住宅地產 (EQR) 2008 Q3 法說會逐字稿

My name is Nicolette and I will be your conference operator today. At this time, I would like to welcome everyone to the third quarter earnings 2008 Equity Residential Earnings conference call. (OPERATOR INSTRUCTIONS) Thank you Mr. McKenna, you may begin to your conference.

Thank you Nicolette. Good morning, and thanks for joining us to discuss Equity Residential's third quarter 2008 results. Our featured speakers today, are David Neithercut, our President and CEO, Mark Parrell, our Chief Financial Officer. Fred Tuomi, our EVP of Property Management, and David Santee, our EVP of Property Operations, are also here with us for the Q and A. Certain matters discussed during this conference call, may constitute forward-looking statements within the meaning of the Federal Securities law. These forward-looking statements are subject to certain economic risk, and uncertainties, and the Company assumes no obligation to supplement these statements that become untrue because of subsequent events. And now, I will turn it over to David.

Thank you Marty, good morning everyone, thanks for joining us for our call today. As noted in last night's press release we delivered what we think are pretty solid operating results. And I want to let our teams across the country know how proud we are of them, and how grateful we are for their contributions to Equity Residential's success. Across the board we had very good occupancy and saw increasing rental rates in most of our markets, and we were able to deliver revenue growth of 3.4% for the quarter, 3.6% for the first nine months of the year. These results were very much in line with expectations.

We continue to benefit from the changes we made in our portfolio over the years. Year to date, same-store net operating income growth for assets we acquired in 2006, was 8.2% on revenue growth of 6%. And assets acquired in 2005, delivered 7.7% net operating income growth on revenue growth of 5.6%. We are very pleased with the performance of those acquisitions. We continue to benefit from our residents reluctance to buy single-family homes. We saw a one percentage point for 5% decrease in the number of residents moving out to buy homes in the third quarter of 2008 versus third quarter of '07 and our resident retention is up. And in October, we realized a positive increase in the rent charged to renewing residents across every one of our markets. Unfortunately, the increases we are getting from our renewing residents have been at decreasing in rates of growth over the last several months.

Furthermore, even though traffic is up, and by that I mean -- both walk-in traffic and [ELI] traffic, new prospects are resisting higher rental rates, and new residents are paying less than the previous occupants in many of our markets. These are trends we expect to continue to see going forward. So our teams across the country are working hard and giving it their all, but they can't overcome the impact the economy is having on our business. So as we expected, and as I included in operating guidance we gave in late July, we are seeing revenue growth slow across every one of our markets. With 10 months of the year in the bank, and the visibility we have 30 to 60 days, out we have tightened up same-store operating guidance we gave in our last call, to numbers that are solidly within the previously given range. Revenue growth for the year, we are now suggesting will be 3.25%, expense growth for the year 2.25%, and net operating income growth, 3.75%. We were expecting things to get tough in the fourth quarter, and unfortunately we were right.

But I want to note that while our same-store operating expectations for the fourth quarter and therefore full year have not changed, it is not because we expected the economy to be as bad as it is because it is certainly in far worse condition than most anyone thought. Its simply that we don't expect the worsening economy to impact the fourth quarter, anymore than we previously thought, due to the limited lease rollover we expect in the next 30 to 60 days. We expect 2009 to be a challenging year. As noted in our release, we will give 2009 earnings guidance in our fourth quarter call in February, therefore our comments today, both prepared and during the Q and A, will be based on how we see things today with a view out 30 to 60 days, because that is the visibility we have with regard to our notice to vacate, lease commencements of our future residents, etc.

Okay, with all that in mind, what are we doing in our various businesses that deal with the current economic and liquidity situation? While on the transaction front to preserve and build liquidity we continue to sell properties and not buy. For the second time in history, we did not buy a single asset in the quarter, and we've reduced our full year acquisition expectations to $400 million. This is down from the level of $750 million which we gave you 90 days ago on our second quarter earnings call. Again, this is down due mainly to our desire to protect our liquidity position, given the uncertainty in the credit markets. As noted in last night's earnings release, this reduction in acquisition activity will be about $0.02 diluted in the fourth quarter. This is what we come to call good dilution. Meanwhile, we continue to take advantage of a strong bid for assets, smaller price points, slower growth in our non-core markets, and other assets we targeted for sale. And as a result we sold 11 assets in the third quarter for $328 million. This is an average sales price of $30 million, where we sold nearly 3500 units, an average age of about 15 years old, at a 5.9% Cap rate, an internal rate of return of 10.8%.

We sold nine assets in Austin in the quarter, essentially completing our exit from the Austin, Texas market, we sold one property in Denver and one property in Sacramento. We continue to assume that we will sell $1 billion of assets for the full year. We sold $807 million through September 30th, we sold another $28P million in October.

We have a pipeline of assets for sale, many of which could close by the end of the year. They are in various stages of diligence, or in the closing process. And these assets are in Texas, Florida, Colorado, Arizona, Connecticut, and North Carolina. Now there is absolutely no certainty that any of these deals will close. I stress, no certainty. In fact, $1 billion could be a stretch goal. But these are all deals being offered at prices of less than $20 million. Fannie and Freddie are working on most of them, and they're open for business. If interest rates don't increase terribly much, our guys think we can close a good portion of these deals.

Now I want to say that on prior calls, we have indicated we could be a net seller of $500 million, without causing the possibility of a special dividend. That was based on our best guess at the time of the assets we were likely to sell. Well based on what we have actually sold, and those we believe we could yet sell this year, we are confident that we could be a net seller of up to $600 million, and not be in a special dividend situation.

Well, turning now to the condo business, you won't be surprised to hear that the last several months have not been very good, the sales velocity there. While traffic remains surprisingly good, there are simply no buyers. Everyone is either waiting for a better deal or afraid to catch a falling knife. So we are taking one of two courses of action on properties that have unsold inventory, and inventory which totals fewer than 160 units in three properties. Where we have a small amount of unsold inventory, we are pricing deals to sell, could very well sell them in bulk, but the objective is to unload this inventory. When we have more unsold inventory we will aggressively lease up units. All of this has caused us to increase the loss of our Conversion business for the year by about $2 million at the midpoint, and this is primarily from closing fewer units.

