UDR, Inc. (UDR) Q2 2008 Earnings Report, Transcript and Summary

Good morning ladies and gentlemen. Thank you so much for standing by. Welcome to the UDR Inc. Second Quarter 2008 Earnings Conference Call. During today's presentation, all parties would be in a listen-only mode. Following the presentation, the conference will be open for questions. [Operator Instructions] As a reminder, this conference is being recorded today on Tuesday the 5th of August, 2008. I'll now turn the conference over to Mr. Larry Thede, Vice President of Investor Relations. Please go ahead.

Thank you. And thanks to all of you for joining us for UDR's second quarter financial results conference call. Our second quarter press release and supplemental disclosure package were distributed yesterday and posted to our website www.udr.com. In the supplement, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. We'll begin the call with management comments and then open the call to your questions. I would like to note that statements made during this call which are not historical, may constitute forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be met. A discussion of risks and risk factors are detailed in yesterday's press release and included in our filings with the SEC. We do not undertake a duty to update any forward-looking statements. I will now turn the call over to our President and CEO, Tom Toomey. Thomas W. Toomey - President & Chief Executive Officer: Thank you Larry. I am joined on the call today by Mark Wallis, Warren Troupe, David Messenger and Jerry Davis. UDR had a very strong quarter on a number of fronts. I'll let the team fill in you on the details but first let me cover some highlights. The operating team did a great job, in particular achieving our 16th consecutive quarter of revenue growth. Based on July's results, it looks like we're now on our way to 70. We performed well in a number of areas but to stick out. We nearly reached 70% in NOI margin and we're approaching average rents of $1200 a month. On the development, redevelopment front, we delivered nearly 1000 homes, at returns exceeding our original underwriting. We've also provided enhanced disclosure in our earnings supplement to help investors understand the status of our activities. In the investment area, we continue to reap the benefits of our March 3rd portfolio sale. Since, March 31st we closed on $280 million of West Coast acquisitions, bringing us very close to completing the redeployment of our sales proceeds. To improve transparency, we're now producing a quarterly portfolio update which details on each of our top 20 markets, which is available on our website. On the capital front, we also continue to enjoy solid balance sheet. It's been great to be sitting on cash, especially during this very turbulent time. It is afforded us the chance to pick our spots and take advantage of market conditions. Now let me take a moment and share our views about the future. Reading countless autonomous forecasts and listening to a number of earnings calls, this quarter from our industry and others, I find that everyone have their queries on the economy for the balance of the year. Simply stated, we at UDR see so many cross currents, it's hard to forecast trends. For the near term, we believe that business is solid and that our capital flexibility will keep us safe during these highly volatile times. We intend to remain focus on what we can control. In particular, our value creation strategies in operations, development and redevelopment. Looking further out, we believe demographics limited new supply and portfolio positioning will work in our favor. And we remained very optimistic about our long term prospects. Now I will like to turn the call over to the team. First, Jerry Davis will discuss operations. Then Mark will cover development and redevelopment, and David will cover our capital markets activity and then we'll open it up for questions. Jerry?

