Q1 2020 Earnings Call

Good day, ladies and gentlemen, and welcome to the each year, our first quarter 2020, <unk> earnings Conference call and webcast today's conference is being recorded.

At this time, but not like just trying to conference over to Mr. Marty Mckenna. Please go ahead Sir.

Thank you operator, good morning, thanks for joining us disguise equity Residentials first quarter 2020 result.

Featured speakers today are Mark Parrell, our president and CEO, Michael minute, let's start Chief operating officer and Bob.

Our Chief Financial Officer.

Please be advised to certain matters discussed during this conference call may constitute forward looking statements within the meaning of the federal Securities laws. These forward looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or supplement these statements that become a true because it sounds quite a bench now I'll turn it over to Mark.

Good morning. Thank you all for joining us today I want to begin today by giving a big Thank you to my equity residential colleagues for their dedication to serving our hundred 50000 residents during this difficult time.

Well the working on site performing a central maintenance or comps years duties, whether you were engaging remotely with prospects using our new touchless leaching process, whether you're working from home in the many corporate roles that make equity residential youre keeping our company rolling So thank you very much equity nation for your amazing work.

Now turning to our business the best way I can describe it in the last seven weeks is resilient in April we collected in our residential business about 97% of the cash that we would usually collect.

No part of our countries you comedy will be immune from the coming recession, we feel that our portfolios properties populated with residents having average annual household incomes of $164000 and often employed in technology and other knowledge industries warfare relatively well.

Our operations team has also shown resiliency.

Pandemic it in full force in mid March Michael Modality, and his team quickly give it did and over a few week period, adjusted our leasing and surface operations dramatically.

On the leasing side, Michael and his team we're able to quickly create a touch this process that meet our customers comfortable beliefs and on the service side, we focused on a central maintenance tasks and cleanliness, which helped our existing residents feel safe and comfortable living with us through this pandemic.

Michael will give you more details about all this shouldn't matter.

When the Lockdowns were initially announced we saw our leasing activity declined significantly but demand is since picked up as we noted in the release.

We see our recent pickup in demand as he further indication that our properties that markets will remain attractive places to live for our target demographic. All in all we think our people and our properties have been resilient with a capital are going through this crisis.

We do fully acknowledge that challenging days remain ahead and are taking steps to weather the storm and prepare for the post pandemic world. We have further fortified our already strong balance sheet as Bob care, a channel will describe in a moment. We're also preparing it Ernest for our properties to operate what fuller staffing as lockdowns across the country out.

Relaxed, we'll keep in mind, the safety of our employees and residents as we reengineer our business.

Equity residential that's historically performed well in these downturns and we would expect this to be no exception, we're optimistic that we will perform well operationally given the circumstances that we will find opportunities to add high quality assets to our platform as the economy works its way through this recession.

Finally, we did withdraw guidance in the release, we are unable to estimate with precision the continuing impacted the pandemic and the timing and character of the reopening process on our business and makes it impossible for us to give you the high quality estimates, where our business might go in the near term that's you're used to receiving we did provide a significant amount.

Out of information on April's preliminary results and hope that is helpful. Now I'll turn the call over to Mike.

Thanks, Mark so today I'm going to provide a quick recap of operations over the past 45 days prior to the Kobin 19 pandemic, we're off to a very good start for the year. Our occupancy was ahead of expectations, we were well positioned for the primary leasing season.

And then cobot 19 get causing us to adjust our operations to this new unprecedented challenge.

He started by acknowledging the dedication and hard work of our employees. During these unprecedented times. They inspire me with their ability to quickly adjust operations, while keeping an intense focus on their customers properties themselves and their families.

Shelter in place was mandated by governors in our markets an early to mid March.

This means that are more than 150000, rather than began staying at home 24 hours a day seven days a week.

In response to shelter in place we made some key changes to our operations. We closed our common area amenities, we increased clean frequency, we quickly modified our website in our artificial intelligence easy responses to pivot the entire sales process to virtual leasing capturing video content and conduct.

During the sales process via video conversations allowed the business to continue uninterrupted. This process would have normally taken a several months to accomplish.

We also like the office doors to encourage social distancing, but kept the business running as we implemented shift rotation of this staff to reduce the number of employees come into the property.

When we look back to March 15th we saw our traffic in applications dropped 50 per cent compared to the same period and 29 gene that being said we continued to receive over 375, new applications. Each week through the end of March which we see is a validation of the new leasing process.

