Welcome to the AvalonBay Communities fourth quarter 2007 earnings conference call. (Operator Instructions) I would now like to introduce your host for today’s conference Mr. John Christie, Director of Investor Relations and Research. Mr. Christie, you may begin your conference.

Thank you and welcome to AvalonBay Communities fourth quarter 2007 earnings conference call. Before we begin, please note that forward-looking statements may be made during this discussion. A variety of risks and uncertainties are associated with forward-looking statements and actual results may differ materially. There is a discussion of these risks and uncertainties in last evening’s press release as well as on the company’s Form 10-K and Form 10-Q 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 that 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 the review of our operating results and financial performance. With that I’ll turn the call over to Bryce Blair, Chairman and CEO of AvalonBay Communities for his remarks.

Thank you, John. With me on the call today are Tim Naughton, our President; Leo Horey, our EVP of Operations; and Tom Sargeant, our Chief Financial Officer. On the call I will summarize our results for the quarter and for the full year and then I will provide some comments regarding our outlook for ‘08. Tom will then discuss the capital plan for the year, comment on the dividend increase we announced last evening and provide some additional color on our 2008 financial outlook. After that we will all be available to answer any questions you may have. Last evening we reported EPS of $1.65 and FFO per share of $1.14. The FFO per share of $1.14 includes an increase of a write-off of $0.05 per share and excluding this $0.05 adjustment, the FFO for the quarter would have been $1.19 which is slightly above the midpoint of the guidance that we gave last quarter. Overall for the year our portfolio performance was in line with the original guidance given last January. The year-over-year revenue growth of 5.5% was within the original range we gave; moderate operating expense growth of 2.1% was the fourth straight year of expense growth at 3% or less; and NOI of 7.2% was in the upper end of our original guidance. Overall for the quarter and the year operating results were right in line with our original expectations. The quarter also concluded a very active year on the investment front. During ‘07, we completed the development of eight communities for a total cost of $440 million and we began construction on 12 additional communities with the total cost of $1.3 billion. During the year, we acquired eight communities for a total price of about $325 million, seven of which were acquired on behalf of our…

Thanks, Bryce. Let me start this afternoon with an overview of four topics I’ll cover. The first is our capital planning and liquidity; second, the 2008 financial outlook that we provided last evening; third our share repurchase plan; and then finally our dividend increase that the board approved two days ago. On the capital front, our financial flexibility allows us to avoid current market volatility and positions us to respond to opportunities that may emerge during the year. With about 30% leverage in floating rate debt that makes up just 10% of our capital structure and with over 80% of our net operating income unencumbered, we enjoy a full range of capital markets options to meet our capital plan for the year. In terms of liquidity and the related sources and uses of capital, our capital needs total about $1.5 billion for the year and that will be used for investment activity and securities redemptions. To some extent these uses are flexible and we will have the ability for some investment activity and securities redemptions, depending on overall capital market conditions. We expect to meet these needs through both secured and unsecured debt with fixed and floating rates as well as asset sales and retained cash. Just one note on the use of secured debt. As you know, we’ve historically favored the unsecured market over secured debt due to the financial and operational flexibility we enjoy through the unsecured markets. The relative uses of secured versus unsecured debt will depend on market conditions. However, recent pricing indications suggest that secured debt is 100 to 150 basis points lower in cost than unsecured fixed-rate debt, which really makes the use of secured debt today a compelling choice. Turning to the financial outlook we provided last evening, you will find more detail…

Thanks, Tom. Despite the likely weak economic environment and the volatility in the capital markets that are expected this year, we are still able to project growth and operating FFO of over 13% for 2008. The reason for the strong growth, it’s not due to aggressive assumptions at the portfolio level, but rather it is a cumulative effect of the contributions from all aspects of our diverse investment activities. Certainly same-store sales portfolio was contributing; also significant contributions from our development and redevelopment activity; the harvesting of value from our dispositions and utilizing the strength of our balance sheet. ‘08 will likely be a year where we will have to show flexibility in terms of our business plan in order to respond to the challenges and opportunities that the economy and capital markets will likely present. With a strong balance sheet, multiple investment options and a deep organization, we are well positioned to capitalize on opportunities that may arise. With that we would be pleased to take questions at this time.

