艾芙隆海灣社區公司 (AVB) 2003 Q2 法說會逐字稿

Good afternoon ladies and gentlemen and welcome to the Avalon Bay Communities second quarter 2003 earnings conference call. At this time, all participants are in a listen-only mode node. Later, we will conduct a question-and-answer session and instructions will follow at that time. If anyone should require assistance during the call, please press star then zero on your touch-tone phone. As a reminder this conference call is being recorded. I would now like to introduce your host for today's conference, Miss Alaine Walsh. You may begin your conference.

Thank you, Amy. Good afternoon and welcome to the Avalon Bay Communities second quarter 2003 earnings conference call. On the call today are Bryce Blair, Chief Executive Officer and President, Tim Naughton, COO, and Tom Sargeant, CFO.

If you did not receive the press release, in last night's fax or e-mail distribution, please call us at (703)317-4636 and we'll be happy to send you a copy.

As always, I'd like to remind that you forward-looking statements may be made during this discussion. There are a variety of risks and uncertainties associated with forward-looking statements and actual results may differ materially. There is a discussion of these risks and uncertainties in yesterday's press release as well as in our Form 10-K filed with the SEC.

Finally, similar to last quarter, we've included definitions and reconciliations of several non-GAAP financial measures and other terms that are included in yesterday's earnings release and which may also be included in today's discussion.

This summary is also available on our website at www.avalonbay.com/earnings. And we encourage you to refer to this information during your review of our operating results.

With that, I'd like to turn the call over to Bryce Blair for his opening remarks. Bryce?

Thank you, and good afternoon.

Last evening we reported quarterly EPS of $1.08 and an FFO per share of 83 cents. The FFO per share of 83 cents was at the high end of the guidance range we provided during last quarter's call. If I were to characterize this quarter, it would be one where the economy and the apartment fundamentals remained weak, one where our operating performance was largely as expected, and where the sales environment for apartments continued to be very strong. I'm going to touch on each of these topics as well as our outlook for the balance of the year and then Tim and Tom will provide some additional color on our operating and our investment activity and our financial performance.

But let me begin first by commenting on the market conditions and our operating performance for the quarter, both of which as I mentioned were very much in line with our prior expectations. I see that on our first quarter call that while our markets remain weak that the rate of decline in our revenues was diminishing. And this is proven to be the case as we saw continued declines in revenues on both a sequential and on a year-over-year basis, yet the rate of decline has been diminishing since peaking in the third quarter last year. Now, demand remains weak due to the continued, albeit lower levels of job losses and the continued strength of the for-sale market, and despite that weak demand, supply of new apartment construction has not declined.

While the apartment fundamentals remain unfavorable the rate of decline in revenues does continue to diminish. Let me give you an example. If you look at the rate of revenue declines on a sequential quarterly basis, our revenues were declining on an average of 1.6% per quarter throughout 2002. And during the first two quarters of this year, our revenues have grown at an average rate of .8% per quarter or half of last year's average rate of decline.

Now, when we look at the current data, in assessing our outlook for the second half of the year, we continue to see mixed signals both in terms of the general economy and also within our specific portfolio. And I'll start first with highlighting a couple areas of concern. In terms of the economy, we see much of the same discouraging data that you see, you know, that is an economy that year to date has continued to shed jobs and unemployment rate at a nine-year high with unemployment claims above four hundred thousand per week which is a level many consider to be a sign of a contracting labor market. And in our own portfolio, concessions and availability remain stubbornly high and revenues continue to decline, although as I mentioned they are declining at a lesser rate.

Yet, there are some encouraging signs as well. On the economic front, the rate of industrial production rose nationally both in May and June, the first two-month gain in almost a year. Consumer confidence is up in the second quarter over the first, after falling for the previous four quarters. And the outlook by most economists is or modest job growth over the next few quarters. In our portfolio, on the positive side we've seen traffic up and turnover down as compared to last year. We've seen a declining rate of concessions per apartment home and stable occupancies in declining lease breaks.

So with these mixed signals what do we expect for the second half of the year? How do we see it? On the job front we're not planning for any material job growth in our markets and if job growth were to pick up more quickly we wouldn't feel any significant impact on our revenues until next year anyways. We expect continuing weak apartment fundamentals for the balance of 24 year which will result in continued yet declining pressures on our revenues. And this outlook is consistent with our expectations at the beginning of the year and is reflected in our reaffirmed guidance.

Now, let me turn to a decision of the sales environment. You know, as contrasted to the continued weakness in apartment fundamentals, the sales environment for apartments remains very, very strong. Investors have all types of aggressively chasing well-located quality product and we've moved aggressively to capitalize on the attractive sale environment and have told over 230 m of assets so far this year, almost 200 m in the second quarter alone. Year to date, these sales have resulted in an economic gain of $40 m, which I think is further evidence of the quality of our product and our and the to harvest the value we've created over the years through our acquisition, development and property management skills. We have and will continue to use the attractive sales environment to exit noncore markets or sell noncore assets, or simply to capture some of the value inherent in the quality of our portfolio.

You know, on the first quarter call I spoke about our actions to close what I called the value gap between how the private and public markets were valuing our assets. And we discussed how in the first quarter we did this through modest asset sales and aggressive share repurchases and during the second quarter we've continued to work at closing the value gap, we didn't repurchase any shares during the quarter but we were a very aggressive seller as I mentioned and we plan to continue to be an aggressive seller for the balance of the year and expect sales to total between 400 and 450 m for the full year.

Overall, in summary, I think this is a quarter where the markets and our performance were largely as we expected. And a quarter where we did act aggressively to harvest value through our sales activity.

With that, I'll pass to Tim who will provide color on our operating and investment activity.

Thanks, Bryce. As Bryce mentioned I'll discuss property operations development activity and finally dispositions.

Starting with property operations, many of the trends we've been discussing over the last couple of quarters continued into Q2. Year-over-year same-store were revenues were down 4.9% with northern California and Seattle still experience experiencing the greatest declines at around 9%. Sequentially from Q1, same-store revenues were down .3% as compared to a sequential decline of 1.3% reported last quarter. This decrease in the rate of decline is consistent with the longer trend we've been seeing over the last few quarters but was also due in part to a higher transactional income that we typically see during the peak leasing season.

Perhaps a more accurate reflection of the longer term trend can be seen in base rental revenues, which excludes transactional income. The sequential decline in base rental revenues was actually .7% in Q2 and 1.2% in Q1. Still a decrease in the rate of decline, but about half the size than that for total revenues.

