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DENVER-Archstone-Smith, one of the nation’s largest apartment REITs, posted net earnings per share for the first quarter of 43 cents per share, compared to 29 cents per share for the same period in 2002. The company’s funds from operations, with gains and losses, was 63 cents per share in the first quarter, compared with 51 cents per share for the same period in 2002.

In an effort to better reflect Archstone-Smith’s long-term commitment to an active capital recycling program–and producing attractive returns on invested capital–the company will begin reporting FFO with gains/losses in addition to earnings per share.

“Archstone-Smith has an excellent track record of creating significant value for our shareholders through a strategic approach to capital allocation,” says R. Scot Sellers, chairman and CEO. “We believe that measuring gross gains and unleveraged internal rates of return achieved on dispositions is essential for all real estate companies,” Sellers adds. “Enhanced disclosure and focus in this area is important for investors to better understand each company’s core competencies. We believe that reporting FFO with gains/losses provides a much more accurate basis from which to measure our performance.”

From 1997 to 2002, Archstone-Smith produced $217.8 million of aggregate gross gains from apartment sales, representing average gross gains of $36.3 million per year. The company’s FFO was 48 cents per share in first quarter 2003, compared with 52 cents per share during first quarter 2002. Archstone-Smith’s first quarter results include the gain from the sale of an apartment community by Ameriton, which contributed about 2 cents per share to the company’s EPS and FFO per share.

Archstone-Smith’s first quarter same-store revenues decreased 1.9% compared with the same period last year; and first quarter same-store net operating income decreased 3.9%.

First quarter same-store expenses increased 2.1% over the same period last year, driven principally by higher snow removal and utility costs related to the harsh winter in Washington, D.C. and the Northeast. Sequentially, first quarter same-store revenues were flat and NOI increased 1.1% over fourth quarter 2002.

As of May 1, Archstone-Smith has completed $190.8 million of dispositions at an average capitalization rate of 7.1%, which produced aggregate gross gains of $35.9 million. This disposition volume included the sale of nine communities, representing an average unleveraged IRR of 13.6%.

“The current economic environment offers very attractive capitalization rates and provides outstanding opportunities for us to further our long-term investment strategy of redeploying capital into investments with better fundamentals for growth and long-term value creation,” says Charles E. Mueller, CFO. “We are proud of our strong investment track record, which has consistently produced significant gains and very attractive unleveraged IRRs. In order to help investors better understand our investment performance, we will report our unleveraged IRR on dispositions going forward.”

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