Reduced traffic coming through the front door, our focus has been on keeping current residents in place.

We are currently offering residents the option to renew without increase overall retention in April and May has improved as we are now renewing in the mid to upper 60% range, which is a 300 basis point improvement from last April and an almost 800 basis point improvement the last night.

Work is having the strongest renewable percents of nearly 70% the March April and May.

Despite this good retention our overall occupancy since March 31st has declined by 130 basis points, we expect the occupancy impact to be the most pronounced in the second quarter setting a new base from which we hope it will improve as shelter in place orders are lifted.

Let me share some color on the performance in April at the beginning April we began to notice an improvement in demand with both traffic and leasing activity rebounding by almost 30% and actually know trending on par with last year. In fact, we had over 900 applications last week, which is a significant improvement.

Compared to the 375 that we were averaging in late March and very encouraging for us.

Given the activity in the last 45 days, we would like to see that volume grow even more to help offset the lower demand that we experienced in March and to match the increased volume of applications that we usually get in make.

What is clear is that our high quality well located portfolio continues to attract future residents. While the pandemic is certainly a deterrent people have life reasons that required them to move like changes in jobs or partners.

On page 13, we reported the first quarter and included April monthly pricing statistics by market.

I would remind everybody. This is only one month of data and that longer periods of time are usually required to show definitive trends.

Mark mentioned, the strength and quality of our resident base. This is evidenced by the fact that we received a very strong 97% of the cash collections in April relative to our March collections. This resilience delivered 5.4% delinquency, which is quite good given the unprecedented circumstances, notably Seattle in Denver, where our mark.

It's with the lowest delinquency at below 3% in Los Angeles was a laggard close to 8% the rest of our markets were centered around the average we've also taken a cut at looking at property type and in most of our markets our garden style or more suburban assets have experienced higher delinquency then our midway.

High rise more urban locations as we move through the continued disruptions created by cobot, 19th we remain strategic in our pricing efforts sitting here today, our base rents are down 4% compared to the same week last year.

Let me give you some color on notable markets overall, our strongest market at Seattle, which has shown great resilience that limited delinquency and the best overall revenue growth performance in the portfolio.

New York is a bit of a mix story, one and it has the strongest retention of any market. But is also not shown the signs of recovery that other markets have with traffic in applications long term, we expect the new York market to benefit from low new supply and technology firms expanding their presence in the city, we are hoping leasing activity will improve.

At the hard to get New York area gets through the worst of the pandemic.

Finally, we started 2020 anticipating that Los Angeles would have a very challenging year, given the new supply pressure coated will definitely add to this despite recent improvements in applications. We expect this market to remain challenged with meaningful pricing pressure that will continue as supply is deliver.

So where do we go from here, but we're now in the early stages of preparing our properties for the new normal we expect things to shift overtime right now the new normal is gonna be focused on increased deep cleaning standards at the properties adjustments to the lay out a common areas, including fitness and lounges to accommodate social distancing.

Balancing the capabilities of virtual leasing what they need to engage with our customers and ultimately staggering work shifts to ensure that we limit the number of employees onsite at any given time. These are challenging times, but our business is resilient and our teams are positioned to deliver thank you at this time I'll turn the call over to buy.

Thanks, Michael This morning, I'll highlight our enhanced disclosure from last nights release give a brief update on nonresidential operations and and with our credibly well positioned balance sheet.

Starting with our new disclosures, we've modified our disclosures to help better present, our business and where it stands today.

We do so by providing April operational in collections statistics.

By breaking out our same store performance between residential and nonresidential practice that we would expect to continue at the performance from our main residential business, which makes up approximately 96% a total revenues is likely to differ meaningfully in the upcoming quarters for are much smaller nonresidential business.

This includes modifying the schedules on pages 10 through 12 of the release and finally by providing an update on liquidity and balance sheet information.

In order to accomplish this we've defined a number of key terms in the back of the release, we hope to be definitions will provide specificity and clarity to our disclosure.

Part of the new disclosure includes a breakout of nonresidential operations for our same store portfolio. It's just a modest component of our business at 4% of total revenues and consists mostly of ground floor retail and public nonresident parking and are well located apartment communities.

Ground floor retail makes up about two thirds of it's 4% with public nonresident parking making up the rest.