Same-store revenues also benefited from an increase in economic occupancy, which was up .2% from last quarter. Economic occupancy averaged 93.6% in Q2 and remained fairly level throughout the quarter and is now hovered in the 93 to 94% range for more than a year now.

And finally, cash concessions remain part of the occupancy story but did decline from last quarter. In Q2, the average cash concession per move-in totaled $583 which was down from an average of about $800 experienced last quarter.

Looking across regions, results were largely influenced by improvement in the Northeast in Mid-Atlantic which both posted sequentially increases in same-store revenues of more than 1%. The Northeast benefited from economic occupancy increases in the northern New Jersey and Fairfield County markets, while the Mid-Atlantic's performance was largely the result of strengthening market conditions in suburban Maryland. Northern California, Seattle and Chicago continue to experience the weakest market conditions in our portfolio, and each posts sequential declines in same-store revenues in the 1 1/2 to 2% range.

And finally, the Southern California region experienced softening demand in Q2, which was reflected in growing availability in vacancy at that occurred through the quarter. This softness occurred mostly in San Diego and parts of Orange County, although Los Angeles suffered from increased vacancy later in the quarter as well. 30-day availability is currently at the highest levels we've seen in Southern California over this past cycle. This is of concern and as in other regions we will be aggressive in managing occupancy at or above market levels.

Expenses in the same store portfolio were up 4.7% year-over-year. This increase was in line with expectations and was largely a function of two items, that being insurance and associate housing discounts. Together these two items contributed about two-thirds of the 4.7% increase.

Shifting to development activity, we completed one community in Q2, Avalon at Mission Bay in San Francisco at a cost of just over $80 m. In addition we started two new communities totaling just over $90 m, both of which are second phases of other communities. The second phases of both Avalon Run East and Avalon Traville are located in sub markets that are supply constrained. In fact, in both cases, entitlements have taken several years to obtain. We believe these factors significantly reduce our risk on these two new development communities.

With these completions and new starts, total development volume, shown on attachment A, now stands at around 560 m, roughly unchanged from last quarter. The average projected yield for this development portfolio is 8.6%, and as we mentioned last quarter, we are now reporting yields net of concessions.

With communities still in lease up, absorption is running at about 85% of goal, occupancy and leasing velocity have been affected by soft market conditions as well as adverse weather conditions this past winter and spring in the East. In fact, in the Mid-Atlantic and Northeast, one of the most severe winters in recent memory was followed by 28 out of 31 days of rain in May. This has put pressure on delivery schedules, which in turn has impacted leasing. Particularly for communities in Washington and Boston. The projected impact of this has been factored into our updated outlook that Tom will discuss in a moment.

Turning lastly to dispositions, as Bryce mentioned the transaction market for assets remains the bright spot in our business. In Q2, we sold 6 communities totaling $185 m, one located in Southern California and the other in Minneapolis, which results in our exit in that market. We have now sold over $230 m year to date at a accumulative cap rate of 6.6%.

In addition, we expect to close another $60 m of dispositions in Q3, which will take our volume close to $300 m by the end of Q3. Which is approximately the total volume we had provided in our original guidance for all of 2003.

But as we mentioned on our call last quarter, we had been prepared to expand our disposition volume by about $100 m in order to capitalize own the strength of the transaction market. Cap rates remain in the low to mid sixes across most of our markets which is 100 to 150 basis points lower than we've typically experienced in the past. We believe this provides an attractive opportunity to harvest value in our portfolio. As a result, we are increasing dispositions by an additional $100 to $150 m for 2003 and are already in the various stages of the marketing process on three additional assets that should close in Q4 and bring this into the $400 to $450 m range by year-end.

In summary, operations are performing in line with expectations through Q2. But still reflect weak fundamentals. Revenues will continue to decline on a sequential basis in the second half of the year. Leasing velocity on new development communities will likely be challenged by both continued soft market conditions and the residual effects of weather-related delays. And finally, asset sales should continue to provide an opportunity to harvest value in many of our markets.

With that, I'd like to turn it over to Tom who will discuss financial highlights for the quarter.

Thanks, Tim.

Now, four topics I'd like to touch on this afternoon. First I'd like to add a few additional comments or color to this quarter's earnings results focusing on some of the nonoperating elements of our reported earnings. I'll also highlight some of the captivity for the quarter and year to date and how that impacts both our earnings and our outlook. I'd like to expand on the financial outlook provided in the text of our press release last evening, and I'll conclude with some comments on expanded disclosures included in this quarter's press release.

First a few highlights related to this highlighted related to this quarter's results. As mentioned gains on asset sales totaled by $54 m and boosted EPS but was appropriately excluded from FFO. Our assets are largely unencumbered and well-located in markets that most investors continue to favor. This affords us great financial flexibility and potential internal liquidity. These asset sales at low cap rates demonstrate how we can self-fund our capital needs by optimizing the overall capital structure.

[INAUDIBLE] operations performed largely as expected for the quarter, we continue to refine our models that correlate job growth to revenue growth, that combined with application of management judgment provides enhanced predictability and reliability related to the stabilized portfolio. You may have noted that the line item on attachment 2 titled other operating expenses was lower than in prior quarters, as we recorded the new direct write-offs of development pursuits during the quarter. This change was in response to an SEC comment letter because are no longer using an allowance account to provide for development pursuits. Capital activity and low variable rate interest rates were important to reported earnings this quarter, one additional demonstrate stock was repurchased the second quarter results differ from the repurchase activity. [INAUDIBLE] recorded rate of preferred stock in the quarter and [INAUDIBLE] 20 basis points between quarters. [INAUDIBLE] 100 m of unsecured those were prepaid at the maturity scheduled maturity date and the rate on these bonds was 6.5%. We provided updated four-year financial outlook in the press release. An FFO range of 318 to 332 per share, within the range but maintaining a midpoint.

Please note that the EPS range provided is coincidently close to the FFO ranges and we thought we should call this out to avoid confusion. It would be easy to pick up the wrong range.

In preparing the revised outlook, some elements of the business are better, most are about the same, and some are less than expected. Floating interest rate environment is better than expected and is projected to persist through the end of the year continuing to benefit earnings. We don't have significant level of floating rate debt so the contribution to earnings from this category are positive but modest. Stabilized operating communities drive earnings results and this element of our business is expected to continue to perform largely according to plan. Job data suggests or continues to suggest that the operating environment will remain challenging, but we anticipated this in our financial outlook we provided in December, April and now again in July. We expect revenue to continue to decline through the rest of the year but we expect expenses to rise in the third quarter in response to normal seasonal trends.

