Good morning, ladies and gentlemen, and welcome to AvalonBay Communities fourth quarter 2008 earnings conference call. (Operator Instructions) I would now like to introduce your host for today's conference call, John Christie, Director of Investor Relations and Research. Mr. Christie, you may begin your conference.

Thank you, [Lori], and welcome to AvalonBay Communities fourth quarter earnings conference call. Before we begin, please note that forward-looking statements may be made during this discussion. There are a variety of risks and uncertainties associated with forward-looking statements, and actual results may differ materially. There's a discussion of these risks and uncertainties in last evening's press release as well as in the company's Form 10-K and Form 10Q filed with the SEC. As usual, the press release does include an attachment with definitions and reconciliations of non-GAAP financial measures and other terms which may be used in today's discussion. The attachment is available on our website at www.AvalonBay.com/earnings and we encourage you to refer to this information during your review of our operating results and financial performance. And with that, I'll turn the call over to Bryce Blair, Chairman and CEO of AvalonBay Communities for his remarks. Bryce?

Thank you, John, and with me on the call today is Tim Naughton, our President, Leo Horey, our EVP of Operations, and Tom Sargeant, our Chief Financial Officer. Tom and I will have some initial prepared remarks and then all four of us will be available to answer any questions you may have. Last evening we reported an EPS loss of $0.02 and FFO per share of $0.30. Our numbers this quarter reflected approximately $70 million of non-routine items that we had previously disclosed in December. These non-routine items were principally attributed to our decision to significantly reduce the pace of our future development activity, which resulted in the writedown or the abandonment of a number of development parcels and related severance costs. Additionally, there was approximately $3 million of excise taxes that were due largely as a result of our successful disposition program this past year. Excluding non-routine items, our FFO per share increased by approximately 7% for the quarter and approximately 9% for the full year. Overall, the growth in our same-store sales portfolio continues to moderate from prior quarters. During the fourth quarter we saw rental revenue growth of 1.7%, which, when combined with essentially flat expense growth, resulted in an NOI increase of approximately 2.5%. During the quarter, our occupancy moderated slightly, averaging just under 96%. In terms of regional performance, Northern California and Seattle continue show the strongest performance although, similar to the overall portfolio, the rate of revenue growth, as expected, continued to moderate from prior quarters. I'd like to take a few minutes to review our '08 activity, both to recap the year and to give some context to our 2009 outlook. I think 2008 was a year that was characterized by a few major themes, the first of which would be declining,…

Thanks, Bryce. I'd like to focus on three overall topics covered in last evening's press release. The first is a recap of our 2008 financial activity and performance, the second would be the 2009 financial outlook that was also included in last evening's press release, and then finally the financial flexibility, capital planning and liquidity. The first point would be to note that our balance sheet and our business model were tested in 2008 and we were able to demonstrate the benefits of the flexibility, the financial flexibility, that comes with a largely unencumbered capital structure. Last year we sourced $1.2 billion in new debt at attractive prices from a variety of sources, including the GSEs, but also taxexempt debt, money center bank debt, and even a local bank for a long-term secured debt on a New York-based community. We used this capital to complete a significant volume of new development communities and refinanced higher cost debt and preferred stock. With record asset sales and the formation of a new investment management fund, we entered 2009 pretty well positioned, with good visibility into liquidity for the year. Let me just illustrate for a second the impact of the financing activity on interest rates. If you look at the interest rate, the weighted average interest rate, on all of our debt at the end of 2007, the overall rate was 6.5%. At the end of 2008, the average interest rate was about 6%. Floating rate debt as a percentage of all debt is generally down slightly and it's about 30% today. So you can see that during the year we were able to reduce our overall interest rates meaningfully on about $1 billion of this debt. As successful as we were, though, in accessing capital in '08, the credit crisis and…

Well, thanks, Tom. I just want to offer a few summary comments before we open it up to questions. Downturns are never fun. They challenge a company's business model, financial strength and management quality. This downturn is particularly challenging given the combination of a very weak economy and an extraordinarily difficult capital markets environment. Our past experience, however, reminds that from these downturns strong companies generally become stronger, with an enhanced competitive position, while weak companies generally emerge weaker, without the capacity to take advantage of opportunities. We're working through this downturn with the benefit of a proven business model, one that has delivered total [inaudible] return and NAV growth near the top of the sector for over 10 years, with a strong balance sheet. Our leverage is the lowest of any apartment REIT and the second-lowest of any REIT overall, and finally, with a proven and stable management team. We're taking the necessary actions today to ensure that the organization and the balance sheet are well positioned to take advantage of the inevitable opportunities that will arise. Given the soundness of our business model, balance sheet and management team, I see no reason why we won't emerge from this downturn as an even stronger company with an enhanced competitive position. And with that, Lori, we'd be glad to open it up for questions.

