasing shares of Common Stock of the Company (Incorporated by reference to
Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1998, File No. 001-12792).
10.12.9 Promissory Note, dated as of August 5, 1998, evidencing a loan of $961,000 to Steven R. LeBlanc for
the purpose of purchasing shares of Common Stock of the Company. (Incorporated by reference to
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1998, File No. 001-12792).
10.12.10 Promissory Note, dated February 2, 1999, evidencing a loan of $1,000,487.05 to Steven R. LeBlanc
for the purpose of purchasing shares of Common Stock of the Company (filed herewith).
10.12.11 Promissory Note, dated February 2, 1999, evidencing a loan of $450,004.09 to Michael L. Schwarz for
the purpose of purchasing shares of Common Stock of the Company (filed herewith).
10.13.1 Registration Rights Agreement, dated October 12, 1994 between the Company and PK Partners, L.P.
(Incorporated by reference to Exhibit 10.15.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, File No. 001-12792).
10.13.2 Registration Rights Agreement, dated February 8, 1994, between the Company and the Continuing
Investors named therein. (Incorporated by reference to Exhibit 10.2 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993, File No. 001-12792).
10.13.3 Registration Rights Agreement, dated December 11, 1995, between the Company and Bissell
Ballantyne, LLC. (Incorporated by reference to Exhibit 10.2 to the Company's Registration Statement
on Form S-3, Registration No. 333-24669).
10.13.4 Registration Rights Agreement, dated January 10, 1996, among the Company, Joseph H. Call and
Gary S. Cangelosi. (Incorporated by reference to Exhibit 10.2 to the Company's Registration Statement
on Form S-3, Registration No. 333-24669).
10.13.5 Registration Rights Agreement, dated February 20, 1997, among the Company, The Northwestern
Mutual Life Insurance Company, J. Ronald Terwilliger, J. Ronald Terwilliger Grantor Trust, Crow
Residential Realty Investors, L.P., Douglas A. Hoeksema, Randy J. Pace, Clifford A. Breining, TCF
Residential Partnership, Ltd. and Trammell S. Crow. (Incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement on Form, Registration No. 333-24669).
10.13.6 Registration Rights Agreement, dated May 16, 1995, between the Company and the individuals named
therein executed in connection with the Crosland Acquisition. (Incorporated by reference to Exhibit
10.15.6 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997,
File No. 001-12792).
10.14 Agreement to Contribute, dated February 13, 1995, between the Company, the Operating Partnership
and Crosland Partnerships. (Incorporated by reference to Exhibit 2.1 to the Company's Current Report
on Form 8-K dated May 16, 1995, File No. 001-12792).
10.15.1 Credit Agreement, dated as of March 27, 1998, by and among the Operating Partnership, the Company,
the Banks listed on the signature pages thereof and the other Lenders from time to time party thereto,
and First Union National Bank, as Administrative Agent for the Lenders thereunder ("1998 Credit
Agreement"). (Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1998, File No. 001-12792).
10.15.2 Letter Agreement, dated November 25, 1998, by and among the Operating Partnership, the Company,
Wachovia Bank, N.A. ("Wachovia") and First Union National Bank, as Administrative Agent and
Lender under the 1998 Credit Agreement ("First Union"), evidencing an increase in First Union's and
Wachovia's Commitments (as defined in the 1998 Credit Agreement) under the 1998 Credit Agreement
of $15,000,000 and $10,000,000, respectively (filed herewith).
</TABLE>

36
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------------
<S> <C>
10.15.3 Replacement Competitive Note, dated November 25, 1998 by and among the Operating Partnership,
The Company and First Union reflecting the increased Commitments (filed herewith).
10.15.4 Replacement Competitive Note, dated November 25, 1998 by and among the Operating Partnership,
The Company and Wachovia reflecting the increased Commitments (filed herewith).
10.15.5 Replacement Competitive Note, dated November 25, 1998 by and among the Operating Partnership,
The Company and NationsBank, N.A. reflecting the increased Commitments (filed herewith).
10.15.6 Replacement Competitive Note, dated November 25, 1998 by and among the Operating Partnership,
The Company and Commerzbank, A.G. reflecting the increased Commitments (filed herewith).
10.15.7 Replacement Competitive Note, dated November 25, 1998 by and among the Operating Partnership,
The Company and PNC Bank, National Association reflecting the increased Commitments (filed
herewith).
10.15.8 Replacement Competitive Note, dated November 25, 1998 by and among the Operating Partnership,
The Company and AmSouth Bank reflecting the increased Commitments (filed herewith).
10.15.9 Replacement Revolving Note, dated November 25, 1998 by and among the Operating Partnership, the
Company and First Union reflecting the increased Commitments (filed herewith).
10.15.10 Replacement Revolving Note, dated November 25, 1998 by and among the Operating Partnership, the
Company and Wachovia reflecting the increased Commitments (filed herewith).
10.16 Agreement and Plan of Reorganization dated as of October 31, 1998 among the Company, affiliates of
the Company (including the Operating Partnership), Ewing Industries, Inc., and affiliates of Ewing
Industries, Inc. (Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form
8-K filed on November 13, 1998, File No. 001-12792).
12.1 Statement Regarding Calculation of Ratios of Earnings to Fixed Charges for the Years Ended
December 31, 1998, 1997, 1996, 1995 and 1994 (filed herewith).
21.1 Subsidiaries of the Company (filed herewith).
23.1 Consent of Deloitte & Touche LLP. (Included in the Independent Auditors' Report dated January 21,
1999 on page 40 of this Annual Report on Form 10-K for the fiscal year ended December 31, 1998
File No. 001-12792).
27 Financial Data Schedule (filed herewith).
</TABLE>

37
<PAGE>

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 March 16, 1999.

SUMMIT PROPERTIES INC.

/S/ WILLIAM F. PAULSEN
----------------------------------------
WILLIAM F. PAULSEN,
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 Directors March 16, 1999
- ----------------------------------
WILLIAM B. MCGUIRE, JR.

/S/ WILLIAM F. PAULSEN Chief Executive Officer and Director March 16, 1999
- ---------------------------------- (Principal Executive Officer)
WILLIAM F. PAULSEN

/S/ STEVEN R. LEBLANC President, Chief Operating Officer and March 16, 1999
- ---------------------------------- Director (Principal Operating Officer)
STEVEN R. LEBLANC

/S/ MICHAEL L. SCHWARZ Chief Financial Officer and Executive Vice March 16, 1999
- ---------------------------------- President (Principal Financial Officer and
MICHAEL L. SCHWARZ Principal Accounting Officer)

/S/ JOHN CROSLAND, JR. Director March 16, 1999
- ----------------------------------
JOHN CROSLAND, JR.

/S/ HENRY H. FISHKIND Director March 16, 1999
- ----------------------------------
HENRY H. FISHKIND

/S/ JAMES H. NANCE, JR. Director March 16, 1999
- ----------------------------------
JAMES H. HANCE, JR.

/S/ NELSON SCHWAB, III Director March 16, 1999
- ----------------------------------
NELSON SCHWAB, III
</TABLE>

38
<PAGE>

INDEX TO FINANCIAL STATEMENTS

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 ............................................................. 40
Consolidated Balance Sheets as of December 31, 1998 and 1997 ............................. 41
Consolidated Statements of Earnings for the Years Ended December 31, 1998, 1997 and 1996 . 42
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1998,
1997 and 1996 .......................................................................... 43
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and
1996 ................................................................................... 44
Notes to Consolidated Financial Statements ............................................... 45
</TABLE>

39
<PAGE>

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, 1998 and 1997 and the related consolidated
statements of earnings, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1998 and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.

We consent to the incorporation by reference of the above report in
Registration Statement Nos. 333-24669, 33-93540, 333-25575, and 333-51623 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 21, 1999

40
<PAGE>

SUMMIT PROPERTIES INC.

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1997
-------------- -------------
<S> <C> <C>
ASSETS
Real estate assets:
Land and land improvements .............................................................. $ 169,374 $ 133,316
Buildings and improvements .............................................................. 836,054 643,812
Furniture, fixtures and equipment ....................................................... 63,963 53,573
---------- ----------
1,069,391 830,701
Less: accumulated depreciation .......................................................... (115,128) (105,979)
---------- ----------
Operating real estate assets .......................................................... 954,263 724,722
Construction in progress ................................................................ 137,145 82,332
---------- ----------
Net real estate assets ................................................................ 1,091,408 807,054
Cash and cash equivalents ................................................................ 2,837 3,563
Restricted cash .......................................................................... 91,981 3,180
Investment in Summit Management Company .................................................. 1,330 1,212
Deferred financing costs, net of accumulated amortization of $4,472 and $3,495 in 1998 and
1997, respectively ...................................................................... 7,538 7,378
Other assets ............................................................................. 3,570 2,906
---------- ----------
Total assets ............................................................................. $1,198,664 $ 825,293
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable ........................................................................... $ 726,103 $ 474,673
Accrued interest payable ................................................................ 6,806 4,916
Accounts payable and accrued expenses ................................................... 32,745 19,945
Dividends and distributions payable ..................................................... 12,713 11,030
Security deposits and prepaid rents ..................................................... 4,188 3,561
---------- ----------
Total liabilities ..................................................................... 782,555 514,125
---------- ----------
Commitments and contingencies ............................................................
Minority interest ........................................................................ 57,184 45,329
Stockholders' equity:
Common stock, $.01 par value--100,000,000 shares authorized, 27,805,836 and 23,411,086
shares issued and outstanding in 1998 and 1997, respectively .......................... 278 234
Preferred stock, $.01 par value--25,000,000 shares authorized, no shares issued and
outstanding ........................................................................... -- --
Additional paid-in capital .............................................................. 442,132 361,731
Accumulated deficit ..................................................................... (80,281) (95,120)
Unamortized restricted stock compensation ............................................... (728) (1,006)
---------- ----------
361,401 265,839
Less employee notes receivable .......................................................... (2,476) --
---------- ----------
Total stockholders' equity ............................................................ 358,925 265,839
---------- ----------
Total liabilities and stockholders' equity ............................................... $1,198,664 $ 825,293
========== ==========
</TABLE>

See notes to consolidated financial statements.

41
<PAGE>

SUMMIT PROPERTIES INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Rental ....................................................................... $ 137,660 $ 109,827 $ 88,864
Other property income ........................................................ 7,996 6,179 4,683
Interest ..................................................................... 1,064 392 558
Other income ................................................................. 849 279 384
----------- ----------- -----------
Total revenues ............................................................ 147,569 116,677 94,489
----------- ----------- -----------
Expenses:
Property operating and maintenance:
Personnel .................................................................. 11,350 9,278 8,368
Advertising and promotion .................................................. 2,419 2,095 1,417
Utilities .................................................................. 6,240 5,033 4,115
Building repairs and maintenance ........................................... 9,893 8,790 7,547
Real estate taxes and insurance ............................................ 14,063 10,721 8,823
Depreciation ............................................................... 28,997 22,652 18,208
Property supervision ....................................................... 3,531 2,783 2,240
Other operating expenses ................................................... 4,054 3,332 2,716
----------- ----------- -----------
80,547 64,684 53,434
Interest ..................................................................... 33,506 21,959 17,138
General and administrative ................................................... 3,861 2,740 2,557
Loss (income) on equity investments:
Summit Management Company .................................................. 327 (274) 173
Real estate joint venture .................................................. 1 -- --
----------- ----------- -----------
Total expenses ............................................................ 118,242 89,109 73,302
----------- ----------- -----------
Income before gain on sale of real estate assets, minority interest of
unitholders in Operating Partnership and extraordinary items ................. 29,327 27,568 21,187
Gain on sale of real estate assets ............................................ 37,148 4,366 --
----------- ----------- -----------
Income before minority interest of unitholders in Operating Partnership and
extraordinary items .......................................................... 66,475 31,934 21,187
Minority interest of unitholders in Operating Partnership ..................... (9,592) (4,818) (3,723)
----------- ----------- -----------
Income before extraordinary items ............................................. 56,883 27,116 17,464
Extraordinary items, net of minority interest of unitholders in Operating
Partnership .................................................................. (508) -- (516)
----------- ----------- -----------
Net income .................................................................... $ 56,375 $ 27,116 $ 16,948
=========== =========== ===========
Per share data:
Income before extraordinary items -- basic and diluted ....................... $ 2.28 $ 1.17 $ 0.92
=========== =========== ===========
Extraordinary items -- basic and diluted ..................................... $ (0.02) -- $ (0.02)
=========== =========== ===========
Net income -- basic and diluted .............................................. $ 2.26 $ 1.17 $ 0.90
=========== =========== ===========
Dividends declared ........................................................... $ 1.63 $ 1.59 $ 1.55
=========== =========== ===========
Weighted average shares -- basic ............................................. 24,934,618 23,145,881 18,887,744
=========== =========== ===========
Weighted average shares -- diluted ........................................... 24,944,002 23,182,302 18,914,674
=========== =========== ===========
</TABLE>

See notes to consolidated financial statements.

42
<PAGE>

SUMMIT PROPERTIES INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
UNAMORTIZED
ADDITIONAL RESTRICTED EMPLOYEE
COMMON PAID IN ACCUMULATED STOCK NOTES
STOCK CAPITAL DEFICIT COMPENSATION RECEIVABLE TOTAL
-------- ------------ ------------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
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 and 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
Dividends ................................... -- -- (37,168) -- (37,168)
Issuance of stock ........................... 6 11,740 -- -- 11,746
Costs of shelf registrations ................ -- (616) -- -- (616)
Proceeds from dividend and stock purchase
plans ..................................... 2 3,605 -- -- 3,607
Conversion of units to shares ............... 2 3,911 -- -- 3,913
Exercise of stock options ................... -- 851 -- -- 851
Issuance of restricted stock grants ......... -- 546 -- (546) --
Amortization of restricted stock grants ..... -- -- -- 354 354
Adjustment for minority interest of
unitholders in Operating Partnership ...... -- (1,178) -- -- (1,178)
Net income .................................. -- -- 27,116 -- 27,116
---- -------- --------- -------- --------- ---------
Balance, December 31, 1997 ................... 234 361,731 (95,120) (1,006) 265,839
Dividends ................................... -- -- (41,536) -- (41,536)
Issuance of stock ........................... 21 37,322 -- -- 37,343
Proceeds from dividend and stock purchase
plans ..................................... 22 42,891 -- -- 42,913
Conversion of units to shares ............... -- 555 -- -- 555
Exercise of stock options ................... 1 840 -- -- 841
Issuance of restricted stock grants ......... -- 162 -- (162) --
Amortization of restricted stock grants ..... -- -- -- 440 440
Adjustment for minority interest of
unitholders in Operating Partnership ...... -- (1,369) -- -- (1,369)
Issuance of employee notes receivable ....... $ (2,476) (2,476)
Net income .................................. -- -- 56,375 -- 56,375
---- -------- --------- -------- -------- ---------
Balance, December 31, 1998 ................... $278 $442,132 $ (80,281) $ (728) $ (2,476) $ 358,925
==== ======== ========= ======== ======== =========
</TABLE>

See notes to consolidated financial statements.

43
<PAGE>

SUMMIT PROPERTIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income .......................................................................... $ 56,375 $ 27,116 $ 16,948
Adjustments to reconcile net income to net cash provided by operating activities:
Extraordinary items ............................................................... 508 -- 516
(Income) loss on equity investments ............................................... 328 (274) 173
Gain on sale of real estate assets ................................................ (37,148) (4,366) --
Depreciation and amortization ..................................................... 30,163 23,897 19,183
(Increase) decrease in restricted cash ............................................ (777) 941 235
Increase in other assets .......................................................... (504) (162) (866)
Increase in accrued interest payable .............................................. 1,444 3,581 333
Increase in accounts payable and accrued expenses ................................. 3,823 517 386
Increase (decrease) in security deposits and prepaid rents ........................ 4 (121) 545
Increase in minority interest of unitholders in Operating Partnership ............. 9,592 4,818 3,723
---------- ---------- ----------
Net cash provided by operating activities ........................................ 63,808 55,947 41,176
---------- ---------- ----------
Cash flows from investing activities:
Construction of real estate assets and land acquisitions, net of payables ........... (122,294) (91,665) (87,081)
Purchase of Communities ............................................................. (124,846) (78,870) (6,360)
Proceeds from disposal of Communities ............................................... 44,245 9,209 --
Capitalized interest ................................................................ (6,142) (5,873) (4,266)
Recurring capital expenditures ...................................................... (4,607) (4,586) (3,291)
Non-recurring capital expenditures, net of payables ................................. (5,526) (4,122) (2,973)
---------- ---------- ----------
Net cash used in investing activities ............................................ (219,170) (175,907) (103,971)
---------- ---------- ----------
Cash flows from financing activities:
Net borrowings on line of credit .................................................... 131,252 (655) 17,792
Net borrowings on unsecured bonds ................................................... 54,392 151,192 30,783
Repayments of mortgage debt ......................................................... (27,391) (3,852) (49,537)
Repayments of tax exempt bonds ...................................................... (1,050) (1,010) (977)
Net proceeds from dividend reinvestment and stock purchase plans .................... 42,913 3,607 1,597
Dividends and distributions to unitholders .......................................... (46,819) (42,971) (34,000)
Issuance of stock ................................................................... -- 6,812 --
Exercise of stock options ........................................................... 841 851 287
Common stock offering proceeds, net of underwriters discount and related costs ...... -- -- 97,634
Increase in advance proceeds from direct stock purchase plan ........................ 2,974 6,500 --
Shelf registration costs ............................................................ -- (616) --
Increase in employee notes receivable ............................................... (2,476) -- --
---------- ---------- ----------
Net cash provided by financing activities ........................................ 154,636 119,858 63,579
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents ................................. (726) (102) 784
Cash and cash equivalents, beginning of year ......................................... 3,563 3,665 2,881
---------- ---------- ----------
Cash and cash equivalents, end of year ............................................... $ 2,837 $ 3,563 $ 3,665
========== ========== ==========
Supplemental disclosure of cash flow information -- Cash paid for interest, net of
capitalized interest ................................................................ $ 31,106 $ 17,321 $ 15,780
========== ========== ==========
</TABLE>

See notes to consolidated financial statements.

44
<PAGE>

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 the construction of development
communities.

2. BASIS OF PRESENTATION

In conjunction with the Initial Offering, construction, management and
leasing activities for third parties were transferred to Summit Management
Company (the "Management Company") and its wholly-owned subsidiary, Summit
Apartment Builders (the "Construction 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.

