Mid-America Apartment Communities Inc (MAA) 2005 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for participating in the Mid-America Apartment Communities fourth-quarter earnings release conference call. The Company will first share its prepared comments, followed by a question-and-answer session.

At this time, we would like to turn the call over to Ms. Leslie Wolfgang, Director of External Reporting. Ms. Wolfgang, you may begin.

Thanks, Matt. Good morning. This is Leslie Wolfgang, Director of External Reporting for Mid-America Apartment Communities. With me are Eric Bolton, our CEO; Simon Wadsworth, our CFO; Al Campbell, Treasurer; Tom Grimes, Director of Property Management; and Drew Taylor, Director of Asset Management.

Before we begin, I want to point out that as part of the discussion this morning, Company management will make forward-looking statements. Please refer to the Safe Harbor language included in yesterday's press release and our [34x] filings with the SEC, which describe risk factors that may impact future results. These reports along with a copy of today's prepared comments and an audio copy of this morning's call can be found on our Website.

I'll now turn the call over to Eric.

Thank you, Leslie, and thanks to those of you on the call for joining us this morning. Mid-America had strong results for the fourth quarter. Same-store fourth-quarter year-over-year NOI growth of 8.2% after backing out the non-cash credit to account for straight lining leasing concessions was the best operating performance we've reported in over 9 years. From this very strong wrap-up to calendar year 2005, we believe that Mid-America is poised to deliver good results heading into 2006 for three reasons.

First, clearly, leasing conditions throughout the Southeast markets are beginning to improve. We expect our Texas markets in particular to show solid recovery this year with continued very strong performance out of Florida and steady recovery throughout our other major markets. With construction costs significantly rising in the last 6 months and the growing scarcity of good development sites in a number of our markets, we expect new supply pressure to be somewhat muted for the next 18 to 24 months.

Second, significant improvements have been made to our operating platform with several other new major enhancements and projects still underway. We are confident that these upgrades and increasing use of technology throughout our property and asset management functions will enable us to drive higher levels of pricing and collections performance. Additionally, we expect these enhancements will be important to our ability to capture more operating efficiencies and continue our long history of effective and strong expense controls.

Third, we've made major strides over the last 3 years in repositioning both the market and product quality of Mid-America's portfolio. This enhancement in portfolio profile along with an accelerating focus on unit interior upgrades at a number of our properties will, we believe, also result in more robust internal growth as we head into recovering market conditions. We believe that all these changes will help Mid-America same-store results to higher levels and deliver solid internal FFO growth for the portfolio.

On a year-over-year basis, same-store revenue growth for the fourth quarter of 6.3% before straight lining concessions was driven primarily by a continued improvement in occupancy. We had expected strong occupancy results in the quarter.

However, in addition to the improved occupancy, we had better-than-expected performance in the area of rent and utility-billing collections. You may recall that last quarter, we discussed a major change implemented relating to our approach to billing residents and collecting past due utility charges. We are quite pleased with the results of this program, with same-store utility reimbursement revenues improving 32% compared to the fourth quarter of 2004 and the likelihood of continued improvement in 2006. We anticipate continued solid operating results heading into 2006.

In fact, for the month just ended January 2006, occupancy ran more than 100 basis points higher than January of last year. With occupancy and collections performance running much better, we expect that pricing recovery will now build increasing momentum throughout 2006. Tom will be available to offer more insights on property management results and market conditions in our Q&A if you'd like more details than what is covered by the supplemental schedules in our earnings release.

In his remarks, Drew is going to provide you with information relating to our efforts to enhance rent growth prospects at a number of our properties through our expanding unit interior renovation program. Our plan involves upgrading units at target properties as part of routine lease expirations and normal repricing windows. We've spent a considerable amount of time in 2005 testing and evaluating both market tolerance and implementation practices. It's important to note that the investment return we expect to capture from this expanding initiative is solely from above market rent growth. In other words, as is our practice with all capital deployment, we are being a little hard nosed about this capital investment decision and are not considering any higher terminal value or similar hope ticket associated with an assumed later sale of the property. Our strategy requires the payback in investment return to come solely from higher operating cash flows.

Drew is also going to provide you with more information relating to our recent acquisition of The Preserve at Brier Creek property in Raleigh, North Carolina and plans to start construction of a 200-unit expansion to the community. Additionally, he will outline two other similar development expansion opportunities we're currently evaluating.