Thank you. (Operator Instructions) Your first question comes from Jay Haberman - Goldman Sachs.

A question for you on the projects that have been delivered in 2008 and I guess the most recent quarter. Can you just give us a sense of where those yields are and, I guess, just generally how rents are trending now for development projects?

I think, as Bryce and Tom had mentioned, we actually completed overall about $1 billion this year, a total of 13 communities. The average yield for those communities is right around 6.5%. The deals that completed this quarter were a little bit south of that on average.

Are those the stabilized yields?

Those are the stabilized yields, Jay, yes.

And can you give us a sense of just time to reach stabilization? I mean, how do you think that might have changed as a result of the changes broadly in the market?

Time to stabilization? Generally, the times don't change dramatically. We often adjust pricing so that lease-up periods don't become too extended. But, you know, it's not unusual in this kind of environment to see the lease-up here maybe extend a quarter. But typically you're not seeing it extend not much more than that. It's really more of a function of pricing. In terms of pricing in today's environment, there continues to be some stress on the developed communities. We had two or three communities where we saw about 3% - 4% drop in effective rental rates, one in New York City, the Morningside deal, a deal in Boston, and a deal in Connecticut all experienced rental declines around $100 on effecting rents. So it continues to be a challenging environment for the lease-ups. But typically we're not seeing lease-up periods that extended.

Okay. And then I just want to clarify something. You mentioned on the revenues for the year the minus 1.5% to minus 3.5%, largely as a result of higher vacancy. Can you just clarify there a bit? What are you assuming in terms of changes in rent specifically? Is it more occupancy driven or are you seeing it really coming from rate?

We're expecting occupancies to decline into the mid-94 range. And just to give you perspective, we ended the year at about 95.5 and January is around 95.3, so in and about the same range. So we expect for the year it to come down into the mid-94s. That would be a reduction of about 1.5%, 1.75%, so the rest would come from rate.

And you purchased some land in Brooklyn. Was this something you had had under contract for some time? I'm just curious, now did the underwriting pencil out here?

Essentially we had closed on that site over a year ago. The way that the deal was structured to accommodate the seller's tax situation, essentially we had closed into a land lease and he had the right to convert that and to require us to essentially take title to the property, and essentially that's what happened this past quarter. But that was a deal that was essentially closed a year ago.

And then just looking broadly at unsecured versus where you can raise capital today from the secured market, at what sort of spread does it make sense? Where do you think you'd tap that market perhaps this year if you could?

We're anxious to return to the unsecured market and I think that you'd have to have the spread differential somewhere within 100 basis points before we'd take a serious look at it. I mean, with the GSE debt and this 10-year debt in the 6.25% range compared to an unsecured offering that could be done maybe around 9% today, we're still a pretty fair piece away from where it would need to align for us to do unsecured debt.

Your next question comes from Robert Stevenson - Fox-Pitt Kelton.

Can you talk a little bit about the same-store growth expectations in your individual markets? What markets are you thinking are going to hold up better relative and what - I assume, New York and Southern Cal - are going to be at the other end and going to be the weakest, and do you really expect anybody at this point, given what your assuming, to have double-digit negative same-store NOI growth in '09?

The answer to the second part of your question is no, we don't see any markets in double-digit decline next year. In terms of generally, I gave some comments in my opening comments about which markets we were maybe a little bit more concerned about. In terms of just revenue performance, we see the better performing on the revenue side being Seattle and probably San Jose, putting two markets in that category, and towards the bottom of the heap would be some of the Southern California markets - L.A., Orange County - and then Northern New Jersey because of the New York effect, if you will. So beyond that, we're not prepared to give any specific projections by market, but that hopefully gives you a flavor for how we see them shaping up.

And then could you give some color on what you guys have been seeing in the New York metro market in the last 60 days or so?