Your first question comes from Jonathan Litt - Citigroup.

On the dispositions you are planning for ‘08, is it more a focus on specific markets or quality of assets? How are you looking at that going and picking out which assets you’re looking to sell?

In terms of the dispositions that we’ve got planned for 2008, it’s not any one specific market. We’re looking at selling across many markets given the strength of the transaction market where there are opportunities to sell assets that we think are either outliers or don’t fit our view of the long-term objective of the portfolio, we just think it’s a good opportunity to dispose off some of those assets in this environment. So it’s really not any one market, it’s really across the board.

The CapEx rate of the mid-4s to low-5s, is that an economic cap rate and if so, what type of assumptions would be needed to get to that kind of CapEx?

I think when we usually quote cap rates we usually are talking nominal cap rates as opposed to economic cap rates, but really not a big difference in our assets typically, you’re talking about 20 basis points maybe, just given the amount of capital expenditures that we typically see in our portfolio. So, the 4.5 low 4 that Bryce quoted are still our best estimate. I would say there wasn’t a lot of transaction activity in Q4 just given the back up in the capital markets. We do anticipate a lot of product to come in the market including some assets that we’ve got currently in the marketing process. So I think in the next few weeks, the next 30 or 45 days will be telling just in terms of pricing patterns. But at this point, we are not seeing any evidence that leads us to believe that there has been any kind of erosion in this kind of cap rates that we have been talking about.

Last question is just on the pursuit costs in the quarter. Can you give a little bit more color on that and the type of projects that where no long being pursued?

The matter of pursued costs we wrote-off this quarter was larger than normal for AvalonBay, but keep in mind it is still pretty small when you are talking about against a $6 billion development pipeline. It really is part of our annual planning process, we do try to exercise some discipline in terms of looking holistically across our portfolio, just given target yields have gone up as Tom mentioned in his remarks as well as some of the liquidity considerations out there in the marketplace combined with some deals where the entitlements we viewed were low probability. We just thought it was prudent to go ahead and abandon some of the deals that we had been pursuing. So it is really a logical set of actions just given the environment when you are talking about reducing the level of starts 20%, 25% increase in the amount of asset sales obviously the repurchase activity that we’re seeing combined with increasing abandonments, it is a very consistent set of actions that makes sense as we look at the current environment and look forward to 2008.

Your next question comes from Kristin O’Connor – Morgan Stanley. Kristin O’Connor – Morgan Stanley : You said that you are expecting Northern California and the Pacific Northwest to be above your revenue guidance range while the other markets would be at or below the midpoint. Can you just give a little more detail on your expectations for those other markets? Like which ones are going to be below the midpoint and where you see the most slowing?

At this point, we’re really not prepared to give guidance on a submarket basis or market-by-market basis. I will add though that to a certain degree it does break East to West with the West Coast markets averaging about 5% and East Coast market averaging in the mid-2%. So it is a to a certain degree a tale of two coasts, but then translates into the median or within the range that we gave. Kristin O’Connor – Morgan Stanley : Can you comment on the sequential weakness in the New York market? It looks like occupancy was down and rental rate growth was negative in the fourth quarter. Are you seeing any impact from financial services layoffs?

Christine, this is Leo Horey. Our expectations for New York are very positive and we expect job growth that is solid and certainly has been solid over the last six months in the New York metropolitan area and it is expected to remain solid although with some concerns based on how the capital markets shake out and supply is fairly minimal. Looking directly at our portfolio, the three markets that you would be addressing would be Fairfield New Haven, New York and Northern New Jersey. Fairfield, the assets that are impacted there by New York by the Stanford assets, those assets are doing well. If there is any drag from the Fairfield it comes more out of Northern Fairfield, which is much less related to New York. On the New York assets, all of our assets are in Westchester County and Rocklin County and those assets have been doing well. We had to make some adjustments to keep occupancy stable, I mean, even at the reduced occupancies levels we are well into the 96% range, which is very solid. Finally in Northern New Jersey, which really trades off the New York area, there is one asset that we had a little more availability that put some pressure but in general, things are going well there and there is a lease-up that is active in that Jersey City area that’s had some limited impact. But, we feel good about where the assets are positioned in New York as long as the financial markets and the financial sector remains strong.

