The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in Part I, Item 1 of this report on Form 10-Q. This discussion may contain forward-looking statements based on current judgments and current knowledge of management, which are subject to certain risks, trends and uncertainties that could cause actual results to vary from those projected, including but not limited to, expectations regarding our 2008 performance, which are based on certain assumptions. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements which speak only as of the dates of the document. These forward-looking statements are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "expects", "projects", "believes", "plans", "anticipates", and similar expressions are intended to identify forward-looking statements. Investors are cautioned that these forward-looking statements involve risks and uncertainty that could cause actual results to differ from estimates or projections contained in these forward-looking statements, including without limitation the following:

• changes in the economic climate in the markets in which we own and manage properties, including interest rates, our ability to consummate the sale of properties pursuant to our current plan, the overall level of economic activity, the availability of consumer credit and mortgage financing, unemployment rates and other factors;
• our ability to refinance debt on favorable terms at maturity;
• our ability to defease or prepay debt pursuant to our current plan;
• risks of a lessening of demand for the multifamily units that we own or manage;
• competition from other available multifamily units and change in market rental rates;
• increases in property and liability insurance costs;
• unanticipated increases in real estate taxes and other operating expenses (e.g., cleaning, utilities, repairs and maintenance costs, insurance and administrative costs, security, landscaping, staffing and other general costs);
• weather and other conditions that might adversely affect operating expenses;
• expenditures that cannot be anticipated such as utility rate and usage increases, unanticipated repairs and real estate tax valuation reassessments or millage rate increases;
• our inability to control operating expenses or achieve increases in revenue;
• the results of litigation filed or to be filed against us;
• changes in tax legislation;
• risks of personal injury claims and property damage related to mold claims because of diminished insurance coverage;
• catastrophic property damage losses that are not covered by our insurance;
• our ability to acquire properties at prices consistent with our investment criteria;
• risks associated with property acquisitions such as environmental liabilities, among others;
• changes in or termination of contracts relating to third party management and advisory business;
• risks related to our joint venture; and
• risks related to the perception of residents and prospective residents as to the attractiveness, convenience and safety of our properties or the neighborhoods in which they are located.

Overview. We are engaged primarily in the ownership and operation of multifamily residential units. We also provide asset and property management services to third party owners of multifamily residential units for which we are paid fees. Our primary source of cash and revenue from operations is rents from the leasing of owned apartment units, which represented 98.1% of our consolidated revenue for the six months ended June 30, 2008.

The operating performance of our properties is affected by factors such as interest rates, unemployment rates, job growth, household formation and the supply and demand of rental apartment communities and in certain markets other housing alternatives, such as condominiums, single and multifamily rental homes and owner occupied single and multifamily homes. Rental revenue collections are a combination of rental rates, occupancy levels and rent concessions. We attempt to adjust these factors from time to time, based on market conditions, in order to maximize rental revenue. Indicators that we use in measuring these factors include physical occupancy and net collected rent. These indicators are more fully described in the Results of Operations comparison. Additionally, we consider property net operating income ("NOI") to be an important indicator of our overall performance. Property NOI (property operating revenue less property operating and maintenance expenses) is a measure of the profitability of our properties, which has the largest impact of all of our sources of income and expense on our financial condition and operating results. See Note 10 of the Notes to Consolidated Financial Statements presented in Part I, Item 1 of this report on Form 10-Q for additional information regarding property NOI and total NOI, in addition to a reconciliation of total NOI to consolidated net (loss) income in accordance with GAAP.

In 2007, we made the decision to exit the Affordable Housing business and during the first half of 2008 we sold all eleven of our wholly owned Affordable Housing properties. We also continued to execute on our strategy to reposition our portfolio by selling older properties with lower margins and replacing them with newer properties in higher growth submarkets by selling four older properties located in Toledo, Ohio. In April, 2008, we acquired two newer Class A properties located in the Richmond, Virginia metropolitan area.

• Portfolio performance - We expect to increase our Same Community property NOI by approximately 4.5% to 4.9% in 2008, driven by property revenue increases of 3.0% to 3.3% and property expense increases of 1.1% to 1.6%. However, these expectations may be adversely impacted if the economy suffers a broad and prolonged recessionary period.

• Property acquisitions and sales - To the extent we can identify transactions that meet our strategic objectives, we plan to acquire and dispose of approximately $100.0 million of properties in 2008. As of the date of this report, we have acquired and disposed of $75.0 million and $92.0 million of properties, respectively.

• Defeasance and other debt prepayment costs - We have incurred $2.0 million in costs to defease/prepay or refinance debt during 2008 and, as of the date of this report, we do not expect to incur any additional defeasance/prepayment costs this year.