As we conclude the busy leasing season, this quarter, turnover and related expenses will peak as these costs are expensed, not capitalized. These costs will fall back to lower levels in the fourth quarter. These factors will combine to produce a decline in NOI for the entire year that should be within a seven to 9% range and revenue for the year is expected to decline four to 5%.

While interest rates and stabilized operations are expected to perform better or as planned, several items offset these positives. The dilutive effect of accelerated dispositions, adversely affect earnings in the second half of the year. Clearly, we're pleased with the execution obtained on our expanded disposition program, sales do dilute FFO until proceeds are reinvested to other accretive uses. Additionally, another factor not provided for in our original plan was the residual impact of severe weather that has delayed delivery of development communities pushing some deliveries outside of our peak leasing season and adversely impacting absorption.

So to recap, a few things went our way, most areas of our business performed as expected and there are a few areas that went against us. We are able to reaffirm the midpoint of the range we originally set in December and affirmed in April while [INAUDIBLE] the overall range. Specifically, the full-year outlook is for FFO per share of 318 to 332, with the third quarter FFO expected to be in the range of 77 to 81 cents. The expected decline in FFO next quarter is driven primarily by the dilutive effect of dispositions and reduced NOI from an expected decline in revenue and increased turnover costs.

The pace of change for public finance reporting is fast and fluid, and we have further expanded disclosures. Attachment 13 summarizes disposition activity providing gains on a GAAP and economic basis, as well as cap rates and unleveraged IRRs. Attachment 14 expand our reconciliation of terms used in our release to amounts presented in accordance with GAAP and in conformance with Reg G.

In summary, we're encouraged with the enhanced predictability of our stabilized operating results. We continue to benefit from capital activity from the first quarter as well as the preferred redemption in Q2. Dispositions allow us to harvest value, contribute to liquidity and enhance our financial flexibility. Our balance sheet offers broad financial and operational flexibility to respond to market opportunities both in the real estate and capital markets environment. And we enhanced and clarified our financial disclosures this quarter.

While economic uncertainty persists the second quarter results that were modestly better than expected combined with carry-over effect our capital transactions and improved confidence in the predictability of operating trends allows us to reaffirm our prior outlook while narrowing that range.

With that, I'd like to turn the presentation back to Bryce.

Thanks, Tom.

In closing, I wanted to highlight three areas that I think are worth emphasizing.

First, the quality of our forecasting. Despite continued uncertainty in the economy, we have been very accurate in anticipating and projecting any changes in the economy that would affect our business. We provided an economic outlook in earnings guidance in December of last year and in our second quarter release we've been able to reaffirm the midpoint of that prior guidance and to narrow the range. We provided specific earnings guidance for both the first and second quarter and performed within those ranges. We understand our business and our customers better today than ever before and it has resulted not only in better forecasting but importantly in our ability for quicker, more proactive decision-making and you've seen us take some of those actions in the first half of this year.

Second point I wanted to emphasize is the rate of decline is diminishing. You heard me speak to that on the first quarter call and again myself, Tim and Tom have all spoke to it on today's call. Our same-store sales revenues have continued but the rate of decline has decreased for each of the last three-quarters. While we do expect to experience continued year-over-year revenue declines for the balance of the year, the decline will be at a lesser rate.

And third, I wanted to emphasize that we are continuing to focus on closing what I referred to as that value gap, that gap between how public markets and private markets are valuing our assets. During the first quarter, we repurchased over a m shares at a price of about $36 per share. Today the price is about 20% higher. Year to date, we sold about 230 m of assets at an average cap rate of 6.6% at a time when most analysts continue to use cap rates 100 to 150 basis points higher than in their NAD calculations. Our sales in EPS has [INAUDIBLE] as it will enhance our long R long-term FFO growth rates.

In summary, despite a weak operating environment, we've within able to successfully execute according to plan while capitalizing on opportunity which will help position the Company for enhanced performance as the economy improves. And with that, we would be glad to take any questions, operator.

Thank you.

Ladies and gentlemen, if you have a question at this time, please press star, then the Number 1 on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, press "star 2". If your using a speakerphone, lift the hand set before asking the question. If you have a question, press "star 1" on your touch-tone telephone. One moment, please for the first question.

Your first question comes from Andrew Rosivach with Piper Jaffray. Please proceed with your question.

Good afternoon, guys. First I wanted a couple questions for Tim. You gave a lot of detail on the pieces of your revenues, I'm wondering if there's any factor of gain to lease or loss to lease that influences your sequential revenues?

Andrew, in terms of loss to lease, as we've talked about in previous quarters, it's relatively negligible. There's a couple of markets where we've got gain situation like San Jose and Chicago but generally minimum loss of lease or generally flat.

Okay. In terms your asset sales since you've been so active in the market, have there been any trends in cap rates given that we've seen this big spike in interest rates in the last month?

Andrew, I think it's too early to see that. To be net loss. We've got a couple of assets in the pricing stage right now, a couple others that are in the earlier stages of marketing, but right now I mean, for the most part we're seeing very strong interest, typically seeing 15 or 20 qualified offers per asset. So we continue to see low to mid six type cap rates across our markets.

Got you. And last on the asset sales, not to get into the specifics of markets but what part of your portfolio are you selling? You've been selling the older stuff. Are you thinking of selling any of your recent developments?

We are, actually. We've got a couple on the market that were developed four to five years ago when they actually completed. And generally they're in markets that had -- have had a pretty good run, not in all cases, but in most cases we do see it's a good opportunity, as I mentioned before to harvest value, particularly in markets that haven't seen much solution in their NO"s.

Terrific. I had a couple of questions, my phone was breaking up of, was the detail on pursuit costs?

Yes, Andrew, can you hear me okay? Can you hear me now, as they say? The pursuit costs we historically have provided an allowance for pursuit costs and this quarter marks a change in the methodology of how we record abandoned pursuits. We previously used this valuation account and we use it to reflect pursuits at net realizable value.

Based on a comment letter from the SEC, we changed the methodology such that pursuits are written off directly as they are deemed not probable for future development. Either methodology will give the same answer over a one to two-year period but the quarterly amounts will likely differ over time. Moving to this new methodology in the second quarter required no direct charges, but this cost will overturn in future quarters. So for modeling, I would tend to spread our historical write-offs of two to 2 1/2 m a year evenly throughout the year. It's going to be more difficult to predict what that line item might be going forward.

