As of December 31, 2006, we owned interests in, operated or were developing 197 multifamily properties comprising 67,631 apartment homes located in 13 states. We had 3,788 apartment homes under development at 11 of our multifamily properties, including 1,069 apartment homes at three multifamily properties owned through joint ventures, 26 apartment homes at one operating property, and several sites we intend to develop into multifamily apartment communities. Additionally, three properties comprised of 930 apartment homes were designated as held for sale.

Operating Strategy

     We believe producing consistent earnings growth through property operations, development and acquisitions, achieving market balance and recycling capital are crucial factors to our success. We rely heavily on our sophisticated property management capabilities and innovative operating strategies to produce consistent earnings growth.

      Real Estate Investments and Market Balance. We believe we are well positioned in our current markets and have the expertise to take advantage of both development and acquisition opportunities in new markets which have healthy long-term fundamentals and strong growth projections. These capabilities, combined with what we believe is a conservative financial structure, allow us to concentrate our growth efforts towards selective development and acquisition opportunities to achieve our strategy of having a geographically and physically diverse portfolio of assets that meet the requirements of our residents. We typically make physical improvements at our acquired properties, such as new or enhanced landscaping design, new or upgraded amenities and redesigned building structures, which, coupled with a strong focus on property management, branding and marketing, have resulted in attractive yields on acquired properties.

     We continue to operate in our core markets in which we believe we have an advantage due to economies of scale. We feel where possible, it is best to operate with a strong base of properties in order to benefit from the personnel allocation and the market strength associated with managing several properties in the same market. However, in order to generate consistent earnings growth, we intend to selectively dispose of properties and redeploy capital if we determine a property cannot meet long term earnings growth expectations.

     We have recently expanded our development pipeline significantly, and we expect selective development of new apartment properties will continue to be important to the growth of our portfolio for the next several years. We use experienced on-site construction superintendents, operating under the supervision of project managers and senior management, to control the construction process. Risks inherent to developing real estate include zoning changes, environmental matters and changes in economic conditions during the development process. See the further discussion of risks associated with development and construction in our “Risk Factors” section.

      Sophisticated Property Management. We believe the depth of our organization enables us to deliver quality services, promote resident satisfaction and improve resident retention, thereby reducing operating expenses. We manage our properties utilizing a staff of professionals and support personnel, including certified property managers, experienced apartment managers and leasing agents, and trained apartment maintenance technicians. Our on-site personnel are trained to deliver high quality services to their residents. We attempt to motivate our on-site employees through incentive compensation arrangements based upon operational results produced at their property, rental rate increases and the level of lease renewals achieved.

      Operations. We believe an intense focus on operations is necessary to realize consistent, sustained earnings growth. Ensuring resident satisfaction, increasing rents as market conditions allow, maximizing rent collections, maintaining property occupancy at optimal levels and controlling operating costs comprise our principal strategies to maximize property net operating income. During 2005, we completed the roll out of our web-based property management and revenue management systems. These two systems have improved on-site operations and were a contributing factor in allowing us to increase rental rates substantially during a period of strong recovery in the United States economy. Lease terms are generally staggered based on vacancy exposure by apartment type so lease expirations are matched to each property’s seasonal rental patterns. We generally offer leases ranging from six to thirteen months, with individual property marketing plans structured to respond to local market conditions. In addition, we conduct ongoing customer service surveys to ensure timely response to residents’ changing needs and a high level of satisfaction.

Competition

     There are numerous housing alternatives which compete with our properties in attracting residents. Our properties compete directly with other multifamily properties as well as condominiums and single family homes which are available for rent or purchase in the markets in which our properties are located. This competitive environment could have a material adverse effect on our ability to lease apartment homes at our present properties or any newly developed or acquired property, as well as on the rents charged.

Employees

     At December 31, 2006, we had approximately 1,920 employees, including executive, administrative and community personnel.

Qualification as a Real Estate Investment Trust

     As of December 31, 2006, we met the qualification of a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”). As a result, we, with the exception of our taxable REIT subsidiaries, will not be subject to federal income tax to the extent we meet certain requirements of the Code.

Item 1A. Risk Factors

     In addition to the other information contained in this Form 10-K, the following risk factors should be considered carefully in evaluating our business. Our business, financial condition, or results of operations could be materially adversely affected by any of these risks. Please note additional risks not presently known to us or which we currently consider immaterial may also impair our business and operations.

