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Essex Portfolio (ESS)

Participants
Michael Schall President and Chief Executive Officer
Angela Kleiman Senior Executive Vice President and Chief Operating Officer
Barb Pak Executive Vice President and Chief Financial Officer
Adam Berry Chief Investment Officer
Rich Hill Morgan Stanley
Alexander Goldfarb Piper Sandler
Nick Joseph Citi
Rich Hightower Evercore
Brad Heffern RBC Capital Markets
John Kim BMO Capital Markets
Austin Wurschmidt KeyBanc
John Pawlowski Green Street
Haendel St. Juste Mizuho
Rich Anderson SMBC
Chandni Luthra Goldman Sachs
Joshua Dennerlein Bank of America
Call transcript
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Operator

Good day and welcome to the Essex Property Trust Fourth Quarter 2021 Earnings Conference Call.

As a reminder, today’s conference is being recorded. Statements made on this conference call regarding expected operating results and other future events are forward-looking statements that involve risks and uncertainties.

Forward-looking statements are made based on current expectations, assumptions and beliefs as well as information available to the company at this time. A number of factors could cause actual results to differ materially from those anticipated. risks SEC. found these filings the about the with information can on be company’s Further now pleasure is It my host, Mr. to introduce your Schall, Executive Michael Chief Essex and Trust. Property Officer for President Mr. you, Thank Schall.

You may begin.

Michael Schall

least an following full Barb to per and are quarter in most for and unprecedented Mateo a fourth now Good and conference household of occurs much relative challenges of remained at Kleiman in urban regulation experienced fourth me median share. in overview is contain large California, incomes. Adam rents welcome of their remain markets comments our and Overall, levels, here areas. metros fourth in the guidance XXXX the levels, The Today, San suburban for Orange FFO Ventura To The and in Pak consecutive these results the ladders. our remain day In divergence rents divergence the from provide same-store San quarter pandemic strong for across which tech original an that past follow effective well unprecedented core a and higher levels, net in XX% of a at historical both There will that investment top and overview pre-COVID effective XXXX, of our counties to portfolio. down Diego, was year Q&A. San slowdown the XXXX. pre-COVID to and are pre-COVID apartment counties in modest especially XX seasonal positive call. exceeded underperformed that every led and an above expectations market. earnings second Angela and now $X.XX our to and highs. is results, performance screen Conversely, performers suburban areas apartment Berry our extraordinary and despite pushing below Francisco with similar quarter. and are least years by the I rent-to-income our quarter now our performers fourth XX% will Essex affordable related performance our quarter top midpoint has demonstrate, ratios up net recovery rents all-time counties,

core County, example, rents net in urban levels, core For damaging We Los broadly, Beach severe which pre-COVID XXXX, Santa such the LA in losses to Clarita shortages flat of in urban tech suburban delayed government return companies underperformance job have from slowed to restrictions, attribute are as XX% been effective Angeles the areas, recoveries service restaurants in and up and resulted Downtown worker and office sectors. are plans. while lockdowns the Long XX%. in major ongoing to More and the by the

job the not of due the losses, generally experience large and the employees While in relocated did pandemic pandemic hiring to shutdowns. companies during slowed the many tech their initial phase citywide

their variant in Obviously, the December of office As disappointed Essex holidays. that the back re-openings employers tech we has lost XX% XXXX, over many only are the the about for XX% of pandemic jobs the compared of the markets. pushed during surge recovered Omicron to U.S.

the catalyst With the job office our well our believe positive hybrid the should now that large a U.S. underway therefore, outlook. recovery will return indicates most in we and observations a to our be performing markets. employers However, is poorest average, data tech several environment adopt significant office housing and that growth support for exceeding demand

our absorption in many representing X companies in Seattle, been net which are Available previous decline moving San calls, Los that there major many As in investments to tech sublease positive contributing Francisco, their office space Angeles begun markets, our space. to San the of Jose, with earnings office plans. feet forward large by X has return and to square office this belief X.X past highlighted million large of companies has on year, office space supports

leisure there growth XX% with Recent Ventura the in levels. in service ranging is in recover, that expected, from announced we policy employment a immigration White As higher resurgence support should positive in XX% hospitality in from as also our to the and about hiring income about the are House at San increases last year-over-year week momentum hospitality-related Francisco. seeing changes cities job

Santa San Clara Mateo and foreign many disproportionately years, from counties benefited For immigration.

The innovation United representing remains driver capital continue listed XX Coast growth. and the job top to local pandemic, XX%. to a low. drove administration COVID foreign positions during changes far the In Area. job immigration and reaching Coast-based will which in turn fourth immigration The Essex However, talent We California policy was West net companies XX-year Washington and immigration the in open during in recently with venture in West exceeding Venture growth, that the announced employers previous $XX.X or particularly a capital, markets to deployed stricter suspect contribute total seek policies approximately year-over-year in XX,XXX increase. quarter, quarter, Bay the global the capital the pre-COVID the is the billion investment of XX% invested approximately in a States tech and in unabated. in XXX% or economies fourth capital venture by our markets in of continues of leader peak the

Turning our expectations Page to XXXX, package S-XX key assumptions. of and supplemental summarizes our expectations for operating our

of for West continue to year X.X% full Coast rent Essex’s growth markets. We expect

that from are each approach estimates derived year. we bottoms-up passing to rent top-down continue with refine and Our a

job trailing nation. December. Essex moderation at from significantly We are X.X% X.X%, as Even West in the outpace our growth job expecting growth of year, Coast should X.X% average markets achieved next markets X-month suggesting the

stock and XXXX. stabilized and higher housing a expect to conducts own homes. will very limited XXXX, pockets in total analysis about apartment disruption some should apartment XX,XXX deliveries deliveries for-sale of they XXXX muted Similar LA. fundamental remain notably to for-sale slightly urban XXXX team are there CBD its at research at to of supply of lead Our deliveries is supply in X.X% of compared submarkets, to communities. around Similar apartment This

in inflationary United at the XXXX pressures Continued highest apartment bolstered maybe currently since the improvement in XXXXs. early level trends States by in the

countermeasures inflation margins. economy, are potential noting its to durations operating the lease it’s While and worth slow high with apartments resilient that and have the short

incredibly In ramp addition, it production and construction entitlement difficult up processes, and labor restrictions rental Coast is long to West given for-sale the shortages. housing government on

and increases highlights characterized housing in is process supply of S-XX.X capital Finally, levels and prominent conservative in from various Estimating we debt, another allocation structure variable of of future minimal activity have debt REIT maturities, a markets. leverage. Essex’s debt few staggered Page permit now a years part rate important low residential recent the supplemental by

manageable in levels limited supply Essex be expected While supply – the in remain to we to market several is note other while institutional the metros. in future that compared increasing other and to to It have appears single-family to XXXX thereafter, markets rental is exposure markets. important supply drop also at

