住宅地產 (EQR) 2002 Q1 法說會逐字稿

Good day everyone and welcome to the Equality Residential first quarter earnings release teleconference, just a reminder today 's call is being recorded. At this is time for opening remarks and introductions, I would like to turn the call over to Ms. Cindy McQue, Please go ahead Madam,

Good afternoon everyone, thank you for joining us today. During today's call there will forwarding-looking statements made including earning projections under the private security litigation reform act of 1995. This statements are subject to certain risks and uncertainties as detailed in our press release, related to the operation of the company. Equity Residential assumes no obligation to update or supplement this forward -looking statements that may come untrue because of [INAUDIBLE] events, This afternoon, We will begin with an overview of our financial results presented by David Neithercut, our Chief Financial Officer, followed by a company and multi-family market overview by Doug Crocker, CEO and Gerry Spector, our Chief Operatoring Officer and Bruce Duncan our Present -- President and is present and available for questions. David

Good afternoon everyone and thanks again for joining us. The company announced for the first quarter of 2002 we earned twenty-eight cents for fully diluted share compared to forty cents for the first quarter of 2001. This reduction in same earning quarter was the result of having significantly less gains on sales in the quarter just ending versus the first quarter of 2001. In the first quarter earnings before gaining or losses on property sales were twenty-five cents per share compared to twenty-six cents per share in the first quarter of 2001. Adjusted earnings per share for the quarter just ended were fifty-eight cents compared to sixty-three cents per share in the first quarter of last year, again, due to the difference in gains on sales. And for the first quarter of 2002, funds from operations were sixty-four cents per share versus sixty-five cents, that we reported for the same period of 2001. The FFO number of sixty-four cents for the quarter just ended exceeded our previous guidance by two cents, primarily due to savings in utility expenses, lower than budget, in floating interest rate and some unbudgeted real estate tax refunds. With today's press release we provided updated guidance of 2002 on each of these performance measurements and despite exceeding our first quarter FFO by two cents, we have reduced the high end of our full years FFO guidance by two cents from two sixty to two fifty-eight, for the current range of two fifty-two to two dollars and fifty eight cents per share. Following Doug's comments on the economy and stated that the apartment market, We will be happy to answer questions you might have about current guidance and the assumptions for 2002. Turning now to same store analysis, on a same store basis for one hundred ninety seven thousand three hundred and five units first quarters of both 2001 and 2002, revenues decrease .4 %, operating expenses decreased .1% and net operating income increased .5%. The same store revenue decrease was the result of a .8% decrease in rental revenues, partially offset by increases in utility collection and other income areas. On a sequential basis from the four quarter 2001 to the first quarter of 02, rental revenue decreased 1% compared to an increase of 1.1 from fourth quarter two thousand to fourth quarter 01. Rental revenue growth reflects changes in contractional rental rate, not market or asking rate. This number is net of concessions, occupancy and bad debt expense. Rental rate increased .8% in the over same period last year. Average rent per unit for EQR properties at three hundred thirty one excluding our portfolio was $860 per month per unit, including lexford The average represent was $809 per unit with lexford totaling $493 dollars for average Lexford unit As a reflection of the slowing economy on a sequential basis, in place rental decreased .7% from the fourth quarter last year. By contrast, on a sequential basis from fourth quarter to first quarter of last year, so a fourth quarter 2000 and first quarter of 01, rental increase .9%. Average occupancy for the same store portfolio decreased by .4% in the first quarter from 94.6% from the first quarter quarter 01 to 94.2% for the same period of 2002. On a sequential basis, occupancy increased by 5.3% from fourth quarter 01. That again compared to .1% sequential increase from fourth quarter 2000 to 1st quarter 01. Turn over increased slightly on a quarter over quarter basis from 13.7% from the first quarter 01 to 14.4% for the 1st quarter of 02. On a sequential basis, turn over declined 1.2 points from fourth quarter to first quarter this compares favorable to sequential turnover of 1.4 points from fourth quarter 2000 to first quarter 01. Comparing first quarter 02 and 1st quarter 01 concessions, increased $2.98 million dollars or 49.1%, but sequentially basis concessions increased only $1 million or 13% from fourth quarter 01 to first quarter 02. Bad debt expense as a percent of total revenue in the first quarter of 2002 increased slightly versus the 1st quarter 01. It increased three hundred nineteen thousand dollars to four