Upfront:WALL STREET WATCH

Despite record oil prices, hurricanes and a slowing housing market, the Apartment Finance Today Index (AFT Index) ended the year with solid gains, and in fact with every company finishing in the black. The AFT Index added 62.50 points, or 5.17%, and closed at 1,271.52. The increase was the highest gain since December 2004. Of the 20 companies now tracked in our index, five companies posted better than a five-point gain for the trading session ended Dec. 15, 2005.

Falling oil prices led to the largest consumer price drop in 56 years. Oil prices that leapt after Hurricanes Katrina and Rita then fell, which pushed gas prices down and consumer prices with it. The Labor Department’s Consumer Price Index fell 0.6% in November, the largest drop since a 0.9% drop in July 1949. However, economists warned that the core pricing index numbers might head up in coming months due to the cumulative effect of gasoline and home heating increases.

Toward the end of our trading session, the Federal Reserve upped its interest rate another quarter point, to 4.25%. It was the 13th consecutive increase since the Fed began to raise rates in June 2004. Fed policymakers expressed confidence in the strength of the economy’s ability to withstand two devastating hurricanes and record oil prices, and Wall Street responded with enthusiasm that there might be light at the end of the rate-hike tunnel. “The underlying message here is that the Fed is rounding for third and heading for home plate. But they are not finished playing yet,” said Stuart Hoffman, chief economist at PNC Financial Services Group.

AvalonBay was one of the high flyers in the AFT Index, jumping 8.73 points, or 10.65%, this session to close at 90.73. For the quarter ended Sept. 30, AvalonBay more than doubled its profit, with net earnings of $99.1 million, or $1.30 per share, compared to last year’s third quarter earnings of $45.4 million, or 60 cents per share. The company cited newly developed communities and stronger operating results. Revenue was $177 million, up from $168.3 million. Analysts surveyed by Thomson First Call expected the company to earn $1.10 per share on revenues of $171 million. AvalonBay was our largest dollar gainer.

Shares of Associated Estates Realty inched ahead this session after the company posted a gain for its third quarter ended Sept. 30 of $12.9 million, or 67 cents per share, compared to a loss of $3.8 million, or 20 cents per share, earned in the comparable year-ago quarter. Investment firm KeyBanc Capital Markets/McDonald initiated coverage on Associated with a rating of “hold.” Associated increased 0.07 points, or 0.77%, and closed at 9.12. Associated was our smallest dollar and percentage gainer this session.

Amli Residential Properties Trust soared this session after Morgan Stanley’s Prime Property Fund said that it will acquire the company for about $2.1 billion in cash, a figure that values Amli at $37.75 per share. The deal is expected to close in the first quarter of 2006. “Multifamily is attractive because of its low volatility and higher risk-adjusted returns relative to other property types,” said David Hardman, head of Morgan Stanley’s U.S. real estate investing arm. Amli rose 6.86 points, or 22.06%, and ended at 37.95. Amli was our top percentage gainer in this period.

Apartment Finance Today Index