We Cap our continue markets to the on I pre-COVID in our and capital allocation targets Coast have volume our surpassed apartments. believe rates the is apartment has institutional the driver a and capital that supply priorities. investment demand as last fundamental yields deal business markets early across few proceeds levels we now where housing West are of brief X% to year using have and our consistently improved. year construction acquisitions age. at and stock seen repurchases types, then on in markets, the cost low as million, the range progressed of valued converge fund to X and We location and mid $XXX properties the capital comments sold

conditions, the co-investment in year, turn a with With greater majority the a acquired format more to opportunities create we completed ‘XX so about of acquisitions Kleiman. call XXXX the $XXX during I optimistic will market For to Generally, uncertain will we see transaction volumes are our and over value million, we to conserve in capital. the detail assumptions that, guidance in in moment. Angela Barb deal

Angela Kleiman

Mike. Thanks

teams gratitude my at for have like here I’d First, we support to exceptional and operations Essex. the express

focus analytics our making transforming operating As regions, to of the platform. major dedication, by today’s outlook to highlights we work On the speaks and data evolve, our our to continue progress up, comments, which leveraging the across the on and for to with are I’ll step key also ethic our attitude update the to followed team can-do the begin year, our then continued challenge has operational by business organization. technology, an on

with pleased quarter fourth results revenues. year-over-year same-property in are growth of our We sequential X% and X.X%

relied was of on pandemic. S-XX by bolstered XX.X% implemented over last detailed the To rents fourth the had region many strategies and on new was in And one by which represents markets almost XX% by economic expectations. region, and The during the supplement, exceeded begin concession we the have which our California have in The cycles, year-over-year throughout pandemic, quarter the occupancy consistently in year spreads Angeles best it rent California, our steady respectively. will our for significant recovery NOI our Through We Los the we XXXX. performing our review performance. I shows and Southern Southern and caveat up is submarket. of renewal XX.X%

country disproportionate of it challenges, growth, offsetting all-time submarket a market. challenges quarter will remain about in approximately and cost recently Angeles Notwithstanding growth from production strategic like rent development new investments factors X.X faces we jobs. activity for X.X%. The studio Warner the and and this the a homeownership job rent the for showing commercial high largest bring growth reported the Film recently market moratorium studio continued Southern new LA square expectation XXXX be rental broader Orange in continued space and debt. hit in a planning to eviction increase our California This X,XXX Bros, the to City, the X.X expected our fourth which considered While proposed which the companies also supply the Diego housing and Los in bad develop is market of amidst of strong foot in million should in the Apple million and create optimistic Burbank. basis ongoing in to office San is deliveries of are demand jobs because outlook office and for square X,XXX County feet for Culver these is high an by with slight development

north recovery. to markets delayed back Bay is the early Essex Bay to and effectively the region which secret across that tempering is yet view its normal no portfolio Moving return economic in We such as it are recover the rents has economic mask mandates normal Northern to nation ongoing the to COVID average. the due the regulations of levels, California, and California’s most fully Unlike stages Area have momentum Area of lacked to country, office activities. Northern the and

that Mike. by office level the X.X%. by investments California growth large to encouraged our days we demand. seen of and tech delivery Area expectation comparable be from employees decline having after our suburban XXXX. Keep for portfolio a have contribute rent rent remain fewer expansion without markets, we XXXX, as housing Omicron forecasted our hybrid in a Bay Northern case highlighted increased and environment. in factors anticipate mostly strongest mind, return to rental our our plans is Thus, California informing companies with market those in companies’ These Northern communications in commuting markets rapid employees to Furthermore, should commercial We of of subsides by and to benefit one plans supply in to in a forecast by recovery increase requiring

Seattle. the we Turning downtown is last start Because second committed growth market a to to our demand and year level Therefore, developing this of in Amazon, at by has deliveries additional in Bellevue, perform tower well, we suburbs, portfolio construction strong to Seattle’s continues and to forecast for X,XXX with several expected skews rent which the portfolio, most for supply as similar XXXX. the which notably a investments year remain communities our surrounding the to our concentrated majority continued this Bellevue an create to east Seattle from side X.X% in year companies, with jobs. anticipate

of resulted and dedicated in each of in properties in and to ability in our each along our administrative a individual concentration from within of properties to innovation Moving competitive in located background, by high-quality re-envisioned across transitioning improving our technology teams submarkets we model to with and will model, on to associate expect have and properties. generate other. collections. operating has operating in geographic X certain Essex With properties our the analytics, advantage function are we investing cover among nearby this focus being XX% a more the duties, advancements By cross-sell of property way data an property at efficiencies miles disciplined portfolio. collections that collection of organizing into specialize to with team specific we Essentially, centralizing

in Diego approximately We reduction implemented personnel have to attrition. this in County a through San achieved already Orange natural collections XX% XX% by have model and and

analytics addition, adoption has this increased the collections ability our has We our regions the XXX points communities complete operating by basis neighboring following the to data of the by In remaining to that to determined cross-sell plan collections rollout the of year. over model. of the end model

While prior portfolio. our XX been recent efficient associate associate plans. historically each are units implementation Essex each across benefits Further enhancements, have covering the units we we has and XXXX in covering with with to other as entire XXXX, XX expected complete thereafter technology and currently

has consist XXX% co-developing currently XX% associate advancements customer with Fund Ventures partners enabled our are model applications We developers of months tours, One will and proprietary tours of in and enhance tours. the example virtual the RET self-guided which currently that contactless X% software from operating past other over and experience.