Got you. And that two, 2 1/2 m is what you've anticipated in your current '03 guidance?

It's not a change in accounting, a change in methodology that should result in the same number over time.

One other thing in terms of guidance, something that's really changed from what you've shown at the end of '02 is your EPS. And the EPS is I think maybe even a double from your December '02 guidance. Is that a function of a higher pace of asset sales or are you getting bigger gains than you anticipated?

Well --

Andrew, is tip. It's a function of both, actually, we are getting bigger prices than we initially anticipated and we're selling more, we're selling about 50 percent more, as we mentioned.

Terrific. Thanks guys.

Your next question comes from Brian Legg with Merrill Lynch.

Hi guys. Can you talk about your relative strength in the New York metro in the quarter, provide some color and also the weakness in terms of rent growth in Chicago and also why you're still seeing rental rate declines in northern California when you're at 95% occupancy?

Okay. Let me start with Chicago, Brian. Chicago's I think experienced in the order of 50,000 jobs lost in the last go to three quarter. So from a demand standpoint it continues to be exceptionally weak. It's been exacerbated by the strength of the single family home market as well. So I think Chicago's really been a demand story. Supply has not ramped up tall in that market to the extent it's mostly supply, it's been on the for sale side.

And the San Jose, San Francisco, Oakland areas, you know, it's been a struggle to keep eight the 94, 95%. The opportunities being hanging in there, it hasn't gotten comfortably and stayed there in the 96% range, availability has typically been in the six to 7.5% range, generally, those levels, pricing starts to level off, we have not yet seen that. We've seen the level decreases the sell rate but we're seeing price pressures. It's the market.

And your New York portfolios, saw some strength in the quarter. Is this a trend? Can you put some color on that?

I think it's a mixed bag. As we mentioned in the past, Long Island continues to be very strong, it continues to be in the high 90s from an occupancy standpoint, have low availability. Northern New Jersey saw a nice healthy increase in occupancy and I think that's probably really the result of a number of things. Actually, saw a little bit of job growth last quarter in no, your Honor New Jersey, thankfully turnover is down, in fact, it's down the most in northern New Jersey than any other, about 24%. I think also what's gone on in downtown Manhattan, it started to fill back up, it's benefited the Hudson river front and I think the lastly, rents of repriced themselves fundamentally in the northern New Jersey market by about $400 per apartment. So I think to some extent we've been buying some occupancy for the last quarter or so.

And you talked about traffic trends in closing ratios. Can you put some numbers around that? Traffic turnover and closing?

Yeah, sure. Traffic for the stabilized portfolio was up 7% year-over-year turn over was down 3% from 66 to 63% annualized rate. 2002 -- 2003 over 2002. And you asked about conversion?

Yeah.

Rates were down a bit but still relatively high levels. I think we ran at 33% versus 36% last year which was -- may have been the highest we've seen actually for the last 10 years. So 33's generally at the high end of the range.

I know you're not giving any '04 guidance but can you talk about sales activity, just the -- I guess the 150 m you have left or there some, you talked about that all being in 2003. Do you think any of this will spill over to '04? Do you expect to be a net seller in '04?

Well, I'll let Bryce speak on 2004 plans in terms of what might leak over in 2003, I think I mentioned we've got three assets in the early stages of marketing. To the extend that one of those deals gets protracted I guess it could happen, we anticipate it will Q4. To the extent we don't believe we'll get a good execution if interest rates move away from us that starts to impact pricing, that could effect what we choose to do in terms of timing on the disposition. But in terms of 2004 guidance, would you like to add something to that?

Sure. One final comment on '03. To amplify a point Tim was making, our business plan and capital plans for 2003 were predicated on the $300 m worth of sales so as Tim mentioned we will [INAUDIBLE] future sales if we deem them to be unattractive in terms of sales and in terms of developing our plan for '04 it will depend upon our view of the sales environment for '04 and how it relates to the balance of our business plan. But as you've seen us act over time, our disposition program is relatively lumpy, there are times when we're not sellers a and there are times when we are aggressive. 2003 we are being an aggressive seller. It will be reasonable to think that volume won't continue into '04 but the specific amount we're not prepared to comment on.

One last question. Your 27% sequential decline in concessions, do you tribute that to just because you're cutting base rents as opposed to offering larger concessions or is this a sign that the markets are strengthening or could it also be a sign of seasonality?

I think it's a sign of seasonality, there's more traffic. To the extent there's a market you're trying to get traction in the first quarter, you might be giving nor concessions than in the second quarter. But I think it's probably a sign of more market stabilizing as opposed to market strengthening. Thank you.

Your next question comes from Steve Swett with Wachovia Securities.

Thanks. Tim, I wanted to follow up on the operating side understanding that your portfolio overall was essentially in line with your expectations. Were there any markets that, you know, surprised you on the upside or the downside within that portfolio?

Probably a couple. On the upside, suburban Maryland both Montgomery county and the DC suburbs and Howard County and the Baltimore suburbs actually saw some quite a bit of strengthening in terms of availability and occupancy. That's probably where we saw the greatest strength.

As I mentioned earlier, we got -- we had a fair bit of occupancy increases in northern New Jersey and Fairfield as well but that was really part of a longer term trend that we've been seeing over a few months. On the down side, Boston more or less went more or less went sideways through the quarter, but continued at pretty weak levels. More recently, we've seen physical occupancies give into the 93 1/2% range in Boston which after a couple of quarters being down in the 90, 91%, we're pleased about that. And then to -- on the down side it's clearly been Southern California. You really starting with San Diego and Orange County more recently, L.A. we have seen weakening demand in traffic in those markets.

Okay. And then the properties that you've recently completed like your Q1 completions, do you have properties that remain in lease up that aren't listed on the development schedule anymore but really aren't stabilized yet?

We do. There's probably three or four properties, Steve, that are what I'm quoting that were running 85% of absorption goal. The communities are still in lease up probably or about three for four more communities that are Anthony on Attachment A.

Okay. The last question for Tom, you have $100 m in maturities listed for the second half but I think you said you redeemed something in early July. Was that the 100 m dollar maturity or was there another one?

No, in my comments I referred to a redemption of the preferred, the floating rate preferred that we redeemed in the second quarter. We also just this week redeemed $100 m of unsecured notes with a rate of 6 1/2%, that is all of our debt maturities for the rest of the year.