Thanks Tom, and good afternoon everyone. Today, I would like to cover several topics. First, our revenue performance during the quarter, next our expense management and finally, our guidance for the remainder of the year. Because we're one of the last to reach to report, I won't spend time going over individual markets. We've heard what our piers have been telling you on their calls, generally we're in agreement with their views of the markets. One of our primary goals as an operating team here at UDR is to lead the individual markets and year-over-year revenue growth. Over the past several quarters, we've had great success doing this, primarily because of our superior location at the right price point. Additionally, we consistently look for ways to reinvest in our real estate with various revenue enhancing initiatives. Critical to our continuing success, as the exceptional performance of our site and regional operating teams. I would like to take this term and to personally thank all of my fellow associates here at UDR, who are dedicated to keeping our performance at the top in the industry. With most of the apartments REITs having reported their second quarter numbers, during six months it looks like we're leading 63% of our markets in revenue growth and we're leading 74% in NOI. During the quarter, we had NOI growth of 7.1% over last year. This was due by revenue growth of 4.4% and a decline in expenses of 1.2%. This performance is driven our same-store operating margin in the second quarter up to 69.2% an increase of 170 basis points. First, on the revenue side. Our effective rents increased 3.4% during the quarter and average occupancy was 20 basis points higher than last year at 94.9%. Revenue per occupied home is now pushing $1200. Looking at our markets, we saw growth in 19 of our 22 markets with declines coming only in the State of Florida. 17 of our 22 markets had sequential revenue growth which drove our same-store revenue growth to 1.2% over the first quarter. This marks the 16th consecutive quarter of sequential revenue growth. On the expense side, our expenses for the quarter were 1.2% under last year's second quarter. When, I look at our expenses the categories of payroll, utilities, taxes, and repairs and maintenance that makeup about 85% of total expenses grew by 3.9%. The remaining 15% of expenses which is made up of insurance and administrative and marketing cost decreased 30%. I'd like to speak of these decreases. Insurance expense was again down due to lower third party premiums compared to last year, as well as much better loss experience. The administrative and marketing cost side, we come down primarily as a result of our continued elimination of print advertising. We expect to totally be out of print at our stabilized properties by the end of this year. Since 2005, we've brought our marketing cost down from $155 per home per year to $95 per home. In the second quarter of 2008, 46% of our movements actually originated from Internet sources. This is up 8% compared to the second quarter of 2007. With our recent web enhancement, we expect this trend to continue going forward. Last, how do we see the balance of this year playing out? Well, I've listened as our piers have told you over week that revenue growth will moderate during the second half of the year. We see the same deceleration occurring. For us, this will be caused primarily by lower job growth, higher prices of the pump as well as other consumer goods. And lastly total revenue comparisons in the second-half of the year. Since rents continue to grow at a good pace in 2007, a lot of the year-over-year growth in the first six months of this year was actually the result of the rent increases achieved last year. With rent growth slowing over the last six to nine months, year-over-year comparisons will moderate. That being said, our revenue growth has remained strong throughout the first-half of the year at 4.6%. We feel very good about our performance so far and our revenue guidance for the full year remained at 4% to 4.5% range. We're about half way through our summer leasing season. Traffic compares well to last year. We look at our occupancy for same-store properties, last week we stood at 95.4% physical occupancy, that's 30 basis points higher than we were at the same week last year. Although pricing power is challenging and all of our best markets. We do feel like we'll be able to push occupancy during the last half of the year. We also believe that we'll be able to continue to see sequential revenue growth for the remainder of 2008. Year-to-date, our expenses are 1% lower than that were last year. But we think the second half of the year will be higher. We began seeing favorable insurance loss experience, both on the property and healthcare side in the second half of last year. We also had positive real estate tax accrual adjustments in the fourth quarter of 2007. Because of this, we expect that our third and fourth quarter expense comparisons will be more difficult from the first half of 2008. Our guidance for expense growth remained to 3% to 3.5% for the full year. Although we will do everything possible to come in below that level, we do recognize that we're being compared to very low expenses last year. With that I'll turn the call over to Mark.

Thanks Jerry. I am going to provide just a brief update of our acquisition redevelopment and development activities for the quarter. First, on the status of our repositioning and the use of our 1031 exchange proceeds resulting from the $1.7 billion sale in March. Since our last call, we've added 546 homes in California and 455 homes in Seattle using 1031 proceeds. We will complete these remaining proceeds by the end of this month; we'll use two of our development pre sales as part of that exchange, the one in Peoria Arizona and in Tampa Florida, those who are listed on Exhibit 8 (c). In addition we are negotiating a little more powerful acquisition for $59 million and we do expect to proceed on that purchase within the next few days. At that point our exchange will be complete with around 4300 homes, purchased on average cap rate of 5%. It's important to note that, at least 72% of the assets we acquired are in targeted coastal markets of California, Metro Washington DC and Washington State. 80% of those assets will be the less than 10 years old and I want to point out the remaining 20% will be rehab by our very experienced redevelopment team. Second, just a review where our developing pipelines stand to say Exhibit ratio of the pipeline at $2.6 billion. I want to break that down, it should be noted that $149 million of development and redevelopment projects have now been completed. The development projects are leasing up well and redevelopment completions are now leased up and producing yields between 7% and 8%. Our in house development and redevelopment seems to have $885 million inactive developments. We have $541 million of pipeline being run by third party development groups under our JV and development presale programs. Then a little over $1 billion or 47% of this pipeline has not been started. We refer to these as our warehouse assets of which approximately 80% produce income today. Let's take a quick overview of the portfolio repositioning and now I will turn it call over to David Messenger. David L. Messenger - Senior Vice President & Chief Financial Officer: Thanks Mark. Our second quarter was relatively flat in the capital markets area. We continue to make progress against our initiatives. We continue to execute our share repurchase program buying back 963,200 shares of our common stock an average price of $23.65 per share approximately 5.4% discount to yesterday's close. We also repurchased $35 million of debt at an average yield of 632. We took advantage of favorable floating rates and drew down the remaining capacity in two of our secured facilities for a total of $55 million currently floating at 3%. We believe this will further insulate us from continued volatility as the capital markets and the GSEs. In addition, since the close of the second quarter we have closed on approximately $50 million of construction loans, with another $100 million in process that we expected to close in the next 45 to 60 days. Going forward, we'll continue to assess the markets for share and bond repurchases from possible debt issuances. We're seeing a great deal of invested capital, sitting on the sidelines, waiting to be put to work often at very attractive rates. Consequently, even though we have funding capacity to grow of our capital and debt obligations through 2010, we'll continue to evaluate opportunities to extend our current maturities and to continue to strengthen our balance sheet. As we previously stated, the calculation on our special dividend would be completed after August 30th when the section 1031 time period expires. The amount of its special dividend remains in a range of $130 million to a $190 million. Upon completion of the calculations, we will review the current market, capital resources, and share price to determine the divided component, cash, stock or combination of both. As we head into the second half of the year, we have a solid balance sheet with 230 million in cash and substantial financial flexibility. While this may be causing some short term earnings dilution with cash currently invested at 2.5%. We believe that position does well to find our strategic objectives and we continue to deliver long term value for our shareholders. Now I will turn the call back to over to Tom. Thomas W. Toomey - President & Chief Executive Officer: Thanks David and operator we're now ready for questions. Question And Answer

Thank you, ladies and gentlemen at this time we will begin the question and answer session. [Operator Instructions] Our first question from the line of Michael Bilerman please state your company followed by your question.

