Operator: Good afternoon, my name is (Shaira) and I will be your conference operator today.

At this time, I would like to welcome everyone to the Hidden Lakes Apartments first quarter

2011 conference call. All lines have been placed on mute to prevent any background noise.

After the speakers’ remarks, there will be a question-and-answer session, if you would like to ask

a question during this time, simply press star then the number one on your telephone keypad. To

withdraw your questions, press the pound key. Thank you. Ms. Tania Jernigan, you may begin

now.

Tania Jernigan: Thank you, and thank you everyone for taking the time to join us this morning

to discuss Hidden lakes. In the room with me this morning at CORE is Jonny Harmer the CFO,

and then Marc Raskulinecz, vice president of Asset and Property Management. I am going to

turn over the call over to Jonny again who will review the financial results and then we will have

a discussion from Marc about the operational results and then of course we will turn over to you

for Q&A. So with that, let’s go ahead and open the conference call.

Jonathan Harmer: Thank you Tania, thank you to everybody again who is joining us on the call.

With regards to the first quarter performance for 2011, I saw some very favorable signs on the

income side. We were favorable the budget by just under $50,000 or eight percent of budget.

And that is due to an increase in occupancy and a decrease in the amount of write-offs. On the

expense side, we were unfavorable by almost, almost the exact same dollar amount; $48,642.

We are just under 13 percent of budget, but that is due in large part to repairs and maintenance

and then turn-over we had, as indicated in the quarterly report, a significant increase in

occupancy which required us to turn and repair some units that had not been occupied for a little

bit of time.

So there was some additional cost in getting those units ready. Overall the net operating income

was favorable by just over $1,000, or about half a percent of budget. And really the big story on

the financial side was a significant increase in occupancy; we ended the quarter at 97 percent

occupancy. It’s been quite some time since we’ve been able to see occupancy that high at this

property. So hats off to Marc and his team for really being able to drive occupancy.

We will see income increase in the coming months. It will take a little bit of time for the cash

flow to follow just because the timing associated with getting the new renters in, obviously the

upfront expense associated with getting some of the units ready. So to date we haven’t seen a

significant decrease in accounts payables, still at $318,274 and about 232,000 of that is due to

CORE – past fees due to CORE.

As a comparison though, at this time last year, the accounts payable was $365,000. So we have

made some progress over the last year. And I anticipate we will see that progress continue and

accelerate as we are able to maintain occupancy in the mid to high 90s. With regards to cash we

ended the quarter with $80,196 of cash-on-hand. Excuse me for that, little misstep there, but

$80,196 of cash-on-hand, which is about equal to where we were a year ago.

Cash flow year to date is positive by $15,135. So with regards to distributions, as we've iterated

in the past, they will remain suspended until through holding occupancy has hit a higher level we

can increase income and subsequently cash flow, that we'll use to first pay down our accounts

payable, and then to fund reserves – necessary operating reserves – of the properties.

With regards to our debt, the loan maturity is not until May of 2017 and amortization is still over

three years out, at June 2014, and that will add approximately $15,000 per month to our debt

service. Our current interest rate on the loan is 5.36 percent. There are two step-ups remaining

on the loan with regards to the interest rate. It will step-up to 5.16 percent in July of this year

and 5.81 percent of July of next year. Each one of those step-ups will add about $3,000 per

month in debt service. With regards to our expenses per door, it did increase during the first

quarter slightly to $294 which is still lower than average that we have seen in our portfolio. But

that increase was primarily due to the increase in repairs and maintenance expense and the turn-

over expense associated with the increase in occupancy. So with that introduction on the

financial side I will ahead and turn the call over to Marc.

Marc Raskulinecz: Thanks so much Jonny. Hidden Lakes currently is at 95 percent occupied as

of today with nine percent payable. As Jonny had said we are seeing some very positive results

in our leasing effort and are set-up is strong next couple of months with very little expiring over

the next 90 days; six percent expiring in May, five percent expiring in June, and six percent

expiring in July. We are seeing offering increases of three to five percent on lease renewals;

three percent on 12 months leases and five percent on leases from six to 11 months. Month-to-

month leases are going to market rates plus a premium of $200. We are seeing a renewal capture

rate of 56 percent year-to-date which is a very solid number. In addition to that we have

continued to see improvement in the unemployment rate in the area, which is now at 9.4 percent.

