艾芙隆海灣社區公司 (AVB) 2004 Q1 法說會逐字稿

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Miss Elaine Walsh, Director of Investor Relations. You may begin your conference.

Thank you, Chastity. Good afternoon and welcome to the AvalonBay Communities First Quarter 2004 Earnings Conference Call. On the call today are Bryce Blair, Chief Executive Officer and President, Tim Naughton, Chief Operating Officer and Tom Sargeant, Chief Financial Officer. I will turn it over to Bryce in just a minute, but first, if you didn't receive the press release and last night's fax or e-mail distribution, please call us at 703-317-4636 and we will be happy to send you a copy.

As always, I'd like to remind you that forward-looking statements may be made during this discussion. There are a variety of risks and uncertainties associated with forward-looking statements actual results may differ materially. There is a discussion of these risks and uncertainties in last night's press release as well as in our form 10K filed with the SEC. As usual, we have 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 discussions. This summary is also available on our web site at www.AvalonBay.com/earnings and we encourage you to refer to this information during your review of our operating results and financial performance.

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

Thank you, Elaine.

On our call today, we will be addressing both our first quarter results as well as our outlook for the balance of the year. Let me start with our quarterly results.

Last evening we reported EPS for the quarter of 32 cents and FFO per share of 79 cents. Our FFO per share was at the high end of the guidance that we gave last quarter due to three primary factors, and I will list them briefly in order of magnitude of their impact on earnings. First was interest savings from the lower rate environment during the quarter. Secondly, from slightly better-than-expected cooperating results. And finally, due to a slight delay in the closing of one of our dispositions.

On last quarter's call, I used the phrase "Transition year," in describing my expectations for 2004. Transition towards meaningful and sustained job growth, transition in apartment fundamentals, both of which would lead it a transition in certain aspects of AvalonBay's business plan. While we saw some early signs late last year that these transitions were beginning, we saw much clearer indications during the first quarter. I will briefly address the economic climate, the transitions we're seeing in apartment fundamentals, and finally how AvalonBay responded during the quarter and in our plans for the balance of the year. And let me start first on the economic side.

There are a number of signs that the economy continues to gain strength. During the first quarter, approximately half a million jobs were created nationally. The strongest in four years. Unemployment claims continue to decline with continuing claims dropping to their lowest level in two and a half years. BPI numbers last week point to upward pressure in consumer pricing and factory orders are up. These are certainly signs of an improving economic environment.

In the financial outlook that we provided in December of last year, we had assumed an improving economic environment, which would translate into positive job growth of approximately 1% for the year. And based upon the economic data that we've seen so far this year, we remain comfortable with those assumptions.

Shifting to the apartment markets, we continue to see signs of improving fundamentals. Occupancy continued to trend up, it averaged 94% for the quarter and while it averaged 94 for the quarter, it trended up during the quarter, ending March at 94.6%. Availability continued to trend down and is now below 7%, this is the lowest we've seen in our portfolio in over two years. Yet market rents remain flat and concessions remain stubbornly high. All of these are signs of a transition in apartment fundamentals. A transition from a demand/supply imbalance last year, moving to a balanced position in 2004.

Now, the signs of transition in the economy, while long-term positives for our sector, did create some significant volatility in the capital markets over the past few weeks. As you know, since the first of April, following a strong jobs report, and other positive economic data and at least three negative stories in the "Wall Street Journal" regarding REITs, DRMS declined about 15% and the 10-year treasury has increased by about 60 basis points in the last 30 days. This level of volatility, while unsettling, is a reflection of the transitional environment we're in. Seemingly positive data such as a stronger-than-expected jobs report can create concerns over escalating interest rates and the impact on REITs. Transitions or inflection points such as we're seeing are appropriate times to pause and reassess your previous plans.

So, against this backdrop of improving economic and apartment fundamentals, and unprecedented capital markets volatility, how have our plans changed since last December? The short answer is not much with regard to our operating strategy and our development activity. In these areas we planned for a transitioning year, which recent indicators appear to validate. However, we have adjusted the timing of some of our planned capital markets and our dispositions activity, based upon our assessment of the current capital markets environment. I want to walk you briefly through what's changed and what hasn't and then Tim and Tom will elaborate.

On the operations side, really no material changes from our original plans. We continue to focus on three things. First, to push occupancy. We have and will continue to push to get stabilized occupancies back to the 95% range. A level which we begin to enjoy pricing power. Secondly, to test revenue growth through modest rental rate increases or reductions in historically high level of concessions. And third, to aggressively manage expenses.

On the development side, really no material changes, either, we still anticipate beginning construction this year on between 400 and $500 million of new construction. As we originally planned, approximately half of that would be financed in a -- in joint venture formats. And the communities we begin this year, please remember we will be stabilizing not until late '05 and early '06. A period of projected strong apartment fundamentals.

However, as I mentioned, we did adjust the timing of some of our dispositions as well as the timing of our recent debt offering. Given the improving economic environment and the impact on the capital markets, particularly treasury bond rates, we are more concerned over rising interest rates than we are rising cap rates. This has led us to delay and potentially reduce some of our planned disposition activity and accelerate a debt issuance that was originally planned for later in the year. Accordingly last week we issued $1215 million of 10-year notes, blocking an attractive long-term capital and reducing our exposure to floating rate debt.

In summary, I leave you with three things. First: The economy and the apartment fundamentals are firming up and firming up in line with our initial expectations. Secondly: Our core operating results were slightly better-than-expected and this is driven primarily by our focus on occupancy. And finally, with regard to our plans for the balance of the year, we're proceeding on our initial plans with regard to our operating and development activity, while we have delayed some dispositions and accelerated some capital markets activity to minimize our exposure to the rising rate environments.

Now, with that I will pass it to Tim who will provide some additional color on our operating and investment activity.

Thanks, Bryce. As Bryce mentioned, I will discuss property operations and investment activity. I will touch on new development as well as dispositions and acquisitions.

Starting with property operations, overall in Q1, as Bryce mentioned in his remarks, operating results reflect apartment markets in transition. By the end of the quarter, same-store revenues were essentially flat on a sequential basis and fundamentals are starting to improve. In addition, many leading indicators made solid gains, further supporting the notion that the apartment markets are in the early stages of recovery.

Year-over-year, same-store revenues declined 2.2% from Q1 of last year and varied across regions. The Mid-Atlantic and Southern California led the way, posting year-over-year increases of 2.5% and 1% respectively. The Mid-Atlantic benefited from the highest job growth in the country in the Washington, D.C. market over the past 12 months, leading to significant year-over-year increases in economic occupancy there. These two regions have had shallow downturns and are on their way to what are likely modest recoveries.