Okay. So the additional asset sales would essentially you would just apply them to the line?

Correct.

Okay. All right, thanks a lot.

Your next question comes from Rob Stevenson with Morgan Stanley.

Good afternoon, guys. Tim, can you talk specifically, I mean, you've talked about Southern California declining, I mean is this just the impact from the troop deployment spilling over, is this something else going on there? Has July been as bad as what you wound up seeing in the second quarter?

The trends that we've seen, Rob, in southern waffle have been pretty consistent over the last three or four months and while the overall occupancy didn't look bad for -- you know, looked still pretty healthy in Q2, it actually currently it's at a lower rate than what the average was for the quarter. So the trend went through the quarter. It really started in San Diego, and I think that was probably somewhat a function of troop movements, our portfolio there is -- for the most part, B product, actually for, I think entirely B product and so and we did see a higher turnover in that market. I think we saw an annualized turn over, 80, 81%, which is high even for Southern California. But we've seen weakness in Orange county and L.A. as well and certain parts of L.A.

Rob, I might add to that, while some of it I'm sure was troop-related our experience has been and I'm sure yours as well, while markets get impacted differently throughout time, it's very unusual to have any market be unscathed. And this economic downturn has gone on for some time, it start certainly in certain markets like San Francisco and migrate to others, but we have been concerned and it does influence our timing of our decisions in Southern California that ultimately Southern California would start to feel some of the same pressures, not to the same magnitude, but some of the other pressures that other markets around the country have felt earlier.

Tim, you also talked about the operating expenses being impacted in the quarter by the insurance and the associate discount. Can you talk a little bit about the sequential change? I mean, that was playing in the sequential increase as well? I would have thought with the removal of the snow removal costs that sequentially you'd be at least flat if not down on the expense side.

Generally, the turnover costs outway what we've seen on the in terms of additional snow removal. Second quarter and third quarter obviously the high turnover quarters for us between -- and that would include marketing costs as well. So it's turning the apartments, getting them leased as well that's usually going to outway any unusual costs we might see in the winter months.

Okay. Tom, it was a little garbled when you were running through the same store NOI expectations for the year. Would you hit that again and when you guys are expecting to see the year-over-year comparisons start to turn positive?

It was garbled on purpose, how's that? Let me just go through at that again, I do understand there was an audio problem. And hopefully it's fixed. The -- basically, my comments about -- I'm sorry, Rob, you're talking about the FFO guidance or the outlook?

The same-store NOI you were talking about what you guys were expecting for the year and also when you expect the comparisons to turn positive.

We didn't talk about when we expected the comparisons to turn positive, you could probably chart that out and probably if you take historical trends it draws a line to a point but we wouldn't opine to that point. What I did say in my comments was that the NOI for the entire year, full 2003, we expect to decline seven to 9%. And we also said revenue for the entire year would decline four to 5%.

All right. And then lastly, Bryce, I know you guys have been sort of reluctant to talk about what you think the value of the company is, but you know, when you start looking at applying you know market cap rates to, you said that analysts were using 150, 200 basis point lower or higher cap rates than you guys are experiencing, I mean, where are you guys sort of coming out on sort of a value basis? I mean, is it still a significant -- I mean, you're getting into the 50s? On a value basis? High 40s? I mean, is that, you know, sort of ballpark as to where you guys think that the value of the company is worth now?

Well, Rob, I've spoken to the value gap and you started off your question by saying we haven't been willing to quantify that. Analytically and I'm not going to start here but clearly when our stock was trading in the mid-30s versus where we knew our assets were tragic, that gave us very short pause in terms of what to do about it in terms of share repurchases. In terms of the assets sales again, short pause when we see cap rates at this level relative to how the public markets are valuing our assets, we think it incumbent upon us to narrow that value gap and those are the actions we've been taking. In terms of the specific cap rate one might apply to the portfolio, the reason we don't quote it, the publicly the NAVs is there's a lot of judgment involved in that, you can see that in the range of the street adjustments in NAV that range more than $10 per share for our company. We don't think there's much that we necessarily can add to that debate except put the facts on the table which is this is what we are selling assets at in these markets, some of you are familiar with the specific assets, all of you are familiar with the markets. And I hope all of you are familiar with the quality of our portfolio overall. And we just find it incongruent with some of the cap rates that are being utilized in the streets estimates for NAV.

I guess taking the question to the next sort of step is that, you know, you're selling a bunch of assets here, you have future development funding requirements to -- that's a lot of that's going to go towards, but given the robust disposition environment, is there a situation where you would sell more and either do a special dividend out or, you know, be buying back more stock? Even at today's levels?

We have are considered a number of options. Our plan is to dispute 400 to 450 m this year. All right. Thanks guys.

Your next question comes from Richard Moore with McDonald Investments.

Hi guys, I know a lot of these questions have been touched on but I've got somewhat of a different wrinkle. On the concessions could you kind of help me out, I think I did a back of the envelope calculation. What would the sequential NOI growth be if you used that 60 basis points drop in revenues that you footed in your supplemental? And then what would it be in the first quarter?

Rich, this is Tom, you're basically saying if we were to convert our revenue to a cash basis, which we actually do for you in the press release, and then apply that, what would the change on NOI, what would it have been?

Yeah, I think the way I calculated it, it looked like it was down like instead of 90 basis points, down about 1.4%. And I just wanted to know if you did that same calculation for the first quarter, what would it be.

We didn't, but we do provide the data in the first quarter and second quarter so you can calculate that.

I couldn't find it, I'll have to look again closely in the first quarter supplemental, I couldn't find that adjustment for the revenue side.

For cash to accrual, it's there.

Okay.

Absolutely. It's there.

And then the other thing that I wanted to ask about concessions, I understand part of it is seasonal, but I'm having a hard time footing or not necessarily footing, but you're talking about concessions going down but in aggregate they're up and that's natural because you have more leasing velocity. But if I compare the concessions granted this year versus concessions granted last year, it's actually up and, you know, second quarter to second quarter. And it's up by a lot. And so my sense is are you giving just smaller concessions across a broader array of units? And I know the number is up versus last year, you cited that in the per unit basis, but what's the nature of your concession now versus in the first quarter and versus last year?

