UDR Inc (UDR) 2009 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the UDR third-quarter earnings conference call. (Operator Instructions). This conference is being recorded Monday, October 19, 2009. I would now like to turn the conference to our host, Tom Toomey, President and CEO. Please go ahead, sir.

Thank you for joining us for UDR's third-quarter financial results conference call. Our third-quarter press release and supplemental disclosure package were distributed earlier today and posted to our website, www.UDR.com. In the supplement, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements.

I would like to note that statements made during this call which are not historical may constitute forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be met. A discussion of risks and risk factors are detailed in this evening's press release and included in our filings with the SEC.

We do not undertake a duty to update any forward-looking statements. When we get to the question-and-answer portion, we ask that you be respectful of everyone's time and limit your questions and follow-ups. Management will be available after the call for your questions that did not get answered on the call.

I will now turn the call over to our President and CEO, Tom Toomey.

Thank you, Andrew, and good evening to everyone. Welcome to UDR's third-quarter conference call. With me today are Jerry Davis, Senior Vice President of Operations; David Messenger, Chief Financial Officer, who will discuss our results; as well as our Senior Executive Vice Presidents Mark Wallis and Warren Troupe, who will be available to answer questions during Q&A.

After the market closed today, UDR announced that it achieved core FFO per share of $0.31, compared to $0.30 last year. This quarter's FFO results were impacted by two items. One, a $0.10 charge related to a non-cash equity loss on the Company's investment in a development joint venture, and a $0.02 charge associated with our bond tender. Including these amounts, our reported FFO per share is $0.19.

During the quarter, we engaged a number of capital market activities. In September, we completed a bond tender. The tender was at a 10% premium, but was the right decision as we realized interest savings over the long term and were able to modify our bond covenants.

Furthermore, in mid-September we initiated at-the-market stock issuance program where we sold roughly 2.3 million shares at an average price of $14.89.

In addition to our efforts to lower our interest expense via our bond tender and to raise our equity opportunistically through the ATM program, UDR secured a 10-year $200 million facility with Fannie Mae at a weighted average interest rate of 5.28% and entered into a $450 million acquisition joint venture with Kuwaiti Finance House.

These activities will be discussed in detail during Dave's remarks. These activities further illustrate that the market's willingness to provide strong multifamily operating platforms like UDR with capital necessary to fortify its existing balance sheet and capital to take advantage of anticipated acquisition opportunities.

From an operating perspective, as we have discussed on prior calls, the economy certainly remains challenging due to the continued job loss and increasingly tough comparables in the field. However, we remain encouraged by how effective we have been executing despite these headwinds.

To that end, in the quarter, we limited our same-store NOI decline to 3.7% on a year-over-year basis and 1% through September 30, and continue to maintain occupancies above 95%.

We have been communicating throughout this year that rental growth will be elusive in the near term as we go through a bottoming process. But the scarcity of new product to compete with in most of our markets and the minimal vacancy in our portfolio should allow us to push rental rates when the job market recovers.

While we expect some markets to continue to moderate, such as our southern California, where we are generating 27% of our same-store NOI, we are seeing a showing -- slowing in rental-rate declines on a sequential basis in other markets, specifically Washington, DC, and Florida, where we generate almost 50% of our same-store NOI. And as we look for sequential rental-rate increases across several of our markets perhaps as second half of 2010.

Jerry and his team have done a great job of managing the trade-off of occupancy, rents, turnover, and resident quality in the field, and he will continue to provide more color on these trends and the individual markets during his remarks.

Recently, there have been some high-profile deals going to contract that illustrate the disconnect between private-market values and those of the public markets. One particular deal in the DC Beltway comes to mind. There were over 30 bidders for this asset at a reported cap rate in the low fives.

This high level of participation on the anniversary of the financial markets' dislocation shows just how far the pendulum has swung from the irrational despair of 2008. Institutional investors are showing an appetite that has returned particularly for properties located in strong employment markets with high barriers to entry.

While this is just one market and one single asset, the story is the same across many markets and many deals, and should provide a reference point or baseline on how valuations in the private market for institutional quality assets relate to those in the public markets.

With that, we've got a good amount of ground to cover. I will pass the call over to Dave to discuss our financial results.

Thanks, Tom. My comments today will focus on the third-quarter results, the steps we've taken to further improve our capital position, and our outlook for the remainder of fiscal 2009.

Earlier this evening, we reported $0.19 of FFO which consists of $0.31 from our core operations, a $0.02 charge associated with our tender offer, and a $0.10 charge related to a loss on an equity investment. We've excluded the $0.01 effect related to the convertible debt accounting.

Our core FFO of $0.31 compares to $0.30 last year. Jerry will provide detail on our operating results in a moment.

During the quarter, we recorded a non-cash charge of $16 million, or $0.10 per diluted share, on an equity investment in two of our unconsolidated Seattle-based joint ventures. One of the ventures has completed development of elements to a 274-unit property located in Bellevue, Washington. The other joint venture was originally established to develop a retail site, also located in Bellevue, Washington.

However, during the first quarter the joint venture decided to delay that construction. UDR does not have any other joint ventures involved in the development of multifamily communities. This charge was a result of recent discussions to change the capital structure of the joint venture such that UDR would become the general partner. Although a definitive agreement has not been reached, nor can be assured of being reached in accordance with generally accepted accounting principles, our investment must be recorded at fair-market value, and if that fair-market value is less than our historical cost basis, then a loss must be recognized.

Regarding capital activity, the third quarter was an active one as we took a number of positive steps in regard to our capital position. We improved the term and cost of our debt, implemented an opportunistic equity offering program, and secured a new line of credit, and announced our venture with Kuwait Finance House.

Our Q3 share count increased as we raised $33.7 million from the sale of 2.3 million shares at a weighted average price of $14.89 under our add-to-market equity offering program. As of September 30, we had in excess of $1 billion of cash and credit capacity, which will more than meet our maturity and development needs through 2011. This capacity allows us to manage our capital plan opportunistically and efficiently.

We maintained our fixed-charge and interest-coverage ratios in excess of 2.0 times after factoring for nonrecurring items.

During the quarter, we completed a tender offer for our 8.5% debentures that mature in 2024. We were able to retire 70.3% of the debentures outstanding for $35.7 million and incurred a charge of $3.7 million, or $0.02, representing the premium and transaction cost. The retirement of this debt will result in savings of $15 million to $17 million in future interest payments.

