Earnings Call: Q2 2020

Aug 4, 2020

Good day, and welcome to the Essex Property Trust Second Quarter 2020 Earnings Conference Call. As a reminder, today's conference call 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. Further information about these risks can be found in the company's filings with the SEC. It is now my pleasure to introduce your host, Mr. Michael Schall, President and Chief Executive Officer for Essex Property Trust. Thank you. You may begin. Thank you for joining our call today. The unprecedented reactions from the COVID 19 pandemic have presented many challenges that have affected every part of our business and indeed our lives. We'd like to offer our best wishes to all those impact by COVID-nineteen, and thank you for participating on the call today. On today's call, John Burkhart and Angela Climan will follow me with comments and Adam Berry is here for Q And A. Our reported results for Q2 reflect these unprecedented challenges as we reported 5.1% decline in core FFO from a year ago, representing an abrupt turnaround from very favorable conditions throughout this economic cycle. Our first priority upon receiving COVID-nineteen related shutdown orders was to ensure the safety of our employees and residents, while reacting thoughtfully to shelter in place restrictions and regulatory hurdles that have been especially pervasive across our market. Uncrestedanded job loss from mandatory shutdown orders in March, suddenly and significantly reduced rental demand, leading to lower occupancy in April, followed by a steady recovery throughout and was 96.2% in July. Delinquencies also spiked due to job losses in anti eviction ordinances, which of COVID-nineteen related rent receivables led us to adopt a conservative approach to bad debts. During the second quarter, the direct costs of the pandemic in the form of greater residential and commercial delinquency lost occupancy and COVID 19 related maintenance totaled $27,000,000. We view these costs as mostly temporary and have seen improvement in each category in second quarter. John and Angela will provide additional detail as part of their remarks. Fortunately, the economy improved quickly from its April trough as measured by resumed job growth, lower continuing unemployment claims, and fewer war notices. In addition, many businesses have found ways to adapt to the virus by creating new safety protocols and procedures. After declining nearly 14% in the Essex markets during April, By June, year over year job declines had moderated by almost 400 basis points to 10.1%. We expect gradual improvements to technology companies are a primary driver of wealth creation and growth in the Bay Area in Seattle. Most of the leading tech companies remain in a growth mode with minimal damage to their business models, and many of them, such as Amazon, Netflix, and Zoom, had benefited from the shelter in place restrictions resulting in greater market share. Generally, It appears that many We track the open positions at the 10 largest public technology companies, all of which are headquartered in an Essex market. Recently, these companies had approximately 17,000 job openings in California and Washington. These large company tech jobs are down by about a third on a year over year basis and are now at about the same levels Microsoft, Amazon, Salesforce, are planning for employees to return to the office and have established related dates which range from October 2020 to July 2021. This is consistent with our comments during our June NAREIT meetings whereby we expect employees in the post COVID era to have a greater work from home flexibility while also needing to report to the office at various times to maintain team dynamics, acclimate new hires, and pursue career opportunities all of which require periodic face to face contact. Venture Capital has continued to flow at a healthy pace according to the most recent data. However, we understand that the mix of investments is more focused on companies have business models that are Southern California has a more diversified economy that has outperformed during previous recessionary period While San Diego, Orange and Ventura counties have generally continued this trend, Los Angeles County has notably underperformed. LA's preliminary unemployment rate was 19.5 percent in June, well above the level implied by recent job losses of 12.3 Freelance Workers in L. A. That are not captured by the BLS payroll survey. Filming and content production is key contributor to Jobs And Wealth Creation in Los Angeles, and the industry came to a temporary standstill. Film LA reported that the number of shoot days during the second quarter declined 98% from the prior year, across television, film and commercials. Despite these challenges, the demand for content is unabated, amid the pandemic and there are reasons to be optimistic. In a joint report called a Safeway forward, various organizations, including the Screen Actors Guild, have outlined the process for content production amid the pandemic which is building production momentum. A key factor impacting all of our markets is the loss of leisure and hospitality and other services jobs, which represented from 12% to 17% of total jobs at June 2019 in the Essex Metros. Compared to the total jobs lost in the Essex markets this past year, These service jobs declined an average of about 30% year over year, with the greatest declines in Seattle and San Francisco. These job losses are throughout each metro area, although the downtown locations have the greatest concentrations of affected businesses. We see the recovery path ahead as reversing the pandemic related declines we experienced this last quarter. In the near term, progress will depend on the direction of COVID infection rates and the associated governmental limitations on business activity, given the COVID related shutdown of film and digital content industries and its potential for value creation, its recovery is essential in Los Angeles. Fortunately, that recovery is underway with a recent restart in the production of daily TV shows such as Jeopardy and Wheel of Fortune in Culver City and several soap operas produced by CBS at ABC. Necessarily crowded motion picture sets and safety mandates will probably make this a slow process. Wealthy areas create demand for restaurants, bars, and other services and the related jobs contribute to housing demand, particularly in the cities. That makes service jobs systematically important to housing, and we believe that they will recover. Finally, most of the technology industries are in great condition and should be expected to resume greater hiring and growth. Along with unspent wealth accumulated during the pandemic, we expect the recovery of jobs to be strong as the outlook for managing the pandemic improves. In light of the unpredictable nature of the pandemic and with the recent surge in COVID-nineteen, cases and hospitalizations, the course of the pandemic and governmental responses had become intertwined with job growth and other economic outcomes. Thus, we've made the decision to withdraw our forecast on page S-sixteen of the supplemental until we have better clarity on the direction of the pandemic. Finally, turning to the apartment transaction market, we sold 2 properties during the quarter, both of which were placed under contract in May. Pricing for both represented a small discount compared to the pre COVID period. Both properties were in downtown San Jose continuing the theme of the past 3 years of selling downtown locations that are more susceptible to added supply and major employment centers that offer a better living experience. Generally, the transaction markets have been slow to recover with very few closed apartment sales and even fewer properties being marketed. The industry is working through key issues in the selling process, such as travel restrictions and due diligence challenges. Given a dearth of transactions, it's too early to conclude on how buyers will value apartment properties going forward. The few closed transactions since the onset of the pandemic traded at prices at or near pre COVID levels, suggesting that highly motivated buyers have taken a longer view when valuing property by treating the COVID-nineteen specific impacts such as delinquency as a purchase price adjustment rather than long term reductions in NOI or higher cap rate. At quarter end, we had 2 additional properties under contract for sale, both are smaller properties and one of them closed in July. Going forward, our intent is to mostly fund our growth with disposition proceeds We announced 1 new development deal in Suburban San Diego and we have a robust preferred equity pipeline. As before, plenty of money is searching for distressed real estate, which will be scarce with institutional grade apartments given extraordinarily low financing costs. As with prior recessions, the existence of Fannie Mae and Freddie Mac virtually assures a source of liquidity for apartments. Yields or cap rates for apartments generally substantially exceed long term interest rates on related debt and the resulting positive leverage remains a powerful force