TO OUR SHAREOWNERS:

Wow, what a year! Many of you are aware of the numerous changes at Gables over the past 12 months. We have named a new chief operating officer, doubled our investment in systems and information technology, researched and defined a new strategic direction for Gables, added two new board members, and raised $240 million of very attractively priced investment capital. How wonderful it is to be able to write this, my first letter to shareowners, knowing that these changes have positioned Gables for substantial improvement in both operating results and earnings growth.

These changes were accomplished while providing a total return to our shareowners of 13.1% for the year. While our annual return goals are substantially higher than 13%, I do take some comfort in knowing that this performance was within the context of a year when total public sector REIT returns were negative 4.6%. Although real estate markets remain strong, total returns remain hampered by the public market’s focus on aggressive growth stocks at the expense of equities that have an income component, such as REITs.

A Strengthened Senior Management Team One of my first priorities after assuming the reins in April was to promote Mike Hefley as Chief Operating Officer. Mike and I have worked together for over 13 years. He brings a wealth of operational and hands-on property management experience to the table. With 85% of the Company’s performance directly tied to the investment in our existing property portfolio, it is important that we have an executive with this background at the helm of REIT property operations. You only need to spend a few minutes with any of our regional property managers to feel the renewed vigor and purpose that Mike has instilled in our organization. The addition of Mike, combined with our existing team, provides us with a breadth and depth of management that I believe is essentially unmatched among our industry peers.

A Higher Level of Technological Competency In terms of technology, Gables truly took a quantum step forward over the past 12 months. Our award-winning website has been in a constant state of improvement and enhancement. With features such as 360-degree online video property tours to customer prospecting and lease qualification, our site leads the industry in its functionality as a marketing tool. We also have made the most extensive investments in Company history in business systems, office automation, systems modeling and the necessary associate training to accompany each. While I have, at times, been accused of being a propeller head because of my personal interest and affinity for technology, I firmly believe that these investments and focus will provide significant productivity gains and thus improved earnings growth going forward.