Hello and welcome to the Camden Property Trust 2008 Fourth Quarter Earnings Conference Call. All participants will be in a listen-only mode there will be an opportunity for you to ask questions at the end of today's presentation. (Operator Instructions) At this time, I would like to turn the conference over to Ms. Kim Callahan. Ms. Callahan, you may begin.

Good morning. Thank you for joining Camden's fourth quarter 2008 earnings conference call. Before we begin our prepared remarks, I would like to advise everyone that we will be making forward-looking statements based on our current expectations and beliefs. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from expectations. Further information about these risks can be found in our filings with the SEC and we encourage you to review them. As a reminder, Camden's complete fourth quarter 2008 earnings release is available in the Investor Relation section of our website, at camdenliving.com, and it includes reconciliations to non-GAAP financial measures, which may be discussed on this call. Joining me today are Rick Campo, Camden's Chairman and Chief Executive Officer; Keith Olden, President; and Dennis Steen, Chief Financial Officer. At this time, I would like to turn the call over to Rick Campo.

Thank Kim and good morning. I hope everyone has taken a leave out there. Welcome to our 61st quarterly conference call that Keith Olden and I have held which since our IPO in 1993. We operated Camden as private company for 10 year before our move to the public markets. Over last 25 years we have navigated many business cycles and market conditions. I point these facts out to make a simple point, this is not our first rodeo. I will not spend a great deal of time today talking about current market conditions. I think everyone on this call could use a break from that. But I will talk about however, its how we are running our business and how we are positioned for what will be our robust recovery when these economic conditions improve. First onsite teams are focused on day-to-day operations and providing living excellence to our residence. Our support teams are focused on providing our onsite teams with workplace excellence. Our liquidity and balance sheet are strong; we have already tapped the secured markets to Fannie Mae and will continue to do so this year. Dennis, will give you more details on our capital plans later on the call. Beginning the third quarter we began right sizing our G&A, development and construction staffing levels for fewer development starts and a more difficult economy. Many of our markets entered the recession in late 2006 and early 2007. With this knowledge we took action to slower our development pipeline before many of our peers did so. We have not started a wholly owned new development since mid 2007. Developments that were started were in joint ventures limiting our risk and lowering our capital requirements. We have just $5 million in developments spending remaining in 2009 that is not…

Thanks Rick. Consistent with prior years I am going to use my time on today's call to review the market conditions. We expect to encounter in our largest markets in 2009. I will address the markets in the order of best to worst by assigning a later grade to each one as well as give you our view as to whether the market is improving, stable or declining. Following the market overview I will provide some additional details of our fourth quarter operations and our 2009 same property guidance. Starting with an overview of Camden's markets will begin in Dallas. With initial ranking of B+ and declining outlook Dallas is our highest rated market for 2009. Although job losses of 9500 or projected that's a manageable number in a market like Dallas. The challenge in Dallas will be the 15,000 projected multifamily completions in 2009 up from 9,000 last year. The new supply and modest demand contraction will make more challenging with fairly decent 2009 in Dallas. We rate Huston in current conditions as B with a declining outlook. Similar to Dallas, Huston will lose jobs but at a manageable level of 10,000. However, an additional 15,000 new apartments on top of the 18,000 delivered in 2008 we'll reduce pricing power for all multifamily operators. Huston was our best performing market in 2008 at 5.5% NOI growth. However the job losses and supply increase will make NOI growth harder to come by in Huston this year. After a sold year of NOI growth last year, Denver will again be one of our best performers in 2009. Job losses should be in the 8000 range with only 4800 new units completed in the year. The market is stable going into 2009 and we believe it will remain, we have rate Denver…

Thanks, Keith. I will begin this morning with a review of our fourth quarter results. Camden reported FFO for the fourth quarter of $10.1 million or $0.17 per diluted share. Included in these results were the following non-recurring items. $8.8 million in gains on the early retirement of debt which I will discuss further in a minute, and $51.3 million non-cash impairment charge on our announced reduction in development activities as detailed in our press release on January 26. Excluding these two non-recurring items which were not included in our prior guidance for the fourth quarter, our FFO for the fourth quarter would have been $52.6 million or $0.90 per diluted share, $0.01 per share above our prior guidance range of $0.85 to $0.89 per share. The slightly better than expected performance is primarily due to property net operating income exceeding our forecast by approximately $700,000 and $340,000 favorable variance in interest expense. The $700,000 favorable variance in property NOI is the result of $900,000 unfavorable variance in property revenues as same store revenues came in at the low end of our expectations with average occupancies and average rental rates declining 1.3% and 0.9% respectively from the third quarter. The unfavorable variance in property revenues was more than offset by $1.6 million favorable variance in property expenses reflecting the success of our cost reductions and containment measures as well as lower-than-anticipated incentive compensations and employee benefit costs. For all of 2008 same store expenses increased 4.6% over 2007 below our guidance of 4.8% to 5.2%. Excluding the expenses related to the roll out of our ancillary income initiatives Perfect Connection, our bulk cable program and Valet Waste our door-to-door trash collection program 2008 same store expenses increased just 1.6% over 2007. Excluding the impact of our ancillary income initiatives and…