Your next question comes from Louis Taylor - Deutsche Bank.

In terms of development starts for ‘08, just a rough sense of the geographic breakdown?

The first part of your question was cut out. But I think you’re asking about the rough geographic breakdown of development starts for 2008. Is that correct?

Yes.

It’s pretty dispersed. Actually if you go back and look into attachment 12, the first tenders are the more likely deals to actually start in the 2008 so you see a mix of West Coast, California, Seattle, both Southern and Northern California as well as some smaller deals in the Boston and New York area.

Second question just pertains to development leasing and the projects that are leased up right now. Are there any projects where the pace of leasing or the rents are very much from your pro forma?

Over the past three months basically from the last call to this call, we have averaged about 19 or 20 leases a month and that compares to a typical run rate for the entire year of about 25. So we are running at about seasonal patterns. To be more specific during that period, it was a little slower at Avalon on the Sound, in New Rochelle, but we have seen more positive results lately. To deal with the second part of your question with respect to lease, we are getting rents for the whole bucket that largely approximate the projections that we had initially anticipated.

In terms of your $800 million of debt financing this year, can you give us a sense of the timing within the year and what would be your early read in terms of how much of that could be absorbed by Fannie and Freddie?

We expect that we will probably do about $300 million of secured debt in the first quarter following with $500 million later in the year on an unsecured basis and that may be bank term debt, it could be the unsecured markets. It depends on what capital market conditions are offered to us. The $300 million secured debt probably would be with Fannie and/or Freddie on several assets although we also are talking with a few insurance companies that are also in the market for secured debt.

Your next question is from Alex Goldfarb - UBS.

How aggressive will you guys be in pursuing unsecured for the second batch before you go back to looking at secured debt?

Alex, how aggressive will we be?

If traditionally you guys have used unsecured then if you start going to the secured route, I just want to get a sense for how much you will pursue where unsecured is before saying okay let’s go start using more and more secured debt?

First, the amount of secured debt that we have in our capital structure right now, we have about 83% of our assets or the NOI from our assets are unencumbered. So we partly use secured debt, we generally use it for tax exempt bonds or to get entitlements in Massachusetts. Our current plan is to obtain about $300 million of proceeds from securing a couple or three assets, probably two assets. Then go into the unsecured market, it may not be a term loan, it could be a bank loan that is a floating rate structure or it could be the traditional unsecured markets depending on the condition of those markets at the time. I guess I should emphasize the unsecured term debt market is open today. We could go out today and get a deal done, it’s speculative because no one is willing to go do it today and find out what the real price is, but probably somewhere on a five-year deal, 6.25% to 6.75% if you believe the buildup of the cost over Treasury. That’s just not competitive with an unsecured debt offering that is probably 100 to 150 basis points less. So we are not abandoning our strategy, we like our unsecured strategy, it gives us a lot of financial flexibility but until the unsecured markets settle down and offer a more competitive cost to us, we are going to use the secured market selectively to finance our business.

Can you give us a sense of where the term loan market may be, the terms on that market?

That market floats over LIBOR and it would be a very competitive market. I don’t want to go into exact spreads over LIBOR but it would be a very attractive source of capital.

The 5% dividend hike, was that the minimum necessary to meet the REIT requirements?

No. It wasn’t. It was an amount that the board came to after considering earnings growth, retaining liquidity and frankly telegraphing the fact that over time if our overall earnings growth have moderated, you want to reflect that in your dividend. It’s still a very big endorsement though in terms of the optimism we have for our financial plan in 2008. When you only have 71% payout ratio, retaining all that capitals is a very important part of our strategy for securing capital or obtaining capital in 2008.

Just going to the dispositions, have you seen any change in the buyer’s ability as you mark assets for them to get financing or are they coming to you guys at all to help facilitate the arranging of financing as they buy assets?