We closed on a construction loan for Vitruvian Park Phase 1 with an interest rate of 5.3% and a maturity of four years inclusive of the one-year extension. Upon closing of this loan, no further financing is required to complete our development pipeline.

Also during the third quarter, we closed on a new 10-year, $200 million secured facility with Fannie Mae at an all-in rate of 5.28%. The proceeds of the second draw will be used to prepay substantially all of our 2010 secured debt maturities.

In August, we announced that UDR had established a joint venture with Kuwait Finance House. The total amount of the venture is $450 million with an equity contribution from the partners of $180 million. UDR's maximum equity contribution will be 30%, or $54 million. The venture's target markets are key high-barrier markets and products similar to what UDR owns today.

Finally, with one quarter remaining in fiscal 2009, we are updating our guidance. Our [ethical] guidance range is now $1.14 to $1.20 per diluted share, compared to the prior range of $1.23 to $1.35. This change reflects the $0.10 charge we recorded this quarter and our expectations that our property operations will continue the trends of the first three quarters. A detailed walk-forward of our guidance is included in our press release.

Now I'll turn the call over to Jerry.

Thanks, Dave. Good afternoon, everyone. In the third quarter, our NOI decreased by 3.7% as revenues fell 3% and were offset by a decrease in expenses of 1.6%.

Our operating teams continue to execute our strategy of maintaining occupancy, reducing resident turnover, driving the operating expenses down, and automating the way we do business.

It appears that job losses are slowing in our markets, but we have not yet begun to see any meaningful hiring. It is unlikely that we will see much of a change in operating results until we see jobs.

Our effective rents were 4.1% lower in 3Q 2009 compared to 3Q 2008, and down 1.6% to the second quarter. We have continued to see new leases reprice at lower rates, but the rate of decline has slowed since the first of the year. This gives us hope that we are approaching a bottom in many of our markets. But we have little visibility on how long that bottom can last.

Rental rates on new leases that were signed in the third quarter of 2009 were 6.8% lower than what the prior resident was paying, while renewing residents averaged decreases of 0.8%. These amounts vary throughout our 21 markets, with California, Phoenix, Orlando, and Seattle experiencing the largest rate declines on new leases.

As expected, our DC, Baltimore, and mid-Atlantic markets experienced the lowest rental rate drops on new leases.

Our strategy in 2009 has been to drive occupancy during prime leasing season in anticipation of the winter seasonal downturn. We have met our plan as same-community occupancy increased 60 basis points to 95.6% from 95.0% last year. During the third quarter, all 21 of our markets had occupancy rates over 94%.

Because of the continued expansion of our technology platform, superior locations, the quality of our real estate, and our focus on customer service, we have been successful in maintaining occupancy levels that have averaged 95.4% over the first nine months of this year. We are confident that we can sustain this level of occupancy through the remainder of 2009. In fact, just this past weekend our occupancy rate was 95.5%. To be at this high occupancy level in the seasonally slow fourth quarter will drive higher revenue this year and also allow us to raise rents when the economy turns around.

Our annualized turnover rate for 3Q 2009 was 69%. That was slightly better than the 70% we reported in 3Q 2008. Year to date, turnover is 60%, which is flat with last year.

Moveouts for home purchase continued to be very low in most of our markets. During the quarter, only 14% of our departing residents left to purchase a home. This compares to 13% last year and also 13% in 2Q 2009.

Markets with high home prices, such as Orange County, San Francisco, San Diego, Monterey, and LA, all had moveout rates for home purchase of 10%. These markets represent almost 40% of our same-store NOI.

Now turning to expenses for the quarter, total expenses were down 1.6% for the quarter, compared to the same quarter last year. Real estate taxes increased 3.2%. Utilities were down 3.4% as increases in water expense were offset by lower natural gas prices and lower electricity expense.

We continue to renegotiate pricing with the vendors that service our properties. These efforts have helped to drive down repairs and maintenance expense during the quarter by 4%. This includes a reduction in turnover expenses of 21%.

Personnel costs were flat, as we have been able to realize some staffing benefits as a result of automating the way we conduct our business. Direct personal cost -- personnel costs were down 2%. However, they were offset by slightly higher associate health care costs.

Over that -- over the last several years, we have been working to automate our business. Our first priority was to increase our Internet marketing to drive more and more prospective renters to our website. This has resulted in over 64% of our third-quarter move-ins originating through an Internet source. This is up from 53% last year and from 62% in the second quarter of 2009.

Additionally, for the first nine months of 2009 we have experienced an increase in traffic to our website, UDR.com, of 41% year over year. Driving more traffic through Internet sources, including mobile devices and multiple language sites, has been beneficial not only in maintaining our occupancy, but also in decreasing our administrative and marketing costs, which were down 7% compared to the third quarter of last year.

In the past year, we have been moving toward giving our residents what they want -- 24/7 access to us and self-service. At the beginning of this year, we rolled out a resident Internet portal that allows them to electronically communicate with us as well as pay their rent online via ACH. Just nine months into the program, almost 80% of our residents are signed up to use the portal to conduct business with us electronically and over 52% of our residents paid their rent via ACH in September.

Additionally, during September 26% of resident service requests were submitted through the portal. This enabled our customers to submit a service request 24 hours a day, seven days a week, with the detailed information they give us going directly into our system and automatically put into the queue to be completed, enabling us to get to the service request faster and fix the problem more quickly. This eliminates administrative work for our site teams, while giving our customers what they want.

Now turning to our redevelopment and development progress, if you refer to Attachment Nine in our earnings supplement you will see that we completed the redevelopment of seven communities containing just over 2,100 apartment homes. These properties have leased occupancies between 95% and 98%, and are performing in line with our pro formas.

We have also completed eight developments containing almost 2,000 homes. Lease-up velocity has been very strong at these properties. In fact, leased occupancy at these properties range from 91% to 100%.

As our development and redevelopment assets reach stabilization, along with our recent acquisitions, our reliance on California and, in particular, Orange County will begin to diminish and our metro DC market will gain prominence in our portfolio. Consequently, DC will become our second-largest market and will account for 12% of our NOI.

This also means that while Orange County will still be our largest market, it will represent only 13% of NOI, down from 16% today.

In closing, these have been and will continue to be challenging times in the field. But with our use of technology, our commitment to our customers, and our focus on having our assets located in the best markets, we should continue to drive cash flow and emerge stronger. I would like to thank all of my fellow UDR associates for executing our game plan and continuing to bring in industry-leading results.

With that, I will turn it back to you, Tom.