Thank you. (Operator Instructions). Our first question will come from Michael Bilerman from Citigroup. Please go ahead.

Good morning. It's David Toti here on the line. Couple of questions on your development pipeline? Can you just talk about Camden Potomac and it seems there was a slight occupancy dip there.

Sure, Camden Potomac is a good example of large project that sort of gets in its way when it strives to finish up its lease-up. You have very good absorption to start with 20 to 30 units a month and then once you get a year ended lease-up, you start having your traditional turnover and your velocity goes down generally in the 10 to 12 units a months. So it takes a lot longer to lease the bigger projects and it does the smaller ones. The Potomac also had an issue, real specific issue to the project. We had a large military corporate account that was working at the Pentagon on a special project that related to about 5% of the occupancy. And that corporate account finished their work and moved out. So, we had sort of a hole in the move out mix related to one corporate user. We think that the project is still very well positioned and we just had a little hiccup on the corporate move out.

Okay. And then also relative to the pipe line. Is there any way to quantify the impact it yields on the move out of some of the stabilization dates?

Well that’s a good question because the whole issue of what is the stabilized yield in this market is very complicated question. Is the stabilized yield based on the rent stream that is under pressure, what is stabilized today is really a hard question. I mean you could take a hard line approach and say that current market conditions remain indefinitely and then you are talking about yields and probably are down, 75 Bips from where they were before plus or minus. And I would say that just see the packing up of some of these dates, what we were doing there is simply trying to maintain decent velocity on lease-up without having to give away the store if you will, we could lease this up ahead of schedule if we just drop rents dramatically and create a market. We think it’s a better strategy to take our time in lease-up and not try to push velocity at the price of rental structure, especially when a lot of these projects are in the mid-70 lease, so we don’t want to describe rental structure for the existing residents.

Okay. And then my last question just along the lines of rental management relative to your management systems, it's obviously you held onto occupancy slightly at the expense of rent growth. What’s the next chapter of that management system? Do you start to look no occupancy at some point to keep revenue decline stable or do you still hold occupancy as the primary goal?

Yes, our system, David, is really calibrated towards maintaining occupancy. The yield to our revenue management system places a huge cost on vacancy as any revenue management system should. So the model is always fighting for occupancy. Interestingly enough our occupancy at the end of the year it was at 93.3%. We are projecting write-off that for the balance of 2009 which is about a percent below where we would normally like to operate the portfolio on a stabilized basis. One of the things that we have done as a result of trends that we saw in the third and fourth quarter, where the downturn started to really accelerate, we had to go in and tweak our model to deal with things that in a normal stabilized world the revenue management model really doesn’t have to deal with. Two that are most obvious in our world are skips and evictions. And I gave you some numbers in my prepared remarks, we used to put a little context to those, the skips and evictions both went up at sixth-tenth of a percent in the fourth quarter on a run rate basis. And that sounds like a whole lot, but if you add those two together skips and evictions are not something other than what you would normally expect to see which is a pretty stable number over long periods of time. They constitute unanticipated demand destruction and a revenue management model. In other words our revenue management model is always looking out at 150 days to try to balance future demands and what we know is becoming available through lease explorations. Well skip or eviction is a lease exploration that happens overnight. And that is very hard to anticipate that in a revenue management model other than they just hold it constant base on history. Well with the increase in that particular metric you got 1.2% increase in immediate demand destruction as opposed to quarterly lease move outs. So we are having to tweak our model to deal with that. We think that we had made the correct adjustments and our expectation is that we will be able to maintain our occupancy in around the 93.5% to 94% range for the year. If there is any, so the upside I think in our particular case because we went into the year about 93.3%. We have been able to maintain that for the first two months of this year, which is better than plan and both months because January and February are normally two of our lowest seasonally adjusted occupancy numbers. So, I think there is a little bit, I think we got in the head of the problem on the skips and evictions and if that continues to be the case there maybe a little bit of upside in that.