Our marketing continues in the same fashion with drive-by marketing including banners, boot-

legs and balloons throughout the marketplace; print marketing with Apartment Finder and

Apartment Guide, online marketing with apartmentfinder.com, apartmentguide.com, the Hidden

Lakes website, as well as Craigslist. Our outreach marketing continues with local government

agencies – police, fire – as well as schools and universities in the area. We do have a referral

program for realtors, locators and residents, paying $200 for every new lease brought to Hidden

Lakes.

We did recently have some storm damage from the tornadoes that went through the area. And at

this point in time we are working through those repairs with the insurance company. And the

estimated damages at this point in time range between $25 and $50,000, only to the roofs as the

roof shingles were pulled off during the storm. At this time I will turn the call over to Tania.

Tania Jernigan: Thank you Marc, operator that concludes the prepared remarks we would like to

open it up for Q&A.

Operator: At this time I would like to remind everyone in order to ask a question, please press

star then the number one on your telephone keypad. That's star then the number one for

questions or comments. We will pause for just a moment.

Your first question comes from the line of (Carol West).

(Carol West): Hi Jonny. Hi Marc. The numbers sound very promising, I hope the overall

economy supports that and continues to support it I should say. I wondered if there was any new

marketing ploys that have worked with any of the sub communities in the area, or just in general

if this is – the building is tending to rise just on the rising tide of employment?

Marc Raskulinecz: Well, we have focused quite a bit on the outreach marketing as well as

referral program at the community with many local businesses expanding which we spoke of on

the last conference call, we have focused many of our outreach efforts to those groups in order to

continue to bring new clientele in. In addition to that, we have stepped up the referral program

on site with (flyering) and reminding the current residents of the referral program and that effort

has worked as well.

The on-going Craigslist advertising is really where we are getting the bulk of our prospects

coming through the door. And that has continued on for most of the year at this point.

(Carol West): Great. Just to know, you said something about capture rate that I missed, not a

question really, but could you just repeat what you said and tell me what the capture rate is? Is

that the number of people that will come through versus number of people you capture?

Marc Raskulinecz: We actually, it was the renewal rate capture.

(Carol West): I see, ok.

Marc Raskulinecz: We are renewing 56 percent of the people who are expiring at any given

month at this point of time through the year, at this time.

(Carol West): And what you would like to see is a good capture rate on the property like, you

know, commercial property?

Marc Raskulinecz: Somewhere between 55 and 65 percent is pretty strong for the market

especially in market that does offer concessions and people the opportunity to relocate at close to

the same amount with getting a three to five percent rate increase, while achieving 56 percent

capture rate is still a very strong number for the industry.

(Carol West): Is it, I do think, I mean obviously you have weighed it, do you think it is better to

go for the three to five percent than try to increase the capture rate first?

Marc Raskulinecz: Absolutely I think at this point getting the revenue increases on the existing

tenants is where Hidden Lakes will make up the bulk of the ground on the revenue side. The

cost to renew someone is very minimal. And to get that three to five percent increase on those

will benefit the bottom line in the long run.

(Carol West): So basically the people who are leaving may be ones who are more recent tenants

where there is not a lot of work to be done they were just taking advantage of the low rates

temporarily?

Marc Raskulinecz: Exactly. Exactly.

(Carol West): Great, well, you know these are great numbers and it is understood that it may

take a few months for the new income to show but thank you both; congratulations. And Tania,

thank you all.

Marc Raskulinecz: Thanks (Carol).

Operator: Your next question comes from the line of (David Belfick).

(David Belfick): Good morning and sorry I got on the call a little bit late so these questions may

have been answered in the discussion but couple of questions I have is I see one of the increase

in expenses and increase in concessions. How much of that are we losing from the rent increases

by the additional concessions and how many months does it to break even and actually show a

net increase in the rent? And then the other question was looks like one of the big expense item

and was increase in the cost per unit per turn-over due to additional work – repairs, painting – in

the unit of $253. Obviously there was more turn-over.

Are you finding that the apartments are, I don’t want to say damaged, but is there more work that

has to be done in excess of the security deposits. Are we trying, is there any way to recapture

any of that additional cost if it is due to the fact that the tenants didn’t maintain the units

properly? And is there any way to try and reduce that expense side. And you know talking

about the maintenance expense on the plumbing, electrical and lighting. I mean, that seems to be

something that should have, you know, we should have known. What kind of lighting expense, I

mean, it seems like a big number for things that probably should have been known if it was on-

going maintenance. So I was just wondering how we are addressing those additional expense

items.