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 have been
adjusted for the minority interest of unitholders in the Operating Partnership.
Minority interest of unitholders in the Operating Partnership is calculated at
the balance sheet date based upon the percentage of Units outstanding owned by
partners other than the Company to the total number of Units outstanding.
Minority interest of unitholders in Operating Partnership earnings is
calculated based on the weighted average Units outstanding during the period.
Units can be exchanged for cash, or at the option of the Company, for shares of
Common Stock on a one-for-one basis. It is the Company's prior practice and
current intention to redeem Units only for shares of Common Stock on a
one-for-one basis. With respect to Units issued in conjunction with the initial
formation of the Company as a REIT, the redemption of Units for shares of
Common Stock is recorded at book value. With respect to Units issued subsequent
to that date, the redemption of Units for shares of Common Stock is accounted
for as the purchase of a minority interest and, therefore, recorded at the fair
market value of the shares of Common Stock issued at the date of the
redemption.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REAL ESTATE ASSETS AND DEPRECIATION -- Real estate assets are stated at
depreciated cost reduced for any estimated impairment in value of which
management believes there is none at December 31, 1998 and 1997.

45
<PAGE>

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)

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 non-recurring capital expenditures. Non-recurring capital
expenditures primarily consist of the cost of improvements such as new garages,
water submeters and improvements made in conjunction with acquisitions and
major renovations. 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 estimated useful lives of the
properties (buildings -- 40 years; land improvements -- 15 years; furniture,
fixtures and equipment -- 5 to 7 years).

The Company records its real estate assets at cost less accumulated
depreciation and adjusts carrying value in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and Long-Lived Assets to be Disposed Of ". SFAS No. 121
requires that long-lived assets such as real estate assets be reviewed whenever
events or changes in circumstances indicate that the book value of the asset
may not be recoverable. If the sum of the estimated future net cash flows
(undiscounted and without interest charges) from an asset to be held and used
is less than the book value of the asset, an impairment loss must be recognized
in the amount of the difference between book value and fair value as opposed to
the difference between book value and net realizable value under the previous
accounting standard. For long-term assets like apartment communities, the
determination of whether there is an impairment loss is dependent primarily on
the Company's estimates on occupancy, rent and expense increases, which
involves numerous assumptions and judgments as to future events over a period
of many years. Assets to be disposed of are reported at the lower of carrying
value or fair value less costs to sell. At December 31, 1998 the Company does
not hold any assets that meet the impairment criteria of SFAS No. 121. At
December 31, 1998, the Company had six apartment communities for sale with a
net book value of approximately $52.5 million. The Company does not anticipate
incurring a loss on any individual apartment community sale. The six apartment
communities held for sale represented approximately 6% of property operating
income for the Company for the year ended December 31, 1998.

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 both Company owned properties as well as properties owned by third
parties. 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, replacement reserve escrows, and
proceeds from apartment community sales deposited with a qualified intermediary
in accordance with like-kind exchange rules and regulations.

DEFERRED FINANCING COSTS -- Deferred financing costs include fees and
costs incurred in conjunction with 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 $6.1 million, $5.9 million
and $4.3 million for the years ended December 31, 1998, 1997 and 1996,
respectively.

ADVERTISING COSTS -- The Company expenses advertising costs as incurred.

INCOME TAXES -- The Company elected to be taxed as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended
(the "Code"). 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.

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 approximately $90.6 million and $25.3 million, as

46
<PAGE>

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)

of December 31, 1998 and 1997, respectively. The change between December 31,
1998 and 1997 was primarily due to financial depreciation exceeding tax
depreciation by approximately $7.8 million offset by the carrying value
exceeding the tax basis by $69.9 million for the Company's 1998 Acquisitions.

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 18%, 25% and 21% for each of the years ended December 31, 1998,
1997 and 1996, respectively.

PER SHARE DATA -- Basic earnings per share with respect to the Company for
the years ended December 31, 1998, 1997 and 1996 are computed based upon the
weighted average number of shares outstanding during the period. The difference
in "basic" and "diluted" weighted average shares is the dilutive effect of the
Company's stock options outstanding (9,384, 36,421 and 26,930 shares added to
weighted shares outstanding in 1998, 1997 and 1996, respectively).

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.

COMPREHENSIVE INCOME -- Statement of Financial Accounting Standard No. 130
"Reporting Comprehensive Income" (FAS 130), presents standards for reporting
and display of comprehensive income and its components. Besides net income, FAS
130 requires the reporting of other comprehensive income, defined as revenues,
expenses, gains and losses that under generally accepted accounting principles
are not included in net income. The Company has no items of other comprehensive
income in any period presented.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES -- Statement of Financial
Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (FAS 133), presents standards for accounting for derivative
instruments. FAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The Company currently holds no derivative
instruments and accordingly does not expect FAS 133 to have an effect on the
Company's financial position and results of operations.

4. REAL ESTATE JOINT VENTURES

The Company obtained a 25% interest in a joint venture named Station Hill
in exchange for the contribution of two communities. Station Hill also owns
five apartment communities previously owned by the Company which were sold to
Hollow Creek LLC on December 16, 1998 and were concurrently contributed to
Station Hill for a 75% joint venture interest (See Acquisitions and
Dispositions -- Note 8). The seven communities are Summit Green, Summit Hill I
& II, Summit Creek, Summit Hollow I & II and Summit Station. The Company's
initial investment in Station Hill was reduced to zero when the Company
eliminated the portion of the gain on disposal related to the percentage of
joint venture ownership interest retained. Station Hill is accounted for on the
equity method of accounting.

The Company owns a 49% interest in each of two joint ventures
("Construction Projects"). Each joint venture is developing an apartment
community which will be accounted for under the equity method of accounting.
The projects are both under construction and had no operations as of December
31, 1998. The construction costs will be funded primarily through separate
loans to each joint venture from unrelated third parties equal to 100% of the
construction costs. During the construction period, in lieu of equity
contribution to each of the respective joint ventures, the Company has under
certain circumstances, subsequent to demand by the third party lenders, agreed
to make contributions which would reduce the respective construction loan by an
amount not to exceed 25% of the total construction loan amount. Any such
contribution would be deemed to be all or a portion of the equity required to
be contributed by the Company to the respective joint venture at the end of the
construction and lease up period. The Company has the right to purchase its
joint venture partner's interest after the projects are complete.

47
<PAGE>

4. REAL ESTATE JOINT VENTURES -- (Continued)

The following is a condensed balance sheet for each of the joint ventures
at December 31, 1998 (in thousands):

<TABLE>
<CAPTION>
STATION CONSTRUCTION
HILL PROJECTS
--------- -------------
<S> <C> <C>
Cash ............................................... $ 533 $ 48
Real estate assets other than construction in process 91,577 --
Construction in process ............................ -- 10,578
Other assets ....................................... 669 5
------- -------
Total assets ...................................... $92,779 $10,631
======= =======
Mortgages payable .................................. $70,150 $ --
Construction loan payable .......................... -- 8,725
Construction liabilities payable ................... -- 1,758
Other liabilities .................................. 193 16
Partners' capital .................................. 22,436 132
------- -------
Total liabilities and partner's capital ........... $92,779 $10,631
======= =======
</TABLE>

Station Hill began operations on December 16, 1998 while the Construction
Projects have had no operations. Accordingly the operations of the joint
ventures are not material to the Company for the year ended December 31, 1998.

5. 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.

The Management Company provides management services to the Company. Total
fees for management services were $3.9 million, $3.1 million and $2.4 million
for the years ended December 31, 1998, 1997 and 1996, respectively.

In addition, 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 $233,000, $214,000 and $267,000 for the performance of such
services for the years ended December 31, 1998, 1997 and 1996, respectively.

Construction Company revenue consists of fees on contracts with the
Company. Revenue from contracts with the Company was $1.1 million, $1.1 million
and $524,000 for the years ended December 31, 1998, 1997 and 1996,
respectively. The Construction Company's profits on these contracts is
eliminated in consolidation against the Company's investment in real estate.
The Company had a $5.7 million and $4.6 million construction contract payable
to the Construction Company as of December 31, 1998 and 1997, respectively.

The Company's investment in the Management Company as of December 31, 1998
and 1997, reported on the equity method, includes the amounts shown below. The
Company's investment in the Management Company is not considered material to
the consolidated financial statements of the Company taken as a whole (in
thousands):

<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Equity investment ........................... $ 111 $ 242
Note receivable ............................. 2,500 2,500
Deferred gain on sale of third
party contract rights ...................... (1,281) (1,530)
--------- ---------
$ 1,330 $ 1,212
========= =========
</TABLE>

48
<PAGE>

6. NOTES PAYABLE
Notes payable consist of the following (in thousands):

<TABLE>
<CAPTION>
INTEREST PRINCIPAL OUTSTANDING
RATE AS OF DECEMBER 31,
DECEMBER 31, -----------------------
1998 1998 1997
--------------- ----------- -----------
<S> <C> <C> <C>
FIXED RATE DEBT
Mortgage Loan ........................ 6.24% $146,740 $149,593
Mortgage Loan ........................ 8.00% 8,470 8,557
Mortgage Notes ....................... 6.75% - 9.80% 115,443 46,676
Tax Exempt Mortgage Notes ............ 6.95% - 7.25% 9,148 9,262
-------- --------
Total Mortgage Debt ................ 279,801 214,088
Unsecured Debt:
6.71% Medium Term Notes due 2000 ..... 6.71% 25,000 --
6.75% Medium Term Notes due 2001 ..... 6.75% 30,000 --
6.80% Notes due 2002 ................. 6.80% 25,000 25,000
6.63% Notes due 2003 ................. 6.63% 30,000 30,000
6.95% Notes due 2004 ................. 6.95% 50,000 50,000
7.20% Notes due 2007 ................. 7.20% 50,000 50,000
Bank Note due 2002 ................... 7.85% 16,000 16,000
Bank Note due 2000 ................... 7.61% 15,000 15,000
-------- --------
Total Unsecured Debt ................ 241,000 186,000
-------- --------
Total Fixed Rate Debt ............... 520,801 400,088
VARIABLE RATE DEBT
Unsecured Credit Facility ............ LIBOR +90 153,500 21,733
Tax Exempt Bonds ..................... 5.55% 51,802 52,852
-------- --------
Total Variable Rate Debt ........... 205,302 74,585
-------- --------
TOTAL OUTSTANDING INDEBTEDNESS ......... $726,103 $474,673
======== ========
</TABLE>

The London Interbank Offered Rate (LIBOR) at December 31, 1998 was 5.63%.

MORTGAGE LOANS -- On September 23, 1998, the Company consolidated and
renewed two mortgage loans which had a $147.2 million balance. The original
loans matured in February 2001 ($118.3 million at 5.88%) and December 2005
($28.9 million at 7.71%). The consolidation and renewal combined the two
mortgage loans into one loan at an interest rate equal to the existing weighted
average interest rate of the two previous mortgage loans (6.24%) up to February
2001. As of February 2001, the rate of interest on the loan will increase to
6.76% until the loan matures in October of 2008.

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 6.75% to 9.80% and require monthly interest and principal payments over
the life of the notes which range from the year 2002 to 2029. The weighted
average interest rate and debt maturity at December 31, 1998 for these ten
Mortgage Notes were 7.20% and 8.4 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, 1998 for these two mortgage notes were
7.12% and 27.5 years, respectively.

MEDIUM-TERM NOTES -- The Company has established a program for the sale of
up to $95 million aggregate principal amount of Medium-Term Notes due nine
months or more from the date of issuance (the "MTN Program"). On July 28, 1998,
the Company sold $30 million of notes under the MTN Program. Such notes are due
on July 30, 2001 and bear interest at 6.75% per year. On October 5, 1998, the
Company sold $25 million of notes under the MTN Program. Such notes are due on
October 5, 2000 and bear interest at 6.71% per year.

49
<PAGE>

6. NOTES PAYABLE -- (Continued)

UNSECURED NOTES -- The unsecured notes consist of $25.0 million of notes
due 2002, $30.0 million of notes due 2003, $50.0 million of notes due 2004 and
$50.0 million of notes due 2007 (collectively, the "Unsecured Notes"). The
Unsecured Notes require semi-annual interest payments until the end of the
respective terms.

UNSECURED BANK NOTES -- The unsecured bank notes consist of a $16.0
million note due 2002 and a $15.0 million note due 2000 (collectively, the
"Unsecured Bank Notes"). The notes require quarterly interest only payments
until the end of the respective terms.

UNSECURED CREDIT FACILITY -- In March, 1998, the Company obtained a new
syndicated unsecured line of credit (the "Unsecured Credit Facility") in the
amount of $175 million which replaced the existing $150 million credit
facility. The Unsecured Credit Facility was increased in December, 1998 to $200
million. The Unsecured Credit Facility provides funds for new development,
acquisitions and general working capital purposes. The Unsecured Credit
Facility has a three year term with two one-year extension options and bears
interest at LIBOR + 90 basis points based upon the Company's current credit
rating of BBB- by Standard & Poor's Rating Services and Baa3 by Moody's
Investors Service. The interest rate will be reduced in the event of an upgrade
of the Company's unsecured credit rating. The Unsecured Credit Facility is
repayable monthly on an interest only basis with principal due at maturity. The
Company's credit facilities had an average interest rate and average balance
outstanding during the years ended December 31, 1998, 1997 and 1996 of 6.67%,
6.73%, 6.46% and $98.0, $53.9 million and $9.4 million, respectively. In
addition, the maximum outstanding during 1998, 1997 and 1996 was $175.0
million, $121.9 million and $22.4 million, respectively.

The Unsecured Credit Facility also provides a bid option sub-facility
equal to a maximum of fifty percent of the total facility ($100 million). This
sub-facility provides the Company with the option to place borrowings in fixed
LIBOR contract periods of thirty, sixty, ninety and one hundred eighty days.
The Company may have up to seven fixed LIBOR contracts outstanding at any one
time. Upon proper notifications, all lenders participating in the Unsecured
Credit Facility may, but are not obligated to, participate in a competitive bid
auction for these fixed LIBOR contracts.

The Unsecured Credit Facility requires the Company to comply with certain
affirmative and negative covenants including the following requirements: (i)
the Company maintain its qualification as a REIT; (ii) the Company maintain a
ratio of EBITDA (as defined therein) to fixed charges (as defined therein) of
not less that 1.75 to 1; (iii) dividends not exceed 90% of funds from
operations (as defined therein); (iv) the Company maintain a ratio of total
funded debt (as defined therein) to implied capitalization value (as defined
therein) of less than .55 to 1; and (v) the Company maintain a ratio of
unencumbered asset value (as defined therein) to unsecured debt of less than
1.75 to 1. In addition, the Unsecured Notes and the Unsecured Bank Notes
require the Company to comply with certain affirmative and negative covenants
including the following requirements: (i) the ratio of unencumbered assets (as
defined therein) to unsecured debt equal or exceed 150%; (ii) the ratio of debt
to assets (as defined therein) not exceed 60%; and (iii) secured debt not to
exceed 40% of assets (as defined therein).

VARIABLE RATE TAX EXEMPT BONDS -- The effective interest rate of the
Variable Rate Tax Exempt Bonds was 4.85% for the year ended December 31, 1998.
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 to $52.9 million. The credit enhancements on
four of the five tax exempt bonds ($44.2 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 $433.5 million serve as
collateral for the various debt agreements.

50
<PAGE>

6. NOTES PAYABLE -- (Continued)

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>
1999 ........... $ 3,094 $ 2,006 $ -- $ 1,105 $ -- $ 6,205
2000 ........... 3,293 2,151 40,000 1,130 -- 46,574
2001 ........... 3,340 2,313 30,000 1,150 153,500 190,303
2002 ........... 3,532 10,517 41,000 1,270 -- 56,319
2003 ........... 3,779 2,517 30,000 1,290 -- 37,586
Thereafter ..... 138,172 105,087 100,000 45,857 -- 389,116
-------- -------- -------- ------- -------- --------
$155,210 $124,591 $241,000 $51,802 $153,500 $726,103
======== ======== ======== ======= ======== ========
</TABLE>

EXTRAORDINARY ITEMS -- The extraordinary items in the year ended December
31, 1998 resulted from the write-off of deferred financing cost in conjunction
with the replacement by the Company of its prior credit facility with the
Unsecured Credit Facility and prepayment penalties on six mortgage notes which
were repaid during the period. 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 Bank Notes. The extraordinary items are net of $86,000 and $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 in 1998 and 1997 respectively.

7. MINORITY INTEREST

Minority interest consists of the following at December 31, 1998 and 1997
(in thousands):

<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Minority interest of unitholders in Operating Partnership .. $57,587 $45,731
Minority interest in one operating community ............... (403) (402)
------- -------
$57,184 $45,329
======= =======
</TABLE>

As of December 31, 1998, there were 32,242,074 Units outstanding of the
Operating Partnership, of which 27,805,836, or 86.2% were owned by the Company
and 4,436,238, or 13.8% were owned by other partners (including certain
officers and directors of the Company).

Proceeds from Common Stock issued by the Company are contributed to the
Operating Partnership for an equivalent number of Units. Total Common Stock
issued by the Company and contributed to the Operating Partnership for
equivalent number of Units was 4.8 million and 1.0 million shares valued at
$89.7 million ($18.52 per share average) and $20.7 million ($20.66 per share
average) for the years ended December 31, 1998 and 1997 respectively. No
individual transaction significantly changed the Company's ownership percentage
in the Operating Partnership. The Company's ownership percentage in the
Operating Partnership was 86.2%, 85.3% and 84.8% as of December 31, 1998, 1997
and 1996, respectively.

In addition to the amounts in the above, the Company issued shares of
Common Stock in exchange for Units owned by other partners on a one-for-one
basis. An aggregate of 28,993 shares and 192,463 shares were issued for Units
in 1998 and 1997, respectively. The shares exchanged were valued based upon the
Company's market price per share and had an aggregate value of $555,000 and
$3.9 million in 1998 and 1997, respectively.

Units issued for the purchase of apartment communities were valued based
upon the Company's market value price per share of Common Stock as the Units
can be exchanged for shares on a one-for-one basis. In addition, of the 438,103
Units issued for the 1997 purchase of apartment communities, 243,608 Units were
issued to the Company in exchange for the Company issuing 243,608 shares of
Common Stock to the sellers of the apartment communities. Of the 2,253,165
Units issued for the 1998 purchase of apartment Communities, 2,074,615 were
issued to the Company in exchange for the company issuing 2,074,615 shares of
common stock to the sellers of the apartment communities.