Great. Thank you for the detail.

You bet.

Your next question will come from Mr. David Bragg from Banc of America. Please go ahead, sir.

Hi, good morning.

Good morning, David.

Rick, given your role at the National multi-housing council, can you talk a little bit about the latest lobbying efforts?

Lobbying efforts with respect to?

With respect to, recently I was reading about the mortgage assistance effort and basically excluding the GSEs or excluding the multi-family portfolio from the GSE portfolio limits?

We are defiantly in the middle of having discussions with all of the related parties in the whole debate on what happens to the GSE’s and what happens with the stimulus bill. We were successful as an industry last year sort of fighting back this tax credit for new home purchases. They originally had a $15,000 number in there that they have now and we were successful in sort of beating that back. I think the industry is definitely well positioned, lobbying on the GSE side. I think the momentum of the stimulus package and fact that the $15,000 tax credit for home purchases came from the republican side and it was a compromise with the democrats and the senate to put it in, makes that probably a really tough thing to lobby against this point given the momentum of the bill and everything that’s going on the hill. I think our industry believes fundamentally, I think the improvement in the single family home market is paramount to the improvement in the overall economy which helps the multi-family business as well. So, while we think it's, it doesn’t make a lot of sense to give people tax and credits to buy houses. We think mortgages rate and dealing with GSEs is probably better way to do it, I don’t think we are going to be successful in limiting that particular tax credit at this point. As far as the GSEs go, we believe that they are going to be around for long time. It's not an easy situation to fix. The multi-family part of the business is very robust they have very limited loan losses. They made a lot of money on multi-family. This last year I think Fannie Mae actually just did a pres release yesterday to talk about how they funded $35 billion multi-family loans in 2008 with very low delinquencies both Freddie and Fannie have increased their profits from multi-family in 2008. The idea of taking multi-family out of the cap is something that we are definitely pushing and make sense. If you go through the Freddie and Fannie press release it's very instructive 89% of their loans were to people that were from a partner perspective related to people at or below the medium income for their communities. So, by definition Fannie Mae continues to and Freddie Mac continue to make affordable housing available for people from a rental perspective, so we think that we are well position to continue to dialogue with Freddie and Fannie. We have broad coalition in your group it's not just multi-housing folks. We have the mortgage bank association, the national homebuilders also senior housing does a lot of Fannie Mae financing as well. So, we have a broad correlation and its working on this not just multi-housing council, but we are definitely pushing very hard and we think we will be recently successful with GSEs.

The focus on affordability that you mentioned, we did see that in press release and had not seen that in the press release from a year prior, is that certainly an increased focus for both Fannie and Freddie?

The whole idea, I think between, if we think about Freddie and Fannie's sort of charge it used to provide liquidity and stability to housing markets and they had sort of a secondary issue which was to provide affordable housing and obviously the Freddie and Fannie scenario is to keep rates low. So, that people can afford homes, the incentive finance committee plus house committees have sort of pounded on the GSEs about providing affordable housing Barnet Frank has made multiple statement that one of their main mission is to provide affordable finance to people and when you look at apartments, people think of market rate apartment is not necessarily affordable make sort of get confused about the definition of affordable. Most people think of affordable means that it's a section A housing or subsidized housing in some fashion. But I would say that future Camden's portfolio we would be probably in that zone, 80% to 90% of our properties are serving the middle income folks, workforce housing if you will, teachers police, fire fighters and those are folk and those people are at or below the medium income of most American. So, the apartment business is all about affordable housing and that’s why I think that Freddie and Fannie, they are not going to see the whole apartments get cut out of the deal especially when you think about how much money they are making on multi-family portfolio. Freddie Mac haven’t seen their year-end numbers yet on the multi-family, but through November they had $380 million of profits built in, that had come in during the year from multi-family originations. That was up like 28% or 30% from the prior year. So, in a market where situation where you have the government trying to figure how to stop losing money, it would seem really odd for them to shut down an entity that is making money in the multi-family area and provides liquidity for affordable housing.

Okay. That’s very interesting. Thank you.

Your next question will come from Rob Stevenson from Fox-Pitt and Kelton. Please go ahead.

Good morning. Ric, given your comments a minute ago, has the Rental Multi-Family Housing Council tried to get a tax credit for renting, slanted towards helping working class families as a way to sort of offset some of the dilution that might impact you guys from having a single family housing tax credit?