Thank you, Jerry, and Operator, I think now we are prepared for the Q&A part of the call.

(Operator Instructions). David Toti, Citigroup.

Tom, is it possible, or Dave, can you walk us through some of the components of your guidance change? It looks like it's suggesting a stronger underlying NOI performance than you originally projected, or is there some component that I'm missing, given the sort of percentage of the reduction?

This is David Messenger. Regarding the guidance, essentially what we did is you take the midpoint from the original guidance, which was $1.29, then you take up $0.10 for the charge and $0.02 for the additional debt tender that we hadn't contemplated during the year. That gets you down to $1.17, which is the midpoint of the new range.

And then we tightened the low and high end of the ranges, which is a combination of several items. One, we continue to receive reverse inquiries to purchase our debt. But we find the pricing unattractive, so we think there is little opportunity left in that well.

We've also chosen to reset some of our maturities during the last couple of quarters at higher interest rates than what they were previously. We are considering the equity that we issued during the third quarter as part of the ATM program and we are expecting our operation trends to continue the way they have in the first nine months of the year.

Okay, great, and then just as a follow-up, are you comfortable with the sustainability of your expense reduction rate or is that something that has a finite life?

This is Jerry. I think it's sustainable. We won't be negative forever, obviously, the way we have been for the first nine months, but we haven't been deferring work. We think we're going to be able to continue to whittle away at expenses throughout the foreseeable future. We continue to negotiate contracts with vendors and we continue to automate our -- the way we do business with technology, which I think is going to yield future benefits.

So I don't think you're going to see a blow-up, but staying negative long term just isn't possible.

[Zaroop Yallah], Morgan Stanley.

My question is about the JV you have at KFH. What kind of competition are you expecting for the assets which you'll be targeting? What kind of bids you are expecting? And also, if you are anticipating any distressed properties to come through and which you'll be able to take advantage of?

This is Mark Wallis. I think what we've seen so far is there's been quite a few buyers in the market for high-quality assets and assets in these higher barrier-to-entry markets.

We continue to look at a lot of deals. And we're going to -- we'll obviously have some criteria that we're going to stick by. At this point, we think we'll be able to make some acquisitions.

But I think what we've learned so far is that cap rates are lower than probably when we first started talking about this months ago, which I think everyone would agree with that they are seeing in the marketplace, too.

So, a lot of it depends on finding the right asset that matches your criteria in your portfolio. We are seeing a fair amount of deals to look at, and I think we have an advantage on larger deals. So we're just going to keep shopping and keep looking, and go from there. Tom, did you want to add something to that?

This is Toomey. I'd add that distressed, as you specifically stated, requires the fact that you don't have anybody to show up at a table to buy or that you have a limited number of buyers, and as I noted in my earlier comments, you see one asset come to the market and there's 30-plus people that are showing up to bid for that asset, all in a tight range and most of them not with financial contingencies.

So we are seeing that similar type of event across many markets, so I'm not saying that there won't be distressed. Right now, we do not see any in the marketplace.

Jay Habermann, Goldman Sachs.

Tom, just a comment. I guess in the press release you mentioned forward development, most of the deliveries being delivered next year in 2010 expecting improving market conditions. Can you clarify a little bit? Are you still expecting that the gap between new rents versus existing will just be that gap continues to narrow or do you think you actually start to see some pricing power again?

I think a couple of things, then I'll add Jerry. In some of our markets that the developments are being delivered, take, for example, the DC corridor and Texas corridor, rents seem to have bottomed and be strengthening, and so we'll probably see stronger rents next year in those markets as those development activities get delivered.

In the case of [property in] Phoenix, it's still sliding down but not at a greater rate than it was at the beginning of the year. Is that a fair summary, Jerry?

Yes, I would agree with that. Just to add on, when you look at our DC rents, compare it -- when you look at the new leases we signed in the third quarter compared to what the prior resident was paying, they're only down 3.5%. That's been sliding down each quarter throughout this year. So we do feel like DC is going to be a market that continues to do well, and the same thing is true for our Dallas product.

And I guess given the cap rates you talked about, sub 5% or 5% range for certainly best-in-class assets, are you starting to look at development yields? And I guess give us a sense of where yields would be today for starts.

This is Mark Wallis. Traditionally what you look for on development yields is obviously a premium over what the cap rates are. Cap rates getting in the fives and sometimes low fives, obviously when you get to your range of, say, 150 basis points over, 6.5, in that range in some of these markets, take a DC market with your expected rent growth as the markets recover, start to make sense.

Historically, what we've seen of cap rate, the cap rate spread or the development versus an acquisition, it's probably tighter in the DC market, in California. If you get to markets like a Texas market, for example, probably that basis-point spread is 25 basis points more. But it's with the cost of debt, and the way things are looking as far as ultimately a recovery, I think we see that median of 150 basis-point spread is being where it is today. Given -- qualify that a coastal market may shade a little bit differently from a Sunbelt market.

And sorry, just to clarify, did you mention that the cap rates were -- those were U.S. institutional buyers or are you seeing foreign capital, given the weak dollar?

U.S. institutional buyers.

Mark Biffert, Oppenheimer & Co..

Adding on to the KFH joint venture, Tom, what IRRs are you guys targeting in that fund? Or that JV?

This is Warren. We're looking at a 7%.

Our IRRs are looking more like a 12.

Okay. And then, in terms of the markets that you're looking at, are they focused mainly on -- you were saying high barrier. Do you consider high barrier in this market to be DC, New York, or is it the West Coast looking like you might get some opportunities, given either distress or sellers that may be financially distressed?

I think we agree DC, New York, and the West Coast, particularly San Francisco, would be considered in that area, and we're also looking at Southern California. And there may be -- we would go up the West Coast to Seattle at some point, but those would highlight where our focus has been.

And then, Tom, you had mentioned in an interview a couple of weeks ago that you might have something closed by the end of the year. Is that still your anticipation or has pricing not moved enough for you to make a move in making a deal?

I think we are in tight on a number of properties that we are bidding on, and while nothing is certain to get across the goal line, we'll see how the chips fall. But, we feel pretty confident that we'll be able to get this money out over the next couple-year period, and find activity.

Whether it's between now and the end of the year or shortly thereafter, I am not overly worried. I'm worried about the long-term yields that we're going to get out of this deal and our [promote].

Okay. And then lastly, I'm just wondering what you think the impact might be if Congress continues the homeownership credit in terms of -- it seemed like homeownership move-ups, homeownership ticked up about 1%. Would you expect it to move up, given some of the recent [axiometric] data which showed that the costs or the spread between renting and owning had compressed through the third quarter?