LIQUIDITY AND CAPITAL RESOURCES

       Cash Flows and Liquidity.  Significant sources and uses of cash in the
six months ended June 30, 2008 and 2007 are summarized as follows:

                                                               Six Months Ended
                                                                   June 30,
(In thousands)                                                 2008        2007
Net cash provided by operating activities                    $ 11,084    $ 11,915
Fixed assets:
Property/land acquisitions, net                               (34,310)    (70,547)
Property disposition proceeds                                  88,357      37,921
Recurring and non-recurring capital expenditures               (4,116)     (4,636)
Debt:
Decrease in mortgage notes                                    (44,258)    (62,940)
(Decrease) increase in revolver borrowings                     (6,900)     75,350
Cash dividends and operating partnership distributions paid    (7,963)     (8,458)
Purchase of preferred and/or treasury shares                     (217)     (3,254)

Our primary sources of liquidity are cash flow provided by operations, short-term borrowings on our revolver and proceeds from property sales. Cash flow provided by operations decreased during 2008 primarily as a result of changes in accounts payable and accrued expenses in 2008 when compared to 2007, which was primarily the result of the timing of the payment of such expenses. These decreases were partially offset by an increase in cash flow from property operations in 2008 when compared with 2007 and a decrease in cash paid for interest in 2008 when compared with 2007.

During the six months ended June 30, 2008, we received $88.4 million from the sale of 15 properties. We placed $23.6 million of these proceeds in a 1031 escrow, which were used to partially fund the acquisition of two properties located in the Richmond, Virginia metropolitan area. Additionally, we used $5.2 million to acquire the ground lessor's interest in ground leases at six of the Affordable Housing properties that were sold. The remaining proceeds were primarily used to prepay/defease $42.9 million of debt and for general corporate purposes.

In March 2008, we increased the borrowing capacity on our unsecured revolving credit facility to $150.0 million from $100.0 million, extended the maturity date of this facility for an additional year to March 20, 2011 and modified certain financial covenants.

We anticipate funding approximately $9.7 million for recurring, revenue enhancing and nonrecurring capital expenditures for the remainder of 2008. These expenditures are expected to be funded from cash flow provided by operating activities and the sale of properties.

Any future multifamily property acquisitions or developments would be financed with the most appropriate sources of capital, which may include borrowings on the revolver, the assumption of mortgage indebtedness, bank and other institutional borrowings, the exchange of properties, undistributed earnings, secured or unsecured debt financings, or the issuance of shares or units exchangeable into common shares.

We anticipate that we will meet our liquidity requirements for the remainder of 2008 generally through cash flow provided by operations. We believe that this and other sources, such as the revolver, should be sufficient to meet operating requirements, capital additions, mortgage amortization payments and the payment of dividends in accordance with REIT requirements. We anticipate that we will continue paying quarterly dividends and sustain our current dividend rate of $0.17 per quarter.

Off-Balance Sheet Investments and Financing Commitments. At June 30, 2008, we had an investment in a joint venture that owns an Affordable Housing property. Joint venture investments enable us to exercise influence over the operations of such properties and share in their profits, while earning additional fee income. We account for our investment in the unconsolidated joint venture under the equity method of accounting as we exercise significant influence, but do not control this entity and are not required to consolidate it in accordance with FASB Interpretation No. 46R, "Consolidation of Variable Interest Entities" or under EITF 04-05, "Investor's Accounting for an Investment in a Limited Partnership When the Investor Is the Sole General Partner and the Limited Partners Have Certain Rights". This investment was initially recorded at cost as investment in joint ventures and subsequently adjusted for equity in earnings/loss and cash contributions and distributions. This joint venture property had negative cash flow during 2007 and is expected to have negative cash flow during 2008 as a result of operating expenses exceeding tenant rents and the housing assistance payments from HUD. The joint venture partnership that owns this property has entered into a contract to sell it. Our proportionate share of the debt on this property at June 30, 2008, was $2.1 million.

RESULTS OF OPERATIONS

Comparison of the three and six months ended June 30, 2008 to the three and six months ended June 30, 2007.

In the following discussion, Same Community properties represent 46 wholly owned properties that we have owned during the entirety of the comparison periods, and Acquired properties represent two properties acquired in April 2008 and two properties acquired in June 2007.

The net loss from continuing operations decreased $2.3 million and $4.5 million during the three and six month comparison periods, respectively. This decrease was primarily due to property NOI increases and reductions in interest expense during 2008 in both comparison periods. Property NOI for the acquisition properties increased $2.8 million and $4.7 million during the three and six month comparison periods, respectively. Property NOI for the Same Community properties increased $1.2 million and $1.8 million during the three and six month comparison periods, respectively, primarily as a result of increased property revenues coupled with flat property operating expenses during both comparison periods. These reductions to net loss from continuing operations were partially offset by increases in depreciation and amortization expense during 2008 in both comparison periods.