million dollars in the quarter just ending, representing .86% of total revenues versus $3.7 million or .79% of total revenues in the first quarter of 2001. On a sequential basis, bad debt decreased from .95% of total revenues in the fourth quarter of 2001. As I mentioned earlier, same store operating expenses decreased .1 percent in first quarter of this year versus first quarter of 01. This decrease included a .7% increase in payroll and 4.8% increase of property taxes and a 41.2% increase in insurance expense. Increases were more than offset by reductions in other line items, including a 10.2% decrease in utility expenses. To put it in perspective, insurance expense represents 3.7% of total expenses with utilities representing 16.3%. Operating margins on the same store unit decreased slightly from 63.9% in the first quarter of 01 to 63.8% in the first quarter of 2002. Turning now to corporate housing business. That operation continues to improve despite the sluggish economy and corresponding reduction in coropate travel. We stabilized the operation of that business at around three thousand total units, down from a high of four thousand seven hundred when we purchased business in mid 2000, Sales in the first quarter were down 18.4% quarter over quarter and down 8.8% from the fourth quarter of 2001. Sales did trend positively within the quarter and occupancy has climbed from 88% at year end to a current level of 93%. However we are struggling to improve gross profit margin due to pressures on rates. Equity corporate housing continued to lease equity residential owned apartment units wherever possible and increased from 5% of the portfolio in mid-2000 to 33% today. The rent paid to equity residential totalled $3.2 million. Before the eliminations that occurred during consolidation, equity corporate housing had an operating loss of six hundred and thirty thousand dollars, and this was an improvement over nine hundred and eleven thousand operating loss in the 4th quarter of 2001. While we continue to believe that the economy will have a negative impact on the corporate housing industry of the whole, with a continued focus on occupancy, world world profit and expenses occupancy and rent controls,Equity corporate housing should continue improve results through the year. We anticipate returning to profitability by the third quarter of this year. and maintaining that level as the economic outlook improves. The goal for 2002 was and continues to be break even operations for the business while contributing twelve million of revenue to EQR properties. In addition to the Equity corporate housing, the company also has approximately twenty-one hundred units leased to third party corporate housing providers, this up from about six hundred units from the end of last year but still down considerably from the four thousand units at the beginning of 2001. Turning now to the balance sheet, the end of the quarter, the company had $5.8 billion outstanding debt and of this amount 56% was secure and 44% unsecured. The floating rate totalled seven hundred and five million or 12% of the total. our weight in average cost of debt at the end of quarter was 6.4% and we had nothing outstanding on the line of credit at the end of the quarter and there was forty-seven million dollars outstanding today which will be properly paid with May rent over the next few days. At the end of the first quarter,Equity Residential share of debt from unconsolidated joint ventures was six hundred thirty-two million dollars. This represents the share of the unconsolidated mortgage debt on completed property and construction financing drawn to date on projects still under development. For which development joint ventures, we have an additional and unfunded three hundred seventy-three million dollars available as of the end of the quarter. We also funded fifty-five million dollars in additional collateral for some loan and otherwise not guaranteed any of the debt. It is all nonrecourse to EQR As I mentioned at the end of the fourth quarter on our fourth quarter call in the same spirit of recognizing this debt that is off balance sheet, I note we have about two hundred and thirteen million that we currently consolidate, which could really be allocated to third parties partners in properties in which we have that debt. That farther adjustment would net the share of unconsolidated debt to four hundred nineteen million dollars. In just some noted Capital events occurred in february. We repaid one hundred million dollars of fixed rate notes that had an interest rate of 9.375%. In April we repaid a hundred and twenty-five million dollars of 7.9% of fixed rate public notes. Proceeds came from a four hundred million dollar of unsecured notes we issued in March, notes were priced at 145 basis points over the ten year treasure, for the face rate of 6.625% and issued at an discount to yield 6.727%. this offering was Extremely well received by the market and pricing was not impacted by the downgrade to BWA-1 by Moody's the previous business day, the offering price at five basis points through the secondary levels actually getting down to a new issue discount rather than a customary new issue premium. I would like to turn it over to Doug Crocker.

