At Bank of America's Investment Conference, Equity ResidentialCEO David Neithercut and Keith Guericke, CEO, and Michael Dance,CFO, of Essex Property Trust, stated that the current focus is onthe firms' balance sheets and preparing to take advantage ofopportunities when they do arise. The executives from both REITsbelieve it's likely that financially troubled Lehman Brothers willbe looking to unload some assets down the road, particularly thoseit gained in its JV acquisition of Archstone Smith, as well as somemezzanine debt portfolios on the West Coast.

In terms of operations, the management of Equity Residential andEssex said fundamentals have moderated even more. They didn't gointo specifics on how, but neither company changed its full-yearearnings and property-level guidance range. Uncertainty over thefinancing environment, particularly in light of the federaltakeover of Fannie Mae and Freddie Mac, over the next year willhave an effect on deal volumes and pricing. Neithercut admittedthat Equity Residential's recently completed $550-million financingdeal with Fannie Mae probably would not have been able to getclosed today. Meanwhile, Essex's Guericke noted that the spreads onGSE debt are still lower than in public unsecured financing.

Meanwhile, on the overall apartment REIT spectrum, propertymanagers across the country reported relatively flat occupancy,reduced rents and increased concessions in August, according toBofA's latest property manager survey. Even traffic levelsdeteriorated; some 39% of respondents said demand was belowexpectations for this time of year. BofA analysts feel that thedearth of new jobs and economic uncertainty is causing many tenantsto put most decisions on hold.