Same-store revenue growth in Seattle and the Midwest was relatively flat from the same quarter last year. Largely as a result of significant increases in economic occupancy. The Seattle and Chicago markets suffered deep downturns but are stabilizing now and we believe the worst is behind us in these regions. Given the limited amount of new supply and job growth projections in the two markets in 2004, Seattle and Chicago should experience some of the better demand supply fundamentals as we move through the year.

Northern California and the Northeast were the most challenged regions. Each posting year-over-year declines in same-store revenues. The performance in both these regions has suffered from deteriorating job markets over the last couple of years, although the Northeast did show signs of improvement during the quarter and ended Q1 in much better shape than it had started.

Sequentially, from the fourth quarter, same-store revenues were down .3%, continuing the trend that has been developing over the past few quarters as same-store revenues were flattening. And by the end of the quarter, same-store revenues were essentially flat on a month-to-month basis. Concessions remain prevalent, averaging about 2/3 of one month per move-in while average market rents remain unchanged from Q4.

The trends are consistent with markets in the early stages of recovery. First, occupancies firm, as we are currently seeing. Then concessions start to moderate and finally market rents begin to increase. Five out of six regions posted economic occupancy gains since Q4, while four out of six had increases in same-store revenues.

Apartment markets are benefitting from improving fundamentals. Our projections, which rely upon third party forecasts, reflect demand and supply coming into balance in our markets for the first time since late 2000. In addition, we are seeing improvements in virtually every key metric and leading indicator in our portfolio. Traffic and turnover both improved this quarter and importantly, the ratio of traffic to move outs is as strong as it has been in three years. Lease breaks and bad debt were both down for the quarter. 30-day availability was at the lowest level in two and a half years. And corporate apartment occupancies were up for the first time in three years. In our lease-up portfolio, traffic and leasing absorption increased significantly this quarter with leasing running 40% ahead per community from the same quarter last year. Virtually all of these trends were more pronounced as we move through the quarter.

I want to shift now to investment activity and I will start with development. We continue to be active with our development program, completing and starting new communities each quarter. While concessions remain prevalent in new lease-ups, averaging just over one month. traffic and absorption are up significantly on a year-over-year and a sequential basis.

In Q4, we completed two communities in the Northeast, one in Boston and one in Fairfield. These two communities were completed at a combined cost of about $96 million.

In addition, we started two new communities in the northern Fairfield New Haven area of Connecticut. These two communities located in the towns of Danbury and Orange totaled 402 apartments in a projected $58 million capital investment. The northern Fairfield and New Haven sub-markets have been relatively insulated from new supply over the past few years and enjoyed more stable performance during that time.

The average projected yield for the development portfolio is 8.4%, net of concessions and unchanged from last quarter. As a point of clarification, the average projected yield incorporates only our pro rata ownership on joint venture investments.

Turning finally to disposition and acquisition activity, during the first quarter there were no dispositions or acquisitions, we did, however, close on one disposition just two days ago. On April 19th, Avalon at Greenbriar in Seattle was sold for just over $34 million.

Recently we have started to pursue acquisitions in anticipation of raising a value-added acquisition fund later this year as we previously disclosed. Over the next couple of quarters, we may choose to warehouse some investments in connection with the formation of this fund in the event we are able to secure what we believe are attractive value-added opportunities. These could include market cycle plays, management or market repositionings or full-scale redevelopments.

So, overall in Q1, operating results point to markets in transition. By the end of the quarter, improving fundamentals and leading indicators further indicate markets that are in the early stages of recovery. As a result, operating performance should continue to improve as we move through the year, more modestly at first and more significantly as we move into 2005.

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

Thanks, Tim.

My comments this afternoon center around capital markets activity and our financial outlook for the remainder of the year. On this call, as well as earlier in the year, Bryce spoke of 2004 as a transition year. Extraordinary volatility that we've seen in the capital markets is largely symptomatic of what one would expect in a transitional environment. Capital markets activity we've completed to date, however, will help minimize any adverse impact of this volatility and it will allow us to focus on value creation opportunities in this early phase of the next expansionary cycle.

To recap some of the first quarter financing and capital markets activity, we did complete the refinancing of $90 million of tax exempt debt. That refinancing converted bonds from fixed to floating and we expect that in 2004 we will save 250 to 300 basis points over the prior fixed financing, obviously depending on which way floating rates head. We also closed a joint venture with a New York common fund and completed, in connection with that joint venture, $117 million of tax-exempt bonds and that all relates to the Chrystie Place development in New York City. We also completed $150 million bond offering that Bryce mentioned in April, helping to manage floating rate exposure.

During the first quarter, we also worked hard to renew our credit facility, we expect the facility to close in early May at attractive pricing.

Tim noted that we had begun the marketing efforts on a discretionary investment management fund during the first quarter. While we're not done yet, we are pleased with the initial response and believe the terms we've set forth to potential investors are market clearing terms. We expect to raise about $250 million in equity of which AvalonBay will contribute $50 million. We will use up to 65% leverage on these assets and once fully invested, the fund should have assets valued at about $700 million. The investment period is three years and we anticipate a five-year average hold. You can find additional information on this fund in our 8K filed on March 29, 2004. It's important to note that this is the exclusive investment vehicle for the Company with respect to acquisitions during the investment period.

As the economic expansion progresses, we do expect interest rates will likely rise. We see a number of benefits to a rising rate environment, given that our exposure to floating rate debt is nominal at just about 3% of our capital structure. Single family sales should begin to slow and fear of deflation has waned and signs of inflation have emerged. Inflation is not always bad as it can signal a return to pricing power we haven't seen since 2001. So with leverage at about 38%, 2.8 times coverage and an unencumbered asset base of 81%, we enjoy excellent financial flexibility, that will enable us to pursue accretive external growth opportunities as the expansion unfolds.

As part of this transition year, our sequential revenue changes will be compared to others, in given that most of the industry accounts for concessions on a cash basis, whereas we account for them to an accrual basis, our supplemental disclosure of changes in revenues on a cash basis provides a better comparable data when comparing to industry reporting.

So, we've talked about a lot of positive indicators, we would temper, though, our enthusiasm by noting that meaningful job growth today will not benefit our business until 2004, late 2004 or early 2005. Acceleration of our debt offering offsets the positive operating trends relative to our original budget. And as a you adjust or consider changing your financial outlook for the Company, we believe the range provided in December remains achievable and for the next quarter, we see FFO in a range of 77 to 81 cents per share or essentially flat compared to this quarter or the first quarter.