I think Jerry highlighted in his earlier comments that homeownership in our portfolio -- in this reconstituted portfolio, moveouts have been extremely low at 10% in our high-barrier markets and 13% in Florida and Texas markets.

So I don't think we are feeling the impact of that $8,000. I don't think it makes people's psychology of running out to buy a home any comfortable now. And you combine the $8,000 credit with even record low mortgage rates, it seems like housing doesn't appear to be much of a threat to this portfolio at this time.

Michael Levy, Macquarie Research Equities.

I know it's early on, but can you please discuss the delta on effective rents since maybe the end of the summer leasing season, maybe the end of August?

Also, are there any markets in which effective rents have been improving since then? I'm trying to get a sense of, now that demand may have dried up a little bit, where rents have headed.

This is Jerry Davis. They really haven't dropped much. Most of our markets have remained firm.

When you look at our occupancy at 95.5% as of today, we've been able to stay full without really seeing a decline in our market rents, and when you look at our gain to lease we have on our rents, and compare June to September, it's actually -- the gain has gone from about 2.5% in June to a little less than 1% now. So we're actually seeing most markets stabilize.

The exception would be some of the Southern California markets. Orange County and San Diego have probably trended down a little. But our mid-Atlantic markets have strengthened. San Francisco's remained stable.

We've done surprisingly well up in Seattle, where the rent has gotten -- they've been fairly stable, but when you look at the decline from last year it shrank a little. And Florida has been pretty stable for the last three to four months.

Thank you very much. If I can just ask a follow-up question unrelatedly, I know Tom's example of the asset being sold in DC with a low five handle was meant for illustrative purposes, but with assets being sold at levels that seem somewhat aggressive, I guess maybe to me, would the Company consider disposing of assets to take advantage of the flood of bidders that seem to have entered the market?

This is Toomey. We sold a $1.7 billion portfolio earlier this year. And in that effort, we made a conscious -- to try to clean out this portfolio, if you will, at that time.

I don't see any point now in what we would be selling and redeploying the funds as a very accretive to NAV-type situation. So I think we are on the sideline for selling assets at this point in time. We'll evaluate it probably in the next year when we get more clarity on NOIs and what we would do with the proceeds.

I'm pretty comfortable with where we're at right now in this portfolio. (Multiple speakers). But ask Jerry to comment a little bit about the occupancy and the rent.

I think you have to realize that we are making a conscious effort to run our occupancy up as high as possible, in the 95%-plus range, to give us, if you will, a little bit of gliding room through the fourth and early part of next year when traffic is very slow. And what we're hopeful is an improving job market and a higher occupancy gives us a chance, if you will, to go to guns and rent increases earlier. And that was a conscious bet on our part and I think it's going to pay off.

I would certainly hope so. I guess I would just ask, after hearing that, you know why -- what sort of efforts were being made to -- it sounded like the turnover was basically the same as it was the previous third quarter, on an annualized basis. Which, I guess, given that you seem to be working pretty hard to keep existing tenants, I guess I was a bit surprised that it was not a more material improvement. Is there any way that I should be looking at that? Or is it just a function of the summer [tends] and the high natural turnover in the portfolio?

There is a little bit of that, but the other thing that's affected us when you compare this year to last year is move-outs related to money problems, whether it's skips evictions or people just moving out, they're losing their jobs, has gone up 4% or 5% year over year.

The people that can afford to stay, they really don't want to move and I think they are seeing the customer service efforts that we've been giving them, as well as allowing them to do business more automated with us, has helped keep it flat, especially when you do look at that increase in the money issues that people have. And you're seeing that more, again, out in the West Coast than you are the other parts of the country.

Michelle Ko, BAS-ML.

I was wondering if you could talk a little bit more about the wide gap, the spread between the new leases and the renewal rates. It seems like you've done a good job in terms of sustaining the wide spread. I was just wondering if you thought that would narrow over the next six to nine months with the renewals rolling down, and in those recent weaker quarters in the 4Q and 1Q, the seasonally-weaker quarters, if we might see more rolldown then?

I think you will see that spread between new leases and renewals compress. This quarter, we were at 6.8% down on new leases, and our renewals were down 0.8%.

I think what you're going to see over the next six months is the spread on new leases to the expiring lease continue to go down. Especially as we get more pricing power in the mid-Atlantic markets, it does feel like some of the West Coast markets have stabilized. But they are not growing larger.

So, I think you're going to see that continue to come down. And I can tell you right now, we are not -- we are making a conscious effort not to push anybody out because of a rent increase. We are consciously monitoring that. We're not going to get aggressive on rent increases until we get more comfortable that we can reload that exiting resident with somebody that's going to pay higher. So, I think you're going to see that spread, which today is about 6%, tighten.

Great. Also, I was wondering if you could give us a little more color on the JV write-downs and how much, in percentage terms, were actually written down. Do you think there could be more write-downs related to some of the other JVs?

Michelle, this is Dave. In terms of our JVs, we assess these every quarter. These are the only two that we felt were indicative of a write-down to what's essentially a lower cost or fair market value under the accounting rules. They are also the only two assets that we have that include non-stabilized or development properties.

So we felt that at the end of the quarter, the balance of our JV investments, which are small to the balance sheet as a whole, were actually accurately stated under GAAP. Did that answer all of your question?

Yes. Thank you.

I think, Michelle, you need to also -- this is Toomey. The value that we wrote them down to were appraisals furnished to us by a bank as they were looking at the loans. And so they may not be indicative of what the ultimate value of the real estate is.

It's just marked to what you have to do in an equity accounting treatment is the fair market value, and our auditors have determined fair market value at this time as the appraisal process. And as a result, I think if you'd talk to any other real estate person, you'd find that appraisals are probably not a very good indication of long-term value to the real estate. They are indicative of stressed banking situations, stressed NOIs, and what assets would have to be sold for today.

But, I think the accounting rules take precedence over everything and as a result, we use the appraisals to evaluate those.

(Operator Instructions). As a reminder, please ask one question and one follow-up question, and re-queue for additional questions. Dave Bragg, ISI Group.

I think one market we didn't really cover yet is Texas. I know it's not a big part of the same-store pool, Jerry, but could you talk about operations there and how they have trended over the past few months?

Yes. You know, we operate in three markets in Texas, Dave -- Dallas, Houston, and Austin.