Thank you, David. As you saw in our press release, We exceeded our first quarter FFO estimates as well as consensus estimates. However, The apartment industry is still under stress from the weak economic conditions throughout the country as well as moderating strength in the single family housing market. During the first quarter we saw good signs of economic growth in many areas of the economy, however, we are currently receiving mixed signals concerning the depth and breck of the recovery, it was interesting to watch our portfolio track the recovery and then weaken again in April. As I noted last quarter, I'm still skeptal of predictions of a robust turn around in economy. Weighing on it will be the following elements. Lack of any consumer pent up demand. I believe it's too unrealistic to expect more car and houses will be sold this year compared to last. The risk posed by high consumer corporate leverage continues prevails. The excess capacity in certain manufacturing sectors as well as information technology. The risk of a volatile stock market that will continue to be impacted by the concerns of the accounting irregularities in corporate america and disappointing earnings. The stock market, I believe continues to be in an over valued state despite recent reversal. The fragile global economy poses risk, as does the threat of higher oil prices resulting from continued uncertainty in the mideast. With that backdrop, I believe the reed industry in general is undervalued on a relative basis to other industries. Despite lower earnings forecast for the multifamily sector, In general, I believe this sector remains undervalued not only on earnings potential, but a net book value basis. while the remainder of this year presents enormous challenges and various factors fall into place that sets the stage for strong rebound of occupancies in 2003 with even stronger growth of earnings in 2004. These factors include first, lower production levels of multifamily units this year. Higher interest rates and response to an improving economy will end the single family housing boom as will a general lack of demand. An increase in renter households through demographic shift and an improving economy withcreased job and lower unemployment levels. On the acquisition front, the environment continues to be competitive due primarily to a bid spread, centered over expected cash flows for the next twelve months, rather than cap rates. At the beginning of the year, I was hopeful to acquire a minimum of five hundred million in newer product based on the continuing spread and increased pressure for product from from the investors. lowering expectations to four hundred million for this year. During the first quarter, we acquired one property with three hundred sixty-eight units for a total of twenty-six million dollars. We have another nine hundred forty-six units for seventy-seven million under contract with an average cap rate of 8.1%. On the disposition front, we sold four sixty-one units for a total of thirty-two million seven hundred for a cap rate of 7.5 which produced profits for EQR of $2.8 million in the first quarter. In addition we sold one property with two hundred-ninety six units out of the Lincoln joint venture at a 6.9% cap rate or a $5.7 million dollar profit EQR. At the present time we have another six thousand seven hundred- forty nine units under contract or letter of intent for total consideration of approximately three hundred forty million dollars. Cap rates ranging from a low of 7.9% to 10% for the various lexford properties. Based on the four mentioned aqustitions acquirement, we will watch our disposition to match acquisitions. On the development front, the weak market condition and uncertain economic conditions will continue to hurt the development process. As I said earlier this year, our new development starts will be timed for openings in mid-to late 2003 to take advantage of what we believe will be improving markets. Expect the new starts to be in the two hundred to two hundred fifty dollar million range. We remain optimistic about the existing pipeline with over forty-five hundred units or 73% of the total units in high [INAUDIBLE] entry market with almost twenty-seven of those units located in the New York and california mark. At this point I'm going to review the operating results for some markets beginning with the strongest markets. We are comparing now one hundred nineteen-seven