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

Well, thanks, Tom.

Just a couple of concluding remarks before we open it up to questions. While the current market conditions remain challenging in many of our markets, there are clear signs in the economy and we've commented on some of those. There are signs in the economy, clear signs in the apartment fundamentals and clear signs in our own portfolio that things are trending in a positive direction. After a couple of years of significantly negative fundamentals, we do see 2004 shaping up as a balanced year with stronger growth into '05 and '06, this is all consistent with our outlook that we gave in December of last year. Given this, we continue to position the Company for outperformance as the market conditions improve.

And as you know, not all companies are expected to perform equally during all phases of the economic cycle. In fact, the performance our own portfolio lagged that of many of our peers over the last few years, due to the nature of our markets and the composition of our portfolio. AvalonBay has some unique factors that position us well for outperformance in the expansionary phase of the real estate cycle, and there's four that I would highlight.

First, our markets, no company has as large and as pure a concentration in the high bearing markets as we do. The nature of these markets are that they toned outperform in the expansionary phase and underperform in the contraction phase. While our markets -- while our market performance lagged over the last few years, they significantly outperformed during the 1994 to 2000 time period, which was a period of strong economic growth. They're expected to once again outperform as demand picks up and supply remains constrained in the supply constrained markets.

Secondly is our portfolio. We have one of the highest quality portfolios in the apartment sector with average rents almost 50 greater than the REIT average. This heavy concentration of As has heard us in a contracting economy and is expected to benefit us in an expanding one.

The third is the developing pipeline. The development pipeline of approximately $3 billion, that's under way and in the planning stages, we have the pipeline and the capabilities to generate meaningful growth through our development efforts.

And fourth and finally is our balance sheet, with debt to total market cap of approximately 38% and a low level of floating rate debt, we have one of the strongest balance sheets in the sector and ability to finance meaningful levels of growth. We continue to focus -- we continue our focus between maximizing our current performance while taking the necessary steps to ensure that we are well positioned for out performance as the market conditions improve. And with that, operator, we'd be glad to open it up for any questions.

Ladies and gentlemen, if you have a question at this time, please press star 1 on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, press star 2 on your telephone. If you're using a speaker phone, please lift the handset before asking your question. Again, if you have a question at this time, please press star, then the number 1 on your touch-tone telephone. One moment, please, for the first question. Your first question comes from the line of Lee Shalop with Banc of America Securities. Please proceed with your question.

Hi, this is Karen Ford here with Lee. Just wanted to ask you about the increase in concessions and how that fits into your recovery scenario and what you're expecting to see with respect to occupancy and concessions.

Yes, sure, Karen. This is Tim Naughton. First of all, you're probably speaking year-over-year in terms of the increase in concessions because they're relatively flat sequentially across quarters.

Right.

On the -- as I mentioned earlier, I mean it's -- it's -- first thing that usually happens is occupancies firm before concessions burn off. It is part of the process in which you ultimately burn through existing inventory that's out there in the market. So, I think it's pretty consistent with what we've seen, not just across cycles, but across markets. That's general the order in that it goes in. Interestingly, I mentioned that Seattle had improved a bit and I think that's a good example. That was a pretty -- that was a very high concessionary market and while it's still shy of 95% occupancies, we are starting to see concessions come down in that market. I suspect you will see -- that's also a function of the fact that there is little new supply being introduced into the market. I suspect we will start seeing that in other markets as we move through the year.

Okay. Secondly, you reaffirmed your 2004 guidance range. Do you have a bias currently towards one end or the other of the range?

Karen, this is Tom Sargeant. We are not biased, we gave a mid-point at $3.22, we still think that's a good number. We wouldn't lead you lower or higher on that mid-point. We understand consensus is slightly lower today, but we're not bias up or down from that mid-point.

Okay. And the cap rate on the disposition that you did subsequent to the end of the quarter?

Karen, this is Tim Naughton again. Low 6% range.

Okay. I think Lee has a question, as well.

Hey, guys. Could you talk a little bit some of the markets, some of the places where it seems to be weak was I would say sort of expected, but other places where I think they would have expected a little bit better, didn't occur. So, could you tell us which markets have been surprised at the continued weakness and what your expectation is over the course of the year?

Really, I can't speak on others' expectations. This is Tim again. The markets are more or less performing per our expectations. I'd say in terms of surprises, Seattle has been somewhat stronger than we had anticipated. At least on the occupancy side, just what we're seeing in traffic in that market. And then at the end of the quarter, the Northeast, as I mentioned earlier, you know, virtually every one of our metrics was moving in the right direction in the Northeast. That's more positive than we expect to see. That was really at the end of the quarter, not necessarily how it performed through the course of the quarter.

Was the San Diego occupancy and rent loss a surprise to you?

A little bit but I think it was really a function of jobs, both San Diego and Orange county have been pretty flat on the job front. Whereas -- if you look at the last six months, most other markets are gaining jobs at this point. I think we have San Francisco and San Jose are still losing jobs. San Francisco just barely and San Jose more materially, but Southern California, for the most part, is still relatively flat and I think L.A. is actually outpacing both San Diego and Orange County right now.

And one last question, we'll relinquish the floor. Tom, can you talk a little bit more about the thought process behind the fund and how you decided that's a good strategy to pursue?

Lee, yes. Let's take a step back for a second and look at where the capital flows have been for our industry. If you go back five or six years, the capital flows really have been dominated by private equity capital, you know, publicly and private -- private debt and private equity has been the overwhelming source of capital to our industry and it's been more consistent than the public sources of capital. It's been there pretty much throughout the last five, six, seven years.

One of our basic operating tenants is that we desire to have continuous, uninterrupted access to cost-effective capital and through all phases of an economic cycle. I know you've heard me say that 1,000 times before, but I just have to say it once again. We think that partnering with private equity capital helps achieve that goal. While access to the capital is important, we also ration that capital to alternative uses and we expect to increasingly use private capital for acquisitions and to selectively use private capital for development based on the development opportunity, the market, the submarket, capital allocation considerations and in real estate cycle considerations.

The fund itself is targeted solely at acquisitions and we -- and it will be our exclusive investment vehicle for acquisitions during the investment period. This is incremental capital that will allow us to activate a growth lever in an area we enjoy a core competency in. That's acquisition. We've enjoyed great success over the past 10 years and created great value for shareholders. Without the fund, that lever might otherwise remain dormant longer than we'd like it to. We certainly don't want it to be inactive during the early phase of the expansionary cycle we're in.