Marc Raskulinecz: All great questions, I will start with the occupancy and concession question.

Concessions were offered earlier in, early part of the year in order to gain the occupancy in

which we have today. And we are actually at, at this point with a 95 percent occupancy. You

are seeing an occupancy rate two percent above what we budgeted for at any point in time during

the year, and ending the quarter at 97 percent that was almost five percent above our projections

in occupancy. Those concessions which are over budget by roughly $9,000, you are seeing that

off-set by the increase in vacancy almost completely at this point.

And we should continue to see that and overcome that additional concession in the occupancy

number in the next 30 to 60 days. It does take a little bit of time in order to get past those

concessions, in order to see the gain in revenue. In addition to that, with the property at 95

percent plus occupied on a week-to-week basis with only nine percent of the building available

the concessions have reduced significantly in what we are offering upfront at this point and only

offering it on select units. And you are seeing a significant reduction in that today that we have

not seen over the past calendar year. Hopefully that answers that part of the question.

With regards to the expenses, there is a couple of things that you asked, and yes we did have

additional turn-over during that period of time. What we did see is the property was focused on

renting apartments with minimal damage early on in our attempt to drive occupancy up, pushing

the more damaged units later down the road in order to control expenses a little better. As we

continued to gain in occupancy, we got to the point where the more damaged units were going to

need to be repaired and so those repairs were completed driving that expense up. Overall, our

maintenance and repairs expenses are, you know, it is hard to say what, you know, what

specifically has driven those up without delving a little farther into the details which I don’t have

in front of me today.

But I do know with regard to the plumbing, and electrical issues, a building of this age you do

unfortunately have on-going plumbing and electrical issues. And we do have a significant

challenge with the drains, in having to clear clog drains on a regular basis and also repair fixtures

that have gone bad, that have not been replaced in many years. We do focus on keeping those

expenses under control to our purchase order system and only replacing items that cannot be

repaired. So you did see a little bit of increase in expenses here in the first quarter, but as the

building has stabilized at above 95 percent those numbers should continue to come down as we

don’t see as much turn-over here over the next few months.

(David Belfick): Well, now I would imagine, I mean looking at tenants that have left a lot of

them it looks from eviction so obviously you had a lot of damage hopefully with the quality of

tenants improving with the economy improving, you know you won’t get that moving forward

and hopefully that is just a temporary not an on-going because a $253 increase per unit is a

significant. I mean that is a lot of money on top of what you normally figured into it. So

hopefully, you know hopefully that does start to work its way down at this point and I can’t

imagine there is much of anything that we can do to try and go after tenants who have caused in

excess of security deposit for damages, I mean …

Marc Raskulinecz: We do. We do go after all tenants who have damaged their unit. And

unfortunately at this community we don’t see a whole lot of recovery in that, but we do have an

active program with a collection agency at the time of move out we charge up for all damages to

the apartment to the resident. The on-site personnel sends 30 days attempting to collect debt and

then it does transfer over to a collection agency to continue the effort. We did see some recovery

from it, but not, certainly we don’t collect dollar-for-dollar what goes to them and what comes

back. The good news is that it does not come off their credit report, and at some point in time

those people will look to buy a car, or rent an apartment, or purchase a home, and need to satisfy

those debts in order to get those products.

Tania Jernigan: But Marc it’s pretty common for that cost because it tends to dance around a lot.

I know that I look at all the properties because I prepare the report, this is Tania. You will find

that, you know from quarter-to-quarter, from property-to-property, it does dance around $100 to

$200 per unit, you know, increase or decrease based on just what happens during that quarter.

So, this isn’t really alarming to me as you know you once see it go this way, but I won’t be

surprised it bounces back the other way next quarter.

Marc Raskulinecz: That is correct. Again, depending on the data the number of evictions tend

to drive the amount, up, the turn-over cost up because when people are been evicted from their

unit, they don’t generally expect to get their security deposit back so cleaning and damage

charges do go up and with a stronger economy you will see that less-and-less.

(David Belfick): So, if they turn over the collection it’s in essences putting a lien on these

individuals that as some point when they go to do something else that lien needs to be satisfied,

or do they have to pay, it kind of sounds like you have indicated.

Marc Raskulinecz: Generally what happens is most major management companies will not

allow a tenant who has a collection from another management company to move in without

satisfying that first. That is our policy as well. With that when people do go out to attempt to

rent an apartment, purchase a car or home, they do look to increase their credit rating or satisfy

those collection accounts before they will get approved for their loan or their new apartment.