Insufficient cash flows could limit our ability to make required payments for debt obligations or pay distributions to shareholders and create refinancing risk.

     Substantially all of our income is derived from rental income from our multifamily communities. As a result, our performance depends on our ability to collect rent from residents which could be negatively affected by a number of factors, including the following:
•   delay in resident lease commencements;    
•   decline in occupancy;    
•   failure of residents to make rental payments when due;    
•   the attractiveness of our properties to residents and potential residents;    
•   our ability to adequately manage and maintain our properties;    
•   competition from other available apartments and housing alternatives; and    
•   changes in market rents.

     Cash flow could be insufficient to meet required payments of principal and interest with respect to debt financing. We are required to distribute annual dividends equal to a minimum of 90% of our REIT taxable income, computed without regards to the dividends paid deduction and our net capital gain, in order for us to continue to qualify as a REIT; this requirement limits the cash flow available to meet required principal and interest payments on our debt. We may need to refinance all or a portion of our outstanding debt as it matures. We may not be able to refinance existing debt or a refinancing may not occur on favorable terms, either of which may have a material adverse effect on our financial condition and results of operations.

Unfavorable changes in economic conditions could adversely impact occupancy or rental rates.

     Economic conditions may significantly affect apartment home occupancy or rental rates. Occupancy and rental rates in the markets in which we operate, in turn, may have a material adverse impact on our cash flows and operating results. The risks that may affect conditions in these markets include the following:
•   changes in the national, regional and local economic climates;    
•   local conditions, such as an oversupply of apartments or a reduction in demand for apartments in the area;    
•   a future economic downturn which simultaneously effects more than one of our geographical markets; and    
•   increased operating costs, if these costs cannot be passed through to residents.

     National, regional and local economic climates may be adversely affected should population or job growth slow. To the extent either of these conditions occurs in the markets in which we operate, market rents will likely be affected. We could also face challenges adequately managing and maintaining our properties should we experience increased operating costs. As a result, we may experience a loss of rental revenues, which may adversely affect our results of operations and our ability to satisfy our financial obligations and to pay distributions to shareholders.

Various changes could adversely impact the market price of our common shares.

     The market price of our publicly traded common shares depends on various conditions. The risks that may affect this market price include the following:
•   investor interest in our property portfolio;    
•   the reputation and performance of REITs;    
•   the attractiveness of REITs as compared to other investment vehicles;    
•   the results of our financial condition and operations;    
•   the perception of our growth and earnings potential;    
•   dividend payment rates; and    
•   increases in market rates, which may lead purchasers of our common shares to demand a higher yield.

Development and construction risks could impact our profitability.

     We intend to continue to develop and construct multifamily apartment communities for our property portfolio. Our development and construction activities may be exposed to a number of risks that may increase our construction costs including the following:
•   inability to obtain, or delays in obtaining, necessary zoning, land-use, building, occupancy and other required permits and authorizations, or problems with subcontractors could result in increased costs;    
•   incurring construction costs for a property exceeding our original estimates due to increased materials, labor or other costs, or due to errors and omissions that occur in the design or construction process;    
•   experiencing fluctuations in occupancy rates and rents at a newly completed property, which may not be adequate to make the property profitable;    
•   inability to obtain financing with favorable terms for the development of a community;    
•   inability to complete construction and lease-up of a community on schedule, resulting in increased costs;    
•   incurring costs related to the abandonment of development opportunities which we have pursued and deemed unfeasible; and    
•   our inability to successfully implement our development and construction strategy could adversely affect our results of operations and our ability to satisfy our financial obligations and pay distributions to shareholders.

     We also develop and construct properties for unrelated third parties pursuant to guaranteed maximum price contracts. The terms of these contracts require us to estimate the time and costs to complete a project and we assume the risk the time and costs associated with our performance may be greater than was anticipated. As a result, our profitability on guaranteed maximum price contracts is dependent on our ability to predict these factors accurately. The time and costs may be affected by a variety of factors, including those listed above, many of which are beyond our control. In addition, the terms of these contracts generally require a warranty period, which may have a duration of up to ten years, during which we may be required to repair, replace or rebuild a project in the event of a material defect.

