Apartment Investment and Management Company (AIV) Q2 2008 Earnings Report, Transcript and Summary

Good day ladies and gentlemen and welcome to the second quarter 2008 Apartment Investment and Management Company earnings conference call. (Operator Instructions) And now I would like to turn the presentation over to your host for today’s call Lisa Cohn, Executive Vice President and General Counsel; please proceed.

Good morning and good afternoon. During this conference call the forward-looking statements we make are based on management’s judgment, including projections related to 2008 results. These statements are subject to certain risks and uncertainties, a description of which can be found in our SEC filings. Actual results may differ materially from what may be discussed today. Also we will discuss certain non-GAAP financial measures, such as funds from operations. These are defined and are reconciled to the most comparable GAAP measures in the supplemental information that is part of the full earnings release published on Aimco’s website. The participants on today’s call will be Terry Considine, our Chairman and CEO, who will provide opening remarks; Jeff Adler, who will review property operations; Tim Beaudin will speak to our redevelopment activities; David Robertson will review Investment Management and Tom Herzog will address financial results and 2008 guidance. I will now turn the call to Terry Considine, our CEO.

Thank you Lisa, good morning and thanks to all of you for joining us today. During the second quarter Aimco made good progress on its business plans. Jeff, Tony and the property operations team produced solid NOI growth with disciplined cost control and gains in both rates and occupancy. Tim and the redevelopment and construction services teams improved the quality of our assets through capital improvements and redevelopments totaling $280 million of spending year-to-date. The redevelopment team completed more than 1,500 units during the second quarter. David and the transaction teams sold 41 properties improving our allocation to the top 20 apartment market and also generating $370 million in net proceeds. Tom and the finance team used the property sales proceeds to pursue the arbitrage between private market values and Aimco’s public market share price by repurchasing 12 million shares so far this year while de-levering Aimco slightly and all while maintaining comfortable liquidity. There is no doubt that capital markets are volatile and that the economy is fragile. That said we have a clear plan to create shareholder value and a talented team hard at work. With that I’ll turn the call over to Jeff Adler to report on property operations.