I'll try to address that. I'm going to address it in two parts, if it's okay, first kind of focusing on Manhattan and then just talking about the broader New York metro area. As you're aware, we have four assets between Manhattan and Long Island City. In the last quarter I had reported that occupancy was slightly over 97% and those assets are running more like 95% now, so they have come under more pressure. We are closing a reasonable portion of that traffic consistent with what we expect. I would tell you that rents are down probably 10% to 15% in those markets and it largely comes through a one-month concession, the fact that landlords or owners are now paying for locator/broker fees where it used to be that the renter paid that, and then some adjustments in rent. So are we seeing some pressure in New York specifically and the surrounding areas, more than we had seen last quarter? Yes, we are. If you go out further, then we typically look at Northern New Jersey and, as you're aware, our portfolio sits on the Jersey waterfront, mainly, and then Connecticut - really, Southern Fairfield and Stamford - and we've seen some pressure there as well. And when we look forward, obviously the last quarter I think I quoted the statistics and the economists were projecting the loss of 100,000 jobs. This quarter that’s been moved up to a loss of 170,000 jobs, and because of how tightly Northern New Jersey and Connecticut - or Southern Fairfield and Stamford area - can trade with New York, we expect that to come under more pressure.

On the development pipeline, is there an incentive at this point, given the outlook for the rest of '09 to be extremely aggressive right now in terms of the concessions and do whatever you can to get somebody into the unit now, even over and above what the market is sort of doing in anticipation that the market's going to continue to deteriorate the longer you go?

Rob, basically we look to have a pace that assumes reasonable absorption. We aren't going and cutting rents too disproportionately. We've seen it done in the past. We've actually done it in the past ourselves during the last downturn and what we found is we got into a renter profile which was not the renter profile that we want in our community. And we're looking at the long term health of these assets. So while we would prefer to have the communities absorb more quickly, we are measuring our absorption in the way that we normally do and we're adjusting rents accordingly with a bias toward getting them filled up sooner, but not at all costs.

Your next question comes from Mark Biffert - Oppenheimer.

The first question I have is related to the CapEx spend that you guys expect to spend next year. Is that an expectation that you'll cut back in that area?

Mark, this is Leo again. Actually, no. We expect our CapEx for apartment homes to go up in the $600 range. And just to give you some perspective on that number, last year at this time I had quoted a $500 to a $550 range so $525, something like that. As I believe Attachment 7 indicates, we spent about $470 per apartment home. What happened is we got a late start. Some of the amount between the $470 and the $525 is going into this year, but we expect for '09 our CapEx spending per apartment home to be around $600.

Well, I'll just add to that, as Leo mentioned, not only do we not plan on cutting it back, we'll be spending modestly more next year on CapEx and significantly more on redevelopment. We're in a position, thankfully, with a strong balance sheet and the ability to make what we think are prudent investments, and to cut back on the maintenance of the properties at this time we think would be the exact wrong move.

And then, Tom, related to the fund, you guys had mentioned that if you did acquisitions it would be through the fund. I didn't see any allocation in your guidance in terms of how you'd plan to fund that. Would that be just off the line or would you look to raise equity or how would you go about doing that?

It would just come off the line, Mark. Our contribution to that would not be that significant in this year, so it's really rounded in these liquidity numbers we've provided.

And then you gave a $3 million federal excise tax in your guidance. What was that related to? Is that related to '08 or was that to the potential asset sales for '09?

Well, it's really a cumulative excise tax. Until you distribute more, it never really goes away. So we are watching the excise tax, recalculating it and making sure that we understand what our exposure is there. As we stand here today, though, we expect that, like 2008, we may incur an excise tax in 2009 and it's really a cost of capital consideration, you know, should we pay a special dividend to address it or should we use that capital for other purposes this year and pay the tax, and that's what we're evaluating.

And then I guess sort of related to that, Bryce, if you can comment on your dividend and your thoughts related to the stock or cash split? That seems to be the hot topic.

Well, Tom, why don't you. Do you want to address that, Tom?

Well, Bryce always gives me the tough questions. Let me start by restating what we said earlier about our committed liquidity and that is that we've identified the liquidity we need to fund all of our development, our debt service payments, our debt maturities through 2010, and that includes cash to pay our recurring quarterly dividend in cash. Not all companies or all sectors have the same access to liquidity that we enjoy and some are moving toward this quarterly dividend, paid largely in stock. Some are doing it out of necessity; they have a weak balance sheet or poor visibility into their future liquidity. And some are very strong companies that are doing this as really an abundance of caution. So as you know, we issued this combined special dividend and quarterly dividend. Last month we declared it and we paid it just last week, and we were very careful to structure that dividend such that the amount of the cash paid in connection with that combined dividend equaled the normal quarterly dividend that we paid in cash. I think that helped telegraph our view about how we feel about the quarterly dividend. Certainly, the world could change from how we view things today, but we have no current plans to pay our recurring quarterly dividend in stock.

Your next question comes from Michelle Ko - UBS.