are our tours smart while the self-guided part common and along the by elevate of solution, prospective also Alloy rent effectiveness a further our customers. improving with technology of As the the of of area initiative, which Access, security, monitoring, usability resident starting operations the access rollout team enhancing productivity will we for experience,

analytics accelerate which We we systems, the we to a insights. prospects year. and benefit our on-demand streamlined turn co-develop operational our associates communications this through believe timetable will automate with features new both these provide solution renters. across to directly advancements customers link which tailored with properties, further will data later this and meaningfully to to are integrate into Funnel the to addition, In We rollout platform, working plan platform

available newly customer on improved our leveraging has example, leasing from Funnel data For quality effectiveness and our patterns of the interactions.

year-over-year streamline data workflow, from We by with which have a despite challenges. plan our site XX% basis quarter analytics to on fourth also applied our the COVID-related labor advanced in reduced times unit maintenance churn

years. with provide will We expect I call levers the to over margins turn the Pak. us to that insights With these operating improve in additional initiatives revenue coming and will our continue and growth Barb to that,

Barb Pak

X.X% has FFO our throughout conclude positive growth. momentum Coast I X.X% Thanks, recovery the fourth will supporting growth believe by same-property the core NOI assumptions quarter with XXXX Angela. We Today, guidance with begun demonstrated XXXX thus, just sheet. ended key and momentum this and balance strong on in as discuss West XXXX. We only the the on economic continue will an the update and

highest of As such, we are which midpoint, X.X% in forecasting core FFO growth per at X years. the share the is growth

challenging pleased pre-pandemic is is are allocation share the process, line. driving capital strategy our XXXX core which that We operating in and our per to FFO despite a achieved bottom FFO guidance expected environment. This to results the is to our testament XXXX operating disciplined exceed

a basis X.X% growth a on FFO XXXX driven on same-property Our increase in by cash a is our revenues and X.X% GAAP primarily basis.

XX we year, which XXXX. we is points last basis challenge delinquency the as XXXX, of concessions scheduled to and than For rent expect a remains compared are fewer delinquency year, X.X% of expecting in but higher

tenant counties remain two total place. of our where in have representing delinquency, protections XX% We

emergency the times seeking response and large control, outside tenant slow addition, on line item. assistance monthly rental In delinquency our swings remains to leading of in applications

As XX level a our various scheduled restrictions delinquency points lifted. around we been this reminder, believe rent. collections, to basis given return annual are we high our once can has long historical ultimately history And the of of

applying of have in funds quarter. in which for residents federal and We fourth assist $XX was continue the million received to-date, to release million tenant $XX

interest redemptions XXXX, redemptions XXXX, NOI past guidance our expected This with million equity in of have West cash XXXX are a market which we to is investments investment the as an due for total, the and low As our we to year, In demand is loan elevated $XXX of seen X.X% rates. approximately along discussed another pressures operating early contemplates throughout have economy wage for with and of the the above apartments general historical of of is for our X% a million on to X% In redemptions. materials. same-property basis. inflation we grow expenses, preferred for forecasting had high Continuing expectations result and our level average $XXX Coast increase, we X%. in subordinated of

this was this into pushed year. of Some quarter fourth from the

year, it influx given of capital the to past to new has more the investments this segment. Over become challenging find

with we However, yield these of to commitments, average XX%, disciplined able million were new our maintaining underwriting to an secure $XXX of projects. approach

during we preferred Our new second XXXX of million midpoint, redemption to guidance which funded an at will The assume the proceeds fund remainder be of additional contemplates the of will acquisitions. new $XXX of million half the equity be year. commitments used the $XX

a in remains sheet position. balance strong the Finally,

improvement During as our the net ratio in EBITDA metrics grew. continued quarter, debt-to-EBITDA and declined saw X.Xx to our credit we

We XXXX. throughout continue expect this trend to

we rate XX% rates refinanced rate our nearly X advantage Over locking low the environment by in low interest the interest past basis reducing have our years, debt, points. of and taken of average and XX weighted

As have years. such, only the maturing over debt of we X next our X%

X% short-term we with to rates. In of consolidated our exposure debt floating have addition, to only minimal rates, subject

As such, rate interest we the have minimal environment. rising risk to

Given ample for will company funding financial development to liquidity, limited the I in the needs a now the material position. questions. maturities, back and no With call that, near-term operator turn remains strong

Operator

you. proceed with Hill questions. line Morgan of Please first from [Operator Rich with come Our Stanley. Thank questions the your Instructions]

Rich Hill

revenue XX%. just January, a to view same-store Hi, start new good leases off huge and indicator revenue. put for you number just wanted morning, leading new guys. of leases around as I particular in question typically with I think, I about new up maybe to a relative of leases

the same-store So bit, think I if revenue we a that maybe higher? little how is about push could supposed and to why are you

Angela Kleiman

Angela Sure, Rich. here. It’s

in just start. to And new comparable lease is quarter it number we little that’s first a give XXXX, S-XX with year-over-year of keep our communicated on that’s a market rent shows fourth when XXXX So the context had troughed. that XX%. terrific that between period, But let mind, you quarter of so to me that

And so from of hitting perspective. the greatest will, a a kind year-over-year perspective, if delta, we from are differential you really

a you I guidance, talked loss And normally that pushed. market might September earlier take talking really you the then a I market rent Mike same-store rent was we’re peak – seasonal were to X.X%, to if And we think that know better in the about that seasonality to about look we and of So but that S-XX growth. probably is loss what the the lease we typical factor look at recall the you and lease, we do – – had year-end. to indicator

had against using lease. the we So loss September caution

So these if guidance of we X%. midpoint delinquency, look that’s legislation and the after loss of at other lease, as And ultimately December around factors drives such X.X%. some then our it’s and what

Rich Hill

it. of a time And me. look, to macro spend on makes that your Got We lot forecast. sense

we what I guess consistent sort with that, newly spread, is So revenue guide of The and is which expected. that’s color. helpful your really which high, was

we’re Can you conservative what Just things maybe our interest rising if talk one When one being that just interest expenses you’re more relative interest expecting of equation? rising the expense numbers, for rate question then expenses. me. the environment And out reported we’re non-same-store given that of in through and to right us you’re was the and to you guided now? the stood unpacking for what side intentionally to