Thanks Terry, we had a good second quarter and continued to make progress on executing our plan for the year. Conventional same store NOI growth was up 4.4% in the second quarter. Revenue was up 2.1% while expenses declined 1.3% [leading] the 4.4% NOI increase. Year-to-date revenue is up 2.8%, expense is up 1.3% and NOI up 3.8% which is in the upper range of our annual expectations. Our growth in same store revenues was composed of 2.2% in [rate] and a tenth of a point in occupancy and negative two-tenths growth in utility reimbursements and other income which was due to a timing adjustment in utility reimbursements. Year-to-date the timing of utility reimbursements is offsetting between quarters and the increase in revenues is 2.8%. Second quarter same store occupancy at 94.8% was up 10 basis points from the second quarter of 2007 as well as sequentially. Second quarter year-over-year renewal rents were up by 3.8% within a tight band across markets. New lease transaction rents were up 2.1%. New lease transaction rents grew strongly in Texas, New England, Northern California and Seattle with moderate growth in Denver, Philadelphia, Atlanta, Washington DC, and Chicago and with declines in Florida, Los Angeles, and Phoenix. Early lease terminations in the second quarter were down versus last year and move-outs due to home ownership remain at a five year low. Customer lease duration in the second quarter was 18 months versus 16 months a year ago. There was an increase in June in the percent of applicants denied indicating some deterioration in the financial picture of the total applicant pool. Happily with the overall increase in apartment demand this was not an impediment to achieving our goals. Directing your attention to supplemental schedule six you can see the year-over-year results for the second quarter in our top 20 target markets. The Pacific’s grew revenue at 4.3%, the North East at 1.6%, Chicago 2.9%, and the Sun Belt at 1.6% and excluding Florida, that would have been 3.1%. Specifically as to Florida we are continuing to make gains sequentially with revenue growth at positive territory. Tampa and the Brower Palm Beach counties are in better shape relatively, in Orlando and our high-rises in Miami pressured by declining rents. As to same store expenses we continue to execute a disciplined, thoughtful plan to control costs in a way consistent with improving the customer experience. While energy costs remain a concern their impact in the second quarter was minimal. Second quarter year-over-year total utility costs rose a bit more than 1%. The natural gas expense component decreased 3% year-over-year due to lower hedged contract natural gas prices were offset by an increase in the heating days and increases in regulated utility gas costs. Consistent with our existing energy policy we forward buy about half of our natural gas usage. We have currently bought forward to April, 2009. Our facility teams executed a new program to reduce electricity usage in vacant apartments reducing electricity costs. Customer experience scores continue to improve in the second quarter versus last year. Our office courtesy score, a key predictor of retention has improved 94% from 92% while maintenance courtesy has risen to 98% from 92%. Our net [promoter] score, a widely used measure of customer experience adopted by many other US corporations was 39% versus 27%. Team member turnover continued its positive downward trend. Total annualized site team member turnover was down 4% to 35%. Our non-same store properties which comprise both acquisition and redevelopment properties exceeded expectations for the quarter. These properties are spread across New York City, Chicago, Atlanta, Florida, Phoenix and California. The university community properties continued to lease well for the 2008 2009 school year. Affordable operations exceeded expectations in the quarter due to increased occupancy and reduced expenses. At the beginning of the quarter Patricia Moscarelli joined us a Chief Information Officer. Pat has over 30 years of experience in information technology and software operations. As a part of an initial overall review she reassessed our approach to property communication technology needs resulting in the discontinuation and write-off of start-up costs associated with a project to expand property level bandwidth. At the same time we deployed community support at several locations to remove onsite administrative tasks which also had the affect of reducing the onsite teams need for bandwidth. The bottom line, we had a good quarter with initiatives in place to achieve NOI growth consistent with the mid point of full year expectations. We are encouraged by the strong level of demand and at the same time cautious about the overall economic climate. Looking forward for third quarter we expect year-over-year NOI growth of 2.5% to 3.5%. The full year 2008 we continue to expect conventional same store NOI to be up in the range of 2.5% to 4.5%. Now here’s Tim Beaudin to review redevelopment.

Thank you Jeff, during the second quarter the construction services and development groups continued to execute Aimco’s plan to improve the quality of our assets throughout capital investment. We invested $67 million in 47 conventional redevelopment projects and completed three during the quarter to end the period with 44 conventional projects in process with budgets totaling $780 million. During the second quarter the development group produced more than 1,500 units and Jeff’s team leased over 1,500 redevelopments units with rent increases consistent with underwriting expectations. Cycle times improved during the quarter which lessens the revenue drag generated during the redevelopment of the property. Our expectation is that in 2008 will be another active year for the development team as we invest $250 million to $300 million in conventional projects. With that I will turn it over to David Robertson for a review of Aimco capital.

Thanks Tim, the Aimco capital team was very active during the second quarter selling 41 properties, completing three tax credit syndications and making one acquisition. The $922 million in property sales generated $368 million of net proceeds for acquisitions, share repurchases, and corporate debt reduction. These sales support our ongoing effort to improve the quality of our portfolio and our allocation of capital to the largest 20 apartment markets. As outlined on schedule eight of the supplemental materials, the properties sold were outside of our 20 target markets or in less desirable locations within our target markets and included our exit from the Salt Lake City market. Also included was the sale of Springhill Lake in Greenbelt, Maryland. While we liked the significant redevelopment potential at Springhill Lake, the sales price was compelling given the accretive use of proceeds. Average rents for the conventional properties sold were $768.00 per month versus our $955.00 per month portfolio average, with average home prices in the surrounding neighborhoods of approximately $260,000 for the properties sold versus $370,000 for the balance of our portfolio. As for pricing we are seeing upward pressure on cap rates increasing roughly 10 to 20 basis points or so on average across our portfolio over the past few months. However the impact on property values has been mitigated to some degree by the 4.4% year-over-year increase in NOI during the second quarter. As I mentioned we completed one acquisition during the quarter, a 224-unit community in San Jose, California for $56 million. This property represents our first investment in San Jose, one of our target markets, and is well located with rents of $1,500.00 per month and nearby home prices of approximately $700,000. As a result of these activities we have increased our total equity allocation to target markets by 1% and reduced units in other markets by 15% from the first quarter of 2008. Turning to our investment management business, investment management income net of tax totaled $29.2 million or $14.2 million above the high end of guidance primarily due to the acceleration of promotes and other [GPPs] from our sales activities partially offset by lower than expected tax credit fees. Tax credit demand continues to soften though we may see some benefit later this year and into 2009 from the recently passed housing legislation. During the quarter we raised approximately $12 million of tax credit equity. As a result of lower than expected tax credit syndication volume we now expect to raise approximately $50 million of tax credit equity this year. Looking forward we continue to expect to generate investment management income net of tax of $55 million to $65 million in 2008 with weakness in the tax credit business offset by promotes and other GPPs. However the timing and amount of promotes and GPPs earned will depend on future property sales. I will now turn the call over to Tom Herzog or CFO.

