Gables Realty Limited Partnership 10-Q 2004 Q2 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10 - Q

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

Commission File Number: 000-22683

GABLES REALTY LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its Charter)

DELAWARE
(State of Incorporation) 58-2077966
(I.R.S. Employer Identification No.)

777 Yamato Road, Suite 510
Boca Raton, Florida 33431
(Address of principal executive offices, including zip code)

(561) 997-9700

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 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.

(X)  YES                      (  ) NO

Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act)
(X)   YES              (  ) NO

GABLES REALTY LIMITED PARTNERSHIP
FORM 10 - Q INDEX

Part I	Financial Information	Page
Item 1:	Unaudited Financial Statements
	Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003	3
	Consolidated Statements of Operations for the three and six months ended June 30, 2004 and 2003	4
	Consolidated Statements of Cash Flows for the six months ended June 30, 2004 and 2003	5
	Notes to Consolidated Financial Statements	6
Item 2:	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4:	Controls and Procedures	39
Part II	Other Information
Item 1:	Legal Proceedings	40
Item 2:	Changes in Securities	40
Item 3:	Defaults Upon Senior Securities	40
Item 4:	Submission of Matters to a Vote of Security Holders	40
Item 5:	Other Information	40
Item 6:	Exhibits and Reports on Form 8-K	40
	Signatures	41

PART I. – FINANCIAL INFORMATION
ITEM 1. – UNAUDITED FINANCIAL STATEMENTS

GABLES REALTY LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEETS (Unaudited and Amounts in Thousands, Except Per Unit Data)
	June 30,		December 31,
	2004		2003       .
ASSETS:
Real estate assets:
Land	$     273,282		$          283,015
Buildings	1,291,860		1,367,086
Furniture, fixtures and equipment	134,571		140,077
Construction in progress	177,950		146,041
Investment in joint ventures	29,674		11,456
Undeveloped land	29,594		15,822
Real estate assets before accumulated depreciation and assets held for sale	1,936,931		1,963,497
Less:  accumulated depreciation	(295,026	)	(297,464	)
Assets held for sale, net of accumulated depreciation of $10,422	46,389		-
Net real estate assets	1,688,294		1,666,033
Cash and cash equivalents	7,763		5,915
Restricted cash	16,122		6,116
Deferred financing costs, net	3,477		5,029
Other assets, net	43,474		41,983
Total assets	$  1,759,130		$    1,725,076
LIABILITIES AND PARTNERS' CAPITAL:
Notes payable, including $28,000 secured by assets held for sale at June 30, 2004	$  1,047,968		$   1,003,100
Accrued interest payable	13,533		13,751
Preferred distributions payable	374		374
Real estate taxes payable	15,214		15,792
Accounts payable and accrued expenses – construction	9,266		12,549
Accounts payable and accrued expenses – operating	17,460		16,466
Security deposits	3,959		4,048
Series Z Preferred Units, at $25.00 liquidation preference, 180 units issued      and outstanding, including accrued and unpaid distributions	5,858		5,746
Total liabilities	1,113,632		1,071,826
Limited partners’ common capital interest (4,247 and 4,353 common units,       respectively), at cash redemption value	142,871		148,595
Commitments and contingencies
Partners' capital:
General partner (335 and 331 common units, respectively)	6,655		6,675
Limited partner (28,942 and 28,449 common shares, respectively)	380,972		382,980
Preferred partners (1,600 Series C-1 Preferred Units and 3,000 Series D Preferred       Units), at $25.00 liquidation preference	115,000		115,000
Total partners' capital	502,627		504,655
Total liabilities, partners’ capital interest and partners' capital	$1,759,130		$ 1,725,076
See notes to consolidated financial statements.

GABLES REALTY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and Amounts in Thousands, Except Per Unit Data)

	Three Months . Ended June 30,.					Six Months Ended June 30,
		2004		2003			2004		2003
Revenues:
Rental revenues		$ 51,756		$ 47,535			$102,667		$94,780
Other property revenues		3,258		2,870			5,982		5,306
Total property revenues		55,014		50,405			108,649		100,086
Property management revenues		2,078		1,951			4,232		3,800
Ancillary services revenues		1,337		1,453			2,551		3,326
Interest income		32		88			40		161
Other revenues		453		74			859		120
Total other revenues		3,900		3,566			7,682		7,407
Total revenues		58,914		53,971			116,331		107,493
Expenses:
Property operating and maintenance (exclusive of items shown separately below)		19,904		17,773			39,465		34,966
Real estate asset depreciation and amortization		13,192		11,283			26,644		22,731
Property management (owned and third party)		4,113		3,644			8,399		7,130
Ancillary services		1,010		1,085			2,074		2,310
Interest expense and credit enhancement fees		10,890		10,349			21,538		20,732
Amortization of deferred financing costs		516		482			1,021		906
General and administrative		2,751		2,272			5,725		4,605
Corporate asset depreciation and amortization		714		482			1,212		824
Total expenses		53,090		47,370			106,078		94,204
Income from continuing operations before equity in income of joint ventures		5,824		6,601			10,253		13,289
Equity in income of joint ventures		60		100			544		195
Income from continuing operations		5,884		6,701			10,797		13,484
Operating income from discontinued operations		600		1,455			1,289		2,991
Gain on sale of discontinued operations		14,198		-			16,580		5,042
Debt extinguishment costs associated with the sale of real estate assets		(986	)	-			(986	)	-
Income from discontinued operations		13,812		1,455			16,883		8,033
Net income		19,696		8,156			27,680		21,517
Distributions to preferred unitholders		(  2,193	)	(2,750	)		(4,387	)	( 4,672	)
Net income available to common unitholders		$17,503		$  5,406			$23,293		$16,845
Weighted average number of common units outstanding – basic		33,461		30,416			33,369		30,359
Weighted average number of common units outstanding – diluted		33,548		30,520			33,487		30,429
Per Common Unit Information – Basic:
Income from continuing operations (net of preferred distributions)		$0.11		$0.13			$0.19		$0.29
Income from discontinued operations		$0.41		$0.05			$0.51		$0.26
Net income available to common unitholders		$0.52		$0.18			$0.70		$0.55
Per Common Unit Information – Diluted:
Income from continuing operations (net of preferred distributions)		$0.11		$0.13			$0.19		$0.29
Income from discontinued operations		$0.41		$0.05			$0.50		$0.26
Net income available to common unitholders		$0.52		$0.18			$0.70		$0.55
See notes to consolidated financial statements.

GABLES REALTY LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited and Amounts in Thousands, Except Per Unit Data)
		Six Months Ended June 30,
			2004		2003
	CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income		$   27,680		$       21,517
	Adjustments to reconcile net income to net cash provided
	by operating activities of continuing operations:
	Income from discontinued operations		(16,883	)	(8,033	)
	Depreciation and amortization		28,877		24,461
	Equity in income of joint ventures		(544	)	(   195	)
	Long-term compensation expense		969		806
	Operating distributions received from joint ventures		977		1,007
	Change in operating assets and liabilities:
	Restricted cash		916		1,439
	Other assets		1,152		589
	Other liabilities, net		622		(   299	)
	Net cash provided by operating activities from continuing operations		43,766		41,292
	Net cash provided by operating activities from discontinued operations		2,549		6,088
	Net cash provided by operating activities		46,315		47,380
	CASH FLOWS FROM INVESTING ACTIVITIES:
	Acquisition, development, construction and renovation of real estate assets		(109,425	)	(111,991	)
	Recurring value retention capital expenditures		(4,711	)	(    5,225	)
	Non-recurring and/or value-enhancing capital expenditures		(2,558	)	(    4,348	)
	Restricted cash held in escrow, net				349
	Net proceeds from the sale of undeveloped land		1,696		-
	Net proceeds from sale of discontinued operations		52,602		18,737
	Investment in joint ventures		(7,745	)	(       892	)
	Net proceeds from sale of joint venture real estate assets		1,580		-
	Other		(2,592	)	(    2,802	)
	Net cash used in investing activities		(71,153	)	(106,521	)
	CASH FLOWS FROM FINANCING ACTIVITIES:
	Contributions from the Trust related to:
	Net proceeds from the issuance of Series D Preferred Shares		-		72,419
	Proceeds from the exercise of share options		5,313		4,347
	Payments of deferred financing costs		(5	)	(  1,220	)
	Notes payable proceeds		195,618		149,152
	Notes payable repayments		(118,076	)	(121,000	)
	Debt extinguishment costs associated with the sale of real estate assets		(617	)	-
	Principal escrow payments deposited into escrow, net		(10,922	)	(     262	)
	Preferred distributions paid		(4,387	)	(  4,998	)
	Common distributions paid ($1.205 per unit)		(40,238	)	(36,633	)
	Net cash provided by financing activities		26,686		61,805
	Net change in cash and cash equivalents		$   1,848		$    2,664
	Cash and cash equivalents, beginning of period		5,915		6,281
	Cash and cash equivalents, end of period		$   7,763		$    8,945
	Supplemental disclosure of cash flow information:
	Cash paid for interest		$ 26,178		$  26,609
	Interest capitalized		4,481		4,361
	Cash paid for interest, net of amounts capitalized		$ 21,697		$  22,248
	See notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Amounts in Thousands, Except Property and Per Unit Data)Unless the context otherwise requires, all references to "we," "our" or "us" in this report refer collectively to Gables Realty Limited Partnership and its subsidiaries.

1.   ORGANIZATION AND FORMATION

        Gables Realty Limited Partnership (the "Operating Partnership") is the entity through which Gables Residential Trust (the "Trust"), a real estate investment trust (a "REIT"), conducts substantially all of its business and owns, either directly or indirectly through subsidiaries, substantially all of its assets. The Trust was formed in 1993 under Maryland law to continue and expand the operations of its privately owned predecessor organization. The Trust completed its initial public offering on January 26, 1994.

       We are a fully integrated real estate company engaged in the multifamily apartment community management, development, construction, acquisition and disposition businesses. We also provide management, development and construction, corporate rental housing and brokerage services to third parties and unconsolidated joint ventures. Substantially all of our third-party management businesses are conducted through a wholly-owned subsidiary, Gables Residential Services.

       As of June 30, 2004, the Trust was an 87.3% economic owner of our common equity. The Trust controls us through Gables GP, Inc. ("Gables GP"), a wholly-owned subsidiary of the Trust and our sole general partner. This organizational structure is commonly referred to as an umbrella partnership REIT or "UPREIT." The board of directors of Gables GP, the members of which are the same as the members of the Trust's board of trustees, manages our affairs by directing the affairs of Gables GP. The Trust's limited partnership and indirect general partnership interests in us entitle it to share in our cash distributions, and in our profits and losses in proportion to its ownership interest therein and entitles the Trust to vote on all matters requiring a vote of the limited partners. Generally, our other limited partners are persons who contributed their direct or indirect interests in certain of our real estate assets primarily in connection with the IPO and the 1998 acquisition of the real estate assets and operations of Trammell Crow Residential South Florida. A unit of limited partnership interest in the Operating Partnership is referred to herein as a “unit.” We are obligated to redeem each common unit held by a person other than the Trust at the request of the holder for an amount equal to the fair market value of a share of the Trust's common shares at the time of such redemption, provided that the Trust, at its option, may elect to acquire each common unit presented for redemption for one common share or cash. Such limited partners' redemption rights are reflected in "limited partners' capital interest" in our accompanying consolidated balance sheets at the cash redemption amount at the balance sheet date. The Trust's percentage ownership interest in us will increase with each redemption. In addition, whenever the Trust issues common shares or preferred shares, it is obligated to contribute any net proceeds to us and we are obligated to issue an equivalent number of common or preferred units with substantially identical rights as the common or preferred shares, as applicable, to the Trust.

       Distributions to holders of units are made to enable the Trust to make distributions to its shareholders under its dividend policy. The Trust must currently distribute 90% of its ordinary taxable income to its shareholders. We make distributions to the Trust to enable it to satisfy this requirement.

As of June 30, 2004, we managed a total of 185 multifamily apartment communities owned by us and our third-party clients comprising 47,784 apartment homes.  As of June 30, 2004, we owned 75 stabilized multifamily apartment communities comprising 19,733 apartment homes, an indirect 50% interest in two stabilized apartment communities comprising 411 apartment homes, an indirect 49% interest in two stabilized apartment communities comprising 532 apartment homes, an indirect 25% interest in one stabilized apartment community comprising 345 apartment homes, an indirect 20% interest in four stabilized apartment communities comprising 1,326 apartment homes, and an indirect 8.3% interest in three stabilized apartment communities comprising 1,118 apartment homes. We also owned nine multifamily apartment communities under development or in lease-up at June 30, 2004 that are expected to comprise 2,548 apartment homes upon completion and an indirect 20% interest in one apartment community under development at June 30, 2004 that is expected to comprise 76 apartment homes upon completion.  In addition, as of June 30, 2004, we owned two parcels of land on which we intend to develop two apartment communities that we currently expect will comprise an estimated 679 apartment homes upon completion.  We also have rights to acquire additional parcels of land, either through options or long-term conditional contracts, on which we believe we could develop nine communities that we currently expect would comprise an estimated 2,136 apartment homes upon completion. Any future development is subject to obtaining permits and other governmental approvals, as well as our ongoing business review, and may not be undertaken or completed.

2. COMMON AND PREFERRED EQUITY ACTIVITY

Secondary Common Share Offerings

        Since its IPO, the Trust has issued a total of 17,331 common shares in nine offerings, generating $426.8 million in net proceeds which were generally used (1) to reduce outstanding indebtedness under our interim financing vehicles utilized to fund our development and acquisition activities and (2) for general working capital purposes, including funding of future development and acquisition activities.  The most recent offering, involving the issuance of 2,500 common shares that generated $79.0 million in net proceeds, closed on August 26, 2003. 

Preferred Share Offerings

        On May 8, 2003, the Trust issued 3,000 shares of 7.5% Series D Cumulative Redeemable Preferred Shares with a liquidation preference of $25.00 per share. The net proceeds from this issuance of approximately $72.4 million were used to reduce outstanding indebtedness under our interim financing vehicles. The Series D Preferred Shares may be redeemed at the Trust’s option at $25.00 per share plus accrued and unpaid dividends on or after May 8, 2008. The Series D Preferred Shares are not subject to any sinking fund or convertible into any other securities of the Trust.

        On September 27, 2002, the Trust issued 1,600 shares of 7.875% Series C Cumulative Redeemable Preferred Shares with a liquidation preference of $25.00 per share in a private placement to an institutional investor.  The net proceeds from this issuance of $39.7 million, together with the net proceeds of $39.7 million from the concurrent issuance of $40 million of senior unsecured notes, were used to retire approximately $82.5 million of unsecured indebtedness at an interest rate of 8.3% that was scheduled to mature in December 2002.  Pursuant to a registration rights agreement with the purchaser of the Series C Preferred Shares, the Trust registered a new series of preferred shares with the Securities and Exchange Commission and offered to exchange those shares on a one-for-one basis for the outstanding Series C Preferred Shares.  The dividend rate, preferences and other terms for the new preferred shares, or 7.875% Series C-1 Cumulative Redeemable Preferred Shares, are identical in all material respects to the Series C Preferred Shares, except that the Series C-1 Preferred Shares are freely tradable by a holder.  The exchange offer was consummated on September 5, 2003 and did not generate any cash proceeds for the Trust.  The Series C-1 Preferred Shares may be redeemed at the Trust’s option at $25.00 per share plus accrued and unpaid dividends on or after September 27, 2006.  The Series C-1 Preferred Shares are not subject to any sinking fund or convertible into any other securities of the Trust.

        On June 18, 1998, the Trust issued 180 shares of 5.0% Series Z Cumulative Redeemable Preferred Shares with a liquidation preference of $25.00 per share in connection with the acquisition of a parcel of land for future development. The Series Z Preferred Shares, which are subject to mandatory redemption on June 18, 2018, may be redeemed at the Trust’s option at any time for $25.00 per share plus accrued and unpaid dividends.  Dividends on the Series Z Preferred Shares are cumulative from the issuance date and the first dividend payment date is June 18, 2008.  Thereafter, dividends will be paid annually in arrears.  The Series Z Preferred Shares are not subject to any sinking fund or convertible into any other securities of the Trust.