in the market. Unlike REIT stocks, private market values in terms of cap rates are generally sticky, meaning that they don't change immediately in reaction to events, but rather seek to reflect the longer term financial performance of a property. At the end of the day, we believe that the transaction markets will likely recover because lower interest rates will provide sufficient incentive to offset transition and in periods of disruption. I'm confident that we have the team, resources, and strategy to thoughtfully act on these opportunities consistent with our long term track record about performance. Thank you, Mike. Our priority during this period was our people, the safety of our residents and our employees. I'm incredibly proud of what our team Looking at the second quarter of 2020 the occupancy challenges that we faced early on related to a reduction in demand when the initial stay at home orders were implemented as opposed to an exit substantially and we took advantage of 2 to 8 weeks on stabilized properties, leading to an increase in our same store occupancy of 110 basis points in June. The relative strength in the market continued into July, enabling us to increase our asking rents, decrease our leasing incentives, and add another 80 basis points in occupancy. Our availability 30 days out as of the end of July was 10 basis points lower than where it was last year at this time. As our customers adapt to the new COVID 19 environment, we are seeing some consumer behavioral changes that make intuitive sets. For example, with the current work from home practices, The value proposition of living in downtown San Francisco has temporarily changed since the restaurant's entertainment and sports venues have shut down. Additionally, the value of having and access to open space for outdoor activities have increased demand for suburban assets despite being at greater distance from corporate offices. We have also noted that work from home has turned into work from anywhere as we have seen several consultants moving back to their original home and continuing to work for their West Coast employer. Regarding the work from anywhere theme, we believe this trend will reverse when conditions permit. We were all positively surprised by the ease in which we all adapted to Zoom and believe that this experience will have a lasting impact on future same day business travel. However, the loss of a personal connection frozen screens and barking dogs in the background show that Zoom cannot replace the value that comes from in person interactions. As I heard someone say recently, I am done with living at work. We see the changes in consumer behavior within orange and San Diego have higher occupancies today than in pre COVID March. Turning to our Q220 results as presented on page 2 of our press release, year over year revenues declined by 3.8%. On delinquencies, various governmental bodies have enacted and continually extend resident protections along with prohibitions against late fees and eviction. These regulations have been a strong headwind for the industry in our markets compared to other metros. Thankfully, they are temporary in nature. Referring to the F-fifteen Delinquency for our total portfolio on a cash basis was 4.3% in the second quarter of 2020 compared to 34 basis points in the second quarter of 2019. In the month of July on a cash basis, delinquency was 2.7%, which is down from the prior month. In July, 18% of our same store assets had positive delinquency, meaning the delinquency line item contributed positively to the revenues due to residents paying past due amounts. We appreciate that our residents continue to prioritize their rental obligations. Moving on to our operating strategy in this new environment. Our operations objective continues to be focused on maximizing revenue Given current conditions, our strategies will evolve as the market changes and will vary across our market. For example, we will likely run lower occupancies in certain urban markets such as downtown San Francisco, while targeting higher occupancies has fallen about 150 basis points and our same store portfolio is expected to run at a lower occupancy for the remainder of the year. As noted on S15, our supplemental and consistent with our expectations, our new lease rates, excluding leasing incentives, were down 5 point will remain depressed in the fall due to the seasonal decline in demand. That said, some of the historical factors such as contractors moving home in the fourth quarter are not an issue since they've already moved out due to work from home policies in place. On 2 tech initiatives. We continue to make considerable progress on the technology front as our employees learn how to optimize our new tools, For example, we currently have We are seeing similar progress with our maintenance systems as well. Our emphasis will continue to be on people first as we try to bring everyone up to speed. However, we expect that through the increased productivity and natural attrition we will both lower our headcount and increase our compensation to our top formers. Another advancement in our technology roadmap includes the development of our mobile leasing app that is on target for pilot at the end of this year. The app is fully integrated with our other sales tools and will fundamentally change how we interact with our prospects, providing them with a simple, seamless, 20 fourseven mobile experience. Finally, we are now offering UltraFAST Internet offered by market leading fiber by year end. The Ultra FAST service is in great demand in our current work from home environment and is expected to be a great value add asset for our residents. Turning to was down 20 basis points and occupancy was down 1%. The greatest decline during this period was in the Seattle Cbd where revenues declined 70 basis points, followed by the east side with a 20 basis point decline, while revenues in the south saw an increase of 10 basis points in the same period. In July, unemployment in Washington remained 90 basis points below the U. S. Average of 10.7%. In the same period, Amazon's job openings remained at just over 8000 a year over year decrease of about 25%. Moving to Northern California, in the Bay Area market, year over year revenues in Q2 were down 3.4%. Revenues in San Francisco, Oakland CBD declined by 6.3% and 7.8% respectively, while our San Jose revenues declined only 1.5% in the same period. San Jose job growth declined the least of our markets in Q2 and was 100 basis points below the U. S. Decline of 11.3. Down in Southern California, year over year revenues in the 2nd quarter declined 5.7% while occupancy declined 2.1%. LA was our hardest hit market with a year over year revenue decline of 8.6% in Q2. Our LA County submarkets declined between 8.4% 9.7% in the same period, with the greatest decline in LACBD. The LA economy has been the most impacted out of all our markets with an unemployment rate of 19.5% leading to a higher delinquency rate North Orange submarket with year over year revenue declines of 2.6% and 5.1% respectively in the second quarter. Finally, in San Diego, year over year revenue declined 2% in Q2 with the exception of the ocean side submarket, which grew revenues by 2% in Currently, our same store portfolio's physical occupancy is 96%. Our availability 30 days out is at 5.5% and our third quarter renewals are being sent out with an average reduction in rate of 1.4%. Thank you. I will now turn the call over to our CFO, Angela Plignment. Thank you, John. I'll start with a few comments about As noted in our earnings release and earlier comments, this was a challenging quarter with declines in both same property revenue growth and core FFO per share. The 3.8 percent decline in same property revenue growth is primarily driven by 2 key factors: First, we took a conservative approach and reserved against approximately 75% of our delinquencies. Which negatively impacted our same property revenue growth by 2.9%. This information is available in a new table at the bottom of page 2 of our press release, along with other additional details. 