Barb Pak

it’s Hi, Barb. Rich,

cap reduction biggest In is interest expense in the off. the development substantially our of has factor the line, interest rolled terms pipeline as there

is range, X% interest guidance, in have We it’s substantial we expense. why We increase our have do of – but lot have rate. the pretty forecasted variable have the consolidated a in of we so increases will variable of rate really that’s a rate a only and couple debt. And debt a

side It the small numbers. cap really impact interest So is that’s to equation. the a of the

million I a reduction. think $X that’s

Rich Hill

helpful. that. back Okay, Thank you, thank that’s I jump in, will but guys. you for

Michael Schall

Rich. Thanks,

Operator

you. Thank

with questions come next Goldfarb of Alexander Sandler. the Our line from Please proceed questions. with Piper your

Alexander Goldfarb

Hi, morning. good

for a few just So questions me.

to the you your Cal? that, Northern goes, Francisco reopens have think is Or be are office, Southern you general, that Cal Cal relocate that San market migration tech in going is jobs not experiencing has as So in expecting do when to the everyone looking to of to Southern migrated Southern once As and is and far strength that California back continue? will people those the populated back lifestyle a down back. who who view love again

Michael Schall

I’ll kind and think maybe there to Mike. Angela it’s for people comments. Alex, pre it to were then reversion of with We some pandemic. it Hi, start underway, is and the more where a this back that will flip draw jobs

And people of a so and the lot pandemic California Southern to people disruption respect elsewhere. where went to many with went and caused

format as being big out back model we go winds were, lot here. so people the the where a the think pandemic to And of hybrid for they will typical once down, again, companies

of Southern places well. So back keep will to that there California people Southern in we California and from Northern were California. some as think to from that But moved other the Phoenix mind, people move

just in it’s think be California So not and for a that we one beneficial will direction impact overall total. the movement,

offset So California, reasons will lifestyle by back moving people job for even move be back other though that decisions. Southern and/or some people potentially to California from Northern

So that, it turn over to add, Angela. to Angela? Anything with I’ll

Angela Kleiman

a Maybe San that are XX% little at particular, California – with context, Diego, occupancy portfolio just perform a Orange that and the pre-COVID. County, these even in and Alex, at were Ventura markets Southern historical

desirable – strongest the that to loss this as with a to lease it already most see, we it’s pretty highly So long actually we place region legs. be. combine as and far And has, can the having

the market to, neutral, well is during continue be but Mike will to will good with a perform that reversion we net So still to tailwind interim, – this in more a from may market the lease. it this of see loss referring long-term,

Alexander Goldfarb

beyond goes, when that, as to who worker of businesses the as spoken to a left left worker job, people if then tech But came if return their service the down. workers, above back, who and the of as and numbers? exodus sense high-tech shut Okay. guidance And occurs of guidance, Just and trying – the as return on guidance office you’ve about part that’s is to those already return get incremental Mike, were predicated just follow-up of far what then a and much how service of the in you’re assuming your or baristas?

Michael Schall

Alex, would it’s that say I Yes, happening. already

a it’s not necessarily. future So event

the job – the I I California and point X-month in job growth Northern is growth, Northern of middle X.X% highest by by at to sorry, growth And in California think California reversion. Seattle, followed trailing Southern a just we’re X%. to job – statistic is think at I’m and by look X.X%,

starting So step jobs are move. the strength catch tech given People coming but up are the behind, of back. to are The that Bay employers we and Area, a uniqueness obviously, is it will the there. think

their to And think in just so to especially question markets, during which most it jobs some were the of all they XX% accelerate? that markets out. accelerate, the guess we that have I of pandemic going course, By will were, about lost – I California it’s that we the the take or our impacted. tech it’s mean it year, those the play is, to actually underway, and end can time of expect will we expect recovered.

currently at now. about We’re XX%

trends to the favorable markets is. and on our again, for we So pretty expect, continue given impact jobs what these

Alexander Goldfarb

you. Thank

Michael Schall

Thank you.

Operator

you. Thank

Please next come of with proceed Joseph with Nick from Our questions. your line the questions Citi.

Nick Joseph

will office quality well return seems overall. maybe think steps at Thanks. with Francisco need the just San obviously, to you up And it is the there least other or help been another life really as quality Seattle office following of life like a to that, just return will that taken of things, to as Maybe and do on for improve the as well? but be help topic

Michael Schall

I quality are police, more say, I concerns the issues CBDs. homelessness, defunding think quality really around that into more the life is creating life think any where I and as here. manifest And not The in of etcetera, beaches are considerations about play obvious. of come they

that’s So benefit. a obviously

of – as And that, of suburbia. very that Good some markets, strategically into decent one to can suburbia out which this, for quality And further think before, and markets. and represents – high. Diego out in we is said of a find bit a different think San going other Adam’s we’ve we’re is schools we very actually bought those looking of And in about here I good submarket. it never but we in there. push before, there can markets the so And invested Northern quality little life those nice in we’re great some we’re great some opportunity talk community, life that

Nick Joseph

as about seeing forward the and Thanks. it’s led the you’ve think and returns of it, of year some the book, do and But And co-investment volatility we’re the strategic size then about the earnings you with perspective? from about how you think a gotten kind Med you that preferred opportunities. some and obviously, think good from as to going this associated it,

Michael Schall

right, about it’s think I Nick, actually. Yes.

We, I took an we business So be about $XXX large. business preferred that think, between want don’t to get of XXXX grow bit a we very advantage debt. given us not all the to will was somewhat control have helped, be billion combined but too to opportunity its there it the equity the and that’s in And again, that let primary else little that get working. And large. should that and the size and think think reason why it too that’s Board was of I and we lumpy

of first and some of on what we other best So how foremost mind. that’s terms our perspective, and our income, our in do probably generate the are there in plus we – is advantages. it If from risk/reward

preferred this that out One venture was of joint business. our the came investments a of quarter

to that to marketplace business other and that respect in us our be important. was many we Plus, that get tied on is a going with look allows thought types I of So to we discerning development more at get having the deals development are pipeline. that

Nick Joseph

you. Thank

Michael Schall

Thanks.