As you what's the fact, a good portion of the retail tenants that rent our space have been significantly impacted by shelter in place orders.

This is evidenced by the 58% April collection rate for all retail that we disclosed.

Which while certainly below what we would've hoped maybe higher than many other retail landlords.

The drugstores bank branches and national chains that occupy a good portion of these spaces have for the most part continued to pay rent while local small business owners have struggled.

With nonresident parking we've seen in approximately 30% decline in parking volume for April given the lack of public events and increased work from home arrangements. We suspect that this may recover as shelter at home orders are eventually let that.

Finally, a few highlights on our balance sheet.

We ended the first quarter with an incredibly strong net debt normalized EBITDA of 4.9 times, and nearly 1.8 billion and liquidity under our revolving credit facility.

Subsequent to quarter end, we improve its already strong position by closing on a very attractively priced 2.6% 495 million dollar 10 year GFT loud and by closing on the sale of an asset in the San Francisco Bay area.

He steps we sit here today with over 84% of our total NOI unencumbered about 150 million in commercial paper outstanding and readily available liquidity of over 2.2 billion under our revolving credit facility, which does not mature until 2024.

Liquidity is more than sufficient to address our modest level of anticipated development spend minimal debt maturities in 2020, Dan to address our next significant debt maturity, which isn't until December of 2021.

Our balance sheet is in excellent condition to weather the storm and take advantage of opportunities should they present themselves with that I'd like to turn it back over to the operator.

Absolutely if you'd like to ask a question. Please signaled by pressing star one on your telephone keypad <unk> are using speakerphone. Please make sure your mute function just turned off to a lighter signal surveyed arc equipment.

Well start with Nick Joseph from Citi. Please go ahead.

Thank you.

You guys are doing well.

Just first on day recollections I recognize personal very early in the long.

Wondering.

And thus far and maybe you can tie it to.

In March or this time last year.

Hi, Michael I guess I'd, just say, so first and foremost yes, you're right. This is very early in the month, but right now looking at kind of how we closed out yesterday, we are identical like right on par to the way collections kind of played out through the month of April.

Thanks, and I, just think about the delinquency movies.

As of April.

Recognize there's always some level of delinquency was helpful doubled in the March number two you know how do you think about <unk>.

Right and then how are you working for residents.

Yeah.

We paid.

Yeah, So maybe I'll start and then Bob can kind of feel land. So so first and foremost I mean, I think you can see from the release, we're dealing with about $11 million in total delinquency.

And that was above the $5.4 million that we had in the previous month. So the process that we're going through right. Now is how we're working through conversations with all of these residents with both kinda than empathetic mindset as well as an obligation Kinda reminder, mindset and that's a tough balance that our teams are doing.

But we're setting up you know various payment plans in places and we're just documenting kinda that the financial hardships that you know many of our residents have experienced from that and we'll be navigating and working through those conversations through the month of May just like we did in the month of April.

Well, how much of that it's Michael Bilerman, maybe just to frame it sounds like a 260 basis points from March was totally in line with historical nature of wherever you are on a monthly basis in terms of collections.

Which obviously accelerating they will get a large amounts of a lot of.

Individuals are going through this or anything in that increased delinquency bucket that it either geography based.

Tight based is there any color you can give in terms of data mild and have you already entered into in answered the phone calls on that amount or outside of the collection that you've had.

So I think first in the prepared remarks that kind of identified rights, Seattle and Denver were absolutely the lowest at 3% or below total delinquency L.A. was the highest at eight go as far as property types. We definitely saw kinda lower delinquency at the high rise kind of mid rise product versus kind of the more suburban or garden style.

So I think right now in regard to deferred rent I mean, the nature of these conversations are all over the place I mean these are very one on one conversations that we're having but much of that delinquency or at least the incremental delinquency from hardships. It's set up in payment plans are set up into deferred rent situation.

And I think the varying state of emergency orders that we have around the country are gonna dictate when those payment plans are going to allow for payments to recur and I just want to add it gets mark you know as you think about building delinquency going forward. He has got to think a little bit we do have significant security deposits.

And we haven't applied in any of these analyses. So generally speaking you take the security deposit when the resident moves out, but that's a matter of local law. So we do have a significant amount of security deposits against these obligations.

