The S&P analysis adds, "This trend was further exacerbated by a greater number of net completions in 2003 and a drop in net absorption." S&P says the average asking and effective rents in metro Atlanta are reported at $826 and $727 per month, up 0.7% and 0.1% respectively from the third quarter.

The physical occupancy rate of the Evergreen Village Estates project was 85.2% on Dec. 31, 2003 and is "in line with submarket rates, which are between 82% and 83%," the report says. "Reis reports that the Atlanta apartment market is struggling with high vacancy as the exuberant building cycle of the recent past has finally caught up with diminished demand as the economy slows."

The average rent at Evergreen Village Estates decreased to $494 per unit per month in fiscal 2003 from an average $529 per month in fiscal 2001. The average rent decreased primarily due to higher vacancies and concessions, the S&P analysis says. Expenses per unit per year increased to $4,377 in fiscal 2003 from $3,894 in 2001.

The increase in expenses can be attributed to higher insurance costs, payroll expenses, and maintenance and repair items. The expense ratio was 70.59% for the year. The total rated bonds loan-to-value for 2003 was about 127%, based on Dec. 31, 2003 net operating income discounted at a 9.25% capitalization rate, the analysts note.

Debt service coverage ratios based on year-end December 2003 unaudited financial statements show senior debt service coverage was about 0.87x and subordinate debt service coverage was about 0.78x. "This is the fourth year in a row that coverage levels have been below underwritten levels," the analysts note.