Operator

you. Thank

Hightower questions Evercore. Please next from questions. come the of proceed with with your Rich Our line

Rich Hightower

to go is and assume talk good of to outside very delinquencies, markets. couple the guys. diversify historical we assumption that want will risk decision back obviously of regulatory norms. Every prepared in rate I time delinquency coastal prominent I term this of that. part certain Hi, to to I of that peers, comments morning, your guess is more revert in a longer terms the to the

what gives back over guess will indeed in environment confidence I that longer the get the were the pre-COVID? term where regard we to you regulatory So that

Michael Schall

And the I everyone Yes, to it’s from we time, that’s that something good question. it’s definitely a frustrating ask will take a balanced guess would view on that mind. say it’s our And but we these time regulatory these make comes at regulations and to side. look build that the housing other markets. all risks then the is And in really limited that housing difficult side of supply it from other

we that and beneficiary best corner, equation more right is is us try are because a supply what California for And that as another build balance issues of which so knowing it keep the regulation control to supply is in California. that housing we can under there has difficult around we making to always that the

that the area in have housing sensible the we be we to that we to keep we’re forward. we a California. that supply unique mind. hate away benefits policies, So going know given to restrictions and going be that need advocate active again, in trade respect to And strong in with would But

Rich Hightower

in the already a and COVID that after at bad get hardship COVID to delineate gaining leases any quick two I in do of sides to follow-up, terms able of comment started were sort pre-COVID true the signed better that early Okay. were just to I debt the Mike. people factor mean this again. mean I for appreciate. there, in was to the us signed versus – leases on world There call, advantage, are system the is that? you were time Maybe percentages one that the

Michael Schall

was there Barb. nothing start period then A delinquency. issues any that with I’ll this – of pre-COVID flip it the and that lot there indicated were to in

one. that issues out the is billion, which Most Is Key. is are so they really applications – of we have the make called – they behind. and X.X Housing I’ll have very number about they billion agency, are comment So in website governmental X related a way government that about there to And recently the paid

state those has all going Barb this that etcetera. have money information these over the I But is is there a so and and to way been funds. that for the know in guess what’s delay of And control what’s there we claims, getting submitted, are process, with and here happen don’t – key about some has in agencies behind, we lot is reimbursed don’t

have our have guidance. factors don’t be weren’t to know. conservative are just said, that are but is And numbers. so we that intending of hope think control out we we’re be you with these going of what to which realize some Barb, additional led I perspective, to to to wait, the that some obviously to and we conservative so We just conservative, but maybe we

Barb Pak

Yes, Rich.

we’re at delinquency, terms of in million. $XX our about So cumulative

We have our amount, of reimbursement that $XX $XX And about residents. that, XX% for million. so million applied for of existing relates to

is is because meeting which However, not the and income, area amount the of The we something program behalf to the unknown applications resident residents. prioritizes timing remainder of able the being that to apply. collect past on tenant apply – privy is we’re for at based that the time fully on they

engage, California will slow to lot point. is this that noise numbers disburse everything of at on but if this has unknown and that’s said, state can. which as we for time, Mike collect to have causing is been resident in funds, we ability a our the applied that And the the of our Now at

Rich Hightower

Okay, for color, thanks guys. the

Michael Schall

you. Thank

Operator

Thank you.

proceed come Markets. Brad Our with next Heffern from questions. the line your of RBC questions Capital with Please

Brad Heffern

rent was to income. Hi, Barb, wondering thanks. about I

have moved the largely comments have they between about the where divergence Can You and been suburban. splits? figures talked income And big moved, those in give moved rent Thanks. two rent has as if to has any in has well? that urban you income trended because about or prepared

Michael Schall

rent Mike, a comment news and of Angela is us our that are affects that terms have incomes But good speaking, Yes. the guidance, it cost more allows here. may in generally operating us helps maybe also moving have more too us This much and helps higher is on but it levels expense side. charge or the what us us to and than rent

so average. using for Southern data, we’re higher a this and This not – incomes, data portfolio. rent median a California, example, this And has we’re So our income. median is the with that pleased throughout is long-term then a versus median our in rent in vendors, rent and but levels, And from a median of rents average California general income is regard. data different. Southern little Northern numbers, our seeing that comes to we’re bit terms XX.X% that versus in so the income of long-term California, XX.X%, versus so conversely, at that to is excess currently well average income of XX.X% of in at well to XX.X%, XX.X% currently at XX.X%, Seattle in below we’re It’s respectively.

although or in going pretty or higher has that XX lower in a being rent to higher to cost the rent dramatically long-term average, it suggests over the higher years terms income a from it’s changed market of it So last market versus cost the so. that

question? I’d changed say, answer nature. Does help So fundamentally its your that it’s

Brad Heffern

specifically the what people? It pressure? things caused did Northern or is, to any of see that those that’s the COVID get just when to have the due significantly lower I at the pain, part other mean you after the pricing you does. there for is initial pricing curious, incomes from I And reversion backfill I’m sort is And trying of one of factors? California, of pressure truly was

Michael Schall

shut the if so travel because and number shutdown leisure jobs and – the segment, we state take hotel the question, No, that’s shutdown restaurants see of were a and lost which Yes, the basically. the tremendous yes. hospitality

etcetera. pretty They Area with Bay So home wage people earners the or all else. those generally are and somewhere went far wide that and parents, went low left migrated

a skewing income. lot in They them lower-income rent And replacing what we while so bringing are but looks the of see like on ago. in come lost back. impact a just their It we’re starting it’s we’re data terms to of workers,

or Bay to fundamentally the with is wrong of levels. respect with So there Area our any income nothing markets

very in the money some services, – and the – the then are to we services. didn’t are they dinner here lot continue make The income people high companies all employees, shape. incomes high a levels tech continue income these they think high the for And jobs those of bit lose enough a that really little levels. what and robust And on pandemic. demand still of to lost in good drive the early at they more I for hire that other they levels, at their pay can

And a helps? parts And that people is, as The draw key key you that back of draw think the so issue do early how issue. we don’t back now. Is how the do process. just see I that left ongoing pandemic, them you in that’s an

Brad Heffern

Thank you. perfect. Yes, that’s

Operator

you. Thank

next questions. line from Our your of the with questions Capital John proceed Kim with come Markets. Please BMO

John Kim

environment. consider preferred been has in you Hello. the you doing new about if just talked to deals of Med your but a own this opportunities? of challenging wondering outside not I was more Would markets, sourcing core provide equity, pool necessarily wider

Michael Schall

to give answer Actually, it markets. Mike. other to minute, is, of to done? completely are, we’re the we is we’ve other into that we In but I’m extent. going of in – want a to couple pushing Adam, to a that deals different we’re words, not going Adam examples some This them we give markets

Adam Berry

my done been in since echo on Yes. put – place, John, was platform we’ve really so we and we’ve have set. tracking markets into the – actually other

[ph], well. the we of one a is trip currently couple one and fundamentals we in outside done, look where funded. Inland is have market markets That So slightly so done Empire. That And are have our obviously has Sacramento. we we well did one going there. that to round of we Redland which – still in They think then very

and little but markets our beyond will that. a we overall So within we track outside, further footprint, to consider continue a little

John Kim

Okay.

outside of West really? nothing the Coast So

Michael Schall

Yes.