Thank you David, there are several items I will cover today. First our second quarter AFFO exceeded the mid point of guidance by $0.09, second we continued our share repurchase program, third as announced on July 18th we declared a special dividend for the quarter, fourth our liquidity remains good, and finally I’ll provide guidance for the third quarter and full year. As I mentioned in our prior two earnings calls, all prior period share and per share amounts reported in our earnings release supplemental schedules and those I will discuss on this call, have been retroactively adjusted for the issuance of common stock in connection with the special dividend paid on January 30, 2008. Adjustments for the special dividend declared in July will be made in earnings releases and financial information prepared subsequent to the August 29th pay date as the number of shares issued in connection with the dividend will not be known until the August 21st and 22nd valuation dates have passed. Turning now to second quarter results, second quarter FFO before real estate impairment charges was $0.90 per share which exceed the mid point of guidance by $0.09. The amount of $0.04 of this positive variance resulted from same store NOI $0.02 higher than expected due to improved expense control, non-same store NOI $0.01 higher as operating expenses across the non-same store portfolio were less than anticipated, and other items that netted to approximately $0.01. The remaining $0.05 of net positive variance resulted from higher investment management income offset by certain non-recurring items. Investment management income net of tax was $0.16 favorable primarily as a result of promote income above expectation due to accelerated asset sales, partially offset by lower syndication fees, tax credit income, and an adjustment to accretion on a discounted note receivable. This favorable variance was partially offset by certain hardware and software costs written off during the quarter as a result of changes in our administrative support functions within operations that resulted in a $0.06 charge to FFO and settlement of certain litigation matters during the quarter and reserves for probable and estimable losses associated with certain other litigation resulted in additional net expenses of $0.05. Sequential results, Q2 FFO before impairment charges was $0.18 higher than Q1 due primarily to the following: a $0.03 increase in same store NOI; a $0.03 decrease in casualty losses; a $0.02 favorable impact due to accretive share repurchases; a $0.19 increase in investment management income net of tax; and several other items which netted to a favorable $0.02. These favorable variances were partially offset by a total of $0.11 related to the write-off of capitalized IT costs, and legal settlements and reserves I previously described, share repurchase activity and special dividends. During Q2 we repurchased 3.9 million shares of Aimco stock at an average price of $38.91 per share for a total of $153 million. Additionally in July under a 10B51 program we repurchased an additional 2.9 million shares for $100 million at an average price of $34.45 per share. Since the third quarter of 2006 we have repurchased ……:

As you know we’ve adopted a strategy of selling properties on a one by one basis and the fact that we’ve been able to sell $900 million of assets this quarter indicates that at least for some buyers that the spread has not been that great. I think as we mentioned on the previous call the market has changed in that you don’t have as many buyers at your targeted price as you might have had last year but there still are buyers that want to transact at reasonable pricing. There are plenty of buyers that would love to buy at lower prices and are making offers, but we’re obviously focusing on the ones that are more likely to close.

And then with respect to your strategy to sell assets you talked about target markets versus other markets but is there any desire to sell more of the non-100% owned assets over time as to clean up in terms of owning all of your assets 100% versus the partial interest stuff?