Dallas has -- the job market's held up fairly well. They have lost 61,000 jobs this year, but overall, what's affected Dallas most is the new supply that's come online, and in the fourth quarter another 8,500 units are set to come online. So, we are in for a fight there.

A lot of the new product also is coming in from the Plano area, as well as uptown and downtown. So, it will be competitive for our properties there because that's also where we are located.

Our rent's fallen about 4% on the new leases in Dallas. And rents in Dallas overall, when you talk to the economists, have fallen 4% year over year. Right now, we're not seeing any real job losses in the foreseeable future. But you do have the supply that's always going to be an issue in Dallas.

Houston -- Houston, at the beginning of the year, was probably our best market when you look at new rents versus expiring rents. I think in the first quarter, we actually had increases. By the third quarter, we were down 7.3%. So Houston has really done a U-turn on us.

Over the last year, they've lost about 95,000 jobs. There's not a whole lot of new supply coming on line. About 3,200 units, but unfortunately there is quite a bit, somewhere in the 15,000-plus units, that are still in lease-up and lease-ups are taking longer in Houston.

And as you're probably aware, what's affected Houston -- there's been a little bit of job loss. I mean, there has been job loss, but there's also been all the people that have moved in from Hurricane Ike. Their homes have been repaired, and they've moved back. So, Houston has gotten dramatically worse in the last nine months.

Then moving on to Austin, Austin continues to be a market that is oversupplied. We saw new leases repricing at 7.6% below what the exiting resident was paying. Austin -- we still believe in it long term. It's going to be one of the premier markets in the country over the next two to three years, but it's going to have to just make its way through all the supply that's come on and could continue to come.

Okay, so just assuming you get the same level of job growth throughout the portfolio, it sounds to me as though you'd be more concerned about these markets going forward. (Multiple speakers) over the next 12 months, assuming no job growth.

I think you're going to have the supply issues, which are much higher than you're going to see around the rest of the country. I think Dallas, Houston, and Austin over the foreseeable future probably will have job growth that's a little better than the rest of the country. But they are going to continue to have supply issues like they always have.

Got it. One other question. Could you just talk about your efforts to generate other income at the property level? Just from visiting properties, I have seen a couple of things, including TVs, closet systems. I'm not sure if you're doing valet waste or something similar to that. Can you talk about just the broader efforts and what sort of penetration do we have across the whole portfolio?

This is Toomey. You know, we've always evaluated each individual asset and market on its merits, and tried to find opportunities where we could inject a better-quality product and get a better return for our investment.

What we're finding today is that many of those programs that residents are not receptive to, those rent increases, and you'll find that we've curtailed a great number of them. Where it does have some traction is probably the DC marketplace, a couple of our particular properties in Southern California and Northern California.

So, the program hasn't been put forth with the same kind of energy we've had in the past because it's not a prudent use of capital and not a prudent return. The good news, I think when the economy kicks back up, we'll be able to go back to guns on those and do well at them.

Anthony Paolone, JPMorgan.

Thank you. I wanted to tie together your core guidance from last quarter and just your guidance for the year. So you had negative 3% to negative 5% same-store, and it would seem that to even be in that range, the fourth quarter would be down into the double digits, almost. Can you comment on that? Are we looking at that right?

I guess the way I've kind of rationalized the guidance going into the fourth quarter, since we are not in the business of giving out quarterly guidance, is that we expect our trends to continue for revenue and expenses through the balance of the year. And while we'll try to be on the low end of both of those ranges, we didn't feel it prudent to try to update and specify an exact target for both revenue and expense.

So revenue, we thought we'd still -- we're trending towards the 3% to 5%. Expenses, we'd be trending, hopefully, on the better side.

Okay. And then, just to follow up on the JV, tying together, I think, a couple of the things you said. So we had 5% cap rates. Can you get to the return hurdles of the fund?

This is Mark Wallis. We didn't bid at five. So I mean, I think that's the statement that we are looking for some values better than that, and as you know, cap rate is not the only story. We are running these on IRR models and it depends on what kind of recovery there is, what the occupancy makeup is, what we think we can do to the assets to increase revenue, but a general answer is when it gets that low, it's going to be harder for us to clear our hurdles.

But you've got to ask them sometimes that's mitigated by value-creation opportunities we see in the asset that we could put into the asset.

Dustin Pizzo, UBS.

Just to follow up on some of the private-market questions, how sustainable do you think these lower cap rates are, assuming that they may be driven by either, a, the lower cost of financing we've seen or, b, simply a dearth of quality product that's on the market today as opposed to buyers getting more aggressive with some of their growth assumptions?

And then, two, do you think that -- or I guess what type of spread do you think there would be today between some of these one-off asset sales that we've seen as opposed to if you tried to trade a larger portfolio, assuming you could even get financing for something like that?

This is Mark Wallis. Regarding the sustainability of these cap rates, and again a cap rate's just one factor you look at, but one thing, if you look out in the next two to three years, aside from a couple of markets, there is very little new product being delivered to the market and there's very new little product being started.

Therefore, that factor is going to remain the same. In fact, the 2-year-old asset in two years is going to be four to five years old, so that's one thing we think is going to make it more sustainable than maybe we thought originally.

Two, eventually recessions end and eventually jobs come back. And when they do come back, someone may underwrite a depressed low NOI, knowing that it's going to rebound quickly when jobs come back, and they'll show greater growth even though the initial going-in cap rate is low. So, we'll see how long this situation will last.

But when jobs come back, that may make it sustainable also. And then, again, just the lack of supply and how that's going to play out. It's hard to replace these assets at these prices. So, I think it's more sustainable, but, as you know, depending on job growth, individual markets, there can -- there is going to be variations off that theme.

Okay. And can you tell us what dollar volume of properties you've actually bid on this year?

I would say around $350 million, give or take.

Nearer to $350 million. If you look at my scorecard.

Some of those, obviously, you bail out early in the process. But what I'm trying to indicate there is we're looking at a lot of stuff. And so, that doesn't mean we're -- we may decide to lose early on.

A couple of other things you might want to factor in to the overall equation about cap rates is the amount of capital that has been raised, either in terms of the private REITs, the public REITs, or just other streams of levered players that are in the marketplace, and when we look down the list of who we are losing to, these are not amateurs. These are people with a lot of money behind them and a lot of skill behind them.