51
<PAGE>

8. ACQUISITIONS AND DISPOSITIONS
On April 1, 1996, the Company acquired its joint venture partner's
interest in Summit Plantation (formerly Plantation Cove), a 262 apartment
community located in Plantation, Florida. The Company paid $6.4 million in cash
for the remaining 75% interest in the joint venture.

During the year ended December 31, 1997, the Company completed the
acquisition of five communities: Summit Portofino, purchased on January 6,
1997: Summit Mayfaire, purchased on January 15, 1997: Summit Sand Lake
purchased on February 20, 1997: Summit Windsor II, purchased on July 18, 1997:
and Summit Fair Oaks, purchased on December 31, 1997 (the "1997 Acquisitions").
The 1997 Acquisitions added a total of 1,434 apartment homes to the Company's
portfolio. The total purchase price for the 1997 Acquisitions was $104.5
million which consisted of $15.2 million in assumed debt, 243,608 shares of
Common Stock (valued at $4.9 million) issued to the seller, 194,495 Units
(valued at $3.9 million) issued to the seller and $78.9 million of cash.
Concurrently with the purchase of Summit Portofino, the Company sold 315,029
shares of Common Stock to the public for cash to fund part of the purchase. The
Summit Windsor II purchase was partially funded by the proceeds from the sale
of a property formerly now as Summit Charleston in May, 1997. The property
formerly known as Summit Charleston was sold for $9.5 million and a gain of the
sale of approximately $4.4 million was recognized.

The Company completed the acquisition of three communities located in
Atlanta, Georgia in 1998: Summit St. Clair, purchased effective March 1, 1998,
Summit Club at Dunwoody, purchased effective May 22, 1998, and Summit at Lenox,
purchased effective July 8, 1998 (the "Atlanta Acquisitions"). The Atlanta
Acquisitions added a total of 1,092 apartment homes to the Company's portfolio
at an aggregate purchase price of $88.3 million. The Atlanta Acquisitions were
financed with the issuance of 259,871 Units (valued at $5.2 million) and the
assumption of $8.8 million of mortgage debt. The balance of the purchase price
was paid in cash.

On May 18, 1998, the Company sold a community in Brandon, Florida formerly
known as Summit Providence for net proceeds of $23.9 million. A gain on the
sale of $8.7 million was recognized. Proceeds from the sale were used to
partially fund the acquisition of Summit Club at Dunwoody.

On October 23, 1998, the Company sold a community in Atlanta, Georgia
formerly known as Summit Springs for $17.5 million. The Company recognized a
gain of approximately $6.0 million on the sale.

On November 2, 1998, the Company sold a community in Winston Salem, North
Carolina, formerly known as Summit Old Town, for $7.5 million. The Company
recognized a gain of approximately $2.3 million from the sale.

On November 4, 1998, the Company acquired a portfolio of multifamily
properties in Texas (the "Ewing Portfolio") through a merger with Ewing
Industries, a private developer of luxury apartment homes. The Ewing Portfolio
consists of 2,465 apartment homes in seven communities located in Dallas,
Austin and San Antonio. The acquisition of the Ewing Portfolio was effected
pursuant to an Agreement and Plan of Reorganization dated as of October 31,
1998 (the "Merger Agreement") among the Company, affiliates of the Company
including the Operating Partnership, Ewing Industries, Inc., an Ohio
corporation ("Ewing Industries"), affiliates of Ewing, and their respective
partners, shareholders and members (together with Ewing Industries, "Ewing").
Pursuant to the Merger Agreement, the acquisition was funded through (i) the
issuance to Ewing of 1,008,988 shares of Common Stock of the Company and
141,921 Units, valued at $20.7 million in the aggregate, (ii) the assumption of
$84.0 million in long-term fixed-rate mortgage indebtedness, (iii) the payment
of $50.6 million in cash and (iv) receipt of $3.8 million of credit for
customary prorations and reserves. A portion of the consideration was deferred
until stabilization of one community (Summit Las Palmas) which was in lease-up
at the time of the acquisition of the Ewing Portfolio. The Summit Las Palmas
purchase was closed on December 31, 1998 with the additional consideration of
(i) 1,065,627 shares of Common Stock and 36,629 Units valued at $19.8 million
in aggregate and (ii) cash in the amount of approximately $600,000.

On December 16, 1998, the Company (i) sold five communities (the "Sold
Communities") to Hollow Creek, LLC., a newly-formed North Carolina limited
liability company for approximately $68 million and (ii) contributed two
communities with an approximate value of $22 million (together with the Sold
Communities, the "Joint Venture Communities") to Station Hill, LLC., a
newly-formed North Carolina limited liability company (the "LLC"). On the same
date, Hollow Creek, LLC contributed the Sold Communities to the LLC. The LLC is
a joint venture limited liability company, the membership of which is comprised
of the Company and a wholly owned subsidiary of a major financial services
company (the "Joint Venture Member"). The disposition was effected pursuant to
a Real Estate Sale Agreement dated November 20, 1998 between the Operating
Partnership and the Joint Venture Member and pursuant to the Operating
Agreement of the LLC, also dated November 20, 1998. The Company's net
contribution to the LLC (approximately $5.6 million) represents a 25 percent

52
<PAGE>

8. ACQUISITIONS AND DISPOSITIONS -- (Continued)

equity interest in the LLC. In addition, the Company is the managing member of
the LLC and will also retain management of the Joint Venture Communities
through a management agreement with the LLC. The cash flow of the LLC will be
distributed pro rata to each member based on its equity contribution until
certain economic benchmarks are achieved, at which point the Company will
receive an escalated portion of the cash flow and residual interest. The LLC
has obtained five separate mortgages totaling $70,150,000 from Fannie Mae.
These mortgages have a ten-year maturity and a 6.70% interest rate. The
proceeds of the mortgages were distributed on a pro rata basis to the LLC's two
members. The Joint Venture Communities involved in the transaction were Summit
Green, Summit Hollow I and II and Summit Creek in Charlotte, North Carolina;
Summit Hill I and II in Raleigh, North Carolina and Summit Station in Tampa,
Florida. The Joint Venture Communities include 1,433 apartment homes. The
Company recognized a gain of approximately $20.2 million on the disposition.
The gain is net of $5.6 million elimination of gain relative to the Company's
retained portion of the joint venture. The elimination of the gain reduced the
Company's investment in the joint venture to zero at the initial joint venture
formation.

Proceeds from the sale of Summit Springs, Summit Old Town and the Sold
Communities were put in escrow with a qualified intermediary in accordance with
like-kind exchange income tax rules and regulations. These proceeds will be
used to fund future developments.

The following summary of selected unaudited pro forma results of
operations presents information as if the Atlanta Acquisitions and the Ewing
Portfolio purchase (except Summit Las Palmas) had occurred as of January 1,
1998 for the 1998 pro forma information. Pro forma information for 1998
excludes Las Palmas as it was in construction and lease-up and had
insignificant operations. Pro forma information for the year ended December 31,
1997 presents information as if the Summit Lenox and the Ewing Portfolio
acquisitions (except for Summit Las Palmas) had occurred as of January 1, 1997.
Pro forma information for 1997 has not been presented for Summit St. Clair,
Summit Club at Dunwoody and Summit Las Palmas as they were under construction
during the period and had insignificant operations. The pro forma information
for the year ended December 31, 1998 and 1997 is provided for informational
purposes only and is not indicative of results that would have occurred or
which may occur in the future (dollars in thousands except per share amounts):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1998 1997
------------- -------------
<S> <C> <C>
Net revenues ................................ $ 166,308 $ 140,570
========= =========
Income before extraordinary items ........... $ 53,457 $ 22,893
========= =========
Net income .................................. $ 52,949 $ 22,893
========= =========
Earnings per share:
Income before extraordinary items ......... $ 2.11 $ 0.97
========= =========
Net income ................................ $ 2.09 $ 0.97
========= =========
</TABLE>

9. NOTES RECEIVABLE FROM EMPLOYEES

On September 8, 1997, the Board of Directors approved a Statement of
Company Policy, which has subsequently been amended and restated by the Board,
on loans to executive officers and certain key employees relating to purchases
of Common Stock (the "Loan Program"). Pursuant to the Loan Program, the Company
may lend amounts to certain of the Company's executive officers and certain of
its key employees for one or more of the following purposes: (i) to finance the
purchase of Common Stock of the Company (a) by certain executive officers on
the open market at the then-current market prices and (b) by other eligible
employees through the Company's 1996 Non-Qualified Employee Stock Purchase
Plan; (ii) to finance an executive officer's or key employee's payment of the
exercise price of one or more stock options to purchase shares of Common Stock
granted to such employees under the Company's 1994 Stock Option Plan; or (iii)
to finance the annual tax liability of certain executive officers related to
the vesting of shares of Common Stock which constitute a portion of a
restricted stock award granted to such employees under the 1994 Stock Option
Plan. The maximum aggregate amount the Company may loan to an executive officer
is $500,000, unless otherwise determined on a case-by-case basis by the Board
of Directors or the Compensation Committee thereof, and the maximum aggregate
amount the Company may loan to a qualified employee other than executive
officers is $100,000. Shares of Common Stock which are the subject of a loan
serve as collateral for the notes until the notes have been paid in full. Each
note bears interest at the applicable federal rate, as established by the
Internal Revenue Service, in effect on the date of the note. The notes are
payable through the application to the outstanding loan balance of all
dividends and distributions related to the collateral stock, first to interest,
with

53
<PAGE>

9. NOTES RECEIVABLE FROM EMPLOYEES -- (Continued)

the remainder, if any, to outstanding principal. Each note becomes due and
payable in full on the tenth anniversary of the respective note. As of December
31, 1998, the Company had issued loans in the net amount of $2,476,000.

10. COMMITMENTS

The estimated cost to complete nine development projects currently under
construction was approximately $82.3 million at December 31, 1998. Anticipated
construction completion dates of the projects range from the first quarter of
1999 to the second quarter of 2000.

The Company rents office space in several locations. Rental expense for
the years ended December 31, 1998, 1997 and 1996 amounted to $121,000, $101,000
and $109,000, respectively ($406,000 in 1998, $347,000 in 1997 and $376,000 in
1996 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>
1999 ................... $ 603
1998 ................... 310
2001 ................... 185
2002 ................... 100
2003 ................... 77
------
$1,275
======
</TABLE>

The Company has employment agreements with all four executive officers.
One of the agreements with the executive officers originally provided for a
term through February 15, 1999 unless otherwise extended and permitted
termination by the executive officer after giving 180 days prior written
notice, without breaching such agreements. This agreement has been replaced
with an employment agreement providing for termination without cause by either
the executive officer or the Company upon 90 days notice. Two of the employment
agreements with the executive officers originally provided for terms through
February 16, 1996 and December 5, 1998, with automatic extension thereof until
such time as terminated pursuant to the terms of such employment agreement.
Both of these agreements remain in effect. The remaining employment agreement
with the executive officers provides for a term through July 1, 2001, with
automatic one year extensions thereof, until terminated pursuant to the terms
of such employment agreement.

All four of the executive officers have non-competition agreements with
the Company. One of these agreements originally prohibited the executive
officer 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. That non-competition
agreement has been replaced with an agreement which provides that the
non-competition provision terminates one year from the date of the agreement.
The non-competition agreements for all the executives include (i) provisions
prohibiting the hiring or attempted hiring of employees of the Company for two
years after termination of employment and (ii) provisions prohibiting the
appropriation or attempted appropriation of projects and trade secrets of the
Company for one year after termination of employment.

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.

11. 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 $242,000, $217,000 and $223,000 were made for
the years ended December 31, 1998, 1997 and 1996, respectively.

54
<PAGE>

11. EMPLOYEE BENEFIT PLANS -- (Continued)

STOCK OPTION PLAN

In 1994, the Company established the 1994 Stock Option and Incentive Plan
under which 1,000,000 shares of the Company's Common Stock were 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, 1998 is as follows:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
------------ -----------------
<S> <C> <C>
Outstanding at December 31, 1995 ..... 539,100 $ 18.64
YEAR ENDED DECEMBER 31, 1996
Granted to employees ............... 28,000 19.30
Exercised .......................... (15,073) 19.04
Forfeited .......................... (53,381) 19.22
-------
Outstanding at December 31, 1996 .. 498,646 18.60
YEAR ENDED DECEMBER 31, 1997
Exercised .......................... (45,900) 18.55
Forfeited .......................... (36,350) 17.74
-------
Outstanding at December 31, 1997 .. 416,396 18.86
YEAR ENDED DECEMBER 31, 1998
Granted to employees ............... 191,000 19.19
Exercised .......................... (45,000) 19.00
Forfeited .......................... (15,000) 19.03
-------
Outstanding at December 31, 1998 .. 547,396 18.80
=======
</TABLE>

Exercise prices for options outstanding as of December 31, 1998 ranged
from $17.13 to $20.75. The weighted average remaining contractual life of those
options is 6.9 years.

As of December 31, 1998, 1997 and 1996 options to purchase 369,528,
359,218 and 283,228 shares, respectively, of Common Stock were exercisable. The
weighted average exercise price for the shares exercisable as of December 31,
1998, 1997 and 1996 was $18.84, $18.86 and $18.36, respectively.

The estimated weighted average fair value of options granted were $2.18
per share in 1998 and $2.10 per share in 1996 (none granted in 1997). The
Company applies Accounting Principles 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,
1998 and 1996 would have changed to the pro forma amounts indicated below
(dollars in thousands except per share amounts):

<TABLE>
<CAPTION>
1998 1996
------------ ----------
<S> <C> <C>
Pro forma net income ............................... $ 55,958 $16,898
Pro forma net income per share -- basic and diluted 2.24 .89
</TABLE>

The fair value of options granted during 1998 were estimated on the date
of grant using the Binomial option-pricing model with the following weighted
average assumptions: dividend yield of 9.3%, expected volatility of 20%, risk
free interest rate of 6.0%, and expected lives of ten years.

The fair value of options granted in 1996 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 ten years.

In addition, the plan provides for the issuance of stock grants to
employees. The Company granted 8,372 shares of restricted stock under the plan
in 1998. The market value of the restricted stock totaled $162,000, 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. Restricted stock of
26,528 shares with a market

55
<PAGE>

11. EMPLOYEE BENEFIT PLANS -- (Continued)

value of $546,000 were granted in the year ended December 31, 1997. Restricted
stock of 56,046 shares with a market value of $1.0 million were granted in the
year ended December 31, 1996. The Company recognized $314,000, $292,000 and
$223,000 of expense in the statement of earnings in the years ended December
31, 1998, 1997 and 1996, respectively, relative to the stock grants.

PERFORMANCE STOCK AWARD PLAN

In January, 1998 the Company agreed to award key employees of the Company
certain amounts of Common Stock under the Company's Performance Stock Award
Plan. The amount of Common Stock to be granted to the key employees is based
upon the Company's average annual return (share appreciation and distributions)
from the date of the award to the third anniversary of the award. The number of
shares to be granted under the performance Stock Award Plan ranges from none
(in the event the Company achieves less than a 11% average annual return) to
147,713 (in the event the Company achieves a 15% or greater annual return). The
starting Common Stock price for the purposes of calculating appreciation was
$21.375 (fair market value at date of award). The Company's stock price at the
end of the year is below the starting price for calculating the number of
grants, accordingly, no compensation cost was recognized in 1998.

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 (with
certain executive officers limited to $25,000) 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 1998, 1997 and 1996 were
65,541, 62,117 and 44,362 with a market value of $1.3 million, $1.3 million and
$871,000, respectively. An additional 65,730 shares with a market value of $1.1
million were issued in January, 1999 under the plan. The Company recognized
$203,000, $265,000 and $151,000 of expense in the statement of earnings in the
years ended December 31, 1998, 1997 and 1996, respectively, relative to the
employee stock purchase plan.

12. DIVIDEND REINVESTMENT AND DIRECT STOCK PURCHASE PLAN

In November 1997, the Company replaced its existing dividend reinvestment
plan with a new dividend reinvestment and direct stock purchase plan ("the
Plan"). The Plan provides both new investors and existing shareholders of the
Company's stock (including Common Stock and other classes of outstanding stock)
with a method to purchase shares of Common Stock under the Stock Purchase
Program of the Plan. The Plan also permits shareholders to designate all, a
portion or none of the cash dividends on their newly purchased Common Stock and
cash dividends on their existing stock for reinvestment in more shares of
Common Stock through the Dividend Reinvestment Program of the Plan. With
respect to reinvested dividends and optional cash payments, shares of Common
Stock will be purchased for the Plan at a discount ranging from 0% to 5%
(established by the Company from time to time) from the market price, as more
fully described in the Prospectus relating to the Plan. Common Stock will be
purchased by the Plan's Agent (First Union National Bank) directly from the
Company or in open market or privately negotiated transactions, as determined
from time to time by the Company, to fulfill requirements for the Plan. At
present, the Company expects that shares usually will be purchased directly
from the Company. On December 31, 1998 and 1997, the Company received $9.5
million and $6.5 million under the plan for shares to be issued January 2, 1999
and 1998, respectively. These proceeds are included in accounts payable and
accrued expenses at December 31, 1998 and 1997, respectively.

13. SHAREHOLDER RIGHTS AGREEMENT

On December 14, 1998, the Board of Directors adopted a shareholder rights
agreement (the "Rights Plan"). In connection with the adoption of the Rights
Plan, the Board of Directors declared a dividend distribution of one preferred
stock purchase right (a "Right") for each outstanding share of common stock to
stockholders of record as of the close of business on December 15, 1998.
Currently, these Rights are not exercisable and trade with the shares of the
Company's Common Stock. Under the Rights Plan, the Rights generally become
exercisable if a person becomes an "acquiring person" by acquiring 15% or more
of the Company's Common Stock, or if a person commences a tender offer that
would result in that person owning 15% or more of the Company's Common Stock.
In the event that a person becomes an "acquiring person,"each holder of a Right
(other than the acquiring person) would be entitled to acquire such number of
units of preferred stock (which are equivalent to shares of the Company's
Common Stock) having a value of twice the exercise price of the Right.