2nd, rereport concessions on a cash basis in our same property results, which reduced our growth rate by approximately 1% compared to using the straight line method. The combined negative impact to same property revenue growth from both of these accounting treatments is 3.9%. As for our core FFO per share growth, the total negative impact of delinquencies in the second quarter is $0.22. Without this, our core FFO per share growth would have been positive 1.5%. More details are available in a new reconciliation table on Page S 15 of the supplemental, along with additional disclosures on operations. Onto operating expenses, Same store expenses increased by 6%, primarily driven by Washington Property taxes, which have increased approximately 15% compared to the prior year. Resulting in a difficult year over Turning to funding plan for investments and the stock buyback, we are expecting to spend approximately $205,000,000 in 20.20 our development pipeline and structure finance commitments. In addition, we have bought back $223,000,000 of stock year to date. Bringing total funding needs to $428,000,000. As for funding sources, We expect $150,000,000 of structured finance redemptions, and we've closed on the sale of 3 assets for $284,000,000. In total, we have $434,000,000 of funds available, which covers all known funding obligations this year on a leverage neutral basis. Moving on to Capital Markets. The finance team was very productive in the second quarter, maturing a $200,000,000 term loan, which was used to pay down all remaining 2020 debt maturities. In June, we opportunistically issued $150,000,000 in bonds achieving a 2.09 percent effective rate for 12 year paper and used the proceeds to pay down our line of credit. Lastly, on dollars. Our net debt to EBITDA would have been 6 times. With nothing drawn on our line of credit and approximately $1,400,000,000 in total liquidity, our balance sheet remains strong we continue to maintain our disciplined approach to capital allocation. Thank you. And I will now turn the call back to the operator for questions. Thank you. You. You. Our first question comes from Jeff Spector with Bank of America. Please proceed with your question. Great. Thank you. Good afternoon. Just looking at some of my notes from the remarks, between Mike and John on your thoughts on periodic contact at the office versus work from home and some of the initiatives that John laid out, I guess, just big picture, can you clarify at least today how you think your portfolio is positioned for what you think may be? I'm sorry, I was a little confused between the different comments. Yes. Why don't I go ahead and start with that? This is John. I think we're actually positioned very well. And what we're seeing is people wanting a different value proposition. So they're looking for our assets, of which we have many that have a little bit lower price $400 per square foot bit more space. They're in great locations as it relates to outdoor recreational opportunities. And then, of course, access to high speed and going forward gig speed of Internet. So I think we're positioned very well for that. What we're seeing is, at this point in time, many of the tech companies have decided that they're going to defer occupying the buildings a range of dates really starting from October through one of them throughout July of 2021. But in no cases do we see that becoming permanent. And then again, it gets back to this reality of people are now realizing that as much as we all kind of sucked it up and we're impressed with Zoom and really worked hard to make things work, which was fantastic, something's being lost. And with the competitive juices flowing, we strongly believe the companies will want to bring people back together and they see the value like they've always saw the value in having that And there's also another piece to it, which is, and I can speak anecdotally, I was talking to someone over the weekend and they mentioned the idea of moving in the extended commute zone and their employer said that's fine, but you're going to get a 20% to 25% pay cut. Obviously completely negating their perceived value of lower real estate prices. So no doubt they're not moving. And we think we're positioned very well for the, for the long run with our portfolio. Does that answer it? Mike, do you have? Yes, Geoff. Let me just add a little bit more kind of, numeric point of view, because I totally agree with what John says. And, and, I think that things are in ultimately pretty good order considering the fact that we've had, 10% loss of jobs in June. So that's an extraordinary number of jobs being lost and more than the financial crisis. And as a result, that's going to impact our performance and our economy. And there are a couple of pieces that are just so fundamental. And these are the things I tried to bring out in my script. Basically tourism is shut down and obviously the West Coast tourism is a pretty big deal. A lot of people like to go to San Francisco and to the various L. A. Places, but with restaurants and bars shut down, those services are not available. Probably can't get there. It's difficult to get there given all the various shutdown orders, etcetera. And the other kind of key parts to our economy are certainly the film and content production in L. A, which, we'd realized exactly how big a problem that was with back to COVID-nineteen and prevention COVID-nineteen and producing content. And then finally, the tax slowdown that I commented on in, in my script. So all these things are actually, things are demanded in the marketplace and they will recover. And yes, it'll take time and we're certainly disappointed about the second wave and the renewed shutdown orders. In many cases, restaurants and bars were open for a couple of days and then shut down again in California. And so this has been incredibly disruptive in California. Made it difficult to get traction on things that really matter. Generally speaking, we have areas with pretty substantial amounts of wealth wealthy people like to consume services and, including restaurants and bars, also people that have a choice between living in the hinterlands where you can make $15 an hour versus working in the city in a restaurant job, restaurant type job making $50 an hour. That's why they're that's why people go to the to the city. So basically, that most of these relationships and activities have been shut down again on a temporary basis. And I think California has been incredibly, let's say, vigilant with respect to the shutdown orders. They have been very extensive throughout the marketplaces and continue to have an impact. So with the easing of that and with better COVID news, I think you're going to see things relatively quickly. Our next question comes from Nick Joseph with Citi. Please proceed with your question. Hey, it's Michael Bilerman here with Nick. Mike, in the press release, you talked about a care fund that Essex started with donations from executive officers and it says that you intend to gave you up to $3,000,000. So of that $3,000,000, was it all donations? And do you expect to use corporate cash as part of it or is it all led by executives? No, Michael. It's a combination of of both. And, we set up, at the beginning of the crisis, we set up a, resident response team and they found extraordinary needs out there, and including people, for example, that couldn't, have didn't have money for, for food and other essential needs. And so we Actually, the executive group in that case, essentially donated some money to provide, meals for people And then we realize that even more broadly, we have we have other needs because there are people that have lost their jobs and don't have great prospects for getting another job. And so we wanted to have an entity that would provide relocation money and similar types of services And, so we decided to set up the Essex Care entity in order to do that. So, in situations where it's not doing them any good, they need to move on in their life and find something better. If we can provide those relocation benefits, it's good for them. It gets them into a better place. And, in our case, we have we have the anti eviction ordinance and so we can't evict them anyway. So it's probably better for everybody. So I think that this is a good example of finding sort of the common good as it relates to the current situation and providing an opportunity to let people move to pursue their life and better their life. Right. So and then so how much of that $3,000,000 was corporate cash? How much was donations? And how much capital do you foresee ethics contributing going forward to these initiatives? Well, I don't think we've decided exactly. I think the, the portion that came from the employee pool is somewhere around $500,000 and the rest came from Essex, but that's not a perfect number, but it does rough number. That's what, that's what we did. And then the 2.5 is prospective or was there an expense in the quarter for the corporate cash then? And how are you doing that? Yes. Yes, Michael, let me address that. So, there were expenses during the quarter, but we sent set the entity up toward the end of the quarter. So what happened during the quarter was already expand And essentially, we created the entity in response to the needs that were out there and what we were seeing on the ground when we're dealing with the people. We our resident response team consists of some 50 to 60 Essex employees and they're talking to our residents a couple times a month typically. And again, they're trying to we came up with a basket of needs and people that were really in difficult situations. And so this is intended to respond to those needs on more of a prospective basis. Okay. And just last one on this topic. Is the $2,500,000 that's going to be FX corporate cash? How are you going to treat that? Are you going to treat that as a contra revenue? Are you going to included in same store or are you going to treat it completely separate, from your financials? Well, I'll let my financial guru talk about that. Angela? Hey, Michael, that's a good question. I think it depends. On what it's being used for. So for example, if it's for