According to the Educational Testing Service, there will be a continued surge in college enrollment in the United States over the next 10 years, which will create sustained high levels of demand for student housing.

The “Echo Boom” generation refers to the children of the Baby Boomers and represents a demographic group as large as the Baby Boom generation. Much of the Echo Boom generation, born between 1977 and 1997, is only now reaching college age. According to the U.S. Census Bureau, the number of Americans turning 18 increased from 3.6 million in 1990 to an estimated 4.0 million in 2003, and is projected to increase to 4.4 million by 2010.

In addition to the growth in the college-aged population, the percentage of high school graduates attending college has been increasing. According to the 2002 report of the Census Bureau, the percentage of high school graduates entering college increased from 49% in 1980 to 62% in 2001. As a result, the pool of future college students has expanded and is poised to increase significantly in the coming decade. According to the National Center for Education Statistics, or NCES, an estimated 16.4 million students were enrolled in colleges and universities in 2003, representing an increase of 14.6%, or 2.1 million additional students, from 10 years earlier. The NCES projects that college enrollments in the United States will climb to 18.2 million students by 2013, an increase of 1.8 million students over 2003.

In addition, the Census Bureau projects that college enrollment will increase by over 2.1 million students between 2000 and 2013. The impact of these demographic changes on college enrollment levels is not expected to be felt equally across all states. The Educational Testing

Compared to traditional multi-family apartments, student housing communities provide a more stable revenue base from a growing population of residents who are less influenced in their housing choices by cyclical economic factors such as interest rate levels, housing prices and employment factors. The Company leases its student housing communities by the bed rather than by apartment unit, and the Company typically requires a parental guaranty for each student’s lease obligations. The Company’s focus on modern, high quality student housing communities featuring resort-style amenities and programs designed to maximize a student’s college experience allows the Company to collect favorable rents and realize high occupancy rates.

The Company’s initial properties consist of 21 communities located in 15 states containing 15,829 beds in 5,069 apartment units located near universities. The Company will acquire seven student housing communities from Allen & O’Hara, certain of the Company’s officers and unaffiliated investors. These properties have been managed by Allen & O’Hara for the last several years.

Operating expenses of the student housing communities increased $0.2 million or 5% to $3.6 million for the six months ended June 30, 2004 from $3.4 million for the six months ended June 30, 2003.

Operating expense reimbursements increased 31%, from $1.9 million for the six months ended June 30, 2003, to $2.4 million for the six months ended June 30, 2004.

General and administrative costs increased 6%, from $1.6 million for the six months ended June 30, 2003 to $1.7 million for the six months ended June 30, 2004, primarily as the result of an increase in the cost of health care benefits for management staff.