I was wondering if you could talk a little bit about renewals and if you're becoming more aggressive on that, you know, offering any types of concessions to lock in occupancy versus in '08, when you might have been in a position where the loss to leases on renewals - where there were loss to leases on renewals. Do you think that this year you might see a reversal where there might be gains to leases on renewals? And also are you trying to lengthen your leases on the renewals, maybe 14 to 16 months rather than 12?

With respect to renewals, the key things that we watch are turnover, in other words, are we generating any disproportionate turnover over what we've seen in the past, as well as the reasons for move out. If the reasons for move out become financial or something along those lines, then we become more concerned. So that really is what guides our renewal strategy. Now, to be more specific, more recently we have seen our renewals trend down, so we are not getting the same level of renewal increases that we had been getting earlier in the year, and I do expect that pattern to continue as we move into '09. But what really guides it is how we're doing on a turnover basis and the reason why residents are leaving our communities. With respect to offering slightly longer lease terms, we would absolutely consider doing that, but what is more important to us is when our expirations occur. In other words, we know that prospect traffic follows seasonal patterns and we put great emphasis on making sure that our expirations occur when we expect prospect traffic to be the greatest and we adjust it for [inaudible] historically we haven't had as much prospect traffic. So while we would look to do longer lease terms, we would only do it while maintaining the integrity of our lease expiration matrix.

If you are seeing renewals trend down, are you offering some type of concessions at that point and, if so, can you give us a sense of how much?

No, it's just whatever we do with the face rent. And the reality is that across the portfolio, when someone renews, they're renewing at a higher rate right now. What I explained is that rate of increase is declining.

And can you tell us what the cap rate was for the 4Q asset that was sold?

Michelle, I don't think we normally quote individual cap rates, but I will say that was an asset where it was priced earlier in the year and so the cap rate was more reflective of the cap rates we were seeing at the beginning of the year, you know, certainly sub 6%.

Then do you think you could give us an idea of where you think cap rates are by asset type, you know, an A versus a B asset? Do you think the cap rates are getting steeper - at a steeper pace for the suburban assets over urban asset?

Michelle, right now there's not a whole lot of transactions to base any insight on cap rates. Just speaking more generally about cap rates, kind of going back to early 2008 - even going back to 2007, when they actually were still sub 5, say in the high 4s - in the first half of 2008 they probably had moved up by about 50 basis points, so call it low 5s. We sold $650 million at a 5.1 cap. And then after September, when everything changed in the capital markets, that's essentially when transactions shut down. You are starting to see some activity out there, at least assets being priced, and the best we can tell cap rates are probably up another 75 to maybe as high as 100 basis points over that, so call it low 6s. We still haven't seen any of those go to settlement, but I'd say cumulatively cap rates are probably up between 125 to 150 basis points off their trough, if you will. As it relates to A&D, you're starting to hear some discussion that there's starting to be some separation in cap rates based upon quality of the asset. Less A and B rather than sort of AB versus C, where there had been some cap rate compression in the 2004 - 2007 time period. But I think it's too early to tell yet whether you'll see it between A and B.

Your next question comes from David Toti - Citigroup.

A couple of questions around some of the charges. The impairment came a little bit lower than original projections. I'm wondering if you can just talk us through how that $58 million was established and what kind of conditions you'd have to see to re-test those values?

Well, those impairments, we provided ranges, so they came in actually pretty much where we thought they would. We provided ranges in our December release. We didn't give you actual numbers. And we've been through in great detail how these numbers are calculated, so I don't want to spend time on this call to go through how impairments and how accounting works for that. I think that's been vetted on other conference calls as well. But we did not give a specific number in the press release that came out in December.

And then relative to the existing developments, many of the pro forma rents haven't really moved and I understand that you really only move those when lease-up commences. What is your sense for some of those assumptions?

Again, I think I mentioned on three of the deals, we did see about 3% or 4% erosion in terms of the projected rents. I would think that they would be somewhat in line with what we're seeing in the balance of the portfolio. Obviously, we're expecting rents to trend down in 2009, and I'd expect the same would occur within the development portfolio.

And then just one last question from me. G&A jumped up considerably. I understand there were some charges in there. Can you just walk us through the delta from the $8 million level last year? We're having trouble reconciling some of those charges relative to that number.

Well, I think if you look at the G&A, most of that difference between years are these one-time items, the severance of $3.2 million; also excise tax of $3.2 million. That makes up most of the adjustment. Then there's minor other things, but the increase is primarily those two items. That's about $6.5 million of it - $6.5 million of the $7.5 million.