And lastly, we have said for the last year or so, we will closely watch our overhead costs to insure they remain in line with our activity this business. And while we continue to think the conversion business can mean important business for us over the long time, we admit that it will likely be a while before that market recovers. On to the development business, given market conditions, there is very little new to report there since our last call. We did complete our [Key Al] project in Orlando, Florida. We did not commence any new projects in the third quarter, nor did we add any new projects to the pipeline. In tact we dropped a couple pipeline deals in the third quarter and incurred a charge for the quarter of $880,000. So the pipeline is now less than $2 billion, and may very well shrink if we abandon pursuit of other deals during the fourth quarter.

Through the second quarter we started $255 million for the year. That does not include the Mosaic transaction we acquired in the second quarter mid-construction, which is now 82% complete. And as I noted previously, we did not start any projects in the third quarter. And I do not expect to start any additional development for our own account, until the capital markets show improvement, and we get a better picture of capital availability. We do have some JV relationships where we may try to find third-party construction financing, but I am not optimistic those deals will come together in this marketplace.

And all that said, I continue to strongly believe that in our core markets, well located, well conceived assets deliver in 2010 and beyond, will perform very well. And this is due to very favorable demographic trends, as well as the likelihood of very little new product being built in near the future, with construction loan market and all but shut down; as a result we will continue to underwrite new development opportunities with the goal of auctioning sites, that is tying them up on our terms, which will include a long lead time before significant funds are actually put at risk. So with all that said, Mark will now give you a little bit more color of operating performance, guidance for the year, and perhaps more importantly, our liquidity position. Mark?

Thanks, David. Good morning everyone and thank you for joining us on today's call. These difficult times for our economy and the capital markets have created a heightened focus across all sectors on liquidity in near term funding needs. In addition to the usual emphasis on apartment fundamentals, as long time investors in our company know, Equity Residential is always maintained a conservative balance sheet. It has been aggressive in addressing cash needs, even before recent events made having liquidity absolutely imperative.

With that in mind I want to give all of you a deep dive in Equity Residential's cash position, funding needs and our plans to meet those needs over the next few years. But first, I want to talk about our good same-store operating results and FFO results, as well as give you some color on our same-store and FFO guidance for the remainder of 2008. We are very pleased to report that same-store NOI growth of 3.9%, for the quarter and 4.4% year-to-date, for the quarter our same-store revenues increased 3.4%, over the third quarter of 2007 driven by a 3.3% increase in average rental rate, solid occupancy of 94.4%, and an increase in other income. As we said on our last call, our growth rates have moderated in the second half of the year in virtually all of our markets. With the moderation more pronounced in the markets that continue to feel the pains of the single-family housing market slowdown, Florida, Inland Empire, Phoenix. We expect same-store quarter-over-quarter revenue in the fourth quarter to only be up 2.5%, as rising unemployment pressures demand for our purposes.

The story on the expense side of the house continues to be good. Same-store expenses were up 2.6% for the quarter, and 2.1% year to date, due to our cost control initiatives. In the third quarter, payroll grew at an inflationary level and insurance costs declined. Other, less controllable expenses, a predominantly insurance, excuse me -- higher utility costs, up 6.8% quarter-over-quarter or $1.8 million. And higher property taxes up 5.3% quarter-over-quarter or $2.2 million offset some of these expense savings. We are also very pleased with a 13% quarter-over-quarter decrease in our total property management expenses, and a 20% decrease in quarterly G&A.

Despite the current conditions in the economy and credit pressures on the consumer, our bad debt was 0.9%, or 90 basis points of revenues in the quarter, which is very much in line with historical standards. Delinquencies were about 3% of rental income in the third quarter, which is very much in historical range and actually about equal to the third quarter of 2007. October was even better, well inside of our third quarter number. We also had a good contribution in the quarter from our lease up properties. As we told you in our original guidance for 2008, we expected our lease up properties, which are not yet in same-store, to make a positive impact $25 million to $35 million for the year and those assets are in plan to meet expectations.

As you saw in our press release, third quarter 2008 FFO results came in at the high end of our range. This was due to a non-budgeted and land sale gain and G&A Savings. We had a negative impact to FFO of $0.2 per share from our condo business due to weaker condo sales this year than last and impairment charges on halted deals. I would like to address guidance for the fourth quarter, and full year 2008. In the press release we provide fourth quarter 2008 FFO guidance of $0.60 to $0.65 per share. The transaction dilution of $0.02 per share is not due to negative cap rate spread, but because through September 30th, we sold approximately $800 million of rental properties, and bought only $340 million.

In the third quarter alone, we had $329 million of disposition but no acquisitions. And as we stated in our release, we have lowered our acquisitions guidance for the year to $400 million from $750 million, and left our decisions guidance at $1 billion. As David said, we believe it is very prudent to maintain liquidity despite the short-term dilution. This is our good dilution. We also have a positive impact from the repurchase of certain of our public debt, partially offset by higher interest expense. I will address our debt purchases in more detail later in my remarks. The higher interest expense includes the impact of the August, $550 million loan and the impact of higher floating rates. We have tightened our full year 2008 FFO guidance range to $2.48 to $2.53 a share. Previously it was $2.45 to $2.55 and have not changed our midpoint. On page 25 of the release, we have listed these and other assumptions driving our 2008 guidance.

Now, I would like to discuss our liquidity and uses of capital for the next few years but first, a bit of background. EQR's guiding philosophy is that our property management and investing activities are the stars of the show. We create value for our investors through buying, selling and developing the right assets and managing them well, not through excessive financing. This has always been true but even more so in these times. Sam Zel said to us recently, for the time being we are running this company for the benefit of widows and orphans. We run our balance sheet with that in mind.

Now to start with sources and uses of capital for the fourth quarter, our cash balance at 9-30-2008 was $530 million as you can see on our disclosure. Our line availability was $1.3 billion, giving us total liquidity of $1.8 billion. We also are going to receive 1031 disposition proceeds of $200 million. This $200 million now sits in the restricted deposit line item. It does not sit in the $539 million cash number I told you just a moment ago, or in the $1.8 billion total liquidity amount. But it will be in our hands by year end. We expect cash from fourth quarter dispositions in addition to that 200 to be $170 million. So total sources in the fourth quarter of $370 million.

As for uses, we will spend about $240 million in the fourth quarter of this year. About $160 million on debt payoffs and repurchases and about $80 million on existing development projects. So that gives us total uses in this quarter of $240 million. The result of all that is a cash balance at year end of $660 million, line availability of $1.3 billion, and total liquidity approaching $2 billion. For 2009, in 2009 we expect to spend cash of $1.15 billion. $1.05 billion, or $1,050,000,000, will be spent on debt payoffs and scheduled amortization.