Well, in terms of on a per move-in basis I think I said it was down about 26 -- I think it's 26% Q1 to Q2. Year-over-year you're right, Rich, I think it's up by close to 80% and there's no doubt, concessions are much more prevalent this time this year than they were this time last year. There are some markets where it is absolutely just the pricing convention that concessions are in the marketplace. You know, DC is a good example of that, even San Francisco interestingly which has typically been more of a net effective rent market has become much for of a concessionary market. So while we might want to market at effective rents as a rule, there are certain markets that we just have to respond is to what's happening around us and the consumer's definitely responding to concessions as part of the pricing scheme.

Is it -- are they markets where they're burning down, though or is it just across the board? Maybe not as large in magnitude but across the board in turns of markets, are you seeing any where they're starting to burn off and others like northern California where they're still prevalent?

I don't think you're seeing anywhere where they're really burning off at this point, Rich.

Okay. And then I have an interesting question for you guys and I like the disclosure, the expanded disclosure on the IRRs on the asset sales. I find it interesting that your commentary is -- and I don't necessarily disagree, but that it's a really good timing to selling. But I kind of find it also interesting that the IRRs that you're achieving on this separate of sales thus far in 2003 are lower than you've experienced in several years, and I just wanted to kind of review, what is the criteria that you guys use to determine a good sale? Is it just cap rate basis or do you look at your IRRs in terms of what type of returns on the capital are you generating?

Rich, this is Bryce. Our decision to sell assets and we've stated this for some time now, really falls into one of three categories, to sell noncore assets or nondoor markets or to just capture some value inherent in a asset. The sales that we've done year to date have been largely -- well, let me deal specifically with the second quarter, the exiting in Minneapolis is five assets, all five of them were acquired by us not developed by us and our decision to sell was based on a strategic decision that it was no longer a market that we chose to be in that we wanted to invest the time and capital to gain a presence in. It was thought based upon a decision of what the IRR would be in terms of the -- on the exit.

What we wanted to do was to exit the market at an oner tune time and we he think we did that in the second quarter. If you're selling assets, in our is Avalon bay that we previously zoned, we're going to have a much higher IRR. You saw that in the fourth quarter last year when we sold the asset Longwood Towers in Boston, we acquired it, redevelop I had it and had the ability toed a value over a nine-year period. That's the 22% IRR. The IRRs are going to be very specific to the story behind the asset, the individual market and the hold period. That's not what guides us. What does is the right time, either factually or opportunistically to sell that individual asset.

Do you have a -- I find that interesting if you had the number in this -- the amounts that you presented here. What is the difference between what you've acquired versus what you've developed, do you know?

We don't have that prone broken here and, in fact, I would say the vast majority of the assets that are on this schedule, schedule 13, the vast majority were assets that had been acquired not developed. As Tom mentioned we are just how or Tim mentioned just now actually planning to sell some assets that we developed four or five years ago. Typically we have been selling as we exited markets, if you remember over the last three or four years, we exited markets that we acquired into in the Midwest, we exited those, those were all by acquisition, very few have been by development.

On a going-forward basis, if it's not too much work, I'd be interested to see that acquisition versus development because again I mean, I think your reputation is there in terms of what people believe your value creation capability is. Nothing like having the numbers to actually outline it for people, kind of show that you are actually getting compensated for the added risk that comes with development.

I think that's a fair question, we'll take a look at that, one thing we need to be respectful of if we keep adding to this disclosure, pretty soon it's going to be like a telephone book.

Final question for Tom and I think I got the heart of this early open, but I wanted to come back to the SEC comment. Originally in your plans you had an accrual list this quarter for a failed pursuit cost just to kind of be conservative, and you didn't recognize that. Is that what's happened? And what would that delta have been this quarter?

Let me take a step back the SEC comment letter was in connection with I guess our triannual review. Once every three years simple the SEC reviews our filings, a number of companies are going through it. It's a normal course of business review. We're about to complete that review now. And this is one element of the review. The difference here in this quarter is that historically we've recognized abandoned pursuits on an incurred but not yet reported basis.

In other words we knew in our development portfolio there are likely some assets that will not proceed to development. We estimate what that could be, knowing that it's already happened at the balance sheet data -- date, we don't recognize it or don't know it. So we're almost, I wouldn't say we're recognizing the cost in advance, but we're recognizing that there are facts that we don't know, we have a deficit of information and we're trying to state our balance sheet and NRV. So our view is, and I think everybody would agree, is that it was a very conservative way to approach abandoned pursuits. Under FAS 67, I won't go into a lot of detail, but FAS 67 does not provide for direct write-offs or for allowances, it just says when they're probable of not proceeding you write them off.

We had one view the SEC had another and we deferred to their judgment and decided that we would start using the direct write-off method. What that means is because we have in essence written off assets in advance of the actual failure, because we knew that they were out there but didn't know the specific assets, there is a catch-up period where you're not going to have a write-off because you're going to the direct write-off method, so this is the quarter that we're basically transitioning to the direct write off method. When we assessed the risk within the pursuit cost basket we determined there were no direct write-offs required given where we had allowed for the pursuits in the past. The important thing is that this will come back next quarter you will see write-offs and it should be in the two, 2 1/2 m dollars range annually. I think last quarter we wrote off, I think it was 700,000, it's in that range, seven to 800,000, it's was, that's what you would, 2 1/2,. I think the average was probably more like 500 to five to 600,000 annually, or quarterly. It's going to be a little lumpier, the direct write-off is something that is predictable.

That was apply next question, it's just going to be variability there when that happens, it happens as opposed to trying to estimate what it would be and straight line it in essence?

Yes.

Okay. Thank you.

Your next question comes from Craig Leopold with Green Street & Partners.

Good morning or afternoon, as the case may be. Most of my questions have been answered except just curious, you guys started two developments in the quarter, I came away from the last quarter call not really expecting you to start much in the way of developments until later in the year. I'm wondering if I just had a misimpression or had something changed I guess in terms of these two specific projects to have you start them maybe sooner than I personally was anticipating?

Craig, this is Tim.

The two deals just to remind Avalon Bay Communities east the second phase in Lawrence in New Jersey and Avalon Traville, when we started the first phase of Avalon Traville we had the ability to start the whole thing and we chose to actually just start about 40% of it because at that time there were more cautious about the market.

But those deals did start right at the end of the quarter, and so when we said we expected the -- our starts to be loaded towards the back half of the year, pretty much they have been. I mean, those are both June starts and the thing that's changed at Traville we feel much better, the occupy sis tightened up 3 to 400 basis points there, and much less supply coming into the sub markets and we are starting to see job growth in DC. We took a cautious approach in the first place waiting to see if job growth returned and see what the market did and that -- in the case of Traville we felt it was the time to go.