No, we really haven’t seen a change in their ability. Frankly, the leverage buyers, the private leverage buyers have been out of the market for a while now. It’s really, for the most part, larger institutions. Oftentimes you really financed at the balance sheet level at the corporate level as opposed to the asset level. In terms of guys that are out there using Freddie and Fannie, they are just putting more equity in the deals. We really haven’t seen a trend where they’re looking to us to help solve any financing gap they may have.

Your next question comes from Andrew McCulloch - Green Street Advisors.

On your employment growth forecast, you have 0.5% employment growth for your core markets. What do you think a good long-term employment growth rate is for those markets?

Andy, I’ll provide a couple of comments and invite John Christie, who as you know, is our Director of Research to add in on that. You’re correct. In the attachment 15 we indicated 0.5% job growth in our markets in ‘08. I would just add to that that is not the modest recession scenario that I commented on in my comments. Under modest recessions scenario we are assuming that would go to zero. But in terms of a long-term growth rate across our markets, John, would you have a comment on that?

Andy, it’s somewhere just below 1%. I think it’s about 0.9% and our markets traditionally grow a little more slowly just because they are bigger, a little more mature than the U.S. I think the U.S. long-term -- and I’m talking 10 years -- probably is about 1.1%, 1.2%.

On development, you brought your yield down just slightly from 6.5% to 6.4%. Is that a mix issue, because you added two California and one New York asset? Are is there other stuff going on there?

It’s simply a mix issue. We’re completing two deals that are north of 6.5% and started almost $600 million this past quarter that is in the low 6%, so it’s strictly a mix issue.

Can you give me any color on what you are seeing in relation to land prices across your various markets?

Obviously the condo has gone [inaudible] in the last three or four quarters. In terms of what apartment guys are willing to pay for land, I think we are in the very early innings -- maybe the first inning -- in terms of adjustments to land buys. I do expect land will adjust somewhat in 2008 as people are doing what we are doing, which is increasing their target yields. That’s not all going to come out of construction costs. Some of it has to come out of land in order for a deal to fund right but as you know that doesn’t tend to happen overnight. There is generally a period of time which the best spreads are wide until they start to come together. But I suspect we will see some transition in the land markets through 2008.

Your next question comes from Anthony Paolone - JP Morgan.

The $125 million to $175 million you outlined that you expect to spend on land in 2008, how much of that is just going out there and finding new parcels of land for future development versus taking down land that’s under options for projects say that are in your attachment 12 listing?

Tony, it’s all related to land that we anticipate having to take down under existing options contract. It doesn’t reflect a projection on our part there are going to be speculative land buying opportunities at this point.

With respect to looking out and underwriting new development deals, can you quantify just roughly the types of yields that you would want at this point given a backdrop of maybe a little more economic risk?

Just to be clear, we always underwrite on current rents, current expenses and current construction costs. I just really want to emphasize that. So in terms of what the future economic considerations might be they don’t necessary factor into what your current underwriting may reflect, although they do factor into what the target yields would be. We probably moved our target yields up on the order of 50 basis points over the last three to four months, but a typical deal we need to underwrite is in the mid 6% or 7% today versus that would have been a low 6 number six months ago.

What market whether it is the New York high rise or West Coast would get the lowest, what would the lowest yield you would underwrite to be?

That we would find acceptable? Well first of all we are pretty darn selective. I think you probably note that this past quarter the pipeline actually was reduced, the shadow pipeline not increased, and generally that is our posture here at least for the first couple of quarters of the year as we think there will be some adjustments in the land markets. But generally yields range about a 100 basis points in total 100, 150 basis points. So from those numbers, depending upon the unique characteristics of the deal or market, sort of 50 to 75 basis points on either side of that target today that I mentioned earlier. Bryce do you have any other comment on that?

The only thing to add is to follow up on a question earlier that the mix of the assets that are started each quarter has a very big impact on it. So as we start more and more West Coast assets implicit in your question was West Coast yields are generally lower and the more urban deals are generally lower. So you shouldn’t be surprised this year the yield may in fact trend down for a couple of quarters as the mix of assets change. What Tim is really referring to is underwriting of new deals, not necessarily what we will be starting in the next couple of quarters.