three and five units of the first quarter of this year of the first quarter last year, taking top honors for the first and last time will time will be Houston, Texas with revenues of 7.1%. DC-Maryland market up 6.2% and Inland Empire up 4.3% San Antonio coming to with a 3.8% increase and san diego at 3.7%. The bottom markets not surprisedly selling lead by San Francisco with a revenue decrease of 11.3%. Austin ,Texas of 7.5%. Phoenix, Arizona with a negative 6.5%. Atlanta Georgia 5.7% negative and the New York-Jersey coast and stanford around a 4.5% negative. We said it's equally important as top line growth. As increase in that operating income level, the following is a summary ,our top five and bottom five markets for the First quarter. The best was the Washington, D.C. Market with an increase of 11.7%. Houston with 9.8%. Minneapolis with 8.1%. San diego 7.9% and Boston 16.6%. The worst markets once again, San Francisco with a negative 15.4%. Giving back some of the bubble that happened in the past couple of years. Austin, Texas with 13.9.% Phoenix with 10.8% negative. Raleigh with negative 10.2% and Atlanta with negative 9.6%. Most of markets marking performing as expected to perform at the beginning of the year. I will only focus this quarter on the worst and best performing in an attempt to explain the various forces that are at work in those markets. Starting off with Austin, I believe this market will take the worst honors for the worst performing this year. While San Francisco will show a 15-20% drop caused by an average rental drop of around 15% and putting it numerically at the top of the list, most of this took place last year. The austin market started to weaken last year, but really accelerated this year. For revenue drops of 13-15% and in the NOInegative 20% range. Developers are still building newscast austin market. In atlanta, denver and phoenix, they are all on a close race for the second spot. Worst performing market. Negative job growth in atlanta while approximately twelve thousand units will cause negative revenues in the 5% range with NOI deteriorating approximately 8.5%. The Denver market continues to decline is over nine thousand units are completed and cut backs in telcom and finance continue. Look for negative revenues of 6-7% and NOI declines of 8-10%. Unfortunately I believe this market will take more than two years to show positive signs. Phoenix continues to build single family houses unabated. The apartment developmenters HB caluacators continue to spin off bad numbers Completion will run approximately sixty-five hundred units this year and starts estimated at forty-five hundred which is forty five hundred too many. Revenue declines of 5-6% and plus NOI drops of 9-12% are common in the market. In Seattle revenue decline of 5-6% NOI decreases in the 7-8% range. The weakest markets will be downtown and BOEING-dependent submarkets. Militaries such as tacoma will remain healthy with positive rent growth. I'm adding New Jersey among THE Hudson as a worst market. The compenation for lower manhattan rentals and lack of accessibility due to the world trade center subway station collapse and massive lay off and relocations of wall street firms and local competition will pause this market to suffer for the next twelve to eighteen months. Revenues are down 8-10% and NOI decreases in excess of 10% are common. While it's tough to find many good markets, a few due strong employment and healthcare defense and governmental sectors. The Washington, D.C. And Maryland markets may take top honors with revenue growth in the 3.5-5% range. Strong NOI increases of 5 to 7% However the beacon has brought in a lot of new starts estimated ine ten thousand unit range. The strength in the market could be short lived. The inland empire continues produces positive revenue growth and the 2.5-3% range with positive NOI's at 4 to 6% Houston will probably take second with revenue growth of 3-4% increases of 6-7%. However based on the past history of this market, enjoy it while you can. San diego continues to produce good job growth. Helping to absorb the five thousand seven hundred units estimated for completion this year. Revenue gains of 2.5-3%. NOI increases of 3-4%. Finally the southern Florida markets in Broward and Dade county continue to produce positive results in the 2-3% range with NOI growth of 4-5%. At this point we will turn it over to the audience for questions.