It has definitely been brought up. But I think it’s a real difficult thing for us to put in to the mix. We get into the whole issue of how big is the proposal, how much does it cost. But the whole single-family housing discussion is one that sort of dominates and I think it is real tough situation to try to get something like that in. I guess, from my perspective this isn’t the industry’s perspective for saving the life. I had a lot of discussions with our industry people about this. The tax credit is not all that bad the 15,000 in my view, because it will be short lived and the people who use it are going to be, not the people that were pulled out of apartments initially. Those folks that don’t have down payments, they don’t have good credit scores, they don’t have stability from a home ownership perspective, are still not going to buy houses. There is going to be credit criteria that keep folks, that really out to be renters in the rental part of the business. The other part of the equation I think that benefits multi-family is that, if you look at what happened in the peak of the housing level, a lot of the baby boom echo kids were buying farmhouses and condos. The parents with personnel notes thinking that it was a great thing to do, so a lot of our rental demand that was coming forward in the form of baby boom echoes were actually buying properties too. We think that the baby boom echo is not going to buy speculative condos or down houses and that our demand is actually going to go up from that sector once the economy improves. So, I hope that answers the question, I just think it would be tough to get a rental credit in here.

I mean to follow your logic, basically yes, there's not going to be little pull to people, our marginal credit out of your units, but what they will be able to pull out with the tax credit or your operation on higher quality renters that have the way with all to buy and presumably given the credit quality of the renter-base seems to be going down across the multi-family space. I mean isn't that likely there a sort of disproportionately impact too.

We have had a lot of discussion about that and I think that in a natural, when you think about the natural supply and demand aspects and the propensity of the rent versus to own, I don’t think that the tax credit is going to create a mad rush to go buy and to move out. I think the consumers sentiment is different is more fragile than just gee $15,000 go buy a house. The people that are going to buy homes are going to buy homes, and we are fine with that. When you think about the problem we are not buying with is when you have people that really can't afford a home, buy a home and our natural renters are I think we are going to have more natural renters than we would having people move out to buy homes. The peak moving out to buy homes, 24% of our people moved out of peak in the mid-part of the decade. If you look back into the 90s we had an average of 12% to 13% of the people moving out to buy houses. We didn’t have the baby boom, the baby boom echo dynamic at that point. And multi-family cash flows rose dramatically during that timeframe. So, I think when you get back to a more normalized economy especially when you are thinking about the supply that we are going to have, there are people that we are talking at (inaudible) conference, about a housing shortage for apartments in 2012 because of the lack of ability to build. We can build even what we are tearing down. We were tearing about 110,000 units a year and most people think that we are going to go below that from a new start perspective in 2009-2010. So, I don’t think that we are going to be negatively impacted by some rush to go buy houses initially.

Okay. And then one last question for Keith. Keith when you take a look at the expected expense growth in '09, ex-trash and cable, what’s putting the upward pressure to get you in the 3% to 4% almost 4.5%. One would expect wages were down, materials were down what’s putting the pressure there on you guys?

Property taxes.

Okay.

We got our forecast for '09 increase in property tax is just 4.5%. Interestingly enough if you take our controllable expenses the way we define and which excludes tax as insurance. We are actually down year-over-year on controllable cost in '09 because of our headcount reductions and our salary [freeze]. So the pressure is coming all from property taxes, obviously that’s going to be a huge battle. There is nothing we can do this year. That’s already baked in, but for next year it’s going to be a huge battleground. We are very aggressive and we will continue to be very aggressive because it is our single largest exposure on the cost side of the equation for 2009. So, it’s not from, we are doing a great job controlling cost. Dennis, walked through it, that you kind of back out those non-comparables for the year. We were up 1.6% for 2008 non-controllables were actually down year-over-year in 2009. So, we are very comfortable with, we have done what we need to do to get any controllable cost out of the run rate. We are just fighting the tax amounts.

Okay, thanks guys.

Your next question will come from Michelle Ko from UBS. Please go ahead.

Hi. I was wondering if you could talk about renewals what gross trade excluding other income are you assuming for renewals in '09. And now you are becoming more aggressive on concessions to lock in occupancy. Then also, are the new residents being offered some better deals than someone renewing for the same unit?

