Item 2.      Management's Discussion and Analysis of Financial Condition and Results of Operations

          The following information should be read in conjunction with Archstone's 2000 Form 10-K as well as the financial statements and notes included in Item 1 of this report.

           Certain statements in this Form 10-Q that are not historical facts are "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations, beliefs, assumptions, estimates and projections about the industry and markets in which we operate. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and variations of such words and similar expressions are intended to identify such forward-looking statements. Information concerning expected investment balances, expected funding sources, planned investments, forecasted dates and revenue and expense growth assumptions are examples of forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. Therefore, actual outcomes and results may differ materially from what is expressed, forecasted or implied in such forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

           Our operating results depend primarily on income from apartment communities, which is substantially influenced by supply and demand for apartment units, operating expense levels, property level operations and the pace and price at which we can develop, acquire or dispose of apartment communities. Capital and credit market conditions, which affect our cost of capital, also influence operating results. See Archstone's 2000 Form 10-K "Item 1. Business" for a more complete discussion of risk factors that could impact our future financial performance.

          On May 4, 2001, we announced an agreement to merge with Smith Residential, a publicly-traded real estate investment trust that primarily develops, acquires, owns, leases and manages high-rise apartment communities in the greater Washington, D.C. metropolitan area, Chicago, Boston and Southeast Florida. The combined company will operate under the name Archstone-Smith Trust. Each outstanding Smith Residential common share (NYSE: SRW) will be converted into the right to receive 1.975 Archstone common shares. This exchange ratio is not subject to change. The merger is structured as a tax-free transaction and is expected to be completed in October 2001, subject to shareholder and Securities and Exchange Commission approval. The following Management's Discussion and Analysis of Financial Condition and Results of Operations does not give effect to the merger. Please reference the registration statements on Form S-4 filed for Archstone-Smith Trust and Archstone-Smith Operating Trust for financial and other information on the expected impact of the merger.

Results of Operations

          Our basic net earnings attributable to Common Shares decreased $9.0 million (11.2%) during the three months ended June 30, 2001 as compared to the same period in 2000. This decrease was primarily attributable to a $10.2 million reduction in apartment community Net Operating Income (due primarily to a reduction in the number of operating properties as a result of significant disposition activity), a $6.4 million decrease in gains on disposition of depreciated real estate and a $5.9 million reduction in interest income from our Homestead mortgage notes as a result of the sale of those notes during 2000. These factors were partially offset by a $7.6 million reduction in depreciation expense and a $4.9 million reduction in interest expense resulting primarily from the significant disposition activity.

          Our basic net earnings attributable to Common Shares increased $15.9 million (13.3%) during the six months ended June 30, 2001 as compared to the same period in 2000. This increase was primarily attributable to a $24.5 million increase in gains on disposition of depreciated real estate, an $11.7 million reduction in depreciation expense and a $4.5 million reduction in interest expense. These factors were influenced primarily by significant disposition activity. Partially offsetting these increases were an $11.9 million reduction in interest income from the Homestead mortgage notes which were sold during 2000, an $8.8 million reduction in Net Operating Income resulting primarily from dispositions and a $6.8 million increase in provisions for loss relating primarily to technology investment write-offs.

                                                                    Three Months Ended          Six Months Ended
                                                                         June 30,                   June 30,       
                                                                    2001         2000         2001         2000    
Rental revenues............................................      $   155,274  $   173,962  $   325,364  $   341,693
Property operating expenses................................           49,222       57,732      103,919      111,427
Net Operating Income.......................................      $   106,052  $   116,230  $   221,445  $   230,266
                                                                 ===========  ===========  ===========  ===========
Operating margin (Net Operating Income/rental revenues)....            68.3%        66.8%        68.1%        67.4%
                                                                 ===========  ===========  ===========  ===========
Average occupancy during period............................            95.7%        96.0%        95.6%        95.7%
Average number of operating units..........................           52,524       67,715       56,768       67,875

                                       Same-Store          Same-Store         Same-Store Net         Number
                                         Revenue             Expense            Operating               of
                                         Growth              Growth           Income Growth       Operating Units   

     2001........................         7.14%               4.96%               8.17%                40,751
     2000........................         6.09%               3.78%               7.25%                45,130

