First-quarter occupancy across the portfolio slipped a full percentage point to 89.3%, according to the company's quarterly report. In the eight-community, 3,243-unit suburban Chicago portfolio, occupancy dipped slightly to 88.6% while net operating income slid 5.7%.

"In our view, it is a mistake to try for 95% occupancy in a market that is 90% occupied, like many of our markets are," says president Allan J. Sweet. With concessions, the increase in occupancy comes at a cost of lower collected rents, he explains. "Our focus is on how many dollars we collect," Sweet adds.

AMLI Residential was poised to make a deal worth nearly $50 million but has backed away from the closing table because of the price. "It's not gone today," Sweet says. "We're still talking to them. But it's on life support."

The acquisition represents nearly all of the wholly owned deals the company planned to complete in 2003, in addition to $75 million of joint venture deals. Now, though, AMLI Residential says it will likely close on $25 million in joint venture deals.

"We choose to believe it reflects disciplined buying," says Sweet, noting capitalization rates on potential acquisitions continue to fall.

Meanwhile, the REIT may sell three to six apartment communities during the second half of the year, Sweet adds.

Prospective tenants are shopping the market more extensively than before, Sweet notes. Also, he says AMLI Residential is not losing a higher than usual number of tenants to homeownership, as other REITs have lamented.