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Essex Property Trust Management Discusses Q2 2012 Results - Earnings Call Transcript

As suggested on previous calls, most of our development transactions will be in a co-investment format, in which we own from 50% to 55%. We believe that the co-investment format improves our risk reward scenario and also reduces our forward funding commitments. We've commenced construction on most of our development pipeline, reducing risks of entitlement and construction costs, increases in delays and compressing the time between our funding obligation and the delivery of the community.

We also moved up the opening of our Expo project to this October, approximately 6 months ahead of our original schedule, and reduced the estimated cost of construction by approximately $3 million. We now estimate that the stabilized cap rate on Expo will be in excess of 7%.

Second topic, the investment markets. Cap rates continue to be aggressive in the coastal markets, and we have not -- and have not changed materially since last quarter. Cap rates range from 4% to 4.5% for A quality property in A locations and from 4.5% to near 5% for B property in A locations. As with 2011, transaction activity abated at year-end and increases throughout the spring and summer months. Through July, we closed $248 million in acquisitions, including the partner buyout at Skyline as outlined on Page S-15 of the supplement.

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