Yeah, let’s talk about just generally on renewals first of all. We don’t deal we will have to deal with the concession part of it, because we do net effective pricing whether it's on renewals or whether its on new leases. Our renewals quotes are all generated from the same yield management system that we used to generate new leases. The only, the new ounce with renewals is if you have someone who is particularly crafting, they have the ability to go in and look at what if we have a current unit offering where those net effective rents have dropped at that particular community on that particular unit type, then they could obviously have visibility to what that other comparable unit maybe leasing for now. Obviously every unit is unique, it's uniquely priced in the location and the community, sales on the new premium, etcetera. But we are clearly aware and we are managing that process by doing the following, we have 60 days prior to any renewal coming up. Our MO is to have a personal contact from someone on staff to the residence and offer them the ability to renew their lease at their existing market rate. Most people when they learn that they are not going to be faced with the rental increase, that’s something that’s seems like a fare and here is a fair bargain for them to be able to renew that lease term. Our community managers have the discretion and the case where you really do have a fairly sizable gap between what current markets is and the visibility into that current market is versus someone’s renewal. They have the ability to adjust the rental rate and negotiate those and individual circumstances. The key though is that you have to make sure all…

Okay. Great. And also have you seen more doubling and tripling up? Have you seen like the most vacancy in studios and one bedroom versus the two and three bedrooms?

Let me say what we have seen, we have seen that transfers within Camden's communities for all reasons for the fourth quarter of 2008 were up. There were about 12.5% versus about 9.8% in the fourth quarter of 2007. So transfers for all reasons we know are up. We believe that a fairly sizable portion of that our people who are transferring to an apartment to accommodate a newly minted roommate relationship. So, we do believe that it's happening. It's happening if you assume that it's some portion of that 4.5% increase or 3.5%. I mean it's a meaningful number and I think if you are going to likely to see that we will likely see more of that as 2009 unfolds. But the hard numbers are transfers are up 3% and we have no way to attribute that to anything other than people or making different choices about the room mate situation.

Okay. And then just lastly, given a number of REITs are trying to conserve capital by issuing a part of there dividend and stock in cash. Can you talk about what your assumptions are going forward in terms of how you pay your dividend?

Well, Dennis, went through in our capital plan or model our current modeling guidance assume that dividend is paid out of operating cash flow and paid at it's current level. When you look through our assumptions, we are paying with the mid point of our range and the CapEx deduction we are paying, our dividend out of operating cash flow. Obviously, with these kinds of markets today, you have to look at every option for liquidity and balance sheet strength as key going forward. I think that our Board reviews the dividend on a quarterly basis, our Board meeting is coming up in a week or so. We will be reviewing the dividend and making sure that we will be survivor in this game and have a strong balance sheet and strong liquidity, I think that there obviously have been companies that have paid stock dividends and companies that have cut their dividend and I think all of that is a function of sort of how they sit in the current market and what their views of the credit markets are in the long term operations of their businesses and will be doing that on a quarterly basis.

Okay. Great. Thank you.

Your next question will come from Karin Ford from KeyBanc Capital Markets. Please go ahead.

Hi, good morning. Just a question on your NOI guidance down 4.5 to down 7.5, given the fact that your markets did enter the decline earlier than others and the fact that your comps looks a little bit easier than some others do. Can you just talk about whether or not you expect the decline sort of continue to increase over the course of the year or, you if start to expect to see the decline start to level out at some point in '09?

Karin let me address that from just a little bit different direction. And I think it might be easier for you to get your head around. If look at Camden, our stock position by the way is what your premise was that Camden's market entered the downturn first. We were the first one who got that with the job losses from the sub-prime debacle. If you look at where those markets that got hit the hardest, for example in Phoenix, Phoenix in 2008 lost 70,000 jobs, that's a really staggering blow to that economy. They're going lose jobs again in 2009, but they're going to lose jobs probably in the 20,000 range. So, if you think about the rate of change of job loss, that's pretty consistent across Camden's market. Now let me kind of bring it back why I think that there is an inflection point coming in 2009 for Camden on a relative basis. If you take the actual reported results at the end of 2008 for our peer group, and you compare it to Camden, the average of the peer group was in NOI growth of roughly 4% positive. We were four-tenth negative, so almost a 4.5% underperformance relative to the peer group if you want to look at that way. If you look at the guidance for 2009, assume that we are all geniuses and we hit our guidance, exactly as it is given, we are 100 basis points below the midpoint of the peer group. Peer groups are about five, we are at down six. So, if you think about it from the rate of change, that's a huge shift on a relative basis, and I think that the underlying reason for that is that, our markets have probably taken the of their hits. I…

That’s very helpful thanks.

You bet.

Next question is just on your acquisition guidance. You put in 0 to 100 million on your balance sheet and 0 to 200 million, potentially in joint-venture. Can you just talk about what type of return expectations, or what type of market conditions you need to see before you start to head down that path?