56
<PAGE>

13. SHAREHOLDER RIGHTS AGREEMENT -- (Continued)

If the Company is acquired in a merger or other business combination
transaction after any such event, each holder of a Right would then be entitled
to purchase, at the then-current exercise price, shares of the acquiring
company's common stock having a value of twice the exercise price of the Right.
The current exercise price per Right is $45.00.

The Rights will expire at the close of business on December 14, 2008 (the
"Expiration Date"), unless previously redeemed or exchanged by the Company as
described below. The Rights may be redeemed in whole, but not in part, at a
price of $0.01 per Right (payable in cash, shares of the Company's Common Stock
or other consideration deemed appropriate by the Board of Directors) by the
Board of Directors only until the earlier of (i) the time at which any person
becomes an "acquiring person" or (ii) the Expiration Date. At any time after
any person becomes an "acquiring person," the Board of Directors may, at its
option, exchange all or any part of the then outstanding and exercisable Rights
for shares of the Company's Common Stock at an exchange ratio specified in the
Rights Plan. Notwithstanding the foregoing, the Board of Directors generally
will not be empowered to effect such exchange at any time after any person
becomes the beneficial owner of 50% or more of the Company's Common Stock.

Until a Right is exercised, the holder will have no rights as a
stockholder of the Company (beyond those as an existing stockholder), including
the right to vote or to receive dividends.

In connection with the establishment of the Rights Plan, the Board of
Directors approved the creation of Preferred Stock of the Company designated as
Series A Junior Participating Cumulative Preferred Stock with a par value of
$0.01 per share. The Board also reserved 350,000 shares of preferred stock for
issuance upon exercise of the Rights.

14. BUSINESS SEGMENTS

Effective December 31, 1998, the Company adopted Financial Accounting
Standards Board (FASB) Statement No. 131, Disclosures about Segments of an
Enterprise and Related Information (FAS 131). FAS 131 established standards for
the way public enterprises report information about operating segments in
annual financial statements. FAS 131 also established standards for related
disclosures about products and services, geographic areas and major customers.
The adoption of FAS 131 did not affect the Company's results of operations or
financial position.

The Company develops and operates luxury garden apartments. The Company
only develops apartments for its own use with no development work done for
outside third parties. In addition, all the apartments the Company operates are
considered "Class A" apartments. Accordingly, there are no product or industry
segments within the Company. The Company uses Funds from Operations ("FFO") as
a performance measure. The Company computes FFO in accordance with the
definition approved by the National Association of Real Estate Investments
Trusts. Information for the apartment communities is summarized below:

<TABLE>
<CAPTION>
1998 1997
------------------------------------------ -------------------------------------
Apartment Corporate/ Apartment Corporate/
Operations Other Total Operations Other Total
-------------- ------------ -------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Rental and other
property income $ 145,656 $ -- $ 145,656 $ 116,006 $ -- $ 116,006
Interest and other income -- 1,913 1,913 -- 671 671
---------- -------- ---------- --------- -------- ---------
Total income 145,656 1,913 147,569 116,006 671 116,677

Property operating expense 51,550 -- 51,550 42,032 -- 42,032
Interest -- 33,506 33,506 -- 21,959 21,959
General and administrative -- 3,861 3,861 -- 2,740 2,740
Depreciation -- other -- 82 82 -- 19 19
(Income) loss on equity
investments -- 328 328 -- (274) (274)
---------- -------- ---------- --------- -------- ---------
Total operating expenses 51,550 37,777 89,327 42,032 24,444 66,476
Funds from Operations 94,106 (35,864) 58,242 73,974 (23,773) 50,201
Depreciation -- apartments (28,915) -- (28,915) (22,633) -- (22,633)
Gain on sale of assets 37,148 -- 37,148 4,366 -- 4,366
Extraordinary items -- (508) (508) -- -- --
Minority interest of unitholders
in Operating Partnership -- (9,592) (9,592) -- (4,818) (4,818)
---------- -------- ---------- --------- -------- ---------
Net income $ 102,339 ($ 45,964) $ 56,375 $ 55,707 ($ 28,591) $ 27,116
========== ======== ========== ========= ======== =========
Capital investment (1) $ 407,190 $ 300 $ 407,490 $ 215,390 $ 100 $ 215,490
========== ======== ========== ========= ======== =========
Assets $1,196,139 $ 2,525 $1,198,664 $ 822,872 $ 2,421 $ 825,293
========== ======== ========== ========= ======== =========

<CAPTION>
1996
---------------------------------------
Apartment Corporate/
Operations Other Total
------------ ------------- ------------
<S> <C> <C> <C>
Rental and other
property income $ 93,547 $ -- $ 93,547
Interest and other income -- 942 942
--------- -------- ---------
Total income 93,547 942 94,489

Property operating expense 35,226 -- 35,226
Interest -- 17,138 17,138
General and administrative -- 2,557 2,557
Depreciation -- other -- 4 4
(Income) loss on equity
investments -- 173 173
--------- -------- ---------
Total operating expenses 35,226 19,872 55,098
Funds from Operations 58,321 (18,930) 39,391
Depreciation -- apartments (18,204) -- (18,204)
Gain on sale of assets -- -- --
Extraordinary items -- (516) (516)
Minority interest of unitholders
in Operating Partnership -- (3,723) (3,723)
--------- -------- ---------
Net income $ 40,117 ($ 23,169) $ 16,948
========= ======== =========
Capital investment (1) $ 120,507 $ 4 $ 120,511
========= ======== =========
Assets $ 633,566 $ 1,425 $ 634,991
========= ======== =========
</TABLE>

(1) Capital investment includes costs during the year of the Company's
developments and acquisitions as well as capital expenditures on existing
properties.

57
<PAGE>

15. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the years ended December
31, 1998, 1997 and 1996 are as follows:

A. The Company purchased the Atlanta Acquisitions and the Ewing Portfolio
by issuing 438,421 Units, issuing 2,074,615 shares of Common Stock,
assuming mortgage notes, assuming certain liabilities and the payment
of cash. The recording of the purchases is summarized as follows (in
thousands):

<TABLE>
<S> <C>
Fixed Assets .................................... $ 267,991
Restricted Cash ................................. 1,713
Current liabilities assumed ..................... (6,327)
Mortgage notes assumed .......................... (92,761)
Value of Operating Partnership Units issued ..... (8,427)
Value of Common Stock issued .................... (37,343)
---------
Cash invested ................................... $ 124,846
=========
</TABLE>

B. The Company disposed of eight communities during 1998 for net proceeds
of approximately $130.6 million. $116.5 million of the sales proceeds
were deposited with a qualified intermediary in accordance with
like-kind exchange income tax rules and regulations. Of the proceeds,
$17.6 million was used to fund the acquisition of an apartment
community, while an additional $12.6 million was used to purchase land
and fund certain development projects. The remaining $86.3 million held
by the qualified intermediary is shown in the balance sheet caption
"Restricted Cash" and will be used to fund the acquisition of other
like-kind property.

C. In the year ended December 31, 1997, the Company purchased five
communities (Summit Mayfaire, Summit Portofino, Summit Sand Lake,
Summit Windsor II and Summit Fair Oaks). The Company completed the
purchase of the five communities by assuming debt, issuing 194,495
Operating Partnership Units, issuing 243,608 shares of Common Stock,
assuming certain liabilities and current assets, and the payment of
cash. The recording of the purchases is summarized as follows (in
thousands):

<TABLE>
<S> <C>
Fixed Assets .................................... $ 104,469
Current Assets .................................. 30
Debt Assumed .................................... (15,226)
Current liabilities assumed ..................... (1,531)
Value of Operating Partnership Units issued ..... (3,939)
Value of Common Stock issued .................... (4,933)
---------
Cash invested ................................... $ 78,870
=========
</TABLE>

D. 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>

E. The Company issued 8,372, 26,528 and 52,086 (net of 3,960 shares
retired) of restricted stock grants in 1998, 1997 and 1996 valued at
$162,000, $546,000 and $1.0 million, respectively.

F. The Company accrued a dividend and distribution payable of $12.7
million, $11.0 million and $10.2 million at December 31, 1998, 1997 and
1996, respectively.

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

58
<PAGE>

16. FAIR VALUE DISCLOSURE AND MARKET RISK 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, 1998 and 1997.

Fixed rate mortgage debt and fixed rate unsecured notes with a carrying
value of $520.9 million have an estimated aggregate fair value of approximately
$521.0 million at December 31, 1998. Fixed rate mortgage debt and unsecured
notes with a carrying value of $400 million have an estimated aggregate fair
value of approximately $399.4 at December 31, 1997. 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, 1998 and 1997. 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.

The fair market value of long-term fixed rate debt is subject to changes
in interest rates. Generally, the fair market value of fixed interest rate debt
will increase as interest rates fall and decrease as interest rates rise. The
estimated fair value of the Company's total fixed rate long-term debt at
December 31, 1998 was $521.0 million. A 1% increase from prevailing interest
rates at December 31, 1998 would result in a decrease in fair value of
long-term debt by approximately $25.7 million. Fair values were determined from
quoted market prices, where available, and from information received from
investment advisors using current interest rates considering credit ratings and
remaining terms to maturity.

17. GEOGRAPHIC CONCENTRATION

The Company's completed communities are concentrated in four major regions
as follows:

<TABLE>
<CAPTION>
NUMBER OF APARTMENT 1998
APARTMENT HOMES -- % % OF
MARKET HOMES OF PORTFOLIO REVENUES
- ----------------------------------------------- ----------- -------------- ---------
<S> <C> <C> <C>
I-85 Corridor (Raleigh, NC to Atlanta, GA) 6,493 37% 36%
Central/South Florida ..................... 4,249 24% 30%
Washington, DC/Virginia ................... 3,405 19% 23%
Texas ..................................... 2,017 12% 2%
Other ..................................... 1,389 8% 9%
----- --- ---
17,553 100% 100%
====== === ===
</TABLE>

The above table does not include Summit Las Palmas (448 apartment homes),
which was acquired on December 31, 1998 and therefore had no rental operations.
In addition, the properties in Texas were acquired in the fourth quarter of
1998.

59
<PAGE>

18. REAL ESTATE AND ACCUMULATED DEPRECIATION
Real estate and accumulated depreciation by apartment community consisted
of the following at December 31, 1998 (dollars in thousands):

GROSS AMOUNT AT WHICH
INITIAL COSTS CARRIED AT CLOSE OF PERIOD
---------------------------- COSTS ---------------------------------------
CAPITALIZED
BUILDINGS SUBSEQUENT BUILDINGS
RELATED AND TO AND
APARTMENTS ENCUMBRANCES LAND IMPROVEMENTS(6) ACQUISITION LAND IMPROVEMENTS(6) TOTAL(1)
- ------------------------- --------------- ---------- ----------------- ------------ ---------- ----------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Summit Arbors ........... $ 780 $ 5,066 $ 342 $ 780 $ 5,408 $ 6,188
Summit Aventura ......... 6,367 25,291 6,368 25,289 31,658
Summit Ballantyne I ..... 2,060 14,431 2,064 14,427 16,491
Summit Ballantyne II .... 1,268 8,974 1,268 8,974 10,242
Summit Beacon Ridge ..... 1,053 5,912 1,154 5,811 6,965
Summit Belcourt ......... $9,708 3,600 16,778 3,600 16,778 20,378
Summit Belmont .......... (4) 974 11,159 984 11,149 12,133
Summit Blue Ash ......... (2) 2,033 11,882 2,169 11,746 13,915
Summit Breckenridge ..... 812 12,188 812 12,188 13,000
Summit Buena Vista ...... 25,779 4,670 30,499 1 4,670 30,500 35,170
Summit Camino Real ...... 3,640 22,210 3,640 22,210 25,850
Summit Club @ Dunwoody... 2,934 24,510 4 2,934 24,510 27,444
Summit Creekside ........ 414 3,614 464 414 4,077 4,492
Summit Crossing ......... 4,106 768 5,174 313 768 5,487 6,255
Summit Del Ray .......... (2) 3,120 14,987 5,402 12,705 18,107
Summit East Ridge ....... 5,042 900 6,303 325 910 6,618 7,528
Summit Eastchester ...... 912 4,699 350 912 5,048 5,961
Summit Fair Oaks ........ 4,356 17,215 37 4,356 17,252 21,608
Summit Fairview ......... 404 5,044 537 4,911 5,448
Summit Fairways ......... 2,819 15,164 2,819 15,164 17,982
Summit Foxcroft ......... 2,663 925 3,797 516 925 4,312 5,238
Summit Gateway .......... (4) 1,738 10,570 2,256 10,051 12,308
Summit Glen ............. (2) 3,652 12,955 3,693 12,915 16,607
Summit Hampton .......... (4) 2,577 13,480 2,972 13,085 16,057
Summit Heron's Run ...... (2) 3,154 10,864 3,192 10,827 14,018
Summit Highland ......... (2) 1,374 6,319 1,374 6,319 7,693
Summit Lake ............. 1,712 18,477 1,712 18,477 20,189
Summit Las Palmas ....... 4,480 25,504 4,480 25,504 29,984
Summit Lenox ............ 10,800 22,997 69 10,800 23,066 33,866
Summit Lofts ............ 1,800 7,337 748 1,800 8,085 9,885
Summit Los Arboles ...... 20,240 4,080 24,403 1 4,080 24,404 28,484
Summit Mayfaire ......... 936 8,897 21 936 8,918 9,854
Summit McIntosh ......... 1,862 10,258 1,943 10,177 12,120
Summit Meadow ........... (2) 2,313 8,592 2,539 8,366 10,905
Summit New Albany ....... 2,693 21,649 2,693 21,649 24,342
Summit Norcroft I ....... (2) 1,072 7,417 1,253 7,236 8,489
Summit Norcroft II ...... 381 3,125 381 3,125 3,506
Summit Oak .............. 2,519 400 3,065 127 400 3,192 3,592
Summit On the River ..... 3,212 20,994 3,212 20,993 24,206
Summit Palm Lake ........ (2) 4,949 16,930 5,084 16,795 21,879
Summit Park ............. 1,680 11,176 1,921 10,934 12,856
Summit Perico ........... (2) 1,588 12,126 2,174 11,540 13,714
Summit Pike Creek ....... (4) 1,132 12,522 1,259 12,395 13,654
Summit Plantation ....... 3,428 18,485 40 3,428 18,525 21,953
Summit Plantation II .... 4,012 17,239 4,012 17,239 21,251
Summit Portofino ........ 3,864 24,504 233 3,864 24,737 28,601
Summit Radbourne ........ 8,507 1,395 12,607 649 1,395 13,256 14,651
Summit Reston ........... 5,434 26,255 573 5,434 26,828 32,262
Summit River Crossing ... 2,562 16,736 2,636 16,661 19,297
Summit Russett .......... 3,995 19,223 3,995 19,223 23,218
Summit Sand Lake ........ 14,679 4,160 22,979 145 4,160 23,124 27,284
Summit Sedgebrook ....... 1,696 14,735 1,719 14,712 16,431
Summit Sherwood ......... 3,274 1,102 4,863 152 1,106 5,011 6,117
Summit Simsbury ......... (3) 650 4,570 406 650 4,976 5,626
Summit Square ........... (2) 2,757 15,683 3,775 14,665 18,440
Summit St. Clair ........ (2) 3,024 24,040 7 3,024 24,048 27,071
Summit Stonefield ....... 3,541 16,160 3,541 16,161 19,701

<CAPTION>
DEPRECIABLE
ACCUMULATED DATE OF DATE LIVES
APARTMENTS DEPRECIATION CONSTRUCTION ACQUIRED YEARS
- ------------------------- -------------- ---------------- ---------- ------------
<S> <C> <C> <C> <C>
Summit Arbors ........... $ (776) 1986(5) 5/95 5-40 years
Summit Aventura ......... (2,638) 6/94-12/95 12/93 5-40 years
Summit Ballantyne I ..... (624) 7/96 12/97 12/95 5-40 years
Summit Ballantyne II .... (106) 8/97 12/98 12/95 5-40 years
Summit Beacon Ridge ..... (2,081) 1/88-7/88 1/88 5-40 years
Summit Belcourt ......... (88) 1994(5) 11/98 5-40 years
Summit Belmont .......... (4,282) 1/86-5/87 1/86 5-40 years
Summit Blue Ash ......... (2,789) 1/92-5/92 1/91 5-40 years
Summit Breckenridge ..... (4,732) 7/85-5/87 6/85 5-40 years
Summit Buena Vista ...... (161) 1996(5) 11/98 5-40 years
Summit Camino Real ...... (117) 1998(5) 11/98 5-40 years
Summit Club @ Dunwoody... (456) 1997(5) 5/98 5-40 years
Summit Creekside ........ (625) 1981(5) 5/95 5-40 years
Summit Crossing ......... (823) 1985(5) 5/95 5-40 years
Summit Del Ray .......... (3,050) 1/92-2/93 1/92 5-40 years
Summit East Ridge ....... (963) 1986(5) 6/95 5-40 years
Summit Eastchester ...... (852) 1981(5) 5/95 5-40 years
Summit Fair Oaks ........ (660) 1990(5) 12/97 5-40 years
Summit Fairview ......... (2,216) 3/82-3/83 3/82 5-40 years
Summit Fairways ......... (1,165) 9/95-12/96 8/95 5-40 years
Summit Foxcroft ......... (699) 1979(5) 5/95 5-40 years
Summit Gateway .......... (3,606) 1/86-1/87 12/85 5-40 years
Summit Glen ............. (3,003) 5/90-8/92 4/90 5-40 years
Summit Hampton .......... (5,026) 11/86-3/88 10/86 5-40 years
Summit Heron's Run ...... (3,147) 7/89-10/90 6/89 5-40 years
Summit Highland ......... (2,637) 3/86-1/87 11/85 5-40 years
Summit Lake ............. (548) 9/96-5/98 4/96 5-40 years
Summit Las Palmas ....... 1998(5) 12/98 5-40 years
Summit Lenox ............ (430) 1965(5) 7/98 5-40 years
Summit Lofts ............ (1,724) 1990(5) 10/94 5-40 years
Summit Los Arboles ...... (135) 1996(5) 11/98 5-40 years
Summit Mayfaire ......... (586) 1995(5) 1/97 5-40 years
Summit McIntosh ......... (3,185) 7/89-6/90 1/89 5-40 years
Summit Meadow ........... (2,571) 8/89-8/90 2/89 5-40 years
Summit New Albany ....... (149) 5/97-12/98 11/96 5-40 years
Summit Norcroft I ....... (2,063) 2/90-3/91 12/89 5-40 years
Summit Norcroft II ...... (110) 3/97-11/97 8/96 5-40 years
Summit Oak .............. (502) 1982(5) 5/95 5-40 years
Summit On the River ..... (1,382) 8/95-6/97 10/94 5-40 years
Summit Palm Lake ........ (4,419) 3/90-2/92 1/90 5-40 years
Summit Park ............. (3,706) 4/88-4/89 1/88 5-40 years
Summit Perico ........... (3,479) 1/89-2/90 8/88 5-40 years
Summit Pike Creek ....... (4,073) 11/86-2/88 4/86 5-40 years
Summit Plantation ....... (1,623) 1/94-7/95 4/96 5-40 years
Summit Plantation II .... (686) 10/96-11/97 9/96 5-40 years
Summit Portofino ........ (1,559) 1995(5) 1/97 5-40 years
Summit Radbourne ........ (1,565) 1991(5) 5/95 5-40 years
Summit Reston ........... (1,977) 1987(5) 4/94 5-40 years
Summit River Crossing ... (1,514) 3/95-9/96 10/94 5-40 years
Summit Russett .......... (989) 7/95-9/97 11/94 5-40 years
Summit Sand Lake ........ (1,584) 1995(5) 2/97 5-40 years
Summit Sedgebrook ....... (543) 6/96-12/97 1/96 5-40 years
Summit Sherwood ......... (836) 1968(5) 5/95 5-40 years
Summit Simsbury ......... (724) 1985(5) 5/95 5-40 years
Summit Square ........... (4,063) 3/89-8/90 2/89 5-40 years
Summit St. Clair ........ (621) 1997(5) 3/98 5-40 years
Summit Stonefield ....... (618) 6/96-3/98 3/96 5-40 years
</TABLE>