Clearly without the incremental capital, we would allocate less public capital to acquisitions given that the relative value creates you an opportunity through development would argue that most of our existing internal capital would be allocated to new development. We think it's a great source of capital for acquisitions and we will continue to commit the -- the REITs public capital to development activity. I hope that's responsive for you.

It is, I appreciate it, thank you.

Lee, this is Bryce, let me add a couple quick points. Just emphasize a couple of things that Tom mentioned. Which is it's clearly not a response to what we were seeing in the capital markets or are seeing in the capital markets currently. It's very much a strategic decision to really accomplish two things which is a diversification of capital sources over the longer term and as Tom mentioned this is a fund that has an eight-year expected life. As well as its indicative of our attitude towards where we are in the cycle and the fact that during the last expansionary cycle, which may or may not surprise some, we were a big buyer of properties, a big redeveloper of properties at the tune of a couple billion dollars worth of business and we expect to be in that game again as the economy improves. So, it's really a function of those couple things.

And finally, before I cede the floor, I think, Lee, this may be the last AvalonBay call that you participate in, is that correct?

That's very likely.

Before you head off to medical school, which we certainly wish you well and thank you for all your attention over the years! You've been a good critic and a good supporter when both sides were warranted. So, we appreciate and wish you well.

Thank you, I appreciate that.

Thank you. Your next question comes from Brian Legg with Merrill Lynch. Please proceed with your question.

Yeah, Tim, going back to the concession question, now that you have your occupancy at the 94% level and we're going into a seasonally stronger period, should we expect to see the concessions per move-in to go down this quarter sequentially?

Brian, I'm not really sure at this point. First of all, it's going to be on a market by market basis. What we're seeing in any one market. I think if -- if we -- if we see the same kind of relationships to traffic to moveouts we've seen seeing in the last six to eight weeks, it's likely to start declining. I think I mentioned that that relationship has been as healthy has it's been in three years. It's around 95%, which markets start coming into balance and you start getting some pricing power and removing concessions is just one form of evidence that pricing power started to return back to the landlord.

Other than Seattle, are you seeing some of your markets where other landlords are -- are backing off on concessions?

Well, everyone's got different strategies, certainly. Some people -- some people attack it through -- through street rents versus concessions. I think, you know, we probably have been more aggressive again in markets where there's more new supply being introduced, frankly it's just more conventional. In those markets offering concessions as new leaseups it's very typical for them to offer new concessions, but I think we're probably seeing it in a few markets. And -- and as I mentioned, you know, concessions were flat quarter-to-quarter, that means they were down at four or five markets, since the fourth quarter and up in four or five markets.

Bryce, you suggested that you may not sell as much this year as you originally had budgeted, you originally budgeted in your guidance of 150 to $200 million. But I -- I didn't hear a follow through on how much that -- that number could come down.

Well, Brian, we're not -- at this point in a position to -- to formally update our guidance. But we -- we did delay certain -- the marketing of certain assets as I mentioned, we made a trade-off between selling assets versus an earlier issuance of the debt. We do have a couple of deals that are in the sales process now that will likely close in the second or third quarter. And the balance of our dispositions were planned in the fourth quarter and they may or may not get done this year. They may get pushed off to next year. It wouldn't have a huge impact in terms of the earnings model because, you know, they were going to happen so late in the year.

But when we think of dispositions, we think of them falling into one of two categories. Either they're strategic, meaning we decided to exit a market. We did a fair amount of that over the last few years and are basically done with that now. So, our dispositions really fall into more of opportunistic category, which is dependent upon how we feel about the underlying real estate fundamentals in that market for that asset, as well as what's going on in the capital market. So, you would expect we will be a little more frisky or agile in terms of what we choose to sell, just like last year where we increased it pretty significantly.

I think it's a fair conclusion that we will sell a little bit less than we originally anticipated and sort of mid-year will be in a better position to give you a more formal update.

You made the comment that you're more concerned about rising interest rates right now than cap rates. Aren't they one in the same? Don't you expect -- Wouldn't now be the time if you think cap rates are too low to start selling assets because maybe the cap rates will back off over the next year as interest rates rise?

Well, certainly interest rates have a -- have a big impact on cap rates, but they're only one impact where -- where we've seen, you know, just like what's happened in interest rates over the last 30 days, let alone the past four or five months. We've seen rises in the bond rates and not seen rises in the cap rates. So, you know, I think, you know, it's not just our conclusion, I think history has shown that interest rates are more -- are more volatile than cap rates and do rise up -- do rise first. Ultimately they will put upward pressure on cap rates, but cap rates are fundamentally driven by supply and demand for the real estate and there is still a shortage of assets being marketed particularly in our markets, our asset class and to date we have not seen any backing up in pricing or raising in cap rates.

And, Tim, can you talk about your markets as far as the amount of supply coming online in your markets. You -- you've added about $300 million of new projects to your development rights. Are you seeing -- with the apparent improvement in apartment fundamentals, are you seeing more developers out there with the same thought process?

Again, it depends upon the market. There's been no shortage of institutional capital wanted to get into either Southern California or the D.C. market. So, I think you will continue to see supply where you can in Southern California. It's more difficult in a good part of L.A. and certainly some -- some of the D.C. market. When you look across the markets overall, 2004, we do expect total supply to be less in our markets as a percentage of total inventory, about 1% than -- than overall U.S., which is more than -- I think more than 1.3% range. Next year, we do -- we do expect there will be a little more in our markets, probably on the order of 1.2%. We may see an increase in supply here in 2005. But we think it's pretty much at the margin.

Okay, thanks.

Your next question comes from the line of Richard Taylee with ABP investments. Please proceed with your question.

Yes, I just have a couple of questions. First I want to follow-up to Brian's question. You have on -- on your balance sheet, a $98 million worth of net, I guess it's after depreciation, of dispositions or I guess held for disposition. Would it be fair to say that that number characterizes your pipeline of active stuff or would it -- or is it stuff that's contemplated for the back end of the year?

Rich, this is Tom. It does contemplate everything that is held for sale, much of that, though, is -- is back ended to the fourth quarter. So, any change in our disposition plan that could occur this year is not likely to impact our numbers much because they were always planned for the later part of the year.

Okay. And then I have another question/comment on the -- I guess on the development pipeline and maybe, Tom, you could help me out on this. As I look through the supplemental schedule, I see that there are projects that you roll off as completed and then they sort of disappear. We don't see any follow-up on things that are not underacted what I guess called construction, but are still in the lease-up pipeline. And I've not heard much discussion of that and I think there are about 4 or 5 projects that are in the active phases of lease-up now and I really didn't hear any commentary, you know, to speak of in depth on that. Could you help me out on what's going on with those projects that are really influencing this year's and perhaps next year's numbers in terms of, you know, where they're coming in relative to budget and rents and just overall occupancy and absorption?