Well, Karin, that's a question that our acquisitions team to ask us every day. And we keep moving our bar up. The biggest issue to me is going to be gain a sense that we have an inflection point in what’s and what NOIs are going to do, because it’s not so much what cap rates you should buy out to me, because I think cap rates are interesting and clearly they have gone up, but the more complex issue to me is what will cash flows be and what the growth rates will be in those cash flows going forward. And so the combination of two things, one is we need to get a cap rate that is north by at least a 100 basis points 150 basis points over the debt loss. And second an underwriting confidence that we can underwrite the NOIs at a level that we feel comfortable with. Now, even if it’s a decline, that’s okay as long as we have an expectation that that decline is going to have an inflection point, and we in fact are going to be able to project increases in the NOI going forward. So that’s why we have 0 to 100 numbers of sides.

Got it. Just last question is have you checked what your pricing is on your issuing new unsecured debt today?

Yes, we went out today would probably somewhere in the 10% to 11% range.

Okay

Back in 300 to 400 basis points.

Okay, thanks very much.

Your next question will come from Jonathan Habermann from Goldman Sachs. Please go ahead.

Hi, good morning. it’s Jon here with (inaudible) while most of our questions have actually been answered already, but just really quickly I was wondering if we could get maybe an update on how the demand for your different ancillary services have been holding up in different markets in terms of Valet Waste program and Perfect Connection and what should we change on that front over the past two or three months?

Well, in both cases the valuation in Camden TV there really isn’t a take option. It’s a service that we provide, we do breakout the fee for that service separately, but our acceptance rate has been extraordinary on both cases. In the case of cable TV it’s fairly, straightforward and a no brainier most of our residents already have cable. They are paying more to the current incumbent provider than what the price we provided at. And we actually provide a little bit better package for less money. So that's just absolutely a win for our residence and the acceptance has been great on the Valet Waste it's a customer service issue. It's also a property maintenance cleanliness issue. Once you roll it out, the way that we roll it out, which we give people the service free for the balance of their lease term whatever that happens to be, even people who conceptually object to the idea of paying to have their thrash collected and taken out. By the time they have had the service for four, five months for free, find that when it comes online and they are paying for it’s a value proposition. So the acceptance has been extremely good, and our only hesitation in rolling it out, cable is rolled out everywhere we can of where the contracts provide. Valet Waste, we are rolling out everywhere that our partner Valet Waste can provide the service, which is at this point about 75% of our portfolio.

Okay thank you.

You're welcome.

Your next question will come from Rich Anderson from BMO Capital. Please go ahead.

Hey, thanks and good morning. Dennis how much more debt can you raise through remain comfortably within covenants levels?

I didn’t hear at all, but I think you asked how much additional debt could I raise from a secured perspective, and after the $250 million raise we have in the second quarter, we have another $100 million to $250 million that we can do in addition to that.

So $400 million in total?

Yeah. $400 million to $450 million in total.

Okay.

That's to make sure you maintain your ratings and all that and that’s very critical and important. But when you look at let's just make an assumption that unsecured market never comes back. I'm saying never here. It’s very hard to believe, or let's just say never. Under that scenario, we could probably borrow an extra $1.5 billion of secured debt and still be in covenant compliance with your bonds. The negative of that would be that you obviously down graded and would be a secured strategy versus unsecured strategy, so we are absolutely committed to an unsecured strategy. We do believe fundamentally that markets will improve, they have already improved, so for this year even though the numbers were still pretty expensive to unsecured. But if you take the zirconnian never ever, ever will the unsecured market comeback for multifamily companies, we could issue a $1.5 billion worth of agency debt and still be in compliance with our bond covenants.

Did the point being why bother maintaining an investment grade rating and there is never.

Well, if the relative advanced care market never comes back.

Right.

And there is never an alternative for us to borrow in that market, then you would go secured. And there wouldn’t be no decision, and I just want to make sure, I am clear on that that we have an unsecured strategy we are going to maintain our ratings, but you have to look at on our worse case downside scenario then it never comes back ever and the answer to the question to $1.5 billion.

And maybe quick question for you too, Rick. Does Fannie and Freddie prefer funding acquisition, or existing asset, there are any difference in the pricing anything like that?

No, Fannie and Freddie really their enjoyed their current position, and that they are able to get the best borrowers. What they really like are the best borrowers and their properties. And today, because borrowers are the public companies because we have low leverage. They hadn’t been able to really make a market with the public companies, and hence we end up with tightest spread and the best yield from Freddie and Fannie.