Thank you. The question is and answer session will be conducted electronically today, If you would like to ask a question, press star followed by the digit one on your telephone key pad. We will proceed in the order that you signal us and take as many questions as time permits. Once again To ask a question, please press star one now. We will pause for a moment to assemble our roster. Our first question comes from Rob Stevenson from Morgan Stanley.

Good afternoon, guys. Can you talk about what's behind the guidance decrease. You did sixty-four cents this quarter. What's the primary weakness that will cause the sixty-two or so cent second quarter here?

I think Doug just discussed that in going through the bottom market.

Just basically the internal performance of the same portfolio?

Yes.

Then you can talk about what the economics are --?.

Let me just go one step farther. In the apartment industry, the best quarter that you usually have is the fourth quarter. The winter quarter if you have good utilities expenses, the second and third best is the spring. The one coming up. The worst is the summer. Normal transition would show that the second quarter without anything happening from a deterioration basis would be lower than the first quarter anyway.

Okay. What is the economics to you guys that deal with the army?

It's thirty- six hundred units. What we did is we will be investing approximately ten million dollars in equity based on the cash flow that the property generates and the financing put in place we should receive that money back in about three and a half years. We end up with a twenty-five -- it's a preferential return of 12% and then the cash flow is split in various stepping pieces starting at seventy-thirty and dropping down to eighty-five/ fifteen after year four which is when we are supposed to get our money back. The management contract should also produce fairly nice profits in the million to million and-a-half range.You are going privation of every armed forces whether it's Army, Navy, Marines or whatever. It will be done probably over the next ten years and we believe that this will be a future source of revenue and profits for EQR, It's extraordinary difficult to go through the process. This took the better part of a year and-a-half. Lots of up front capital. The competition should be limited in that a piece of business that we are continuing to look to do in the future.

You will own the assets?

We physically own the asset. It's on a lease with the government for a long period, at which time it reverts back.

Do you get any sort of benefit or preferential treatment if they decide to close this base?

No. That's why we basically said we want our money out in about three and a half years. This base is the major staging base for everything that goes on in Asia with a ground force invasion or something like that. The chances of this base being closed in the next three years is about as slim to not existent as you can get.

Last question. What happened to push the estimated completion date of the water mark property in Irvine out a couple of quarters?

Intelligence. We decided not to start it when we wanted to start it.

Thanks, guys.

Our next question is from Jonathan Litt from Solomon Smith Barney.

It's Rich Anderson here with Jon. Regarding the Boston NOI growth, can you sort of give some color as to why we saw an up tick in that market this quarter?

It will be short lived. The suburbs are starting to weaken very, very dramatically. I think quite frankly it's a timing differential.

It wasn't an expense-related issue since it was an NOI number in?

The expenses were alittle bit lower than last year, but the revenues gone as bad as they were and also contrary to public opinion, the growth portfolio is performing extraordinary well.

Doug, you made a comment about lowering guidance from five hundred million to four hundred million. Did I miss hear you did you say dispositions or acquisitions?

In the acquisition front, I don't think we will get anywhere near the five hundred unless things really open up at the end of the year.

The reduction was for dispositions?

Acquisitions.

What is your disposition goal?

Still at five hundred, Probably will have a mismatch of about one hundred million.

Okay, Regarding turn over, what would you guys say the percentage of your turn over is the result of people moving out to buy a single family home and how has it changed over the past year or so?

It hasn't changed much. Still running 25% of the population. Moving out to buy homes. We haven't seen an up tick or certainly haven't seen a downtick at all.

Last question. You mentioned the ten thousand units coming or starting in the DC market. Where specifically are those properties being built?

They are literally all over the place. Montgomery county and a number in Montgomery. Downtown Washington, D.C., spread throughout the -- I'm assuming the ones that had been permitted, yet built. And the in-close Virginia, people are finally realizing that Laughin county will be a while before you start building. It's pretty close in.

Could you venture a guess of what the NOI growth rate to be in a year?

well You tell me whether -- What do you think the GDP of this country will be at?

Is that the growth rate?

GDP in the country is three and a half of unemployment is back down to 5%. You can probably get 3% NOI growth.

Even with the ten thousand units coming on-line?

They will absorb it.

