R E S U LT S O F O P E R AT I O N S Tenant recoveries increased by $3.8 million, or 12%, to $35.9 million for 2004 compared to $32.1 million for 2003.The increase resulted primarily from the 2003 Properties being owned for a full year and the addition of the 2004 Properties. Tenant recoveries for the 2004 Same Properties increased by $575,000, or 2.3%, primarily due to increases in certain recoverable operating expenses during 2004.  Other income increased by $1.5 million, or 71%, to $3.5 million for 2004 compared to $2.1 million for 2003, primarily due to an increase in realized gains on investments and from a general increase in miscellaneous sources of income. Rental operating expenses increased by $5.6 million, or 17%, to $38.4 million for 2004 compared to $32.8 million for 2003.The increase resulted primarily from the 2003 Properties being owned for a full year and the addition of the 2004 Properties. Operating expenses for the 2004 Same Properties increased by $398,000, or 1.6%, primarily due to increases in payroll, property taxes and repair and maintenance expenses offset slightly by a decrease in property insurance expenses. Substantially all of these changes in expenses resulted in corresponding changes in tenant recoveries. General and administrative expenses increased by $894,000, or 6%, to $15.1 million for 2004 com- pared to $14.2 million for 2003, mainly due to compliance with Section 404 of the Sarbanes-Oxley Act, Operation Outreach and general increases in administrative costs. Our Operation Outreach program provides financial assistance to families of activated and deployed soldiers that faced significant financial challenges and had significant financial needs.  Interest expense increased by $2.3 million, or 9%, to $28.7 million for 2004 compared to $26.4 mil- lion for 2003.The increase resulted primarily from increases in indebtedness on our unsecured line of credit, unsecured term loan and secured notes payable, and to increases in the floating interest rates on our unsecured line of credit and unsecured term loan. These borrowings were utilized to finance the acquisition of the 2003 and 2004 Properties, and the development and redevelopment of properties.The weighted average effective interest rate on these borrowings (not including the effect of interest rate swap agreements) increased from 2.64% as of December 31, 2003 to 3.72% as of December 31, 2004. We have entered into certain swap agreements to hedge a portion of exposure to variable interest rates with our unsecured line of credit and unsecured term loan (see “Liquidity and Capital Resources – Unsecured Line of Credit and Unsecured Term Loan”). Depreciation and amortization increased by $3.9 million, or 10%, to $42.5 million for 2004 compared to $38.6 million for 2003.The increase resulted primarily from depreciation associated with the 2003 Properties being owned for a full year and the addition of the 2004 Properties.  Income from discontinued operations of $1.6 million for 2004 reflects the results of operations of one property that was designated as “held for sale” as of December 31, 2003. In connection with this sale, we recorded a gain of approximately $1.6 million during 2004. Income from discontinued operations of $11.1 million for 2003 reflects the results of operations of three properties that were designated as “held for sale” as of December 31, 2002. In connection with the sale of these properties, we recorded a net gain of approximately $8.3 million during 2003. Rental revenues increased by $17.5 million, or 14%, to $143.9 million for 2004 compared to $126.4 million for 2003.The increase resulted primarily from the 2003 Properties being owned for a full year and the addition of the 2004 Properties. Rental revenues from properties operating for a full year dur- ing 2004 and 2003 (the “2004 Same Properties”) increased by $2.2 million, or 2.2%, primarily due to increases in rental rates and a slight increase in occupancy. The average occupancy level of the 2004  Same Properties was 97.1% as of December 31, 2004, compared to 96.6% as of December 31, 2003.  Comparison of the Year Ended December 31, 2004 to the Year Ended December 31, 2003 Comparison of the Year Ended December 31, 2003 to the Year Ended December 31, 2002 Rental revenues increased by $14.7 million, or 13%, to $126.4 million for 2003 compared to $111.7 million for 2002.The increase resulted primarily from the 2002 Properties being owned for a full year and the addition of the 2003 Properties. Rental revenues from properties operating for a full year dur- ing 2003 and 2002 (the “2003 Same Properties”) increased by $1.7 million, or 2.1%, due to increases in rental rates and offset by a slight decrease in occupancy. The average occupancy level of the 2003  P 8