Rich, this is Tim. I guess you're talking about as things fall off this quarter, would be attachment seven, systemically when they fall off sometimes they are stabilized. Other times there is nothing left to stabilize.

You know, I think you guys have like four projects that are supposed to stabilize in the back end of this year. But it is kind of hard to track them with what's going on with them. So, perhaps maybe you could add some -- I know it's going to be a thick package, but, you know, the stuff that's in lease-up, where we are with respect to occupancy, or at least, you know, enhance your commentary in terms of, you know, the projects where you are. So, could you help me with that now?

I -- I don't have that in front of me. You're looking more for occupancy numbers on things that would have rolled off the schedule when they rolled off the schedule, say they're at 80%, you're looking for an update as to where they stand in subsequent quarters?

Yeah, how they doing? I remember a couple of years ago, I forget who used to give the color, but you'd say they're on budget, you know, on time, 10% ahead of, you know, leasing goal. I have not heard any commentary on that and it's a pretty sizeable amount that's going on at this point. Is that correct?

Not as much as I think you may think in terms of stuff that's actually rolled off the schedule. Most of those are at stabilization or close to stabilization. Across the portfolio. I know the numbers you're talking about. I think the last couple of quarters we had -- that we had disclosed that information, we were running about 88% of our absorption goal. That number is actually higher today, closer to 95%. We have seen increased absorption, but the net effect of rents are down a little bit. I think we had been running in the 95, 96% range in net effect of rents and those numbers are down a couple percents, because we've largely been buying some absorption in those communities. Tom, did you have something?

Yes, Rich, I wanted to go back and be sure I was clear. On the $98 million, that -- as we define held for sale, that only includes what's either sold or under contract. Obviously Greenbriar sold after the first quarter. There are other absences we've targeted for sale in our plan that are not yet under contract and therefore don't meet our definition of held for sale. So, $98 million is not all of what we plan to do this year. We did give guidance of, you know, 150 to $200 million or $180 million, whatever the number was. So, there is more that would be slotted for that category, the balance sheet, as we bring those assets to market and get them under contract.

Right. Yeah. Because my first comment was that's a net number, net of depreciation, also, so, I kind of realize that it's probably represented more in sales dollars than just the carrying value on it.

Right. But there's more to be added to that number.

And what's the criteria from the accounting? Is that to be underactively marketed? Or just if you're contemplating it? I forgot when you have to slot it in that disposition line item?

Well, there is some discretion over when you classify it as held for sale. Under our policy, it's when it's under contract.

Okay. Thanks.

Yep.

Your next question comes from the line of Jordan Sadler with Smith Barney. Please proceed with your question.

Good afternoon. I just wanted to follow up on your sequential revenue performance. Obviously it's starting to improve and -- on a cash basis it may have been up marginally, but the Northeast, as you commented, and the Bay Area, remain pretty weak. Can you maybe talk about what you're seeing specifically in those two markets and then maybe your expectations as to when sequential revenues may improve or grow? In those two markets...

Jordan, this is Tim. Let me take maybe the last part of that first. In terms of sequential revenue growth, I think I mentioned in my prepared remarks, on the same-store basket, it's basically flat right now. And I think you can expect in the second quarter we're basically running flat and then we expect, as we move to the second half of the year, to -- to modestly improve.

Now, it's different, obviously, across regions. Southern California and the -- and Mid-Atlantic are going to be sort of in the healthy bucket, if you will, or should be. We expect actually the Northeast and Midwest to be more flat on a sequential basis and probably Seattle since it's -- it's actually been performing ahead of expectations, but Northern California will continue to trend down on a sequential basis as we move through the year.

So, California probably -- Northern California throughout the rest of this year will continue to be down --

I'm sorry, I couldn't hear that, Jordan.

Northern California will continue to be down sequentially throughout the rest of this year?

Yes, but moderating.

Okay. And -- and the Northeast will flatten out when? Do you think?

Towards the middle of the year, it's starting to flatten out already. It's towards the middle of the year.

Okay. I guess just -- one comment you had in terms of leasing activity relative to last year, could you maybe flesh out that metric for me? Is it volume of leasing? You said it was up 40% year-over-year?

I was speaking specifically to our lease-up portfolio and that metric was on a per-community basis so leasing velocity through the first quarter of this year versus the first quarter last year was up 40%. That was weaker last year, but -- and that number actually was accelerating as we move through the quarter and March and the first half of April have been much stronger than even the average in the first quarter.

And I'm sorry, you said the leaseup portfolio?

Yes, those would be the communities, essentially the development portfolio plus the, you know, one or two communities that -- that Richard Taylee asked about in his remarks. So, it's -- things that had not yet stabilized.

So, that could be 5 to 10 assets or so?

Yes, probably more like 7 assets.

Okay. And then just a little further on the joint venture. Or the fund you guys are marketing. What are the targeted returns and expected returns for Avalon? And what is the structure as it relates to that?

Jordan, we -- we have disclosed in the 8K and on this call the general perameters of the term. Obviously we're still in the early marketing phases and gauging investor interest and sentiment. So, I think it's premature to talk about what investors might be expecting so we'd like to defer that obviously until we're further along in the marking of the fund and gained investor sentiment.

And I thought you had said that the perameters you were sort of out there with seemed to have -- you think will clear the market? Did I read that wrong?

Nope, you read it right.

That's not what you're talking about when you -- you're not talking about --

We think that -- we think the general terms are market clearing terms. But, again, everything, when you're on the road marketing the fund, you do have to gain investor sentiment and there are terms that will change over time and when you speak to an estimated returns, that's not really a term. That really is just what investors are seeking or might be interested in getting. It doesn't mean that you're guaranteeing that or you are promising those types of returns. Obviously we want to make sure our -- our terms or what we think our returns will be are aligned with what investors want because we don't want to disappoint them. But it's premature to say today what investors are looking for in terms of returns in a fund like this.

Is there a particular fee structure that you guys might have? I know there's going to be a rehab component that you guys are discussing you might want to share, or is it too soon for that?

I'd really rather wait. Those are obviously negotiable, we'd rather wait until we've hard-circled names, but there are fees related to this investment management fund that are generally known within the marketplace of what a fund like this would achieve.

And I guess in terms of where the money might be put, I know you talked about a few different times of assets, but market-wise, can you maybe give us some color on that?