Let me put some perspective on this new development effort and how it fits with our strategy to capture higher levels of new or external FFO growth. First, this investment does not signal intent on our part to get back into new development in a significant way. I continue to believe that in markets characterized by strong and steady demand with lower new supply barriers, Mid-America shareholders are better served by opportunistically buying newly-developed communities rather than building them ourselves. However, when we can secure new development investments providing a clear cost advantage to normal development requirements or an expansion of an existing community, where we can leverage existing overhead and drive higher-than-normal levels of return on capital, we're going to pursue these unique value-added development investments on a limited basis.

On the acquisitions front, our pipeline is very full and we have several opportunities under active evaluation. While the environment for acquiring high-end properties in solid growth markets does remain very competitive, we expect to capture a total of 170 million or so deals in 2006. We believe that given our market cap size, we can remain very disciplined in our capital deployment practices, which I can assure you we do plan to do that, and still deliver a competitive amount of new growth within the apartment REIT sector relative to our size.

We're optimistic about 2006 and the opportunities to capture higher levels of FFO. As Simon will detail for you, our initial FFO guidance for 2006 is $3.18 to $3.32 per share. At the midpoint for 2006 and reducing '05 results by the $0.11 of revenue from one-time items and non-cash accounting adjustments, we're forecasting growth in FFO per share of approximately 5%. I believe that we will continue to capture increasing robust performance in net operating income as leasing conditions improve and various enhancements to our operating platform take effect. We are very encouraged about the prospects for 2006.

Well with that, I'm going to turn it over to Drew. Drew?

Thank you, Eric. Good morning, everyone. As Eric mentioned, in January, we closed on The Preserve at Brier Creek, a 250-unit community built in 2002 and located in the heart of the Research Triangle in Raleigh, Durham and Chapel Hill, North Carolina. The property is currently 94% occupied. And as we said in our announcement, we expect close to a 7% ingoing NOI yield as well as solid NOI improvement. The submarket is forecast to be quite strong over the next 2 years. Additionally, we expect to start construction on Phase II of the property in the second quarter. This expansion will add 200 units to the community, and we expect to take delivery of our first units in the first quarter of 2007.

We are under contract on an all-in fixed-price basis with the developer of Phase I, who will oversee the development of Phase II. We expect our total investment costs to be $24 million for this expansion phase, and we expect an initial stabilized NOI yield of just over 8% on Phase II. We anticipate stabilization in the summer of 2008.

In addition to our development initiative in Raleigh, we've begun analysis on two other value-added development opportunities consisting of expanding existing communities, where we own adjacent land.

In Jacksonville, Florida, we are underway with the initial, design, planning and permitting for an expansion of our St. Augustine at the Lake community by an additional 124 units on adjacent land that we currently own. We expect to break ground in the third quarter. The Jacksonville apartment market continues to perform very well, and our St. Augustine property has maintained a 98% average occupancy over the past year.

We are also underway with early planning on an expansion of our Boulder Ridge property located in the Alliance Airport growth corridor of Dallas-Fort Worth. We plan to break ground here on an additional 200 units in late 2006. With strong job growth expected for this submarket, excellent renter demographics and very limited additional new development options available in this area, we expect that these new units will mirror the strengthening performance of our Watermark and Boulder Ridge communities, which are both performing very well.

In total, we expect to invest $25 million in development capital in fiscal year 2006 at these three property expansions and expect an ultimate total investment of $51 million.

We continue to move forward with plans to accelerate our unit interior renovation program, and it's currently targeted at 17 properties of between 1,000 and 1,500 units to upgrade in 2006 for a total investment of approximately $4 million. We believe that these properties located in markets such as Jacksonville, Florida; Nashville, Tennessee; Hampton, Virginia; and Charleston, South Carolina present clear opportunities to further leverage outstanding locations in solid markets.

Typical unit interior renovations include countertop, appliance and lighting upgrades as well as new kitchen and bath fixtures. We plan to spend between 2,000 and $5000 a unit, depending on the scope of each project. We've conducted extensive testing and evaluation of our approach throughout 2005 and are optimistic about the rent growth opportunities associated with this project. Our renovation program is very flexible and is structured to generate rent increases from 12 to 20%, varying depending on the extent of the renovation work completed. These rental increases are what we expect to capture over and above our typical market rate increases, with a payback in expected returns exceeding our normal investment hurdle rate requirements. And, as Eric noted, it is important to recognize that our underwriting is based strictly on incremental revenue that we expect to capture from higher rents and not by assigning any sort of assumed terminal value to the capital invested or by assuming there is an opportunity to capture a lower cap rate from a later hypothetical sale of the property. Because the payback expectations are current, we're able to monitor the initiatives' financial results very closely and adjust our plan on a real-time basis as performance warrants. Simon?