groceries or to relocate our tenants, it'll be a G and A item. But it's for something that's revenue related, you know, impacting safe delinquency. It would be a contra revenue item. And so at this point, it's too early to, to see where that geography lands. But the intention is really more of a G and A item. And we'll see what the needs end is being. All right. And I'm still sick of living that work. Thank you. Our next question comes from Rich Hill with Morgan Stanley. Please proceed with your question. Hey, good morning guys. And I apologize if my phone dies in the middle of this call. We're in the midst of getting pretty bad storm. I think a lot of my people on the phone might be as well. So I wanted to come back and talk about a topic that you've spent some time on the past, which is valuing occupancy versus rent growth. And if I'm looking at, sort of your metrics, I think you're at 90 94.9% in 2Q. And you've gone up to 95.8% as of July, but new and renewal spreads are obviously, negative and maybe even a little bit, lower than where they were. In the quarter. So I'm just wondering if you can give us an update about how you're thinking about occupancy versus rent growth at this point. And when you think that you might be in a position to push occupancy and renewal and new leases be less bad than they are right now? That's a great question. Well, again, as Mike had mentioned, we started in a hole in April really related to the shelter in place and just the demand stopped for a period of time. So as we moved in as traffic increased pretty dramatically in May. And then we took advantage of that and decided to pull up the portfolio. And big picture, there's a saying that we like, which is let's not be proud and bake it. And vacant units really obviously earn nothing. So we made the decision to get aggressive and offer some leasing discounts or leasing incentives to enable us to gain occupancy and we ultimately gain about 200 basis points of occupancy between June July. And that's positioned as well. We subsequently hold back on concession. And we're still offering them and certainly market by market, it depends, but taking some of our markets to suburban markets like the San Diego, Orange County, Venture Costa, In many of those cases, we've pulled back quite a bit on concession and those occupancies are riding higher. There is in actuality, they're higher, as I mentioned, on my remarks than they were in March. So we look at it and say, the best thing is position ourselves so that we're leading the market and not allow ourselves to be sitting vacant. And so that's why we took that action. Right now, we're at a pretty good spot and we're just watching the market on a literally a daily basis, understanding what's going on. There are some areas that are more distressed Certainly, San Francisco, we only have less than 1000 units there, but San Francisco is definitely under stress. And, I'll also note San Francisco about 30% of our units or so are studios and studios are clearly a challenged, unit types this market, the results have moved out. And so that's also putting a little bit of excessive pressure in the San Francisco market in our numbers. Does that answer your question? Yes, yes, it does. It does. And I wanted to maybe just come back to that a little bit more and think about the impact of concessions. And you might have talked about this a little bit earlier on. But if I'm thinking about this correctly, new leases or an average new leases on average of 1 to 2 months of concessions, So I'm just trying to think about how we're supposed to think about the net effective rents. Can you just walk us through walk us through the effective portion of it because it seems like it could be down a lot more than what the headline suggests. So I want to make sure I'm thinking about that correctly. Yes. So concessions, I mean, think of it in this particular market, I would think of it very similar to a development lease up, where you offer concessions to incent someone to move. And there's obviously a certain real cost to moving and then there's just a pure motivation of moving. And so when we desire to fill up our portfolio, we offered concessions. It's not really reflective on SLA market rents or lower. Doing often the concessions enabled us to gain a significant amount of occupancy. So I would look at it that way. I don't want to dance around though. There are clearly concessions in the marketplace. We were more aggressive because we want to fill up our portfolio and we've now backed away quite a bit from that. Our average concessions I know in the supplemental you're looking at, say, 4 to 8 weeks, and that was pretty common, but the average concession during June was closer to 4% of 4 weeks or a little bit less than that, that we used to, which enabled us to fill up. But we did there was a range clearly had assets that had zero concessions and some that were at 8 weeks and so hence the footnote in the financials. Got it. Got it. And so just to be clear, and I'm sorry for belaboring this point, but it's hard to compare across names and that's why I'm trying to stand at this point. The new and renewals are headline without the concession, right? That is correct. And I'll actually throw in one more comment on the renewals to give a little clarity. The renewals go out typically 60 days plus into the marketplace. Both we're trying to give our customers time to make a decision. And then there's certain laws that prevent us from sending them out, say, less than 30 days. And so what can happen is the market can move between the time you send the renewal out, which is what happened in the second quarter, and when it actually becomes effective. So we would have had renewals that were effective in June that may have been signed in March. If that makes sense. Okay. So you're always the renewals are always going to lag the market rents which are happening at that point in time. Yes, that makes sense. Thank you very much guys, sir, for harping on a nuance question. Oh, no problem. Great questions, Rich. Our next question comes from Austin Wurschmidt with KeyBanc. Please proceed with your question. Yes, thanks guys. And just building a little bit, maybe even more, John, it sounds like you said that end of July incentives have improved even more So, I mean, relative to that 4 weeks or less in June, have you virtually eliminated concessions at this point across most of your markets given where occupancy is today? Or is it 2 weeks? Can you give us help us quantify that and then what the impact is on from an effective rent perspective? Sure, sure. So it moves around daily literally. But I can tell you that for a period of time, we completely eliminated them out of a San Diego, Orange, Ventura, and parts of a contra cost subsequently, we've moved back in with a week to 2 weeks here and there, other markets and certainly Seattle falls in that bucket as well. Other markets like San Francisco, we continue to offer concessions somewhere in the range of 4 to 8 weeks. It depends. And San Mateo is pretty high with concessions and a similar number of weeks And, Silicon Valley is a mixed bag, but there are concessions in Silicon Valley, especially near the lease ups. There's, both Downtown Oakland and Silicon Valley and then some in San Francisco where there's lease ups that obviously is a concessionary market. But we are pulling them back and we're going back and forth. And part of it is we run the company as a portfolio and not, asset by asset. So where we see opportunity where the markets are stronger, like Orange County and San Diego, Ventura, we're going to allow that to increase the occupancy increase a little bit more and offset some of the areas that are a little bit weaker like Africa. That's helpful. And then how frequent are you using concessions on renewal leases to retain tenants? And Could you quantify what that net effective spread is in July versus last year? Yes. So with renewals, much less, it's probably about 10% of 10% of what we're doing with the new leases And the renewals go out without any concessions, they can get negotiated in depending upon the situation, but our renewals, are really I expect that the renewals going forward, that'll really dry out because the market changing right now. And so where we were in June and what we negotiated in June, we negotiated less in July and probably less again in August. So maybe it's a week or something or less than that, I mean, because again, most of them don't even have concessions for the renewals. We're not really trying to incent someone to move. It's the when we're trying to incent someone to move, that's where they come into play because it really is a matter of of moving costs. And so there's kind of this exchange that goes on. Yes. No, understood. No, that's very helpful. Appreciate the time. Our next question comes from Alexander Goldfarb with Piper Sandler. Please proceed with your question. Hey, good morning. Good morning out there. And, Rich was right on the power outage. So, A few questions here. John, in hearing your responses to everyone's questions, it sounds like things improved in July. And then since