Also on development at the Wilburn and Battery Place projects that appear to be fully leased at this point. Where do those yields come in? It seems like you don’t trend rents, and I would imagine from the point you started those to the point they got fully leased up here the West probably moved a decent amount?

Well, it certainly is the case at Battery Place, they did. In the case of Wilburn, I think we may have seen some modest improvements, but those deals roughly average around 7% upon stabilization with just annualizing the existing rent roll up on completion.

Your next question comes from Rich Anderson - BMO Capital Markets.

The issue of dispositions, you mentioned 4.5% to 5% cap rates, but is that the average and are there markets where you are seeing something in the mid 5% or are there no markets were that you are testing a 5.5% type of number?

Rich like I mentioned before, we do have a number of assets in marketing right now. So we may find that out in the next 30 days, but to date we have not seen any markets that would be above the low 5% in our markets. Having said that I think there is evidence in other markets where cap rates have probably moved more, generally I think people are saying the higher quality locations in coastal markets seemed to hold cap rates more than the secondary or tertiary markets or for that matter some of the sunbelt markets.

I think to add to that, Tim is talking that there is probably a growing disparity between the stronger markets and the weaker markets, there is also a growing disparity between the higher quality assets and the lower quality assets. So this cap rate compression that we saw over the past few years that all markets are being treated the same and all assets are being treated same has been unwinding, and so we are hearing about some higher cap rates for some lower quality assets in some tertiary markets; we are just not seeing that yet for our quality assets in our markets. But by evidence of our actions, we are concerned about that; that’s why we are moving aggressively with a large disposition pool.

On a market like Boston, which has been pretty weak maybe it will get weaker now that the Patriots lost, but you are not worried about that?

That really hurts Rick.

Chicago, will you look to exit that market? Sort of hanging out there with that 800 units, is that something that you would consider?

No, we do not have any plans to exit the Chicago market, in fact we’ve been growing our concentration in that market through acquisition activity. It’s a small market for us and will remain relatively small component of our portfolio, but we have no plans to exit.

Are there any loopholes where you can sell assets that you have owned for less than four years> I mean that you have changed the strategies that you can actually sell assets you have only owned for couple of years, or is that not the case?

No, it is the case. It’s not that you are prohibited from selling within four years. It is just when you’re outside of four years you are in a safe harbor. If you are within that four-year period, it is a fact and circumstance test and it depends upon your change in strategy.

On the G&A you might have mentioned this, I got on little late, on the midpoint 10% versus last year, what’s driving the G&A increase?

Overall G&A increases are due to compensation increases. Some of it relates to start-up costs for our new administrative processing center in Virginia Beach. Those would be the two main factors, compensation and start-up costs.

Your next question comes from Paula Palkins - Robert W. Baird.

What are your expectations that are underlying your assumptions in guidance for ‘08?

I’m sorry, the first part of that was cut off. Could you repeat the question?

Certainly. Just a follow-up on the G&A expenses question. What are you assuming in your guidance for G&A in 2008?

For the guidance on attachment 15, shows 8% to 12% increase overall in G&A from 2007 level. That consists of three categories: corporate G&A, property management costs and investment management service. So it is a combination of the three should go up between 8% to 12%.

Just to elaborate on the cost of the new administrative center, do you expect that to moderate -- in other words we are further along in the game than behind?

We expect that is a non-recurring costs and over time we’ll actually see our costs go down because of that center. But they are non-recurring start-up costs you would expect whenever you start -- think of it as a new business.

As you look at the reasons for move out and I apologize if I missed this in your prepared comments, are you seeing any differences in the trends across your markets for the reasons for move out asides from two-home ownership?

With respect to home ownership, as we have been talking about, it typically trades between 20% and 25%; for the most recent quarter we’re around 20%. As far as move outs overall and any changes across markets or even just the categories, there really hasn’t better any change. The reasons for move out in all the places that we’re watching carefully are people moving out for financial reasons that typically runs 8% to 10%. We were at the lower end of that range this last quarter and we are not finding any major differences or major changes among our markets. So things are staying pretty well on course, obviously the reason for move out related to home purchase is down somewhat.