Thank you, Drew. Our FFO for the fourth quarter of $0.81 per share is a record high for any fourth quarter and an increase of 5.2% over the same quarter a year ago. It's the top end of the range that we projected in December when we increased our guidance range from $0.72 to $0.77 to $0.76 to $0.81. For the year, our FFO was $3.20 per share, $0.01 above the top end of our full year guidance -- a record -- and a 6.7% increase over the $3.00 we reported in 2004.

We reported record AFFO of $2.55 per share for 2005, an increase of $0.10 over the prior year. The only adjustment we make to FFO in calculating AFFO is to deduct recurring capital expenditures. Our financial flexibility has increased substantially over the past 3 years, as our FFO and AFFO have grown relative to our fixed commitments and to our dividend.

At the end of the year, our debt (indiscernible) preferred stock as a percent of gross assets was almost 200 basis points below the level of a year ago. And you will notice that despite the rising interest rate, our fixed charge coverage increased from 1.95 in the same quarter a year ago to 2.1, close to the median for the sector. Our borrowing availability under our credit facility is almost $90 million.

Our fourth-quarter results were also helped by lower interest expense than we forecast and more joint venture FFO. We incurred $0.02 per share of expense relating to prepayment penalties associated with the refinancing of tax-free bonds and a related write-off of deferred finance costs. We recorded expense during the quarter of approximately $225,000 related to damage from storms compared to $146,000 for the fourth quarter of last year.

After careful review and discussions with our new auditors, Ernst & Young, we made two non-cash accounting interests in the fourth quarter that impacted our results. The first was a prior year adjustment to record $1.33 million of concession revenue. As you will recollect, prior to 2004, we recorded concessions on the cash method. Concessions were recorded as they occurred. Effective January of 2004, we began to straight line our concessions, amortizing them over the remaining life of the lease. We judged the balance sheet difference between the cash and the straight line methods as of December of '03 to be our core level of concessions, and so this remained as an unrecorded difference. We've now been advised that we need to record the pre-2004 balance of $1.33 million. So, accordingly, we credited revenues by $1.33 million in debit and prepaid concessions.

The second non-cash entry was to book compensation expense of $887,000. This represented the amortization of the costs of a management-restricted stock plan for the period 2002 through 2005. This brought forward the expensing of a 10-year incentive plan that we previously believed should vest between 2007 and 2011.

The combined impact of these two non-cash entries was to add nearly $0.02 per share of FFO to the fourth quarter. I realize that the concession accounting is hard to follow. If you will call me after the conference call, I will be glad to answer questions.

Our 2006 forecast for FFO is a range of $3.18 to $3.32 per share, with the $3.25 midpoint based on same-store NOI growth in the 4% range. Remember that in 2005, we had approximately $0.11 of FFO from one-time events, including $0.07 of promote fees from our joint venture, the $0.02 prior period accounting adjustment I just described and income from land sales. The midpoint of our 2006 FFO forecast is an increase of 5.2% over 2005 results after backing out these one-time events from FFO.

We're forecasting that same-store concessions will decline from 4.2% of net potential rent in 2005 to around 3.5 to 4%. We expect increasing pressure on real estate taxes and insurance costs and forecast of 3.5 to 4% increase in real estate taxes compared to an increase of 2.5% in 2005 and a 5 to 6% increase in insurance expense when our program renews in July.

We're projecting that our combined G&A and property management expenses will be in the range of 22 to $23 million for the year. This includes our current estimate of the impact of FAS 123R on our three major restricted stock plans. We have not issued any stock options since 2002 when we changed to restricted stock as along with bonuses our preferred form of management retention in the incentive pool.

Our average cost of debt was 5.28% in 2005. We have just $60 million of fixed-rate maturities in 2006, and only 15% of our debt is floating. Al has just two small refinancings totaling $18 million planned for 2006. We expect a slight increase in our average effective borrowing costs of 20 to 25 basis points, excluding a $0.02 per share first-quarter charge associated with the refinancing of tax-free bonds.