then, they have improved. So where I think it was Mike who talked about or you talked about rent pressure in the back half, it sounds like that's more like you're not pushing rents positively but you're seeing good demand. Most of your markets are seeing up occupancy and that you're really not concerned about the back half for repeat of the softening that occurred in early in 2Q. Is that a fair assessment? Hey, I'll start. I'm sure Mike might have some comments, but there's a lot of risk factors out there, Alex. So certainly factually today, the market is better today than it was yesterday, the day before, etcetera. And this is all a good thing, and we feel good about that. Our portfolio is positioned very well, all things considered. But there's obviously things that are happening related to COVID that throw risk factors. There's some unusual, there's some positives, as I mentioned. We had consultants they usually move out in the fourth quarter. Well, that's not going to happen because they already moved out. We didn't have interns come in and therefore, they won't move out. So those are positives that may enable us to have a longer leasing period. And then there's some interesting things going around some of the colleges For example, many of them are doing partially online and that requires you to be very tethered to the university because you may be online for a class and then half an hour later, you have a lab on-site. So you still need to live, right, at that university and they've cut down the, occupancy my family just went through this and, my daughter got bumped out of her spot. So she's now in an apartment and So there's things like that that are positive, but there's obviously risk factors out there. And, I'll flip it over to Mike if you have more to add there. Yes, Alex, let me, I try to tie this thing pretty specifically back to what's going on in the job front. And, John, so John mentioned that things have gotten better, And, probably didn't draw enough attention to this, but in my script, I said, year over year job growth declines have moderated almost 400 basis points to 10.1%. So from my perspective, things are really horrible in April. We fell off a cliff in terms of occupancy and a variety of other things. We had an additional challenge in that had all of these anti eviction ordinances. And if someone wanted out of their lease, given the backdrop of having an anti eviction ordinance, we were actually I would say motivated to let them out of their lease probably to a greater extent than many other places would be And so we did. So that accounted for sort of the occupancy drop. And then if things got better and again, job declines moderated 400 basis points. And the results got better. And so I would kind of the point of my, my script is to say we need things to continue to get better. And, that's going to be intertwined with the COVID-nineteen experience going forward. And we remain hopeful that it's certainly we certainly believe it's going the right direction. We certainly believe that mankind and potentially a vaccine or therapeutics or whatever is going to continue to moderate the picture. But, we need positive positive development certainly as it relates to these shutdown orders. And once again, it looks like we're hitting a new peak on this second surge. And so maybe we can open the restaurants again and we can do some other things. I was talking to some people recently about, restaurants in Palo Alto and they're shutting down partially shutting down the streets so that they can move more of the tables out on the street and then have a traditional restaurant experience outdoors that won't work in the winter, but in the summer, that'll be great. So there is incremental improvement for sure. And we can just good, thoughtful people can overcome a lot of these challenges. So I would expect certainly the progress to be ongoing, but whether we can take a big step forward or when we take the big step forward we're still unclear as to when that might be. Hopefully that makes sense. So we're making progress. We want it to be faster. It's a little too slow, but it seems to be going the right direction. Right. But I guess to the point, Mike, you guys obviously, none of us can predict the future, but from what your properties and your regions are telling you today, you feel comfortable, as you guys said, pulling back in session, you've seen an uptick in occupancy. And I think with the exception of like a downtown LA or downtown San Cisco, it sounds like most of your markets have been responding well to the actions that you guys have taken. You didn't identify maybe I missed it did sound like you identified markets that are still weakening and getting softer yet, correct? Yes. I mean, that's a fair statement, Alex. I mean, San Francisco is still challenged. That I'm trying to figure that one out, but it's very small part of our portfolio. But the, yes, no, the other markets clearly responded to pricing. We've said this back at NAREIT, we saw traffic increase pretty dramatically and that's when we made the decision to get aggressive and lease up the portfolio. So Yeah, our pricing was intended to increase occupancy. It worked very well. We've pulled back from that. We're maintain occupancy. It's still we're working very hard. We're watching things daily, but, yes, no, we're not seeing things fall backwards. In your words, San Francisco again is an exception. It's a little challenge. It's not necessarily falling backwards. It's just Hey, Jonas. Okay. And then just the second question. On the delinquency, it sounds like you guys let people leave, who because the ability to do so, whatever, unlike New York. So you guys let people leave their rent, the delinquency came down. The people who are in there, do you expect those people to be money good or these are sort of the free loaders that are just paying out for free rent and they're never going to pay, they're never going to leave the unit? There's going to be, I mean, there's no doubt there's going to be a mixed bag of people, but as I said in my remarks, we had 18% or almost 1 out of 5 assets where we had positive delinquency meaning it contributed to revenues because people that owed us were paying back payments. So there's a lot of hardworking people out there. We continually see these headlines of people struggling to get unemployment payments. So my sense is as the money is coming through, many of them are trying to make a good effort to pay us. In the end, will there be some that take advantage of us? There are always are, but I don't think that's the majority But how it works out, certainly this thing drags on, it becomes harder to peg. And so we're cautious on how this whole thing plays out as it relates Our next question comes from Rich Hightower with Evercore. Please proceed with your question. Just to maybe steer the conversation in a different direction here. Mike, what's your updated take on the policy risk landscape, and certainly, we could be having a very different conversation 90 days from now the next time you report. So just where do we stand on the different bills and, prop 21 and so forth? Yes. Well, there's definitely a lot to talk about. So, Rich, if I missed something, you can just follow-up and ask again. But obviously, the biggest one that we're most focused on is Prop 21 here in California, which would amend a law that was passed in the in the mid-90s to promote housing construction called Costa Hawkins. And so it would severely change that law and bring back potentially forms of rent control that really don't work, that really discourage housing production in all the cities that they adopted. And, it's interesting that we already have statewide rent control with respect to AB1482, which passed last year, along with about 18 other bills that were intended to try to jump start and to increase the amount of housing that was available in California. But And in fact, in the case of AB-fourteen eighty two, the apartment industry did not oppose that bill because we thought it was a reasonable finding the middle ground of the need for more housing and the need to protect tenants. So we thought that the legislature did a very good job of that. And, but, prop 21 is, brought by a someone that is not involved in the housing industry. It's a special interest group. And so they are continuing that campaign In our case, we decided to keep our entity that we used to, fight prop 10 in 2018 alive and essentially the same group of people lead that entity and are the opposition team on with respect to Prop 21. And they've made a lot of progress. Poland continues to be fairly similar to what it was as it relates to Prop 10 at this time, maybe a little bit better than that, because AB1482 was passed, the politics, I think, are somewhat different in that. We already have statewide rent control. So why do we need this other rent control proposal. And the campaign is proceeding well. There are something like or somewhere over 100 organizations and you can see them all representing seniors, labor, community groups, etcetera, that have joined Essex in opposing prop 21. And there is a