I guess I was thinking within acquisition they least have a data point in terms of value asset.

No. I don’t really think they even look at that number at all. What they look at is debt coverage. They look at debt coverage period and the story and they could careless what you have to acquire the property at, do you acquire the property at a number that they are going to look at their loan and say, I want debt coverage of 125 or 130 and that will you take whatever underwritten cash flow for trailing three months, is divided by that number and that's what they are going to lend, and so I don’t think they have preference as to carrying what you pay as long as you are putting equity in to cover their debt.

Okay. That's all I have thanks.

Okay.

Your next question will come from Alexander Goldfab from Sandler O'Neil. Please go ahead.

Good morning.

Good morning, Alex.

Good morning Alex. Glad to have you back.

It's good to be back. It's pretty rough market out there.

I have heard that.

I know the paper have all those good news in there lose that in the headlines. Just a question on development, going through, obviously you guys or not alone in pairing back, but going through, it's interesting Colorado, you axed although I think in your opening comments you said that Colorado was sort of at the top of your list for performing market. Selma and Vine got axed NoMa too axed, but you kept Las Vegas just want to get a little more color into how you made decisions on, which deals to keep, which ones to get rid up, and then specifically on Selma and Vine, just given the difficulty with LA, the decision to give up that assets and then also what was driving the expense, because on a per-door basis it looks pretty pricy, so not sure if that's hard cost or if that's the carrying cost and the soft cost.

Okay, well the way we analyzed our development pipeline, and went through this impairment analysis and discussion, we did two things. One was we sort of separated projects by size and by what we thought projected yields would be in current market conditions. The challenge on the second piece was construction cost have come in dramatically in the last six months, plus or minus and it's really hard to sort of judge what construction costs are today. We know market conditions from a rental perspective and out robust for sure. So we categorize each property from a size perspective and a total return perspective based on what we thoughts the cash flows would be. So two projects stock out which would no NoMa phase II and Selma and Vine as they were large projects over $150 million each and then the other projects sort of hit based on a yield filter, if you well, and we then evaluated the cut points on which projects we thoughts going forward to be regional projects and ones that could be done in phase I or phase II, we're analyzed and Las Vegas for example just to give you color on that. Las Vegas can be done at a phase II, which is a very three-storey, four-storey, garage wrapped product it's a bread and butter product. And we think Las Vegas in long-term is a great market. And we have a decent basis on our land. So, we have decide to keep that one. The price pressure on cyclical product has going down a whole lot more than type one construction on Selma and Vine for example. Now the fact that Denver is doing well today is important, but ultimately the decision was what total \ return could we earn on that projects in Denver relative to other projects. So it was really just making a cut at what returns we were willing to take. Now, that said, the fact that we wrote these down, and the fact that we have abandon the construction on them at this point doesn't mean that we can't reinstitute them in the future at the written down price. So, Selma and Vine point out has a lot of entitlements and one of the issues with it was because of the entitlement issues that took us years to get that building entitled and today the question ultimately would be whether that building gets to built as entitled though we have to change the entitlement in the future. So, bottom line is that even though these are abandoned developments today, they could be restarted in the future if in fact they made sense.

Okay. And then as far as your California strategy, it seems like just the tough, not as seems it is a tough market to do business in, and as far as growing the portfolio in that market doesn't seem to, has grown as much as the other areas. Are you guys still focused on California, do you think that this down cycle will provide opportunities or your is experience so far is that it's just not worth, the upside isn't worth the risk and your money is better spent in the other markets?

No. I think that you point out definite dilemma. And the reason we don’t have a lot of development in California right now is, because we cancelled it all. We didn't approve a single deal in California in last three years, and trust me we had a very robust California development team out there who was working on deals ongoing basis, yet we rejected every single deal they brought with the exceptions of Selma and Vine. And so I think that it has been a difficult environment and people in California were willing to take the risk and develop the 5.5 cap rates that ultimately you are going to be less than 5.5 in the current environment. And so we just elected not to do that. California is a great market long-term, we have 10% plus of our portfolio in California today, we are committed to California to be a long-term. I think that as the markets continue to create price discovery and that California will offer some opportunities, co-acquisitions of either potential developments that need to be refinanced that have some issues on getting the refinancing done and do acquisitions going forward. So we are absolutely committed to California long-term and it will still be part of our portfolio.

Thank you.

Your next question will come from Paula Poskon from Robert W Baird. Please go ahead.