Issuances of Common Operating Partnership Units

       Since the IPO, we have issued a total of 4,487 common units in connection with the 1998 acquisition of the real estate assets and operations of Trammell Crow Residential South Florida, the acquisition of other operating apartment communities and the acquisition of parcels of land for future development.  The most recent issuance of common units on June 17, 2004 was related to the acquisition of a parcel of land for the future development of an apartment community expected to comprise 418 apartment homes upon completion.  The purchase price of $12.3 million was financed in part through the issuance of 66 common units. 

Issuance of Preferred Operating Partnership Units

      On November 12, 1998, we issued 2,000 of our 8.625% Series B Preferred Units to an institutional investor. The net proceeds from this issuance of $48.7 million were used to reduce outstanding indebtedness under our interim financing vehicles. On November 17, 2003, we redeemed each of the 2,000 outstanding Series B Preferred Units at $25.00 per unit plus accrued and unpaid distributions.  The redemption price of the Series B Preferred Units exceeded the related carrying value by the $1.3 million of issuance costs that were originally incurred and classified as a reduction to partners’ capital.  In the fourth quarter of 2003, the $1.3 million excess was reflected as a reduction to earnings in arriving at net income available to common unitholders in accordance with the July 2003 clarification of EITF Abstracts, Topic No. D-42, "The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock" (Note 5).

Common Equity Repurchase Program

      The Trust’s board of trustees implemented a common equity repurchase program pursuant to which the Trust is authorized to purchase up to $200 million of its outstanding common shares or units. The Trust views the repurchase of common equity with consideration of other investment alternatives when capital is available to be deployed.  The Trust has repurchased shares from time to time in open market and privately negotiated transactions, depending on market prices and other prevailing conditions, using proceeds from sales of selected assets. Whenever the Trust repurchases common shares from shareholders, we are required to redeem from the Trust an equivalent number of common units on the same terms and for the same aggregate price.  After redemption, the common units redeemed by us are no longer deemed outstanding.  Common units have also been repurchased for cash from time to time upon their presentation for redemption by unitholders.  As of June 30, 2004, we had redeemed 4,806 common units, including 4,506 common units redeemed by the Trust, for a total of $116.0 million, including $0.2 million in related commissions.

Shelf Registration Statement

       We have an effective shelf registration statement on file with the Securities and Exchange Commission under which the Trust has $500 million of equity capacity and we have $500 million of debt capacity.  We believe it is prudent to maintain shelf registration capacity in order to facilitate future capital raising activities.  To date, there have been no issuances of securities under this registration statement.  

3. BASIS OF PRESENTATION

       The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the consolidated accounts of the Operating Partnership and its subsidiaries, including Gables Residential Services. We consolidate the financial statements of all entities in which we have a controlling financial interest, as that term is defined under GAAP, through either majority voting interest or contractual agreements. Our investments in non-controlled joint ventures are accounted for using the equity method.  All significant intercompany accounts and transactions have been eliminated in consolidation.

       The accompanying interim unaudited financial statements have been prepared in accordance with GAAP for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, all adjustments (consisting only of normally recurring adjustments) considered necessary for a fair presentation for these interim periods have been included. The results of operations for the interim period ended June 30, 2004 are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the financial statements included in our Form 10-K for the year ended December 31, 2003.

      Certain amounts in the 2003 financial statements have been reclassified to conform to the 2004 presentation.

4.  PORTFOLIO AND OTHER FINANCING ACTIVITY

Community Dispositions Subject to Discontinued Operations Reporting

      In May 2004, we sold an apartment community located in Atlanta comprising 603 apartment homes.  The community was secured by $10.5 million of tax-exempt fixed-rate bonds that had a scheduled maturity date of January 2025.  The net proceeds from the sale of $25.6 million were used to defease the $10.5 million bond indebtedness and to pay down outstanding borrowings under our interim financing vehicles.  In connection with the sale transaction, we incurred $1.0 million of debt extinguishment costs, including $0.6 million of defeasance costs and $0.4 million relating to the write-off of unamortized deferred financing costs.  This amount is reflected in the accompanying consolidated statements of operations as “debt extinguishment costs associated with the sale of real estate assets.”  Such costs are excluded from the gain on sale of real estate assets because the debt was not part of the disposal group.  The gain from the sale of this community, exclusive of the debt extinguishment costs, was $14.2 million and was recognized in the second quarter of 2004. 
In March 2004, we sold an apartment community located in Orlando comprising 231 apartment homes.  The net proceeds from this sale were $27.0 million and were used to pay down outstanding borrowings under our interim financing vehicles.  In connection with the sale transaction, we were relieved of a $2.0 million note payable obligation. The gain from the sale of this community was $2.4 million and was recognized in the first quarter of 2004. 
During 2003, we sold four apartment communities located in Houston comprising 1,373 apartment homes and an apartment community located in Dallas comprising 300 apartment homes. The net proceeds from these sales were $112.1 million and were used to pay down outstanding borrowings under our interim financing vehicles. The aggregate gain from the sale of these five communities was $37.7 million.  One of these sales occurred during the first quarter of 2003, resulting in a $5.0 million gain which was recognized in the first quarter of 2003.  The other sales occurred during the third and fourth quarters of 2003.

      Historical operating results, gains and debt extinguishment costs associated with the sale of real estate assets are reflected as discontinued operations in the accompanying consolidated statements of operations (Note 6).

Community and Land Dispositions Not Subject to Discontinued Operations Reporting

       In June 2004, we sold a 50% interest in two apartment communities located in South Florida comprising 411 apartment homes in connection with the formation of a new joint venture, GN Apartment Fund LLC.  This transaction did not meet the criteria for gain recognition.  See “GN Apartment Fund LLC” below for further discussion.

      In March 2004, we sold our 20% ownership interest in an apartment community located in Houston comprising 186 apartment homes to our partner in the Gables Residential Apartment Portfolio JV (the "GRAP JV").  The net proceeds from this sale were $1.6 million, resulting in a gain of $0.4 million which was recognized in the first quarter of 2004.

        In February 2004, we sold a parcel of land in San Antonio.  The net proceeds from this sale were $1.7 million and resulted in no gain or loss.

       Historical operating results and gains are included in continuing operations in the accompanying consolidated statements of operations (Note 6).

Community Acquisitions

       In June 2004, we acquired an apartment community located in Dallas comprising 30 apartment homes for approximately $2.0 million in cash.

       In June 2004, we acquired an apartment community located in Atlanta comprising 272 apartment homes for approximately $32.9 million in cash.

       In December 2003, we acquired an apartment community for renovation located in South Florida comprising 36 apartment homes for approximately $4.1 million in cash.  This community is adjacent to a land parcel that we acquired in January 2004 for the future development of an apartment community that we currently expect will comprise 261 apartment homes.

        In July 2003, we acquired an apartment community located in Washington, D.C. comprising 211 apartment homes for approximately $54.6 million in cash, including approximately $1.6 million of closing costs.

       In May 2003, we acquired an apartment community located in Dallas comprising 334 apartment homes for approximately $33.5 million in cash.

       In February 2003, we acquired an apartment community located in Austin that is subject to a long-term ground lease and is comprised of 239 apartment homes and 7,366 square feet of retail space for approximately $30.2 million in cash.

Other Acquisitions

       In May 2004, we acquired Income Growth Property Management, Inc. ("IGPM"), a property management company based in San Diego, CA that managed 2,141 apartment homes in 17 multifamily apartment communities located in the San Diego and Inland Empire (San Bernardino/Riverside) areas at the time of acquisition.  The purchase price of approximately $2.2 million, inclusive of related commissions, is structured to be paid in three installments based on retention of the management contracts in place upon acquisition.  The purchase price may increase if certain additional management contracts are obtained.  As of June 30, 2004, we had funded $1.5 million of the $2.2 million purchase price.  The second and third installments are expected to be paid in the second quarters of 2005 and 2006, respectively.

       In May 2003, we acquired property management contracts for 10,684 apartment homes in 32 multifamily apartment communities from Archstone Management Services Incorporated.  The services rendered under acquired management contracts for 9,184 apartment homes transitioned to us over the ensuing three month period.  The services to be rendered under the remaining management contracts for 1,500 apartment homes did not transition to us in 2003 for various reasons associated with the underlying assets, including sale prior to transition and location.  The purchase price of approximately $5.4 million was paid in three installments and was based on the retention of the contracts acquired.  The final installment of $1.1 million was determined and paid in the second quarter of 2004.

GN Apartment Fund LLC

         The GN Apartment Fund LLC was formed in June 2004.  Our ownership interest in this venture is 50%.  We serve as the managing member of the venture and have responsibility for all day-to-day operating matters and as property manager.  In connection with the formation transactions, we contributed 100% of our ownership interest in two communities in South Florida comprising 411 apartment homes with an agreed upon fair value of $51.1 million, subject to $30.7 million of indebtedness, and $7.2 million in cash in return for a 50% ownership interest in the venture.  Our venture partner, New York State Teachers' Retirement System ("NYSTRS"), as advised by JP Morgan Fleming Asset Management, contributed 98% of its ownership interest in two communities in Temecula, CA comprising 532 apartment homes with an agreed upon fair value of $66.1 million, subject to $31.4 million of indebtedness, and other net liabilities of $0.6 million, in return for its 50% ownership interest in the venture and $6.5 million in cash.  Our initial investment in this joint venture is equal to the net book value of the assets and liabilities we contributed to the venture.   

       In connection with this transaction, we have discussed making future investments with NYSTRS through the formation of additional joint ventures whereby the ventures, on a collective basis, intend to own, operate, acquire and develop up to $800 million of multifamily apartment communities located primarily in the San Diego, Inland Empire and Washington, D.C. markets.  We have granted NYSTRS a three-year right-of-first-opportunity for investment opportunities in San Diego and Washington, D.C. that exceed $50 million and those that exceed $35 million in the Inland Empire. 

Senior Unsecured Note Exchange

      On September 27, 2002, we issued $40 million of senior unsecured notes in two series in a private placement to an institutional investor: $30 million at an interest rate of 5.86% maturing in September 2009 and $10 million at an interest rate of 6.10% maturing in September 2010. The net proceeds of $39.7 million, together with the net proceeds of $39.7 million from the concurrent issuance by the Trust of the 7.875% Series C Preferred Shares, were used to retire approximately $82.5 million of senior unsecured notes at an interest rate of 8.3% that were scheduled to mature in December 2002. We did not incur any prepayment costs in connection with the early debt retirement.  Pursuant to a registration rights agreement with the purchaser of the $40 million of senior unsecured notes, we registered new notes with the Securities and Exchange Commission, and offered to exchange those new notes for the original notes.  The new notes, also issued in two series, are identical in all material respects to the original 5.86% notes due 2009 and the 6.10% notes due 2010, except that the new notes are freely tradable by a holder.  The exchange offer was consummated on September 5, 2003 and did not generate any cash proceeds for us.

5. RECENT ACCOUNTING PRONOUNCEMENTS

        In January 2003, FIN 46, "Consolidation of Variable Interest Entities," was issued, and was subsequently replaced by FIN 46R in December 2003.   In general, a variable interest entity ("VIE") is an entity that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities.  Previously, a company generally had only consolidated another entity in its financial statements if it controlled the entity through voting interests.  FIN 46R changes that by requiring a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss from the VIE's activities or is entitled to receive a majority of the entity's residual returns or both.  The provisions of FIN 46R are effective for the first interim period ending after March 15, 2004.  The adoption of FIN 46R did not have a significant impact on our financial statements or result in the consolidation of any previously unconsolidated entities.

         In May 2003, SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” was issued.  SFAS No. 150 (effective for us July 1, 2003) establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.  Upon adoption of SFAS No. 150, we reclassified our mandatorily redeemable Series Z Preferred Units to the liability section of our balance sheet and, beginning July 1, 2003, have recorded distributions on the Series Z Preferred Units as interest expense in our statements of operations.  The adoption of SFAS No. 150 did not have a significant impact on our financial statements.

        In July 2003, EITF Abstracts, Topic No. D-42, "The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock," was clarified. Topic No. D-42 requires that, in arriving at net earnings available to common shareholders in the calculation of earnings per share, the excess of (1) the fair value of the consideration transferred to the holders of preferred stock over (2) the carrying amount of the preferred stock in the balance sheet be subtracted from net earnings. In July 2003, it was clarified that the carrying amount of the preferred stock should be reduced by the issuance costs of the preferred stock, regardless of where in the stockholders' equity section those costs were initially classified upon issuance.  Prior to this clarification, we had not considered issuance costs in determining the carrying amount of preferred stock. This clarification of Topic No. D-42 was required to be reflected retroactively in the third quarter of 2003, by restating the financial statements of prior periods in accordance with the provisions of paragraphs 27-30 of APB Opinion No. 20, “Accounting Changes.” We redeemed our Series B Preferred Units in November 2003. The redemption price of the Series B Preferred Units exceeded the related carrying value by the $1.3 million of issuance costs originally incurred and classified as a reduction to partners’ capital.  In the fourth quarter of 2003, the $1.3 million excess was reflected as a reduction to earnings in arriving at net income available to common unitholders in accordance with this clarification.  We will also apply the provisions of Topic No. D-42 to any future redemptions of preferred stock.

6.  DISCONTINUED OPERATIONS

We adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” effective January 1, 2002.  SFAS No. 144 requires, among other things, that the operating results of certain real estate assets which have been sold subsequent to January 1, 2002, or otherwise qualify as held for sale (as defined by SFAS No. 144), be reflected as discontinued operations in the consolidated statements of operations for all periods presented.  We sold one operating apartment community during the first quarter of 2004 and one operating apartment community during the second quarter of 2004.  As of June 30, 2004, we had three operating apartment communities that were under contract for sale and were classified as held for sale.  During 2003, we sold the following operating apartment communities:  one during the first quarter, two during the third quarter and two during the fourth quarter.  The operating results for these ten wholly-owned assets sold or classified as held for sale, are reflected as discontinued operations in the accompanying statements of operations for all periods presented. Interest expense has been allocated to the results of the discontinued operations in accordance with EITF No. 87-24. We had no assets that qualified as held for sale as defined by SFAS No. 144 at December 31, 2003.

       During the second quarter of 2004, we contributed our interest in two operating apartment communities, Gables Palma Vista and Gables Wellington, to the GN Apartment Fund LLC, a joint venture in which we have a 50% interest.  Due to our continuing involvement with the operations of these two communities, the operating results of these assets are included in continuing operations for all periods presented.

       Condensed financial information of the results of operations for the real estate assets sold or held for sale reflected as discontinued operations is as follows:

	Three Months              Ended June 30,			Six Months     Ended June 30,
	2004		2003	2004		2003
Total property revenues	$2,489		$6,866	$6,085		$14,078
Property operating and maintenance expense     (exclusive of items shown separately below) Real estate asset depreciation expense Interest expense    Total expenses	1,007       488     394   1,889		2,870 1,480   1,061   5,411	2,488 1,260     1,048   4,796		5,797 3,097   2,193 11,087
Operating income from discontinued operations	600		1,455	1,289		2,991
Gain on sale of discontinued operations	14,198		-	16,580		5,042
Debt extinguishment costs associated with the sale of real estate assets	(986	)	-	(986	)	-
Income from discontinued operations	$13,812		$1,455	$16,883		$8,033

7.   EARNINGS PER UNIT

      Basic earnings per unit are computed based on net income available to common unitholders and the weighted average number of common units outstanding. Diluted earnings per unit reflect the assumed issuance of common units under the Trust’s share option and incentive plan. The numerator and denominator used for both basic and diluted earnings per unit computations are as follows:

	Three Months    Ended June 30,		Six Months     Ended June 30,
	2004	2003	2004	2003
Basic and diluted income available to common unitholders (numerator):
Income from continuing operations (net of preferred distributions) – basic and diluted   Income from discontinued operations – basic and diluted  Net income available to common unitholders – basic and diluted Common units (denominator): Average units outstanding – basic Incremental units from assumed conversions of:    Stock options    Other Average units outstanding – diluted	$   3,691 $ 13,812 $17,503 33,461   73          14   33,548	$  3,951 $  1,455 $  5,406 30,416 95          9 30,520	$  6,410 $16,883 $23,293 33,369 104         14 33,487	$ 8,812 $ 8,033 $16,845 30,359 61          9 30,429

8.  SEGMENT REPORTING

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our senior management group.