No, when we’re looking at how we allocate capital, where we want to own properties we don’t take ownership interest into account. The only way that we think about our ownership interest in assets is how it relates to the amount of Aimco equity that we have allocated to our target markets.

Your next question comes from the line of Steve Sakwa – Merrill Lynch Steve Sakwa – Merrill Lynch: I just wanted to get a little more detail on the assets that are sold, could you tell me what the average occupancy was of this $900 million plus, just trying to get a sense of how that compares, I know the rental rates were lower than your corporate average, but I wanted to know what the occupancy was.

I don’t have the information in front of me right now, but the occupancy is generally going to be consistent with the occupancy across the balance of the portfolio because as you can see what we’re selling is fairly representative of the portfolio. So I’d say that the occupancy is probably 94%, 95% across these assets.

What I would say is that the discontinued operations profit [inaudible] in the quarter exceeded budget expectations for the quarter so these properties performed well. Steve Sakwa – Merrill Lynch: What I’m trying to get a handle on is if you kind of back into sort of a cash on cash NOI cap rate and you think about it from the buyers perspective, if you were to buy these yourself and had underwritten them what kind of IRR do you think these buyers could achieve or expect to achieve on these purchases relating back to the other question about buyers—where do you think IRRs are today?

It’s really hard to speculate what buyers are assuming in their underwriting. I really can only address what we’re looking at the assets when we sell them. As it outlines on the schedule we sold these on average at a 5.7% trailing 12 month free cash flow yield. If you’re trying to get to a cap rate everybody looking at cap rates somewhat differently but for us you could probably add something in the neighborhood of 50 basis points to that number to get to a cap rate. Steve Sakwa – Merrill Lynch: But if you were to buy these and underwrite them yourself have you looked at what your own expectations would yield on an IRR basis or you don’t do that exercise?

No we don’t do that, we look at what we expect to earn on the assets and when we’re selling the properties we’re obviously looking to achieve pricing [not] consistent with our expectations.

As we look at selling assets, we’ll look at what we believe the asset will achieve in our portfolio as compared to other uses for those proceeds and especially as a repositioning in other markets and so we might be considering cap rates on current assets in some of our non-core portfolios that are higher on a current NOI yield basis but at the same time we might be looking at greater growth prospects in some of the assets that we’re purchasing. So from an overall IRR perspective we would expect to achieve something better than what we’re selling obviously.

Your next question comes from the line of Michael Bilerman - Citigroup Michael Bilerman – Citigroup: With regard to tax and the tax environment, can you speak a little bit more about your expectations for your tax credit business in 2009 and also a little bit about your expectations for pressures on municipal tax rates in 2009 given the context of slowing fundamentals.

As I said our expectations this year we produced the syndication volume down to $50 million. The recent housing legislation has some benefits that target the tax credit business specifically there’s a 20% increase in tax credit allocations for the next two years. They’ve eliminated the 10 year hold requirement for tax credit properties and there’s a number of other provisions that make this a more attractive business but the reality is its going to be tough for the states to react to the changes and get them pushed through for this year which is why we expect the benefit this year to be limited and but we do expect to see some benefit next year. As far as its impact on investors I think probably the key provision is the elimination of the AMT provision so that investors that become subject to the AMT can still use tax credits to offset their taxable income up until the legislation passed they would not have been able to participate and that kept a number of people out of the market. But again whether or not they can react over the next four or five months and make investments this year remains to be seen. But I do think it will have a positive impact all things being equal next year. Michael Bilerman – Citigroup: Regarding your expectations for property tax expenses going forward let’s say for the next 18 months given the pressures on many municipalities meeting budgets right now, what are your thoughts on that?

There are a combination of factors going on obviously property taxes are increasing year-over-year in the 3% or 4% range right now, it does vary by jurisdiction, with fundamental moderating there’ll be obviously changes in valuation which will tend to constrain growth in property taxes and of course there will be pressures locally since we are a hidden tax relative to other taxes that local authorities can levy to attempt to increase taxation rates so we have a very active property tax group that tries to get us fair value and do a good job of paying what we legitimately owe and restraining our cost increases. So it’s just another one of the cost items among many that we’ll be working on.