Another $100 million will be spent on existing development projects and miscellaneous other investment activities. So summarizing, at December 31, 2009, cash on hand will be minimal, line availability will be approximately $750 million. And that $750 million of availability is before any proceeds from property sales. A conservative assumption as Freddie Mac and Fannie Mae continue to loan money into our sector allowing sales transactions to occurred. As David mentioned in his remarks, we will continue to sell assets at attractive pricing.

Moving to 2010, we expect to spend $450 million in that year, $400 million on debt payoffs and scheduled amortization, $50 million on development fundings. Our 500 I would note -- our $500 million term loan initially comes due in October 2010, it has an extension option, which we can use to make the final effective maturity date on October 2012. It is not included in our refinancing needs for 2010. So at December 31, 2010 we expect cash on hand to be minimal and line availability to be approximately $300 million. And again, this is before any disposition proceeds.

In summary, we believe our cash on hand and line availability will allow us to meet all of our funding obligations through 2010, with no refinancing required and still have $300 million of the availability on our line at the end of 2010. Going beyond 2010, we expect to finance ourselves in agency debt markets, through life insurers and other traditional lenders to our sector, through our disposition activity and eventually through capital markets that will at some point reopen.

Now let me address a key aspect of liquidity, that is the quality of our bank line. We have a $1.5 billion line of credit for a diverse group of 25 banks with high credit quality. We do not rely on any one bank for a material amount. We continually monitor the credit quality of banks in our line and we will be pro-active in trying to replace the banks that have issues. Many credit agreements, but not ours, contain clauses that allow the banks not to fund the borrowers general financial condition or overall economic climate as materially deteriorating. These are referred to as a material adverse change clauses or MAC clauses. Our line agreement does not contain a MAC clause and the facility does not mature until 2012.

We have substantial head room under all our financial covenants. Our 2009, and 2010 projections are before any proceeds from asset sales. That is unlikely to be true as Fannie Mae and Freddie Mac continue to finance buyers in this sector, and we continue to sell assets although at a slower pace than earlier in 2008. Also, unlike companies in almost any other line of business, debt financing continues to be available to our Company in size and attractive rates. We have spent time with Freddie Mac and Fannie Mae in their offices in the last two weeks, and continue to believe they are open for business, albeit at higher spreads and with more conservative underwriting than before.

Also, we continue to maintain relationships with high-quality life companies, traditionally large lenders to our sector, who have been largely priced out of the sector lately due to Fannie Mae and Freddie, and that we expect will again be lenders to us. Life companies have called on us recently, and we continue working to broaden these relationships. We have been aggressive at Equity Residential in maintaining excellent liquidity, and you can bet we will continue to be very proactive.Taking this all into account, we think our liquidity position is outstanding. I also want to remind you of a loan transaction we talked about on our last call. In August we closed a $550 million loan with Fannie Mae, the loan had a 11 1/2 year term, of which 10 1/2 years was at a fixed rate and the final year is floating. The all-in effective interest rate is approximately 6%. Consistent with what we said last quarter, the costs of prefunding our 2009 maturities with this loan did reduce FFO by $0.01 in the third quarter, and will reduce fourth quarter's FFO by $0.01 as well.

Being proactive in funding our future maturities and having substantial liquidity from recent agressive dispo drive despite some short-term dilution, has allowed us to take advantage of opportunities in the dislocated capital markets. In the third quarter, we purchased $28 million of our June 2009, 4.75% unsecured notes, at a discount to yield 6.1% to us. This was done primarily as a cash management matter, better to take a 6% yield now, and let cash we would have used to pay this debt off anyway, languish at lower money-market rates. We have also been active purchasers in the fourth quarter of other of our public debt, we will have more to report in the fourth quarter earnings call. We will not discuss specifics of these purchases at this time, as it will place the company in a competitive disadvantage in executing further of these trades.

Suffice it to say, that these purchases are being done at attractive yield to maturity to us, and will add about $0.04 per share to fourth quarter FFO, as we mentioned in the earnings release,p will not materially change our debt duration. So let me finish emphasizing again, that we believe we have a strong balance sheet and sufficient liquidity to weather the uncertainties in the credit market, and management is committed to being aggressive in maintaining the company's liquidity and credit strength. Now, I will turn the call back over to David Neithercut.

Before we open the call to questions, I would like to make a couple final points. The first -- as Mark has explained in quite a bit of detail, from a liquidity standpoint, we are in very good shape. Mark and his team, they have been very pro-active in addressing this and shareholders will benefit from their efforts. Also, Alan George and his team have continued to sell assets and build liquidity.

In fact, in the nine quarters beginning fourth quarter of '06, through and including the fourth quarter of '08, we will likely be a net seller of $1.75 billion of assets. In doing so, we continue to execute our strategy of exiting slower growth markets, and concentrating our capital in high bearing markets, that will create households and jobs at a faster rate than the national average. And Fred Tuomi and David Santee teams are well along the learning curve of our revenue management tool and our new operating platform which will produce superior operating results for us going forward.

Meanwhile, a tough economy can't change the demographic picture of this country, which continues to be extremely favorable to the apartment business. ,But the economy will reduce the supply of new apartments and as an owner of high quality apartment complexes in core markets across the country, we have absolutely no problem with that. As a result of our shareholders and our employees, can expect us to not simply whether the storm but emerge from this economic downturn stronger, stronger than ever. With that, operator Nicolette will open the call to questions.

(OPERATOR INSTRUCTIONS) First question comes from Dustin Pizzo of Banc of America Securities. Thanks, good morning.

Good morning Dustin.

David, given your exposure in the New York market, can you just quickly talk about what you have seen there during October, since a lot of what been is going on in the financial-services sector has taken place after an end of the quarter.

Sure, Fred, why don't you go ahead?

Sure Dustin, New York is very important to us as you know. And what we see right now today is a very stable environment, believe it or not. We are 96.8 % occupied today. 6% exposure, and its very solid, stable stream of demand, but things are changing. The primary that is changing is that we have diminished pricing power. As you know In the last couple years we priced at will, most on new lease and renewals. And that is certainly not the case now.

People are much more price sensitive, they are shifting around, they're transferring to cheaper units, they're negotiating tougher on renewals and prices are coming down because of that. In certain pockets, some of the competitors, especially the local, private owners are getting nervous and they are putting in concessions. And the OP, or the owner pay broker market has changed to our detriment where we are having to pay more of these broker fees. The way we see it, right now, today we are very happy especially in Manhattan. Quarter-over-quarter we are up 8.5% on revenue, and sequential was strong at 2.8. So things look good on the ground today, however, the head winds are definitely there and we anticipating a more diminished slow down fourth quarter and into next year depending on the job situation.