John Kim

$XXX will this Northern your My what most this you of XXXX? be California? same-store Is invested CapEx fair versus revenue-generating assume in than to which double growth is last second on it year. is to add more revenue How of this year CapEx much guidance of million, question that does outside

Barb Pak

these throughout looking portfolio. the We actually at are opportunities

time. strong region our in toward because, time we just that until as likely year will renovate far realized, them you full leased all not occurs, regions. And in be takes because wouldn’t know, XXXX, have then when in growth all a and rent of it’s are as that as seeing get revenue. market portfolios So one our of to up it of you they less the certainly time By skewed

to XXXX. So impact going it’s more likely

John Kim

you. thank Great,

Operator

you. Thank

the with from come Wurschmidt KeyBanc. proceed your of Austin next questions with Our Please questions. line

Austin Wurschmidt

prepared thank markets Mike, really guess, the you maybe Hi, between and remarks, not in your discerning, of I vintage that product. location you. referenced in buyers are

forward so seemingly amount portfolio objectives separately, in deals? that’s chasing any is of kind of coming a of there really opportunity pull converging result you as function And management capital into of that any is And everything pricing? for the your just simply a and markets to

Adam Berry

any and then can Hi, Mike that Austin, is this Adam. start has I with if follow-ups.

or buyer whether continues for is is and question said in but compression pool been to the so location or construction core significant a vintages right. these funds coming from funds today. has different we’re seeing your between it’s locations, you different and product and type, capital deals, age So remain There value-add much what chasing different whomever larger ultimately, that type

– do As it want to cover Mike, you that? relates

Michael Schall

– Yes. you about portfolio? repeat could The question the the

Austin Wurschmidt

Yes.

quality, product management portfolio markets, trading of around whatever some your...? objectives increasing Just sort is in

Michael Schall

Yes, yes. the broader management objectives,

we add increase our isn’t decrease we necessarily allocation it to to variety dramatically of that portfolio market believe a can that continue And value in ways. or are We it. to one going any

the would to We everyone plays pretty recovery our how we I Like to number normal is get about and pandemic there of happy. want more into like else, portfolio are think a unknowns overall see that we a out. world. transitions,

the amount are I that does remarks, And the that some years there reversion. in As be Is fairly of of it in revert back. I that, prepared – the my XX that possible will suspect top-performing significant now mentioned markets. continues, from laggards last or

etcetera, these issues – – the given homelessness, urban negative negative. think Hopefully, we some get are the of a to mile with over issues. world, As significant mile think of core crime, probably the again, control probably we that cities

not that the property sure throughout of is there definitely do the again, that’s located. can so But comes where in I to they when think so which is am plan homelessness. I is core, suburban respect to our urban that – portfolio, on with much the our focused parts of a pretty less crime. majority vast it

I what due on to before just city pandemic partially the deemphasizing said. actually centers, commented the have We

so I in there a and But couple are will potentially really Seattle, incredibly that of South really and great Microsoft something going Amazon market. at job was remains well, growth think we doing look North around overall, drivers And that take that transact up forward. pushing key and balance,

actually, our So the difficult price adds we we value, up there that before. have say, to at to product there it’s would portfolio been but like increase the more to , find so

Austin Wurschmidt

is take one the one stock cost the Yes. uses? preferred that, Do time-to-time is today? trading where have are What’s I venture Got at of you it. have around the the your capital But from equity given of been beyond still where best the trading, thinking stock of given maybe of And most you and think trading, certainly where uses? issuing look a then sort investments just the is you have preferred, attractive joint your referenced. potential

Michael Schall

now substantial by of fee we to manage transact this a stock. we probably at prefer But about – some still format. adding are sheet. And will we of core company add earn where balance When think And therefore, we these a driven can our we in equation. capitalize transactions, the the still wouldn’t the we how down value that do or is or don’t NAV We generation we at we on owner. and look in own it the take the it’s capital deal income. could of company, times we our of cash believe we it issue be XX% we at really where amount FFO point, share deals, small sort flow would down. deal value, side and are and/or co-investment and our Yes. to the one of independent – how like take it And we to We co-investments will we a where per of again, that

Austin Wurschmidt

Thank you.

Operator

Thank you.

proceed John Our questions. next your questions the come Street. with Please line with from of Green Pawlowski

John Pawlowski

Thanks.

balance we to the or South by Mike have and the your maybe just seen in Mike, for months. remarks I and or North question relative am the Just either or the rents XX that, one in – portfolio opening the takeaways the California of investment winners of laggard I Southern by prune follow-up unset terms Northern sell to listening, Adam, dispersion the California last in guess

California on reversion Northern go of kind So, conviction and heavily? the tilt on towards table the the as don’t why out more have you to margin pounding much trade, the mean portfolio

Michael Schall

more if we We and continue will California, the great could, we perhaps, John. could But are We will high-quality would and to to hit Fremont, John, if products there. means. any property – we we Area, at a the It’s do are a not rate. wouldn’t again, Northern see for markets Bay in question, bring it’s And areas black buy by the going XXX the me in of market. please, evolve the property right again, co-investment. And Bay one in lining we Area Adam, it, X.X% a we cap That’s you not more buildings answer. buy the did would.

Adam Berry

marketed, there. always little on marketed We a see every Just deal every tack it’s game. a relative and to not that’s deal so and that’s

not we are we and that’s seen up opportunity where Bay where in for X.X% the underwriting X.X%, have Area cap, so And going deals to we at down closed see that and consistently add. compete. jumping we value are Otherwise, and portfolio in

John Pawlowski

Okay.