In the case of Avalon east just depending upon with we had the entitlements to go, central New Jersey has been relatively stable over the last couple of years. Occupancies are probably in the low 90s, but rents have been pretty flat over the last year, compared to many of our other markets and it's just such a supply-constrained market we just felt from a risk perspective and from a attractiveness of the economics it was appropriate to go ahead and start that deal.

Any other broad changes to your expected development starts this year?

No. No, none that I can think of.

Okay. Thanks.

Your next question comes from David Harris with Lehman Brothers.

Could I follow along with a question on the development side or two. What are your pro forma return expectations on the latest projects?

On the two that we just started, David?

We've got the blended number of 8-6, is that weighted?.

On average.

Is that what you would consider to be your necessary hurdle rate on any new project.

Frankly, probably lower particularly if you're underwriting effective rents.

Okay. Maybe this is a question for Bryce as much as it is for you, Tim. This is fairly still a fairly sizable development program and you've got a very substantial pipeline behind it. What do you think you're going to be looking at in terms of development starts and the size of the program through into '04? Is this a time to expand your development activities or are we hold steady or pull back a little here?

Well, David, certainly overall for '03 was a time to contract it and that's what you've seen us do. We're at a peak of about 800 m under development in the third quarter of last year. And we have been cautious in any new starts so as communities have pretrial completed it's brought the run rate down to about 550. We will be beginning additional communities in the second half of the year, but there are a number of communities completing.

I think Tim said they basically balance out, we're holding it at roughly the same start, five, 600 m, 650 maybe in that range, but not that it's going to go to a b in the second half of the year.

It is though David a time when we have been and we will continue to be opportunistic in terms of adding to the development rights which are the communities that we're working through the approval process and you saw that or will see it on our attachment. We -- development particularly in our markets is a long-term gain, an average length of time about four years of gaining the approvals. We are continuing to work diligently on identifying good sites and working them through the approval process.

When we start them, it's a decision that we make at that particular point in time depending upon the market conditions which are largely driven by the state of the economy. We feel good about our plan for '03 and we, barring any significant changing in the economy we will stay on plan maybe a little bit higher but not materially higher. The guidance we gave at the beginning of the year.

'04 we're not in a position to comment on yet.

Okay. Your dividend cover getting pretty tight, it doesn't leave much room for downside risks. Would you be comfortable selling assets to cover any short fall if earnings were to fall short of expectations?

This is Tom. I can just say that in our projections, we don't see any quarters where we feel like we're going to come close to paying in excess of our FFO. I don't -- you know, we see that our coverage ratios in the mid to eye 80s in terms of FFO payout ratios, though I'm not sure what you're looking at to calculate --

I think we focused on a FAD number other than FFO.

Even a FAD number we don't capitalize as much as our peer groups, I think it's viewed by most as being excellent coverage of the dividend so I can just say that in our projections we don't see any point where we come close to paying out more than our FAD, however you might calculate it, unless you use a very, very conservative way of calculating FAD that close in development cost which we think is not appropriate.

Okay. Thank you.

Your next question comes from Lee Schalop with Banc of America Securities.

Karen Ford's on the line, too. A question on --

Lee, can you speak up a little bit?

Better?

A little bit.

I'm just trying to -- my thought would be that raising your expectation of both sales and prices at a point where rates are going up is sort of a risky kind of thought process. I just wanted a little more color on how you're comfortable with that issue. I think most people would expect if rates continue to rise, that's going to have an impact on the sales market.

Lee, this is Bryce. First off, to clarify, the additional 60 m that Tim's talking about closing in the third quarter are deals under contract today. So we plan to sell 300 m in 2003 those are initial plan and that is either closed or under contract today. What we have been talking about is the expansion of that from the 300 m to the 400 to 450 m as we stated earlier to the extent prices backed up to a point where we did not think we were getting an attractive execution, we would not sell. We didn't need to sell it based on a capital or business plan. One of the things that I emphasized on our first quarter call is that we went through a very diligent planning process for '03 and were pleased that we are working according to that plan. We're also pleased that we've been very opportunistic to take advantage of opportunities that the market gave us whether it was in the capital market side, redemption of the preferred, to repurchase the shares or whether it's been in the sales environment where we are performing aggressively to execute if the markets provide that opportunity.

On Southern California, I was surprised and I think as Tim was surprised too since he mentioned it as a surprise on issue, can you point to any qualitative things that you think are going on, a lot of new apartments, jobs turned out to be less than expected? What's causing the Southern California problem?

Lee, this is Tim.

I think part of it's the job situation. We have seen some job losses in Southern California. Over the last quarter or two. And as we know, that generally takes a couple quarters to start working its way into the results. And I think that's -- I think that's largely what we're feeling right now. You know, particularly in L.A. which shouldn't necessarily show up in the results but we are feeling some pressure in L.A. right now which has been, you know, probably the strongest of the three major sub markets in Southern California to date.

So I think it's primarily demand, I didn't want to overblow the higher turnover in San Diego due to maybe some troop movements, I think it's more of a demand story, supply's still not out of whack and in most of the markets in Southern California there are certain sub markets like Marina Del Ray area , for instance, in L.A. that's feeling the crush of some fly. For the most part, it's not a market wide problem.

Thanks, I think Karen has a question.

Just a follow-up. Can you give us any color on occupancy or any of your other operating metrics for July?

Yeah. So far the trends are continuing through July, some markets up, some markets down. I had mentioned that Boston actually is gotten a little bit of traction. Southern California's actually moved down a bit. But when you look across the portfolio, it's actually has stayed pretty level. You look back to basically May, June of last year, it's been pretty level.

Okay. Thank you.

Sure.

Your next question comes from Dave Rogers with McDonald Investments.

Hi guys I'm here with Rich Moore, I had two questions. The first for Tom. As you suspect to sell assets, you're going to reinvest the proceeds into the balance sheet. What is the capital structure look like that you're heading for?

That's a good question. We generally want to operate in a leverage range of, you know, 45 to 55%. We're in that -- we're at the low end of that range now, actually 40 to 55%, we're at about 45, 46, fixed charge coverage at 2.6 we'd like to move that up to the 2.8 range. That will be a product of certainly improved fundamentaling when they come. But also away do with the proceeds from asset sales and how long it takes you to reinvest those into increasing opportunities. So these are really the key debt-to-total market cap and our fixed charge range that we'd like to be within, we're comfortable where we are now but certainly would like to be positioned for the upturn with a couple of stronger metrics.