Okay, given the way the New York portfolio is structured, when does the bulk of the leasing take place there? Have you guys centered around that? Is it springtime? Or --

It more -- its got a little bit of a seasonal bulge, not as dramatic as other markets. The turnover is lower -- your running a very much lower turnover It is not that much of a whipsaw type of market. Yes, but there is more activity in spring and summer, and it slows through the winter.

Okay. And David, going back to the asset sales, of the ones you completed during this quarter, do you know what percentage had assumable debt and what the average rate was on that debt?

I don't believe any of it was assumable Dustin.

Okay. And then as you think about -- the other side on acquisitions, what would it take from a pricing perspective to get you more excited today, about the acquisition market

Now thats hard to say. As Mark noted in his remarks we are very focused on liquidity. And while we believe that there are -- you know there could be opportunities out there. I would not be surprised to see more opportunities particularly as the year comes to an end. I think that for the time being we are going to -- we will sit patiently on the sidelines. I am never say never, but really I -- I think that until we get a better view of the capital market situation and continue to have confidence that the disposition market will remain reasonably active, I would expect us to be relatively inactive on the acquisition side.

And then just lastly, and some of the recent published reports we have seen, seem to indicate that some of the land values have fallen as much as kind of 50% for the garden properties, 30% for mid high-rise properties. So can you just comment? One, have you seen this at all? Obviously where you guys are developing are some of the more high (inaudible) markets? And second, if that is taking place, where do you think replacement value kind of trending in that light?

We certainly we've seen downward trends in land values, but again as I think we talk about property values and land values there has not been a significant amount of velocity in either one of those sectors. But I will tell you that our guys as I mentioned they continue to look at deals and underwrite opportunities around the country. And they suggested that on the landside, prices are down this year 10% to 20% on the types of land -- the assets that we have been looking at. We are also seeing continued reduction in construction costs, and our expectations for 2008, is those costs will be down 5% to 10%. So clearly replacement costs are heading down.

Thank you.

You bet.

Your next question comes from Michael Bilerman of Citigroup.

David Tody here with Michael. Couple of questions. Without getting into too much detail can you provide a bit of color on the buyers of your assets? What is generating their interest?

It has not really changed over the last year. It is the local and regional investor. Again as I mentioned what we sold in the third quarter was a $30 million average ticket, and what we hope to sell in the fourth quarter will be a $20 million, if not lower, ticket. And the removal of sort of the strong, heavily leveraged institutional bid from the marketplace has opened the market again to the local and regional player.

In fact, I was told the other day, Alan George our acquisition EVP mentioned to me that we are working with a local player on some assets who said I haven't bought anything in the past five or six years, because I thought pricing was getting kind of crazy and now I think pricing is beginning to make sense. So again, the local and regional player, very small price points,again Freddie Mac and Fannie Mae financing a very large market share of these dispositions. Nicolette, you want to go to the next question?

Next question comes from Jay Habermann with Goldman Sachs.

Good morning David.

Hi Jay.

I was curious coming your comments, you talked about obviously the renewing -- the increases in rent from renewals, that sort of decreasing trend in terms of growth, and also new residents, sort of the price sensitivity, and willing to pay less. But sort of in your -- in the press release, you commented on significant head wind -- that talked about Q4 and obviously as we look forward to 2009, can you give us a sense of what you are seeing now, and sort of contrasting it versus 2001, and 2002?

Well, thats a good question, and I am not sure we are ready to compare what we're seeing now, to 2001, and 2002. Because I guess we are not really seeing it yet - we are beginning to see it build. And so I think it would be premature to make some kind of comparison. We thought things were slow in the fourth quarter, they certainly are. We are starting to see things slow even more than we had thought as we begin to go into 2009.

And then, just to follow up on the point you talked about in terms of liquidity. You have significant maturity in 2011. Is the goal really to use asset sales, or just simply to use a line of credit to take care of near-term maturities? Are you expecting to delever over this time frame? Or is it really just hang down near term maturities with -- using a line of credit?

Yes, I mean great question. When you look at the 2011 maturities and you see a fairly large number, I see disposition proceeds and I see potential additional secured debt activity as the most likely ways for us to address 2011 maturities, until the larger capital markets open back up. I would expect our leverage ratios to remain about constant. I say that because as we sell assets, what we're doing on the other side, is doing development. So we are adding assets to the books. So really the two of those, so our average asset levels, about the same. In fact, net debt for us has been constant for about five or six quarters. Because as we been disposing of assets, we have been essentially been using those proceeds to fund a development pipeline.

Okay. Also, just sort of broader calls for banks to begin lending, have you seen any improvement at all? It sounds like in terms of, -- Fannie and Freddie , have have been there, but you seen any improvement more broadly in the market in terms of just

No I havent to this point. I have spent some time in New York and certainly the climate there as you know is very negative. I think our banks right now are trying to repair their capital ratios, get in better shape. I do have a view that over the next year or so there will be more availability in terms of term loan bank markets, to real-estate companies that are conservatively financed. I think the banks will be moving on bad assets, getting a lot of new capital from the government, and will have at some point some need to land. Whether that is six months or a year and a half from now, I have no idea but the goal needs to be for everyone to get as close as they can to a lender who has some manner of government support. That is why we are fortunate in our sector to have Fannie and Freddie providing liquidity to us. But I have not seen the bank improve as of late.

And a last question, just remind us of potential disposition over the near term? What constitutes sort of noncore at this point, and would you be willing to even expand that into just core assets, where again, sort of anticipating the deleveraging?

Well again, I think the focus Jay, continues to be on our exit from what we consider to be our noncore markets, at particularly at those lower price points. So I think until we can get through that, I don't think we'll turn to our core markets. I will tell you that at some point in time, we will begin to -- maybe change the complexion of our portfolio in some of our core markets, but really our focus is continue to exit those markets we have identified as non-core assets.

How much is there?

I think we have got a $1 billion plus or so more to do there.

Thank you.

Also,those tend to be at a price points, values $20 million or less, that are easier for Fannie to finance, and that people are more interested in purchasing at this point in the cycle.

Okay great. Thanks.

Your next question comes from Lou Taylor with Deutsche Bank.

Thanks, Fred you talked a little bit about some of the tactics that New York residents were pursuing in terms of going to cheaper units. Can you or maybe David just expand on that a little bit in terms of what are the tactics you're seeing residents do in this kind of stressful environment in terms of just going to roommates or moving to other cheaper units and where are you seeing it most prevalent?