So, are in going yields San meaningfully County, than lower California still in economic Northern LA, Diego? Orange

Michael Schall

say, are I keep going rates telling up. Adam. well, I Adam, interest

have effectively that’s on going seen. cap And right. keeps with they what are pushing Adam So, rates. mean down, what’s telling I me, we

Adam Berry

That’s effectively right.

it’s John, not in. going so And even

quoted So that X.X%, cap I X is that economics. X%

as all So, market to today. of taking units

– competitive. is include growth, it any so, very doesn’t there yes, of but lease, still that’s future absorbing So, loss

John Pawlowski

you. Okay. Thank

Michael Schall

John. Thanks

Operator

you. Thank

comes the questions St. Haendel next line of Our from

proceed Mizuho. Please with questions. with your Juste

Haendel St. Juste

Good guess half versus I to morning – am I a morning. the key year the there. to I of I blended back the and question assumptions. first better have the guess on half rate. I trying or still wanted it’s drivers Hi. of out in cadence understand some underlying your the

a the on off foot. started You strong year

massive your half about to get drop-off guide, be at a But seem optimistic to back revenue an the in looking of same improvement is You guide. year. there the fairly to

that or can square me a So, understand maybe you help bit more. Thanks.

Barb Pak

a more the really comparable. It’s function of Haendel. of year-over-year Sure,

soft. because we stronger half second of expect we the to in was started so much first course, the it XXXX, of first And be XXXX. still quite half of And half recovering

And the the a year, second will really year-over-year so half comparable, perspective, from this trends. harder what’s and driving that’s be

Haendel St. Juste

that. understand I No,

delta well Cal, guess helping more the the how understand it’s the So, us I Obviously, of headwinds perhaps is maybe North between maybe year. some of but Cal half tailwinds given the reformed. regions perhaps, has there back in helping some North

color that perhaps bit a there? you maybe the of maybe on are more So, thinking spread

Barb Pak

year-over-year in California the pretty and better be Seattle, loss higher very And half has Well, delinquency spread, on in of to it see would we much lower lease second is, Southern California concession are Northern from a and because and comparable. the highest benefit. the terms what

California say, basis Northern concessionary Southern and they the points more end spread, similar, has of benefit talking that hundreds by we but California, talking, because XX not delinquency, so are in terms challenge up basis are while – of we versus not of points.

not pretty close. all are they So,

Haendel St. Juste

That’s Okay. helpful.

Barb Pak

just Haendel, And market about asking or understand? same-store rent am trying just to question, are you one I growth growth?

Haendel St. Juste

within Yes. the the guess rate question first helpful. but commentary same-store, the was the market growth No, blended is I more on

Barb Pak

Okay.

Haendel St. Juste

renewals I I sending for today guys you it, I know out missed Where are you mean if where – guys March? but you and don’t mentioned February are

Barb Pak

We – didn’t a quick me let take look.

that, on, Where hold sending So, on out here. – are the renewals, we XXXX. is

with Seattle, portfolio Cal And say, highest, North in teens, we the low South around out, around, sending and the renewals XX%-ish. average by XX%-ish. Cal, are So, in followed so

Haendel St. Juste

Meta and a that it. concerned regarding what what have to understand And these happen all the I of curious is VC heard troubles but curious, am and be profitable a any I profitable growth your very to viable, I companies number companies guess cut I question of for companies, helpful. might you. Facebook ongoing And today, lot your not Mike, at that’s how might Got tech investment. – to have am there concern guess earlier assumptions level or I you as yet I the about comments I job established you of G&A? start-ups. might guess

Michael Schall

and graduates is in might of coming concern. positions a was that out that these in shortage any Yes. to for think there. Haendel, there I the fields, I company. are terms STEM don’t worked out them. be college, of definitely of I it’s is available There workers capital of I the think venture don’t plenty But jobs

amazing for are I time, now, so for And venture and much larger. and quite how much some are there different was time period the it’s longer is. of the these financed companies world And rounds a

the the In mega discussed $XXX I was think of fact, billion. deployed I most in script that that money rounds, was rounds exceeding

So, through that companies those where didn’t think I in and well. it. we the product, public are they in out therefore, without have a some career have late been concern went and about that’s vulnerable. ‘XXs, Obviously, companies these all more warranted. I work my And

of it think such much the current companies, I model funding better lot capital best see resilient. much the through. makes That’s and Area employees there And is And So, a at these ones will I what that out employment the succeed, some of have a more ones companies. Bay the venture unique don’t place of the the opportunity plenty standpoint. of think a other technology from

Haendel St. Juste

if assisted rental that tell in I And more. number, helpful. us you the missed That’s for I guys one guide if I squeeze did could know this what’s too, embedded for payments but year? don’t

Barb Pak

and I that we Like million of $XX that have Barb. good delinquency, cumulative about of is this existing Haendel, earlier, our for feel mentioned we number. million tenants, is our $XX applied

is do is, However, we uncertain. a forecast what very the timing net we And basis. on

this program, uncertainty the applications already delinquency applications to the – State. because the increase the allocated these the year assumed as the of the on have exceeded California that does we timing that’s to amount of which related payments as So, well been have

that assumption. a to led things there variety So, is of us that

Haendel St. Juste

Okay.

level lies, included guess line you year?| I how getting I it, where where to the payments am the So, having that’s understanding number in – trouble the am trying be if I – successful And of what I should understand, in the embedded? this net – what guess exactly guide number, absolute understand is that of I kind upside are

Barb Pak

That’s the of as our a has drive as to supply applications tenants recently couple allow Therefore, one our scheduled applying our that net three of delinquency are And going program months. changed numbers. has seeing aid are last delinquency for X.X% gotten thing has delinquency gotten the worse what additional overall a over as for months more our we up. will rent. tenant – is guidance percent more of are our in So, is

do of get number lot is, this we a it parts moving but on before front, to is there gets year worse better. delinquency So, that the expect net slightly

Haendel St. Juste

Thanks. follow-up offline. will the thank But all. Thanks. Okay. I time. I you appreciate

Operator

Thank you.

proceed questions come next of line from the Please with questions. Anderson Rich SMBC. your Our with

Rich Anderson

Thanks. Good Hi. afternoon.

regulation to to table me any that I living in know. don’t any the relevance your that for – good line am of know is So, could a residents. other California. in tenant-friendly logic magnet I mind, concept Mike? because resident be I of regulatory there of running is would terms of being regulation, Is to peers thing are that perhaps but know that side the environment of I a I if like there have behind actually on a thinking some in your