The following chart reflects the amount and percentage change in line items that are relevant to the changes in overall operating performance when comparing the three and six months ended June 30, 2008 to the three and six months ended June 30, 2007:

                                                           Increase (decrease) when      Increase (decrease) when
                                                          comparing the three months     comparing the six months
                                                             ended June 30, 2008           ended June 30, 2008
(In thousands)                                                 to June 30, 2007              to June 30, 2007

Property revenue                                          $       5,161         18.3%   $       9,216         16.6%
Property operating and maintenance                                1,129          8.6%           2,679         10.8%
Property NOI                                                      4,032         26.7%           6,537         21.2%

Fees, reimbursements and other                                   (2,752)      (87.4)%          (4,893)      (83.7)%
Depreciation and amortization                                     2,679         39.5%           4,611         34.4%
Direct property management and service company expenses          (3,231)      (89.0)%          (6,078)      (88.5)%
General and administrative                                          484         17.9%           1,300         24.0%
Interest expense                                                   (905)       (9.2)%          (2,976)      (14.1)%

Property revenue. Property revenue is impacted by a combination of rental rates, rent concessions and occupancy levels. We measure these factors using indicators such as physical occupancy (number of units occupied divided by total number of units at the end of the period) and average monthly net collected rent per unit (gross potential rents less vacancies and concessions divided by total number of units). This information is presented in the following tables for the three and six months ended June 30, 2008 and 2007:

                               Physical Occupancy
                                    June 30,
                               2008         2007
Same Community Properties:
Midwest                        97.2%        97.1%
Mid-Atlantic/Southeast         95.3%        94.6%
Total Same Community           96.7%        96.4%
Acquired Properties            95.5%        93.9%



                                        Average Monthly Net Collected Rent Per Unit
                               Three Months Ended June 30,        Six Months Ended June 30,
                                  2008              2007            2008             2007
Same Community Properties:
Midwest                       $        773       $      738      $       763      $       731
Mid-Atlantic/Southeast        $      1,060       $    1,065      $     1,060      $     1,056
Total Same Community          $        846       $      821      $       839      $       814
Acquired Properties           $        948      N/A              $       961     N/A

Total property revenue increased in 2008 during both comparison periods primarily as a result of increases in revenue from the Acquired properties of $4.2 million and $7.3 million during the three and six month comparison periods, respectively. Property revenue for the Same Community segment increased $900,000 and $1.9 million during the three and six month comparison periods, respectively, primarily as a result of stable occupancy combined with rental rate increases and an overall reduction in concessions being offered. The Midwest portfolio, which contains 75.0% of the Same Community units, was the primary contributor as average net collected rents increased 4.7% and 4.4% for that portfolio during the three and six month comparison periods, respectively, while the Mid-Atlantic/Southeast portfolio fluctuated less than 0.5% during each comparison period.

Property operating and maintenance expenses. Property operating and maintenance expenses increased during 2008 primarily as a result of additional expenses relating to the Acquired properties.

Fees, reimbursements and other revenue. The management and service operations recognized a decrease of $559,000 and $1.1 million in fee revenue in 2008 for the three and six month comparison periods, respectively, primarily as a result of the loss of management fee revenue associated with our exit from the Affordable Housing fee management business at the end of 2007 and the resulting reduction of properties managed for third party owners. Reimbursement of expense from managed properties decreased $2.2 million and $4.0 million in 2008 for the three and six month comparison periods, respectively, also as a result of the reduction of the number of properties managed. This reduction had no impact to the net loss from continuing operations as these reimbursements are also included in "Direct property management expenses".

Depreciation and amortization. Depreciation and amortization expense increased in 2008 primarily due to the addition of the Acquired properties. As a result of the June 2007 and April 2008 acquisitions, we recorded intangible assets totaling $3.2 million in 2007 and $2.5 million in 2008 which are being amortized over 12 to 16 month periods.

Direct property management and service company expenses. Direct property management and service company expenses decreased in 2008 as a result of the reduction in the number of properties managed for third party owners. The reimbursement of expenses from the managed properties decreased, as noted above, in 2008 during both comparison periods. However, this reduction had no impact to the net loss from continuing operations as these reimbursements are also included in "Fees, reimbursements and other" revenue. Service company expenses, which represent the portion of general and administrative expense that relates to the management of third party owned properties, also decreased $1.0 million and $2.1 million in 2008 for the three and six month comparison periods, respectively, due to the reduction in the number of properties managed.

General and administrative expense. General and administrative expense increased in 2008 during both comparison periods primarily as a result of the reduction in costs allocated to "Direct property management and service company expenses" in 2008 during both comparison periods. These increases were partially offset by decreases in payroll related costs in 2008 and a decrease in Directors' compensation resulting from valuation adjustments of their deferred compensation based upon the closing price of our common shares at the end of each period.

Interest expense. Interest expense decreased in 2008 during both comparison periods primarily due to defeasance/prepayment costs recognized in 2007 of $1.5 million and $4.2 million during the three and six month periods, respectively. After removing the effect of the 2007 defeasance/prepayment costs, interest expense increased $575,000 and $1.1 million in 2008 during the three and six month comparison periods, respectively. These increases were primarily due to interest expense for loans associated with the addition of the acquired properties.

Income from Discontinued Operations. Discontinued operations include the operating results of 15 properties that were sold during 2008 and three properties that were sold during 2007 and the gains related to sales completed during each of the comparison periods. Defeasance/prepayment costs recognized in 2008 totaling $2.0 million were included in discontinued operations. For further details on "Income from discontinued operations," see Note 2 of the Notes to Consolidated Financial Statements presented in Part I, Item 1 of this report on Form 10-Q.

CONTINGENCIES

For a discussion of contingencies, see Note 11 of the Notes to Consolidated Financial Statements presented in Part I, Item 1 of this report on Form 10-Q.