Michael has entered into a bunch of payment plans or the company ads and they'll be more of those so I I don't disagree that the economy will get worse before it gets better and I'd also say we do have these other offsets both on the security deposit side and with these payment plans and we'll just have to fuel our way through it.

Right in your April that would be equal numbers, you're quoting outside of that 5.9 11 million would you have already deferred a certain amount of your monthly rent was already do so effectively there is more sort of delay in cash collections, even outside of the 11.

Yes, Bob and I'll give you a little bit of color that you think about March and kind of the regular be pre Kobe delinquency levels, it's very uncommon or would have been very uncommon to have any level of deferral.

Some of rental payments typically you would have ended at month at 2% to 3% of delinquency and then through the regular process that having conversations in collecting that rent et cetera that would have diminished onto the point in time, where it converted to a financial statement impact, which would have been right off the bad that et cetera, and that number would have been some.

Something more like 50 basis points of call. It total income so very uncommon in this business to have a material amount of delinquency or payment plans. If you will obviously that situation has changed modestly with the Kobe 19, and pandemic implication and Nick I want to answer just precisely.

Delinquency includes everything including the payment plans. So that number is all inclusive as it relates to the residential book there isn't like if it's a payment plan that isn't suddenly and delinquent. It remains in our books don't like we aren't just we just aren't pursuing the resident we have a deal with them, but we don't we include that in our number.

Perfect. Thank you.

Thank you.

Thank you we'll next go with Rob Stevenson from Janney. Please go ahead.

Let's talk about what a level of extra operating expenses, you're incurring from coated and how much of that is that offset by reduced hours for employees and other areas.

I'm sure somebody this is Michael I'll start off I guess I would tell you to date.

We probably have encouraged about a half a million dollars of expense specific to co bid and that would include kind of not only the increase clean standard.

That are occurring it at our properties, but also some of the personal protection equipment that we've been acquiring and I think some of the offset then obviously, we're incurring less overtime expense.

Our payroll, we're experiencing less turnover expense.

Then on the flip side, having all these residents living with Oh, We're also having some increased trash expense that's mitigating some of those offsets.

Okay, I didn't things begin to small back up in some markets.

How much of that you expect of the expense side to be sticky and hot how much of the offset to do you lose as the hours for employees pick back up and other things I assume that the trends doesn't go down anytime soon et cetera.

Yeah. So I mean, I think we're looking at kind of what it looks like to kinda reopen and what that new normal is gonna look and feel like I think it is clear to expect that we are going to be spending more money on cleaning standards and protocols at our properties.

But I think that we're gonna be balancing kinda that out not only kind of what the labor and the overtime, but trying to figure out more things that we're going to get done in house versus relying on contract labor and I'll just add I mean, if were yeah. We did withdraw guidance I know you're trying to steal your way through that so we'll give you a few other building blocks are general instinct here is that our.

Expense numbers will be lower this year than we thought not higher so these cleanliness and other costs aren't zero, but they're not that significant and he overtime. The less you know routine maintenance, that's being done because things are being deferred.

All of that is more material and so over time again, you could have you know certain events occur in markets weather related or otherwise, but absent that our general sense is that the expenses will remain pretty tight at this is not going to blow a hole in the expense number for us.

Okay, and then on the the capital side I mean, how I assume that all the dispositions completed year to date were under contract before could.

Can you just talk about I mean, if you wanted to sell assets today is there enough demand and pricing to be able is that market back to be liquid or people, taking a pause. There. How are you guys thinking about potentially making acquisitions going forward and also redevelopment spend over the next quarter too.

Yeah, there isn't a lot going on right now I mean, the last seven weeks with the pandemic.

Again talking to the brokers talking to potential sellers, there really isn't anything institutional grade in our markets, that's priced and closed or is even very far along in that process. So I I don't have any markers. There you relate de QR I mean, we're.

We're always out there we have teams in our markets and their job to always be looking at purchase opportunities and such but right now there's just on that line not a lot going on.

And on redevelopment or you're going to could be able to get the returns good warrant the spending in the near term or do you guys put pause on that for now.

Yeah, Great question, we have a pause on it but for a little different reason our residents don't really want contractors in the building.

Pardon me, our contractors don't really want to go out right now with the shelter in place so what you're gonna see across our portfolio is a real slow down in capital spending including renovations.