Your next question comes from the line of Rich Anderson - BMO Capital Markets

On the promote element to our investment management income for this quarter its 40% of your total FFO unless I’m looking at the wrong numbers, but suffice it to say it’s a big percentage. Looking at it annually, what do you think promote income will be as a percentage of FFO for the full year 2008 and do you think that people should be applying a multiple consistent with rental income on this much more lumpy promote income?

As I mentioned the amount of promote income and similar type of income, when we say GPPs we mean disposition fees and refinancing fees so the amount that we will recognize will be a function of the property sales and while we had a lot during the quarter which is why promoting income as such a large number if we sell a lot of assets the second half of the year, then the number will be quite large and if we don’t it won’t. Going forward it’s really the same analysis it’ll really be a function of how much we’re selling year to year. As you know we’ve identified about $4.5 billion of assets that we plan to sell over time. We’ve sold about $1 billion of that that leaves $3.5 billion. Once we work through that then promote income will be at a lower rate than what you’re seeing right now.

Could you quantify the impact of the buyback program on the elevated level of guidance for 2008?

For 2008 we picked up about $0.14 in total compared to 2007 in accretive impact on FFO due to share repurchases and from our original guidance we already had $0.04 of that dialed in due to the early repurchases that occurred in the year or so. As we changed our guidance it was about $0.10 of that change was due to the change in the share repurchase.

So then when we look forward you don’t have any more buybacks in the guidance range yet expect for that which has been done in July?

That’s correct.

Your next question comes from the line of Alex Goldfarb – UBS Alex Goldfarb – UBS: Going to the guidance the $3.33 to $3.43 just want to get some clarification on that, is that based on the $0.90 second quarter or is it based on $0.83 and then I’m just looking at the footnote on page 10 where it says the FFO was before impairments, I just want to get clarification on what things are and are not included in that guidance.

Everything is before real estate impairments and the way that we’ve guided and when we report FFO before impairments that is before impairments. We’ve handled that consistently through the years since that change was made so we report the FFO on an [inaudible] basis and then we always report FFO before impairments. I guess I’d point out that we had gains that exceeded probably $300 million or north of $300 million up against impairments of about $7 million. The gains obviously are excluded and so for the FFO number we also present it before impairments. When I refer to guidance I’m referring to it before impairments. Alex Goldfarb – UBS: So it’s based on the $0.83 number in the second quarter is what’s going into the $3.33 to $3.43?

No it would be the $0.90 number. Alex Goldfarb – UBS: But doesn’t that have, so the IT stuff that you wrote off that’s real estate impairments?

No, the IT stuff and the litigation write-offs that we took, the sum total of the two at $0.11 that’s included in FFO. So it’s included in both measurements of FFO. The only thing that we add back are the real estate impairments to get from $0.83 to $0.90 for the quarter, there’s $0.07 of real estate impairments. Alex Goldfarb – UBS: On the promotes, on the Palazzo deal and the promote level there seemed, I don’t know if there were promotes directly tied to that or not, but if there were it seems to be less then what you quoted here, how do get a handle on understanding if you have asset sales like which assets have promotes and what the structure is?

We have numerous partnerships throughout our portfolio and with many, many different partnership structures and within many of those structures you’re going to find that there are prefs and there are promotes built within them. So it spans across a wide variety of different partnerships. Alex Goldfarb – UBS: So there’s no way to get clarity on, we just have to take it at face value then, they’ll come when they come and there’s no way to get any color on timing.

That’s correct and then as we’ve had accelerated sales obviously we’re going to see more promotes that are recognized because assets, the promotes are often generated by way of sale of the asset when that gain occurs it kicks us into the promote category so that‘s why David mentioned that as we have larger sales you’re going to see larger promotes coming through.

Your next question comes from the line of Haendel St. Juste - Green Street

Could you provide more color on the dispositions, the change in pricing from peak pricing, how the pricing you receive compared to expectations as well as some color on the buyers, the type of buyers and their source of financing if there’s any seller financing involved.