Hi this is David Toddy [ph] here with Michael. Just a couple of quick questions, to start with development. Has there been any changes to your underwritings relative to costs expected stabilized yields and the timing?

This is Mark Wallis, no; there has not been any significant changes at this point. As you can see the pipeline remains fairly stabilized so is volume. So nothing at this point we try to underwrite those conservatively and so far, that's held.

Great. And then relative to the shadow pipeline it appears that it's increased in scale. Can you just provide some color on those additions?

Are you referring to... I guess the last Exhibit pay test [ph]. It moved I believe part of it is we've moved part of the trivial [ph] over there or just because those are lighter places which are the income producing assets on there. And in addition we've moved, we should go back to where that is a site we have that has entitlements but we're finding those entitlements at this time and we would term that entry in this development a little bit later than originally thought.

Okay. And forgive me I joined the call a little bit late, but could you talk a little bit about the traffic and the price tolerance that you're seeing of incoming customers in June and July?

Traffic, this is Jerry. Traffic's holding up pretty steady with last year. It's gone up just a hair and that's probably because we rolled out our level one call center in at the end of the... we are in the middle of rather the second quarter. And that's helped push traffic higher, so we don't miss any phone calls any longer. Pricing, we have pricing strength up in the Pacific North West as well as Northern California. We're typically seeing 4% to 5% increases on either renewals or incoming people over what they have prior resident was paying. I'd say for the rest of the country with the exception of Florida, Phoenix and the England Empire we're probably seeing in the 2% range and then when you get to Florida, Phoenix and the England Empire it's roughly flat.

Great. And then just lastly, just had a quick question on a strategy which is probably in the acquired longer asset, but could you just give us a sense of what your team is thinking relative to the growth focus today, now that you've gone through this sort significant transformation? Would you characterize your focus more as internal now? Do you still feel there are sort of large scale external opportunities? Thomas W. Toomey - President & Chief Executive Officer: This is Toomey. At this point in time, I think what's our view would be, first interest rates is going to rise. And interest rates rising usually indicates that asset pricing is going to fall. What's the timing of those two events, we think it's slowly easing into it. I mean you look at spreads today and you look at base rates, there really doesn't seem to be a whole lot of pressure up and as a result you are not seeing a whole lot of pressure on asset pricing. So the thing is one of these cases where a lot of people are waiting around for assets to appreciably dropping value, we don't see that happening. We see a slight drop, probably another 5% to 10% more. It's not going to be a great feeding frenzy that it was in the '80s or even the '90s. By virtue NOIs are pretty solid, there is no new supply until I would tell you I think from external standpoint, we're going to continue to look and pick our spots in markets where we think we can add some value redeveloping our operations that our second growth strategy is continue to focus on this development pipeline which looks to be delivering $400 million to $500 million on an annual basis that are 100 to 150 basis points over what we can get in market. And I think those are the primary growth strategies that we have at this time and see that if we play our capital prudently and be patient that by the year 2010 you got a large demographic swell coming right at you and you just got to be in the right market presenting the right product and it's still going to come down to where the job markets are in 2010. And I think we have our portfolio positioned right in those corridors where people are going to be getting jobs right out of college and those are pretty good targeted group. So, I think that's our strategy over the next three, four year period.

Great. Thanks for the call today.

Thank you. Our next question is from the line of Michael Gorman. Please state your company name followed by your question.

Thanks, good afternoon. It's Credit Suisse. Can you just spend a little bit time on you guidance I guess I'm a little bit confused on the moving parts. It looks like your operational guidance is projecting a pretty significant fall off in the second half, but if you look at the FFO guidance continued in acceleration in the quarterly run rate to get there on the second quarter. Can you just give us a little bit more breakdown on what's actually moving in and out of the guidance at this point? Thomas W. Toomey - President & Chief Executive Officer: Jerry I'll cover the kind of the operation guidance for the balance of the year. From an FFO standpoint there is a couple of things that are you're not seeing right now which is broaden some assets and then lease up and you have lot of redevelopment assets coming back on line as well as development come in. And so second half of the year, we're forecasting goals assets to generate more than they did this last quarter. Jerry.

Well,I'll just reiterate what already said. On the expense side, we get kept guidance at 3% to 3.5% that is based purely on tough comparisons to last year when we had very low insurance in the second half of the year as well as a real estate tax adjustment. We are hopeful we can and under that but it's still tough. The one thing we do see is that revenue has slowed from the first half of the year. We don't see it decelerating at a great pace, July right on planned what we expected but those are really what we say.