        We own, operate and develop multifamily apartment communities in major markets located in Texas, Georgia, Florida, Washington, D.C., San Diego/Inland Empire and Tennessee.  Such apartment communities generate rental revenue and other income through the leasing of apartment homes to a diverse base of residents.  The operating performance of each of our communities is affected by the supply and demand dynamics within the immediate submarket or neighborhood of the major market that each community is located in.  We evaluate the performance of each of our apartment communities on an individual basis. However, because each of our apartment communities has similar economic characteristics, residents, and products and services, our apartment communities have been aggregated into one reportable segment. This segment comprised 93% of our total revenues for the three and six months ended June 30, 2004 and 2003.

        The primary financial measure for our reportable business segment is net operating income (NOI), which represents total property revenues less property operating and maintenance expenses.  Property operating and maintenance expenses represent direct property operating and maintenance expenses as reflected in our accompanying statements of operations and exclude certain expenses included in the determination of net income such as property management and other indirect operating expenses, interest expense and depreciation and amortization expense.  These items are excluded from NOI in order to provide results that are more closely related to a property’s results of operations.  NOI is also used by industry analysts and investors to measure operating performance of our apartment communities. Current year NOI is compared to prior year NOI and current year budgeted NOI as a measure of financial performance. The NOI yield or return on total capitalized costs is an additional measure of financial performance.

        NOI from our wholly-owned apartment communities included in continuing operations, and a reconciliation thereof to income from continuing operations before equity in income of joint ventures (this caption in the accompanying statements of operations is the most directly comparable GAAP measure to NOI) is as follows:

	Three Months    .  Ended June 30,   .				Six Months    . Ended June 30,
	2004		2003			2004		2003
Total property revenues Less:  Property operating and maintenance expenses	$55,014 (19,904	)	$50,405   ( 17,773	)			$108,649.   ( 39,465)	$100,086   ( 34,966	)
Net operating income (NOI)	$35,110		$32,632				$  69,184.	$  65,120
Less other expenses:
Real estate asset depreciation and amortization	(13,192	)	(11,283	)			(26,644)	(22,731	)
Property management (owned and third party)	(  4,113	)	( 3,644	)			(  8,399)	(  7,130	)
Ancillary services	(  1,010	)	( 1,085	)			(  2,074)	(  2,310	)
Interest expense and credit enhancement fees	(10,890	)	(10,349	)			(21,538)	(20,732	)
Amortization of deferred financing costs	(    516	)	(    482	)			(  1,021)	(     906	)
General and administrative	( 2,751	)	( 2,272	)			(  5,725)	(  4,605	)
Corporate asset depreciation and amortization	(    714	)	(    482	)			(  1,212)	(     824	)
Total other expenses	(33,186	)	(29,597	)			(66,613)	(59,238	)
Add other revenues:
Property management revenues	2,078		1,951				4,232.	3,800
Ancillary services revenues	1,337		1,453				2,551.	3,326
Interest income	32		88				40.	161
Other revenues	453		74				859.	120
Total other revenues	3,900		3,566				7,682.	7,407
Income from continuing operations before equity in income    of  joint ventures	$5,824		$6,601				$10,253.	$13,289

        All other measurements for our reportable segment are disclosed in our consolidated financial statements.

        We also provide management, development and construction, corporate apartment home and brokerage services to third parties and unconsolidated joint ventures. These operations, on an individual and aggregate basis, do not meet the quantitative thresholds for segment reporting set forth in SFAS No. 131.

9.  STOCK OPTIONS

      Beginning January 1, 2003, we adopted the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” for stock-based employee compensation.  Under the prospective method of adoption selected by us, the recognition provisions of SFAS No. 123 apply to all new employee option awards granted by the Trust after December 31, 2002.  Prior option awards will continue to be accounted for under APB Opinion No. 25, “Accounting for Stock Issued to Employees,” under which no compensation cost has been recognized since all options have been granted with an exercise price equal to the fair value of the Trust’s common shares on the date of grant.  Had compensation cost on all outstanding and unvested option awards been determined consistent with SFAS No. 123, our net income available to common unitholders and earnings per unit would have been reduced to the following pro forma amounts:

	Three Months   . Ended June 30, .		Six Months      .. Ended June 30,  .
	2004	2003		2004	2003
Net income available to common unitholders, as reported Deduct:  Total stock-based employee compensation expense    determined under fair value based method for all option awards Net income available to common unitholders, pro forma Earnings per unit:      Basic – as reported      Basic – pro forma      Diluted – as reported      Diluted – pro forma	$17,503             - $17,503 $0.52 $0.52 $0.52 $0.52	$5,406 (      11 $ 5,395 $0.18 $0.18 $0.18 $0.18	)	$23,293            - $23,293 $0.70 $0.70 $0.70 $0.70	$16,845        (27 $16,818 $0.55 $0.55 $0.55 $0.55	)

10. COMMITMENTS AND CONTINGENCIES

Development and Construction Commitments

       We currently have nine communities under development that are expected to comprise 2,548 apartment homes upon completion. The estimated costs to complete the development of these assets total $155 million at June 30, 2004, including $4 million of costs pertaining to the single-family lot development adjacent to our Gables Montecito development community.  These costs are expected to be initially funded by $36 million in construction loan proceeds and $119 million in borrowings under our credit facilities.  We also have an indirect 20% ownership interest in one development community that is expected to comprise 76 apartment homes upon completion.  As of June 30, 2004, we had fulfilled our funding commitment related to this community.  The remaining $3 million of the costs to complete this community are expected to be funded by construction loan proceeds.

      At June 30, 2004, we owned two parcels of land on which we intend to develop two communities that we currently expect will comprise 679 apartment homes upon completion.  We also had rights to acquire additional parcels of land, either through options or long-term conditional contracts, on which we believe we could develop nine communities that we currently expect would comprise an estimated 2,136 apartment homes upon completion.  Any future development is subject to obtaining permits and other governmental approvals, as well as our ongoing business review, and may not be undertaken or completed.

       We have letter of credit and performance obligations of approximately $8.5 million related to our wholly-owned development and construction activities.  As the related development and construction activities are completed, such obligations will be reduced accordingly.

       We are currently serving as general contractor for the construction of four apartment communities for third parties and an unconsolidated joint venture under "cost plus a fee" contracts with guaranteed maximum prices on the costs of construction of approximately $39 million in aggregate.  The construction of these assets was 40% complete in aggregate at June 30, 2004.  Under these contracts, we are obligated to fund any construction cost overruns that are not recovered through a change order.  In addition, we are entitled to a share of the savings generated under these contracts, if any, in the form of an incentive fee.  Because our clients are obligated to fund the costs that are incurred on their behalf pursuant to the related contract, we net the reimbursement of these costs against the billings for such costs.  Development and construction fees are recognized when earned using the percentage of completion method. During the three months ended June 30, 2004 and 2003, we recognized $0.5 million and $0.4 million, respectively, in development and construction fees under related contracts with gross billings of $10.1 million and $8.0 million, respectively.  During the six months ended June 30, 2004 and 2003, we recognized $0.9 million and $1.0 million, respectively, in development and construction fees under related contracts with gross billings of $18.9 million and $19.4 million, respectively.  Such development and construction fees are included in ancillary services revenues in the accompanying statements of operations.

Operating Leases

      We are party to two long-term ground leases for two apartment communities in Austin with initial terms expiring in 2044 and 2065. We have paid the ground lease rent in full for these leases through the initial term. The prepaid lease payments, net of accumulated amortization, are included in other assets, net in the accompanying balance sheets. We are party to long-term ground leases for an apartment community in Atlanta and an apartment community in Austin with initial terms expiring in 2075 and 2069, respectively. The payments under the Atlanta lease and the Austin lease are made on a monthly and quarterly basis, respectively. We are also party to operating leases for office space with various terms. Rent incurred under these operating leases was $551 and  $531 for the three months ended June 30, 2004 and 2003, respectively, and was $1,094 and  $1,044 for the six months ended June 30, 2004 and 2003, respectively.  Future minimum lease payments under these operating leases at June 30, 2004 are as follows:

2004	$   1,139
2005	2,316
2006	2,258
2007	2,060
2008	1,707
2009 and thereafter	34,618
Total	$44,098

Joint Venture Indebtedness and Related Recourse Guarantee Obligations

       The apartment community owned and operated by the Arbors of Harbortown JV, in which we have a 25% ownership interest, is secured by a $16.4 million tax-exempt bond obligation which bears interest at a low-floater rate.  The credit enhancement for the bond obligation is provided by our venture partner and expires in May 2006.  The maturity date of the underlying bond issue is April 2013.   None of the bond indebtedness is recourse to us.

       The apartment community owned by the GRAP JV, in which we have a 20% ownership interest, is secured by a $28.0 million permanent loan that bears interest at a fixed rate of 4.2% and matures in November 2008.  None of this indebtedness is recourse to us.

       At June 30, 2004, two of the four communities owned by the Gables Residential Apartment Portfolio JV Two (the “GRAP JV Two”), in which we have a 20% ownership interest, are secured by construction loans with committed fundings of $21.8 million.  The loans have initial maturity dates of  October 2004 and June 2005 and have two extension options that, if exercised, would result in final maturity dates of April 2007 and June 2007, respectively.  As of June 30, 2004, there was an aggregate of $19.2 million of indebtedness outstanding under these construction loans which currently bear interest at spreads over LIBOR of 1.60% and 1.70%.  We have a limited payment guaranty on these two loans, pursuant to which we are obligated to pay to the lender a stipulated percentage of all amounts of principal, interest and any other indebtedness becoming due and payable on the loans that is not paid by the borrower, subject to a maximum guaranteed amount of $7.1 million.  At June 30, 2004, the portion of the $19.2 million of outstanding principal that is recourse to us is $5.8 million.  There are no principal amortization requirements through the initial maturity dates.  The inability of the venture to pay any principal or interest under these loans when due would require us to perform under this guaranty obligation.  To the extent we are required to make a payment to the lender under the guaranty agreement, our venture partner would be obligated to pay us its share of that payment based on its ownership interest percentage in the venture.  We have not recorded a liability on our accompanying consolidated balance sheets in connection with this recourse obligation that was entered into prior to January 1, 2003.

      The remaining two communities owned by the GRAP JV Two are secured by permanent loans totaling $39.5 million which mature in November 2008 and bear interest at fixed rates of 4.25% and 4.30%.  None of the indebtedness associated with these two permanent loans is recourse to us. 

       Each of the three communities owned by the CMS Tennessee Multifamily JV, in which we have a 8.26% ownership interest, is secured by a conventional fixed-rate loan with a maturity of January 2011.  As of June 30, 2004, there was an aggregate of $51.4 million of indebtedness outstanding under these loans which bear interest at a rate of 7.22%.  None of this indebtedness is recourse to us.

      The four apartment communities owned and operated by the GN Apartment Fund LLC, in which we have a 50% ownership interest, are secured by permanent loans totaling $62.1 million.  Two of the loans totaling $31.4 million mature in July 2009 and bear interest at a fixed rate of 6.07%.  The other two loans totaling $30.7 million mature in July 2011 and bear interest at a fixed rate of 4.12%.  None of this indebtedness is recourse to us.

IGPM Acquisition

       In May 2004, we acquired IGPM, a property management company that managed 2,141 apartment homes in 17 multifamily apartment communities at the time of acquisition.  The purchase price of approximately $2.2 million, inclusive of related commissions, is structured to be paid in three installments based on retention of the management contracts in place upon acquisition.  The purchase price may increase if certain additional management contracts are obtained.  As of June 30, 2004, we had funded $1.5 million of the $2.2 million purchase price.  The second and third installments are expected to be paid in the second quarters of 2005 and 2006, respectively.

Contingencies

      The entities comprising Gables Realty Limited Partnership are subject to various legal proceedings and claims that arise in the ordinary course of business.  We believe that these matters are generally covered by insurance. While the resolution of these matters cannot be predicted with certainty, we believe that the final outcome of such matters will not have a material adverse effect on our financial statements.

11.  SUBSEQUENT EVENTS

       In July 2004, we sold three apartment communities located in South Florida comprising 836 apartment homes.  Two of such communities were secured by $28.0 million of tax-exempt variable-rate bonds that were enhanced by letters of credit with an expiration date of April 2008.  The net proceeds from such sale were $69.4 million and were used to repay the $28.0 million bond indebtedness and to pay down outstanding borrowing under our interim financing vehicles.  The gain from the sale of these communities was approximately $23.0 million and will be recognized in the third quarter of 2004.  Additionally, in connection with the sale transaction, we incurred approximately $0.5 million of debt extinguishment costs.  These properties were classified as assets held for sale at June 30, 2004 in accordance with SFAS No. 144 (Note 6).

       In July 2004, we acquired an apartment community located in Dallas comprising 55 apartment homes for approximately $16.9 million in cash.

 

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Amounts in Thousands, Except Property and Per Unit Data)

All references to "we," "our" or "us" refer collectively to Gables Realty Limited Partnership and its subsidiaries.

       We are the entity through which Gables Residential Trust (the "Trust"), a real estate investment trust (a "REIT"), conducts substantially all of its business and owns, either directly or indirectly through subsidiaries, substantially all of its assets. We are focused within the multifamily industry in demand-driven markets throughout the United States that have exhibited high job growth and resiliency to economic downturns.  Our operating performance is based predominantly on net operating income (NOI) from our apartment communities. NOI, which represents total property revenues less property operating and maintenance expenses (as reflected in the consolidated statements of operations), is affected by the demand and supply dynamics within our markets. See Note 8, Segment Reporting, to the accompanying consolidated financial statements for further discussion of our use of NOI as the primary financial measure of performance for our apartment communities.  Our performance is also affected by the general availability and cost of capital and our ability to develop and acquire additional apartment communities with returns in excess of our long-term weighted average cost of capital.

Business Objective and Strategies

       The Trust’s objective is to increase shareholder value by producing consistent high quality earnings to sustain dividends and annual total returns that exceed the NAREIT Apartment Index. To achieve that objective, we employ a number of business strategies. First, our long-term investment strategy is research-driven, with the objective of creating a portfolio of high quality assets in strategically selected markets that are complementary through economic diversity and characterized by high job growth and resiliency to national economic downturns. We believe such a portfolio will provide predictable operating cash flow performance that exceeds the national average on a sustainable basis. Second, we adhere to a strategy of owning and operating high quality, class AA/A apartment communities under the Gables brand in Established Premium Neighborhoods,™ or EPNs. EPNs are generally characterized as areas with the highest prices for single-family homes on a per square foot basis. We believe that communities, when located in EPNs and supplemented with high quality service and amenities, attract the affluent renter-by-choice who is willing to pay a premium for location preference, superior service and high quality communities. The resulting portfolio should maintain high levels of occupancy and rental rates relative to overall market conditions. This, coupled with more predictable operating expenses and reduced capital expenditure requirements associated with high quality construction materials, should lead to operating margins that exceed national averages for the apartment sector and sustainable growth in operating cash flow. Third, our aim is to be recognized as the employer of choice within the industry. Our mission of Taking Care of the Way People Live® involves innovative human resource practices that we believe will attract and retain the highest caliber associates. Because of our long-established presence as a fully integrated apartment management, development, construction, acquisition and disposition company within our markets, we have the ability to offer multi-faceted career opportunities among the various disciplines within the industry. Finally, our capital strategy is to generate a return on invested capital that exceeds our long-term weighted average cost of capital while maintaining financial flexibility through a conservative, investment grade credit profile. We judiciously manage our capital and we redeploy capital through the reinvestment of asset disposition proceeds into our business.

       We believe we are well positioned to continue achieving our objectives because (1) the markets we have selected for investment are projected to continue to experience job growth that exceed national averages, (2) our EPN locations are expected to outperform local market results and (3) national demand for apartments is expected to increase during the next five to ten years as the demographic group referred to as the Echo Boomer generation begins to form new households.

        In the ordinary course of our business, we evaluate the continued ownership of our assets relative to available opportunities to acquire and develop new assets and relative to available equity and debt capital financing.  We sell assets if we determine that such sales are the most attractive sources of capital for redeployment in our business, for repayment of debt, for repurchase of stock and for other uses. We maintain staffing levels sufficient to meet our existing development, construction, acquisition and property operating activities. When market conditions warrant, we adjust staffing levels in an attempt to mitigate a negative impact on our results of operations.

