AvalonBay Communities (AVB)

Indebtedness of Management.

Since January 1, 2005, no executive officer or director of the Company has had any outstanding loan payable to or other indebtedness owed to the Company.

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Mortgage Loan to Third Party Partnership.

Concurrently with Avalon Properties’ initial public offering in November 1993, Avalon Properties purchased an existing participating mortgage loan made to Arbor Commons Associates Limited Partnership (“Arbor Commons Associates”) that was originated by CIGNA Investments, Inc. The mortgage loan was secured by Arbor Commons Associates’ interests in the Avalon Arbor community. Avalon Properties purchased the mortgage loan from the lender, rather than purchasing the Avalon Arbor community from Arbor Commons Associates, to avoid the current recapture of certain low income housing tax credits by certain unaffiliated third party investors. The mortgage loan accrued interest at a fixed rate of 10.2% per annum, payable at 9% per annum. In October 2004, the Company received payment in full of the outstanding mortgage loan and the relationship between the Company and Arbor Commons Associates was terminated. Until May 2004, Mr. Blair was a partner of an entity that was the general partner of Arbor Commons Associates. However, Mr. Blair disposed of his entire interest in such entity to an unrelated third party in May 2004.

During 2004, the largest amount outstanding under the loan was approximately $32.4 million. In addition, the Company managed the Avalon Arbor community and received approximately $112,000 in 2004 from Arbor Commons Associates for rendering such management services.

Indebtedness of Management.

Since January 1, 2004, no executive officer or director of the Company has had any outstanding loan payable to or other indebtedness owed to the Company.

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