Okay and one follow up. What was the timing like on the 960,000 share repurchase, how much did that add to the quarterly results? Thomas W. Toomey - President & Chief Executive Officer: Minimal.

Okay thanks.

Thank you. Our next question is from the line of Rob Stevenson. Please state your company name followed by your question.

It's FPK. Good afternoon guys. Tom when you are thinking about redevelopments, how does the economic outlook play into that and from that standpoint, what do you expect to start over the next 12 months or so in terms of new redevelopments? Thomas W. Toomey - President & Chief Executive Officer: I'll let Mark take a lead on that and I'll follow up.

Well, you can see we are really finished a lot and we moved through back into the fully leased stabilized status and I think we did hit the market pretty well with several of those. Going forward, we're really tackling some deals as for a little bit harder in that couple more in California. So I think that range of homes that are being production where they were 4000 based on working on firming and entitlements we may have more than we're working on but actually productions to be more 1500 homes here to take. That's what we see going forward. Now we like the business a lot. We've had very good returns there some the market are changes in response we have ability to do more that's what we see right now.

What's generally the thing that you start to see because as you would say hey let's pull back on investing dollars on redevelopment because we are not going to get money out the other end

A lot of it's just trying a lot product frankly. We've done a lot of our product and with our sale we did and repositioning net down 40 some thousand homes there is less to do that fit our criteria. So target is fine where our products I mentioned in the couple of our acquisitions do fit that criteria. So it's somewhat limited by overall market factors but then also finding the right products.

Okay. Thomas W. Toomey - President & Chief Executive Officer: Well pull back decision for us would be primarily driven around the rent structure. And we think when we start one of these or we get a pretty good handle on it, we got good solid handle on the cost structure of it. What may often weigh our decision is where do we see rent and that's where you see us moving towards the West Coast or in our case the district in DC. Those markets are still as Jerry has said where you've got pricing power, you feel strong about the market and the prospects and we think we can take assets offline there and bring them back and get the rents that are better than today's markets trend itself. I think that's what would really weigh us down Robert and that's been our plan all along was to move towards the coast in our redevelopment strategy and Mark's right in terms of the number of homes you see but if you look at the net throughput of rents that we're deriving from those it's about the same level of dilution on a consistent basis.

Okay. Just a follow-up when you take a look out there and you see what the reasons are for moving out and sort of the profile of your tenants I mean how much of an impact do you think it might have on closing the turnover the back door in terms of turnover from the elimination of some of these down payments at system programs on a single-family side?

I think it's kind of difficult to tell right now. I think with the new laws out or the new home owner's systems program, it obviously going to help some people jump into the first house. But you still have a huge cost difference between leasing and owning and most of our markets, especially out in the West Coast and D.C. Area, it's not clear yet how much it's going to help. Thomas W. Toomey - President & Chief Executive Officer: This is Toomey. At this level I would add to that is the psychology of a purchase of a home is still very damaged, and once you get passed the economics and the tax incentives would you invest in something that you knew the price was going to go down another 10%. Most rationally people won't and we think that going to prevail for sometime and when it will reverse, you'll see it like anything else it was down turn. You'll see it in certain markets at certain price points. We think the way we are positioned, California, the West Coast being 50% of the portfolio now; it's got a long way to go before those people get back into the game in our opinion.

What's the move outs of home purchases running this past quarter? Thomas W. Toomey - President & Chief Executive Officer: This quarter it was 13.5%. That's the same as it was in the first quarter but last year and second quarter it was 16.7%. So it's down quite a bit.

Okay. Thanks guys.

Thank you. Our next question is from line of Dustin Pizzo. Please state your company name followed by your question.

Banc of America. I guess its David or Tom, was any of the positive impact from the debt repurchase or the common stock repurchase factored into guidance previously? Thomas W. Toomey - President & Chief Executive Officer: This is Toomey. The guidance that was given was really done at beginning of the year and which we had contemplated significantly more share repurchases and no debt repurchases, and as the market has progressed the share prices have risen to an attractive level but not to a point where we would buy them and that has presented an opportunity. And so in my calculus of looking at their kind of two are offsetting each other but it wasn't the original plan it's more of the consequences of the environment.

Okay. So then as you look to the back half, can you comment on what you're currently thinking there as far as either continued repurchases or continue activity on the debt side? Thomas W. Toomey - President & Chief Executive Officer: Yes,I think we'll be active in both depending on the price and based on your call notes and the results thereon.

Okay. And then just thinking about on the debt side, I guess first what was the coupon and the maturity date of the bonds that you repurchased? David L. Messenger - Senior Vice President & Chief Financial Officer: See coupon was 5.5% and the maturity were $2.14.