website of anyone's interest it, which is, no on prop-twenty one dot boat and go to that website and see it. So we we're optimistic about it. We're fully 100% in support of it. And we're raising money and preparing for the final showdown. So that is the story on Prop 21. Rich, maybe before I go on, do you have any follow ups on prop 21, or did I get that one? Yes. No, that was great. A great summary, Mike. You mentioned that pulling, just propped in maybe a little bit of back. And is there anything other than the obvious, the COVID environment that's driving that or, are there any takeaways from that element specifically? Well, it's difficult to see exactly how COVID is going to is going to play out as it relates to that. Obviously, rents have declined and, certainly since AB1482, was past rents have declined. So why not give 14.82 a chance to work because it seems to be working And again, what is the need for another, valid proposition that effectively attacks the same issue that the legislature has already acted upon. And I think that that issue actually helps us because again, we have a legislation solutions. So why do we need to go to the ballot box? Certainly with respect to a sponsor that has very little to do with housing. And fight that battle. So, but that's where we are. And we will see. I mean, there will be more coming out on prop 21 and in the coming weeks. So happy to discuss, if you want to call separately or whatever. And then I guess I would also mention the potpourri of anti eviction ordinances, which are incredibly difficult and like John, I give great credit to the Essex team because sorting through city, county, state, and even federal laws with respect to anti Vic ordinances and, and all the different things that are out there. There's a tremendous amount going on they are constantly changing all of these various eviction ordinances being extended, different terms. I think that there will likely be some legal action on some of them because they're pushing the envelope with respect to I think, what would normally seem to be appropriate in the circumstances. And, I throw out, as an example, that San Francisco permanently banning landlords, from eviction. This is in at any time in the future, for COVID-nineteen delinquency. So I mean, we definitely have a, an uphill struggle with respect to collections And, to the extent it almost appears that if you never have to if you never have to have accountability for your delinquency, then it almost seems like and we can't there's no late fees, there's no interest charges. You almost may create a scenario where there's no incentive to pay the landlord. So this is the dilemma because, we're not in many cases allowed to add for documentation of a COVID-nineteen hardship and normal things that one would expect. So this continues to be an ongoing dilemma. Okay. I appreciate the color there. I mean, I guess, one follow-up, if I may. The incentive being a landlord in some of these places might also be called into question longer term. I mean, what's your sense of risk to the portfolio from a capital allocation standpoint. And obviously, it's nothing you can turn on a dime. Or do quickly, but how do you think about diversification sort of beyond your current core markets in that sense? Well, yeah, we're, I mean, we're here for a very specific reason. So, I think we're actually pretty diversified as it relates to the major metros on the West Coast, which again, it's a big part of the of the global economy, what I think California and Washington are something like a 5th largest economy in the world. So we're not talking about a small area. And what we've done is tried to diversify with respect to product and in many, many cities up and down the West Coast. So I think we're actually more diverse than that that might that it might seem And having said that, why are we here? We're here because supply and demand for housing is very attractive and rents grow better over time. And so If there were other places that had similar long term rent growth as the West Coast, we would likely be there. But that doesn't exist. And so we are trying to maximize the growth of the portfolio over time and do it in a thoughtful way and certainly a risk adverse way and, diversify the portfolio within the West Coast, which again, it's a very large area. So, and so we will look at and we constantly look at other geographies and other opportunities. And we'll continue to do that. We certainly do that once a year in our strategic planning session with the board, which comes up here in September. And so we'll continue to do that. And maybe this will change it a little bit, but I would say, the anecdote to maybe a little bit less diversity is a very strong balance sheet. So you have to withstand the periods of time when there's more volatility and we've done that. And as a result, we believe that we have kind of the best of both worlds. We have a very strong balance sheet that can withstand significant shocks. And on the other hand, have among the highest long term growth rates Our next question comes from Rich Anderson with SMBC. Please proceed with your question. Maybe there should be a new proposition to cap rent declines. That'll get them. Hey, Rich, we'll vote for you for Governor. So I'd like to get back to the concentration, West Coast concentrations here. Point, Mike, I get it, big economies, big area of the country, but still a lot of common knitting in the state of California that's causing sort of a singular problem. But one thing I've noticed about you guys over the years is things have a tendency to be to change over a shorter period of time than your peers. I remember back that the supply issue 1 quarter you were kind of having trouble pinpointing at the next quarter, things suddenly were much better. And I have that a little bit wrong, but I know I'm close. Do you in saying that things change in press measure in months for Essex where it might be measured in quarters for your peers. And I'm wondering, could third quarter have a very different flavor. Is there a real chance that we could have a conversation 3 months from now that could fuel vastly different than the tone of the press release that you released last night? Well, that's a very good question. And, my take would be that, and I tried to highlight this that we need the drivers and normal drivers of wealth and, job creation to do well. And we noted a couple of them. We need the tech world to go back to growing and growing robustly. And, we think that they've effectively taken a break by letting their people work from home for a time being And the motion picture industry needs to come back. And we need the normal tourism that we benefit from So I mean, we're really looking at those things as a catalyst for something better to happen during the quarter. And that is all intertwined with COVID-nineteen. And again, we were incredibly, I can't tell you how disappointed we were when we had that resurgence of cases and which is now looks like it's starting to abate finally, but So I think it might be a little bit longer term than that. Having said that, we fell off a cliff in terms of occupancy in April. And again, because of these anti eviction ordinances, we were probably more aggressive at letting people move on with their life if they lost their job and needed more affordable housing than some of the others. And that caused vacancy to decline more. And, but it also set us up to find a tenant that can be a good long term tenant. And so we there were some definite trade offs during the quarter and then playing catch up with respect to using concessions to build occupancy as John alluded to, definitely cost us something. And again, as of July, we're in a much better position and we don't have that We don't have that overhang that we have to deal with. So I would say that's incrementally better. Certainly, unemployment going from improving by 400 basis points, that's going to help us in the quarter. So there is good news out there. And you know, but as I tried to allude to in my comments, we need, we need the, field production business to come back. And that looks like a choppy road. And even restaurants, all the service jobs and restaurants and bars, etcetera, that looks like a somewhat choppy road. So cautiously optimistic, and we'll see, but I do think the next quarter will be better than the last one. That's for sure. Okay. And then, correlate to the concentration question, and you mentioned this, you're always going to look at Southern markets, and I don't remember when it was probably 15 years ago when you were looking at Baltimore And Town And Country. I mean, is your radar that far away? Or is it more closer in to the West Coast area perhaps at Denver or something like that? Yes, it's a little of both. I mean, what we try to do is look at other major metros, similar to the West, similar to the West Coast. So there's some element supply constraints. We look at the stability of the economy and the federal government at Washington D. C. Is pretty darn stable employer of of people. And so it tends to do better when, when things are not, not going