(David Belfick): And the increase in the plumbing and electricals is that common area

maintenance cost or is that inside the units as in replacing toilets and sinks and lighting fixtures.

Marc Raskulinecz: It can be a combination of both.

(David Belfick): OK. So it’s everything in whole; OK.

Marc Raskulinecz: It can be a combination of both.

(David Belfick): It just seems like it’s pretty high, pretty far above budget I mean from what you

have said, you know it’s an older building it does have increased repair, we do have additional

repairs we know about these, but it just seems to be you know, a lot more than, you know, higher

than the budget anticipated. So you know …

Jonathan Harmer: I realized. Part of the reason for that as Marc said earlier, our highest

occupancy during the year was anticipated to be 93 percent or 94 percent, we were up to 97

percent, so on a property like this where you have almost 500 units, you are looking at a

significant number of units to turn that we did not anticipate turning. And so the budget

anticipated that we would have an extra three to four percent vacant, which is another 20 units

vacant. Which again, those will be the 20 units that are most heavily damaged because in prior

quarters we really focused on turning the units that were easiest to turn and least expensive to

turn. Now because we are able to get more people moving in, it’s kind of a good problem to

have. We had to turn the units that were a little bit more expensive to turn, so that we could get

folks in. And everything is ok if you are getting a return on these units. Certainly, you get more

on the income side than it cost you on the expense side. The primary reason we are over budget,

is because we are over budget on the income side.

(David Belfick): So I guess then what you are saying, and not to keep dragging this on, but the

$250 per unit increase in cost to turn it and the $14,000 increase in the budget for plumbing and

electrical had to do with repairing units that were more highly damaged from broken toilets, light

fixtures that had been stolen or broken. So it was you didn’t anticipate having to repair those

because, I mean if toilet breaks, the toilet breaks you have to fix that right. You know, electrical

fixtures, you know fail, I mean that’s like you said that is part of an on-going maintenance. But

you said, you know, it was an increase in cost because of a higher turn-over, so I mean is it

normal maintenance, is it higher turn-over I guess that is where really the question kind of falls

in.

Tania Jernigan: It’s really going to be a combination of the two. But the more significant side of

that is going to be that we did have 20 additional units occupied that we had to get ready during

that time period.

(David Belfick): OK. So I don’t think you had anticipated to enter the quarter …

Tania Jernigan: (Inaudible) after later in the year.

(David Belfick): OK. And then one last question is, I know you got a lot big turn-over coming

up in the next quarter I believe you said with rents coming up and I may have missed this at the

beginning, what of the units that are coming up for renewal, I don’t remember what the number

was it’s in her somewhere, how many of those, I mean, you have obviously been contacting

those people, 60 or 90 days in advance, what do you anticipate in retention of the units that are

coming up for renewal?

Tania Jernigan: At this point we have seen a 56 percent retention rate for the year. We don’t

anticipate that to change significantly in May. It probably in June and July, you tend to see as

the leasing season starts that number dip down just a little bit probably move closer to 50 percent

range, because you do have more (inaudible) (times a year) for people to move in and out. The

weather is right, people are going to be relocating for school, or a family reason, and generally

you just see more people moving in and out during, you know, July, August, and September than

you do for really the other parts of the year.

(David Belfick): OK, I appreciate. Thanks guys.

Marc Raskulinecz: Sure.

Operator: You have a follow up question from the line of (Carol West).

(Carol West): I’m sorry, I just wanted (David) to provide identification if he could identify

himself. Are you one of the owners (David), you are not known to me and I thought maybe, are

you a broker or if you don’t mind, I would like to include in the information that the owners are

sharing.

Tania Jernigan: Operator you want to go ahead and give the instructions again how to queue up.

Operator: Ladies and gentlemen if you have a question or a comment please press star one on

your telephone keypad.

You have a follow up from (David Belfick).

(David Belfick): (Carol) and the, I vouch for one of the (peak) owners.

Tania Jernigan: Thank you (David), do we have any more questions in queue operator?

Operator: Again if you have a question or comment please press star one. And there are no

farther questions or comments.

Tania Jernigan: OK, well thank you everyone again for joining us, we look forward to following

up with you again in about 90 days. Have a good day.

Operator: This concludes today conference, you may now disconnect.

END