In particular, I thought the DC asset was unique in the sense that the top 10 bidders were only 2% apart on their bids. So that meant there was, in this case, 29 people who did not succeed who are probably out there a little bit hungrier the next time around, trying to get that money out. So, I think high-caliber assets in good markets, good locations, we are going to start to finally see the spread in cap rates emerge that hasn't been lacking for the last three years.

And, so the five that's kind of being thrown around that deal certainly looks like there's a lot of money out there that's interested in putting itself to work at that entry level. And I can't say that's not a bad idea.

If you think about the long-term supply and demand of the market, Mark's point is right. A lot of people are underwriting kind of an 2012 spike in rents because there has been nothing been delivered for some period of time now. I mean, we are at a 25-year record low building, and every time I've seen this industry, and I haven't been at it for a full 25 years, but whenever you hit these types of supply numbers and there's capital, prices rise.

One thing we didn't, I guess, ask your one-off question, one-off asset versus portfolio. I think that's always very difficult to answer because portfolios sometimes -- I mean there's five great assets and one asset you got to take to get the great asset that clouds the cap rate and the delta between the two.

I think people tend to underwrite these assets on their own. Sometimes you get a dynamic either way, either a better price or, depending on the competition and the strategic value of the portfolio, you can have a higher price. It's really hard to make a call on that. Plus you're just not seeing anything [compared] to either way.

Then I believe Ross has a follow-up as well.

A question on your expense line because you, I think, positively surprised us with the decline. And I'm looking at page 27 in your supplemental. And I compared it to your disclosure a year ago for the first nine months, and what's interesting to me is it looks like year over year you drove the spending per unit down, at least for the first nine months, down to about $519 a unit, which is down $10 from where it was at this point last year.

But the CapEx spending shot up pretty dramatically, from about $430 to $511. So it looks like the R&M line is going down and the CapEx line is going up. So I guess I'm having trouble reconciling those two.

Why don't we, as we are looking through it, take the next call and see if we can come back with -- .

I'd say -- this is Dave. Ross, just real quick, the R&M line, we expect it to be coming down as we have newer assets and we've completed a lot of the projects over the past several years, be it the kitchen and bath a few years ago, the HVAC program we did two or three years ago, four years ago. With that, we have a newer portfolio, a younger portfolio that requires less to do on a repair and maintenance side, and so what we've chosen to do is put more of our dollars into the capital side of the business versus having to spend on a needed basis for R&M.

I would add one thing to that. We made a conscious effort this year to get a lot of our larger projects, what we call asset-quality deals, done early in the year so we can get the benefit and revenue from that, whether it's paint jobs, parking lots, things like that, so I think part of it is we have done more early in the year than we did in the past.

We are on track this year to spend about $675 a door in recurring CapEx. Last year, we spent about $630, $635. So it's going up a little bit. I think the other thing is we pushed more of it early in the year to get the revenue benefit.

Rob Stevenson, Fox-Pitt Kelton Cochran Caronia Waller.

Most of my questions have been answered, but, Tom, given the comments that have been -- that you guys have made about cap rates, the DC market, the demand for properties that's probably only going to get more significant as we move forward, why wouldn't you guys start the 14th Street development project in the remainder of 2009 for, let's say, a 2011 delivery, given that your debt is in a decent position, you guys could issue at the market equity today at 15.5 or so, something like that. So it seems like that that would be one of the development projects that could get green lit sooner rather than later.

This is Mark Wallis. A couple of things on timing. Obviously, we entered 2009 being very cautious about our timing. We probably tend to be more cautious than we maybe could have been, but that's usually good.

A couple of things. One is timing of just when you start projects in DC and the weather. So, right now what we'd look -- we're always evaluating when's the right time to go. I can't commit to that today, but it would be more of a mid-2010 would be the time you'd look at starting.

And the other thing we're doing is our construction prices have got much better. We have spent the time to get our drawings up to 100%. And, so that we now can really get tighter bids on that, and so we would still have that process to go through, come back, evaluate, see how the market looks, how the capital market looks, and go, but those two factors would put you, when you -- decision point mid-2010 versus -- in mid-2009, we were not at that point.

Then follow-up, part one, Jerry, what was bad debt this quarter and a year ago, and then, Dave, is there any equity issuance in your fourth-quarter guidance?

I will take that first. Bad debt this quarter was 0.6% of gross potential rents. That compares to 0.5% last year in the third quarter. So it was up a little bit.

If you look at it on a full year versus full year, this year we are at 0.7%. Last year we were at 0.4%. What that tells me is the worst of the bad debt, hopefully, is over.

We started having bad debt look worse in the third quarter of last year. It progressively got worse, probably peaked in the middle of the first to the middle of the second quarter, and it seems to be stabilizing back down on that 0.6%.

This is Dave. In terms of guidance, what we provided was an annual range, so what I have in there is the equity issuance that we did in the third quarter of 2.3 million shares.

Karin Ford, KeyBanc Capital Markets.

I guess on past calls, Tom, you've discussed at length your views on the ideal leverage for the Company and given the positive changes in the capital market environment, as well as it seems like improving visibility in the fundamental environment, can you just talk about any changes to your views on leverage?

I guess my views haven't changed at all. Been pretty consistent through this economic downturn that we've got a good balance sheet, structured properly, and we'll continue to be looking at the market and the pricing of the full range of capital, and figuring out what's the best opportunities for us.

Okay. Just a follow-up, we talked about the write-downs in the JV portfolio. Do you guys foresee any potential write-downs in the owned-land portfolio?

This is Dave. We continue to evaluate our land and our holdings every quarter. So, it's an ongoing quarterly process.

Michael Salinsky, Royal Bank of Canada Capital.

Most of my questions have been answered. Just had a question specifically about the 2008 acquisition portfolio. Can you talk about the performance of that? And also, one of the catalysts there had been about the lease-up opportunities, the ramp-up opportunities. Can you talk about, like, where that portfolio is from an occupancy and how much lease-up opportunities, and also when you expect to roll that into the same-store portfolio?

Sure, I'll take first shot at that. Every one of those properties we bought last year, I believe, has reached stabilized occupancy, and probably operates between a 93% and 98% occupancy today.

Obviously, some of the rents we underwrote those deals at -- the economy changed and we are not getting the pro forma rents that we had expected. But we have been able to fill them up, to run them effectively. And I guess that's about it.

But, you know, rent levels in some of the markets -- DC has probably held up a little better than the ones in San Francisco and the West Coast. We did have one in San Jose that has performed probably better than expectations. The ones in Texas are pretty close to expectations, but the ones up in Seattle, as well as the one in downtown San Francisco, the rents are not where we had expected.