well, although it also can produce a a fair amount of apartment supply at the same time. So that can hurt it. But, we look at things much like trying to find markets that are like the West Coast, which are very difficult to find. And then we also consider blurring the line. So at what point in time might we go to some of the other markets that are near our existing markets, but just a step further out. We own an asset in Santa Cruz. We've owned assets in Tracy, and the Inland Empire. And I'd say our experience there is those are very much timing markets And so is there a possibility of, for example, setting up a co investment type entity, which inherently will have an exit owner for a period of time and then exit and do more a timing type trading is something that we also consider. And so I'm not sure what we're going to do. I do know that, from feedback from our board that they are going to want to take a harder look at at this issue. So we'll be having more robust conversations about it. Great. Thanks very much. Thank you. Our next question is from Neal Molkin with Capital One Securities. Please proceed with your question. Hey, everyone. Good morning. Good morning. Good morning. Hey, okay. So maybe just talking about the development side, or the external side, we started a JV development. Just curious, how that side of the business is going and the appetite level, hearing that only kind of distressed in the market and not really on the acquisition side, but more on the, development, land, prepurchase, those types of things. Can you just talk about, what you see there? Have you gotten more inbound calls and how do you see maybe the next 6 to 9 months shaking out, on that side of the ledger? Hi, Neil. This is Adam. So I can cover this. And Mike, feel free Oppen. So as far as distress goes on the land side of things, land owners are incredibly stubborn when it comes to decreasing their expectations on land values. So So, yes, lots of inbound calls. But very few deals that seem to be getting inked right now. We haven't seen much, if any, decrease in construction costs. So So that coupled with some challenging, a challenging rental environment. There's very little that we see right now that would pencil. We continue to be aggressive on the, on the Prep Equity side, because there are a number of legacy deals that, that are out there searching for funding. And construction lending standards have gotten somewhat tighter. And we've gotten more conservative with our pref underwriting, but even still there's still a relatively high demand for that. So like I said, we continue to have a robust prep pipeline. And that's probably where the main focus is going to be for the immediate future. Okay, great. Another one for me, kind of been talked about, but things like on each call, the talk about regulation and things like that continue to get I don't know, worst or more extreme. Can you just maybe talk about a couple of things in particular, AB1430 6, which I think is the statewide, codifying the statewide, the Victorian moratorium either the sooner of the end of date of emergency plus 90 days or April 2021 just maybe what's going on there? And then the other thing, I guess, Part B would be, if you look at like CHOP or Chaz in Seattle, You look at a lot of these things that keep on the police. A lot of issues that although you are diversified, as you say, they're very much a function of the California and Washington, I'll say mentality type. So I'm just wondering how you navigate through that process or approach these things that seem to kind of come out at you. On a more frequent basis? Yes. It is a great question. And, I will say that we are surprised at the incredible both number of eviction related and tenant protection related bills that come out of this And, if certainly in the short term, we had our own, our own self imposed limitations for 90 days on evictions and rent increases and a variety of other things. So I think that that is something that is, just appropriate and proper in the, in dealing with this with the pandemic. But there's a point at which, and I would guess that we're getting near that point that, things go too far. And so what we've tried to do is both certainly comply and understand all the existing ordinances that are out there. And again, they're at all different levels of government and they constantly change. And, and at the same time, try to advocate in our discussions with, CAA and others, like for example, if a resident, if this goes on for some prolong period of time if a resident owes us a certain amount of funds, shouldn't they have some affirmative responsibility to prove their COVID-nineteen effect or impact or something like that and work with their their tenant. There is this fear out there that, there's going to be widespread evictions following this situation And, I look at it as we're realistic people. We have no interest in just mass addictions at all. In fact, we're better off working together, but you to be on several level playing field. We need them to essentially prove their or acknowledge their COVID-nineteen issue and then we can react and try to do what is what is thoughtful for both of us. So, the laws as they are currently constructed don't don't do that exactly. So there's a bunch of laws out there, as you point out, that prolong the eviction process and not just limited to the one you mentioned, but just on an ongoing basis. And it still remains to be seen what happens with those laws. I mentioned in San Francisco, the inability to evict anyone at any time. Indefinitely for COVID-nineteen delinquencies. And I'm not sure exactly how we get paid back on those those particular delinquencies. So this has been an ongoing issue and certainly it's disappointing from our perspective in that we have no ability to control our destiny. And it seems like people have the ability to essentially do things they shouldn't be allowed to do. So I'll leave it at that. Our next question comes from Alex Thomas with Zelman And Associates. Please proceed with your question. Hi, thank you for taking my question. Just looking at your noted discrepancy between the public market cap rate and private market cap rate. Would it make sense to sort of match fund your stock buybacks with dispositions or are you looking to get a little more progressive on side effects need to proceed? Thank you. Angela, in her remarks, talked about match funding, virtually everything that we do, going forward. So that that definitely is the plan. And so not just by stock buyback, but preferred equity and others. So, and Angela outlined the resources and uses for the rest of the year. So I think we're I think we're on the same page with respect to how we're going to do that. Maintain a very strong balance sheet. And then just looking at rent collections month over month, what is the usual cadence for catch up in the following options there for delinquent? It's a little bit hard to hear your question, so I'll repeat it. Hopefully, I get it right. You're asking the usual cadence for rent collection if someone's delinquent, I think. And we're just in a different time, because normally if someone's delinquent, We're going to obviously communicate with them, either come up with an agreement with them in which case we're pretty reasonable, let's say, over the month's rent, we're going to have a prepayment plan that's going to work over a reasonable amount of time. If they don't want to communicate, we're going to give them a 3 day notice and start a process and work through that. So normally, that's how it would go. Where it is today, some of those options are not available, but communication is And again, I'm very pleased to see that without, any current hammers, we're seeing people step up and make payments on what they owe. Some people wanting to enter payment plans. Others not, they're concerned about whether they'll be able to keep those, but they're still paying more than their rent. And so we're seeing good behavior out of people in general. Hopefully that answers your question. Thanks. I'm looking for, is there a percentage catch up that you're collecting 94% of April rent at the end of April. And for context, if you, in May, is there a basis point catch up that you has been seen or has it been mostly, negotiated? Yes. Hey, this is Angela here. If you're looking at, the amount of revenue that is not reserved, we are essentially, at over 100% collected for same store, which means some of that, of course, goes towards delinquency. But keep in mind, this is only July. It's 1 month And so to John's point, we are seeing good behavior and most people are trying to be responsible. But it's just too early to be able to say, okay, what does that trend mean given this is July numbers? Got it. Thank you. Thank you. Our next question comes from John Pawlowski with Green Street Advisors. Please proceed with your question. Hey, thanks for continuing the call longer. Just one follow-up for me, John. Help me understand a little bit your comment where elevated concessions aren't exactly indicative of where market rents are. In certain markets, it feels like every a lot of big