Projects that we've talked about on prior calls we hope to begin those again, you know will be thoughtful about whether we can get the rents and all of that but at this point really a lot of this capital spending depends on having people on site lets people aren't willing to calm and frankly, our residents are more comfortable with nothing there. So I think there's going to be a real slow down there.

How significant a been any of the develop the delays in the development pipeline for those few last Oh.

Yeah, that's not that's a great question.

It depends on where you are so I'll start by saying that so for example in Boston, where we've got a tower. We're building the mayor close down construction may 17th.

It's still hasn't reopened on an absolute sort of city of Boston rule, but outside the city of Boston in some of the suburbs. Construction continues so it's really placed by place across the country and I'd say, there's more significant delays in places like Boston and New York in terms of places, we do business and do a good.

Extent, Seattle, there's less of a delay in DC in southern California, where things have just kinda continued and the delays you'll see in those places are you know people working in shifts general contractor, saying you need to split your ships up we need more physical distance between workers and so you'll see things slow down a little bit because of that.

For example, when you look at our numbers and Axios numbers for supply shifting like whats happened between our opinion at the end of 2019 and at the end of the first quarter of 2020 as to what 2020 supply would be and in markets like Boston and New York. Those numbers, we think are going to move down supply.

Being lower in 20 by upwards of 20% I in places like Southern California, It's more nominal and the same with D.C. So it it's very much a local law thing.

Okay. Thanks, guys appreciate the time.

Thank you.

Thank you we'll next go with Nick Yulico from Scotia Bank. Please go ahead.

Thanks. So appreciate you know the April date and gave on renewals new leases.

In terms of rate growth I guess, you know from from a timing standpoint, I want to be clear and that's because I think it can be confusing at times.

You know if you guys reported renewal rates achieved a 2.8% in April you're saying that I think he said that you're offering zero renewals a flat renewals across the portfolio now well worth pointing to year does that sort of zero percent renewal rate growth get kind of food factor.

Turning to your rent roll.

Yes. So this is Michael so I think first and foremost got realize the April numbers that we reported on renewals. Many of those offers were generated in January and February. So many of those leases were already executed well before kind of Kogas 19 pandemic began.

When we started issuing those offers and mid to late March those are really for kind of May June and now even July offers that are out there. So I think would you could expect to see it may is going to trend down probably be somewhere between 50 to 100 basis points positive and then in June is when I would do.

Spec that you'll start to see us kind of deliver flat on the renewal increase person and just to add a little too that you know we will start to adjust our renewal I expectations are ascs and we'll try and look at the market and see what what we can get done so it's condition start to normalize well.

So feel our way through supply and demand conditions, and you will see us increase our renewal asks I would expect need to later in the year right now, we're making decisions in some markets as far out is August so we've got to call that Nick at some point and make a naked a judgment.

Okay. That's helpful. I guess also on the on the new lease changed slotting look at the April numbers.

I don't know if you have any you know data you could share on our made so far but I mean April it seems like it's unusual monthly you didn't have as much traffic.

So if we're looking at him down almost 2% on movies growth in April.

I guess you know they shake out to be a similar number maybe just talk about how you know how we should think about that new lease growth and Paul.

Well I pick in the prepared remarks, I Kinda stated that base rents are amenitized rents right now were down about 4% compared to the same week last year. So as you kinda just fast forward. Your way through May you could expect that that new lease change you know could deteriorate down to that 4%, but again the number.

Is that you're looking on that release, if you'd go to the footnote of that you'll see that the 12 to 12 of the like term actually improves by about 110 basis points. So it's actually down negative 80 basis points. So I I don't know exactly where it will land because again. This is kind of a lease by lease thing that you work through his baby steps, which is why.

I always caution everybody from looking at just one month.

But I think I I like to just understand where our my amenitized are asking rents relative to last year, and that's that kinda down 4% level and I'm just going to take the chance Nick to add a little bit to that answer and that's you know we feel that we gave some extra disclosure about you know at the moment demand conditions, we like.

The occupancy side the momentum we feel like we will pick up certain it's not certain we have to see how these unwinds. These various stay at home orders go, but we wouldn't expect our occupancy to recover and we feel good about that and then you have Michael said with the recession and that'll affect lease and renewal and all the other quote.

But on the occupancy side I think weve shown were already have engage we have more move ins then move outs were already seeing all that occupancy stuff kind of steady so as we see these markets opened up our hope is that again, if it's done an orderly fashion and we don't slide back into Oh locked down again that will will work out.