We anticipate continuing to fund our external growth with a mixture of common equity sold out through our direct stock purchase plan and with debt. We're projecting that our total leverage defined as debt plus preferred stock as a percent of gross assets following the nearly 200 basis point decline in 2005 will remain at about the current level this year. FFO dilution from the forecast property expansions is projected to be $0.01 to $0.02 per share.

Apart from the new programs mentioned by Drew, we anticipate our regular recurring capital expenditures will approximate the same level as in 2005 on a per-unit basis -- about $420. Revenue enhancing other capital expenditures are projected to increase to about $230 from $205.

Our acquisition program for 2006 assumes that we complete approximately $150 million of acquisitions in addition to Brier Creek that we closed on last week. The total FFO contribution of all acquisitions in 2006 is forecasted at approximately $0.04 per share. At present, we have not included dispositions in our forecast. We are presently examining some modest alternatives but do not anticipate significant dilution from any that we have in mind.

These are the key components of what we think is a realistic forecast for 2006, which we're entering in a strong operating environment and well protected from potential interest rate increases. Eric?

Thanks, Tom. In summary, let me just add that while we are pleased with 2005 results, we are more enthused with the building momentum and operating results and the various initiatives we have underway in 2006 to fully capitalize on the recovering markets. We expect to continue to deliver solid same-store NOI growth and remain confident that in addition we will deliver steady external growth in '06 and into 2007. That's all we have in the way of prepared comments. So, Matt, I'm going to turn it back to you for any questions we might have.

(Operator Instructions). Robert Stevenson, Morgan Stanley.

Simon, how much did you guys do in '05 in direct stock purchase plan? How much is this from your acquisition funding for '06 or you assuming that you would do this year?

Rob, good question. We did about $32 million in '05 from the DRSPP. We've got $60 million dialed in for this year, about $5 million a month or so.

Then, you guys put the turnover number in your release, but what is the percentage that you guys are running in terms of move-out-to-home purchases these days?

Rob, it's Tom. It's running about 24.5%, and that's basically flat with last year -- not a lot of change there.

Then lastly, can you talk about what's going on in Houston in your portfolio? Some of your competitors have really got a big boost, not only on this physical occupancy but also the economic occupancy from the Katrina victims and the sort of occupancy that sort of boosted that entire market?

Sure, Rob, and we certainly saw that physical occupancy boost as well. And you know, they are chugging along now. The reason the variance on the economic occupancy is as you know prior to Katrina, Houston was a pretty tough market. And the variance between those two is really a result of concessions booked prior to the Katrina push that occurred in Houston. We feel like that has accelerated it. Houston absorbed something like 20,000 units last year, and we feel like that sort of accelerated the process of it. We expect to see concessions begin to burn off there in the first quarter.

So you guys have what would be termed as, I guess, a change from reverting back to the '90s. Is it a significant loss to lease in the Houston market right now?

That's exactly right, Rob.

What other market are you seeing your biggest loss to lease these days?

We're seeing it in Dallas as well, but that one seems to be turning the corner as well. We've seen improvement there, but Dallas comes to mind and Houston of course. Austin has improved a great deal. Really, it was the Texas markets that hurt us the most in 2005 on that front. And you know, I hate to ring the bell quite yet, but we are encouraged by what we've seen out of all of those.

Bill Crow, Raymond James.

A couple of questions. First of all, could you just walk us through why 4% NOI growth doesn't translate to higher FFO growth year-over-year basis? Is it -- just maybe remind us, have you sold more than you bought? Or what is it that's kind of keeping FFO from going growing faster than that?

In broad terms, we had -- I'm just trying to think -- we had a couple million dollars or so of interest expense (multiple speakers) from the yield curve (multiple speakers) --

-- lines from last year.

We also had the G&A expense, which was -- you know we had the one-time adjustment from that concession plan that was in the -- excuse me from the incentive plan that was in the press release that was about $900,000.

Was that not in that statistic that you gave us? If you back all those things out, you are in the midpoint of the range -- is 5% growth?

No, it was not. There is also an additional $0.02 in the 2006 forecast right off of refinancing as well, Bill.

Then Eric, when you are buying and selling deals, what is the CapEx that is used when you are calculating cap rate? Is it still 300 a unit, or has that changed?