Yeah, let me turn that over to Bryce.

Jordan, first, just to clarify for everybody, this is focus -- will be our exclusive acquisition vehicle. So, everything we would purchase would be through this fund. By definition, the acquisitions are going to be largely focused on more "B" type than "A" type properties. Certainly we have the proven capabilities to build quite well and quite high volume, the "A" communities. It is a value-added fund. It would focusing on opportunities where we can buy and then reposition these communities as we have done to a large magnitude in the late '90s of buying and rehabbing.

In terms of geographically it would mimic our overall geographic goals, which is to increase concentration in Southern California, to increase concentration in the Midwest, to increase some concentration in the New Jersey market, particularly central Jersey. But it will most definitely be opportunistically driven. I mean we are going to look for opportunities throughout all of our 16 markets but we will just have a bias in certain markets where we think the opportunities are better and our goals are higher.

And I think John Litt has a question, as well.

I wanted to follow up on the fund. If this is your exclusive acquisitions program, does that mean you won't be doing any "A" acquisitions either with or without the fund?

John, this is Tom. This is the exclusive acquisition vehicle for the company through the investment period or until 80% of the capital is invested. So, I think you have to expect that with some carve-outs like down re-transactions or larger portfolios, that this would be the exclusive acquisition vehicle for the next two and a half to three years and -- and we have to set it forth that way to eliminate conflicts so that investors don't think we are taking an asset in place for the portfolio of AvalonBay over the fund or cherry-picking assets that we acquire. Right.

And -- but you will and this is one of my questions, you will have a frozen M&A opportunity that may fall outside the bounds of this entity?

Yes. By -- by virtue of it being a portfolio acquisition, it would be -- that would be the case. It would fall outside the fund.

Now it sounds to me like, you know, rehab is kind of the high octane growth opportunity stuff that you guys are the best at. And, you know, if you bring in joint venture capital for that, you're going to give up some of that excess return but you still want to keep a fair portion of it. And I guess I just want to the get a sense that -- just for you guys if that's the way you're thinking or are you more worried about dilution from this rehab stuff and so you'd rather do it in the JV so you don't take the hit to earnings at the REIT?

John, there's really three strategies to the fund. One is certainly redevelopment and we are good at it. We've done a lot of it and created a lot of value. The other two components, though, are, you know, management turn around situations and the third would be market cycle opportunities. So, if you think about how these funds work and driven off of IRR, you know, redevelopment community may put capital into an investment that takes longer to get out of and therefore may not be -- we -- we may not -- it may not be as well suited, depending on what you're trying to achieve with the asset.

What I'm trying to say is that the more capital we have to put in, the quicker you have to get it out to meet certain return objectives. So, we have to be careful as we redevelop these assets within the fund that we can get the capital in and out and get a good return during the investment period. There may be some redevelopment opportunities, frankly, that can get great returns but over a longer period of time, which would be better suited for the REIT. I don't know if you wanted to add anything? Okay.

It would be structured in a way where the fact that you've created this operating capability, you'll be disproportionately compensated for that?

Absolutely.

Those are my questions. Thanks, guys.

Thank you.

Your next question comes from the line of Jay Leupp with RBC Capital Markets. Please proceed with your question.

Hi, good afternoon. Here with David Ronco. One follow-up on your discussion of occupancy and rental rates. When do you actually think this year, if you'd even give us a kind of a range of months, do you think that you'll actually cross over from focusing on maintaining and growing occupancy and actually start moving rents? And can you give us some idea as to where we should be looking for -- the first signs of actual real rent growth in the portfolio?

Well, Jay, this is Tim. Again, it's sort of market specific and it can be asset specific. We have markets right now where, overall the market rents may be going down, but we're actually pushing market rents particular assets, or getting rent increases on renewals. Renewals are about, you know, 40, 45% of -- of the leases we cut and any point in time and they sometimes offer an even q better opportunity to test market rent increases obviously because you've got the switching cost for residents, but -- so, it's -- I mean -- when we say market rents are flat across the portfolio, from last quarter to this quarter, that basically means they're actually up in about half the markets and down in half the markets. Markets that were up 4% year-over-year this past quarter and we had markets down 3 or 4%.

Okay, and one quick one and I'll turn it over to Dave. With respect to the joint venture, is there any possibility or are you precluded in any way from moving some existing portfolio assets into the venture? And can we look for that to possibly happen sometime this year?

Yeah, real clear. There is a term of art here. Joint ventures are thing that we're also active in, but this -- you're speaking to the investment management side.

Yes, the acquisition fund.

Right, we're not moving any existing assets that we own today into the fund because of the conflicts that are -- that are inherent in that kind of a transaction. Similarly, we aren't asking to be able to acquire any assets out of the fund when those assets are held for three, four, five years. We're trying to make this a completely separate vehicle to eliminate any conflicts, or potential conflict, or appearance of conflict and that way we think that the marketing of the fund will go more smoothly and we can achieve our -- our goals with respect to the fund.

Hey, this is Dave Ronco with a follow-up. Tim a, couple of questions on the San Jose market. Number one, I know it's still relatively early in the year, but can you talk about how your job outlook for that region has changed, if at all. And two, your occupancy has been stable there, both sequentially and year-over-year. Has that been the result of increased concessions or are you actually stating to see concessions burn off it in that region?

We're not really seeing concessions or market rents, you know, move positively in that region. We are still -- in terms of the job outlook, starting there, it still has the weakest job outlook of any of the markets we're in, David. And San Jose is a much weaker job outlook than either Oakland or San Francisco that order. So, we would not expect -- we're not expecting to be positively surprised at this point. And in the New York area, Northeast, actually, some of those markets appear to be gaining more strength in the labor markets than we had initially might have expected. We're not seeing it in the Bay Area at this point.

You said later markets and concessions haven't been a surprise on the upside. Have they been worse than you expected?

About as expected overall across the portfolio. Yeah.

Okay. Question for -- for Tom briefly, could you talk about current liquidity? It looks like at quarter-end you had $250 million on your line. You had the $150 million note offering and you recently sold that asset. can you talk about where do you stand now?

In terms of current liquidity on the line, it's -- it's about $130 million out on the line as of today. In terms of sources and uses of capital for the year we continued to enjoy excellent liquidity. One can say we're over liquid and we certainly have adequate sources of liquidity to execute our development plans for the year and as well as -- as initial acquisitions under the fund it would then flip into the fund.

Great, thanks, guys.

Thank you.

Your next question comes from the line of Andrew Rosivach with CSFB. Please proceed with your question.