I guess peak pricing, if you go back a year and a half ago, we’ve seen cap rates move up roughly 50 to 60 basis points and then if you look at the PPR data for the top 54 markets they’re at 53 basis points so we’re in the same ballpark. As for the buyers we’re seeing smaller and local and regional buyers typically buying anywhere from one to four assets at a clip.

Was there any seller financing there?

We have not provided seller financing.

As far as the acquisition in San Jose, I’m assuming that was 1031 driven and if so can you quantify your remaining 1031 capacity?

It was 1031 driven. When you speak of capacity it’s merely a function of what percentage of our sales we target as 1031s and that’s going to be driven by our ability to make acquisitions that achieve our targets returns.

So its part of acquisitions going forward that will depend on, any additional color you could give on that.

As you know I don’t want to give any kind of guidance on what we think we’re likely to do this year but I will say that we’re actively looking to increase our allocation of capital to markets where we’re currently under allocated and that means we’re actively looking to acquire properties so we have a lot going on and whether or not we can get across the finish line on transactions remains to be seen.

Your next question comes from the line of Fred Taylor – MJS Asset Management Fred Taylor – MJS Asset Management: On the asset sales done to date, I can see that on the balance sheet as well as the perspective, I’m more interested in perspective for the balance of the year, what that net number is likely to be?

Without giving guidance of what’s likely to happen the balance of the year, we have indicated previously that we plan to sell about $4.5 billion of assets over time as markets and pricing allow. We sold about $1 billion to date so there’s roughly $3.5 billion of assets that we plan to sell over time and how much of that we get done this year versus next year or the following year, we’ll see. But as you know as a REIT we are limited in how much we could sell in any calendar year so we obviously will not be selling that amount this year. Fred Taylor – MJS Asset Management : Is this moving towards an asset light model where you become a management company or you’ll still want to own the fixed asset?

No this is not a change in business model; it’s merely a change in where we own properties and how we allocate our capital. Fred Taylor – MJS Asset Management : I heard somewhere in the conversation today you’d like to stay leveraged neutral just noticing and I know money is [inaudible] that that did tick up that’ you’re into the credit facility and some of that may have found its way into share repurchase.

No, when you look at the revolver you’re right to point out that the balance, $145 million we had closed a couple of significant sales right at the end of the quarter, like the last day of the quarter, and the money had, you’ll find the money in cash and it would have been transferred the next day to relieve that revolver balance. Fred Taylor – MJS Asset Management : Is that at zero now?

Yes, so when I described dry powder of $600 million, that’s a $650 million revolver balance with the normal letters of credit against it that then provide dry powder of-- Fred Taylor – MJS Asset Management : Okay so no desire to change business model or change leverage significantly over the long haul?

No in fact its one of the things we’re being very careful of is that as we sell assets and execute a share repurchase that we’re paying debt down not just the property debt accompanying those assets but a corresponding amount of corporate level debt for preferreds over time so that on a relative basis we stay leverage neutral or better.

Your next question comes from the line of Stephen Swett – Keefe, Bruyette & Woods Stephen Swett – Keefe, Bruyette & Woods: I know earlier this year you and actually for the last couple of years you’ve been very cautious on the acquisition side particularly in some of the markets that have the lowest cap rates, just curious if you could provide a little more color on the acquisition in the quarter in San Jose.

First of all on the acquisition side, these strategies are funded with 1031 proceeds so as we’re selling out of non-target markets when we have an acquisition that needs our required return its located in our top 20 markets we’re using the 1031 mechanism to reallocate the capital. As for San Jose we are typically targeting value add types of acquisitions where we can do light to moderate rehabs primarily kitchen and bath, and some common area upgrades to get us to a mid teen type of return. On the San Jose acquisition in particular is a newer property, its about 10 years old, its in good shape so its actually a very light rehab and our expectations in terms of leverage returns we’ve targeted a 13% leverage return on that acquisition and it was funded by assets that we sold in Michigan which had lower expected returns so it was accretive. Stephen Swett – Keefe, Bruyette & Woods: On the rehab activity can you provide an estimate of the drag in the quarter and then how do you think the overall investment commitment is going to progress over the next couple of quarters?