Tom, it's Michael Bilerman. I just wanted to go through, as you think about the development that you delivered this year as sort of the billion dollars as placed in service that you're leasing up, what sort of drag is there in your sort of '09 FFO on those assets?

You mean the lease-up period deficits that arise from new development?

Yes, I'm trying to think about if you delivered a billion in '08, they're probably all not going to reach that 6% - 6.5% stabilization in '09, especially given the decline in rents and potentially further declines in the market. And obviously you've already sucked in all the capital costs in terms of interest expense, and so I'm just trying to think about, you know, you may have a bigger jump as you move into 2010 - 2011 as market stabilize and potentially turn positive. You'd get a much bigger ramp up.

I don't know that we have the exact number you're looking for, but on Attachment 9 we do try to call out the assets, the deals that have been completed but not yet stabilized. And, you know, of that billion roughly five communities totaling $280 million are not yet stabilized, and so those had an economic occupancy, I guess, by the end of the period of around 90%, so not fully stabilized yet but pretty close.

And the balance reached your expected yields?

Right. Right. The balance, the other $700 million or so, would be roughly in line with that 6.5% stabilized yield that I mentioned.

Just to clarify, stabilized yield for AvalonBay, those are the actual rents that are in place in leaseup. Those aren't a projection of where we hope to get to. So to the extent the property is stabilized, which, as Tim mentioned, for all but those five that are on that page, they're at stabilization and at the rents that are calculated in that 6.5% yield.

Your next question comes from Karin A. Ford - KeyBanc Capital Markets.

It looks like you guys started two new developments in the fourth quarter. Can you just talk about those projects and what your return expectations are for them versus your current cost of capital today?

Sure can, Karin. Well, those two deals, one was a smaller deal in the Boston area in Northborough, $27 million; the other was a larger deal in downtown Belleview in the Seattle market. Both of those deals were started right at the beginning of the quarter just to be clear, early October, so a lot of what had happened in September hadn't yet unfolded at the time that we started. And really our decision to stop new developments occurred really more in the middle of the quarter. In terms of the economics of those deals, I would say they're pretty consistent with the deals that we talked about that are completed in 2008, sort of mid-6s in terms of yields. Certainly since then our target yields have moved up, our required returns have moved up. But I guess the way we looked at both of those markets, both Seattle and Boston are two of the stronger markets we saw in 2008 and as of early October we still felt pretty good about those markets and relatively speaking, those markets, we believe, will likely perform better in 2009 than in many other markets.

A question on the land parcels that were abandoned. Do you plan to sell those or do you plan to hold them for awhile and wait and see if there's a recovery and a rebound?

Well, you know, our intent is not to develop those. In essence, they're abandoned pursuits where we just happen to own the land. Having said that, that doesn't mean that we're taking them to market today. It's not a good market to be selling land into and technically they're classified as held for investment as opposed to held for development or held for sale. So I think it'd be our intent, as land markets firm in the future, that we'd then start testing the market with these deals. And I guess there's a chance that in one market conditions might change dramatically in a way that we hadn't anticipated that might cause us to revisit our plans, but the intent is to sell it at a later day.

My last question is do you know how many land parcels make up the $239 million book of land held for development today?

I do, actually. It's 16 - 16 different parcels.

Your next question comes from [David Bray] - Banc of America.

Tom, a question for you on the community bank mortgage that was mentioned. Could you talk about that, the size and the terms as compared to where the GSEs and life companies are today?

Yes. The interest rate on that and terms were actually equal to or slightly better than the GSE financings. And it was about a $50 million financing.

And is that a route that, as you look at the $750 million for this year, is that an area that you continue to look into?

Yes, the answer's yes. And I think that the reason we point out that relatively small financing is that, while we're very thankful that the GSEs are there, they're not the only game in town and there are other alternatives to secured debt, including insurance company debt, and we're going to pursue GSE debt, unsecured debt, community bank debt and insurance company debt in 2009 and really diversify our sources of secured and unsecured debt.

And then, Leo, just a couple of follow up questions for you on your earlier comments. Could you, in case you did not mention this, could you walk us through any notable changes in the reasons for move outs in 4Q into January?