Thank you, just one question. Are you seeing any increase in early lease terminations and relatedly, what is happening with the average length of stay and does that have any impact on your recurring CapEx guidance?

Yeah. The change in the lease terms that we have seen has come primarily from the increase in skips and evictions. And depending on where they are in the lease term, then it could be a really long piece of termination or a short piece of termination. Our overall lease term has really not changed that much. We offer through our revenue management system, the resident has the opportunity to choose their own lease terms. Everyone of them is priced differently at a different price point is depending on what the revenue model is looking at in the future for explorations and demands. So that piece of the household is really decided by our residents and it's roughly the same as what it was at the beginning of the year, there really hasn't been much a change.

Thanks very much.

You bet.

Your next question will come from Michael Salinsky from RBC Capital Markets.

Good afternoon. First of all congratulations on your ranking in the top 50 for FORBES list of top 100 companies to work for, thanks.

Thank you.

First of all, question for Rick. Can you talk about your unemployment scenario assuming your guidance and what the sensitivity are in NOI?

I'm sorry, you broke up a little.

On your forecast for 2009, can you talk about the sensitivity to employment change?

Yeah, our forecast for unemployment for 2009 is right at 9.5%. Sensitivity to that, we have always used the metric and this is of sort of like using on axe I understand to kind of do some surgery, but broadly speaking we have always used the for every five jobs you create one natural net apartment rental demand. So if you wanted to kind of work through the math market by market you could run that number through and that would roughly be what we would see a sensitivity.

Okay that’s helpful. Secondly can you touch on the January trends and how that played our relative to guidance?

Little better, better than plan, we are not January and the primary difference was a little bit better occupancy rate in January that we had, had in our plans. February was, also looks like its slightly better again primarily in occupancy we will see whether that can continue this trend can continue to hold. But relative to plan off to a pretty good start.

You touched upon your outlook for different market in terms of with letter grades and whether are you proving in which markets do you think are closest to the bottom right now. And conversely which markets do you feel at this point or as we stand here to-date have the furthest of fall?

Well since we only gave only one improving and I gave that to Phoenix. Its hard to say that we are ready to call bottoms in any of these. I think that the, we are pretty far down the trail in most of our markets where there are going to be significant job losses with the exception of Atlanta that still has pretty big job loss forecast for 2009. South Florida still has a pretty sizeable job loss and then Southern California. I think based on the job numbers alone those three markets would be the ones where you, you probably not quite as for a long an see a turn around on the jobs part of the puzzles. Interestingly enough in Las Vegas. I think that's probably one that may have surprised of people and the ranking and it certainly surprises us a little bit in the performance in '08 and the projection for '09. The resilient treatment pretty good there I think we are pretty far down the trail. I think if you just kind of think of it in. There is a wave that's rolling though some of it was housing related and then some of it is more general economic conditions. The housing related markets that stated getting whacked the soonest would have been Phoenix, Las Vegas, Tampa, Orlando in Northern Virginia. So, I think that you still for the general economic overtly to deal with but I think the housing piece of it in the sub prime piece of the equation is probably largely behind us in those markets. I do not know if that helps you any way.

Only I would add is that Las Vegas you have 14,000 hotel rooms that are opening up towards end of '09 and into 2010. We know it takes two and a half employees to run each hotel room even with the situation that's going on there now. So you have built in job growth they have to operate the hotels, they are not shuttering them, they are opening them and I think that equation helps Vegas lot better then the rest of the market volume.

That’s very helpful for the color there and finally Rick, some of your peers have mentioned I think 2010 could be potentially worse than 2009. I just be interested to get your take on that?

I think anybody who knows what’s going to happen out about out more then sort of 60 to 90 days in this economy. This just is speculating. You can make a case that 2010 is going to be a decent year for the apartment business and I think it just a function of how the economy plays out. What happens with the Stimulus Bill? Do you have improving economic conditions and I do not think we are not saying that 2010 is going to be the year that we have positive same store NOI growth but we are also, I just think it's really hard to prognosticate backend of 2010. I know that at some point you are going to have recovery and with the limited supply that we have in the marketplace from multifamily perspective with the demographic trends that we have with everything going on our business we know we are going to have pricing powers at some point, is it in 2010 may be is on your view that may be 2011, but I can not argue with somebody who says 2010 is going to be worse than 2009 at this point.

Okay. Thanks.

Okay. Great. Well, that was the last question so we appreciate you are being on the call and we will talk to you again next quarter. Thank you very much.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.