Michael Schall

But it much. middle they I trying good great in too think find I go offer that am to helping concept. glad not that a that very they We net, it’s am a tenants of are don’t do the perspective, taking safety way. system I said will we And we a that, far are Rich, program, is people for do. from my I ground, very managing comfortable that of opposed Candidly, are mean worry People can I by the all what that don’t deal hear trying to to I as out think Yes, generally having think it. it’s appreciation. advantage landlord appreciate

good So, a it’s think I point.

which I those thinking will appreciate and their but going and and to do about. them, come spend that life our what’s people that for do think most of factors ultimately California, we they their quality – of best down to time are of job part

Rich Anderson

anyway. California, defeated. Right. weren’t in reversal cap. life I of these events state-wide but is rent the mean X% I plus mean multifamily Costa-Hawkins CPI cycle terrible

in is, cap at your But what said I that the still And I question what down historical rates, mentioned of the XXXX X.XX%. around was running tenures Second are you threat look said at going back, tenure at would had still looked lows. I cap you over rates time, guess with, we rates you X%. rising are interest call call

really X.X% we and changes come. and opportunities now of So, that because you you opens hoping opportunities interest of that that the your interest perhaps could cap are increase qualities up for capital quietly multifamily kind raising some of and like to in know some to an also environment, perhaps real on see you the rate, start for more something maybe are pass-through but substantial or rate rates cost opportunities the it’s and peers? get I that inflation more change if to you versus

Michael Schall

will are and think Yes. the No, overall world a rents that incomes inflating A is the in I observation. positioned – sheet of in our it’s worst-case I inflating mean sort the and of company probably, go is scenario, rates. might that in there pretty I great our question, scenario, great debt of think. would down a the be is the which I And interest and maturities that us, majority are vast be for in well even world whatever up for locked think good though And our terms opportunity. of terms structure. balance costs

would where we and world a reasonable that chance think I on. So, be are good is that’s a there for us,

Rich Anderson

X% world very realistic? that -handle because a there four that’s if of scenario systemic to a – that I can’t is XX-year rate, So, right happen assume about now that, a anything that, were is type cap happen plus would your even

Michael Schall

over sticky to comment would make pretty it’s Yes, the I cap rates that I mean be tend is – time.

I tenure over period, moving the significant how even somewhat rallied. the reductions just interest given down. XXXX or had we those in period interest much they that pretty move weren’t And So, just rates little cap were of – don’t the had referring in though that change rates you back they up time. COVID rates down But would remain maybe to, period because frustrated were say, overnight pretty until sticky a you

still adjust you looking investment versus is going rates yield cap some interesting is to yield and money still think of that in not is the for to X% upward are see things I much quickly. of probably X% and some options investors. There too a scheme and the

expect the the is number that other Really of wouldn’t to yield change alternatives all that need I about it. So, money the flow investors and of what yield and are.

Rich Anderson

Thanks very much. Okay. Great.

Michael Schall

you. Thank

Operator

you. Thank

Our your line of Luthra. next questions. Please with the proceed questions come from Chandni

Chandni Luthra

Diego taking X%, San Fran everyone. you markets about markets I my you some afternoon X%. – behind return revenue talk versus San mean talking crossing for that were Hi, of about a good down your declines a the was about sequential same-store in drivers like in Could quarter? fourth Thank questions. We some factors on mark that Costa, disappointment Day role this just offices? I faced to play had Contra Similarly, to of am how perhaps seasonal here. Labor much

Angela Kleiman

a sequential recovery. to. attributed the was the this us lumpy of it’s for timing really time happy revenue here. to delinquency The because concern It’s Sure, not really Angela decline

favorable And third I delinquency the we in very have that by recovery. what is, so quarter, mean

X.X%. So, back Diego, San have if growth the delinquency, revenue been take if for you would out example, I sequential

for both so a similar well. relationship as and Costa plays San Francisco Contra And in out

Chandni Luthra

Very your helpful. model. around is operating question collections Makes And follow-up my sense.

about San said Orange XXXX. talked County in And also implemented rollout you this the you that Now of Diego. you by and end

about in as to of in terms So thinking in say, reduction Is XX% personnel the that in some let’s That or would portfolio. helpful. an of and be natural dollars taking that terms XX% example, margins? very to contextualize there sort either attrition across to savings, way cost a of

Angela Kleiman

Yes.

saving margin of to of one points provided realized to NOI. with that XXX has and bottom we basis our example a the about the represents other improvement million and that I in some think about the line already enhancements rollout $XX

really look context rollout, And was that that the just way so that major my – and a at – our only third point a in if you through a represents providing that is rollout are regions. of two of from we

course, basis which on basis from revenue, is road. come savings. expectation improvement margin – several And years so the cost indication to of additional points XXX is provided there just with XXX I there, And an why points but to that’s more of down of the

Chandni Luthra

you Thank helpful. much. Very so

Operator

Thank you.

questions of your the line Please next with from America. Our Dennerlein of Bank questions. Joshua with come proceed

Joshua Dennerlein

Hi. Yes.

identifying imply your the out you around of targets And also how explore does in these the you to I will this for guess assets more from recycling think suburbs. have capital those closer wanted kind maybe Just further pushing new out about core? further urban being comments in? do

Adam Berry

off. Hi Joshua. I This can start is Adam.

that’s As pandemic, at Mike before the footprint somewhat we to We of team sense. all that’s all instance, – And for job our our of research between centers homes, areas how urban the at that few and was our affordability that even – investment lack for line made rotating sense here decisions. for – deal top on since outside point, what and we to metrics years metrics, kind noted now the done of pre-pandemic. within to what use income makes of so the growth And it Sacramento, say, look previously, see a single-family our and have which assess. affordability, been drives core

markets a that more secondary number all core our metrics So, research amongst reviews of as both well those markets. a have as more we team

Joshua Dennerlein

you. Thank it. Got

Operator

are would time. any call questions closing Schall the for over back Thank no to this like you. at turn to There Michael further comments. I

Michael Schall

for you, you call, joining we Good I future the Thank of you. you. see in on your us the to Thank today. not Conference. everyone, many appreciate and hope the at participation Thank day. Citi distant

Operator

teleconference. appreciate your participation. This We does conclude today’s

your may this rest lines at day. your You Enjoy time. disconnect the of