Okay, so I guess, how do you think about given that we're in a pretty difficult environment here, you think the rates are probably rising in the future, you look at the yield to maturity of 6-3 that they are repurchased at versus the comment. Should we take that to mean that you guys are assuming less than kind of 6%-3% return on the comment going forward here? Thomas W. Toomey - President & Chief Executive Officer: No we didn't try to look at it both, I mean one, if I comment considering a number of things, both your liquidity position. Where do you think your NAB is and where do you think your price will be in the future? The debt we really looked at the inside of the trait. If we think today we could issue secured or unsecured debt inside a fix and extend the maturities. And the market gives you an opportunity to buy $35 million on a $3.2 billion debt. Okay, you take advantage of it. It's not that big of a number. Kind of interesting opportunity to buy at below par we thought why not. It's a big deep market at that discount? Probably not. The shares you can pretty much look at where we've been buying them for the last three year-to- date. And gather where we think our NABs and where we think a good discount is. So well we bought was 6 million shares, something like that, year-to-date inside a 24 stock's trading at 26 today, but we're not buying today.

Fair enough. Thanks. Thomas W. Toomey - President & Chief Executive Officer: No, thanks.

Thank you. Our next question is from the line of Rich Anderson. Please state your company name followed by your question.

I am with BMO and this question is for Toomey.. I just want to say that. Thomas W. Toomey - President & Chief Executive Officer: Some day I am going to be able to respond in stand or two Rich.

Actually I am in notice for Toomey, but anyway the questions on that special dividend, and I guess Mark it was you said that once you finished some of these acquisitions there you have right on the immediate landscape that you'll be done with the redeployment process of the portfolio sales. But that doesn't... you are saying that in addition to that you will do another special dividend of about 150 and a special dividend the range of about $150 million, is that right? It gets you to a 150 million shy of the $1.7 billion.

Toomey here, Would tell the range on your special dividend and the timing in that. Thomas W. Toomey - President & Chief Executive Officer: The range of special dividend Rich is still the 130 to 190.

Right. Thomas W. Toomey - President & Chief Executive Officer: And that's contemplating the acquisitions that Mark is queuing up and closing over the course of... from today through August 30th.

Okay. So then the other question is, if I'm right and I think you guys said this in your Investor Day that you actually sort of looked at two and half times the amount of acquisitions that you would actually need to buy...right to eliminate some of the pressures that might come from people knowing that you are a buyer. And so have you given any thoughts of saying, you know what let's strap the special dividend idea and let's just... let's go buy more assets?

This is Mark; let me speak to that, I mean... we've bought nearly 4200 homes towards... kind of $1 billion and so of acquisitions. So...and we have ...we did identify over two times in our assets were we've closing gone through we've traded one against another as we've got through these closings, we are just down to a really one asset. We have one competing with that, we think we picked the one we are going to pick. So in this last trade actually I had two assets competing against each other. So we're just out of the end now.

Okay.

So I don't have any ...the assets that I have left had identified I can think of a couple but on the surface look pretty good as far as the marking the location we can't get too impressed there are market for us to buy. Thomas W. Toomey - President & Chief Executive Officer: Rich it's Toomey and in addition to that. One year against the short market if you will. I am 1031 expires at the end of august. Mark and his teams traded a number of assets and you kind of get to a point where you say, wait a minute. We think cap rates are moving a little bit. If the sellers are not going to move their price, is it really serving a judiciary duty to just pay up? So, that to pay a special dividend. And I just can't bring myself to do that, and I think that's been the discipline we've forced upon ourselves as I say that's why we gave you a range to 130 to 190. We didn't want to back ourselves into a corner and say all of a sudden we've changed our mind we wanted to buy more assets. That's because we thought we could get good prices. We didn't get good prices. We weren't going to buy the damn real estate and we always thought about it that way. Its more discipline on our part, than it is to try to do anything else so.

Okay. So, then the other question is the stock up as high as it is at this point. I mean does that give you a sense to issue more in a way of a stock dividend or a cash dividend. It might be better for you as a company to issue the stock as a dividend, but maybe investors wouldn't be thrilled to get it to 26.50 as they might at 23%. Thomas W. Toomey - President & Chief Executive Officer: Well, I think as we've talked to shareholders, a lot of them viewed is a stock split. And so it's not diluted to them or just getting pro-rata share that they had before, and if they so elect to monetize it by selling the, company has got capital and if the shares would fall they viewed as positive by virtue of people, we would be able to jump in and support the stock if they had a number. Other people have said just send me the cash. And right now we are lending out and saying what's the best thing both given the economic environment that we are dealing in, the stock price environment and the value of cash. And I tell you that I am more driven by the long term value of the enterprise and one quarter of earnings or even the next six months of earnings. So we're going to play through that, we'll have a pretty damn good picture after August 31st. We finish the 1031 period, we get the auditors in here, we get the tax people in here to sign off on the tax calculation and then we figure out exactly where the market is. And we'll be very upfront with everybody about the rationale behind whatever decision is ultimately reached.

Okay. A quick one here, any additional debt free purchases in the current 2008 guidance? Thomas W. Toomey - President & Chief Executive Officer: No.