Okay. In terms -- relative to your same-store portfolio, I'm assuming the performance has been better, then?

It's probably comparable. It depends on the market they are in. They've done as well as the properties in our same-store DC -- probably a little better because these deals were inside the Beltway versus the ones that are outside, so they probably performed a little better, although they have been in competition with other properties in Arlington that were in lease-up, so they been fairly concessionary over the first 12 months we owned them.

The rest of the properties, I would say, have performed pretty much like our same-store properties, and your other question, I think, was when did they roll into same-store? They have been. They typically stay out of the same-store for five quarters, and then we roll them in. So we can always have a comparable quarter in the last year.

Paula Poskon, Robert W. Baird & Company Inc..

How you seeing any differences across the markets in terms of turnover trends, and in particular, in what markets, if any, are you seeing job loss as the biggest contributor to move-outs?

I'm seeing job loss as probably one of the bigger ones in Orange County. Some in San Francisco. Turnover trends, you've got some markets that are down dramatically from last year. I know Phoenix, Inland Empire, some of the ones that you'd be surprised because of the market is not performing well. You just had such high turnover last year when the economy first turned that on a comparable basis, they're doing better.

Thanks, and just a follow-up on the DC asset transaction that we've been talking about. Would you have been considering that for your JV or for your own balance sheet?

This is Mark Wallis. That was considered for our JV, although [I said] we liked the asset. We had committed that that would be a first look for our JV, but that we liked the asset, it is certainly something we would put on our balance sheet if given the right opportunity.

Steve Sakwa, ISI Group.

Tom, I just want to clarify. The cap rate that you've been talking about for this DC asset, as I understand it, that's kind of after CapEx and the management fee. Is that correct?

This is Mark Wallis, that's correct.

So, if you were to just kind of adjust that to kind of plain old NOI, do you have a sense for how much that cap rate might move up?

It usually moves up, what, 100 basis points. Typically. Rule of thumb -- haven't done the math. But it's going to be close to that.

And then, just to maybe go back to Ross's question just on this, I guess, Attachment 12 where you are talking about CapEx. I guess I'm just trying to understand. There are kind of two buckets. You've got something called revenue enhancing as well as asset preservation. And I guess the revenue enhancing, it would seem to me you almost have to add that with the bucket below in order to kind of really assess how the same-store is being impacted. Is that correct, or what am I missing on the revenue enhancing?

That's correct. Just keep in mind that on a -- the asset preservation is on stabilized [fund] count, so it'll be slightly different. But your analysis isn't far off.

So would it be fair to use the rough same 43,400 units for that kind of $19 million bucket to try and get kind of a gross CapEx per unit number, or am I going to be terribly off?

No, that's correct.

[Michael Dell], AIG.

Just a follow-up to a leverage question from earlier. I'm just curious in terms of the combination between secured versus unsecured. Is this purely a pricing decision in your mindset, or does the greater alliance [like] GSEs or just mortgage debt as a whole come into play there? Where does the price become less of an issue?

This is Warren. I think to date the unsecured market has been not as attractive as the secured, and so obviously we've gone out and done a substantial amount under the Fannie Mae facilities. But the secured market there -- or the unsecured market has come in, and it's become a lot more attractive.

And also, we've tried to maintain some kind of balance between our unsecured and our secured. So I think as we go forward, we're going to -- we'll continue to evaluate both options.

Do the rating agencies give you any sort of restrictions in terms of what percent of your debt is coming from secured versus unsecured, and where that could put downward ratings pressure?

It gives some general guidelines, but they don't give you specific numbers.

Okay. And then, just an operational question. In previous quarters, you may have noted this already, but you provided a rent first buy gap on your portfolio. Could you give us any sort of sense as to what that is in this quarter?

I'm sorry, rent versus what?

Rent versus buy differential margin.

Yes. Today, for the entire portfolio, our average rent is probably about 80% of a -- what a mortgage payment would be. That varies, obviously, by market. When you look at an Orange County, I think last quarter I said the difference was, I think, $750 or $800. It's dropped a little. It's about $700, and then the spread on San Francisco, for example, is still well over $1,000.

Some of the markets, it's a push, to be honest with you. Some of the Sunbelt markets where prices have been knocked down and average rents may be $900 to $1,000, it will be equal. But portfolio wide, it's about 80%.

And at what level do you get -- do you start to see a greater propensity to move out to buy? I know you said it for the whole portfolio, [that] you're not really starting to see much of an increase, but at what point do you believe the stress actually pushes them to move out?

I don't think rent levels today would stress. I think what's pushing them right now is home prices coming down, and you are losing some of your better residents that have been -- they have good credit and they have good jobs -- do see opportunities at times to jump out and buy a house.

That happens more in the Sunbelt markets than we are seeing in our coastal markets. Where you're really -- moveouts to homeownership, to purchase a home in Orange County, it's 6% of our moveouts. In San Francisco, it's, I think, 6% to 8%. DC is probably a little around 10%.

The markets where you see people moving out are places like Nashville, Houston, Richmond, places where home prices are cheap.

Andrew McCulloch, Green Street Advisors.

Back to the private-market valuation for a second, on private-market values for a second. Cap rates can be misleading, depending on what CapEx you are using, NOI, what NOI assumptions, management fees, etc.. Can you comment a little bit on the trends you're seeing as far as price per door in your major markets? And are those actually rising or have they just stopped falling?

This is Mark Wallis. I don't think generally -- that's a very general question. But the price per door has been going up.

How do you think that compares to replacement costs? How do you think about replacement costs when you're looking at acquisitions versus starting the development pipeline back up?

The academic method is you find a comparable piece of land and you have to price the land, and then we take -- since we're in the development business, we usually have current construction prices at hand, and we price it out that way.

The variable always is can I find a comparable piece of land? In some cases, it's hard to find -- if it's infill, urban -- an exactly comparable piece of land. But what we do is take our -- we can, in markets, usually have relationships with general contractors, aside from the deals we're building, and see what they see as far as prices. Then you also have to evaluate design and that kind of thing. But we do that exercise.

This is Toomey. I think the asset that we were particularly focused on in commenting priced probably at about 75% of its original construction, and so today, replacement cost is probably at 90% of replacement cost for a 4-year-old asset.

So I think we've got some visibility and comfort around your NOIs. Assets are going to price very close to replacement cost very quickly. And people will -- astute buyers will focus on that, and where you still have falling NOIs, people are going to be a little bit more hesitant and resident, if you will, and pull back from that type of number.

