"That difference might still narrow," says president Allan J. Sweet, noting institutional demand for multifamily rental property remains high. "There is more high net-worth capital chasing real estate at this point in time."

Meanwhile, the company plans is expanding a marketing experiment in Atlanta through the rest of its US portfolio. Rather than offering concessions, AMLI Residential plans to quote effective rent prices.

"It's not a difference in substance. It's a difference in marketing," Sweet says. "The entire apartment industry is analyzing whether they want to make this shift or not. Many have, and some don't want to. It doesn't change the fundamentals. It is a change in marketing. It helps us identify what the market really is."

"We've looked at what we've been able to rent out the units in the last 90 days, at what price are you actually signing leases, we looked at what our competitors were charging at a net effective rent basis and we've gone to straight pricing," EVP Robert S. Aisner explains. "The unit is priced at $800 a month. It's not $1,000 minus a $200 concession. We've been selling it on what we call it hassle-free pricing."

AMLI Residential's rental agents have seen traffic drop every month since March, with a 21.6% drop in the fourth quarter compared to the summer months. While an improvement over the same period in 2001, occupancy in the fourth quarter at its eight suburban Chicago properties fell to 89.3%, about three points off the third-quarter numbers.

The REIT is finishing construction this year of the 520-unit, $82.2-million AMLI at Seven Bridges in southwest suburban Woodridge and anticipates developing AMLI at Museum Gardens in north suburban Vernon Hills.

Faced with flat revenue as a result of increased occupancy and lower rents, AMLI Residential managed to eke out savings in real estate taxes and property insurance. "The net result was about what we thought it would be," says Sweet of the full-year results. "It's obviously an uncertain world we're living in."

For example, the 2,760-unit suburban Chicago portfolio saw a 7.3% decline in revenue in 2002, but AMLI Residential managed to cut expenses here by 8.8%. That boosted net operating income slightly by 1.5%.

Property insurance premiums increased 14%, which was less than the REIT expected, Sweet says. Meanwhile, taxing bodies will be looking for more revenue this year, but the value of properties has dropped in some cases, he adds.

Instant Insights /

AMLI Downsizes 2003 Acquisition Target

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