Our property acquisition strategy may not produce the cash flows expected.

     In the normal course of our business, we continually evaluate a number of potential acquisitions and may acquire additional operating properties. The success of our acquisition activities is subject to a number of risks, including the following:
•   we may not be able to successfully integrate acquired properties into our existing operations;    
•   our estimates of the costs of repositioning or redeveloping the acquired property may prove inaccurate; and    
•   the expected occupancy and rental rates may differ from the actual results.

     Our inability to successfully implement our property acquisition strategy could adversely affect our results of operations and our ability to satisfy our financial obligations and pay distributions to shareholders. We expect other real estate investors, including insurance companies, pension and investment funds, private investors and other apartment REITs will compete with us to acquire existing properties and to develop new properties. This competition could increase prices for the type of properties we would likely pursue and adversely affect our ability to acquire these properties or the profitability of such properties upon acquisition.

Difficulties of selling real estate could limit our flexibility.

     Real estate investments generally cannot be disposed of quickly, especially when market conditions are poor. This may limit our ability to vary our portfolio promptly in response to changes in economic or other conditions. In addition, in order to maintain our status as a REIT, the Code imposes restrictions on our ability to sell properties held fewer than four years, which may cause us to incur losses thereby reducing our cash flows and adversely impacting distributions to shareholders.

We have significant debt, which could have important consequences.

     As of December 31, 2006, we had outstanding debt of approximately $2.3 billion. This indebtedness could have important consequences, including:
•   if a property is mortgaged to secure payment of indebtedness, and if we are unable to meet our mortgage obligations, we could sustain a loss as a result of foreclosure on the mortgage;    
•   our vulnerability to general adverse economic and industry conditions is increased; and    
•   our flexibility in planning for, or reacting to, changes in business and industry is limited.

Variable rate debt is subject to interest rate risk.

     We have mortgage debt with varying interest rates dependent upon the market index. In addition, we have a revolving credit facility bearing interest at a variable rate on all amounts drawn on the facility. We may incur additional variable rate debt in the future. Increases in interest rates on variable rate debt would increase our interest expense, which would adversely affect net income and cash available for payment of our debt obligations and distributions to shareholders.

Issuances of additional debt or equity may adversely impact our financial condition.

     Our capital requirements depend on numerous factors, including the occupancy rates of our apartment properties, dividend payment rates to our shareholders, development and capital expenditures, costs of operations and potential acquisitions. If our capital requirements vary materially from our plans, we may require additional financing sooner than anticipated. Accordingly, we could become more leveraged, resulting in increased risk of default on our obligations and an increase in our debt service requirements, both of which could adversely affect our financial condition and ability to access debt and equity capital markets in the future.

Losses from catastrophes may exceed our insurance coverage.

     We carry comprehensive property and liability insurance on our properties, which we believe is of the type and amount customarily obtained on similar real property assets. We intend to obtain similar coverage for properties we acquire in the future. However, some losses, generally of a catastrophic nature, such as losses from floods, hurricanes or earthquakes, may be subject to coverage limitations. We exercise our discretion in determining amounts, coverage limits and deductibility provisions of insurance, to maintain appropriate insurance on our investments at a reasonable cost and on suitable terms. If we suffer a substantial loss, our insurance coverage may not be sufficient to pay the full current market value or current replacement value of our lost investment, as well as the anticipated future revenues from the property. Inflation, changes in building codes and ordinances, environmental considerations and other factors also may reduce the feasibility of using insurance proceeds to replace a property after it has been damaged or destroyed.

Potential liability for environmental contamination could result in substantial costs.

     Under various federal, state and local laws, ordinances and regulations, we are liable for costs to investigate and remove or remediate hazardous or toxic substances on or in our properties, in some cases, regardless of whether we knew of or were responsible for the presence of these substances. These costs, and other costs of investigation, remediation or removal of hazardous substances, may be substantial. Also, the presence of hazardous or toxic substances on a property, or the failure to properly remediate such substances, may adversely affect our ability to sell or rent the property or use the property as collateral.

     Additionally, we occasionally develop, manage, lease and/or operate various properties for third parties. Consequently, we may be considered to have been or to be an operator of these properties and, therefore, potentially liable for removal or remediation costs or other potential costs that could relate to hazardous or toxic substances.