Well, I'm going to hit the big ones and then I'll tell you one other one that I've been focusing on. The two big ones that we've been talking about are move out due to home purchase. Historically that's been 20% to 25%. Now most recently it's been below that 20%, in the mid-19% range. The second one is for financial reasons. That's historically run 8% to 10%. It was approximately 9% this quarter. But the other one that I'm watching is - I've been questioned and I've been watching just for our portfolio's sake - am I seeing people double up? Is anything going on there? So I've been watching a number of categories that have to do with are people within our community? Are people moving from one of our communities to another community? Are people going to our competitors or are there roommate status issues? And in the most recent quarter I did see that go up somewhat and it's something, while we don't keep a specific metric or statistic on people doubling up, as we're going into a more difficult economy, as people are becoming more price sensitive, it's something that I am watching. And it went from about 24% a year ago to about 29% this year, and it's something that we're just monitoring as we create strategies for operating the portfolio.

And then finally, what is the quarterly expiration schedule that you mentioned before?

I will give you rough numbers. We typically have about 20% of our apartment homes expire in the first quarter, about 28% expire in the second quarter, about 32% expire in the third quarter, and about 20% expire in the fourth quarter. And that's roughly the pattern that we've seen over multiple years of the way prospect traffic comes through the door, the rationale being we want to make sure that when we have more prospect traffic we have those people there and we have apartments, that's when we would have our expirations there as well.

Your next question comes from Alexander Goldfarb - Sander O'Neill.

I just want to take a look at the New York deals. It looks like one of the New York projects was abandoned and at the same time you went through with the purchase of the Brooklyn land. Can you just walk us through why the economics made sense for the Brooklyn one but no longer made sense for the other New York deal?

Yes, Alex. Just to repeat something I mentioned earlier, the Brooklyn deal was a deal essentially we closed about a year ago. We had closed into a land lease and it was converted to fee this past quarter. And it's a entitled piece of property. It's in Brooklyn, first of all. The other deal was actually in Manhattan, unentitled, so part of it was looking on a risk-adjusted basis. We sensed a lengthy entitlement period ahead of us. It has a mix of some other uses as well that, just given the current environment, we weren't comfortable continuing to invest pursuit dollars.

And then the second question just goes to the new unsecured line of credit in the fund. The banks that make up that line of credit, are those existing relationships or are those new relationships? And then if you could just give some color on the types of banks that participated.

Alex, that is an existing relationship and it's actually one bank.

Like a money center bank?

A money center bank.

Your next question comes from Mike Salinsky - RBC Capital Markets.

Tom, could you talk about the decision to state the stock dividend on a going forward basis instead of retroactively restating prior results?

I'm sorry. Mike, can you repeat the question because I want to make sure - I know what the question is, but I want to make sure that you asked it in the way I'm going to answer it, so please repeat it.

Sure. The stock dividend that you guys did, one of your peers had chosen to retroactively restate all prior period results, yet in your earnings release you announce that you're not going to retroactively restate results. I just kind of wonder the basis for the decision.

Yes, that's what I thought you'd asked. You know, in this area the accounting guidance over it is very confusing. Some of the accounting literature literally regarding this was written in 1941 and it's not exactly on point with what the REIT industry's doing. So I think there is an opportunity and you'll likely see some divergence of practice within the industry regarding this. We've taken the position that it's better not to adjust prior periods, but we can easily see how others could come to a different conclusion. And I have to confess that over the last month I've gone both ways on this, and this is where I landed with it. And after talking with management and our Audit Committee and our accountants, this is how I felt that it was most appropriate to move forward. That doesn't mean that we're right and they're wrong, but I do think it does suggest there's going to be a divergence in practice. And it's going to make your job a little harder in terms of comparing relative performance between the companies. Note that our earnings for 2009 - and I mentioned this in the earnings release - they're going to be diluted by $0.16 per share or about 3.5% of our FFO per share growth is diluted by the fact that we're not restating the prior shares outstanding both for FFO and EPS per share.

Second, at what point does the single family housing market - just given over 2 million of vacant, foreclosed homes and extensive efforts by the government right now - begin to impact the multifamily sector in your view, and is any of that contemplated in your fiscal year '09 guidance?

I'll take a shot at that and John Christie may want to add some comments as well. Clearly, the weakness in the housing market is a positive and a negative to the rental business. You're identifying a potential negative; obviously, the positive is that, as Leo mentioned, we're seeing fewer people move out to home purchases. And with the home ownership rate, including the data that just came out, I think it was yesterday, John, on homeownership rates showed an additional decline in the homeownership rate nationally and even more so in our markets, we're certainly not seeing people flooding to buy homes. Certainly, at a point, as prices continue to adjust down, you would expect to see the housing market strengthen. With inventory right now I think approaching 10 months of standing inventory, it's got a ways to go for the market to get healthy. In terms of the shadow market, we are not seeing tremendous competition. We are seeing some, certainly in certain markets. I think Leo probably - maybe San Diego and D.C. may be two of the markets we're seeing.