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

In your disposition guidance for the full year, are there any markets we should expect a significant concentration of those to come out of?

We anticipate selling in several markets; we are not exiting or intend to exit any markets in 2008. It is a pretty diversified pool of properties.

Some development deals are having trouble finding financing right now. I know you guys use your line and everything else, but have you heard anything to that extent?

To some extent certainly on the debt side; not as much on the equity side. Generally what I’m hearing is for good projects with good sponsors there is still equity out there, but that tends to be more problematic. Sometimes getting the term after the construction term has been tougher on folks in terms of that are really looking to have some flexibility built into their capital structure upon the start of construction. But not as much on the equity side, really as you might imagine.

Finally as you continue to recycle capital here, your current CapEx over the past couple of years has come down. What are you predicting for recurring CapEx for fiscal year 08?

I expect the reoccurring CapEx for ‘08 to be in the low $500 range per apartment home.

Your next question comes from Michael Dimler - UBS.

On the secured debt, in terms of exactly what secured debt you are thinking would be considering issuing, was it Fannie or Freddie financing or are you talking about private mortgage financing?

It would be both Fannie and Freddie as well as insurance companies that are currently active in the secured markets. So we would price all sources.

In terms of Fannie/ Freddie versus the insurance pricing, is there a major difference there or are they about the same?

I don’t want too handicap too much our friends at the insurance companies because we want them to really sharpen their pencil in their bids, but Fannie and Freddie do have a competitive advantage because of their structure as a government-sponsored entity. But having said, Fannie and Freddie are clearly providing more competitive bids out there but we are not giving up on our friends in the insurance business.

Your next question comes from Richard Pallee - ADC Investment.

On the guidance page on attachment 15 you have LIBOR expectations. Just remind us how much of your floating rate debt is LIBOR-based, because I know you have some tax exempt variable rates that tends to move less.

If I could just spend a moment, we have gotten a few questions that have come in this morning about floating rate debt. I would just like to reframe the question for a second on floating rate debt. Overall, our floating rate debt as compared to the total market cap is about 10% and that’s fairly modest. We have very little debt to start with. I mean, on average our debt is less than the industry averages. As you remember, floating rate debt allows us to create a natural business edge when rates are declining, we generally are in a contracting business environment so we see that rates floating lower allow us to match moderating fundamentals and help preserve overall earnings levels. Said differently, interest rate changes are very correlated to revenue changes. So having more floating rate debt in our capital structure is a strategy we have been pursuing over the last five years. The other thing about floating-rate debt is people frequently use the term, let’s match long-term debt with long-term assets and if you think about what our asset is, our asset provides revenues at lease, and that lease resets every 18 months on average. So if you’re trying to do asset liability duration management, we would really argue for shorter-term debt, that’s another practical maybe a more theoretical reason behind trying to have more floating rate debt in your capital structure. But the combination of the practical aspect of revenues being correlated with interest rates and the fact that we want to match up the lease terms with debt are two of the reasons we really try to get more floating rate debt in our capital structure over time. So I apologize for the diatribe on floating rate debt but I understand that people were asking questions about it and I wanted to at least address that. In terms of our overall debt it’s about 10% of our capital structure and I don’t know if that’s responsive to your question.

I was just curious of that 10% is half of that floating rate exposure LIBOR based? Because in the past when people were nervous that rates were going up, part of the argument was the variable rates tax exempt tend to have less volatility and obviously the LIBOR-based is more market oriented. My question is a negative spin on it, just curious because I appreciate the hedged comment with respect to slowing economy, lower rates.

At the end of the year, we had about $250 million of floating rate debt that was not related to our line. Of that, about $125 million of it was tax exempt, and another $125 million of it was conventional floating rate debt primarily for the Massachusetts assets that we have to use floating rate debt for. So about $500 million then we had about $500 million out on the line. So it’s about $1 billion of floating rate debt, half of which is the line and half of which is other forms of floating rate debt.

Therefore half of it is LIBOR-based?

