Called Fund II, this capital pool will be used to acquire andoperate multifamily communities in high barrier-to-entry markets inmost of the country; specifically the Northeast, Mid-Atlantic,Midwest and West Coast. Acquisitions will also be made with an eyetowards adding value through redevelopment, improving buildingoperations and targeting markets that are expected to improve.

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The fund, which has a term of 10 years, plus two one-yearextension options, is going to be AvalonBay's exclusive vehiclethrough which it will make its acquisitions for a period. Itdefines that period of time as three years from the closing date,or until 90% of its committed capital is invested. AvalonBay'sdevelopment activities, however, will be funded outside of FundII.

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In fact, the REIT is scaling back development for the year,Bryce Blair, chairman and CEO, told listeners in the Q2 earningscall. "Originally we expected to start between $900 million and$1.1 billion of new developments," he said, according to atranscript of the call. "And our current estimate is for about $700million of starts. Given the weakening economic environment andvolatile capital markets, we felt it prudent to reduce our planned2008 starts, electing to push some out to 2009."

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One project with which it is pushing forward is SomersetDevelopment's Westmont Station,where it just signed on as a development partner.

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