Okay. And then my last question is; I need to just further understand the development pipeline and I know you said you moved some things from the sort of the underdevelopment to the future development category. But can you explain how that happened mechanically? You'd spent money up until the first quarter on these four assets that moved from the under development to the future development. So how do you account for that in terms of the money that's has already been spent sort of from the balance sheet because you expected to do it eventually or how does that work? David L. Messenger - Senior Vice President & Chief Financial Officer: This is David yes, those dollars are still good on the balance sheet in terms of our being capitalized cost. We're still going forward with, like Mark spoke to you about Mission Bay [ph]. We're on the top to give you the entitlement knowing the work is done we are just meeting from fine tuning to it and that caused us to move it from our so it today being developed through a future development activity.

Okay. But is there any chance that any of these would be shelf completely?

From the past... no I don't think so in that case now. Soon these assets I guess the print started growing at 40% in San Diego which actually I guess it's not totally out of the room for the possibility, you might delay you doing it, but no. All of these we feel are good solid opportunities. I think we're trying to communicate to that we are trying to be prudent about when we bring these on to the pipeline that match up market conditions. And that's where we're hoping to communicate there, but no, they are all in good solid shape, very good size.

Okay. Thank you Wallis.

And the one they have mentioned in admission we haven't probably today; we got a window we can better it. And so we feel like we had to do that, just create more value that way.

Okay.That's it for me. Thank you. Thomas W. Toomey - President & Chief Executive Officer: This is Toomey signing off too.

Thanks Toomey.

Thank you. Our next question is from the line of Sameer Upadhyay [ph]. Please state your company name followed by your question.

Sameer Upadhyay from FBR Capital Markets. Can you please talk a little bit about your thoughts on the GSE financing environment spreads and the overall availability?

Yes, this is Warren. In terms of GSEs we're still seeing a very aggressive action in terms that their willingness to make secured loans and we have not seen any pull back. There's been pulled back on a secured loan I think a couple of our peers have noted that its still 100 to 150 basis points less than some of the unsecured financing. So it's still very attractive financing.

But you only rate on a 5 or 7 or 10?

Our normal rate are five, is still five or six, in that. Thomas W. Toomey - President & Chief Executive Officer: I think one thing to recognize thing is that that if you can get back your money at 5-6 its going support cap rates for where back rates are at. And so you got positive NOI growth and you got a 5-6 debt number and you can get 70% proceeds. Your return on equity on a levered basis, moderate growth is still going to be probably about 12. That's pretty attractive in this environment. So we think real estate is going to hold up.

Just another question. Your views on the Florida markets, you look at cap, its negative. I think its been a couple of quarters it's negative and what's your view going forward?

This is jerry. Tampa does continue to be our worst market right now as far as growth. We think it's probably going to stumble along the bottom, may be for another 12 months, that's at least what we're hearing. Has a lot of speculator homes or just a shadow market, we do perform better I can tell you up that was on that Atlas County side than we do on Hills Burrow side but Tampa, it's tough to call it bottom but hopefully we're in it, and it's not going to get worse.

Did they get many worse right now?

No its not really its getting bottom and... closing on the bottom. So you ought to start anniversary soft numbers and start being able to get some growth, start next year. Yes.

Okay. Thanks guys. Thomas W. Toomey - President & Chief Executive Officer: Don't call it a recovery just call bottom in.

Thanks

Thanks. Your next question is from the line of Michael Salinsky. Please state your company name followed by your question.

Mike Salinsky with RBC Capital Markets. Real quickly, your performance in South Carolina and its areas and that such and Southern California has been well above your peer group. To what do you attribute that to, is it redevelopment, is it people training down A assets to D assets, is it market positioning, what's the driver behind that?

He just answered the question. It's actually a lot of that. In Orange county where we stated this before and we firmly believe it, we have great coastal locations, we're located the west of the 405. We do think we're at the right price points where some of those peoples those have lost their lending jobs last year had traded down to us in our average French and Orange Counties in the 1400 to 1500 range. People were paying 22,300 have come down to us. We had an active kitchen and bath program there over the last several years that have helped profits up in modernize some of our 1968 to 1972 product. And the other think I think as we have a real stable operating team in Southern California and there is really even other some new product popping up in Ravine [ph] as well Anatine [ph] in our more direct backyard of New Port and the Huntington beach in coast we've really not seen that product, that's the Orange County. And the England Empire just we looked great there but keep in mind we have three properties. One is a development that we completed I think in 2006. We finished a lease up there last year about mid-year we were still heavily in the concession for first half of the year and those were burned off, anniversary high concession and we eliminated concessions there around the third quarter or so. Other two assets are probably around break even and that one property is in fit in Rand Rodomont [ph] I think struck either, that one is doing extremely well. San Diego is also doing very well, and a lot of that is... we own a lot in north San Diego County, and as the... they cater a bit to the military market and then this represent we do well and we have done extremely well there.