Well in terms of just how we think about cap rates, we use 350 as the standard metric when we just think about cap rates. But I will tell you this. In answer to your question about what we think about when we go buy a property, we think about -- we underwrite what we really believe the capital needs of the property to be. Honestly, it generally tends to be much higher than 350.

Sure. No question about it. But it seems historically at least the last several years, it's been kind of 300 that the brokers have used and that's sort of an -- as you negotiate in transactions. So do you think that's moved up universally to that 350, or what are you hearing among the brokerage community?

You know I think that in the brokerage community, probably they keep as low as they can. But 350 is the number that I hear more of. In terms of what companies like ourselves think about it and maybe on the buy side a little bit, I hear numbers tossed around between 600 and 800, which I think is probably more realistic.

It depends on -- you are going to be at the top end of that range, depending on the age of the portfolio and things of that nature. We historically run between 600 and 650 for 12 years.

I'm sorry you've run how much -- we had a (multiple speakers) storm going on outside.

Between 600 and 650, kind of in that range. That's where we've been for every year forever.

Right. But you are using kind of a 425 for AFFO deduct?

That's right, Bill.

So, does that 425 need to go up to better represent what the true cost is?

I think it depends if we stick to our definition of AFFO, which is FFO less recurring CapEx, then it doesn't. But, if you want to say what does it take year after year to run our portfolio; then, it would. You know (technical difficulty) year the run on portfolio, it's been 600 to 630, 650 then.

David Rodgers, KeyBanc Capital.

First on, Eric, the underwriting for the development that you're doing, can you talk a little bit more about that? Are you using trended rents? And the yield you quoted, is that after the construction or the developers' fee?

The yield is after the fee. As far as the trends, we underwrite the market ourselves. We look at REITs information, [HGO] metrics -- all the various guidance that you can get on this. But I'm not sure exactly what you are asking on that. We underwrite based on what we think the market is going to do. Typically, in that particular submarket, everything that we have seen suggests that that's going to be a very strong market for the next 2 to 3 years and then probably plateau in the 3.5% range or something of that nature in terms of sustainable rent growth.

Yes, that's fine; that answered the question. In terms of the reinvestment in the development spending, can you break out a little better throughout the course of 2006 what you expect the cash flow into separately the development piece and then the reinvestment into the portfolio might be on a quarterly basis or first half/second half?

Well, we can put something out on the Website on that. Sure.

Okay, we will keep an eye out for that then.

Yes. Also, we will be reporting more of that kind of information as (multiple speakers) we get into the year.

Simon, two questions for you. First on the utility benefit you mentioned in your prepared comments, you said it was up 32% I think in December or in the fourth quarter. What are you implying for 2006 that that might do for FFO going forward?

I think we've got -- what have we got built in there, Al? I think we've got a 10% overall increase in our utility collections and forecast as we --

10% growth or improvement over prior year for the full year.

For the full year. And I will, rather than looking right now, will get you the more precise information after the call.

Yes, I will follow up with you. And then, my last question is, your interest rate exposure in the quarter went up really for the first time that we've seen it kind of push higher of late the -- I guess about 15% of your balance sheet now. Do you expect to forward swap or fix that out at any point?

No. I think that honestly, we've generally been pretty comfortable floating 20 to 30% and we've done some work on this of our total debt outstanding. You know, we've brought it down last year -- the second half of last year when we thought interest rates were beginning to move at 10 to 12%. And I think that this year, we're looking at -- Al -- being about 15% or so for the balance of the year.

Right we're into [pre-year] here we are right now, maybe slightly below the 15%. But, we have 60 million in refinancings this year. Our maturities are refinancing. We expect to have savings of about between 1.25 to 1.5% on those replacements. So, that will help us going into this year, and we expect to have what -- about 5.5% average borrowing costs in 2006.

Tony Howard, Hilliard Lyons.

Congratulations on a good quarter and a good year. Simon, I have a question and a lot of clarification, and I wasn't too sure about the G&A numbers -- obviously went up sequentially pretty much. And that's something I had to do with the conversation. First question, what is your estimate for a run rate going forward? And how come that was not amortized over a 4-quarter period?

A couple of questions there. I think our going forward estimate for G&A is 22 to $23 million for this coming year. That's total G&A and managed property management cost fee. If you will -- Tony, if you are referring to the $880,000 charge we took in the fourth quarter to amortize the -- to the restricted stock plan, the reason that we took the charge in the fourth quarter that it was not amortized previously was because we were given advice that we should be amortizing that over the vesting period, which was 2007 through 2011.