private and public developers are 4 to 8 weeks free. So it feels like the market clearing price of rents to incense demand, market rents across your portfolio, if all your competitors are 4 to 8 free is down in the neighborhood of 15%. Could you just elaborate on that? Yes. No, I'm glad to. First I have to give you guys some credit. You've done a nice job trying to track things. So I appreciate that getting the facts out there. But I would say what in part what we're picking up and what Essex does is out of frustration out of not having great market data because some of the vendors are doing a great job. We created our own proprietary database. So we've got over 1000 assets and we're tracking them. And what we find is different days, different competitors are offering concessions. They're doing it in different units. And so there are commonly, assets out there that are offering maybe 4 to 8 weeks, but that doesn't mean that those are the only units that are renting. And what we saw back in June was many of the bigger owners were trying to gain occupancy, increased absorption just like a very large development lease up. Ultimately or multiple lease ups competing against each other. That works for us. And, I can't speak for our peers, but that works for us. And so we're backing off and we're continuing to find that we're achieving leases in many cases without too not all though, like I said, San Francisco is different and asset by asset, we have different plans. But the idea of having the concessions to help pay the moving cost and incent some of the move has paid off for us. And we again, we're generally backing off. Now where you get into very competitive spots like Downtown Oakland and the Cbd or San Francisco or Downtown San Jose, there's lease ups going on in L. A. There's lease ups going on and so things get blurred a little bit because you've got the lease ups that are offering concessions. If you're stabilizing, you're down the street, you're probably still offering large concessions. So there's a little blurring going on, but we are seeing as you get down to other markets like Save Ventura, lots of Orange County, San Diego, in many cases, concessions just drying up. And that's kind of what can happen with concession is that they're in the market and then they just dry up rather rapidly. And we are seeing that happen. So overall, again, really as a tool to increase absorption. And I understand your idea of the net effective, but the reality is we're trying to use them to increase and they worked well for us. So did that answer question? It does. It sounds like it's more of a a debate over duration. So if these concessions were to continue for the next 6 months, the effective rents have to be down 15 ish percent across these markets, right? I mean, it's just it's just too lucrative of a market, yes. Yes, Joe. It went on forever. And again, with us, that's why I referenced we gained 200 or 190 basis points in occupancy because there was an impact, Prava. We offered concessions. We increased our expenses. It was a direct impact, and we're backing off of that. So that worked well to create excess demand. So Yes, no, if they went on forever, yes, then they're part of the market. That'd be different. Our next question comes from John Kim with BMO Capital Markets. Please proceed with your question. Thanks. Good morning. John mentioned in your prepared remarks, the value proposition of downtown assets that's defined with the bourbon. And I was just wondering if you could remind us of the breakdown that you have or that you identify as downturn or urban with the suburban in each of your markets? Sure. Well, yes, we look at about 10% urban and 90% suburban. And there's obviously can be some blending that goes on certainly as you get into some of the locations in Southern California. Where it's kind of blended. But overall, we'd look at 10%. We have very little in San Francisco under 1000 units in downtown. Downtown market in our same store portfolio. Okay. And then on this concession discussion, which I know it's already in the same property results, but if we're assuming 4 weeks of concession that you use on average, it might be higher than that, the second quarter, then that would imply your new leases were down 10% renewals were down 8%. And I think there's a commentary made that July's gotten better, I mean, from the concession level, but I'm not really sure if on an effective basis level it's gotten better, just given where the rates you quoted, Kevan. So I was wondering if you could help quantify that difference in the second quarter July as far as the effective rent change? Yes. Well, I can definitely tell you on it. If you were to look at it purely on net effective and disregard the increase in absorption, so just Where did rents transact, net effective, they definitely did get better in July. And on the they're going to comment on renewals, not all the renewals got concessions and in many cases it was a week or something like that. So what it wouldn't be, it wouldn't translate to let's say an average of an 8% or 1 month on the renewals. That's the renewals were closer to 1% somewhere in that area. But on the new leases, again, the focus was on the new leases with the concessions to increase absorption. So and some of that has gone away. And so that if you looked at it purely that way, net effective, yeah, definitely, rents are up in July over June. Our next question comes from Zack Silverberg with Mizuho. Hi, thanks and good morning out there. Just a quick one on capital allocation. I'm just curious, just reading the press release, you mentioned more stock buybacks Where does the stock buyback program fit into your best use of capital today? And how do you view this moving forward? Yes, hi. This is, this is Mike. Yes, we've, we slowed down a little bit on the stock buyback. And the thought there is that the effects of COVID-nineteen are going to be with us for a longer period of time. And so the impetus to do a lot of stock buyback, it quickly is less important we are constantly watching debt to EBITDA and some of the other balance sheet metrics. And so If you're selling assets, to buy back stock, you're going to need to de leverage along the way because as you sell an asset, obviously, your EBITDA is shrinking. So So we're mindful about, about how we do stock buyback. We're still very interested in it. It is still one of the things that is important to us. But, and again, funding it along the way with asset sales is an imperative with respect to all of what we're doing. So I'd say at this point in time, as Adam mentioned, that probably the preferred equity pipeline is going to be our our go to source given that there are fewer providers out there. And therefore, we have a better selection of transactions to pick from. And, and that would be bad. And, we definitely like co investment transactions when the transaction market gets better and we see more quality assets that are trading. And obviously, it depends on what what value they're trading at, but this idea of buying, let's say, a 4.5 type cap rate with, cost of debt in the low to mid-2s, that generates a whole lot of cash flow and is a pretty attractive transaction So, so I think we're going to have opportunities on the external side. And actually, I think this is this is the fun part of the business. It's, when there's disruption in the marketplace and lots of opportunity and we get to pick what the best use of capital is is, I think that's what we do exceptionally well. Yes. That was perfect. Appreciate the color. And just another quick one from me. You guys mentioned a mobile leasing app that you're developing. Have any sort of, project return targets around this? And what percentage, I guess, of your portfolio is completely touchless for the for a customer, from the lease up process? Sure. So, yeah, we're not giving away the metrics at this point in time on that, but I can tell you quite a change from a perspective of the customer being able to come in and lease on a mobile iPhone literally set up, obviously, some setting up the appointment all the way through to getting approved instantly and in moving forward. So we're very excited about that. We think that will give us a great customer experience and position us very well going forward. When you're talking about the touch list, at this point in time, really we have from a tour perspective and otherwise, we can go touch list all the way through other than, of course, once they get to the site, they're going to move in. But, we're a touch list across the board in that sense. Does that answer the question? Yes, I think I got it. Thank you very much for your time. Thank you. We have reached the end of the question and answer session. At this time, I'd like to turn the call back over to Michael Schall for closing comments. Very good. Thank you, operator. And thank you everyone for joining the call today. Certainly our best wishes to you and your families during these very challenging times. And we hope to see you all either in person or on Zoom someday soon. Have a good day. This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.