In New York in particular, which covers Manhattan and Jersey Goldcoast, we are seeing some interesting things but they kind of make sense. One is that people are looking for more value, lower cost units. Our smaller studios and one bedrooms, are highly occupied right no where is lot of demand -- steady demand for those smaller, kind of cheaper coupon rate apartments. And also what you are seeing the lower price, or the more valued, larger, two bedrooms, are a hot ticket right now. People are taking roommates, one, two, three roommates, they are doubling up, they are sharing rental costs. Interesting though, at the high end, the penthouse, all of our penthouses right now are occupied in Manhattan. So the high-rollers are there.They're not buying expensive condos. They are staying put and they are renting our high ticket apartments. We are glad to see that.

The only part where we have difficulty renting, are the fully amenitized, higher floor, two bedrooms and the large one bedrooms. Those are a little more difficult in these times, so we are seeing a little more price pressure on those. Another tactic is extending out to more of the 24 month leases, which was difficult to get people to take before, and now we are pushing some of those more now. In addition to the third quarter, same-store which is our Park collection, which is the Upper West Side near the park, we got very small units in those, They are small studios, very small one-bedrooms, we rehabed them with some beautiful, really cool, modern kitchens. They are small, I would say a kitchenette, but they are in very strong demand, and we are leasing them as soon as we get them ready. And its been a good use for our revenue this quarter.

Okay, How about other markets? What other markets seeing, this type of -- kind of resident creativity here?

It is a broad base. We have seen this and other economic slowdowns, it is a natural reaction for people to want to watch their personal budget -- with a little bit of uncertainty, consumer confidence down, uncertainty about jobs, etc. -- people do lots of things to reduce their costs. And what we see in our numbers is a reflection of that, transfers are up, our intra-property transfers, people are transferring from a larger apartment down to smaller, or perhaps from one-bedroom alone to a two bedroom with a roommate or family. We have heard of families moving in together.

Also, statistically we have seen our larger two bedrooms and three bedrooms, a number of occupants per apartment has been creeping up. Over the last twelve months, that has been a steady climb, about a couple percentage points, actually almost equivalent to one full person per three-bedroom apartment on the increase. So that is a natural reaction, we have seen it before. In good times, people live by themselves, challenging times, they are willing to take a roommate.

Same question, for Mark, in terms of your unencumbered asset pool on a dollar basis roughly, how big is that pool?

About $750 million, give or take a NOI, leading to a value in our minds of $11.5 billion to $12 billion right now.

In terms of your debt covenant, how high can you go in terms of encumbered assets?

So without tripping our debt covenants, it would be $3 billion to $4 billion more of secured debt, before we would trip our covenants. I am not sure our rating agencies frankly, would show that much patience. They have been very supportive of our drive to have of lot of liquidity. And I think they like fixed rate coverage being so good, fixed charge coverage being so good. At some point you are going to have so much secured debt that you will get some agency pressure, well before you hit your covenant.

Thank you.

Do we have another call?

Next question comes from William Atkinson of Benchmark.

Getting back to the property sales, when during the quarter did most of them take place? Earlier in the quarter? Middle of the quarter? Any in September?

Well you're getting down to the details here.

What I am trying to shoot at here is --

I will tell you Bill, that nine of them occurred on August 22nd. How about that for detail -- nine of the eleven on August 22nd.

There you go. Which leads to the second half of that question, do you think if pricing or to change materially if these were to have taken place after the middle of September when kind of like the world changed?

I don't know the answer to that question Bill. I will tell you is that the assets you sold in the third quarter, we sold in aggregate at about 99% of how we valued them in the first quarter of '07, which we think was a potential high water mark. Would the things have changed much, to use your word, material, I don't believe so. I think frankly, if things were going to change materially I am not sure we would be a seller. So I think we will see what happens in the fourth quarter, and we will report back to you in February, as to what we saw in the fourth quarter and how that change and how that impacted our actual disposition volumes.

On the development lease, some of it looked a little bit slow. Can you give us some color on -- what sort of concessions you are offering and where yields are going?

Sure, as we have noted, the -- our new residents coming through the door on our stabilized properties, are negotiating pretty hard. And so its not a leap to suggest people walking through the door to lease a new development wouldn't be going through the same process. So that the rates that we are receiving on our lease ups are off of what we had expected and the amount of absorption is dependent on property by property. We are probably giving half a month, to a month of concessions on our development deals, but clearly the absorption there, and the rates we are yielding are not what we had hoped.

Bella Vista, maybe its was somewhat over occupied, in the second quarter it was 97%, went down to 93% for the third quarter. Anything in particular there?

You can't read much into Bella Vista That was Phase III, there are two other phases there. That is all operating as a single apartment property, you can't draw any conclusions from the one phase.

Okay, got you. Lastly, it looks like, just looking at your guidance in here, backing into a 1.5% year-over-year same-store growth rate for the fourth quarter. Sequentially, NOI was down a tick in their third quarter. Is that likely to be the trend for the fourth quarter?

Yes. Hi this is Mark. We expect sequential revenue in the fourth quarter to decline, when we look at our sort of sequential set. That is what we saw three months ago, and we continues to see now. It is important for you to think also about total operating income for just a moment, and understand that you have lease up income and other things that will keep the cash in the bank number pretty constant. But the sequential number that we report next quarter is likely to be negative on the revenue side.

Next question comes from Rob Stevenson of Fox Pitt Kelton.

Good morning. David, in this environment, do you start pulling the plug on redevelopments or rehabs on units, figuring that you are going to start seeing the leak -- sort of a leakdown in terms of pricing? So -- and not -- given your liquidity, and how you want to keep that up high, it is not a good spend of money right now?

That is a great question, and one that we talk about a lot in our investment committee. But just to put things in perspective. We spend $30 million or so on our rehab business. So it has not been a huge business. We're looking at a lot of rehabs. And one of the questions we ask, we have those discussions, is now, the time to turn these units into units that now cost $150, or $200 more. And we do have that discussion. We have recently approved some rehab, because we believe with the test we have done that there is enough depth at a higher price point.

But the thing about the rehabs that is nice about them, is that you can turn them off at any moment. If all of a sudden we determined we are not getting the appropriate premium for what is probably averaging now about $10,000 a door that we are putting into them, you can just stop. We are going to continue to consider them and underwrite them, but we are very thoughtful about how deep the market is, in demanding 300 more units of $150 or $200 higher price point.