       We have experienced declines in rental revenues on a same store basis since 2002 as compared to prior years.  This is primarily due to national economic weakness, coupled with low mortgage rates that have resulted in an increase in home purchases by apartment residents. During 2004, we have been executing an operating tactic focused on increasing gross potential rents in a number of our markets based on expectations of improving economic fundamentals.  We expected an initial decrease in occupancy from raising rents that would not be immediately offset by the increased rent levels.  During the second quarter of 2004, economic occupancy decreased below our targeted threshold to continue our tactical focus on rent growth.  As a result, we have adjusted tactics to focus on increasing economic occupancy back to acceptable levels given current economic fundamentals in our markets. We expect that operating fundamentals for our business will improve as job growth, and the balance between supply and demand, improves in our markets.  The job growth prospects for our markets are partially related to national economic conditions.  We expect job growth to continue in our markets, but it is uncertain whether, and to what extent, the national economy and related job growth will improve in 2004.

        On a same store basis, we expect (1) total property revenues in 2004 to decline slightly from 2003 levels and (2) property operating and maintenance expenses for 2004 to increase over 2003 levels generally in line with inflation.  We intend to capitalize on our expectations of improving operating fundamentals by increasing our investment activity for both acquisition and development of new communities.  At the same time, we intend to take advantage of attractive valuations for apartment communities by continuing to sell assets that are no longer consistent with our strategy.

Forward-Looking Statements

        This report contains forward-looking statements within the meaning of the federal securities laws.  Actual results or developments could differ materially from those projected in such statements as a result of the risk factors set forth in the relevant paragraphs of “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our accompanying consolidated financial statements and notes thereto.

Common and Preferred Equity Activity

Secondary Common Share Offerings

       Since its initial public offering in January 1994, the Trust has issued a total of 17,331 common shares in nine offerings, generating $426.8 million in net proceeds which were generally used (1) to reduce outstanding indebtedness under our interim financing vehicles utilized to fund our development and acquisition activities and (2) for general working capital purposes, including funding of future development and acquisition activities.  The most recent offering, involving the issuance of 2,500 common shares that generated $79.0 million in net proceeds, closed on August 26, 2003. 

Preferred Share Offerings

       On May 8, 2003, the Trust issued 3,000 shares of 7.5% Series D Cumulative Redeemable Preferred Shares with a liquidation preference of $25.00 per share. The net proceeds from this issuance of approximately $72.4 million were used to reduce outstanding indebtedness under our interim financing vehicles. The Series D Preferred Shares may be redeemed at the Trust’s option at $25.00 per share plus accrued and unpaid dividends on or after May 8, 2008. The Series D Preferred Shares are not subject to any sinking fund or convertible into any other securities of the Trust.

       On September 27, 2002, the Trust issued 1,600 shares of 7.875% Series C Cumulative Redeemable Preferred Shares with a liquidation preference of $25.00 per share in a private placement to an institutional investor.  The net proceeds from this issuance of $39.7 million, together with the net proceeds of $39.7 million from the concurrent issuance of $40 million of senior unsecured notes, were used to retire approximately $82.5 million of unsecured indebtedness at an interest rate of 8.3% that was scheduled to mature in December 2002.  Pursuant to a registration rights agreement with the purchaser of the Series C Preferred Shares, the Trust registered a new series of preferred shares with the Securities and Exchange Commission and offered to exchange those shares on a one-for-one basis for the outstanding Series C Preferred Shares.  The dividend rate, preferences and other terms for the new preferred shares, or 7.875% Series C-1 Cumulative Redeemable Preferred Shares, are identical in all material respects to the Series C Preferred Shares, except that the Series C-1 Preferred Shares are freely tradable by a holder.  The exchange offer was consummated on September 5, 2003 and did not generate any cash proceeds for the Trust.  The Series C-1 Preferred Shares may be redeemed at the Trust’s option at $25.00 per share plus accrued and unpaid dividends on or after September 27, 2006.  The Series C-1 Preferred Shares are not subject to any sinking fund or convertible into any other securities of the Trust.

        On June 18, 1998, the Trust issued 180 shares of 5.0% Series Z Cumulative Redeemable Preferred Shares with a liquidation preference of $25.00 per share in connection with the acquisition of a parcel of land for future development. The Series Z Preferred Shares, which are subject to mandatory redemption on June 18, 2018, may be redeemed at the Trust’s option at any time for $25.00 per share plus accrued and unpaid dividends.  Dividends on the Series Z Preferred Shares are cumulative from the issuance date and the first dividend payment date is June 18, 2008.  Thereafter, dividends will be paid annually in arrears.  The Series Z Preferred Shares are not subject to any sinking fund or convertible into any other securities of the Trust.

Issuances of Common Operating Partnership Units

       Since the IPO, we have issued a total of 4,487 common units in connection with the 1998 acquisition of the real estate assets and operations of Trammell Crow Residential South Florida, the acquisition of other operating apartment communities and the acquisition of parcels of land for future development.  The most recent issuance of common units on June 17, 2004 was related to the acquisition of a parcel of land for the future development of an apartment community expected to comprise 418 apartment homes upon completion.  The purchase price of $12.3 million was financed in part through the issuance of 66 common units. 

Issuance of Preferred Operating Partnership Units

       On November 12, 1998, we issued 2,000 of our 8.625% Series B Preferred Units to an institutional investor. The net proceeds from this issuance of $48.7 million were used to reduce outstanding indebtedness under our interim financing vehicles. On November 17, 2003, the Operating Partnership redeemed each of the 2,000 outstanding Series B Preferred Units at $25.00 per unit plus accrued and unpaid distributions.  The redemption price of the Series B Preferred Units exceeded the related carrying value by the $1.3 million of issuance costs that were originally incurred and classified as a reduction to partners’ capital.  In the fourth quarter of 2003, the $1.3 million excess was reflected as a reduction to earnings in arriving at net income available to common unitholders in accordance with the July 2003 clarification of EITF Abstracts, Topic No. D-42, "The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock." See Note 5 to the accompanying consolidated financial statements.

Common Equity Repurchase Program

          The Trust’s board of trustees implemented a common equity repurchase program pursuant to which the Trust is authorized to purchase up to $200 million of its outstanding common shares or units. The Trust views the repurchase of common equity with consideration of other investment alternatives when capital is available to be deployed.  The Trust has repurchased shares from time to time in open market and privately negotiated transactions, depending on market prices and other prevailing conditions, using proceeds from sales of selected assets. Whenever the Trust repurchases common shares from shareholders, we are required to redeem from the Trust an equivalent number of common units on the same terms and for the same aggregate price.  After redemption, the common units redeemed by us are no longer deemed outstanding.  Common units have also been repurchased for cash from time to time upon their presentation for redemption by unitholders.  As of June 30, 2004, we had redeemed 4,806 common units, including 4,506 common units redeemed by the Trust, for a total of $116.0 million, including $0.2 million in related commissions.

Shelf Registration Statement

       We have an effective shelf registration statement on file with the Securities and Exchange Commission under which the Trust has $500 million of equity capacity and we have $500 million of debt capacity.  We believe it is prudent to maintain shelf registration capacity in order to facilitate future capital raising activities.  To date, there have been no issuances of securities under this registration statement.  

Portfolio and Other Financing Activity

Community Dispositions Subject to Discontinued Operations Reporting

      In May 2004, we sold an apartment community located in Atlanta comprising 603 apartment homes.  The community was secured by $10.5 million of tax-exempt fixed-rate bonds that had a scheduled maturity date of January 2025.  The net proceeds from the sale of $25.6 million were used to defease the $10.5 million bond indebtedness and to pay down outstanding borrowings under our interim financing vehicles. In connection with the sale transaction, we incurred $1.0 million of debt extinguishment costs, including $0.6 million of defeasance costs and $0.4 million relating to the write-off of unamortized deferred financing costs.  This amount is reflected in the accompanying consolidated statements of operations as “debt extinguishment costs associated with the sale of real estate assets.”  Such costs are excluded from the gain on sale of real estate assets because the debt was not part of the disposal group.  The gain from the sale of this community, exclusive of the debt extinguishment costs, was $14.2 million and was recognized in the second quarter of 2004. 
In March 2004, we sold an apartment community located in Orlando comprising 231 apartment homes.  The net proceeds from this sale were $27.0 million and were used to pay down outstanding borrowings under our interim financing vehicles.  In connection with the sale transaction, we were relieved of a $2.0 million note payable obligation.  The gain from the sale of this community was $2.4 million and was recognized in the first quarter of 2004. 
During 2003, we sold four apartment communities located in Houston comprising 1,373 apartment homes and an apartment community located in Dallas comprising 300 apartment homes. The net proceeds from these sales were $112.1 million and were used to pay down outstanding borrowings under our interim financing vehicles. The aggregate gain from the sale of these five communities was $37.7 million.  One of these sales occurred during the first quarter of 2003, resulting in a $5.0 million gain which was recognized in the first quarter of 2003.  The other sales occurred during the third and fourth quarters of 2003.

Historical operating results, gains and debt extinguishment costs associated with the sale of real estate assets are reflected as discontinued operations in the accompanying consolidated statements of operations.  See Note 6 to the accompanying consolidated financial statements for further discussion.

Community and Land Dispositions Not Subject to Discontinued Operations Reporting

       In June 2004, we sold a 50% interest in two apartment communities located in South Florida comprising 411 apartment homes in connection with the formation of a new joint venture, GN Apartment Fund LLC.  This transaction did not meet the criteria for gain recognition.  See “GN Apartment Fund LLC” below for further discussion.
In March 2004, we sold our 20% ownership interest in an apartment community located in Houston comprising 186 apartment homes to our partner in the Gables Residential Apartment Portfolio JV (the "GRAP JV").  The net proceeds from this sale were $1.6 million, resulting in a gain of $0.4 million which was recognized in the first quarter of 2004.

        In February 2004, we sold a parcel of land in San Antonio.  The net proceeds from this sale were $1.7 million and resulted in no gain or loss.

       Historical operating results and gains are included in continuing operations in the accompanying consolidated statements of operations. See Note 6 to the accompanying consolidated financial statements for further discussion.

Community Acquisitions

       In June 2004, we acquired an apartment community located in Dallas comprising 30 apartment homes for approximately $2.0 million in cash.

       In June 2004, we acquired an apartment community located in Atlanta comprising 272 apartment homes for approximately $32.9 million in cash.

       In December 2003, we acquired an apartment community for renovation located in South Florida comprising 36 apartment homes for approximately $4.1 million in cash.  This community is adjacent to a land parcel that we acquired in January 2004 for the future development of an apartment community that we currently expect will comprise 261 apartment homes.

       In July 2003, we acquired an apartment community located in Washington, D.C. comprising 211 apartment homes for approximately $54.6 million in cash, including approximately $1.6 million of closing costs.

       In May 2003, we acquired an apartment community located in Dallas comprising 334 apartment homes for approximately $33.5 million in cash. 
        
       In February 2003, we acquired an apartment community located in Austin that is subject to a long-term ground lease and is comprised of 239 apartment homes and 7,366 square feet of retail space for approximately $30.2 million in cash.         

Other Acquisitions

       In May 2004, we acquired Income Growth Property Management, Inc. ("IGPM"), a property management company based in San Diego, CA that managed 2,141 apartment homes in 17 multifamily apartment communities located in the San Diego and Inland Empire (San Bernardino/Riverside) areas at the time of acquisition.  The purchase price of approximately $2.2 million, inclusive of related commissions, is structured to be paid in three installments based on retention of the management contracts in place upon acquisition.  The purchase price may increase if certain additional management contracts are obtained.  As of June 30, 2004, we had funded $1.5 million of the $2.2 million purchase price.  The second and third installments are expected to be paid in the second quarters of 2005 and 2006, respectively.

In May 2003, we acquired property management contracts for 10,684 apartment homes in 32 multifamily apartment communities from Archstone Management Services Incorporated (“Archstone Management Business”).  The services rendered under acquired management contracts for 9,184 apartment homes transitioned to us over the ensuing three month period.  The services to be rendered under the remaining management contracts for 1,500 apartment homes did not transition to us in 2003 for various reasons associated with the underlying assets, including sale prior to transition and location.  The purchase price of approximately $5.4 million was paid in three installments and was based on the retention of the contracts acquired.  The final installment of $1.1 million was determined and paid in the second quarter of 2004.

GN Apartment Fund LLC
 
         The GN Apartment Fund LLC was formed in June 2004.  Our ownership interest in this venture is 50%.  We serve as the managing member of the venture and have responsibility for all day-to-day operating matters and as property manager.  In connection with the formation transactions, we contributed 100% of our ownership interest in two communities in South Florida comprising 411 apartment homes with an agreed upon fair value of $51.1 million, subject to $30.7 million of indebtedness, and $7.2 million in cash in return for a 50% ownership interest in the venture.  Our venture partner, New York State Teachers' Retirement System ("NYSTRS"), as advised by JP Morgan Fleming Asset Management, contributed 98% of its ownership interest in two communities in Temecula, CA comprising 532 apartment homes with an agreed upon fair value of $66.1 million, subject to $31.4 million of indebtedness, and other net liabilities of $0.6 million, in return for its 50% ownership interest in the venture and $6.5 million in cash.  Our initial investment in this joint venture is equal to the net book value of the assets and liabilities we contributed to the venture.   

       In connection with this transaction, we have discussed making future investments with NYSTRS through the formation of additional joint ventures whereby the ventures, on a collective basis, intend to own, operate, acquire and develop up to $800 million of multifamily apartment communities located primarily in the San Diego, Inland Empire and Washington, D.C. markets.  We have granted NYSTRS a three-year right-of-first-opportunity for investment opportunities in San Diego and Washington, D.C. that exceed $50 million and those that exceed $35 million in the Inland Empire. 

Senior Unsecured Note Exchange

      On September 27, 2002, we issued $40 million of senior unsecured notes in two series in a private placement to an institutional investor: $30 million at an interest rate of 5.86% maturing in September 2009 and $10 million at an interest rate of 6.10% maturing in September 2010. The net proceeds of $39.7 million, together with the net proceeds of $39.7 million from the concurrent issuance by the Trust of the 7.875% Series C Preferred Shares, were used to retire approximately $82.5 million of senior unsecured notes at an interest rate of 8.3% that were scheduled to mature in December 2002. We did not incur any prepayment costs in connection with the early debt retirement.  Pursuant to a registration rights agreement with the purchaser of the $40 million of senior unsecured notes, we registered new notes with the Securities and Exchange Commission, and offered to exchange those new notes for the original notes.  The new notes, also issued in two series, are identical in all material respects to the original 5.86% notes due 2009 and the 6.10% notes due 2010, except that the new notes are freely tradable by a holder.  The exchange offer was consummated on September 5, 2003 and did not generate any cash proceeds for us.

Critical Accounting Policies and Recent Accounting Pronouncements

       Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and a summary of our significant accounting policies is included in Notes 4 and 6 to the consolidated financial statements included in our Form 10-K for the year ended December 31, 2003. Note 5 to the accompanying consolidated financial statements includes a summary of recent accounting pronouncements and their actual or expected impact on our consolidated financial statements. Our preparation of the financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. Our actual results may differ from these estimates. As an owner, operator and developer of apartment communities, our critical accounting policies relate to revenue recognition, cost capitalization and asset impairment evaluation.

Revenue Recognition

       Rental: We lease our residential properties under operating leases with terms generally equal to one year or less.   In the second quarter of 2004, we changed our revenue recognition policy for our communities under lease-up whereby we began recognizing revenue on a straight-line basis for these communities.  This did not have a significant impact on our financial statements. Rental income for the rest of our communities is recognized when earned, which materially approximates revenue recognition on a straight-line basis.

       Property management: We provide property management services to third parties and unconsolidated joint ventures. Property management fees are recognized when earned.

       Ancillary services: We provide development and construction, corporate rental housing and brokerage services to third parties and unconsolidated joint ventures. Development and construction services are typically provided under "cost plus a fee" contracts.  Because our clients are obligated to fund the costs that are incurred on their behalf pursuant to the related contract, we net the reimbursement of these costs against the billings for such costs.  Development and construction fees are recognized when earned using the percentage of completion method.  During the three months ended June 30, 2004 and 2003, we recognized $0.5 million and $0.4 million, respectively, in development and construction fees under related contracts with gross billings of $10.1 million and $8.0 million, respectively.  During the six months ended June 30, 2004 and 2003, we recognized $0.9 million and $1.0 million, respectively, in development and construction fees under related contracts with gross billings of $18.9 million and $19.4 million, respectively.  Corporate rental housing revenues and brokerage commissions are recognized when earned.