The markets that are most impacted by it are the markets where the housing's most affordable, so Chicago, Central New Jersey, Northern Fairfield in Connecticut, a little in Southern Fairfield, but more in Northern Fairfield. And then two markets where in the most recent quarter we've seen some spot impacts would be in downtown San Francisco just because of condos and then our properties that are located close to downtown San Jose. But those are the markets that really have shown some impact, and the two in Northern California are just this most recent quarter and really just the condominium issue.

I think if you step back for a minute, certainly if you think of the housing market and its components, the shadow market, as Leo mentioned, is an issue, but not our biggest issue. People moving or the concern that people are going to start to purchase homes is an issue, but not the biggest issue. The biggest issue remains 1.5 million jobs lost last quarter, the potential of another 3 million this year - that overshadows, in our opinion, the impact we're seeing from any competition from the housing market. And as the homeownership rate continues to fall, it ultimately creates more customers for us, not less. So it's something we watch pretty carefully, but it's the economy that keeps us up at night.

The basis of the question is I'm just wondering if and when job growth does come back, does multifamily rebound as much with people essentially with the affordability gap having closed significantly. Finally, then, just a bookkeeping question here. The gain on the term notes and the abandoned pursuit costs, where were those located on the P&L? And also in your guidance for 2009, what is the benefit from the lower LIBOR rates?

The gain on the term notes I believe is in interest expense. And what was the second part of your question?

The abandoned pursuit costs?

Oh, that's in the investment and other investment and investment management costs.

Okay, and then the LIBOR benefit embedded in guidance?

You know, we gave our range of LIBOR in the press release last evening. I would tell you that, if you're look at the forward LIBOR curve, it's probably at the low end of the curve. But the benefit there, there's not really a lot of floating rate - there's not a lot of LIBOR-based floating rate debt on our balance sheet in 2009, our line. We don't anticipate our line is going to be really drawn that much during 2009. It benefits us, but it's not going to be that dramatic.

Okay. There's just a lot of moving pieces there?

Yes.

Your next question comes from Andy McCullough – Green Street Advisors. Andy McCullough – Green Street Advisors: Tom, you had talked about construction costs coming down. Could you quantify that both in terms of materials and labor? And then how much farther does it really have to fall before development starts to pencil again and assume, for argument's sake, flat rents and 7-ish cap rates?

Andy, this is Tim, actually. In terms of breaking it down between labor and materials, I'm not sure I'm going to be able to do that for you. In terms of what we've seen so far in the market in deals that we have been pricing - we're not pricing much these days - low double-digit declines from the peak. We have benefited, though, from deals that we've already started where in some cases we've actually been able to go back and re-bid a number of contracts, not necessarily all the contracts but a number of the contracts. I think a good example of that is the deal in Brooklyn, Avalon Fort Greene, which had an original budget closer to $320 million and we reflected a $14 million decrease in that this quarter which was largely based upon rebidding with a number major trades. And then we continue to get very favorable buyouts that would suggest that we've been able to get another 3% - 4% out of many of these other budgets. I think collectively we were able to bring our estimated construction costs down by about $25 million for the 14 communities currently under construction. In terms of what I've seen between labor and materials, I really don't have that at hand to give you a sense of how that breaks down. And then had a second part of the question, if I could ask you to repeat it. I think it related to yield parameters, but would you mind repeating that?

Yes, just how much further do these costs have to come down before you start taking a second look at some of these deals that you have on the back burner?

Yes, I think there's probably more than just costs. I think that's part of it. First of all, we want to make sure we have the capital. But in terms of moderation in construction costs, I think probably another 10% or so would be my sense before you start seeing yields in a range that would be worth taking a look at starting the deals.

And then with respect to redevelopment, it's interesting to hear you guys, that you might actually ramp that up. What types of yields are you targeting there and how did those yields change over the last 12 months?

Well, in terms of redevelopment, it's not that capital intensive, just something to remember. I think we're planning on starting, you know, typically it's $6 to $8 million per project of new capital that you're putting in. And typically we look to see yields a little north of 10% on the enhancement component of that capital. Some of that capital does reflect deferred maintenance costs that you're going to spend one way or the other. We just collapse it into the capital budget at the time of the redevelopment. And we haven't really seen those numbers change dramatically. It's interesting. What we focus on is really the difference between the rehab units and the non-rehab units. And while in certain markets absolute rent levels may be coming down, the relative rent levels between a nonrehabbed and a rehabbed unit have stayed relatively constant over the last year.