Out of occupancy and then they'll be just the rate stuff to deal with so I just want to emphasize we feel pretty good about demand even in a pandemic. We're seeing good demand for our product. It's just a matter of figuring out the clearing price at the moment.

Okay Yeah.

Helpful. Mark I guess, just one follow up on occupancy and now you guys. We talk about second quarter being the biggest occupancy impact in the portfolio.

In April versus March every last hundred 30 basis points physical occupancy I mean is it is that kinda or the broad today as it could get worse than that and then any idea on a on occupancy for the second quarter right now.

Well I.

And I guess the way to think about because right now is that the fact that bar applications like they are right now are on par with last year and my retention.

Continues to improve its already improved but if it continues to improve I think you're gonna see occupancy not only stabilized, but possibly start to improve if our demand continues at this pace and our application start running above last year with stronger retention I think you're still going to see this portfolio come back.

To that 96% level and start kind of optimizing revenue there, but I think it's still a little bit too early to understand because we really need some of these shelter in places to be lifted so truly understand the longer term kinda demand or impact on traffic for us to kinda optimize revenue off of yeah and.

I everything Michael said, absolutely agree with Bill would add you know, we don't really understand the impact of the recession. I mean, it is true at 20 million plus jobs are gone, it's hard for us to understand that impact on rate non demand without all these stay at home orders being lifted and once that happens we'll have a better view for you, but yes sir.

I hope that given the strong demand we've seen while we're still in a shutdown that we have stem. The that's sort of occupancy bleed for the most part and then we're just going to have to all figure out what rate is in a recession like this.

Okay. Thanks, a lot appreciate.

Thanks, Nick.

Thank you we'll next go with rich Hightower from Evercore. Please go ahead.

Hi, Good morning, guys hope as well.

Just to.

Thank you just a follow up again on that occupancy question just.

To clarify that 130 basis point, a month over month loss were those move outs and April according to <unk>.

Normal lease expirations or the cold and related what what was the sort of composition of of the change exactly if it's if you don't mind, adding a little more color there.

No problem, so it's a little bit of both right. So I think when March 15th kind of roll around everybody that was scheduled to move out for the balance of the airport. They are for the balance of the month based on lease expiration moved out people that were scheduled to move in some of those folks canceled kinda those those move ins or deferred.

Moving and then we had you know calling couple of hundred of our units basically kobin specific reasons, a LIBOR early early terminations.

Okay, and that's really the impact on the occupancy.

Yeah. That's okay. That's that's helpful color and then maybe you know.

You see tough to predict but.

As you apply the experience from for maybe a way to nine Andy the possibility of sort of the trade down or the doubling up affect you know coming out of a recession, where where do you guys.

How do you think about your portfolio.

Given its its predominant class a white collar composition, how do you how do you think about that dynamic with with respect to your own portfolio going forward here.

Yeah, Hey, rich its mark I start by saying the portfolio its similar but not the same is a wait no nine I mean, we have a higher end clientele as you acknowledged in your question.

I like the income levels I like the kind of employment, our resident SAB doesn't mean, they're immune to the recession, that's coming but I think there'll be less affected than some of the the folks and hospitality in other industries got laid off very quickly and and suffered unfortunately very quickly in this recession. So I guess, we feel I know I guess we.

I do feel much better about our resident base, we think they've both got skills that will mean it'll be more readily employable I mean, we worry I think a little bit about portfolios that depend on workers that had been laid off and how many of those workers really getting those jobs back and our portfolio. We just don't see that as much at this point doesn't mean, a few people won't lose there.

Jonathan our resident base, but we think being tied to technology and some of these knowledge industry jobs, there's going to mean that aren't folks will have more employability less lay offs coming through this recession.

Okay appreciate that.

Thank you we'll next go with its John Polasky from Green Street Advisors. Please go ahead.

Thanks, Good morning, I, just want to follow up with or something like comments in terms of the occupancy floor and application volumes picking back up I'm just trying to my head around what's the more important leading indicator for what this spring and summer leasing season applications currently being flat traffic being down.

On a percent and.

Michael level kind of wait you put on traffic versus applications, just trying to understand what's what's more important for us to focus on.

Well, so I think the improvement in traffic is really telling right compared to where we were you going in the beginning of the month than where we are right now and then our closing ratios its kind of giving us petsense of this market clearing price and if I backed up all the way to March I'll tell you I mean.