Well, actually all of it when you think about it, it all kind of trades within LIBOR. If you look at the break out of the conventional floating rate debt it trades with LIBOR as well. So really 75% of that debt, that $1 billion almost directly floats with LIBOR. The other 25% or $250 million floats and it kind of comes in with LIBOR but it actually is a little more sticky, it’s the floating rate tax exempt debt.

Right. That was my question, the heart of my question.

I’m sorry it took me so long to get to the heart of it.

Leo, did you speak to availability at all? In other words what percent you have vacant and/or notice to vacate that is not yet leased in the portfolio?

I didn’t speak to that; we typically don’t quote availability. But to give you some perspective in January our occupancy is running about 96.4% and it looks like it is going to stay that way through February. You can contrast that with last year at the same time where we were at 96.2% between January and February. So one of the things that I would tell you Rich is I believe that we have come through this winter and really have the portfolio well positioned to gain whatever opportunity exists for us with respect to rent increases.

Your next question comes from Karin Ford - KeyBanc Capital.

Hi, just one quick question. Going back to the land price discussion, I know you carry most of your land for future development under options, but of the $200 million you have held directly on your balance sheet, do you anticipate having to take any type of impairment charges on that if land prices keep coming down?

This is Tom. No, we don’t anticipate any impairment charges. I think that question probably arises because of the homebuilders and if you recall, we buy land for investment purposes and expect to develop it and as long as you can recover your costs through development over the estimated depreciable life on an undiscounted basis, you have no impairment charge. That’s contrasted with home sellers or homebuilders that by their nature are buying land to sell it almost immediately, and they have to mark that to market. So we’re buying for investment, they are buying for sale and I think that’s the primary difference.

I was just asking with relation to a function of you guys raising your underwriting returns with that method more land would end up needing to be sold instead of developed?

We don’t anticipate that at this time.

Your next question comes from Chris Hummer - Greenline Capital.

Looking at the balance sheet if I look at the growth in the construction in progress and land held for development over the last eight quarters, it looks like it’s about similar to the same increase in your debt. That suggests maybe you are funding this development 100% with debt, which maybe helps explain why the debt is up 40% from the beginning of ‘06 but the interest expense is actually down. Does this reflect a shift in how much debt you guys want to have on your balance sheet relative to your real estate value going forward? Are you looking to do a higher debt to cap ratio going forward?

No, it doesn’t; we are not trying to signal anything with those numbers and when you look at interest expense there are a lot of things that go into that including increased capitalized interest as well as interest we earn on the proceeds from our equity offering last year that stayed invested in short-term marketable securities for a period of time. So we’re not trying to signal anything. I think you are trying to match things up that are probably not easily matched up in terms of a strategy.

Your next question comes from Mark Bilfer - Goldman Sachs.

You had mentioned in the release that you might look at the option of doing joint ventures. How much of the disposition volumes that you are planning could you do through a joint venture, and what’s your preference for using joint ventures?

The dispositions we have right now, we haven’t specifically lined up any joint venture activity for any of those dispositions. It’s something that we are exploring right now. We don’t know what the terms would be; it may be better just to selling them outright as opposed to put them in a joint venture. So it is hard to determine what the terms might be on that. I think you have to look at that disposition activity and expect that at this point most of it will end up being sold to third parties and we won’t retain an interest. However if we can get great terms, we will put some of those in joint ventures and retain part interest.

Are you guys still looking at doing a fund or a second fund to your current one?

We are exploring options to fund acquisition activity. We think that there will be some great opportunities during the year for acquisitions and we are exploring sources of funds to pursue that, but to say at this point in time that we have got anything that we could speak to, that’s not something that we are prepared to announce at this time.

Last question related to the new position that you guys created and the cost savings that person is going to be in charge of procuring, are a lot of those cost savings already built into your expectations for ‘08 or is that in addition to what you have projected?

That position is a strategic add; it is very difficult for us to start attaching cost savings to that new position at this time although everyone will be tasked to perform and he will be tasked to perform and get us great cost savings. But it is really a strategic shift in how we think about spend and it would be premature to start pro forma in cost savings based on that new position.

At this time there are no further questions. Mr. Blair, do you have any closing remarks?

I just want to thank people for their time on the call today. We will be chatting with you in the future. Thank you.