       Gains on sales of real estate assets: Gains on sales of real estate assets are recognized pursuant to the provisions of SFAS No. 66, "Accounting for Sales of Real Estate."  The specific timing of the recognition of the sale and the related gain is measured against the various criteria in SFAS No. 66 related to the terms of the transactions and any continuing involvement associated with the assets sold.  To the extent the sales criteria are not met, we defer gain recognition until the sales criteria are met.

Cost Capitalization

        As a vertically integrated real estate company, we have in-house investment professionals involved in the development, construction and acquisition of apartment communities. Direct internal costs associated with development and construction activities for wholly-owned assets are included in the capitalized development cost of such assets. Direct internal costs associated with development and construction activities for third parties and unconsolidated joint ventures are reflected in ancillary services expense as the related services are being rendered. As required by GAAP, we expense all internal costs associated with the acquisition of operating apartment communities to general and administrative expense in the period such costs are incurred.

        Our real estate development pursuits are subject to obtaining permits and other governmental approvals, as well as our ongoing business review of the underlying real estate fundamentals and the impact on our capital structure. We do not always move forward with development of our real estate pursuits, and therefore, we regularly evaluate the viability of real estate pursuits and the recoverability of capitalized pursuit costs. Based on this review, we expense any costs that are deemed unrealizable at that time to general and administrative expense.

        During the development and construction of a new apartment community, we capitalize related interest costs, as well as other carrying costs such as property taxes and insurance. We begin to expense these items as the construction of the community becomes substantially complete and the residential apartment homes become available for initial occupancy. Accordingly, we gradually reduce the amounts we capitalize as construction is being completed.

        Expenditures in excess of $1 for purchases of a new asset with a useful life in excess of one year and for replacements and repairs that extend the useful life of the asset are capitalized and depreciated over their useful lives. Recurring value retention capital expenditures are typically incurred every year during the life of an apartment community and include such expenditures as carpet, flooring and appliances. Non-recurring capital expenditures are costs that are generally incurred in connection with a major project impacting an entire community, such as roof replacement, parking lot resurfacing, exterior painting and siding replacement. Value-enhancing capital expenditures are costs for which an incremental value is expected to be achieved from increasing the NOI potential for a community or recharacterizing the quality of the income stream with an anticipated reduction in potential sales cap rate for items such as replacement of wood siding with a masonry-based hardi-board product, amenity upgrades and additions, installation of security gates and additions of covered parking. Recurring value retention and non-recurring and/or value-enhancing capital expenditures do not include costs incurred in connection with a major renovation of an apartment community. Repairs and maintenance, such as landscaping maintenance, interior painting and cleaning and supplies used in such activities, are expensed as incurred.

Depreciation and Asset Impairment Evaluation

        Under GAAP, real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired.  Depreciation is computed on a straight-line basis over the estimated useful lives of 20 to 40 years for buildings and improvements and 5 years for furniture, fixtures and equipment. As required by GAAP, we periodically evaluate our real estate assets to determine if there has been any impairment in their carrying value and record impairment losses if there are indicators of impairment and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. No such impairment losses have been recognized to date.

Purchase Price Allocation for Apartment Community Acquisitions

       In connection with the acquisition of an apartment community, we perform a valuation and allocation to each asset and liability acquired in such transaction, based on their estimated fair values at the date of acquisition. The valuation of assets acquired subsequent to July 1, 2001, the effective date of SFAS No. 141, "Business Combinations," includes both tangible assets and intangible assets. Tangible asset values, consisting of land, buildings and improvements, and furniture, fixtures and equipment, are reflected in real estate assets and depreciated over their estimated useful lives. Intangible asset values, consisting of at-market, in-place leases and resident relationships, are reflected in other assets and amortized over the average remaining lease term of the acquired resident relationships.

Discontinued Operations

      We adopted SFAS No. 144 effective January 1, 2002 which requires, among other things, that the operating results of certain real estate assets which have been sold subsequent to January 1, 2002, or otherwise qualify as held for sale (as defined by SFAS No. 144), be reflected as discontinued operations in the consolidated statements of operations for all periods presented.  We sold one  operating apartment community during the first quarter of 2004 and one operating apartment community during the second quarter of 2004.  As of June 30, 2004 we had three operating apartment communities that were under contract for sale and were classified as held for sale.   During 2003, we sold the following operating apartment communities:  one during the first quarter, two during the third quarter and two during the fourth quarter.  The operating results for these ten wholly-owned assets sold, or classified as held for sale, are reflected as discontinued operations in the accompanying statements of operations for all periods presented. Interest expense has been allocated to the results of the discontinued operations in accordance with EITF No. 87-24. We had no assets that qualified as held for sale as defined by SFAS No. 144 at December 31, 2003.

       During the second quarter of 2004, we contributed our interest in two operating apartment communities, Gables Palma Vista and Gables Wellington, to the GN Apartment Fund LLC, a joint venture in which we have a 50% interest.  Due to our continuing involvement with the operations of these two communities, the operating results of these assets are included in continuing operations for all periods presented.

Results of Operations

Comparison of operating results for the three months ended June 30, 2004  (the “2004 Period”) to the three months ended June 30, 2003 (the “2003 Period”)

       Our net income is generated primarily from the operation of our apartment communities and the disposition of assets that no longer meet our investment criteria. For purposes of evaluating comparative operating performance, we categorize our operating communities based on the period each community reaches a stabilized occupancy and expense level. A community is considered to have achieved stabilized occupancy on the earlier to occur of (1) attainment of 93% physical occupancy or (2) one year after completion of construction. The combined operating performance for all of our wholly-owned apartment communities that are included in continuing operations for the 2004 Period and the 2003 Period is summarized as follows:

	Number of 2004 Period Apt. Homes	2004 Period	2003   Period	$ Change	% Change
Rental and other property revenues: Same-store communities (a) Triple net master lease communities Communities stabilized in the 2004 Period, but not in the 2003 Period Communities not stabilized in the 2004 Period (b) Sold communities (c)    Total property revenues	14,852 728 2,403 2,161     411 20,555	$39,899 1,862 7,760 4,323     1,170 $55,014	$41,062 1,849 5,426 569    1,499 $50,405	$(1,163)    13  2,334. 3,754.     (329) $ 4,609.	-2.8% 0.7% 43.0% 659.8%   -21.9%      9.1%
Property operating and maintenance expenses (d): Same-store communities (a) Triple net master lease communities Communities stabilized in the 2004 Period, but not in the 2003 Period Communities not stabilized in the 2004 Period (b) Sold communities (c)    Total property operating and maintenance expenses		$14,938 216 2,960 1,301      489 $19,904	$14,658 203 2,200 213        499 $17,773	$  280    13. 760  1,088        (10)  $2,131.	1.9% 6.4% 34.5% 510.8%    -2.0%    12.0%
Property net operating income (NOI) (e): Same-store communities (a) Triple net master lease communities Communities stabilized in the 2004 Period, but not in the 2003 Period Communities not stabilized in the 2004 Period (b)   Sold communities (c)    Total property net operating income (NOI)		$24,961 1,646 4,800 3,022        681 $35,110	$26,404 1,646 3,226 356     1,000 $32,632	$(1,443) -. 1,574. 2,666.        (319) $  2,478	-5.5% 0.0%48.8% 748.9%    -31.9%      7.6%
Total property NOI as a percentage of total property revenues		63.8%	64.7%	-	-0.9%

(a)  Communities that were owned and fully stabilized throughout both the 2004 Period and the 2003 Period ("same-store").

(b)  Communities that were under development/lease-up, in renovation or not fully operational, or acquired subsequent to April 1, 2004, as applicable.  Includes the results of Gables Augusta, Gables Beach Park, Belmar, Gables Druid Hills, Gables Floresta, Gables Grandview, Gables Parkwood, Gables Rock Springs and Gables Woodley Park. 

(c)  Communities that were sold subsequent to April 1, 2003.   Includes the results of Gables Palma Vista and Gables Welliington which we contributed to the GN Apartment Fund LLC in the 2004 Period.

(d)  Represents direct property operating and maintenance expenses as reflected in the accompanying consolidated statements of operations and excludes certain expenses included in the determination of net income such as property management and other indirect operating expenses, interest expense and depreciation and amortization expense.

(e)  Calculated as total property revenues less property operating and maintenance expenses (d).  See Note 8, Segment Reporting, to the accompanying financial statements for further discussion of our use of NOI as the primary financial measure of performance for our apartment communities.  In addition, NOI from this reportable segment is reconciled to the most directly comparable GAAP measure in Note 8.

Total property revenues increased $4,609, or 9.1%, from $50,405 to $55,014 due to an increase in the number of apartment homes resulting from the development, lease-up and acquisition of additional communities, as well as an increase in number of available apartment homes associated with renovation activities at several of our communities.  These increases were partially offset by a 2.8% decrease in same-store performance as a result of supply and demand fundamentals in our markets along with a decrease resulting from the contribution of two communities to a new joint venture during the 2004 Period.

        Property operating and maintenance expenses, as reflected in our consolidated statements of operations, increased $2,131, or 12.0%, from $17,773 to $19,904 due to an increase in the number of apartment homes resulting from the development, lease-up and acquisition of additional communities, as well as an increase in the number of available apartment homes associated with renovation activities at several of our communities.  In addition, same-store expenses increased 1.9% due to increases in maintenance, marketing and redecorating expenses partially offset by decreases in property tax expense. 

        Additional information for the 56 same-store apartment communities presented in the preceding table is as follows:

	Number of	% of 2004	Physical Occupancy		Economic Occupancy	% Change from the 2003 Period to the 2004 Period in
Market	Apartment Homes	Period  NOI	in the 2004   Period (a)		in the 2004  Period (a)	Economic Occupancy	Revenues		Expenses	NOI
South Florida	3,310	27.4%		94.9%	92.7%	0.8%		3.1%	5.9%		1.7%
Houston	3,857	24.0%		92.7%	90.7%	-2.7%		-6.0%	-2.3%		-8.1%
Atlanta	3,614	19.8%		92.7%	88.2%	-3.9%		-5.3%	5.9%		-11.5%
Austin	1,677	12.4%		89.1%	88.0%	-1.4%		-3.9%	-7.0%		-1.8%
Dallas	1,300	11.3%		95.2%	93.5%	0.3%		-2.6%	0.5%		-4.3%
Washington, D.C.	82	1.9%		96.4%	96.3%	2.6%		3.9%	9.6%		2.0%
Other	1,012	3.2%		87.3%	78.8%	-7.0%		-5.7%	13.9%		-21.4%
Totals	14,852	100.0%		92.9%	90.1%	-1.7%		-2.8%	1.9%		-  5.5%

(a)  Physical occupancy represents gross potential rent less physical vacancy loss as a percentage of gross potential rent.  Economic occupancy represents actual rental revenue collected divided by gross potential rent.  Thus, economic occupancy differs from physical occupancy in that it takes into account concessions, non-revenue producing apartment homes and delinquencies.

        Property management revenues increased $127, or 6.5%, from $1,951 to $2,078 due primarily to a net increase of approximately 1,500 apartment homes managed for third parties and unconsolidated joint ventures from an average of 24,400 in the 2003 Period to 25,900 in the 2004 Period.  This net increase in units managed is due primarily to the May 2003 acquisition of the Archstone Management Business and the May 2004 acquisition of IGPM, offset in part by a net decrease in apartment homes managed for third parties due primarily to sales.

        Ancillary services revenues decreased $116, or 8.0%, from $1,453 to $1,337 due primarily to a decrease of $414 in corporate rental housing revenue due to volume declines in services rendered.  This decrease was offset in part by an increase of $88 in development and construction fee revenue and an increase of $210 in brokerage services revenue.  Such increases were due to volume increases in services rendered.              

        Interest income decreased $56, or 63.6%, from $88 to $32 due to a decrease in interest-bearing deposits and a decrease in interest rates.

        Other revenues increased $379, or 512.2%, from $74 to $453 due primarily to income earned during the 2004 Period related to various non-routine items.

        Real estate asset depreciation and amortization increased $1,909, or 16.9%, from $11,283 to $13,192 due primarily to the impact of the development and acquisition of additional communities and capital improvements made to existing operating communities. 

        Property management expense for communities owned by us and third parties increased $469, or 12.9%, from $3,644 to $4,113 due to increased support costs and an increase of approximately 1,200 apartment homes under management from an average of 45,400 in the 2003 Period to an average of 46,600 in the 2004 Period due primarily to the May 2003 acquisition of the Archstone Management Business, the May 2004 acquisition of IGPM and the lease-up of additional owned communities.  These increases were offset in part by a net decrease in apartment homes managed for third parties due primarily to sales. 

        Ancillary services expense decreased $75, or 6.9%, from $1,085 to $1,010 due primarily to a decrease in corporate rental housing expenses of $110 due to volume declines in services rendered.

        Interest expense and credit enhancement fees increased $541, or 5.2%, from $10,349 to $10,890.  An increase in outstanding indebtedness associated with the November 2003 redemption of our Series B Preferred Units and an increase in operating debt associated with the development and acquisition of additional communities was offset in part by a decrease in interest rates for variable-rate borrowings and a decrease in outstanding indebtedness associated with 2004 and 2003 sale activities, the May 2003 issuance of our Series D Preferred Shares and the August 2003 issuance of 2,500 common shares.

        Amortization of deferred financing costs increased $34, or 7.1%, from $482 to $516 due primarily to increased financing costs associated with the modification of our unsecured revolving credit facility in December 2003.

        General and administrative expense increased $479, or 21.1%, from $2,272  to $2,751 due primarily to increases in professional fees, internal acquisition costs associated with the acquisition of operating apartment communities and abandoned real estate pursuit costs.

        Corporate asset depreciation and amortization increased $232, or 48.1%, from $482 to $714 due primarily to an increase in amortization resulting from the management contracts acquired in connection with the May 2003 acquisition of the Archstone Management Business and the May 2004 acquisition of IGPM.

        Equity in income of joint ventures decreased $40, or 40.0%, from $100 to $60 due to a non-recurring adjustment recorded to depreciation expense in the 2004 Period.

        Our share of the operating results for the apartment communities owned by the unconsolidated joint ventures in which we have an interest during the 2004 Period and the 2003 Period is as follows:

2004 Period					Total
Stabilized    (a)	Development  & Lease-up    (b)	Acquisitions (c)	Sales (d)	Total	2003 Period

Our share of joint venture results:
Rental and other property revenues
Property operating and maintenance expenses
(exclusive of items shown separately below)
     Property net operating income (NOI)
Interest expense and credit enhancement fees
Amortization of deferred costs
Other
     Funds from operations (FFO)
Gain on sale of operating real estate assets
Real estate asset depreciation
     Equity in income of joint ventures

Number of operating communities
Number of apartment homes in
   operating communities
Average percent occupied during the period
$ 1,086

  (    447
    639
(    254
(      12
  (      10
363
-
  (    362
$        1

7

2,492
92%


)

)
)
)


)





$   163

(      70
     93
(      21
(        5
(        1
     66
-
  (     50
$     16

1

297
91%


)

)
)
)


)





$  354

(    124
    230
(      97
(        3
(        4
126
-
  (     83
$     43

4

943
92%


)

)
)
)


)
$      -

          -
      -
-
        -
          -
      -
-
          -
$        -

-

-
-
$1,603

  ( 641
   962
( 372
    (   20
  (   15
555
-
  ( 495
$    60

12

3,732
92%


)

)
)
)


)





$1,182

  (    492
   690
 (   213
 (     17
  (     11
   449
-
(   349
$   100

9

2,975
83%


)

)
)
)


)

(a) Communities that were owned and fully stabilized throughout the 2004 Period.
(b) Communities in the development and/or lease-up phase that were not fully stabilized during all or any of the 2004 Period.
(c) Communities that were acquired subsequent to April 1, 2004. Includes the results of Gables Palma Vista, Gables Wellington, Gables Solana Ridge and Gables Tuscany Ridge
      from the June 9, 2004 GN Apartment Fund LLC joint venture formation date.
(d) Communities that were sold subsequent to April 1, 2004.

        Income from discontinued operations increased $12,357, or 849.3%, from $1,455 to $13,812 due primarily to the $14,198 gain on sale of discontinued operations recognized in the 2004 Period.

        Distributions to preferred unitholders decreased $557, or 20.3%, from $2,750 to $2,193 due primarily to the $50 million redemption of our Series B Preferred Units in November 2003, offset in part by the $75 million issuance of our Series D Preferred Shares in May 2003.