60
<PAGE>

18. REAL ESTATE AND ACCUMULATED DEPRECIATION -- (Continued)

INITIAL COSTS COSTS
----------------------------- CAPITALIZED
BUILDINGS SUBSEQUENT
RELATED AND TO
APARTMENTS ENCUMBRANCES LAND IMPROVEMENTS(6) ACQUISITION
- --------------------------- --------------- ----------- ----------------- ------------
<S> <C> <C> <C> <C>
Summit Stony Point ........ (4) 1,638 13,041 464
Summit Touchstone ......... (3) 766 5,568 307
Summit Turtle Cove ........ 17,073 3,480 19,775
Summit Turtle Rock ........ 11,001 2,500 14,074 1
Summit Village ............ (2) 3,212 14,142
Summit Walk ............... 568 237 5,534
Summit Waterford .......... (2) 1,568 14,459
Summit Windsor I .......... (2) 644 6,627
Summit Windsor II ......... (2) 3,060 14,497 111
----- ------ ------
Total ..................... $161,450 $437,564 $469,427
======== ======== ========

<CAPTION>
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
-------------------------------------------
BUILDINGS DEPRECIABLE
AND ACCUMULATED DATE OF DATE LIVES
APARTMENTS LAND IMPROVEMENTS(6) TOTAL(1) DEPRECIATION CONSTRUCTION ACQUIRED YEARS
- --------------------------- ----------- ----------------- ------------- -------------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Summit Stony Point ........ 1,638 13,504 15,143 (2,756) 1986(5) 2/94 5-40 years
Summit Touchstone ......... 766 5,875 6,641 (855) 1986(5) 5/95 5-40 years
Summit Turtle Cove ........ 3,480 19,775 23,255 (108) 1996(5) 11/98 5-40 years
Summit Turtle Rock ........ 2,500 14,075 16,575 (80) 1995(5) 11/98 5-40 years
Summit Village ............ 3,653 13,701 17,354 (3,891) 9/89-1/91 8/89 5-40 years
Summit Walk ............... 983 5,356 6,339 (1,053) 4/92-2/93 4/92 5-40 years
Summit Waterford .......... 1,949 14,078 16,027 (4,241) 1/89-6/90 11/88 5-40 years
Summit Windsor I .......... 969 6,302 7,271 (2,071) 8/88-8/89 3/95 5-40 years
Summit Windsor II ......... 3,060 14,608 17,668 (851) 1988(5) 7/97 5-40 years
----- ------ ------ ------
Total ..................... $169,374 $899,058 $1,068,435 $ (114,196)
======== ======== ========== ==========
</TABLE>

- ---------
(1) The aggregate cost for federal income tax purposes at December 31, 1998 is
$ 944.9 million.

(2) Encumbered by fixed rate mortgages of $146.7 million.

(3) Encumbered by fixed rate mortgage of $8.5 million.

(4) Collateral for $52.9 million of letters of credit which serve as collateral
for $51.8 million in tax exempt bonds.

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

(6) Includes furniture, fixtures and equipment.

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
-------------- ------------ -----------
<S> <C> <C> <C>
REAL ESTATE ASSETS (1):
Balance at beginning of year ......... $ 830,068 $618,102 $524,772
---------- -------- --------
Acquisitions ......................... 267,991 104,469 21,913
Improvements ......................... 9,804 9,823 4,780
Developments ......................... 74,559 104,897 66,637
Disposition of property .............. (113,987) (7,223) --
---------- -------- --------
238,367 211,966 93,330
---------- -------- --------
Balance at end of year ............... $1,068,435 $830,068 $618,102
========== ======== ========
ACCUMULATED DEPRECIATION (1):
Balance at beginning of year ......... $ 105,313 $ 85,031 $ 66,978
Depreciation ......................... 28,733 22,610 18,053
Disposition of property .............. (19,850) (2,328) --
---------- -------- --------
Balance at end of year ............... $ 114,196 $105,313 $ 85,031
========== ======== ========
</TABLE>

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

61
<PAGE>

19. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for the years 1998 and 1997 are as follows
(in thousands except per share data):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-------------------------------------------
FIRST SECOND THIRD FOURTH
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues ..................................................... $33,239 $ 34,571 $ 38,256 $ 41,503
Income before gain on sale of real estate assets, minority
interest of unitholders in Operating Partnership and
extraordinary items ......................................... 6,892 7,137 7,892 7,406
Gain on sale of real estate assets ........................... -- 8,731 -- 28,417
Minority interest of unitholders in Operating Partnership .... (995) (2,315) (1,129) (5,153)
Extraordinary items .......................................... (158) -- -- (350)
Net income ................................................... 5,739 13,553 6,763 30,320
Income per share:
Income before extraordinary items -- basic .................. 0.25 0.55 0.27 1.19
Income before extraordinary items -- diluted ................ 0.24 0.55 0.27 1.19
Net income -- basic and diluted ............................. 0.24 0.55 0.27 1.17
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------
FIRST SECOND THIRD FOURTH
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues ................................................. $ 27,249 $ 28,103 $ 30,068 $ 31,257
Income before gain on sale of real estate assets and
minority interest of unitholders in Operating
Partnership ............................................. 6,928 6,856 6,948 6,836
Gain on sale of real estate assets ....................... -- 4,366 -- --
Minority interest of unitholders in Operating Partnership (1,052) (1,729) (1,031) (1,006)
Net income ............................................... 5,876 9,493 5,917 5,830
Net income per share -- basic and diluted ................ 0.26 0.41 0.25 0.25
</TABLE>

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into on
this 1st day of July, 1998, ("Effective Date") by and between STEVEN R.
LEBLANC, 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 President and Chief Operating Officer of Summit Properties Inc.
and Vice 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.

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 Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00)
per annum (the "Base Salary"), which amount shall be subject to adjustment, if
any, in accordance with this ss. 2.1. The Compensation Committee of the Board
(the "Committee") shall review Executive's

<PAGE>

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 Two Hundred Fifty Thousand
and 00/100 Dollars ($250,000.00) 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 ss.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. The Committee has determined that Executive's cash bonus
component of the above executive compensation plan for calendar year 1998 will
be calculated as a percentage of Executive's Base Salary which corresponds to
the actual per share growth in Funds Flow from Operations ("FFO") during the
period from December 31, 1997 to December 31, 1998 as set forth in the following
table:

FFO Growth % 4 5 6 7 8 9 10 11
Cash Bonus as % of Base Salary 30 40 50 60 70 80 90 100

With such cash bonus for 1998 as calculated above then prorated by multiplying
said cash bonus by a fraction, the numerator of which will be the number of days
occurring between the Effective Date and December 31 1998 and the denominator of
which will be 365. Such cash bonus for calendar year 1998 subsequent to
proration as described above shall not be less than Seventy-five thousand
dollars ($75,000.00). The payment of said prorated cash bonus shall be
conditioned upon Executive's continuing employment with the Company through
December 31, 1998. For all years subsequent to 1998, Executives Cash Bonus shall
be determined by the Committee.

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. Executive shall receive $100,000 as complete and total
compensation for any and all relocation costs associated with Executives
relocation to Charlotte, NC. Said $100,000 shall be paid by Company to Executive
no later than five (5) business days after the Effective Date. To the extent
actual relocation costs are less than $100,000 Executive shall retain the
difference between such actual costs and $100,000. To the extent that actual
relocation costs exceed $100,000 Executive shall be responsible for the payment
thereof.

2
<PAGE>
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 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 twenty days. 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
ss. 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 third
anniversary of such date (the "Original Term"). Following the Original Term, the
employment relationship under this Agreement shall automatically continue for
consecutive one-year terms unless and until terminated in accordance with ss.
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

(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

3
<PAGE>

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 ss. 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 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 ss. 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 ss. 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 Voluntary Termination. If Executive's
employment under this Agreement is terminated as a result of a Voluntary
Termination or 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 owned to Executive but is unpaid as of the date on which
Executive's employment is terminated.

<PAGE>

4.2 Termination As Result of No Cause Termination or Employee-Initiated
Termination. If Executive's employment under this Agreement is terminated as a
result of a No Cause Termination or an Employee-Initiated Termination, Executive
shall be entitled to receive (i) any Base Salary which may be owned to Executive
but is unpaid as of the date on which Executive's employment is terminated; (ii)
his Base Salary as in effect on the date of such termination for the period up
to, but not including (I) the later of (a) the third anniversary of the
Effective Date or (b) the first anniversary of the date of Termination or (II)
if Termination occurs later than (a) or (b) above, the later of (x) the end of
the one year term of employment under any extension of this Agreement or (y) the
first anniversary of the date of Termination; and (iii) a bonus amount ("Bonus")
consisting of cash equal to the cash bonus, if any, paid to the Executive
pursuant to ss. 2.2 of this Agreement for the calendar year immediately
preceding the calendar year in which the Termination occurred. The Bonus amount
shall include the cash value of shares of common stock of the Company, if any,
issued in lieu of a portion of the above mentioned cash bonus. The payment of
such Base Salary pursuant to clause (ii) above and Bonus amount pursuant to
clause (iii) above shall be made 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. 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
clauses (i) and (ii) above and Bonus payable to Executive under clause (iii)
above 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 and Bonus 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 and cash bonus which may be owed to Executive but is unpaid as
of the date on which Executive's employment is terminated; (ii) his Base Salary
as in effect on the date of such termination for the period up to, but not
including (I) the later of (a) the third anniversary of the Effective Date or
(b) the first anniversary of the date of Termination or (II) if the above said
Termination occurs later than (a) or (b) above, the later of (x) the end of his
one year term of employment under any extension of this Agreement or (y) the
first anniversary of the date of Termination, and (iii) a bonus amount ("Bonus")
consisting of cash equal to the cash bonus, if any, paid to the Executive
pursuant to of ss. 2.2 of this Agreement for the calendar year immediately
preceding the calendar year in which the Termination occurred. The Bonus amount
shall include the cash value of shares of common stock of the Company, if any,
issued in lieu of a portion of the above mentioned cash bonus. In addition, the
following provisions shall apply:

<PAGE>

(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, 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.

4.5 Special Provision for Terminations on or Prior to December 31,
1998. If Executive's Employment under this Agreement is terminated as a result
of a No-Cause Termination or an Employee Initiated Termination on or prior to
December 31, 1998, Executive shall be entitled to a Bonus amount, under Section
4.2(iii) of this Agreement, of $75,000. If Executive's Employment under this
Agreement is terminated as a result of a Death Termination or Disability
Termination on or prior to December 31, 1998, Executive (or, in the case of a
Death Termination, Executive's Beneficiary as defined in Section 4.2) shall be
entitled to a Bonus amount, under Section 4.3(iii) of this Agreement, of
$75,000.

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

6
<PAGE>

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.

5.3 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 an 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 no such waiver or consent
shall be construed as a waiver of any other provision or as a consent with
respect to any similar instance or circumstance.

5.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.

5.5 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.

5.6 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.

5.7 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:

Steven R. LeBlanc
At last known address as reflected in the Company's
records.

(b) If to the Company, addressed to:

Summit Properties Inc.
212 South Tryon Street, Suite 500
Charlotte, North Carolina 28281

7
<PAGE>

Attn: Michael G. Malone

5.8 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.

5.9 Entire Agreement. This Agreement, together with the Noncompetition
Agreement and Executive Severance Agreement, constitute 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. This Agreement
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: /s/ William F. Paulsen
-----------------------------
Name: William F. Paulsen
Title: President

SUMMIT MANAGEMENT COMPANY

By: /s/ William F. Paulsen
-----------------------------
Name: William F. Paulsen
Title: Vice President

Collectively, the "Company"

/s/ Steven R. LeBlanc (SEAL]
----------------------------------
Steven R. LeBlanc

"Executive"
8

NONCOMPETITION AGREEMENT

THIS NONCOMPETITION AGREEMENT is entered into as of July 1, 1998
("Effective Date") by and between STEVEN R. LEBLANC ("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 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. Company agrees to provide Executive
with a list of all Company Projects within thirty (30) business day of
Executives termination of employment with the Company for any reason.

<PAGE>

"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 Properties Inc., 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 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.

<PAGE>

(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 non-public information remains a
Trade Secret. The term "Trade Secret" as used in this Agreement shall mean
non-public information including, but not limited to, technical or non-technical
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 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 non-public information of the Company
not otherwise included in the definition of "Trade Secret" above. The term
"Confidential and Proprietary non-public 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.

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

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<PAGE>

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. 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.

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<PAGE>

(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.

(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.

<PAGE>

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: /s/ William F. Paulsen
-------------------------------
Name: William F. Paulsen
Title: President

SUMMIT MANAGEMENT COMPANY

By: /s/ William F. Paulsen
-------------------------------
Name: William F. Paulsen
Title: Vice President

/s/ Steven R. LeBlanc [SEAL]
---------------------------------
Steven R. LeBlanc

"Executive"

Executive Severance Agreement

AGREEMENT made as of this lst day of July 1998 by and between Summit
Properties Inc., a Maryland corporation with its principal place of business in
Charlotte, North Carolina (the "Company"), and Steven R. LeBlanc of Atlanta,
Georgia (the "Executive").

1. Purpose. The Company considers it essential to the best interests of
its stockholders to foster the continuous employment of key management
personnel. The Board of Directors of the Company (the "Board") recognizes,
however, that, as is the case with many publicly held corporations, the
possibility of a Change in Control (as defined in Section 2 hereof) exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders. Therefore, the
Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a Change in Control. Nothing in this Agreement shall be construed
as creating an express or implied contract of employment or any right to be
retained in the employ of the Company. The Company and the Executive have
entered into an Employment Agreement dated July 1, 1998 (as such agreement may
be in effect from time to time, and including any replacement employment
agreement, the "Employment Agreement") that provides for compensation to the
Executive under certain circumstances in the event that the Executive's
employment is terminated. This Agreement is intended to supplement the
Employment Agreement without duplicating payments in the event of the
termination of the Executive's employment.

2. Change in Control and Combination Transactions.

(a) A "Change in Control" shall be deemed to have occurred in
any one of the following events:

(i) any "person," as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Act")
(other than the Company, Summit Properties Partnership, L.P. (together
with any other subsidiaries of the Company, the "Subsidiaries"), or any
trustee, fiduciary or other person or entity holding securities under
any employee benefit plan or trust of the Company or any of its
Subsidiaries), together with all "affiliates" and "associates" (as such
terms are defined in Rule 12b-2 under the Act) of such person, shall
become the "beneficial owner" (as such term is defined in Rule 12b-2
under the Act), directly or indirectly, of securities of the Company
representing 40% or more of either (A) the combined voting power of the
Company's then outstanding securities having the right to vote in an
election of the Board ("Voting Securities") or (B) the then outstanding
shares of stock of the Company

<PAGE>

("Stock"), in either such case other than as a result of an acquisition
of securities directly from the Company; or

(ii) persons who, as of the date hereof, constitute
the Board (the "Incumbent Directors") cease for any reason, including,
without limitation, as a result of a tender offer, proxy contest,
merger or similar transaction, to constitute at least a majority of the
Board, provided that any person becoming a director of the Company
subsequent to the date hereof whose election or nomination for election
was approved by a vote of at least a majority of the Incumbent
Directors shall, for purposes of this Agreement, be considered an
Incumbent Director; or

(iii) the stockholders of the Company shall approve
(A) any consolidation or merger of the Company or any Subsidiary where
the stockholders of the Company, immediately prior to the consolidation
or merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3) under the
Act), directly or indirectly, shares representing in the aggregate
fifty percent (50%) or more of the voting shares of the corporation
issuing cash or securities in the consolidation or merger (or of its
ultimate parent corporation, if any), (B) any sale, lease, exchange or
other transfer (in one transaction or a series of transactions
contemplated or arranged by any party as a single plan) of all or
substantially all of the assets of the Company or (C) any plan or
proposal for the liquidation or dissolution of the Company.

Notwithstanding the foregoing, a "Change of Control" shall not be deemed to have
occurred for purposes of the foregoing clause (i) solely as the result of an
acquisition of securities by the Company which, by reducing the number of shares
of Stock or other Voting Securities outstanding, increases (x) the proportionate
number of shares of Stock beneficially owned by any person to 40% or more of the
shares of Stock then outstanding or (y) the proportionate voting power
represented by the Voting Securities beneficially owned by any person to 40% or
more of the combined voting power of all then outstanding Voting Securities;
provided, however, that if any person referred to in clause (x) or (y) of this
sentence shall thereafter become the beneficial owner of any additional shares
of Stock or other Voting Securities (other than pursuant to a stock split, stock
dividend, or similar transaction), then a "Change of Control" shall be deemed to
have occurred for purposes of the foregoing clause (i).