Are you seeing any material change on the attitude on real estate taxes given the budget shortfall, a lot of states and municipalities?

It is hard to make that call but we are always worried about real estate taxes. It is a very large, uncontrollable line item. We have done a good job of managing that. We will be very aggressive in dealing with the appeals, in every year going forward just like we have been every year in the past.

You were talking about acquisitions not being an attractive enough at the moment, if your stock price stays where it is today, if its back to 2004 levels, is that a more attractive use than acquisitions?

Certainly it would be, but right now, we are looking at it not so much on how attractive acquisitions are, but what is the most appropriate thing to do relative to the liquidity problems and capital markets and the appropriate way for us to stay linked.

Last question, you got a situation, potential lame-duck session of Congress, home builders, realtors, and a bunch of the other housing guys, trying to push through and get $20,000, $25,000 tax credit and some mortgage stuff and everything in there. Are you guys doing anything active to fight that? You think that impacts -- has a great deal of impact on your operations as it rolls into '09 or something like that gets passed?

Well, you are talking to the co-chair of the PAC fund-raising committee, for the National Multi Housing Council. I can tell you that the National Housing Council is out there beating this back as much as we possibly can. And we are trying to raise money to provide them the financial support necessary to do that. I can't tell you exactly if they do this or they do that, what impact is going to have on our business. But clearly we are not in favor of and are trying to back these charitable contributions for down payments or all those sorts of things. We are getting some traction in Washington against this notion that everybody needs to be in a single-family home. And the flexibility and optionality provided by rental housing is very good for a lot of our citizens. If we turn a lot of renters into really bad homeowners, supply is down, there will be issues in Washington about getting single-family home building going again. And I just tell you that we will be up there trying to make sure it is done in a rational, sensible manner.

Thanks, guys.

Your next question comes from Michael Cow with EBS.

Hi, It is actually Michele Cow. In your release you mentioned that some of your markets are experiencing significant head winds. I was wondering if you can you comment which markets specifically you are seeing more more impact than others?

Hi Michele, its the usual suspects over the last several months. Its the housing supply markets are -- Florida continues just to hang out at the bottom at a very low level, maybe even declining a little bit more. You got Phoenix that had a very tough summer and not much winter uptick, because of the single family overhang. Inland Empire has actually done better than those considering the environment, but still a very tough environment. So its the housing bubble markets are the most of the concern.

Do you expect the same markets to be the hardest hit next year or are you anticipating other markets?

I think those will continue to be a challenge, because its going to take more time to work through that single-family kind of dislocation. It will take longer recovery. And you add on top of that, the general economic slowdown and job losses across sectors other than real estate ate and construction. Then thats going to make that turnaround take even longer. The rest of the markets are performing fairly well. They will be affected by the general and global economic slowdown, but not to the extent of the housing bubble markets

Okay great, thank you. Also I was wondering if you could give more details around some of the asset sales that you had in the quarter in terms of specific markets, in terms of capped rates if you could, or if you could give us a sense of how cap rates might have moved over the three months, for A versus B assets?

We sold two deals in the quarter -- I'm sorry-- in October, one in Sacramento, one in Fresno, at about a 6.5% cap rate on a weighted average basis. And those assets were 28 years old on average. Clearly cap rates are up. Cap rates -- kind of core product are up as much as 50 to 100 basis points, theres been a pretty meaningful movement in that over the past 60 or so days.

Lastly, if you could talk a little more about LA and Orange County, The occupancy seem to decline quite a bit in the third quarter. I was wondering if you could give more insight into that?

Los Angeles have a decent year, but not a stellar year for Los Angeles, primarily because we had some pockets of supply. Normally you don't have many apartments to deliver there, but we had 6,800 in '08 and we are expecting it to drop to 2,000 next year. But to take those units on at a time when you have general economic slowdown and the real-estate issues coupled with, that was enough to make some of the submarkets, especially on the 101 Freeway, Warner Center, San Fernando Valley, those were hit pretty hard by those lease ups, a lot of concessions and a decline in occupancy.

However, the other markets like the [Midwheelshire], the Beach Cities, Long Beach area, very strong, Korea Town, [Noho] (inaudible). We are doing very well there. It is spotty in Los Angeles. Next year we will improve because of the drop-off in supply, but the wild card will be the impact on the general economic slowdown but the entertainment business is doing okay.

In terms of Orange County, it has done very well. We had 20,000 job loss, followed by 27,000 this year, and expectation, and maybe more losses next year because of the meltdown of sub prime, But its performed better than I thought. We had very good occupancy there through the summer. Today we're 96% occupied with very good exposure in Orange County. We have a little bit of a supply issue there, as things slow. Irvine Apartment Company puts in a lot of units, they are concessing right now, so we got a little bit of local competitive pressure, But Orange County is doing better than I expected.

Okay great. Thank you.

Your welcome.

Next question comes from David Bragg with Merrill Lynch.

Good morning. You have made it clear you are out of the acquisition market right now, but maybe if you could help us understand, as your investment team continues to monitor opportunities, how are you adjusting your thinking in terms of your targeted returns and maybe frame that with in -- in thinking about the targeted, unlevered IRRs of 9% that you mentioned for your 2Q acquisitions?

Well again, we are not really buying anything and we are not developing --, we're not taking land down to build anything. So I guess we really don't have targets today. But I would tell you those targets would certainly be up. And with a lack of buyers out there, we could buy a product we believe at 100 plus basis points, higher IRRs than we might have some time ago.

Okay, that helps, just one other question. Can you provide detail on land exposure and maybe break that out for us generally by markets?

Sure, we have exposure in the Bay area, and I would say that that exposure is probably a third of the -- And I want to frame just the land exposure of the Company, it is $367 million less than 2%, or around 2% of total assets. Its pretty immaterial for us, especially compared to a lot other real estate companies. That said, a third of it is in the Bay area, there is some in Southern California, a little bit in D.C. and New York city. Those are the primary areas of concentration.

Thank you.

Your next question comes from Anthony Paolone of JPMorgan.

I just have one question left. The four -- the $0.04 you mentioned in the fourth quarter coming from any gain come from retiring some debt to securities. Was that in the previous guidance or is this something that got added, just given what you have done or what you plan to do?

Its new. All of those trades were executed during the month of October. That $0.04 is the result of everything that occurred this month.

Thank you.

Your next question comes from [Amir Bieda] with FRB Capital Markets.

Just one question, about expense controls. Is that something you will be able to sustain in 2009 to offset weaker trends?