Comparison of operating results for the six months ended June 30, 2004  (the “2004 Period”) to the six months ended June 30, 2003 (the “2003 Period”)

       Our net income is generated primarily from the operation of our apartment communities and the disposition of assets that no longer meet our investment criteria. For purposes of evaluating comparative operating performance, we categorize our operating communities based on the period each community reaches a stabilized occupancy and expense level. A community is considered to have achieved stabilized occupancy on the earlier to occur of (1) attainment of 93% physical occupancy or (2) one year after completion of construction. The combined operating performance for all of our wholly-owned apartment communities that are included in continuing operations for the 2004 Period and the 2003 Period is summarized as follows:

	Number of 2004 Period Apt. Homes	2004 Period	2003   Period	$ Change	% Change
Rental and other property revenues: Same-store communities (a) Triple net master lease communities Communities stabilized in the 2004 Period, but not in the 2003 Period Communities not stabilized in the 2004 Period (b) Sold communities (c)    Total property revenues	14,852 728 2,113 2,451      411 20,555	$80,002 3,724 12,975 9,250      2,698 $108,649	$82,687 3,700 9,356 1,290       3,053 $100,086	$(2,685)    24  3,619  7,960      (355) $ 8,563	-3.2% 0.6% 38.7% 617.1%   -11.6%      8.6%
Property operating and maintenance expenses (d): Same-store communities (a) Triple net master lease communities Communities stabilized in the 2004 Period, but not in the 2003 Period Communities not stabilized in the 2004 Period (b)   Sold communities (c)    Total property operating and maintenance expenses		$29,802 431 4,987 3,233    1,012 $39,465	$29,185 407 3,852 532        990 $34,966	$  617    24  1,135  2,701          22   $4,499	2.1% 5.9% 29.5% 507.7%         2.2%.      12.9%
Property net operating income (NOI) (e): Same-store communities (a) Triple net master lease communities Communities stabilized in the 2004 Period, but not in the 2003 Period Communities not stabilized in the 2004 Period (b)   Sold communities (c)    Total property net operating income (NOI)		$50,200 3,293 7,988 6,017       1,686 $69,184	$53,502 3,293 5,504 758       2,063 $65,120	$(3,302) -. 2,484. 5,259.       (377) $   4,064	-6.2% 0.0% 45.1% 693.8%     -18.3%      6.2%
Total property NOI as a percentage of total property revenues		63.7%	65.1%	-	-1.4%

(a)  Communities that were owned and fully stabilized throughout both the 2004 Period and the 2003 Period ("same-store"). 

(b)  Communities that were under development/lease-up, in renovation or not fully operational, or acquired subsequent to January 1, 2004, as applicable.  Includes the results of Gables Augusta, Gables Beach Park, Belmar, Gables Druid Hills, Gables Floresta, Gables Grandview, Gables Parkwood, Gables Ravello, Gables Rock Springs and Gables Woodley Park.

(c)  Communities that were sold subsequent to January 1, 2003. Includes the results of Gables Palma Vista and Gables Wellington which we contributed to the GN Apartment Fund LLC in the 2004 Period.

(d)  Represents direct property operating and maintenance expenses as reflected in the accompanying consolidated statements of operations and excludes certain expenses included in the determination of net income such as property management and other indirect operating expenses, interest expense and depreciation and amortization expense.

(e)  Calculated as total property revenues less property operating and maintenance expenses (d).  See Note 8, Segment Reporting, to the accompanying financial statements for further discussion of our use of NOI as the primary financial measure of performance for our apartment communities.  In addition, NOI from this reportable segment is reconciled to the most directly comparable GAAP measure in Note 8.

Total property revenues increased $8,563 or 8.6%, from $100,086 to $108,649 due to an increase in the number of apartment homes resulting from the development, lease-up and acquisition of additional communities, as well as an increase in number of available apartment homes associated with renovation activities at several of our communities.  These increases were partially offset by a 3.2% decrease in same-store performance as a result of supply and demand fundamentals in our markets along with a decrease resulting from the contribution of two communities to a new joint venture during the 2004 Period.

        Property operating and maintenance expenses, as reflected in our consolidated statements of operations, increased $4,499, or 12.9%, from $34,966 to $39,465 due to an increase in the number of apartment homes resulting from the development, lease-up and acquisition of additional communities, as well as an increase in the number of available apartment homes associated with renovation activities at several of our communities.  In addition, same-store expenses increased 2.1% due to increases in redecorating, maintenance, payroll and property tax expenses partially offset by decreases in utilities and landscaping expenses. 

        Additional information for the 56 same-store apartment communities presented in the preceding table is as follows:

	Number of	% of 2004	Physical Occupancy	Economic Occupancy	% Change from the 2003 Period to the 2004 Period in
Market	Apartment Homes	Period  NOI	in the 2004  Period (a)	in the 2004  Period (a)	Economic Occupancy	Revenues		Expenses	NOI
South Florida	3,310	27.1%	94.8%	92.8%	-0.2%		1.1%	4.5%	-0.5%
Houston	3,857	23.9%	93.3%	91.4%	-2.5%		-5.6%	1.1%	-9.4%
Atlanta	3,614	20.2%	92.9%	89.3%	-2.5%		-5.1%	2.9%	-9.4%
Austin	1,677	12.5%	91.1%	90.0%	-1.2%		-4.3%	-4.6%	-4.1%
Dallas	1,300	11.1%	95.0%	93.0%	-0.1%		-2.8%	0.6%	-4.6%
Washington, D.C.	82	1.8%	95.4%	95.1%	-0.8%		0.7%	10.3%	-2.6%
Other	1,012	3.4%	88.1%	80.3%	-6.1%		-4.7%	12.4%	-17.6%
Totals	14,852	100.0%	93.3%	90.8%	-1.7%		-3.2%	2.1%	-6.2%

(a)  Physical occupancy represents gross potential rent less physical vacancy loss as a percentage of gross potential rent.  Economic occupancy represents actual rental revenue collected divided by gross potential rent.  Thus, economic occupancy differs from physical occupancy in that it takes into account concessions, non-revenue producing apartment homes and delinquencies.

        Property management revenues increased $432, or 11.4%, from $3,800 to $4,232 due primarily to a net increase of approximately 2,100 apartment homes managed for third parties and unconsolidated joint ventures from an average of 23,700 in the 2003 Period to 25,800 in the 2004 Period.  This net increase in units managed is due primarily to the May 2003 acquisition of the Archstone Management Business and the May 2004 acquisition of IGPM, offset in part by a net decrease in apartment homes managed for third parties due primarily to sales.

        Ancillary services revenues decreased $775, or 23.3%, from $3,326 to $2,551 due primarily to a decrease of $819 in corporate rental housing revenue and a decrease of $65 in development and construction fee revenue due to volume declines in services rendered.  These decreases were offset in part by an increase of $109 in brokerage services revenue due to volume increases in services rendered.              

        Interest income decreased $121, or 75.2%, from $161 to $40 due to a decrease in interest-bearing deposits and a decrease in interest rates.

        Other revenues increased $739, or 615.8%, from $120 to $859 due primarily to income earned during the 2004 Period related to various non-routine items.

        Real estate asset depreciation and amortization increased $3,913, or 17.2%, from $22,731 to $26,644 due primarily to the impact of the development and acquisition of additional communities and capital improvements made to existing operating communities, as well as a non-recurring adjustment recorded to depreciation in the 2004 Period of $707. 

        Property management expense for communities owned by us and third parties increased $1,269, or 17.8%, from $7,130 to $8,399  due to increased support costs and an increase of approximately 2,300 apartment homes under management from an average of 44,400 in the 2003 Period to an average of 46,700 in the 2004 Period due primarily to the May 2003 acquisition of the Archstone Management Business, the May 2004 acquisition of IGPM and the lease-up of additional owned communities.  These increases were offset in part by a net decrease in apartment homes managed for third parties due primarily to sales. 

        Ancillary services expense decreased $236, or 10.2%, from $2,310 to $2,074 due primarily to a decrease in corporate rental housing expenses of $152 and a decrease in development and construction expenses of $100.  Such decreases are due to volume declines in services rendered.

        Interest expense and credit enhancement fees increased $806, or 3.9%, from $20,732 to $21,538.  An increase in outstanding indebtedness associated with the November 2003 redemption of our Series B Preferred Units and an increase in operating debt associated with the development and acquisition of additional communities was offset in part by a decrease in interest rates for variable-rate borrowings and a decrease in outstanding indebtedness associated with 2004 and 2003 sale activities, the May 2003 issuance of our Series D Preferred Shares and the August 2003 issuance of 2,500 common shares.

        Amortization of deferred financing costs increased $115, or 12.7%, from $906 to $1,021 due primarily to increased financing costs associated with the modification of our unsecured revolving credit facility in February 2003 and December 2003.

        General and administrative expense increased $1,120, or 24.3%, from $4,605 to $5,725 due primarily to increases in professional fees, travel expenses related to our national meeting in the 2004 Period, abandoned real estate pursuit costs, insurance costs and long-term compensation costs.

        Corporate asset depreciation and amortization increased $388, or 47.1%, from $824 to $1,212 due primarily to an increase in amortization resulting from the management contracts acquired in connection with the May 2003 acquisition of the Archstone Management Business and the May 2004 acquisition of IGPM.

        Equity in income of joint ventures increased $349, or 179.0%, from $195 to $544 due primarily to the sale of our 20% ownership interest in an apartment community located in Houston to our joint venture partner, resulting in a $432 gain recognized in the 2004 Period.

        Our share of the operating results for the apartment communities owned by the unconsolidated joint ventures in which we have an interest during the 2004 Period and the 2003 Period is as follows:

2004 Period											Total
	Stabilized (a)		Development & Lease-up    (b)		Acquisitions (c)		Sales (d).		Total			2003   Period
Our share of joint venture results: Rental and other property revenues Property operating and maintenance expenses (exclusive of items shown separately below)      Property net operating income (NOI) Interest expense and credit enhancement fees Amortization of deferred costs Other      Funds from operations (FFO) Gain on sale of operating real estate assets Real estate asset depreciation      Equity in income of joint ventures Number of operating communities Number of apartment homes in    operating communities Average percent occupied during the period	$ 2,132     (    873     1,259 (    505 (      23   (      18      713 -   (    675 $      38 7 2,492 91%	) ) ) ) )	$   309 (    135      174 (      42 (      11 (        3     118 -   (     96 $      22 1 297 86%	) ) ) ) )	$  354   (   124 230 (     97 (        3   (      4 126 -   (    83 $    43 4 943 92%	) ) ) ) )	$      97   (      43       54 (      11 (        1   (        1       41 432   (      32 $    441 1 186 94%	) ) ) ) )	$2,892   ( 1,175    1,717 (    655 (      38   (      26    998 432   (    886 $   544 13 3,918 91%	) ) ) ) )		$2,328   (  959 1,369  (  421  (    33 (    31    884 - (   689 $  195 9 2,975 82%	) ) ) ) )

(a) Communities that were owned and fully stabilized throughout the 2004 Period.
(b) Communities in the development and/or lease-up phase that were not fully stabilized during all or any of the 2004 Period.
(c) Communities that were acquired subsequent to January 1, 2004.  Includes the results of Gables Palma Vista, Gables Wellington, Gables Solana Ridge and Gables Tuscany Ridge from the June 9, 2004 GN Apartment Fund formation date.
(d) Communities that were sold subsequent to January 1, 2004.

        Income from discontinued operations increased $8,850, or 110.2%, from $8,033 to $16,883 due primarily to the $16,580 gain on sale of discontinued operations recognized in the 2004 Period, partially offset by the $5,042 gain on sale of discontinued operations recognized in the 2003 Period.

       Distributions to preferred unitholders decreased $285, or 6.1%, from $4,672 to $4,387 due primarily to the $50 million redemption of our Series B Preferred Units in November 2003, offset in part by the $75 million issuance of our Series D Preferred Shares in May 2003.

Liquidity and Capital Resources

Cash Flows from Operating, Investing and Financing Activities

        Net cash provided by operating activities from continuing operations increased from $41,292 for the six months ended June 30, 2003 to $43,766 for the six months ended June 30, 2004 due to a change in other liabilities between periods of  $921, a change in other assets between periods of  $563 and an increase of  $1,513 in income from continuing operations (a) before specified non-cash or non-operating items, including depreciation, amortization, equity in income of joint ventures, long-term compensation expense and  (b) after operating distributions received from joint ventures.  Such increases were offset in part by a change in restricted cash between periods of  $523. Net cash provided by operating activities from discontinued operations decreased from $6,088 to $2,549 due to the disposition of discontinued operations in 2003 and 2004.

        We used $106,521 of net cash in investing activities for the six months ended June 30, 2003 compared to   $71,153 for the six months ended June 30, 2004.  During the six months ended June 30, 2004, we expended (1) $109,425 related to acquisition, development, construction and renovation expenditures, (2) $4,711 related to recurring value retention capital expenditures for operating apartment communities, (3) $2,558 related to non-recurring and/or value-enhancing capital expenditures for operating apartment communities, (4) $7,745 related to our investment in joint ventures and (5) $2,592 related to other investments.   During the six months ended June 30, 2004, we received cash of  (1) $52,602 in connection with the sale of discontinued operations, (2) $1,696 in connection with the sale of undeveloped land and (3) $1,580 from the sale of our joint venture real estate asset interest. During the six months ended June 30, 2003, we expended (1) $111,991 related to acquisition, development, construction and renovation expenditures, (2) $5,225 related to recurring value retention capital expenditures for operating apartment communities, (3) $4,348 related to non-recurring and/or value-enhancing capital expenditures for operating apartment communities, (4) $2,802 related to other investments and (5) $892 related to our investment in joint ventures.  During the six months ended June 30, 2003, we received cash of  $18,737 in connection with the sale of discontinued operations.

        We had  $61,805 of net cash provided by financing activities for the six months ended June 30, 2003 compared to $26,686 for the six months ended June 30, 2004. During the six months ended June 30, 2004, we received net proceeds of  $77,542 from net borrowings and  $5,313 from the issuance by the Trust of common shares upon the exercise of share options.  We expended (1) $44,625 in common and preferred distributions, (2) $10,922 of principal escrow payments deposited into escrow, net, (3) $617 of debt extinguishment costs associated with the sale of real estate assets and (4) $5 in deferred financing costs, net.  During the six months ended June 30, 2003, we received net proceeds of (1) $72,419 from the issuance by the Trust of its Series D Preferred Shares, (2) $28,152 from net borrowings and  (3) $4,347 from the issuance by the Trust of common shares upon the exercise of share options. We expended (1) $41,631 in common and preferred distributions, (2) $1,220 in deferred financing costs and (3) $262 of principal escrow payments deposited into escrow, net.

        The Trust has elected to be taxed as a REIT under the Internal Revenue Code. To qualify as a REIT, the Trust must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of the REIT’s ordinary taxable income to its shareholders.  It is the current intention of the Trust to adhere to these requirements and maintain its REIT status. As a REIT, the Trust generally will not be subject to federal income tax on distributed taxable income. We utilize Gables Residential Services, a taxable REIT subsidiary, to provide management and other services to third parties that we, as a REIT, may be prohibited from providing. Taxable REIT subsidiaries are subject to federal, state and local income taxes.

Contractual Obligations

        A summary of our contractual obligations at June 30, 2004 is as follows:

	Payments Due by Year
	2004	2005	2006	2007	2008	2009 &     Thereafter	Total
Regularly scheduled principal amortization payments	$  680	$  1,383	$  1,281	$   1,379	$  972	$ 2,071	$ 7,766
Balloon principal payments due at maturity (a), (b)	48,365	332,596	245,449	206,398	90,200	117,194	1,040,202
Total notes payable	49,045	333,979	246,730	207,777	91,172	119,265	1,047,968
Operating leases (c)	1,139	2,316	2,258	2,060	1,707	34,618	44,098
Deferred purchase price of IGPM (d)	-	327	327	-	-	-	654
Manditorily redeemable Series Z Preferred Units (e)	-	-	-	-	2,250	4,500	6,750
Total	$50,184	$336,622	$249,315	$209,837	$95,129	$158,383	$1,099,470

(a)  Outstanding indebtedness for each tax-exempt bond issue is reflected in the preceding table using the earlier of the related bond maturity date or the bond         
      enhancement facility maturity date, as applicable.