(b) A "Combination Transaction" shall be deemed to have
occurred if the Company shall consummate any consolidation or merger of the
company or any Subsidiary where the stockholders of the Company, immediately
prior to the consolidation or merger, would not, immediately after the
consolidation or merger, beneficially own (as such term is defined in Rule
13d-3) under the Act), directly or indirectly, shares representing in the
aggregate 75% or more of either (i) the combined voting power of the company's
then outstanding Voting Securities or (ii) the then outstanding shares of Stock.

<PAGE>

(c) For purposes of determining whether a Change in Control or
a Combination Transaction has occurred, all outstanding options, warrants and
other convertible securities that are then exchangeable or convertible into
Voting Securities of the Company, including, without limitation, all partnership
units of any Subsidiary that are convertible into Voting Securities of the
Company at the option of the holder or the Company, shall be deemed to have been
converted into the applicable number of shares of Voting Securities of the
Company immediately prior to making such determination.

3. Terminating Event. A "Terminating Event" shall mean any of the
following events:

(a) termination occurring subsequent to a Change of Control or
a Combination Transaction by the Company of the employment of the Executive with
the Company for any reason other than:

(i) the death of the Executive (which shall be
referred to as a "Death Termination") or total disability of the
Executive (total disability meaning the inability of the 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 the 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 the retirement of the Executive;

(ii) if the 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, any Subsidiary or any affiliate of the Company, as
determined by the Board in good faith in its sole discretion;

(iii) if the Executive engaged in a fraudulent act to
the material damage or prejudice of the Company, any Subsidiary or any
affiliate of the Company or in conduct or activities materially
damaging to the property, business or reputation of the Company, any
Subsidiary or any affiliate of the Company, all as determined by the
Board in good faith in its sole discretion;

(iv) in the event of any material act or omission by
the Executive involving malfeasance or negligence in the performance of
the Executive's duties to the Company to the material detriment of the
Company, any Subsidiary or any affiliate of the Company, as determined
by the Board in good faith in its sole discretion, which has not been
corrected by the Executive within thirty (30) days after written notice
from the Company of any such act or omission:

(v) failure by the Executive to comply in any
material respect with the terms of the Employment 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

3
<PAGE>

been corrected by the Executive within thirty (30) days after written
notice from the Company of such failure; or

(vi) a material breach by the Executive of that
certain Noncompetition agreement between the Executive and the Company
dated January 13, 1994 (the "Noncompetition Agreement") as determined
by the Board in good faith in its sole discretion.

Each of the events described in the foregoing clauses (ii) through (vi) shall be
referred to individually and collectively as a "For Cause Termination."
Notwithstanding any other provision of this Section 3(a), a Terminating Event
shall not be deemed to have occurred pursuant to this Section 3(a) solely as a
result of the Executive being an employee of any direct or indirect successor to
the business or assets of the Company, rather that continuing as an employee of
the Company following a Change in Control or A Combination Transaction. For
purposes of clause (i) of this Section 3(a), "retirement" shall mean termination
of the Executive's employment in accordance with the Company's normal retirement
policy, generally applicable to its salaried employees, as in effect immediately
prior to the change in Control or Combination Transaction, or in accordance with
any retirement arrangement established with respect to the Executive with the
Executive's express written consent; or

(b) termination occurring subsequent to a Change in Control or
a Combination Transaction by the Executive of the Executive's employment with
the company for Good Reason. "Good Reason" shall mean the occurrence of any of
the following, provided that in either case the Board has not corrected such
material reduction described below within thirty (30) days after written notice
by the Executive of such material reduction: (i) there is a material reduction
in the Executive's duties, rights or responsibilities under the Employment
Agreement without his consent, or (ii) there is a material decrease in the
aggregate value of the Executive's compensation and benefits package from the
Company under the Employment Agreement without his consent, other than a
reduction in the Executive's base salary that is permitted under the Employment
Agreement and other than a reduction in compensation and/or benefits affecting a
broad group of employees of the Company as determined by the Board in good faith
in its sole discretion, (iii) there is a relocation of the Company's offices at
which the Executive is principally employed immediately prior to the date of a
Change in Control or Combination Transaction to a location more than fifty (50)
miles from such offices, or the requirement by the Company for the Executive to
be based anywhere other than the Company's offices at such location, except for
required travel on the Company's business to an extent substantially consistent
with the Executive's business travel obligations immediately prior to the Change
in Control or a Combination Transaction; or

(c) termination occurring subsequent to a Change of Control by
the Executive of the Executive's employment with the Company for any reason,
unless an event that would constitute grounds for a For Cause Termination of the
Executive's employment has occurred.

<PAGE>

4. Severance Payment. In the event that either a Terminating Event
described in Section 3(a), 3(b), or 3(c) occurs within twelve (12) months after
a Change in Control, or a Terminating Event described in Section 3(a) or 3(b)
occurs within twelve (12) months after a Combination Transaction:

(a) the Company shall pay to the Executive an amount equal to
the difference between (i) three (3) times the Executive's salary and cash bonus
paid (including amounts that were deferred by the Executive but would have been
paid in the absence of such deferral) with respect to the fiscal year
immediately preceding the year in which the Terminating Event occurred and (ii)
any amount of severance or other cash compensation paid to the Executive
pursuant to the Employment Agreement as a result of the termination of the
Executive's employment. Said amount shall be paid in one lump sum payment no
later than thirty-one (31) days following the Date of Termination (as such term
is defined in Section 8(b); and

(b) the Company shall pay to the Executive all reasonable
legal and arbitration fees and expenses incurred by the Executive in obtaining
or enforcing any right or benefit provided by this Agreement, except in cases
involving frivolous or bad faith litigation.

5. Additional Benefits.

(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (the "Severance Payments"), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended, ("the Code"), or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Severance Payments, any
Federal, state and local income tax, employment tax and Excise Tax upon the
payment provided by this subsection, and any interest and/or penalties assessed
with respect to such Excise Tax, shall be equal to the Severance Payments.

(b) Subject to the provisions of Section 5(c), all
determinations required to be made under this Section 5, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment. shall be
made by the Company's independent certified public accounting firm (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days of the Date of
Termination, if applicable, or at such earlier time as is reasonably requested
by the Company or the Executive. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation applicable to individuals
for the calendar year in which the Gross-Up Payment

5
<PAGE>

is to be made and state and local income taxes at the highest marginal rates of
individual taxation in the state and locality of the Executive's residence on
the Date of Termination, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes. The
initial Gross-Up Payment, if any, as determined pursuant to this Section 5(b),
shall be paid to the Executive within five days of the receipt of the Accounting
Firm's determination. If the Accounting Firm determines that no Excise Tax is
payable by the Executive, the Company shall furnish the Executive with an
opinion of counsel that failure to report the Excise Tax on the Executive's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made (an
"Underpayment"). In the event that the Company exhausts its remedies pursuant to
Section 5(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred, consistent with the calculations required to be made
hereunder, and any such Underpayment, and any interest and penalties imposed on
the Underpayment and required to be paid by the Executive in connection with the
proceedings described in Section 5(c), shall be promptly paid by the Company to
or for the benefit of the Executive.

(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Executive
knows of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which he gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:

(i) give the Company any information reasonably
requested by the Company relating to such claim,

(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time
to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney selected by the Company,

(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and

<PAGE>

(iv) permit the Company to participate in any
proceedings relating to such claim; provided, however that the Company
shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest
and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on
the foregoing provisions of this Section 5(c), the Company shall
control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay such claim and sue for
a refund, the Company shall advance the amount of such payment to the
Executive on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or
income tax, including interest or penalties with respect thereto,
imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issues raised by the
Internal Revenue Service or any other taxing authority.

(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 5(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 5(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.

6. Term. This Agreement shall take effect on the date first set forth
above and shall terminate upon the earlier of (a) immediately prior to a For
Cause Termination by the Company of the employment of the Executive, (b) the
termination of employment of the Executive by the Company or the Executive for
any reason prior to a Change in Control or a Combination Transaction, (c) the
resignation of the Executive other than for Good Reason after

7
<PAGE>

a Combination transaction, but prior to a Change in Control, or (d) immediately
prior to the resignation of the Executive after a Change in Control if any event
that would constitute grounds for a For Cause Termination of the Executive's
employment has occurred.

7. Withholding. All payments made by the Company under this Agreement
shall be net of any tax or other amounts required to be withheld by the Company
under applicable law.

8. Notice and Date of Termination; Disputes; Etc.

(a) Notice of Termination. After a Change in Control or
Combination Transaction and during the term of this Agreement, any purported
termination of the Executive's employment (other than by reason of a Death
Termination) shall be communicated by written Notice of Termination from one
party hereto to the other party hereto in accordance with this Section 8. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and the Date of Termination.

(b) Date of Termination. "Date of Termination", with respect
to any purported termination of the Executive's employment after a Change in
Control or Combination Transaction and during the term of this Agreement, shall
mean (i) if there is a Disability Termination, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period) and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination. In the case of a
termination by the Company other than a For Cause Termination (which may be
effective immediately), the Date of Termination shall not be less than thirty
(30) days after the Notice of Termination is given. In the case of a termination
by the Executive, the Date of Termination shall not be less than fifteen (15)
days from the date such Notice of Termination is given. Notwithstanding Section
3(a) of this Agreement, in the event that the Executive gives a Notice of
Termination to the Company, the Company may unilaterally accelerate the Date of
Termination and such acceleration shall not result in a Terminating Event for
purposes of Section 3(a) of this Agreement.

(c) No Mitigation. The Company agrees that, if the Executive's
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Sections
4(a) and (b) hereof. Further, the amount of any payment provided for in this
Agreement shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer, but shall be subject to reduction
by certain amounts received under the Employment Agreement as provided in
Section 4(a) hereof.

(d) Settlement and Arbitration of Disputes. Any controversy or
claim arising out of or relating to this Agreement or the breach thereof shall
be settled exclusively by

8
<PAGE>

arbitration in accordance with the laws of the State of North Carolina by three
arbitrators, one of whom shall be appointed by the Company, one by the Executive
and the third by the first two arbitrators. If the first two arbitrators cannot
agree on the appointment of a third arbitrator, then the third arbitrator shall
be appointed by the American Arbitration Association in the City of Charlotte,
North Carolina. Such arbitration shall be conducted in the City of Charlotte,
North Carolina in accordance with the rules of the American Arbitration
Association for commercial arbitrations, except with respect to the selection of
arbitrators which shall be as provided in this Section 8(d). Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.

9. Assignment; Prior Agreements. Neither the Company nor the Executive
may make any assignment of this Agreement or any interest herein, by operation
of law or otherwise, without the prior written consent of the other party, and
without such consent any attempted transfer shall be null and void and of no
effect. This Agreement shall inure to the benefit of and be binding upon the
Company and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns. In the event of the Executive's
death after a Terminating Event but prior to the completion by the Company of
all payments due him under Section 4(a) and (b) of this Agreement, the Company
shall continue such payments to the Executive's beneficiary designated in
writing to the Company prior to his death (or to his estate, if the Executive
fails to make such designation).

10. Enforceability. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.

11. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.

12. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Company, or to the Company at its main office, attention of the Board.

13. Effect on Other Plans. An election by the Executive to resign after
a Change in Control under the provisions of this Agreement shall not be deemed a
voluntary termination of employment by the Executive for the purpose of
interpreting the provisions of any of the Company's benefit plans, programs or
policies. Nothing in this Agreement shall be construed

9
<PAGE>

to limit the rights of the Executive under the Company's benefit plans, programs
or policies except as otherwise provided in Section 5 hereof, and except that
the Executive shall have no rights to any severance benefits under any severance
pay plan other than cash amounts specifically set forth in the Employment
Agreement or this Agreement.

14. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representative of the Company.

15. Governing Law. This Agreement shall be construed under and be
governed in all respects by the laws of the State of North Carolina.

16. Obligations of Successors. In addition to any obligations imposed
by law upon any successor to the Company, the Company will use its best efforts
to require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place.

17. Confidential Information. The Executive shall never use, publish or
disclose in a manner adverse to the Company's interests, any proprietary or
confidential information relating to (a) the business, operations or properties
of the Company or any Subsidiary or other affiliate of the Company, or (b) any
materials, processes, business practices, technology, know-how, research,
programs or other information used in the business of the Company or any
Subsidiary or other affiliate of the Company, provided, however, that no breach
or alleged breach of this Section 17 shall entitle the Company to fail to comply
fully and in a timely manner with any other provision hereof. Nothing in this
Agreement shall preclude the Company from seeking money damages, or equitable
relief by injunction or otherwise without the necessity of proving actual damage
to the Company, for any breach by the Executive hereunder.

IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company by its duly authorized officer, and by the Executive,
as of the date first above written.

COMPANY:

SUMMIT PROPERTIES INC.

By: /s/ Michael G. Malone
-------------------------------------
Name: Michael G. Malone
Title: Senior Vice President
Secretary & General Counsel

10
<PAGE>

EXECUTIVE:

/s/ Steven R. LeBlanc
------------------------------------------
Steven R. LeBlanc

PROMISSORY NOTE AND SECURITY AGREEMENT

$960,577.50 August 5, 1998

FOR VALUE RECEIVED, Executive who resides at 2308 Oakmeade Drive,
Charlotte, North Carolina, 28270, (hereinafter referred to as the "Employee")
hereby promises to pay to the order of Summit Properties Inc., a Maryland
corporation with its principal place of business at 212 South Tryon Street,
Suite 500, Charlotte, North Carolina (hereinafter referred to as the "Company"),
the principal amount of $960,577.50 together with interest thereon as provided
below subject to the terms and conditions set forth herein.

1. Purpose and Authority. This Promissory Note and Security Agreement
(the "Note") is entered into for the purpose of financing the Employee's
purchase of shares of common stock, par value $0.01 per share, of the Company
("Common Stock") pursuant to and subject to the terms and conditions of (i) the
Company's Statement of Company Policy on Loans to Executive Officers and
Qualified Employees to Purchase the Company Stock as adopted by the Board of
Directors of the Company on September 8, 1997, as amended from time to time, and
(ii) the Company's 1994 Stock Option and Incentive Plan, as amended from time to
time.

2. Security. The Employee hereby grants the Company a security interest
in any and all shares of Common Stock purchased by the Employee with the
proceeds of this Note (hereinafter referred to as the "Collateral Stock") and in
any and all distributions and dividends which may from time to time be, paid or
payable on the Collateral Stock (each, a "Distribution"). Employee agrees to
take all such actions and execute all such documents as may from time to time be
reasonably requested by the Company to perfect and maintain the validity and
priority of any security interest granted to the Company pursuant to this Note.
Employee also agrees that a carbon, photographic or other reproduction of this
Promissory Note and Security Agreement may be filed as a financing statement to
the extent that the Company determines that such filing is necessary for the
Company to establish or maintain its security interest in the Collateral Stock.
The Employee shall cause the Collateral Stock to be delivered to the Company and
the Company may retain possession of the Collateral Stock until such time as the
Note has been paid in full.

3. Payment. All Distributions received by the Employee in cash shall be
applied toward repayment of this Note. The Employee agrees that the Company may
establish and institute any procedure that it deems necessary or advisable to
ensure that each such Distribution shall be applied toward repayment of this
Note, including without limitation, the placement of a restrictive legend on any
check representing a Distribution. Each such payment shall first be applied to
the payment of interest accrued as of the date of such payment and the remainder
thereof, if any, shall then be applied to the payment of outstanding principal.
The Note will bear interest at the rate provided in Section 4 hereof. The entire
principal balance
<PAGE>

and all accrued and unpaid interest and other charges as may be due hereunder
shall be due and payable on or before the tenth anniversary of the date of this
Note (the "Maturity Date").

4. Interest. Interest on this Note will be computed on a simple
interest basis and will accrue on the unpaid principal balance due under the
Note until maturity, whether by reason of Default (as defined below) and
acceleration, lapse of time or otherwise ("Maturity"), at the rate of Five and
57/100 percent (5.57%) per annum. Prior to Maturity interest shall be payable
solely from Distributions.

5. Prepayment. The Employee may prepay the whole or any part of the
principal amount of this Note from time to time without premium or penalty.

6. Default. (a) The occurrence of any of the following events and the
expiration of the applicable cure period without such event having been cured,
shall constitute a Default under this Note:

(i) the failure by the Employee to deliver or cause
to be delivered the Collateral Stock to the Company within three
business days after the purchase of any Collateral Stock;

(ii) retention by the Employee of any Distribution,
which retention continues for a period of ten (10) days;

(iii) the failure by the Employee to pay the entire
outstanding balance of this Note and all accrued interest within one
hundred and twenty (120) days after termination of the Employee's
employment with the Company; or

(iv) the failure by the Employee to pay the entire
outstanding balance of this Note and all accrued interest on or before
the Maturity Date.

(b) Upon the occurrence of a Default under this Note, the
outstanding principal balance hereof, together with all reasonable costs of
collection and/or enforcement of the Note, including reasonable attorney's fees,
shall at the option of the Company become immediately due and payable.

(c) If the Employee is in Default hereunder, the Company may,
except as otherwise provided herein, exercise the rights and remedies accorded a
secured party by the Uniform Commercial Code as enacted in the State of
Maryland.

7. Notice and Cure Periods. Notwithstanding any term or provision to
the contrary in this Note or any other document or instrument evidencing or
securing the loan (collectively the "Loan Documents"), Employee shall have
thirty (30) days following written notice to the Employee of Employee's default
under any provision of the Loan Documents, including, without limitation, the
Note, in which to cure any such default before the Company

2
<PAGE>

may exercise any remedies for said default as provided in this Note or any other
Loan Documents.

8. Personal Liability. Except in the case of fraud, willful
misrepresentation or retention of a Distribution by Employee, the Company agrees
that the Employee's personal liability on this Note shall be limited to Ninety
Six Thousand Fifty Seven and 75/100 Dollars ($96,057.75) due hereunder for any
deficiency which may arise upon a foreclosure and sale or other disposition of
the Collateral Stock; provided that, this provision shall not diminish in any
way the powers of the Company to foreclose on the Collateral Stock and to apply
the full value of the Collateral Stock and all related Distributions to the
amount outstanding under this Note in the event of a Default.