Okay. Second question with the acquisitions you made around five at year I think you mentioned in the last call that you anticipated being pretty close to north of the six by the end of 2009. Is that still the case given what you see in the markets right now? Thomas W. Toomey - President & Chief Executive Officer: That's your call Mark.

Can you repeat that.

Yes, previous call you have mentioned that, you know, why you are buying these assets at low cap rates these are the growth opportunities for phenomenon which have been north of the six followed by a the end of 2009 at this point, that still the case given what you are seeing across the markets right now.

I think generally that's still the case where we underwrote those assets yet.

Okay. Third question is fixed charge coverage has continued to come down here over the past couple of quarters. Is that something that you are going to be able to grow into with properties and lease that you are bringing on line or is it possibly you have to sell additional assets next year to fund to continue capital spending and growth efforts? David L. Messenger - Senior Vice President & Chief Financial Officer: This is Dave. We'll improve that as the assets come out online, second half of this year going into '09. Thomas W. Toomey - President & Chief Executive Officer: This is Toomey. We have on the 2010, all our funding obligation are already met. So we don't see the need for capital raise. What we see it as an opportunistic window market presents itself those things we do.

But you're not pushing up any close to any covenants. Thomas W. Toomey - President & Chief Executive Officer: No.

And then finally, just subjugate as quarter end, have you repurchased any shares or bought back any additional debt? Thomas W. Toomey - President & Chief Executive Officer: No.

Okay. Thank you. Thomas W. Toomey - President & Chief Executive Officer: Operator, are we done?

Sorry, our next question is from the line of Alex Goldfarb. Please state your company name followed by your question.

Hi, UBS. Good morning out there. Thomas W. Toomey - President & Chief Executive Officer: Hi Alex.

Sorry, I hopped on late so I apologize if you already addressed some of this stuff, but just wanted to go back on the special dividend and the one cash balance. Is the $190 million top end of the special dividend, is that what would happen if you did all the acquisitions that are planned? So try another way if you don't do all the acquisitions that are planned and you get to that deadline on the 1031 money, then the special dividend could potentially exceed the $190 million? David L. Messenger - Senior Vice President & Chief Financial Officer: No it's the top level, assuming we don't close anything in the next 29 days... 28 days.

Okay. So if the cash in the 1031 accounts stay there then that would get you through the $190 million. David L. Messenger - Senior Vice President & Chief Financial Officer: That is correct.

Okay. And from a modeling perspective or guidance were you giving other income for the year, your expectations? David L. Messenger - Senior Vice President & Chief Financial Officer: No. We haven't changed any of that. I believe at the beginning of the year, we said already three end come and still don't believe there is any.

Okay. And then just the other stuff running through there is fairly interest income? David L. Messenger - Senior Vice President & Chief Financial Officer: Interest income, correct.

Okay. And then on development side, whether your peers... some write downs, want to get a sense from you guys how comfortable you are with the land on your books, the way it's strengthening? David L. Messenger - Senior Vice President & Chief Financial Officer: I don't think we bought any land with anticipation of building condos like some of our peers.

And what about the new rentals developments?

You're talking that rental acquisitions?

Yes...

Now we are very comfortable with those. And I think Tom spoke to the fact that we think there is fact where cap rates still in there... they are steady right now. We've been pretty active in several markets. And so we feel really good by our acquisitions and there is a rent growth that's in front of us on all of those and we think on our development side that, we are in very good position there and for our unit cost.

Okay. Thank you.

Thank you. Your next question is from the line of Paula Poskon. Please state your company name followed by your question.

With Robert Baird. I have an operational question for you about just generally speaking what percentage would you say of your tenant base is involved in some sort of automated rent payment either from direct dividend of their checking account or to a credit card?

Currently, it is pretty low. We're actually in the process of rowing out ACH payment throughout our portfolio we're testing it at a seven or eight locations right now. So it's a low percentage right now.

Okay, thank you. Thomas W. Toomey - President & Chief Executive Officer: Thanks Paula.

Thank you. Our next question is from line of Anthony Paolone. Please state your company name followed by question.

Thanks JP Morgan. First question, on the presales, can you give us an update as to where you think those yields will come in at?

Well, I think we're still in usual range that we disclosed. As Tom mentioned our acquisitions are at least 150 basis points better that what we can basically softened when those probably more like 175-180 basis points, over... they are still isn't leased up so we are reported how they come out but we're still in a pretty good range there.

So, for the assets like 15x temp Orlando [ph] being three of four that has been a significant amount of gymnasium [ph] and what maybe the yield you're expecting in those markets?

We had seven plus percent yield on Phoenix and that might be more to 7 or 7.5 we've still started to lease up there so that's yet to determined. Orlando we've actually 87% leased I think we've leased 35 homes so that actually has been surprising that we had pretty conservative underwriting on that we did that a couple of years ago I remember that it was a couple of years ago. So that's been actually better than expected to give in the wind of marketing in Tampa. We've not turned into units yet its an interior location in that part of that market area. We've locked that location through urban infield spot and so it will be little bit difficult from the typical suburban markets that or may be softer. Thomas W. Toomey - President & Chief Executive Officer: Offsetting that you've got that those are flat or slightly below and you've got plus which Texas, California and Seattle all probably going to be well.