Okay, Thank you very much.

We will now move to Raul A. with Merrill Lynch.

First a quick accounting question. How do you account for concessions. Are they accounted on an as given basis or are they amortized over the term for lease?

As given. our revenues is our cash. If we give a month free rent, there is no cash for that month. If there happens to be a discounted rent over a twelve month period, we recognize the cash we receive.

On a related question would be, are you leasing managers offering any back ended concessions at this point?

No. Strictly amortized or up front.

And then a question on the Legacy and Lincoln joint ventures. Is there anything in the structure that would limit the down side to a poor performance during [INAUDIBLE]?

No. We have a preferred return and on the deals we have the equity in the deal. There is a slower lease up. We feel that. That's the bad news. The good news is because of the pool, hopefully and as is proven in four one, we'll more then offset that by better then expected performance in some other properties in the pool.

I guess my question was does Legacy or Lincoln, do they have anything unannounced first eliminated in so far as the weak performance?

We are shoulder to shoulder.

I don't think they have an equity -- some of these are already completed. As David has said they are pools. There is equity in their share that goes -- that our preferred return gets ahead of them getting any money out. We have a cushion, if you will, given the equity and value in the pool.

Let's assume a pool had five million dollars worth of cash flow that was being split. two-five to Lincoln and two million five to us. The property had a terrible lease up. and was five million dollars behind, We would suffer two-five and Lincoln would suffer two-five. So, they are bearing half of the delay in the lease up. Assuming that the pool on a positive basis.

That's helpful. Thanks a lot.

Next is Lou Taylor with Deutsch Bank securities.

It looks like a positive spread between the assets you sold and bought. Should we look for more or will it be negative?

We got lucky, Lou.

I figured that. What do you think this spread will be?

Not as bad as it used to be. I think it is probably seventy-five to a hundred basis points maybe.

Okay.

The real argument is over what do you think the economic occupancy is when you talk to the seller? is it eighty-eight or eighty-six or if you do better than your -- will you make a lot of money if you do worse? The spread will go back up to one hundred-twenty five basis points.

Then could you comment on just traffic? How is traffic in the quarter? Up? Down? Even? How are you feeling along those lines?

Traffic is definitely down from the prior year. Much more so in the first quarter than the last quarter of last year. On a month to month. In January down 7.4%. February moved up to 27.7% and March over March 16.9%. So there's increasing decline in traffic right now. On a sequential basis, turn over is down. I'm sorry, it's up. It's up from negative six-two to negative eleven- five.So it's moving in the wrong direction, Usually traffic increases February to March which it did. Not at the same rate that we saw in the prior year. The prior year sequential increased 19.5% and this year it's only up 13.7%. so we are seeing a falloff of traffic as well in a February to March trend.

The increase you just read was more seasonal and it's not --.

Seasonal as well as it is, it's down on the same store basis. It is seasonal by nature. Seasonal in January. And February and March it starts to paik up. It's not at the same rate as the prior year.

David, For the GNA for the quarter, how much is seasonal and what is it for the year?

We talked about it in the fourth quarter call, we are seeing GNA for this upcoming year of about forty-two million dollars.

Okay so a little bit lower than the current run rate?

Yeah. That run rate it's up just a touch more than what would be a normal run rate. We also mentioned on the last call that number will come down three or so million in 03 and another million and-a-half dollars in 04. A more normal run rate i'll call it thirty-seven or so million dollars.

Last question. With regards to the increase in property taxes and insurance, what was the nominal increase in your insurance cost?

Um, absolute insurance cost in was up $1.8 million.

Thank you.

We will move on to Jay Lape from Robertson Stevens.

I'm going to go back before you start, that was same store. same store insurance up $1.8 million.

Good afternoon,. Brett Johnson from Robertson. A couple of quick questions for you guys. First on the occupancy front. Has occupancy fallen off from the end of quarter to right now?

Physical occupancy?

Yeah.