We have tremendous visibility. Keep in mind between payroll, property tax, utilities, that makes up about 66% of our entire spend. Most of our property levels spend, we had tremendous procurement programs, we have online, online catalog for all of our property folks, that allow us to maintain consistent pricing, and monitor that spend. We will be in good position to keep a firm grip on our expenses next year.

Thank you.

And your next question comes from David Harris with [Roy] Capital.

Hey a voice from the past eh?

Hey David. Welcome, good to hear from you.

David, I have a couple questions for you if I may. Going back on your prepared remarks, you made reference to high rates of tenant retention, and you are not seeing much of a loss or impact, diminished volume of loss to home ownership -- home sales. The latest data would actually indicate that some of the sales are picking up, with buyers responding to lower prices in particular in some states like California with foreclosures. You are not experiencing that?

This is David again. What I do is look back all the way to Q1 of '07. And probably the most material change we have seen in home buying is in the Inland Empire. But still, the last two quarters are still at Q1early '07 levels. So there is nothing going off the chart. Consequently places like south Florida, Phoenix, who used to be in the 18% range of our move outs are down into very low single digits, so across the portfolio, we are still 300 basis points below our Q1 move out percentages for home buyers. So there is moderation in these markets, places like L.A., Denver, you are starting to see a little activity, but nothing that is moving the meter.

Okay, I know you are backing off making too much a definitive forecast into '09, but is it your expectation that with lower prices and an acceptance by sellers that we are living in a different environment, that well-funded buyers are going to be --, are you going to start to see volumes of higher tenant move outs to purchase homes in some locations?

I think that is possible, but I think as David noted there are some markets in which they haven't begun to budge to do that.

Okay. One final question, a year ago, I think it may be been this call a year ago, you talked about your in-house economists, having a no recession forecast in his thinking. What is the latest thinking from in-house? I had to ask that one.

Our in-house economists is Mr. Zell. I think Sam is probably more pessimistic than he was, but continues to be more optimistic than most. He has urged us to not underestimate the impact that these lower oil prices will have on the consumer, anybody filling up their gas tank now, knows that it is $25, $30 less than it was not too long ago. You add that up in a month, that is real money for consumers that are trying to deleverage. He encourages us not to underestimate the impact of that. He is probably more pessimistic than he was, but remains more optimistic than most. I guess he and I talked about, that it is never as good as you think, and never as bad as you think.

Just to state my point, and it is not a cheap shot. His forecasts are at least as good as anything I could have come up with but I am just interested to hear what the latest.

And his bank account reflects that.

Alright,.Thanks, guys.

Nice to hear from you again.

Next question comes from Michael Salinsky of RBC Capital Markets.

Good afternoon. As you went through your sources and uses, it seems like development spending over the next couple years is going to ramp down significantly. Is that more a function of just the overall market fundamentals, asset land pricing? I mean what is the driver behind that? Because as new supply tapers off here over the next couple years, you would think that 2010, 2011, 2012 would be pretty good years to deliver into.

There is a two part answer to that . First just on my sources and uses, Michael,l as you go through it, is based on our additional development starts besides what you see disclosed on the development page. We're spending -- these deals are very capital-intensive up front, as you get into 2011 -- they are completed -- There will be an excellent time to deliver the product, kind of through and on the other side of the slowdown We continue to think about development as something we want to do, but again as we try to maintain liquidity inside the Company, a very capital intensive process for us. You are right to see our sources and uses taper, that exactly what is happening. Its is based on our current spend for the deals listed on that page. As David told you we're not -- we haven't purchased any other new deals. So there isn't any forecast inside my numbers of us buying anything more and spending any more money on development. I guess at some point, it certainly could

Secondly, you talked about the transaction markets, you also talked that things have changed just slightly in the past 60 days. Where is the greatest demand for assets right now? Is it still on the value ad? Are you seeing more and more people with distressed assets? Where is the demand coming from?

Well I think the assets we have been selling have been the lower price point assets, where I think there could be some part of a value ad opportunity, But again are they creating pretty good leveraged income streams for these local and regional players. Again, I mean there is not a great deal of demand out there right now, there is a lot of money that is sitting on the sidelines. The product we have been selling in the markets, in the markets in which we have been exiting, I am sure has been -- people have been underwriting to some value ad, certainly not distress, the assets we are not distressed. One hears about a lot demand for distressed assets, people apparently are raising capital for distressed assets but I haven't seen anyone actually buy any yet. What we have been selling, have been generally stabilized, perhaps some assets that have some value ad opportunity but are creating pretty good, long-term leveraged cash and non-cash returns for local and regional buyers.

Finally, you talked that you are out of the acquisition market right now. But just given the performance of your stock year-to-date versus that of your peers, and you look at some of the compelling valuations out there,, would you look at a portfolio transaction or such?

I guess thinking about acquisitions, thinking about portfolios, even thinking about development, I think that there are --maybe -- I expect there to be interesting opportunities, but again they are all very capital intensive at time in which the capital markets, there's a great deal of uncertainty. So you need sources and uses, and for the time being we are protecting our sources, continuing to look at the potential opportunities, and I am sure there will be some. But again one can only begin to act on those when one has a clearer picture and more confidence about the future of capital market availability.

Thank you.

A follow-up question from Michael Bilerman of Citigroup.

I think I got some how cut off before. Just quick, how much dollars do you spend on the buybacks? Just trying to think about your sources and uses.

I guess I quoted in my script, I think it was about $140 million. We didn't spend all of that. Some of that is spent on other things. A couple things I have thrown into that number.

And that was what was spent, and so you are still anticipating to spend a little bit more from that.

I'm sorry Michael, What was that?

You are still expecting to spend a little bit more in the fourth quarter it sounded like?

I have put into that number a whole bunch of different things. So I am intentionally camouflaging that just a little bit. because again you can sort of solve backwards in that sense. So to be honest with you, the number I gave you of uses was $160 million, that includes some debt payoffs of '08 stuff, some debt payoffs of '09 stuff, regularly scheduled amortization, plus the buyback. I did not budget for any more than we have done to date.

And then some -- you talked about some small write offs, and obviously the above are pretty light (inaudible) relative to your peer set -- just wanted to get more color on the development that you decided not to pursue. What was driving that, and how did your return expectations change when you started to evaluate that?

Obviously they went up. And so without suggesting what the return expectation needed to be, the new one just couldn't be met. We had an opportunity to walk away and not take land down, would have been tied up some time ago and went ahead in the third quarter and incurred about, $880,000 impairment charge as a result of that. And we will do that, in good markets or bad, before we take down land. We ask ourselves -- go through that exact same process and we will go through in the fourth quarter again. We're monitoring the spend we got on every transaction that we are "pursuing" and make sure that that level of spend is appropriate and stand down from those deals that no longer makes sense.