     Over the past several years, there have been an increasing number of lawsuits against owners and managers of multifamily properties alleging personal injury and property damage caused by the presence of mold in residential real estate. Some of these lawsuits have resulted in substantial monetary judgments or settlements. Insurance carriers have reacted to these liability awards by excluding mold related claims from standard policies and pricing mold endorsements at high rates. Therefore, should we be named in a lawsuit regarding mold infiltration, the amount of damages may not be fully covered under insurance.

Tax matters, including failure to qualify as a REIT, could have adverse consequences.

     We may not continue to qualify in the future as a REIT. The Internal Revenue Service may challenge our qualification as a REIT for prior years and new legislation, regulations, administrative interpretations or court decisions may change the tax laws or the application of the tax laws with respect to qualification as a REIT or the federal tax consequences of such qualification.

     For any taxable year we fail to qualify as a REIT:
•   we would be subject to federal income tax on our taxable income at corporate rates, subject to any applicable alternative minimum tax;

•   we would be disqualified from treatment as a REIT for the four taxable years following the year in which we failed to qualify, thereby reducing our net earning available for operations, including any distributions to shareholders, as we would be required to pay significant income taxes for the year or years involved; and    
•   our ability to expand our business and raise capital would be impaired, which may adversely affect the value of our common shares.

     We may face other tax liabilities in the future which may impact our cash flow. These potential tax liabilities may be calculated on our income or property at either the corporate or individual property levels. Any additional tax expense incurred would decrease the cash available for distribution to our shareholders.

Investments through joint ventures and partnerships involve risks not present in investments in which we are the sole investor.

     Instead of acquiring or developing apartment communities directly, we may invest in a joint venture or partnership as a partner. These investments involve risks, including the possibility our partner may become insolvent, our partner may have business goals which are inconsistent with ours, or our partner may be in a position to take action or withhold consent contrary to our requests. We and our partner may each have the right to trigger a buy-sell arrangement, which could cause us to sell our interest, or acquire our partner’s interest, at a time when we otherwise would not have initiated such a transaction.

Compliance or failure to comply with laws requiring access to our properties by disabled persons could result in substantial cost.

     The Americans with Disabilities Act, or ADA, the Fair Housing Amendments Act of 1988, or FHAA, and other federal, state and local laws generally require public accommodations be made accessible to disabled persons. Noncompliance could result in the imposition of fines by the government or the award of damages to private litigants. These laws may require us to modify our existing properties. These laws may also restrict renovations by requiring improved access to such buildings by disabled persons or may require us to add other structural features that increase our construction costs. Legislation or regulations adopted in the future may impose further burdens or restrictions on us with respect to improved access by disabled persons. Although we believe our properties are substantially in compliance with present requirements, we may incur unanticipated expenses to comply with ADA, FHAA and other federal, state and local laws.

Share ownership limits and our ability to issue additional equity securities may prevent takeovers beneficial to shareholders.

     For us to maintain our qualification as a REIT, we must have 100 or more shareholders during the year and not more than 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals. As defined for federal income tax purposes, the term “individuals” includes a number of specified entities. To minimize the possibility we will fail to qualify as a REIT under this test, our declaration of trust includes restrictions on transfers of our shares and ownership limits. The ownership limits, as well as our ability to issue other classes of equity securities, may delay, defer or prevent a change in control. These provisions may also deter tender offers for our common shares that may be attractive to you, or limit your opportunity to receive a premium for your shares that might otherwise exist if a third party were attempting to effect a change in control transaction.

Competition could limit our ability to lease apartments or increase or maintain rental income.

     Our apartment communities compete with numerous housing alternatives in attracting residents, including other rental apartments, condominiums and single-family homes available for rent or sale. Competitive residential housing in a particular area could adversely affect our ability to lease apartments and increase or maintain rents.

We depend on our key personnel.

     Our success depends in part on our ability to attract and retain the services of executive officers and other personnel. There is substantial competition for qualified personnel in the real estate industry and the loss of several of our key personnel could have an adverse effect on us.

Changes in laws and litigation risks could affect our business.

     As a large publicly-traded owner of multifamily properties, we may become involved in legal proceedings, including consumer, employment, tort or commercial litigation, which if decided adversely to or settled by us, could result in liability that is material to our financial condition or results of operations.

Item 1B. Unresolved Staff Comments

     None.