Okay. Second question for Tim actually, you discussed a little bit about the Maryland suburbs. But I didn't hear any direct comments on D.C. or northern Virginia so if you could highlight any of your thoughts on that particular area.

Sure, David. I think as I intimated before it's been uneven performance in the D.C. suburbs, in the metro area, I should say. Maryland's seen some strengthening as I mentioned. Northern Virginia, still sluggish, low 90s, in term of occupancy, new fly continues to be introduced, it's not clear that the job growth we've seen so far is disproportionately gone to northern Virginia as I think a lot of folks would have expected begin defense spending. In downtown, the demand is weak.

We're seeing it on existing product as well as our lease up at gallery place. It's not seeing much job growth at all in D.C., it's happening for the most part in the suburbs. The other thing I would see a lot of supply has not yet hit downtown D.C. It doesn't bode well without a robust job picture for the next three or four quarters, that may be mitigated somewhat by some folks converting to condominium. There's probably a couple that have already decided to convert, and at least five or six others that are thinking about it.

Great, thanks.

Sure.

Your next question comes from Rich Anderson with Max Corp. Financial.

Thank you. With regard to the Mission Bay completion, do you have a cap rate stabilized cap rate on that project?

We do not, have not given yields on individual assets now for a couple years.

So I figured you'd say that, so I offer this: If you look at the pipeline, you added a couple projects that are in the high nines, as you just stated. And the change in the average cap rate went from 8-five last quarter to 8-six this quarter, doesn't that suggest all things being equal that your Mission Bay project taken out of that pool would be a number lower, at least lower than eight-five.

Yes, clearly. We've stated last quarter and I'm glad to state again, the rates on Mission Bay are off 25% from what our original expectations are so there's no attempt for us to try to hide that it's a lower yield. We're just trying to report it consistent with how we've done the last couple years.

The other question is do you have some sort of obligation vis-à-vis your relationship with Catellis to start Phase II at Mission Bay at some point?

We have an agreement with Catellis that has a number of performance requirements in it and a start date is one of them. It is a date that has been extend in the past and whether we extend it again in the future has not been determined.

What is it now, that start date?

The assumption is the middle of next year.

Okay. Thank you.

Your next question comes from Keith Mills with DBS.

Good afternoon. Beginning with Tim, just had a question, Tim, do you believe given all the comments that you made about weather and the economy and the war and some of other challenges in the nation faced so far this year, particularly through May, that there could be any pent up demand for apartments out there that maybe you haven't realized as of yet?

Keith, I don't know that we're seeing it yet in any market other than maybe Long Island. I think there is some still some pent up demand in Long Island. I think it will be interesting to see if rates into in fact continue to move up, whether you might see a boomerang effect in terms of demand for rental housing. Clearly it's had an impact, you know, just beyond the job situation, what's gone on with respect to single family. So to the extent rates were to move up another 100 basis points, I think it would be interesting to see if there wouldn't bay real shift in department.

All right. Bryce, or Tim so while I have you, if you could comment on the report or announcement by Boeing they were going to cut another four or 5,000 jobs, how you think that might impact your portfolio up there?

Obviously it would impact either the south or the north, we've got a single asset that would probably be impacted most is my guess, then we've got a number of assets, four assets in Lynn wood or Everett to the north that could well be impacted as well, that probably relates about half of our portfolio in Seattle, the balance is on the east side and probably be least impacted as it's more impacted by what's going on in the technology sector.

What's the new supplier can best like up in the Seattle area?

You know, it's -- I think that's a good question because when you look at the reports from Reece and others, there's still supply coming into that market on the order of one to 1 1/2% of existing stock. I think most is condominium because I thinks that one market where at least in our markets that it has more or less shut down. And I think the next deals to get started are going to have a bit of an open playing field in Seattle.

Bryce, one of your competitors noted that they were going to try to start to increase rents in the bay area. What are your thoughts on that as it relates to your portfolio?

We wish them good luck, and we certainly, as we do in all our markets, follow the market very, very closely and try to lead the market in terms of aggressive occupancy making sure that we have a strong occupancy platform. But we're constantly testing the market. Can’t testing. If we -- you can be assured in certain assets we test the market on rent increases as well but to make a statement across the board that we see it as a time for increased rentals we're not at that point.

Okay. Finally Tom, maybe you mentioned this already and I apologize if I missed this, while Avalon Bay Communities that given an expectation for FFO and EPS for the third quarter, you look at that relative to your full-year expectation it's pretty wide indicating that if you look at the fourth quarter, there's more uncertainty there and obviously as you move further out it wouldn't improve, can you comment why the range is so wide relative to the fourth quarter?

I think one of the reasons is that we are in our peak leasing season today and it is a volatile time and these leases are turning and we have to consider that this is -- the season where we make it and break it in terms of revenues. So we would like to get through this peak leasing season before we narrow the range further but we felt compelled after two quarters of exceeding our expectations and I think the analyst community in general, that we needed to narrow that range. But still leave it out there to some extent, you know, clearly we have additional dispositions to go during the year, we feel good about where we are with that. We don't see any short-term interest rate movement, although long-term rates have been moving up but I think the key driver right now is the peak leasing season and also absorbing the new product that has been shifted dew into our a little bit outside of our peak leasing season due to the winter weather and wet spring.

Appreciate your comments. Thank you.

You're welcome.

At this time, there are no further questions. Do you have any closing remarks?

I do, operator. Just a final comment. As I state in my opening comment, you know, this was a quarter where the economy and market conditions, market apartment conditions remained weak, that was as we expected. We are seeing some of the pressures on our business lighten up a little bit but they still remain. And thus, as I mentioned and Tom gave in his guidance, we expect the rate of decline in our revenues and in our NOI on a year-over-year basis to continue to diminish as we continue through the balance of this year. That is all according to our plan. That was consistent with our expectations.

You've also seen us in both the first and the second quarter go off of our plan and be opportunistic either on the capital market side with our activity in the first quarter, or in terms of our aggressiveness on the asset sales side where in any event we'll complete our full-year plan, a full quarter ahead of our original expectations. We've moved aggressively to take advantage of those market opportunities where they presented themselves.

So we're pleased with our performance to date, we wish the economy, as I know you do, we wish the economy was a little stronger and we continue to look for signs in that as we operate our portfolio.

So with that, we thank you for your time and we hope you all have an enjoyable summer and we'll sign off.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.