How many deals was in the third quarter?

Two.

Total cost of those projects would have been?

The cost of those projects, I don't know off the top of my head. $150 million or so.

Is this is where you've gone hard on land?

No, these were just generally modest deposits if any, and mostly third-party costs one incurs in going through the preliminary due diligence process.

Thanks.

Next question comes from Dan Lind from LaSalle Investments.

I just wanted more color on the Inland Empire. You saw revenues up 1, 3 Essex reported Riverside County was down 5%, they only have 640 units. I am not sure what to make of that. Can you talk about the submarkets in the Inland Empire and if there is a large differientation in growth between them?

I will let Fred answer the question that you touched on an important point when comparing one company's performance to another. My guess is you're talking about how they happen to perform on their maybe probably two assets into whatever submarket they happen to be in, versus us and a much larger portfolio across more submarket.

We have 4,355, third quarter same-store units in the Inland empire. As I mentioned, it has performed a little better than I was expecting. We saw good demand stream and actually an increase in occupancy through the core of the summer. As the schools came in session up there, we had a little surge so we are happy to see that, but it is submarket specific. We are seeing some pockets of supply coming in, they delivered not many, 1500 units, but in a weak market that can be disruptive. But they are clustered in areas pretty much further east of the county, they are in Corona and Cucamunga. and other areas were insulated, and certainly in Chino from these supply issues. So it all depends on the submarket basis. Overall, Inland Empire is at risk. going forward, the job losses are more broad-based now other than just real-estate. And with the logistics and distribution businesses we are just happy to 95% occupied and 7% exposure to date.

Can you give us a sense of the difference in revenue growth the farther you are at east or west?

If you are going further east and south in the county, you will hit more pockets of supply and the consumer looking for a cheaper ticket, so you are going to have a worse chance on holding rent in those areas.

Is there a sense that revenue in those areas would have been down 5%, or was that sort of an anomaly given their two assets.

I can't comment on that.

On your assets did you see revenue declining to that magnitude or was it generally more towards the 1.3 you saw for the rest of it?

Well the 1.3 was positive for the quarter. Since then we have seen a little diminish in pricing, but again occupancy has been strong. So it really depends asset by asset, location by location --

One other question, the $0.04 in the fourth quarter for the repurchase of debt, is that gains on that or that interest savings?

Gain, Interest savings separate is not very substantial. That relates to they '09 debt maturities. Those are two separate things.

Thank you.

Next question comes from Hendale Just with GreenStreet Adviser.

Good afternoon. Can you go back and clarify your comments on cap rate changes for the Sacramento Fresno assets? I didn't hear if they were from peak pricing?

I appreciate you asking of the question. I guess it must not have been clear. Those deals were sold at a about 6.5 cap rate, and my comments about cap rates were more global, about cap rates in general across our core markets.

And within the past?

On our second quarter call, I talked about cap rates for better quality product in our core markets, having been up 25 or 50 basis points, now, I am suggesting 50 to 100.

That is reflecting through current, not through just the end of September, because obviously the world changed dramatically in the last 30-60 days. I am trying to get a sense --

That is correct. That being said, we heard intel about some deals in Manhattan selling at a three handle. There will always be exceptions, so I am telling you in general, we are thinking that it is 50 to -- what was 25 to 50 might be 50 to 100 today.

To continue on that line, what is your assessment of the current bid -- spread for smaller deals, the $20 to $30 million that you were focusing on selling, and a bigger ticket deal, the $100 million or so of which you have quite a bit within your portfolio?

We have managed to continue to sell an awful lot of product in that $20 to $30 million price tag, in our noncore market at prices that have held up exceptionally well, I think, relative to how we valued them as far back as the first quarter of '07. It really unknown, the value of the higher ticket item because we're not seeing deals trade plus $100 million. I have told my own board, that while we have seen a lot of sales of our smaller properties in our noncore markets selling at prices very similar to how we value them some time ago, there's not enough activity for me to be able tell you with the same degree of confidence that you could extrapolate that into the rest of our portfolio. But that being said, there are anecdotal -- sort of intel we get here and there about deals trading. So I say in places like Manhattan with a 3 handle, you are not seeing large deals trade.

I understand, In the more normal environment bid -- spread is 5%,10%, certainly hearing that is much wider, maybe 20% to 25% in the current environment, so trying to get more of an idea, what you are seeing real time.

I can't give you the specificity you want. But I will tell you that we have seen us tracking transactions, the types of assets, the types of markets we would be interested in buying. Where we are not in the best and final, and before you know it, they are knocking on our door asking if we would like to talk to them about some reduced price. I certainly think sellers have of that price, that quality of property, that expectations, that they are not going to -- will not likely be realized in this marketplace. And as Mark mentioned earlier, when you think about the financing that Fannie and Freddie is providing, how these $20 million and $30 million deals are really in their wheel house, the ability of debt financing of those larger tickets, I am not sure how would that can actually get done.

One or two quick ones here, what is your estimate of where life insurers would price comparable 65% leveraged type of debt today?

Let me start by telling you where the agencies would be. On a five-year deal they would be 300 over, a 10-year deal, 250 over, gives you coupons, 580, and 640. And again the life companies were very interested in doing more business with us and a lot of conversations were very constructive, That said, you are approaching the end of the year, a lot of them have used up their allocations, I don't know how our pricing would be in the next month or so but I expect the number would be 50 basis points or so higher. And I think all the numbers I gave you, I should qualify by saying these are kind of rack pricing, the way a QR would give pricing. We would be inside all those levels. I see analysts as they compare us when we make statements about interest rates quotes on the phone. I want to do the same when they compare it to other companies, my quotes assume IO, and 3360 and other things that generally cause the rate I quote to you it to be perceived as higher. So when I give you a 300 and a 250, that rate someone else may honestly see the same loan at 285.

Any estimates of what unsecured would cost you in today's market?

The way I have heard it described, is we are trading on an appointment basis now, to do unsecured debt, and I think it would trade on more of the coupon than and a spread basis, and I think it would be more of a 10% plus number, for ten years money. That is not a reflection again on equity residential, simply a reflection of the state of capital markets.

Thank you for the color. Good afternoon.

There are no following questions at this time.

Thank you for dialing in. We look forward to seeing you in San Diego next month.

This concludes today's conference call. You may now disconnect.