(b)  The $48,365 of tax-exempt fixed-rate bonds were remarketed on July 1, 2004 as tax-exempt variable-rate bonds.  The bonds are enhanced
      by unsecured letters of credit which have an initial maturity of July 1, 2005 and a one-year extension option.

(c)  Includes two ground leases relating to apartment communities owned and operated by us.

(d)  Amount represents the maximum amount contingently payable for the contracts in place at the acquisition date in accordance with the purchase agreement.

(e)  Includes cumulative distributions of $2,250 from the June 1998 issuance date that are payable in June 2008.  Distributions from June 2008 to the June 2018
      mandatory redemption date are payable annually and thus are excluded from the preceding table.

        We have various standing or renewable service contracts with vendors related to the operation of our communities.  These contracts have terms generally equal to one year or less and provide for cancellation with insignificant or no penalties.

        In addition to these contractual obligations, we currently have nine communities under development that are expected to comprise 2,548 apartment homes upon completion.  The estimated costs to complete the development of these assets total $155 million at June 30, 2004, including $4 million of costs pertaining to the single-family lot development adjacent to our Gables Montecito development community.  These costs are expected to be initially funded by $36 million in construction loan proceeds and $119 million in borrowings under our credit facilities described below.  We also have an indirect 20% ownership interest in one development community that is expected to comprise 76 apartment homes upon completion.   As of June 30, 2004, we had fulfilled our funding commitment related to this community.  The remaining $3 million of the costs to complete this community are expected to be funded by construction loan proceeds.

        At June 30, 2004, we owned two parcels of land on which we intend to develop two communities that we currently expect will comprise 679 apartment homes upon completion.  We also had rights to acquire additional parcels of land, either through options or long-term conditional contracts, on which we believe we could develop nine communities that we currently expect would comprise an estimated 2,136 apartment homes upon completion.  Any future development is subject to obtaining permits and other governmental approvals, as well as our ongoing business review, and may not be undertaken or completed.

       Additional information regarding our development activity is included in the “Development and Lease-up Communities” table below.

Funding of Short-term and Long-term Liquidity Requirements

        Our common and preferred distributions historically have been paid from cash provided by recurring real estate activities. We anticipate that such distributions will continue to be paid from cash provided by recurring real estate activities that include both operating activities and asset disposition activities when evaluated over a twelve-month period. This twelve-month evaluation period is relevant due to the timing of disposition activities and the payment of particular expense items that are accrued monthly but are paid on a less frequent basis, such as real estate taxes and interest on our senior unsecured notes.

        We have met and expect to continue to meet our short-term liquidity requirements through net cash provided by recurring real estate activities. Our net cash from recurring real estate activities has been adequate, and we believe that it will continue to be adequate, to meet both operating requirements and payment of dividends in accordance with REIT requirements. Recurring value retention capital expenditures and non-recurring and/or value-enhancing capital expenditures, in addition to regularly scheduled principal amortization payments, are also expected to be funded from recurring real estate activities that include both operating and asset disposition activities. We anticipate that acquisition, construction, development and renovation activities as well as land purchases, will be initially funded primarily through borrowings under our credit facilities and construction loans described below.

        We expect to meet our long-term liquidity requirements, including the balloon principal payments due at maturity of our notes payable and possible land and property acquisitions, through long-term secured and unsecured borrowings, the issuance of debt securities or equity securities, private equity investments in the form of joint ventures, or through the disposition of assets which, in our evaluation, may no longer meet our investment requirements.

$300 Million Credit Facility

        We have an unsecured revolving credit facility with a committed capacity of $300 million provided by a syndicate of banks that has a maturity date of May 2005.  This facility was modified in February 2003 and December 2003 to, among other things, increase the committed capacity under the facility from $225 million to $252 million and from $252 million to $300 million, respectively.  Syndicated borrowings under this facility currently bear interest at our option of LIBOR plus 0.95% or prime minus 0.25%.  Fees for letters of credit issued under this facility are equal to the spread over LIBOR for syndicated borrowings.  In addition, we pay a facility fee currently equal to 0.20% of the $300 million committed capacity.  The spread over LIBOR for syndicated borrowings and the facility fee may be adjusted up or down based on changes in our senior unsecured credit ratings and our leverage ratios.  There are five stated pricing levels for (1) the spread over LIBOR for syndicated borrowings ranging from 0.70% to 1.25% and (2) the facility fee ranging from 0.15% to 0.30%.  A competitive bid option is available for borrowings up to 50% of the $300 million committed capacity, or $150 million.  This option allows participating banks to bid to provide us loans at a rate that is lower than the stated rate for syndicated borrowings.  At June 30, 2004, we had outstanding under the facility (1) $150 million in borrowings outstanding under the competitive bid option at an average interest rate of 1.58% and (2) $49 million of letters of credit, including $46 million of letters of credit enhancing four tax-exempt variable rate notes payable totaling $45 million.  Thus, we had $101 million of availability under the facility at June 30, 2004.  We expect to renew and/or renegotiate the facility prior to the May 2005 maturity date, however there can be no assurance that such renewal and/or renegotiation will occur.

$37.5 Million Borrowing Facility

        We have a $37.5 million unsecured borrowing facility with a bank that has a maturity date of May 2005. The interest rate and maturity date related to each advance under this facility is agreed to by both parties prior to each advance. We had $17.8 million in borrowings outstanding under this facility at June 30, 2004 at an interest rate of 1.85%.

$10 Million Credit Facility

We have a $10 million unsecured revolving credit facility with a bank that has a maturity date of May 2005.  Borrowings under this facility bear interest at the same scheduled interest rates for syndicated borrowings as the $300 million credit facility.  We had $3.0 million in borrowings outstanding under this facility at June 30, 2004 at an interest rate of 2.12%.

Secured Construction Loans

We have committed fundings under eight construction-related financing vehicles for four wholly-owned development communities totaling $78.1 million from a bank. At June 30, 2004, we had drawn $42.2 million under these variable-rate financing vehicles and therefore have  $35.9 million of remaining capacity. Borrowings under these vehicles bear interest at a weighted average rate of 3.15% at June 30, 2004.

Restrictive Covenants

Our secured and unsecured debt agreements generally contain representations, financial and other covenants and events of default typical for each specific type of facility or borrowing.

        The indentures under which our publicly traded and other unsecured debt securities have been issued contain the following limitations on the incurrence of indebtedness: (1) a maximum leverage ratio of 60% of total assets; (2) a minimum debt service coverage ratio of 1.50:1; (3) a maximum secured debt ratio of 40% of total assets; and (4) a minimum amount of unencumbered assets of  150% of total unsecured debt.  Our indentures also include other affirmative and restrictive covenants.

        Our ability to borrow under our unsecured credit facilities and secured construction loans is subject to our compliance with a number of financial covenants, affirmative covenants and other restrictions on an ongoing basis.  The principal financial covenants impacting our leverage are: (1) our total debt may not exceed 57.5% of our total assets; (2) our annualized interest coverage ratio may not be less than 2.0:1; (3) our annualized fixed charge coverage ratio may be not less than 1.75:1; (4) our total secured debt may not exceed 35% of our total assets, and the recourse portion of our secured debt may not exceed 10% of our total assets; (5) our unencumbered assets may not be less than 175% of our total unsecured debt; (6) our tangible net worth may not be less than $749.6 million; and (7) our floating rate debt may not exceed 30% of our total assets.  Such financing vehicles also restrict the amount of capital we can invest in specific categories of assets, such as unimproved land, properties under construction, non-multifamily properties, debt or equity securities, and unconsolidated affiliates.

        In addition, we have a covenant under our unsecured credit facilities and secured construction loans that restricts our ability to make distributions in excess of stated amounts, which in turn restricts the Trust’s ability to declare and pay dividends.  In general, during any fiscal year, we may only distribute up to 100% of our consolidated income available for distribution.  This provision contains an exception to this limitation to allow us to make any distributions necessary to (1) allow the Trust to maintain its status as a REIT or (2) distribute 100% of the Trust’s taxable income.  We do not anticipate that this provision will adversely affect our ability to make distributions sufficient for the Trust to pay dividends under its current dividend policy.       

        Our credit facilities, construction loans and indentures are cross-defaulted and also contain cross default provisions with other of our material indebtedness.  We were in compliance with covenants and other restrictions included in our debt agreements as of June 30, 2004.  The indentures and the $300 million credit facility agreement containing the financial covenants discussed above, as well as the other material terms of our indebtedness, including definitions of the many terms used in and the calculations required by financial covenants, have been filed with the Securities and Exchange Commission as exhibits to our periodic or other reports.

        Our tax-exempt bonds contain customary covenants for this type of financing which require a specified percentage of the apartments in the bond-financed communities to be rented to individuals based upon income levels specified by U.S. government programs.

Off-Balance Sheet Arrangements

        We do not have any off-balance sheet arrangements that we believe have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources. 

        We account for our joint venture arrangements using the equity method.  Total indebtedness of our unconsolidated joint ventures is $216.7 million at June 30, 2004.  We have a $7.1 million maximum limited payment guaranty on two joint venture construction loans with committed fundings aggregating $21.8 million.  At June 30, 2004, there is $19.2 million of principal outstanding under these loans and the portion of this that is recourse to us is $5.8 million.  We do not believe that we will have any funding obligations under this limited payment guaranty.  The remaining $197.5 million of joint venture indebtedness is not recourse to us.

Inflation

       Substantially all of the leases at our apartment communities are for a term of one year or less.  In the event of significant inflation, this may enable us to realize increased rents upon renewal of existing leases or the beginning of new leases. Short-term leases generally minimize our risk from the adverse effects of inflation, although these leases generally permit residents to leave at the end of the lease term without penalty and therefore expose us to the effect of a decline in market rents. In a deflationary rent environment, as is currently being experienced in some of our markets, we are exposed to declining rents more quickly under these shorter term leases.

Certain Factors Affecting Future Operating Results

        This report contains forward-looking statements within the meaning of the federal securities laws.  The words "believe," "expect," "anticipate," "intend," "plan," "estimate," "assume" and other similar expressions which are predictions of or indicate future events and trends and which do not relate solely to historical matters identify forward-looking statements. These statements include, among other things, statements regarding our intent, belief or expectations with respect to the following: 

• our ability to increase shareholder value by producing consistent high quality earnings to sustain dividends and annual total returns that exceed the multifamily sector average;

• our ability to create a portfolio of high quality assets in strategically selected markets that are complementary through economic diversity and characterized by high job growth and resiliency to economic downturns;

• the ability of our portfolio to maintain high levels of occupancy and rental rates relative to overall market conditions;

• our ability to generate a return on invested capital that exceeds our long-term weighted average cost of capital while maintaining financial flexibility through a conservative, investment grade credit profile;

• our expectation that the markets we have selected for investment will continue to experience job growth that exceeds national averages, and that our EPN locations will outperform local market results;

• our ability to meet short-term liquidity requirements, including the payment of common and preferred distributions, through net cash provided by recurring real estate activities, and to meet long-term liquidity requirements through long-term secured and unsecured borrowings, the issuance of debt securities or equity securities, private equity investments in the form of joint ventures, or through the disposition of assets which, in our evaluation, may no longer meet our investment requirements; and

• estimated development and construction costs for our development and lease-up communities, and anticipated construction commencement, completion, lease-up and stabilization dates for these communities.

You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and may cause our actual results, performance or achievements to differ materially from anticipated future results, or the performance or achievements expressed or implied by such forward-looking statements. Factors that might cause such a difference include, but are not limited to:

• national and local economic conditions generally, and the real estate market specifically, including changes in occupancy rates and market rents, a continued deceleration of economic conditions in our markets, and a failure of national and local economic conditions to rebound in a timely manner;

• changes in job growth, household formation and population growth in our markets;

• excess supply of and insufficient demand for apartment communities in our markets;

• competition, which could limit our ability to secure attractive investment opportunities, lease apartment homes or increase or maintain rents;

• our failure to sell apartment communities in a timely manner or on favorable terms;

• uncertainties associated with our development and construction activities, including the failure to obtain zoning and other approvals, actual development and construction costs exceeding our budgeted estimates and construction material defects;

• construction and lease-up may not be completed on schedule, resulting in increased debt service expense and construction costs and reduced rental revenues;

• new debt or equity financing may not be available or may not be available on favorable terms, and existing indebtedness may mature in an unfavorable credit environment, preventing such indebtedness from being refinanced or, if financed, causing such refinancing to occur on terms that are not as favorable as the terms of existing indebtedness;

• changes in interest rates;

• cash flow from recurring real estate activities may be insufficient to meet our short-term liquidity requirements, including the payment of common and preferred distributions;

• legislative, regulatory and accounting changes, including changes to laws governing the taxation of REITs or changes in GAAP; and 

• potential liability for uninsured losses and environmental contamination.

While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Development and Lease-up Communities at June 30, 2004:

						Percent at June 30, 2004 Complete  Leased  Occupied			Actual or Estimated Quarter of
Market	Community	No. of Apt. Homes		Total Budgeted Cost	Cost to Complete				Constr- uction Start	Initial Occu- pancy	Constr- uction End	Stab- ilized Occupancy
				(millions)	(millions)							(a)
Wholly-Owned Development/Lease-up Communities:
Atlanta, GA	Gables Rock Springs III (b)		193	$        19	$      17	7%	--	--	1 Q 2004	1 Q 2005	4 Q 2005	1 Q 2006
Austin, TX	Gables Grandview (c)		458	56	4	93%	43%	33%	1 Q 2003	4 Q 2003	4 Q 2004	4 Q 2005
Dallas, TX	Gables Uptown Place (c)		311	44	34	2%	--	--	2 Q 2004	4 Q 2005	3 Q 2006	4 Q 2006
Houston, TX	Gables Augusta (c)		312	33	4	86%	52%	31%	1 Q 2003	1 Q 2004	4 Q 2004	2 Q 2005
Houston, TX	Gables River Oaks (c)		144	20	15	3%	--	--	2 Q 2004	3 Q 2005	1 Q 2006	3 Q 2006
South FL	Gables Floresta		311	39	3	89%	57%	41%	1 Q 2003	4 Q 2003	4 Q 2004	2 Q 2005
South FL	Gables Montecito (d)		450	61	51	6%	--	--	2 Q 2004	3 Q 2005	4 Q 2006	1 Q 2007
Tampa, FL	Gables Beach Park		166	23	1	98%	74%	65%	1 Q 2003	4 Q 2003	3 Q 2004	4 Q 2004
Washington, D.C.	Gables Rothbury Square		203	25	22	--	--	--	3 Q 2004	3 Q 2005	1 Q 2006	2 Q 2006
	Wholly-Owned Totals		2,548	$     320	$151
Co-Investment Development/Lease-up Community:
Tampa, FL	Gables West Park Village III (e)	76		$        10	$       3(f)	67%	--	--	4 Q 2003	--	4 Q 2004	--
	Co-Investment Totals	76		$       10	$       3
	(a) Stabilized occupancy is defined as the earlier to occur of (i) 93% occupancy or (ii) one year after completion of construction. (b) This community represents the reconstruction of 56 apartment homes previously owned and operated by us into 193 apartment homes. (c) These communities are secured by construction loans with an aggregate committed capacity of $78 million, of which $42 million was outstanding at June 30, 2004. (d) We are developing single-family lots adjacent to this community and have such lots under contract for sale once development is complete. Amounts pertaining to the single-family lots have been excluded from the disclosure above.  At June 30, 2004, $9 million in costs have been incurred pertaining to the single family lots, and the estimated cost to complete is $4 million. Such costs are included in construction in progress in the accompanying consolidated balance sheet. (e) This community is owned by the GRAP JV Two, in which we hold an indirect 20% interest, and is expected to be sold to a condominium converter upon completion.  (f) Construction loan proceeds are expected to fund all $3 million of the costs to complete at June 30, 2004.

        The projections and estimates contained in the table above are forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve risks and uncertainties and actual results may differ materially from those projected and estimated in such statements. Risks associated with our development, construction and lease-up activities, which could impact the forward-looking statements made, include: development opportunities may be abandoned; construction costs of a community may exceed original estimates, possibly making the community uneconomical; and construction and lease-up may not be completed on schedule, resulting in increased debt service and construction costs.