A quick one for Tom, I noticed that the interest income's at 900 forever and it dropped to 20. Is that -- is that that mortgage note getting FIN 46-ized or is it something else?

Well, Andrew, one, I'm going to give you credit for that term: FIN 46-ized! Then I'm going to claim ownership over it for the rest of the -- my career! Yes, we've been FIN 46-ized with respect to interest income and that's substantially all of the change.

Great. That's it, guys, thanks a lot.

Your next question comes from the line of Carey Calligan with Goldman Sachs. Please proceed with your question.

Just -- just a quick question. On the -- on the fund, you indicated you might wear out some acquisitions. Can you give us a sense of how -- what that magnitude might be? And presumably that's not part of our FFO guidance that would be additive?

You know, the -- the warehousing would be very short term and it would be probably 50, $60 million of acquisitions. And it may be nominally accretive to FFO. We actually do have it in the plan. So, I don't think you would expect much pop to FFO from -- short-term warehousing of those assets.

So, it's pretty small 50 to 60.

Yeah. And it will flip into the fund real quickly. So, I think there's very little opportunity there.

Yep. Okay, that's it. Thank you.

Your next question comes from the line of Rob Stevenson with Morgan Stanley. Please proceed with your question.

Good afternoon. Tim, on the development schedule, the rent level there, is that -- for the stuff that's being delivered at the end of this year and next year, is there any growth over current rents in those numbers?

No, no. There's no -- there's no growth. Those are current rents.

Okay, that's current market rent in each case of what you would expect if these things were coming online today?

Well, for -- for communities that are currently leasing up, they're effective lease rents net of concessions and then for communities that have not yet started leasing, they reflect current market rents less half a month in -- in concession.

Okay. So to the extent that the stuff like -- like the Bethesda and the Glen Cove asset that will be delivered in the back half -- is it that more units will continued to be delivered here, if market rents go up, there is upside to that, potentially?

That's correct, if market rents go up, our concessions go down.

Okay. Second question, given the talk on the call about redevelopments, on schedule 8, it's been a long time since anything has been added there. Are you guys planning on doing anything in the core portfolio, redevelopment-wise in '04?

Rob, this is Bryce. Very modest and, you know, we talked briefly about this in past calls, you know, the raw material for redevelopment is generally an acquisition as opposed to the rehabbing of our core portfolio. We do have those on occasion and you see a couple of those in the portfolio today. But until we get -- until we start acquiring again, you won't see the redevelopment get anywhere near to the magnitude that it was in the late '90s, when it wasn't uncommon for us to have six or eight under way.

In terms of redevelopment of core portfolio assets, generally we will do that in better market conditions than we're seeing today. Whenever you're disrupting the property, you're better off doing with t with stronger market conditions. People just have more choices and -- and, you know, we generally find that's the way to maximize the outcome.

Okay. And then a couple of housekeeping items. What was unit turnover during the quarter?

It was 44%.

Okay. And moveouts to home purchases?

It was just under 25%.

All right. And what is the average age of the portfolio right now?

I believe 7 1/2 years.

Okay.

And, Rob, just one -- I want to go back to your first question to Tim just to be real, real clear. Since the beginning of time, 1993 through today and into the future, we do not trend rents in any of our underwriting nor trend rents in any of the disclosures. They're alway our assessment of the current market conditions, if it's a community not in leaseup. If it's in leaseup, it's the actual effective rents that we're achieving. We're not in the trending business, or the projecting business in the data we put out.

Okay. Thanks, guys.

Your next question comes from the line of David Harris with Lehman Brothers. Please proceed with your question.

Yeah, hi, good afternoon, everyone. Sorry to keep this going. I think this question is directed at Tom. Tom, you guys were pretty active at buying and selling your own shares last year. Can you give us a comment on what your thoughts might be on the potential for share buybacks in the current environment?

We -- as we said last call we don't have any equity repurchases or sales in our plan for this year.

Okay. And the G&A run rate in the quarter, is that a fair -- I'm sure -- the Q1 G&A,, is that a fair run rate for the rest of the year?

We gave a range in our initial outlook in December of 10 to 15%. This came in at slightly under 10. I guess -- and one, we're not updating our outlook, so I think you can expect it's probably a little lighter than it would be going forward.

And can you just elaborate, maybe I missed this, it was in a footnote I skimmed over. The change in accounting principles seem to have an effect on your stated P&L?

It had an effect on our EPS but not FFO. We were FIN 46-ized.

Okay. [ Laughter ]

That required to us pick an asset that was previously unconsolidated, which was a participating mortgage note and consolidate it. And when you do that you to revalue the asset to current market. That's what this cumulative effect of a change in accounting principle is.

Okay. And finally for Tim, what are the current return expectations on the -- on the development program?

8.4%.

Okay. Thank you.

Your next question comes from the line of Rich Anderson with Max Core Financial. Please proceed with your question.

Thanks. Are you guys already looking around for acquisitions for the fund?

Rich, this is Tim. As I mentioned in my remarks we have started pursuing acquisitions.

Okay. And you said that the fund would mimic AvalonBay's goals as they stand today, one of them being increasing your exposure to the Midwest. I don't remember that as being necessarily a goal that you've talked about in the past. Is that a reflection of what you're seeing in Chicago today and -- and trying to get more exposure to Chicago?

Rich, this is Bryce. It is something we have mentioned in the past much we have an extraordinarily small portfolio in Chicago today relative to the market size and our -- in our -- and our appetite for that market. We actually only own four assets, I believe, in Chicago. So, we have an asset allocation target in each of our markets and for that market, it is to increase its exposure to it. It's been that way for some time. If we haven't been clear on that, it's certainly something we have mentioned in the past. The second part of your question was?

I think that covers it. I will try to get through this quickly. The other question I have is the last question on the development pipeline. You -- your average cap rate at 8.4%, but I noticed a lot of the rents for the majority of the development projects and process came down since last quarter. Is the fact that you started two projects in Fairfield helped to stabilize the number at 8.4 and if not for them, the average cap rate would have come down this water?

That's part of it. The changing baskets of communities. We had two leaving and two coming in. So, yes that was part of it. That was -- that was part of it. And actually the other part of it was last quarter we had not actually reflected the -- the one joint venture investment on a pro rata basis. We reflected the whole thing and that had a -- something to do with it, as well.

Okay, I guess one more quick question. You have two pieces of land in your development rights schedule in and around Seattle. Any thought to move quicker on them, if you could, in light of the -- what you're seeing, the progress in Seattle?

Rich, yeah, we -- we are actually looking at Seattle and we are contemplating potentially moving forward on -- on one or both of those at some point over the next -- over the next year.