You really don't look at physical occupancy. you look to the concessions which drive occupancy. It's your -- where are your revenues running on a same basis.

Just in the going into the quarter, what we are seeing is occupancy actually kicked up a hair. That's from the prior quarter. We are giving away a lot more. The economic went down. That's why we are seeing the trend continuing in April We are not seeing deterioration in occupancy, but we are seeing really driven by concessions.

I guess I'm looking at the Q1 02 occupancy of 94.2% and full year assumption 93%. You expect occupancy to falloff later in the year?

If we keep it up to 94, you will give it away in the concession. We didn't give it away in the concession, the answer would be yes you would see it at 93.

I guess on the same front, I apologize if you have done this, but a big picture comment on the general concession environment right now in your portfolio and has it that changed over the past quarter or two.

If you could find a property in the United States that wasn't offering a concession,it would be unique.

On a same store basis, our concession were up three million in the first quarter 02 versus first quarter 01. Sequentially for fourth quarter 01 to first quarter 02, they were up a million dollars.

Perfect. Thanks.

Now from Green Street Advisors, Mike Kirby.

Your input on your thoughts on supply. The picture you painted a quarter ago was I would say in which you expected to see a pretty material drop in supply take hold as the year transpires. Is that still your view?

Yes and you are seeing it because,what you have to go through is peel off the condo's, which are included in the total numbers and peel off the investment tax credits with low earn moderate income housing and what you are seeing In products we buy, own, and build is going to be down probably 25-30%. All of the major developers from Tramaco, JPI, and Lincoln, Legacy and etcerta. Are looking for 25-30% decreases in the production top of about 15-20% last year. My guess is the number of units that we actually are in the buying mode of is probably going to be down in the one hundred forty thousand unit a hundred thirty-five thousand range.

Versus two hundredish?

Yep.

When you say that, is that a number for the year or a run rate going forward?

I think Mike that is a number for the whole year, With a run rate that's accelerating.

Why are we not seeing that in the data?

What you are seeing in the starts data is combined number which includes condo's, the stuff that is what I call the standard market rate and then the low and moderate income housing. You have to borrow through that to get down to the stuff that we are competing with.

I guess what you suggesting is that we have seen an increase in the level of multifamily and tax credit deals versus last year?

Absolutely. Probably will see an increase somewhere in the 15-20% range.

you went through the individual market, in each market, you seem to have a negative comment about the level of development activity. Have you seen some reduction in some markets or is it still expectation based on --.

You have seen a reduction. You take a look at Austin. It's a disaster. It got reduced production, but you need the production they are building. Phoenix same thing production in production You need none of it. Atlanta, production in production. You don't need any of it. You go through the major metropolitan markets and you don't need any of it.

So is the 25% not enough? The 25% reduction not enough?

As far as I'm concerned it's enough. I would like to see eighty thousand units built this year. Just make the recovery that much faster.

Thanks.

Our next question is from Dan Oppenheim at Bank of America Securities.

It's Lee Shallop calling. I was interested in comments about april given the fact that bad debt was down in the over the first quarter over the fourth quarter. occupancy was up and things are worse in April Can you quantify a little more Is it occupancies down or regional,? What's going in April to make it worse?

It's a matter of two major issues. One thing we see a lot more of that we haven't is a lot of renewal concessions. We closed the back door because Traffic is slowed and the way to address that is to retain as many residents as you can. You are pushing through greater renewals that doesn't obviously doesn't affect your occupancy and again your up front concessions, you are seeing concessions in markets and like Austin, across the board, we are giving away two months in almost every asset, That's really the two phenomena alone and everybody is meeting those bids. on renewals as well as the up front concessions to get somebody in the door. It's entire economic deterioration and not physical.

The second follow-up question for Doug on Acquisitions . it sounds like even four hundred million is going to be a stretch. Is there a comment?

Don't tell my acquisition team about that. It will be hard.

Thanks.

Challenging I think is the right word.

There appears to be no further questions at this time. That concludes today's conference call. Thank you for your participation.