Stabilized Communities at June 30, 2004

		No. of Apt.	June 30, 2004			June 30, 2004                        Market Rent Per
Community		Homes	Occupancy			Home           Square Foot
Atlanta, GA Briarcliff Gables Buckhead Gables Gables Cityscape Gables Druid Hills Gables Metropolitan I (JV)  Gables Metropolitan II (JV) Gables Mill Gables Montclair Gables Northcliff Gables Paces Gables Rock Springs I & II Gables Vinings Gables Walk Gables Wood Arbor  Gables Wood Crossing Gables Wood Glen  Gables Wood Knoll Roswell Gables I  Roswell Gables II Spalding Gables  Wildwood Gables   Totals/Averages South FL Belmar Cotton Bay Gables Boca Place Gables Boynton Beach I Gables Boynton Beach II Gables Kings Colony Gables Mizner on the Green Gables Palma Vista (JV) Gables San Michele I Gables San Michele II  Gables San Remo Gables Town Colony Gables Town Place  Gables Wellington (JV) Hampton Lakes  Hampton Place Mahogany Bay  Vinings at Hampton Village   Totals/ Averages Houston,  TX Gables Austin Colony Gables Cityscape  Gables Citywalk/   Waterford Sq.  Gables Edgewater	104 162 182 272 435 274 438 183 82 80 365 315 310 140 268 380 312 384 284 252     546 5,768 36 444 180 252 296 480 246 189 249 343 180 172 312 222 300 368 328        168 4,765 237 252 317 292		94% 94% 99% --- 91% 94% 92% 97% 95% 91% 96% 96% 94% 96% 85% 93% 92% 90% 90% 96%        94%     93% --- 95% 94% 93% 97% 97% 91% 94% 95% 96% 95% 98% 95% 91% 94% 95% 93%    96%   95% 92% 90% 95% 95%	(a) (b) (c)	$1,042 778 792 1,066 1,215 1,270 768 1,469 1,164 1,900 1,237 947 972 632 685 574 663 818 818 836       863   $ 932 $936 796  1,081 962 956 914 1,579 1,647 1,567 1,557 1,311 1,015 894 1,079 861 806 845     890 $1,066 $ 941 842 878 878		$0.84 1.03 0.93 0.94 1.08 1.14 0.83 0.96 0.75 1.15 1.10 0.89 0.82 0.69 0.71 0.58 0.67 0.75 0.70 0.84    0.76 $0.86 $0.61 0.81 1.11 0.80 0.79 1.01 1.25 1.14 1.12 1.12 0.96 1.18 1.07 0.93 0.82 0.84 0.84   0.74 $0.96 $0.96 0.99 1.09 1.00

Stabilized Communities at June 30, 2004 (continued)

		No. of  Apt.	June 30, 2004	June 30, 2004                Market Rent Per
Community		Homes	Occupancy	Home     Square Foot
Houston, TX(continued) Gables Lions Head  Gables Metropolitan Uptown Gables of First Colony Gables Piney Point Gables Pin Oak Green Gables Pin Oak Park Gables Rivercrest I  Gables Rivercrest II Gables Windmill Landing   Totals/Averages Dallas, TX Gables at Pearl Street Gables CityPlace  Gables Ellis Street Gables Knoxbridge Gables Mirabella Gables Parkwood Gables Spring Park Gables State Thomas Townhomes Gables State Thomas Ravello Gables Turtle Creek Gables Valley Ranch   Totals/Averages Austin, TX Gables at the Terrace Gables Barton Creek Gables Bluffstone Gables Central Park Gables Great Hills Gables Park Mesa Gables Town Lake Gables West Avenue    Totals/Averages Memphis, TN Arbors of Harbortown (JV) Gables Cordova  Gables Stonebridge (JV)    Totals/Averages Nashville, TN Brentwood Gables (JV) Gables Hendersonville (JV) Gables Hickory Hollow I Gables Hickory Hollow II    Totals/Averages	277 318 324 246 581 474 140 140     259 3,857 108 232 245 334 126 30 188 177 290 150    319 2,199 308 160 256 273 276 148 256    239 1,916 345 464    500 1,309 254 364 276    272 1,166		96% 91% 96% 94% 92% 88% 94% 96%   94%  93% 97% 95% 95% 95% 98% 80% 91% 95% 96% 98%     95%    95% 95% 89% 91% 78% 93% 92%    90%    92%   90% 94% 90%   91%  91% 93% 88% 88%      87%  89%	$  769 891 1,002 862 936 940 780 767     714 $ 880 $1,313 1,422 1,520 1,055 1,149 822 947 1,815 1,584 1,219      877 $1,268 $1,105 1,397 990 1,402 804 1,156 1,339   1,429 $1,189 $911 701    700 $756 $953 688 667    660 $734	$ 0.91 0.98 1.01 0.93 0.92 0.92 0.93 0.91    0.82 $0.95 $1.21 1.35 1.26 1.24 1.26 1.31 0.90 1.21 1.39 1.21    0.86 $1.19 $1.16 1.20 1.01 1.49 0.97 1.06 1.43   1.67 $1.25 $0.92 0.75   0.80 $0.81 $0.84 0.73 0.74   0.69 $0.75

Stabilized Communities at June 30, 2004 (continued)

	No. of  Apt.	June 30, 2004	June 30, 2004                   Market Rent Per
Community	Homes	Occupancy	Home           Square Foot

Orlando, FL Gables Chatham Square Gables North Village The Commons at Little Lake Bryan    Totals/Averages Tampa, FL Gables West Park Village I (JV) Gables West Park Village II (JV) Totals/Averages Inland Empire, CA Gables Solana Ridge (JV) Gables Tuscany Ridge (JV)    Totals/Averages Washington, D.C. Gables Dupont Circle Gables Woodley Park    Totals/Averages	448 315    280 1,043 320 297 617 312 220 532   82       211      293	100% 96%    100%    99%   92%   94%   93% 92% 90% 92%    98%      ---  98%	(e)	$      --- 1,143      --- $1,143 $1,188   1,170 $1,179 $1,129   1,143 $1,135 $2,731   2,222 $2,364	(d) (d)	$    --- 0.86       --- $0.86 $0.95   0.98 $0.96 $1.21   1.22 $1.22 $2.80   2.57 $2.64	(d) (d)
Grand Totals/Averages	23,465	93%		$1,018		$0.98

(a)
(b)
(c)

(d)

(e) This community is not fully operational as of June 30, 2004; therefore, occupancy is based on apartment homes available for lease.
This community was in lease-up upon our acquisition in June 2004.  At June 30, 2004, the community was 78% occupied.
This community was acquired by us in December 2003 for renovation and was 64% occupied at June 30, 2004.  This community is adjacent to a land parcel that Gables acquired in January 2004 for the future development of an estimated 261 apartment homes.
This community is leased to a single user group pursuant to a triple net master lease.  Accordingly, scheduled
rent data is not reflected as it is not comparable to the rest of our portfolio. 
This community was in lease-up upon our acquisition in July 2003.  At June 30, 2004, the community was 92% occupied.

Portfolio Indebtedness Summary at June 30, 2004
Type of Indebtedness	Balance	Interest Rate (a)	Total    Rate (b)	Years to  Maturity
Fixed Rate: Unsecured fixed-rate notes Secured fixed-rate notes Unsecured tax-exempt fixed-rate loans     Total fixed-rate indebtedness
	$ 498,578 117,055   48,365   $ 663,998	6.59% 7.82% 4.75% 6.67%	6.59% 7.82% 4.75% 6.67%	2.39 4.48 0.00  2.58	(c)
Variable Rate: Secured tax-exempt variable-rate loans Unsecured variable-rate credit facilities  (d) Secured variable-rate construction loans     Total variable-rate indebtedness	$ 170,955 170,806     42,209 $ 383,970	1.10% 1.62% 3.15%  1.55%	2.08% 1.62% 3.15% 1.99%	2.62 0.87       2.25    1.80
Total portfolio debt (e), (f)	$1,047,968	4.79%	4.96%	2.30

(a)  Interest Rate represents the weighted average interest rate incurred on our indebtedness, exclusive of deferred financing cost amortization
      and credit enhancement fees, as applicable.
(b)  Total Rate represents the Interest Rate (a) plus credit enhancement fees, as applicable.
(c)  The $48,365 of tax-exempt fixed-rate bonds were remarketed on July 1, 2004 as tax-exempt variable-rate bonds.  The bonds are enhanced
      by unsecured letters of credit which have an initial maturity of July 1, 2005 and a one-year extension option.
(d)  Our credit facilities bear interest at various spreads over LIBOR.  For purposes of the years to maturity disclosure, all such indebtedness is
      presented using the May 2005 maturity date of our $300,000 unsecured credit facility. 
(e)  Interest associated with construction activities is capitalized as a cost of development and does not impact current earnings. The qualifying
      construction expenditures at June 30, 2004 for purposes of interest capitalization were $142,241.
(f)   Excludes (i) $62,138 of indebtedness related to a joint venture in which we own a 50% interest, (ii) $16,350 of tax-exempt bonds related
      to a joint venture in which we own a 25% interest, (iii) $86,741 of  indebtedness related to joint ventures in which we own a 20% interest,
      and (iv) $51,446 of conventional indebtedness related to a joint venture in which we own an 8.26% interest.

SUPPLEMENTAL DISCUSSION - Funds From Operations

        Funds from operations (“FFO”) is used by industry analysts and investors as a supplemental operating performance measure of an equity REIT.  We calculate FFO in accordance with the definition that was adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”).  FFO, as defined by NAREIT, represents net income (loss) determined in accordance with GAAP, excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated operating real estate assets, plus specified non-cash items, such as real estate asset depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.

       Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time.  Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.  Thus, NAREIT created FFO as a supplemental measure of REIT operating performance that excludes historical cost depreciation, among other items, from GAAP net income.  The use of FFO, combined with the required primary GAAP presentations, has improved the understanding of operating results of REITs among the investing public and made comparisons of REIT operating results more meaningful.  We generally consider FFO to be a useful measure for reviewing our comparative operating and financial performance (although FFO should be reviewed in conjunction with net income which remains the primary measure of performance) because by excluding gains or losses related to sales of previously depreciated operating real estate assets and excluding real estate asset depreciation and amortization, FFO can help users compare the operating performance of a company’s real estate between periods or as compared to different companies.

      FFO presented herein is not necessarily comparable to the FFO of other REITs due to the fact that not all REITs use the NAREIT definition.  However, our FFO is comparable to the FFO of REITs that use the NAREIT definition.  FFO should not be considered an  alternative to net income as an indicator of our operating performance.  Additionally, FFO does not represent cash flows from operating, investing or financing activities as defined by GAAP.  Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” for a discussion of our cash needs and cash flows.
      
       We present FFO with a supplemental adjustment to exclude debt extinguishment costs associated with the sale of real estate assets.  These debt extinguishment costs are incurred when the sale of an asset encumbered by debt requires us to pay the extinguishment costs prior to the debt’s stated maturity and to write-off unamortized loan costs at the date of the extinguishment.  Such costs are excluded from the gain on sale of real estate assets reported in accordance with GAAP because the debt was not part of the disposal group.  However, we view the debt extinguishment costs associated with the sale of real estate assets as an incremental cost of the sale transaction because we extinguished the debt in connection with the consummation of the sale transaction and we had no intent to extinguish the debt absent such transaction.  We believe that this supplemental adjustment more appropriately reflects the results of our operations exclusive of the impact of our sale transactions. 

A reconciliation of FFO available to common unitholders from net income available to common unitholders (the most directly comparable GAAP measure to FFO available to common unitholders) is as follows:

	Three Months          . Ended June 30,         .			Six Months          Ended June 30,
	2004		2003	2004		2003
Net income available to common unitholders	$17,503		$5,406	$23,293		$16,845
Real estate asset depreciation and amortization:      Wholly-owned real estate assets - continuing operations      Wholly-owned real estate assets - discontinued operations      Joint venture real estate assets         Total	13,192 488   495 14,175		11,283 1,480         349 13,112	26,644 1,260         886 28,790		22,731 3,097         689 26,517
Gain on sale of operating real estate assets:      Wholly-owned real estate assets - discontinued operations      Joint venture real estate assets        Total	(14,198             -   (14,198	) )	-          -           -	(16,580      (432   (17,012	) ) )	(5,042              - (5,042	) )
FFO available to common unitholders – basic and diluted	$17,480		$18,518	$35,071		$38,320
Debt extinguishment costs associated with the sale of real estate assets	$     986		-	$     986		-
FFO available to common unitholders, after a supplemental   adjustment to exclude debt extinguishment costs associated with   the sale of real estate assets – basic and diluted	$18,466		$18,518	$36,057		$38,320
Average common units outstanding - basic	33,461		30,416	33,369		30,359
Average common units outstanding - diluted	33,548		30,520	33,487		30,429

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       Our capital structure includes the use of fixed-rate and variable rate indebtedness. As such, we are exposed to the impact of changes in interest rates. We periodically seek input from third-party consultants regarding market interest rate and credit risk in order to evaluate our interest rate exposure. In some situations, we may utilize derivative financial instruments in the form of rate caps, rate swaps or rate locks to hedge interest rate exposure by modifying the interest rate characteristics of related balance sheet instruments and prospective financing transactions. We do not utilize such instruments for trading or speculative purposes.  We did not have any derivative instruments in place at June 30, 2004 or December 31, 2003.

       We typically refinance maturing debt instruments at then-existing market interest rates and terms, which may be more or less favorable than the interest rates and terms on the maturing debt.

       Refer to our Annual Report on Form 10-K for the year ended December 31, 2003 for detailed disclosure about quantitative and qualitative disclosures about market risk. Quantitative and qualitative disclosures about market risk have not materially changed since December 31, 2003.


ITEM 4.  CONTROLS AND PROCEDURES

      We carried out an evaluation under the supervision and with the participation of senior management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness as of June 30, 2004 of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15 under the Securities Exchange Act 1934, as amended (the “Exchange Act”).  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. We continue to review and document our disclosure controls and procedures, including our internal controls and procedures for financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

       There was no change in internal control over financial reporting that occurred in the second quarter of 2004 that has materially affected or is reasonably likely to materially affect our internal controls over financial reporting.

Part II – Other Information
Item	1:			Legal Proceedings
				None
Item	2:			Changes in Securities
				On June 17, 2004, we issued 65,967 common units valued at $2.1 million to private land owners unaffiliated with the Operating Partnership in connection with the acquisition of a parcel of land for future development.  Such shares were issued in reliance on an exemption from registration under Section 4(2) of the Securities Act, and the rules and regulations promulgated thereunder. As of June 30, 2004, we had 79 holders of common units (one general partner and 78 limited partners). Each time the Trust issues shares of beneficial interest, it contributes the proceeds of such issuance to the Operating Partnership in return for a like number of units with rights and preferences analogous to the shares issued. During the period commencing on April 1, 2004 and ending on June 30, 2004, in connection with issuances of common shares by the Trust during that time period, the Operating Partnership issued an aggregate of 12,172 common units to the Trust. Such common units were issued in reliance on an exemption from registration under Section 4(2) of the Securities Act, and the rules and regulations promulgated thereunder, as these were transactions by an issuer not involving a public offering.  In light of the information obtained by us from the Trust in connection with these transactions, we believe we may rely on this exemption.
Item	3:			Defaults Upon Senior Securities
				None
Item	4:			Submission of Matters to a Vote of Security Holders
				None
Item	5:			Other Information
				None
Item	6:			Exhibits and Reports on Form 8-K
		(a)		Exhibits
		*	31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)
		*	31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)
		**	32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
				_____________
				*   Filed herewith
				** Furnished herewith
		(b)		Reports on Form 8-K
				A Form 8-K was furnished to the Securities and Exchange Commission on May 11, 2004 to disclose the Trust’s first quarter 2004 earnings press release and press release supplements dated May 10, 2004. A Form 8-K was filed with the Securities and Exchange Commission on June 7, 2004 to disclose a press release announcing the acquisition of Income Growth Property Management, Inc. (“IGPM”) and the agreement with New York State Teachers’ Retirement System (“NYSTRS”) to enter into joint venture arrangements to acquire and develop assets in the San Diego, Inland Empire and Washington D.C. markets.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		GABLES REALTY LIMITED PARTNERSHIP
		By:  Gables GP, Inc. Its:   General Partner
Date:	August 9, 2004	/s/ Marvin R. Banks, Jr.
Date:	August 9, 2004	Marvin R. Banks, Jr. Senior Vice President and Chief Financial Officer (Authorized Officer of the Registrant and Principal Financial Officer) /s/ Dawn H. Severt Dawn H. Severt Vice President and Chief Accounting Officer (Principal Accounting Officer)