So, we will continue to amortize it over the 10-year life of the program, which will be about $200,000 a year charged to G&A between now and 2011. I don't know if that answers you question, but --

Yes, it does. Can you further breakdown -- in other words as far as in guidance of what the G&A is versus just the total G&A and management, kind of the 22 million you just mentioned?

You know, let me get that to you. Internally, we look at it on a combined basis. We break it out for external purposes. So let me get that information to you if I can.

Also I wanted to be real clear as far as sequentially, the share count went up fairly much over the third quarter. Now was that part of the purchase plan or--?

Yes, it would be. We issued about -- I think about $9 million or so of -- through the direct stock purchase plan in the fourth quarter.

That was for the total change in the amount of shares because it was something like 100,000 shares or 150,000?

Yes, that would be as the result of DRSPP.

Okay. Clarification on Series G preferred. Now, was that called or is it callable in 2006?

That's $10 million. And we actually put notification of a call this year, this May, Tony. We will actually call that or pay it off May of 2006. So that's in our forecast, and that's part of our refinancings that we've planned.

And it's considered part of debt now and sort of --

It is. It's included in the debt, and it's $10 million. And it's about an 8.6% rate right now. We expect to replace that at significant savings.

The number of total properties, has that stayed at the same amount as quarter over quarter?

Yes. I believe -- is that correct (multiple speakers)?

Two were added into the same-store group in fourth quarter -- Prescott in Atlanta and Watermark in Texas and then (multiple speakers) --

But as far as changed store goes, as far as total portfolio, there was no change (multiple speakers). We added Brier Creek in the first quarter.

So it was at the end of the year though -- was 132, so now it would be 133?

That's correct.

That's all the questions I got. Thanks and congratulations.

Nap Overton, Morgan Keegan.

A couple of things. Total capital spending for 2005 and 2006 projected?

The total capital for 2005 was about $27 million. That expenditure is on the properties. Now that would exclude acquisitions of course and then any sort of construction related to fire damage or storm damage that was covered by insurance, etc. For 2006, we would be looking at about a $30 number on equivalent basis.

Does the 170 million in new investments that you have baked into your guidance include or exclude the 25 million in development spending?

It excludes it.

So, it's incremental.

Yes. But incidentally now, my $30 million number would have excluded the $4 million on Drew's program that he was describing on the refurbishment -- the interior upgrade program. That would be in addition to that.

How much was that again?

It's 4 million.

Then, what is the -- this little straight line rent thing has jumped up a couple of times in the past 2 years. What is your assumption on that for 2000 in your 2006 estimate?

In 2006, we expect in our baseline forecast that we will have debit to revenues of about $400,000.

Which is a reflection of an expectation that concessions go down.

That's right. Yes. As I mentioned in my remarks, we expect concessions to be down from about 4.2% or so last year to probably in the 3.5 to 4.% maybe a midpoint of 3.7% in our [pace-wide] forecast. So, as a result of reduced concessions, we will be recording that debit.

Great. So, it's accurate that you had a credit in 2005 of 1.4 million for the full year, and that flips to a debit of 400,000.

That's correct.

And then Simon, you ran through two or three things in explaining your guidance kind of on a per-share basis -- you know acquisition adds, so and so. Could you summarize those real quick for me because you spoke more quickly than I could note?

Sure. Let me go back to my notes. We were looking at I think same-store concessions that I mentioned declining from about 4.2% to a midpoint of about 3.7% or so. Real estate taxes and insurance costs, we're expecting about a 3.5 to 4% increase in real estate taxes, which is a higher rate of growth than we've seen before. But, it's certainly a lot of pressure out there.

And then, our insurance program renews in July and we are projecting a 5 to 6% increase in insurance costs. Then, we're expecting a G&A run rate -- our G&A, when I refer to that, I'm including our property management costs of a combined 22 to $23 million for 2006. Debt costs, we are expecting that to be around 5.5 for 2006 on an average basis. We do have a $0.02 per share estimated cost for refinancing a tax-free bond in the first quarter. And then of course, we were talking about the direct stock purchase plan. We do plan to issue about $60 million of stock through that to fund our growth program. Those are really the main assumptions.

At this time, I'm showing no further questions.

Thanks, Matt, and we appreciate everyone joining us this morning. Thank you.

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