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DENVER-Archstone-Smith, the apartment real estate investment trust based here, will pay more than $21 million to ensure that 71 apartment communities it owns nationwide provide proper access to those tenants with disabilities. The settlement will cost Archstone more than $20 million in estimated retrofitting costs, in addition to paying $1.4 million in damages and legal fees.

Archstone-Smith, which specializes in building luxury apartment communities in cities with strong barriers to entry, will renovate as many as 12,000 apartments as part of the settlement. The company calls it a “full and final settlement” of litigation with three national disability organizations in order to make apartments compliant with Fair Housing Act and the Americans with Disabilities Act. The agreement was reached in US District Court in Maryland.

In a statement, Archstone-Smith executives say that the settlement will reduce its second quarter 2005 net earnings and funds from operations by about 2 cents per share. The company is seeking reimbursement for these damages from its insurers. At the same time, Archstone-Smith its full-year FFO guidance of $1.90 to $2 per share, but does not include any potential insurance recoveries.

“When constructing communities, Archstone-Smith relies on the professional services of outside architects, engineers and builders to ensure that its communities are in compliance with all building codes and laws, including the FHA and ADA,” the company says. The company says it will seek “recovery of a substantial portion of the expenses and capital expenditures related to this settlement from the architects, engineers, and builders upon whom the company relied for assurances of building design and construction compliance.”

Renovations to apartment units could include improving access to thermostats and electrical outlets, improving maneuverability in kitchens and bathrooms and adjustments to doorway thresholds. Attorneys for the plaintiffs estimate the cost at $20 million, but Archstone-Smith, says it has not yet determined the amount of the capital expenditure.

“These expenditures are expected to be capitalized as they are incurred,” according to the company. “The settlement agreement approved by the court allows Archstone-Smith to remediate the designated communities over the next three years, and also provides that Archstone-Smith is not restricted from selling any of its communities during the remediation period.”

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