                                                                                      Per Share      Total  
Common Share distributions......................................................     $     1.64   $  198,843
Series A Convertible Preferred Share dividends..................................           2.21        7,083
Series C Preferred Share dividends..............................................           2.16        4,289
Series D Preferred Share dividends..............................................           2.19        4,358
Series E perpetual preferred limited partnership unit distributions(1)..........           2.09        3,350
Series F perpetual preferred limited partnership unit distributions(1)..........           2.03        1,625
Series G perpetual preferred limited partnership unit distributions(1)..........           2.16        1,294
Other distributions on minority interests(1)....................................           1.64        1,556
     Total dividend/distribution requirements...................................                  $  222,398
                                                                                                  ==========

                                                                                      Planned Investments      
                                                                      Units      Discretionary     Committed   
Communities under construction.................................          3,440   $            -  $      195,548
Communities In Planning and owned..............................          1,646          200,611               -
Communities In Planning and Under Control......................          1,583          268,215               -
Operating community acquisitions under contract................          1,709          200,188               -
     Total.....................................................          8,378   $      669,014  $      195,548
                                                                    ==========  ===============  ==============

                                                                                  Carrying and
                                                    Notional       Maturity      Estimated Fair
                                                     Amount       Date Range         Value     
         Cash flow hedges:
            Interest rate caps.................  $     152,958     2002-2005     $           72
            Interest rate swaps................        205,000     2001-2006                533
              Total cash flow hedges...........  $     357,958     2001-2006     $          605
         Fair value hedges:
            Interest rate swaps................  $     104,005     2006-2008     $        2,477
            Total rate of return swaps.........         69,756     2004-2007              1,495
              Total fair value hedges..........  $     173,761     2004-2008     $        3,972
                 Total hedges..................  $     531,719     2001-2008     $        4,577
                                                 =============  ===============  ==============

                                              Expected Maturity/Principal Repayment Schedule at    
                                         June 30,                   December 31,                   
                                                                                                                 Estimated
                                                                                                       Total       Fair
                                           2001     2002      2003     2004      2005    Thereafter   Balance     Value (1)
Interest rate sensitive liabilities:
  Long-Term Unsecured Debt:
    Fixed rate.......................... $ 57,357 $ 97,810 $ 171,560 $ 51,560 $ 251,560 $   683,045 $ 1,312,892 $ 1,320,904
      Average nominal interest rate (2).    7.50%    7.54%     7.59%    7.62%     7.57%       7.50%           -           -
    Variable rate (3)................... $      - $      - $       - $      - $       - $    77,327 $    77,327 $    78,940
      Average nominal interest rate (2).        -        -         -        -         -       3.92%           -           -
  Mortgages payable:
    Fixed rate debt (4)................. $  1,849 $  3,853 $  18,760 $  4,206 $  32,164 $   443,795 $   504,627 $   512,542
      Average nominal interest rate (2).    7.22%    7.22%     7.21%    7.21%     7.21%       7.20%           -           -
    Variable rate debt.................. $    453 $  1,117 $   1,210 $ 38,484 $   1,421 $   284,341 $   327,026 $   327,026
      Average nominal interest rate (2).    5.23%    5.23%     5.23%    5.28%     5.33%       5.33%           -           -

                                                                        Shares Voted
                                                                      Against, Including
                                                Shares Voted in        Abstentions and
                       Name                          Favor                Non-votes
           -------------------------------      ---------------       ------------------
           Ned S. Holmes..................        105,391,098              772,911
           R. Scot Sellers................        105,385,787              778,222
           John M. Richman................        105,350,411              813,598

   (a) Exhibits:

       2.1   Amended and Restated Agreement and Plan of Merger, dated as of May 3, 2001, by and among Archstone
             Communities  Trust, New Garden Residential Trust,  Charles E. Smith Residential  Realty,  Inc. and
             Charles  E.  Smith  Residential  Realty,  L.P.  (incorporated  by  reference  to  Annex  A to  the
             prospectus  contained in the  Archstone-Smith  Trust Registration  Statement on Form S-4 (File No.
             333-63734))

       3.1   Form of Amended and Restated Declaration of Trust of Archstone-Smith Trust (incorporated by reference to
             Exhibit  2.1(d) to  Archstone  Communities  Trust's  Current  Report  on Form 8-K  filed  with the
             Securities and Exchange Commission on June 19, 2001)

       3.2   Form of Amended and Restated Bylaws of Archstone-Smith Trust (incorporated by reference to Exhibit 2.1(e)
             to  Archstone  Communities  Trust's  Current  Report on Form 8-K  filed  with the  Securities  and
             Exchange Commission on June 19, 2001)