Right and as mentioned we have a asset where in lease up for the development in phase 2 Lincoln Town Square in Dallas. This is still little bit of back to report but we're 50 leases at that project in July. Probably enclosed with 60 and we've been since the numbers, so in Texas its pretty strong.

Okay. So when you roll up all of this stuff it doesn't sound like its too for up to mark?

That's not characterized.

Okay. And second question, you commented about the move out home ownership rate being heading down to 13% by any chance you have a track where your tenants are for coming from. And whether there's been any meaningful trends on that front?

You know I'm hard date on that, if you're asking and getting it foreclosures or we're getting people from suburban locations any more infill, we are feeling some of that but I really can't quantify with accuracy.

Yes, I mean whether it's a foreclosure not just the idea of home ownership rate coming down and maybe folks coming back in from a house if there's been any trend there that's indiscernible.

Nothing they could that I've seen.

Okay, thank you.

Thanks Sam, Tony.

All right thank you. [Operator Instructions]. Our next question is from the line of Jeff Donnelly. Please state your company name followed by your question.

Yes, Wachovia and my first question just concern of the product you're seeing in acquisition market, are you easing any noticeable shift in the mix of assets available for purchase such as more redevelopment projects and stabilized or any more products in second year cities and kind of 24/7 locations?

I think we're not looking at those secondary markets, so I really can't speak to that although I don't think there's been any dramatic change in the current market ad you can see in those markets. Do you think there has been which as been good for us it has been more urban in-field product its on real ends or near real ends or near urban retail and we've been able to take advantage of that. We haven't seen a lot of rehabbed product under markets we as I mentioned we had a couple kind of that we wanted to do provide that expertise and do rehab work on but there hasn't... what we've seen and haven't seen a lot of that top product its been some newer developments in these more than urban locations.

And what was competition like I am curious to floor assets you just acquired and it may be used at as a mechanism just talking about how has the competitive environment changed for acquisition this level for last six to 12 months do you we seen it improve?

I think it has improved and I think this term, if you look at may be the early summer of the last year when you look at the asset pretty good to the August, September time frame of the last year. That in the top assets that you see we bought in Washington State and in California. They were typically ten 10 bidders and you've been invited of best in final of may be five to six with us there and it was highly competitive a lot of care [ph] compression. I think on these higher end assets there has been improvement over may be 25 or 30 basis points because what we saw they were probably five real bidders versus 10. So it was a better environment to buy, but there still were competitive buyers out there but fewer. And we also stepped down and chase some assets a couple of assets like Allan's where they were completing their lease up and we will and that near of the number bidder's down because we're comfortable with to finish that lease.

I guess here is a follow and may be in earlier question on Tampa, I guess is that your view with the company on markets at Vegas to Phoenix or Orlando similar in that and that they might reach bottom in '09 and I guess wanted to take three guys to get more aggressive on allocating capital some of those challenge markets over the next 12 to 18 months?

Jerry, it might have space to what do you see as a slower I think we spoken to that probably Phoenix and Tampa, Orlando are close to bottom. As Tom mentioned we'll look for opportunities and be opportunistic there. We don't see things compelling out there in those markets right now. Anything you want to there? Thomas W. Toomey - President & Chief Executive Officer: I would agree with that, Tampa, Orlando has been trailing along the bottom. Phoenix over the last couple months did get quite a bit worse. Luckily we have only have three properties there. But, Phoenix did turn south this past quarter. We're hopefully in our quarter at least 2009, things pop and '09 probably a little bit later trailing Florida I would think Phoenix comes back.

Just one last question. Does your 2008 guidance contemplate any common shares repurchases but through the remainder of the year?

We gave guidance at the beginning of the year it had a significant amount of share repurchases of which we've not completed and so it's really hard for us to look out the next five months and say we are going to be able to excluding more share repurchases given where the stock trading, you guys are frustrated as we are but if you see it up 5% one day and down seven the next and its all other period to tied for us to have any forecasting accuracy about what we're going to be able to do or not do. And so yes it was an original guidance, that is correct we have not changed it. Our contemplation is that to be responsible to the market and our part is not to tie ourself to the next quarter or the next six months earnings but we've prudent capital locator's thoughtful about what we have to put in our capital, so I think we're going to continue that posture we don't see any material change and reason for change in our guidance.

Great. Thanks guys.

Thank you.

Thank you. There are no further questions at this time I'll turn the call back to Mr. Toomey for any closing comments. Thomas W. Toomey - President & Chief Executive Officer: Operator and for everyone on the call we appreciate your time today and know that you got a few other calls. So we will say goodbye, wish you the best and take care.

Thank you ladies and gentlemen. This does conclude the UDR Inc. Second Quarter 2008 Earnings Conference Call. You may now disconnect. Thank you for using AT&T [ph] conferencing. Have a very pleasant rest of your day.