But ultimately, I think a replacement cost represents a nice flooring for a business with very little supply coming online, and you'll see more and more people get drawn to that pricing mechanism.

Great. Thanks. That was helpful, and then just had one follow-up question on unsecured debt. What do you think you could do a 10-year unsecured deal at today?

Probably about 7.5.

[Jordan Sherman], [Parental Real Estate].

I'm trying to -- two things. One is, midpoint of guidance -- FFO guidance, it comes down by $0.02. Am I to understand -- how much of that reflects the changes in the capital markets, activities, your debt issuance, if there are debt retirement, equity issuance, versus changes in your operating assumptions?

Jordan, this is Dave. The $0.02 that you are referring to was a result of the debt tender offer that we did in the third quarter. So the midpoint for the original guidance was $1.29. Take out $0.10 for the charge on equity investment, $0.02 on the debt tender, gets you to $1.17.

So no changes in underlying operating assumptions?

We tightened the ranges. We tightened the high and the low ends, just based on what we are seeing in debt repurchase activity and possibilities. The fact that we've reset some of our maturities ahead of schedule. We factored into account the equity issuance we did in the third quarter of 2.3 million shares under the ATM program.

Okay. And then, I just want to revisit the question that Tony Paolone asked previously. Come at it from a different angle. The way I understand your answer to this question is that the negative 3%, the negative 5% decline in same-store NOI is a runrate in the fourth quarter, not the expectation for full-year results.

No, that's not correct. The expectation for full year would be that you would -- for the full 12 months of 2009, the revenue would be down 3% to 5%. I'm sorry, 1% to 3%, and NOI would be down 3% to 5%.

That sort of implies a negative sort of 12% decline in the fourth quarter. Or something in that range.

That is, I believe, how the math shakes out, and like I said earlier, revenue we're expecting to be in the midpoint of our original guidance. Expenses, we'll try to do better than what we've got out there, and we'll let the NOI line shake out to where it is. So if we end up beating the 3% to 5% range, or landing in the middle of it, we'll be pleased with those results.

[Eric Lee], [L&B Investments].

Tom, it's Jon Litt. I'm here with Craig Melcher. Can you hear me all right? My question was following up on Tony's as well. I'm just trying to understand, so the position you guys are taking is that you're not giving quarterly guidance and that's why that 3% to 5% for NOI is still valid, is that right?

Correct.

So if you were -- because you did give effectively fourth-quarter guidance by narrowing the range, so it seems a little incongruous because we're not going to get a negative double-digit NOI number, so it sounds like it's just you're abstaining from commenting on that for the fourth quarter?

Correct.

Michael Salinsky, Royal Bank of Canada Capital Markets.

I just had a follow-up question in light of the impairments there on the two Bellevue assets. Are there any of your joint venture partners that are struggling right now and is there any buyout opportunities on any of those?

That was the only joint ventures, with those Bellevue assets, that we might have that opportunity. We have engaged in that.

We are trying to develop, and this is, I think, a mutual engagement, so we're trying to work on something that will be a win-win for both of us. I think obviously out there in the marketplace, a lot of private developers are looking for capital, and they might be more willing to look at this than they would otherwise, so, yes, we are looking at that.

But we're just working out something that would be a win-win for both of us now that the asset is about completed.

Mike, you've seen the asset, right?

Yes.

You know it's a fabulous asset right across the street from Microsoft. Lease-up is going better than planned. I think Jerry has already reported this month 35 leases. And practically for everything that's got a CO, we've got a lease. So we are very encouraged by the lease-up of the asset and we want to be fair to our partner as well.

Mark Biffert, Oppenheimer & Co..

All my questions have been answered. Thanks.

David Toti, Citigroup.

It's Michael Bilerman. David, I just wanted to come back to this -- just the guidance range for the fourth quarter is $0.24 to $0.30. I'm just trying to understand what may be in there, if there is any sort of charges or gains or anything that would cause such a wide variance. We're talking almost 22%, 23% in terms of a spread for fourth-quarter expectations.

If you take the third quarter core operations, we're expecting revenue to come down. Expenses will have tough comparables. I think that gets you into your range of $0.24 to $0.30 for the fourth quarter.

But the core coming out of the quarter was $0.31. I mean, to go down $0.07 to the low end would seem pretty dramatic of a decline.

That's fair. It's not an exact science. But looking at how leases are repricing today and where we see some of the possibilities on expenses, be it through either insurance, real estate, taxes, and some other unknowns that are out there, we're comfortable that $0.24 to $0.30 is the number you stated.

Right. And then, effectively, everything in guidance is updated from capital markets' perspective in terms of the equity issuance, the earlier debt issuance, and everything else. The losses on the JVs, except for, within guidance today, it's still this negative 3% to negative 5%. So, if we model what you're running today, negative 1% year-to-date same-store NOI growth, if we model that negative 2%, the Street generally is going to move their numbers much higher than your guidance range. Is that a fair assumption?

I'd have to run the math when you're talking about going down to one or two, but the first half of your question, about everything being factored into guidance, that is correct.

And then, it's just the operations (multiple speakers)

Correct. Yes, just the operations.

Anthony Paolone, JPMorgan.

Tom, last quarter you were pretty adamant about not issuing equity unless you had an investment use of the proceeds, and you did a little bit in the third quarter, and your stock's a little higher today. I'm just wondering if you can update just your thoughts on how you're thinking about your at-the-market program and equity right now.

Tony, it's a fair question. In terms of the use of proceeds, certainly we are focused on our joint venture and funding our $54 million under that opportunity, and we find assets to buy with the joint venture, it's nice to show up with our money. And so, that's been in the intent on the equity issuance is to try to get ahead of that, and I think it's a smart move on our part.

I think we've just always said that we want to be flexible, too, and be able to dilate all of our capital market opportunities.

Michael Levy, Macquarie Research Equities.

I was actually taking myself out of the queue. Tony just asked my question.

Thank you. At this time, I'm now showing no further questions. I'll turn the call back to management for any closing remarks.

Thank you, Operator. And thank all of you for your time today. We certainly appreciate your calls and your attention to our Company. With that, we look forward to seeing many of you next month at NAREIT and with that, take care.

Thank you, sir. Ladies and gentlemen, this does conclude the UDR third-quarter earnings conference call. If you would like to listen to a replay of today's conference, please dial 303-590-3030 or 1-800-406-7325, and enter in the access code 414-1754. We thank you for your participation, and you may now disconnect.