Okay. Thank you.

Your next question comes from the line of Stephen Swett with Wachovia. Please proceed with your question.

Good afternoon. Tim, just a couple of questions on -- on your operations. Is there any material difference between the quarter-end occupancy and the average for the first quarter?

Yes, Steve. The -- in terms of economic occupancy, it was actually 94.6 in the month of March versus 94 for the average for the quarter and -- and physical occupancy standing here in mid-April is right around 95%.

And you mentioned trying to get to 95 so I mean are you essentially there? Or are you trying to get the economic occupancy to 95?

The -- we're trying to get the economic occupancy to 95.

And just one question on much one market, northern Jersey. You had a pretty significant increase in occupancy, doesn't look like rents changed too much. Was that a market where you just saw a real increase in traffic?

Increase in traffic, did you say?

A real increase in leasing activity, it doesn't look like you changed the rents and yet you got a big increase in occupancy.

We did. But we've been pretty aggressive actually over the last couple of quarters with respect to both market rents and the use of concessions in Northern New Jersey. We had quite a bit of availability. Availability has come down pretty dramatically in that market. I think today it's probably in the 7, 7.5% range. It had been well into double digits probably a couple of quarters ago.

So, you have gotten aggressive on concessions, it just --

We have been there. That's the -- that's the market that has the single highest level of concessions today and has been for the last couple of quarters. We really have been buying occupancy in that market.

Great, thanks.

You bet.

Your next question comes from the line of Keith Mills with UBS. Please proceed with your question.

Gentlemen, how are you?

Good.

Good.

First question is for Bryce. Bryce, can you just comment on what you're seeing in terms of acquisition cap rates at this point? Have you started to see them back up -- maybe you answered this earlier and I missed it -- but have you started to see them back up due to the rising interest rates? If not, at what point, based on your experience do you think that they start to back up?

Keith, we -- we have not seen them back up yet, I touched on it very briefly earlier, but we haven't seen it back up yet. As we stated last quarter, and we generally reaffirm now, we certainly would expect them to ultimately start to move up in response to the rising of interest rates. But again, the cap rates are not the only driver -- interest rates are not the only driver of cap rates and what will keep cap rates down is high demand for quality product in good markets. So, we have not seen that change though it's -- you know, so far no material change, we're being watchful for it but as long as the appetite for apartments is -- remains strong, you know, we're not seeing it.

It's not the only factor, Bryce, is that -- as the increase in rates at all changed your plans, at least in the near-term, in terms of how aggressive you will be in acquisitions related to the fund?

Well, as Tim mentioned, we are just really at the early stages, we're prospecting for acquisitions right now. We see a couple that we're interested in but we're going to start off slow and be cautious in this transitionary period.

Next question is for Tim. Tim, can you give us a sense of what you're seeing in terms of construction or development-related costs at this point, maybe year to date compared to your expectations were?

Well, on the -- on the development schedule and on attachment 7, there were actually I think three or four communities that actually we reflected some cost increases and one community -- I'm sorry, cost decreases and then one community that actually had a budget increase. With respect to the remaining communities that are in that development schedule, contingencies are very healthy. So, the stuff that's under way, we are in fine shape. You know, obviously there's pressure and there's a lot been written on materials pricing and that is having some impact with respect to estimates on -- on new construction. You know, probably on the order over the last three months, probably in the order of 2 or 3% in terms of construction costs versus what we might have been estimating three or four months ago.

Are you able to lock in the costs before you start developing the product? Or it's not structured that way?

We generally lock in just about everything before we actually start construction, Keith. The buyouts are usually -- all the material subs are bought out before we start construction.

So,unlikely to have a material change in cost unless you make changes to the project itself?

That's correct, for what's underway that is correct.

And finally for Tom, Tom, I know you mentioned on the line of credit an expected renewal coming up in -- in May. Can you give us some sense in terms of how that plays out, in terms of rate -- or have you had the opportunity to lock in the rate prior to the recent rise in interest rates?

Well, the credit facility is a floating rate facility. There is no locking to be done. The -- it is a great time to be in the market with a new facility from the borrower standpoint and we expect better pricing on this facility than our existing facility.

And the term in terms of the duration?

It would be three years with a one-year extension, which is pretty standard in the industry.

Okay. Thanks, guys I appreciate it.

Thanks.

Your next question comes from the line of Dennis Maloney with Deutsche Banc. Please proceed with your question.

Hi, good afternoon. One quick question on two data points. What was the percent change sequentially in base rental revenue? Normally you have some buyback. And where was bad debt as a percentage of revenues?

Dennis, this is Tim, I can take both of those. The sequential change in base rental revenues was .2% versus total revenues of .3% negative. So, a decline by .2%. Total same-store revenues declined by .3%. And bad debt was .8% this past quarter and was actually down from .9% last quarter.

Thank you.

Your next question comes from the line of Chris Nisomo with Northern Trust. Please proceed with your question.

Hello, everyone. I just had a couple of quick questions for you. First I wondered if you could give us your maintenance Cap Ex for your existing asset portfolio?

Could you repeat the question? You broke up a little bit.

I'm sorry, I'm looking for your maintenance Cap Ex for your existing asset portfolio?

Maintenance Cap Ex?

That's right.

The normalized Cap Ex level that we expect for this year is somewhere in the 350 range.

Do you have anything to provide us for the previous quarter, like the first quarter?

Well we -- we -- we generally give Cap Ex per unit, if you look at attachment 2 or 1 you will see by quarter what the Cap Ex was over the last four quarters.

Okay. But you can't flesh that out a little bit further?

Yeah, capitalized -- non-revenue Cap Ex per home is given on attachment 1 for the last four quarters.

It was $46 per unit, per apartment, for last quarter. I think it's been about 340 for the last four quarters.

That 46 is a seasonal low. I wouldn't annualize that number. It will escalate during the year to be about 350ish.

Okay. And second, I was wondering if you could provide us with your GAAP cash flow from operations number? Is that available?

I'm sorry, you're breaking up or I don't understand the term.

I'm sorry, your GAAP cash flow from operations?

GAAP cash flow -- I'm with you, I'm with you. I'm sorry, we do not have that schedule prepared at this time am we prepare that in connection with the 10Q and don't have it prepared yet.

Okay, great. Thank you very much.

Yep.

We have no further questions at this time. I would now like to turn the conference over to Bryce Blair for closing comments or remarks.

Well, thank you and thank you all for your time today put we look forward to seeing many of you at the NAREIT coming up in June. Thank you very much.

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