       3.3   Form of Amended and Restated Declaration of Trust of Archstone-Smith Operating  Trust (incorporated by
             reference to Exhibit  2.1(b) to Archstone  Communities  Trust's  Current  Report on Form 8-K filed
             with Securities and Exchange Commission on June 19, 2001)

       3.4   Form of Amended and Restated Bylaws of Archstone-Smith Operating Trust (incorporated by reference to
             Exhibit  2.1(c) to  Archstone  Communities  Trust's  Current  Report  on Form 8-K  filed  with the
             Securities and Exchange Commission on June 19, 2001)

       4.1   Form  of Archstone-Smith Trust common share of  beneficial ownership share  certificate
             (incorporated by reference to Exhibit 3.3 to the prospectus contained in the Archstone-Smith
             Trust Registration Statement on Form S-4 (File No. 333-63734))

       4.2   Form of Archstone-Smith Trust share certificate for Series A Preferred Shares (incorporated by reference
             to Exhibit 3.4 to the prospectus contained in the  Archstone-Smith  Trust Registration  Statement
             on Form S-4 (File No. 333-63734))

       4.3   Form of Archstone-Smith Trust share certificate for Series C Preferred Shares (incorporated by
             reference to Exhibit 3.5 to the prospectus contained in the  Archstone-Smith Trust Registration
             Statement on Form S-4 (File No. 333-63734))

       4.4   Form of Archstone-Smith Trust share certificate for Series D Preferred Shares (incorporated by reference
             to Exhibit 3.6 to the prospectus contained in the Archstone-Smith Trust Registration Statement
             on Form S-4 (File No. 333-63734))

       4.5   Form of Archstone-Smith Trust share certificate for Series H Preferred Shares (incorporated by reference
             to Exhibit 3.7 to the prospectus contained in the Archstone-Smith Trust Registration Statement
             on Form S-4 (File No. 333-63734))

       4.6   Form of Archstone-Smith Trust share certificate for Series I Preferred Shares (incorporated by reference
             to Exhibit 3.8 to the prospectus contained in the  Archstone-Smith Trust Registration Statement
             on Form S-4 (File No. 333-63734))

       4.7   Form of Archstone-Smith Trust share certificate for Series J Preferred Shares (incorporated by reference
             to Exhibit 3.9 to the prospectus contained in the Archstone-Smith Trust Registration Statement
             on Form S-4 (File No. 333-63734))

       4.8   Form of Archstone-Smith Trust share certificate for Series K Preferred Shares (incorporated by reference
             to Exhibit 3.10 to the prospectus contained in the Archstone-Smith Trust Registration Statement
             on Form S-4 (File No. 333-63734))

       4.9   Form of Archstone-Smith Trust share certificate for Series L Preferred Shares (incorporated by reference
             to Exhibit 3.11 to the prospectus contained in the Archstone-Smith  Trust Registration Statement
             on Form S-4 (File No. 333-63734))

       4.10  Form of Archstone-Smith Trust share certificate for Series A Preferred Shares (incorporated by reference
             to Exhibit 3.12 to the prospectus contained in the Archstone-Smith Trust Registration Statement
             on Form S-4 (File No. 333-63734))

       10.16 Purchase and Sale Agreement, dated as of February  15,  2001,  between Archstone and Security Capital
             (incorporated by eference to Exhibit  99.1 to Archstone's Current Report on Form 8-K dated
             February 16, 2001)

       10.17 Amendment No. 3, dated February 15, 2001, to Third Amended and Restated Investor Agreement by
             and  between Archstone and  Security  Capital (incorporated  by reference to Exhibit 99.2 to
             Archstone's Current Report on Form 8-K dated February 16, 2001)

       12.1  Computation of Earnings to Fixed Charges

       12.2  Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Share Dividends

       15.1  Letter from KPMG LLP dated August 14, 2001 regarding unaudited financial information

       99.1  Current Development Activity

   (b) Reports on Form 8-K: The  following  report on Form 8-K was filed during the quarter of the period  covered
       by this report.

       Archstone  filed a Current Report on Form 8-K,  dated June 19, 2001,  under Items 5 and 7, Other Events and
       Financial Statements and Exhibits, respectively.

                                     BY:            /S/ CHARLES E. MUELLER, JR.
                                            -------------------------------------------
                                                       Charles E. Mueller, Jr.
                                                      Chief Financial Officer
                                                    (Principal Financial Officer)




                                     BY:            /S/ WILLIAM KELL
                                            -------------------------------------------
                                                           William Kell
                                                 Senior Vice President and Controller
                                                     (Principal Accounting Officer)