The volume levels have been fairly consistent. Tim’s tightened up the cycle times a little bit. I think we spoke on the last couple, three quarters of $0.04 per quarter of drag. It’s probably more in the $0.03 to $0.04 range at this point and projected through the remainder of the year.

I think on the commitment on the, there’s still lots of opportunities in the portfolio. I think we’re being semi cautious on what we’re going to commit to redev until we see what goes on in some of the capital markets and David’s activity. I think we’re just going to continue to analyze that. There’s a lot to be done. We have a lot of opportunities and I think next year will be probably consistent with what we’ve done this year if nothing changes dramatically. So I can see next year being another $250 million to $300 million, that’s all dependent upon what happens in the capital markets.

Your next question comes from the line of Alan Tazaron – European Investors Alan Tazaron – European Investors: I know you maintained your 2.5% to 4.5% NOI guidance have you commented on what your revenue guidance was or how you felt about that?

It’s consistent with what we said at the beginning of the year so-- Alan Tazaron – European Investors: It was like 2.5% to 3.5%?

Yes I haven’t made any changes to our overall expectations for the year. Alan Tazaron – European Investors: When you quote your same store revenue do you include the redeveloped properties in there?

No, when I talked about the guidance we’re providing same store sale guidance, redevelopment properties and any units taken down for redevelopment, that property is removed from same store sales for the time that the redevelopment program is under way.

Including the stabilization period for one year. So that it’s a fair comparison when it comes back in. Alan Tazaron – European Investors: Can you talk about the Springhill Lake disposition, I was surprised by that given you have talked a lot about that property the last couple of Investor Days and just what the process was, were you looking to sell that or someone approach you?

As I mentioned we liked the redevelopment potential at Springhill Lake and we have talked about it. Obviously the market for the single family home market has deteriorated over the past year and so our, the opportunities there probably aren’t quite as great as they were when we last discussed it but that being said we tested the market and found out that we could get very good pricing on the sale and given the opportunity to buyback stock at such an accretive level we decided it was the right thing to do.

Your final question comes from the line of Jay Habermann - Goldman Sachs

I know you focused on buying back stock to some degree but I’m just curious about some of the preferred shares outstanding, any thoughts there in terms of redeeming some preferreds?

We’ve got 100 million that is redeemable at the current date, its our highest rate preferred that we have on the books at 9 3/8 and you know I’ve looked at that and we’ve talked about it internally and concluded that given the current sketchy financial environment that just purely for prudence purposes that we would hold off on repurchasing that preferred at the current date. At some future date I fully expect that we may take that out and it would depend on conditions at the time but thought it better to hold the dry powder back probably create ourselves a little bit of additional room at the property debt level with a little bit of property dry powder if you will and so just simply for degree of safety. So at this point into the short-term we’re not planning on taking that instrument out.

And on IRRs can you just talk about the IRRs you anticipate or you look for as you reallocate capital, as you continue to sell assets and reallocate in your target markets, can you give us a sense of maybe specifically which markets look most appealing at the present?

As I mentioned we are targeting value add transactions where we can take advantage of Tim’s teams’ expertise on the redevelopment side and typically that’s going to be anywhere from kind of a 13% up to a 17% levered IRR. And all of the acquisition activity will be in the top 20 markets. Now when we’re looking at 1031s it’s a slightly different analysis in that we’re looking at the expected levered IRR of the assets that we own and comparing that to the assets that we’re acquiring and in those cases we may be willing to take a slightly lower return but one that is higher then the assets that we’re selling especially given that we’re reallocating capital from markets that we want to exit to markets where we want to be a long-term owner.

There are no further questions at this time; I would now like to turn it back over to Terry Considine for any closing remarks.

Thank you all for your interest in Aimco. We close by where we began, we’ve had a good quarter, we have a good plan for the year, we’ve got a team hard at work and we look forward to creating significant shareholder value this year. Thank you very much.