9. Modification. Neither this Note nor any provision hereof may be
modified, altered, or amended in any manner or form except by an agreement in
writing, executed by a duly authorized officer of the Company and the Employee,
which writing shall make specific reference hereto.

10. Transfer by Employee. Employee will not sell, assign, transfer or
otherwise dispose of, directly or indirectly, nor grant any option with respect
to, or pledge or grant any security interest in or otherwise encumber any of the
Collateral Stock or any interest therein, except for the security interest
provided for in this Note.

11. Severability. If for any reason any provision or provisions hereof
are determined to be invalid, unenforceable or contrary to any existing or
future law, such invalidity or unenforceability shall not impair the operation
or affect those portions of this Note which are valid.

12. Usury, etc. All agreements between the Employee and the Company are
hereby expressly limited so that in no contingency or event whatsoever, whether
by reason Maturity of the indebtedness or otherwise, shall the amount paid or
agreed to be paid to the holder for the use, forbearance or detention of the
indebtedness evidenced hereby exceed the maximum amount which the holder is
permitted to receive under applicable law. If, from any circumstances
whatsoever, fulfillment of any provision of this Note, at the time performance
of such provision shall be due, shall involve payments exceeding such amount,
then the obligation to be fulfilled shall automatically be reduced to the limit
of such maximum amount, and if from any circumstances the holder should ever
receive as interest an amount which would exceed such maximum amount, such
amount which would be excessive interest shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest. As
used herein, the term "applicable law" shall mean the law in effect as of the
date hereof; provided, however, that in the event that there is a change in the
law which results in a higher permissible rate of interest, then this Note shall
be governed by such new law as of its effective date. This provision shall
control every other provision of this Note.

<PAGE>

13. Valuation: Manner of Disposition. Employee acknowledges and agrees
that the Company may not be able to effect a public sale of the Collateral Stock
and, accordingly, agrees that in the event of any sale, collection, realization
or other disposition of or upon the Collateral Stock by the Company, in lieu of
such public sale, the Company may transfer all or any portion of the Collateral
Stock to itself and apply the value of such shares (at a price per share equal
to the average of the daily high and low sales prices, computed to three decimal
places, of the Company's stock as reported on the New York Stock Exchange (the
"NYSE") for the ten (10) days on which the NYSE is open and for which trades in
the Company stock are reported immediately preceding the date of such action by
the Company or, if one or more of such days is not a day on which the NYSE is
open or the Company's stock is not traded on the NYSE for the ten (10) days
immediately preceding said action for which the trades are reported) to the
amounts due under or in connection with this Note.

14. Governing Law. The execution, delivery and performance of this Note
shall be governed by, construed, and enforced in accordance with the laws of the
State of Maryland.

15. Waivers. The failure of the Company at any time to exercise any
option or right hereunder shall not constitute a waiver of the Company's right
to exercise such option or right at any other time.

[Remainder of page intentionally left blank]

<PAGE>

IN WITNESS WHEREOF, this Note has been executed and delivered as a
sealed instrument as of the date first set forth above.

/s/ Steven R. LeBlanc
-------------------------
Steven R. LeBlanc

Executed, sealed and
delivered in the presence of:

/s/ John C. Moore
- --------------------
Name of Witness:

PROMISSORY NOTE AND SECURITY AGREEMENT

$1,000,487.05 FEBRUARY 2, 1999

FOR VALUE RECEIVED, Executive who resides at 2308 Oakmeade Drive,
Charlotte, North Carolina, 28270, (hereinafter referred to as the "Employee")
hereby promises to pay to the order of Summit Properties Inc., a Maryland
corporation with its principal place of business at 212 South Tryon Street,
Suite 500, Charlotte, North Carolina (hereinafter referred to as the "Company"),
the principal amount of One million four hundred eighty-seven and 05/100 dollars
($1,000,487.05) together with interest thereon as provided below subject to the
terms and conditions set forth herein.

4. Interest. Interest on this Note will be computed on a simple interest
basis and will accrue on the unpaid principal balance due under the Note until
maturity, whether by reason of Default (as defined below) and acceleration,
lapse of time or otherwise ("Maturity"), at the rate of Four and 71/100 percent
(4.71%) per annum. Prior to Maturity interest shall be payable solely from
Distributions.

5. Prepayment. The Employee may prepay the whole or any part of the
principal amount of this Note from time to time without premium or penalty.

6. Default. (a) The occurrence of any of the following events and the
expiration of the applicable cure period without such event having been cured,
shall constitute a Default under this Note:

(i) the failure by the Employee to deliver or cause to be
delivered the Collateral Stock to the Company within three business days
after the purchase of any Collateral Stock;

(ii) retention by the Employee of any Distribution, which
retention continues for a period of ten (10) days;

(iv) the failure by the Employee to pay the entire
outstanding balance of this Note and all accrued interest on or before
the Maturity Date.

7. Notice and Cure Periods. Notwithstanding any term or provision to the
contrary in this Note or any other document or instrument evidencing or securing
the loan (collectively the "Loan Documents"), Employee shall have thirty (30)
days following written notice to the Employee of Employee's default under any
provision of the Loan Documents, including, without limitation, the Note, in
which to cure any such default before the Company may exercise any remedies for
said default as provided in this Note or any other Loan Documents.

2
<PAGE>

way the powers of the Company to foreclose on the Collateral Stock and to apply
the full value of the Collateral Stock and all related Distributions to the
amount outstanding under this Note in the event of a Default.

3
<PAGE>

14. Governing Law. The execution, delivery and performance of this Note
shall be governed by, construed, and enforced in accordance with the laws of the
State of Maryland.

15. Waivers. The failure of the Company at any time to exercise any
option or right hereunder shall not constitute a waiver of the Company's right
to exercise such option or right at any other time.

[Remainder of page intentionally left blank]

4
<PAGE>

IN WITNESS WHEREOF, this Note has been executed and delivered as a
sealed instrument as of the date first set forth above.

/s/ STEVEN R. LEBLANC
-----------------------------------
Steven R. LeBlanc

Executed, sealed and
delivered in the
presence of:

/s/ JOHN C. MOORE
- -----------------------------------
Name of Witness:

PROMISSORY NOTE AND SECURITY AGREEMENT

$450,004.09 FEBRUARY 2, 1999

FOR VALUE RECEIVED, Executive who resides at 2039 Coniston Place,
Charlotte, North Carolina 28207, (hereinafter referred to as the "Employee")
hereby promises to pay to the order of Summit Properties Inc., a Maryland
corporation with its principal place of business at 212 South Tryon Street,
Suite 500, Charlotte, North Carolina (hereinafter referred to as the "Company"),
the principal amount of Four hundred fifty thousand four and 09/100 dollars
($450,004.09) together with interest thereon as provided below subject to the
terms and conditions set forth herein.

<PAGE>

4. Interest. Interest on this Note will be computed on a simple interest
basis and will accrue on the unpaid principal balance due under the Note until
maturity, whether by reason of Default (as defined below) and acceleration,
lapse of time or otherwise ("Maturity"), at the rate of Four and 71/100 percent
(4.71%) per annum. Prior to Maturity interest shall be payable solely from
Distributions.

5. Prepayment. The Employee may prepay the whole or any part of the
principal amount of this Note from time to time without premium or penalty.

6. Default. (a) The occurrence of any of the following events shall
constitute a Default under this Note:

(i) the failure by the Employee to deliver or cause to be
delivered the Collateral Stock to the Company within three business days
after the purchase of any Collateral Stock;

(ii) retention by the Employee of any Distribution, which
retention continues for a period of ten (10) days;

(iv) the failure by the Employee to pay the entire
outstanding balance of this Note and all accrued interest on or before
the Maturity Date.

7. Personal Liability. Except in the case of fraud, willful
misrepresentation or retention of a Distribution by Employee, the Company agrees
that the Employee's personal liability on this Note shall be limited to One
hundred twelve thousand five hundred one and 02/100 dollars ($112,501.02) due
hereunder for any deficiency which may arise upon a foreclosure and sale or
other disposition of the Collateral Stock; provided that, this provision shall
not diminish in any way the powers of the Company to foreclose on the Collateral
Stock and to apply the full value of the Collateral Stock and all related
Distributions to the amount outstanding under this Note in the event of a
Default.

8. Modification. Neither this Note nor any provision hereof may be
modified, altered, or amended in any manner or form except by an agreement in
writing, executed by a duly

2
<PAGE>

authorized officer of the Company and the Employee, which writing shall make
specific reference hereto.

9. Transfer by Employee. Employee will not sell, assign, transfer or
otherwise dispose of, directly or indirectly, nor grant any option with respect
to, or pledge or grant any security interest in or otherwise encumber any of the
Collateral Stock or any interest therein, except for the security interest
provided for in this Note.

10. Severability. If for any reason any provision or provisions hereof
are determined to be invalid, unenforceable or contrary to any existing or
future law, such invalidity or unenforceability shall not impair the operation
or affect those portions of this Note which are valid.

11. Usury, etc. All agreements between the Employee and the Company are
hereby expressly limited so that in no contingency or event whatsoever, whether
by reason Maturity of the indebtedness or otherwise, shall the amount paid or
agreed to be paid to the holder for the use, forbearance or detention of the
indebtedness evidenced hereby exceed the maximum amount which the holder is
permitted to receive under applicable law. If, from any circumstances
whatsoever, fulfillment of any provision of this Note, at the time performance
of such provision shall be due, shall involve payments exceeding such amount,
then the obligation to be fulfilled shall automatically be reduced to the limit
of such maximum amount, and if from any circumstances the holder should ever
receive as interest an amount which would exceed such maximum amount, such
amount which would be excessive interest shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest. As
used herein, the term "applicable law" shall mean the law in effect as of the
date hereof; provided, however, that in the event that there is a change in the
law which results in a higher permissible rate of interest, then this Note shall
be governed by such new law as of its effective date. This provision shall
control every other provision of this Note.

12. Valuation: Manner of Disposition. Employee acknowledges and agrees
that the Company may not be able to effect a public sale of the Collateral Stock
and, accordingly, agrees that in the event of any sale, collection, realization
or other disposition of or upon the Collateral Stock by the Company, in lieu of
such public sale, the Company may transfer all or any portion of the Collateral
Stock to itself and apply the value of such shares (at a price per share equal
to the average of the daily high and low sales prices, computed to three decimal
places, of the Company's stock as reported on the New York Stock Exchange (the
"NYSE") for the ten (10) days on which the NYSE is open and for which trades in
the Company stock are reported immediately preceding the date of such action by
the Company or, if one or more of such days is not a day on which the NYSE is
open or the Company's stock is not traded on the NYSE for the ten (10) days
immediately preceding said action for which the trades are reported) to the
amounts due under or in connection with this Note.

13. Governing Law. The execution, delivery and performance of this Note
shall be governed by, construed, and enforced in accordance with the laws of the
State of Maryland.

14. Waivers. The failure of the Company at any time to exercise any
option or right hereunder shall not constitute a waiver of the Company's right
to exercise such option or right at any other time.

3
<PAGE>

IN WITNESS WHEREOF, this Note has been executed and delivered as a
sealed instrument as of the date first set forth above.

/s/ MICHAEL L. SCHWARZ
------------------------------------
Michael L. Schwarz

Executed, sealed and
delivered in the
presence of:

/s/ JOHN C. MOORE
- -------------------------
Name of Witness:

EXHIBIT 10.15.2

November 25, 1998

First Union National Bank,
as Administrative Agent
and Lender under the Credit
Agreement referred to below

Wachovia Bank, N.A. as Lender
under the Credit Agreement
referred to below

RE: SUMMIT PROPERTIES PARTNERSHIP, L.P. SENIOR UNSECURED CREDIT FACILITY

Ladies and Gentlemen:

Reference is hereby made to that certain Credit Agreement dated as of
March 27, 1998 (the "CREDIT AGREEMENT") among Summit Properties Partnership,
L.P., as borrower, Summit Properties, Inc., as guarantor, the banks named
therein and First Union National Bank, as Administrative Agent. Capitalized
terms used herein and not otherwise defined herein shall have the meaning
ascribed thereto in the Credit Agreement.

In accordance with Section 2.1(d) of the Credit Agreement, we requested,
pursuant to a letter dated September 21, 1998, that each of the Lenders increase
their Commitments in order to increase the aggregate amount of Commitments under
the credit facility to $200,000,000.

First Union National Bank ("FIRST UNION") and Wachovia Bank N.A.
("WACHOVIA" and together with First Union, the "INCREASING LENDERS") have agreed
to increase their Commitments by $15,000,000 and $10,000,000, respectively.

By consenting to this letter (i) First Union hereby confirms that its
Commitment shall be increased from $35,000,000 to $50,000,000 and (ii) Wachovia
hereby confirms that its Commitment shall be increased from $35,000,000 to
$45,000,000. The aggregate amount of Commitments under the Credit Agreement
shall be increased from $175,000,000 to $200,000,000. As of the date hereof,
each reference to the "COMMITMENTS" in the Credit Agreement and the other Loan
Documents shall be a reference to the Commitments as increased hereby.
Notwithstanding anything to the contrary set forth in this letter, this letter
shall not increase the Commitments of any Lender (other than the Increasing
Lenders).

Please evidence your agreement to the foregoing by consenting to this
letter in the space provided below. This letter shall be effective upon the
execution by you of this letter subject however to (a) your receipt of duly
executed replacement Revolving Notes revised to reflect the

<PAGE>

increased Commitments and (b) your receipt of all fees set forth in those
certain fee letters dated the date hereof. Furthermore, we agree to (i) promptly
provide to each of the Lenders' duly executed replacement Competitive Notes
revised to reflect the increased Commitments and (ii) pay all reasonable costs
and expenses (including, without limitation, reasonable fees and expenses of
counsel) incurred in connection with the foregoing. Promptly after receipt of
the replacement Revolving Notes referred to above (or any other Note replaced as
a consequence of the increase in the Commitments contemplated hereby) First
Union and Wachovia hereby agree to deliver to the Borrower the original Notes so
replaced. Section 2.1 of the Credit Agreement provides that the consent of the
Lenders (other than the Increasing Lenders) is not required to approve the
increase of the Commitments.

This letter may be executed in any number of counterparts and by any
combination of the parties hereto in separate counterparts, each of which
counterparts shall be an original and all of which taken together shall
constitute one and the same letter.

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

By: SUMMIT PROPERTIES, INC., its general partner

By: /s/ Gregg D. Adzema
----------------------------------------------
Name: Gregg D. Adzema
Title: Vice President-Finance

SUMMIT PROPERTIES, INC., as guarantor

By: /s/ Gregg D. Adzema
----------------------------------------------
Name: Gregg D. Adzema
Title: Vice President-Finance

AGREED AND CONSENTED TO:

FIRST UNION NATIONAL BANK,
as Administrative Agent and Lender

By: /s/ David M. Blackman
---------------------------------------------
Name: David M. Blackman
Title: Vice President

WACHOVIA BANK, N. A.

By: /s/ Wayne A. Osellia
---------------------------------------------
Name: Wayne A. Osellia
Title: Senior Vice President

<PAGE>

cc: The Financial Institutions
set forth on Schedule I

<PAGE>

SCHEDULE I

LENDER
Bank of America
(formerly NationsBank, N.A.)

Commerzbank, A.G.,
Atlanta Agency

PNC Bank, National Association

AmSouth Bank

EXHIBIT 10.15.3

COMPETITIVE NOTE

$200,000,000 Charlotte, North Carolina
November 25, 1998

FOR VALUE RECEIVED, the undersigned, SUMMIT PROPERTIES PARTNERSHIP,
L.P., a limited partnership organized under the laws of the State of Delaware
(the "BORROWER"), hereby promises to pay to the order of FIRST UNION NATIONAL
BANK (the "LENDER"), (i) subject to Section 3.5(e) of the Credit Agreement
referred to below, on the last day of each applicable Interest Period, as
defined in the Credit Agreement, the aggregate unpaid principal amount of all
Competitive Advances (as defined in the Credit Agreement) made by the Lender to
the Borrower pursuant to Section 3.3 of the Credit Agreement to which such
Interest Period applies and (ii) on the Termination Date (as defined in the
Credit Agreement), the lesser of the principal sum of $200,000,000 and the
aggregate unpaid principal amount of all Competitive Advances made by the Lender
to the Borrower pursuant to Section 3.3 of the Credit Agreement, in lawful money
of the United States of America in immediately available funds, and to pay
interest on such principal amount from time to time outstanding, in like funds,
at a rate or rates per annum and payable with respect to such periods and on
such dates as determined pursuant to the Credit Agreement.

The Borrower promises to pay interest, on demand, on any overdue principal
and overdue interest from their due dates at a rate or rates determined as set
forth in the Credit Agreement.

The Borrower hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The nonexercise by the holder of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.

All borrowings evidenced by this Competitive Note and all payments and
prepayments of the principal hereof and interest hereon and the respective dates
thereof shall be endorsed by the holder hereof on the schedule attached hereto
and made a part hereof, or on a continuation thereof which shall be attached
hereto and made a part hereof, or otherwise recorded by such holders in its
internal records; PROVIDED, HOWEVER, that any failure of the holder hereof to
make such a notation or any error in such notation shall not in any manner
affect the obligation of the Borrower to make payments of principal and interest
in accordance with the terms of this Competitive Note and the Credit Agreement.

This Competitive Note is one of the Competitive Notes referred to in the
Credit Agreement dated as of March 27, 1998 among the Borrower, Summit
Properties, Inc., a Maryland corporation, as guarantor, the Banks and Agents
named therein and First Union National Bank as Administrative Agent (as amended
from time to time in accordance with its terms, the "CREDIT AGREEMENT") and is
subject to the terms and conditions contained in the Credit Agreement and is
entitled to the benefits thereof. The Credit Agreement, among other things,
contains provisions for the acceleration of the maturity hereof upon the
happening of certain events, for prepayment of the principal hereof prior to the
maturity thereof and for the amendment or waiver of certain provisions of the
Credit Agreement, all upon the terms and conditions therein specified.

<PAGE>

This Competitive Note shall be construed in accordance with and governed
by the laws of the State of North Carolina and any applicable laws of the United
States of America.