What percent of your portfolio is currently on revenue management now?

Currently, we have 18 communities that are on revenue management, and I'd expect by the end of 2009 we might have 50 plus or minus communities. We probably would deploy more quickly, but we just have other initiatives that would make it more complicated. So that's about where we're at and where we're going.

Do you notice any noticeable difference in the performance of those communities versus the communities not on revenue management? I don't know if you have any communities in the same market, with one being on and one being off, that you can directly compare, but any color there?

I can give you just some general color. Obviously, if we didn't that we were getting a lift, we wouldn't be moving forward with it. We've been doing revenue management or testing it for basically two years. We believe in the science, we believe it makes sense, and we believe we've found the right product. So we do expect to get a lift - I don't want to get into the specifics of what that lift might be - and that's why we're moving forward with deploying it to additional communities in '09 and I would expect in 2010 we'd probably finish the deployment of our entire portfolio.

Your next question comes from [Connor Finnerty] - Deutsche Bank.

What's your expected retained cash flow in 2009?

It's about $75 million.

(Operator Instructions) Your next question comes from Paula J. Poskon - Robert W. Baird & Co. Paula J. Poskon - Robert W. Baird & Co.: What are you seeing in terms of existing tenants coming to you seeking to have an early lease termination or seeking to go to month-to-month? And tangentially to that, what's happening with delinquencies?

With respect to month-to-months, our month-to-months have actually gone down. I think that last quarter I told you that a year ago - so the Q3 '07 - was about 5%. In Q3 '08 it was just under 4%. In Q4 '08 it dropped to approximately 3%. So they are definitely coming down. With respect to delinquencies, we really focus on bad debt. In the fourth quarter our bad debt ran approximately 0.8% of revenues, and that's up from the previous two quarters, where it was running approximately 0.7%. Lease cancellation fees are up. I don't have the exact percentage, though not much. There haven't been a lot of cancellations; it's not a big percentage of our reasons for move out. It is something we watch, and I don't have the exact number in front of me, Paula. Paula J. Poskon - Robert W. Baird & Co.: That's fine. I was just looking for sort of an order of magnitude, if you will. And then just one other question, a housekeeping question actually. On the first page of the press release you have a very nice per share table there that outlines the non-recurring items and then on Attachment 17 you have the same line items, not on a per share but just in whole dollars, but I can't make those two things tie, and in particular, it's the federal excise tax. On the front page on the per share it's a $0.04 impact, but I can only get about $0.015.

Yes, there's some rounding issues on that, but you need to stick to the front page and I think that'll give you a better guide. We have to include the dollars in the back just to make sure that we conform with GAAP and non-GAAP measure disclosure requirements.

Your next question comes from Eric Anderson - Hartford Financial.

Just a quick question. I wonder if you put in perspective for me what you would need to see, either in terms of pressure on occupancy or on rents themselves before there would be any kind of pressure on the dividend?

We enjoy a very low payout ratio relative to anybody else in our sector. It's the lowest in the sector and it's one of the lowest in the industry, so in terms of calculating the pressure, you can do the math, but if we're retaining $75 million a year - which is a question I answered just a moment ago - that would give you a measure of how much NOI would fall before we would have an issue with our dividend if nothing else changed.

Okay, so 75 on - what would be the base number, then?

Recurring NOI of $550 million or so.

(Operator Instructions) Your next question comes from Gordon Watson - Ore Hill Partners.

I'm just having a little trouble; maybe you can help me. I don't know if you said this, but could you basically walk through a real quick sources and uses for '09 and '10? It's a little tough getting there.

You know, if you'd like to call us - we're now kind of going over the hour - if you'd like to call me, I would be happy to walk you through that, but I've given some detail in my comments as well as Attachment 16 and I don't want to really consume too much time on this call going through that again. But if you'd like to call me, I'd be happy to address your questions.

Just being in the New York area we've heard a lot of anecdotal evidence about people going, you know, if they hear someone in their building is getting a rent 10% - 15% below the asking market price, that they're going back and sort of threatening to break their lease if they don't get a discount. Have you guys seen anything like that or are you expecting to?

With respect to someone coming in saying they're going to break their lease, no, I haven't heard anything anecdotally in that regard. Sometimes it does come up during the renewal process and we deal with it accordingly.

Thank you very much. At this time we have no further questions. I'll turn the conference back over to Bryce Blair.

Well, thank you, Lori, and we appreciate everyone's time on the call today. Thank you for participating.