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

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

By: /s/ Michael G. Malone
------------------------------------------------
Name: Michael G. Malone
Title: Senior Vice President and General Counsel

<PAGE>

GRID NOTE SCHEDULE
------------------
<TABLE>
<CAPTION>

ISSUE AMOUNT OF INTEREST INTEREST NUMBER INTEREST DATE AMOUNT NOTED
DATE PRINCIPAL RATE PERIOD OF DAYS DUE PAID PAID BY
<S> <C> <C> <C> <C> <C> <C> <C> <C>

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

- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

EXHIBIT 10.15.4

COMPETITIVE NOTE

$200,000,000 Charlotte, North Carolina
November 25, 1998

FOR VALUE RECEIVED, the undersigned, SUMMIT PROPERTIES PARTNERSHIP,
L.P., a limited partnership organized under the laws of the State of Delaware
(the "BORROWER"), hereby promises to pay to the order of WACHOVIA BANK, N.A.
(the "LENDER"), (i) subject to Section 3.5(e) of the Credit Agreement referred
to below, on the last day of each applicable Interest Period, as defined in the
Credit Agreement, the aggregate unpaid principal amount of all Competitive
Advances (as defined in the Credit Agreement) made by the Lender to the Borrower
pursuant to Section 3.3 of the Credit Agreement to which such Interest Period
applies and (ii) on the Termination Date (as defined in the Credit Agreement),
the lesser of the principal sum of $200,000,000 and the aggregate unpaid
principal amount of all Competitive Advances made by the Lender to the Borrower
pursuant to Section 3.3 of the Credit Agreement, in lawful money of the United
States of America in immediately available funds, and to pay interest on such
principal amount from time to time outstanding, in like funds, at a rate or
rates per annum and payable with respect to such periods and on such dates as
determined pursuant to the Credit Agreement.

The Borrower promises to pay interest, on demand, on any overdue principal
and overdue interest from their due dates at a rate or rates determined as set
forth in the Credit Agreement.

<PAGE>

This Competitive Note shall be construed in accordance with and governed
by the laws of the State of North Carolina and any applicable laws of the United
States of America.

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

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

By: /s/ Michael G. Malone
-------------------------------------------------
Name: Michael G. Malone
Title: Senior Vice President and General Counsel

<PAGE>

GRID NOTE SCHEDULE
------------------
<TABLE>
<CAPTION>

ISSUE AMOUNT OF INTEREST INTEREST NUMBER INTEREST DATE AMOUNT NOTED
DATE PRINCIPAL RATE PERIOD OF DAYS DUE PAID PAID BY
<S> <C> <C> <C> <C> <C> <C> <C> <C>

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

- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

EXHIBIT 10.15.5

COMPETITIVE NOTE

$200,000,000 Charlotte, North Carolina
November 25, 1998

FOR VALUE RECEIVED, the undersigned, SUMMIT PROPERTIES PARTNERSHIP,
L.P., a limited partnership organized under the laws of the State of Delaware
(the "BORROWER"), hereby promises to pay to the order of NATIONSBANK, N.A. (the
"LENDER"), (i) subject to Section 3.5(e) of the Credit Agreement referred to
below, on the last day of each applicable Interest Period, as defined in the
Credit Agreement, the aggregate unpaid principal amount of all Competitive
Advances (as defined in the Credit Agreement) made by the Lender to the Borrower
pursuant to Section 3.3 of the Credit Agreement to which such Interest Period
applies and (ii) on the Termination Date (as defined in the Credit Agreement),
the lesser of the principal sum of $200,000,000 and the aggregate unpaid
principal amount of all Competitive Advances made by the Lender to the Borrower
pursuant to Section 3.3 of the Credit Agreement, in lawful money of the United
States of America in immediately available funds, and to pay interest on such
principal amount from time to time outstanding, in like funds, at a rate or
rates per annum and payable with respect to such periods and on such dates as
determined pursuant to the Credit Agreement.

The Borrower promises to pay interest, on demand, on any overdue principal
and overdue interest from their due dates at a rate or rates determined as set
forth in the Credit Agreement.

<PAGE>

This Competitive Note shall be construed in accordance with and governed
by the laws of the State of North Carolina and any applicable laws of the United
States of America.

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

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

By: /s/ Michael G. Malone
--------------------------------------------------
Name: Michael G. Malone
Title: Senior Vice President and General Counsel

<PAGE>

GRID NOTE SCHEDULE
------------------
<TABLE>
<CAPTION>

ISSUE AMOUNT OF INTEREST INTEREST NUMBER INTEREST DATE AMOUNT NOTED
DATE PRINCIPAL RATE PERIOD OF DAYS DUE PAID PAID BY
<S> <C> <C> <C> <C> <C> <C> <C> <C>

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

- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

EXHIBIT 10.15.6

COMPETITIVE NOTE

$200,000,000 Charlotte, North Carolina
November 25, 1998

FOR VALUE RECEIVED, the undersigned, SUMMIT PROPERTIES PARTNERSHIP,
L.P., a limited partnership organized under the laws of the State of Delaware
(the "BORROWER"), hereby promises to pay to the order of COMMERZBANK, A.G. (the
"LENDER"), (i) subject to Section 3.5(e) of the Credit Agreement referred to
below, on the last day of each applicable Interest Period, as defined in the
Credit Agreement, the aggregate unpaid principal amount of all Competitive
Advances (as defined in the Credit Agreement) made by the Lender to the Borrower
pursuant to Section 3.3 of the Credit Agreement to which such Interest Period
applies and (ii) on the Termination Date (as defined in the Credit Agreement),
the lesser of the principal sum of $200,000,000 and the aggregate unpaid
principal amount of all Competitive Advances made by the Lender to the Borrower
pursuant to Section 3.3 of the Credit Agreement, in lawful money of the United
States of America in immediately available funds, and to pay interest on such
principal amount from time to time outstanding, in like funds, at a rate or
rates per annum and payable with respect to such periods and on such dates as
determined pursuant to the Credit Agreement.

The Borrower promises to pay interest, on demand, on any overdue principal
and overdue interest from their due dates at a rate or rates determined as set
forth in the Credit Agreement.

<PAGE>

This Competitive Note shall be construed in accordance with and governed
by the laws of the State of North Carolina and any applicable laws of the United
States of America.

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

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

By: /s/ Michael G. Malone
-------------------------------------------------
Name: Michael G. Malone
Title: Senior Vice President and General Counsel

<PAGE>

GRID NOTE SCHEDULE
------------------
<TABLE>
<CAPTION>

ISSUE AMOUNT OF INTEREST INTEREST NUMBER INTEREST DATE AMOUNT NOTED
DATE PRINCIPAL RATE PERIOD OF DAYS DUE PAID PAID BY
<S> <C> <C> <C> <C> <C> <C> <C> <C>

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

- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

EXHIBIT 10.15.7

COMPETITIVE NOTE

$200,000,000 Charlotte, North Carolina
November 25, 1998

FOR VALUE RECEIVED, the undersigned, SUMMIT PROPERTIES PARTNERSHIP,
L.P., a limited partnership organized under the laws of the State of Delaware
(the "BORROWER"), hereby promises to pay to the order of PNC BANK, NATIONAL
ASSOCIATION (the "LENDER"), (i) subject to Section 3.5(e) of the Credit
Agreement referred to below, on the last day of each applicable Interest Period,
as defined in the Credit Agreement, the aggregate unpaid principal amount of all
Competitive Advances (as defined in the Credit Agreement) made by the Lender to
the Borrower pursuant to Section 3.3 of the Credit Agreement to which such
Interest Period applies and (ii) on the Termination Date (as defined in the
Credit Agreement), the lesser of the principal sum of $200,000,000 and the
aggregate unpaid principal amount of all Competitive Advances made by the Lender
to the Borrower pursuant to Section 3.3 of the Credit Agreement, in lawful money
of the United States of America in immediately available funds, and to pay
interest on such principal amount from time to time outstanding, in like funds,
at a rate or rates per annum and payable with respect to such periods and on
such dates as determined pursuant to the Credit Agreement.

The Borrower promises to pay interest, on demand, on any overdue principal
and overdue interest from their due dates at a rate or rates determined as set
forth in the Credit Agreement.

<PAGE>

This Competitive Note shall be construed in accordance with and governed
by the laws of the State of North Carolina and any applicable laws of the United
States of America.

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

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

By: /s/ Michael G. Malone
--------------------------------------------------
Name: Michael G. Malone
Title: Senior Vice President and General Counsel

<PAGE>

GRID NOTE SCHEDULE
------------------
<TABLE>
<CAPTION>

ISSUE AMOUNT OF INTEREST INTEREST NUMBER INTEREST DATE AMOUNT NOTED
DATE PRINCIPAL RATE PERIOD OF DAYS DUE PAID PAID BY
<S> <C> <C> <C> <C> <C> <C> <C> <C>

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

- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

EXHIBIT 10.15.8

COMPETITIVE NOTE

$200,000,000 Charlotte, North Carolina
November 25, 1998

FOR VALUE RECEIVED, the undersigned, SUMMIT PROPERTIES PARTNERSHIP,
L.P., a limited partnership organized under the laws of the State of Delaware
(the "BORROWER"), hereby promises to pay to the order of AMSOUTH BANK (the
"LENDER"), (i) subject to Section 3.5(e) of the Credit Agreement referred to
below, on the last day of each applicable Interest Period, as defined in the
Credit Agreement, the aggregate unpaid principal amount of all Competitive
Advances (as defined in the Credit Agreement) made by the Lender to the Borrower
pursuant to Section 3.3 of the Credit Agreement to which such Interest Period
applies and (ii) on the Termination Date (as defined in the Credit Agreement),
the lesser of the principal sum of $200,000,000 and the aggregate unpaid
principal amount of all Competitive Advances made by the Lender to the Borrower
pursuant to Section 3.3 of the Credit Agreement, in lawful money of the United
States of America in immediately available funds, and to pay interest on such
principal amount from time to time outstanding, in like funds, at a rate or
rates per annum and payable with respect to such periods and on such dates as
determined pursuant to the Credit Agreement.

The Borrower promises to pay interest, on demand, on any overdue principal
and overdue interest from their due dates at a rate or rates determined as set
forth in the Credit Agreement.

<PAGE>

This Competitive Note shall be construed in accordance with and governed
by the laws of the State of North Carolina and any applicable laws of the United
States of America.

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

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

By: /s/ Michael G. Malone
--------------------------------------------------
Name: Michael G. Malone
Title: Senior Vice President and General Counsel

<PAGE>

GRID NOTE SCHEDULE
------------------
<TABLE>
<CAPTION>

ISSUE AMOUNT OF INTEREST INTEREST NUMBER INTEREST DATE AMOUNT NOTED
DATE PRINCIPAL RATE PERIOD OF DAYS DUE PAID PAID BY
<S> <C> <C> <C> <C> <C> <C> <C> <C>

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

- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

EXHIBIT 10.15.9

REVOLVING NOTE

$50,000,000 Charlotte, North Carolina
November 25, 1998

FOR VALUE RECEIVED, the undersigned, SUMMIT PROPERTIES PARTNERSHIP,
L.P., a limited partnership organized under the laws of the State of Delaware
(the "BORROWER"), hereby promises to pay to the order of FIRST UNION NATIONAL
BANK (the "LENDER"), (i) subject to Section 3.5(e) of the Credit Agreement
referred to below, on the last day of each Interest Period, as defined in the
Credit Agreement, the aggregate unpaid principal amount of all Revolving
Advances (as defined in the Credit Agreement) made by the Lender to the Borrower
pursuant to Sections 3.1 and 3.2 of the Credit Agreement to which such Interest
Period applies and (ii) on the Termination Date (as defined in the Credit
Agreement), the lesser of the principal sum of $50,000,000 and the aggregate
unpaid principal amount of all Revolving Advances made by the Lender to the
Borrower pursuant to Sections 3.1 and 3.2 of the Credit Agreement, in lawful
money of the United States of America in immediately available funds, and to pay
interest on such principal amount from time to time outstanding, in like funds,
at a rate or rates per annum and payable with respect to such periods and on
such dates as determined pursuant to the Credit Agreement.

The Borrower promises to pay interest, on demand, on any overdue principal
and overdue interest from their due dates at a rate or rates determined as set
forth in the Credit Agreement.

All borrowings evidenced by this Revolving Note and all payments and
prepayments of the principal hereof and interest hereon and the respective dates
thereof shall be endorsed by the holder hereof on the schedule attached hereto
and made a part hereof, or on a continuation thereof which shall be attached
hereto and made a part hereof, or otherwise recorded by such holder in its
internal records; PROVIDED, HOWEVER, that any failure of the holder hereof to
make such a notation or any error in such notation shall not in any manner
affect the obligation of the Borrower to make payments of principal and interest
in accordance with the terms of this Revolving Note and the Credit Agreement.

This Revolving Note is one of the Revolving Notes referred to in the
Credit Agreement dated as of March 27, 1998 among the Borrower, Summit
Properties, Inc., a Maryland corporation, as guarantor, the Banks and Agents
named therein and First Union National Bank, as Administrative Agent (as amended
from time to time in accordance with its terms, the "CREDIT AGREEMENT") and is
subject to the terms and conditions contained in the Credit Agreement and is
entitled to the benefits thereof. The Credit Agreement, among other things,
contains provisions for the acceleration of the maturity hereof upon the
happening of certain events, for prepayment of the principal hereof prior to the
maturity thereof and for the amendment or waiver of certain provisions of the
Credit Agreement, all upon the terms and conditions therein specified.

<PAGE>

This Revolving Note shall be construed in accordance with and governed by
the laws of the State of North Carolina and any applicable laws of the United
States of America.

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

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

By: /s/ Michael G. Malone
-------------------------------------------------
Name: Michael G. Malone
Title: Senior Vice President

<PAGE>

GRID NOTE SCHEDULE
------------------

DATE OF AMOUNT OF INTEREST INTEREST NUMBER INTEREST DATE AMOUNT NOTED
ADVANCE PRINCIPAL RATE PERIOD OF DAYS DUE PAID PAID BY
<S> <C> <C> <C> <C> <C> <C> <C> <C>

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

- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

EXHIBIT 10.15.10

REVOLVING NOTE

$45,000,000 Charlotte, North Carolina
November 25, 1998

FOR VALUE RECEIVED, the undersigned, SUMMIT PROPERTIES PARTNERSHIP,
L.P., a limited partnership organized under the laws of the State of Delaware
(the "BORROWER"), hereby promises to pay to the order of WACHOVIA BANK, N.A.
(the "LENDER"), (i) subject to Section 3.5(e) of the Credit Agreement referred
to below, on the last day of each Interest Period, as defined in the Credit
Agreement, the aggregate unpaid principal amount of all Revolving Advances (as
defined in the Credit Agreement) made by the Lender to the Borrower pursuant to
Sections 3.1 and 3.2 of the Credit Agreement to which such Interest Period
applies and (ii) on the Termination Date (as defined in the Credit Agreement),
the lesser of the principal sum of $45,000,000 and the aggregate unpaid
principal amount of all Revolving Advances made by the Lender to the Borrower
pursuant to Sections 3.1 and 3.2 of the Credit Agreement, in lawful money of the
United States of America in immediately available funds, and to pay interest on
such principal amount from time to time outstanding, in like funds, at a rate or
rates per annum and payable with respect to such periods and on such dates as
determined pursuant to the Credit Agreement.

The Borrower promises to pay interest, on demand, on any overdue principal
and overdue interest from their due dates at a rate or rates determined as set
forth in the Credit Agreement.

<PAGE>

This Revolving Note shall be construed in accordance with and governed by
the laws of the State of North Carolina and any applicable laws of the United
States of America.

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

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

By: /s/ Michael G. Malone
------------------------------------------------
Name: Michael G. Malone
Title: Senior Vice President

<PAGE>

GRID NOTE SCHEDULE
------------------
<TABLE>
<CAPTION>

DATE OF AMOUNT OF INTEREST INTEREST NUMBER INTEREST DATE AMOUNT NOTED
ADVANCE PRINCIPAL RATE PERIOD OF DAYS DUE PAID PAID BY
<S> <C> <C> <C> <C> <C> <C> <C> <C>

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

- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

EXHIBIT 12.1
SUMMIT PROPERTIES INC.

CALCULATION OF RATIOS OF EARNINGS TO FIXED CHARGES

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Income before minority interest of unitholders in Operating
Partnership and extraordinary items .......................... 66,475 $ 31,934 $ 21,187 $ 15,051 $ 8,527
Interest:
Expense incurred ............................................. 32,550 20,902 16,113 13,715 13,006
Amortization of deferred financing costs ..................... 956 1,057 1,025 1,087 1,061
------ -------- -------- -------- --------
Total ........................................................ $ 99,981 $ 53,893 $ 38,325 $ 29,853 $ 22,594
======== ======== ======== ======== ========
Fixed charges:
Interest expense ............................................. $ 32,550 $ 20,902 $ 16,113 $ 13,715 $ 13,006
Interest capitalized ......................................... 6,143 5,876 4,266 3,110 686
Rental fixed charges ......................................... 133 115 124 134 124
Amortization of deferred financing costs ..................... 956 1,057 1,025 1,087 1,061
-------- -------- -------- -------- --------
Total ...................................................... $ 39,782 $ 27,950 $ 21,528 $ 18,046 $ 14,877
======== ======== ======== ======== ========
Ratio of earnings to fixed charges ............................ $ 2.51 $ 1.93 $ 1.78 $ 1.65 $ 1.52
======== ======== ======== ======== ========
</TABLE>

Exhibit 21.1

Subsidiaries of Summit Properties Inc.

1. Summit Properties Partnership, L.P., a North Carolina limited partnership
2. Summit Financing, Inc., a North Carolina corporation
3. Summit Southwest I, Inc., a Maryland corporation
4. Summit Southwest GP, Inc., a Maryland corporation

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,837
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,206,536
<DEPRECIATION> 115,128
<TOTAL-ASSETS> 1,198,664
<CURRENT-LIABILITIES> 0
<BONDS> 726,103
0
0
<COMMON> 278
<OTHER-SE> 415,831
<TOTAL-LIABILITY-AND-EQUITY> 1,198,664
<SALES> 145,656
<TOTAL-REVENUES> 147,569
<CGS> 0
<TOTAL-COSTS> 51,878
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,506
<INCOME-PRETAX> 56,883
<INCOME-TAX> 0
<INCOME-CONTINUING> 56,883
<DISCONTINUED> 0
<EXTRAORDINARY> 508
<CHANGES> 0
<NET-INCOME> 56,375
<EPS-PRIMARY> 2.26
<EPS-DILUTED> 2.26

</TABLE>