We're looking at how many eyeballs, we're hitting the web site what was that traffic count looking like and we were close in 70% to 80% of everybody who expressed interest. So it was not a price issue back then and right. Now is you can see okay. We have an opportunity to kind of make an impact with the traffic improvement that were.

Again, and we're going to continue to do what we're doing with promotion based on to go forward and tried to recover some of what we gave back in the last 45 days, but I think it's really be improving trends is what you got to focus on because again the peak leasing season is not going to exist like the peak leasing season has in the <unk>.

Yes, it's probably going to shift forward a few months or it may just be kind of more bolt throughout the whole thing we don't know that yet so what we're watching this week over week are we seeing the improving traffic are we seeing the improvement in apps like you would expect to see through a leasing season and so far that's what's been playing out.

For the last several weeks for us.

Okay.

On the delinquency side Thats actually the comments on you know what's the typical delinquency rate and then as you work through the payments what does it all comes down to in terms of bad debt to 3% delinquency eventually getting down to 50, that's a market like L.A., where there's an 8% delinquency rate and tenants have a year to pay that right.

They percent deteriorate, what's a reasonable bad debt working assumption for the legacy.

I think that's a hard question to answer in all fairness, we haven't seen those kind of levels historically right. So like I said this business was very fortunate in hasn't it very fortunate to be very little delinquency historically.

Not sure that that ratio of that I talked about between 2% to 3% converting itself ultimately to 50 basis points necessarily holds true in the middle of a pandemic I do think that all the positives that we haven't our resident base that mark outlined on in terms of you know high quality employment et cetera should health in the collections process, but how.

It's a hard to get sick or any answer to that one right now.

Right. It's fair to say, we probably you probably won't know until you get 2021, and we won't see it in the financials and deploying on the net net short Paul.

Yeah, I mean, my night and that kind of get towards the kind of bad debt expense policy or kind of what policy. We had in terms of write off et cetera on I think that's something that in the second quarter, we will evaluate with a lot more detail about at what point you reserve again some of these outstanding to for all programs.

Andrew and payment programs, because certainly there will be some some subset of residents that are subject to a payment program that ultimately don't pay that's something that we're currently evaluating and currently discussing as which we as we have just simply a lack of historical payment history to understand because of the unprecedented nature. So I think you're correct.

In assuming that you know it'll bet is to be told as how it manifests itself in the financial statements and again just to add to that just a little bit John we have the security deposits that we need do apply against this amount it's not appropriate to applied against delinquency now you usually bylaw do it when the residents moves out or near that time or.

With the west residents agreements. So we do have a little bit of an offset there that we need to figure out, but well certainly be more delinquency I thought I think maybe you give a little color on what was delinquency and the great financial crisis, Yeah, delinquency and I'm, sorry, and bad bad debt expense. So I'll talk maybe the bad debt expense to give you a frame of reference I mentioned earlier that enormous.

All kind of environment, they're not in the great financial crisis, we run about 50 basis points to total on in 2009, which would have been the worst year of the great financial crisis that 50 basis point converted itself to slightly over 100 basis points.

Is that helpful. John give me a little bit of a frame of reference.

Yeah, that's definitely I know I know you've got some game right now, but there's more cities enact a longer payback periods of Seattle yesterday come out and saying you have the 2021 I imagine more cities along the coast, we'll do the same and just trying to understand how those historical relationships change in this in this environment.

Thank you.

Thank you.

Thank you.

We'll next go with Wes Golladay from RBC capital markets. Please go ahead.

Good morning, guys I'm looking at that 11 million to London delinquency is that mostly tied to hardship in your opinion is it more people electing not to pay rent more coming from the government.

So did the coast over the last question well so just to make sure I understand your question Wes is it mostly people who have hardship issues that they can sort of document or is it folks that have just decided not to pay sort of the moral hazard issue that the question.

Good on that.

Yeah.

I guess, that's a little hard to tell for US on you know not some of the resident seven called is back we don't have insight into their thought process not paying us, but that's a very small number for us given again the quality of the portfolio. We're talking about a pretty small number of accounts here. So I guess I'd say that most of the <unk>.

Conversations that Michael a shared with me have been people, saying, Hey, I need another week or two and then they paid so that's been most of the conversations that we've had to date I'd also point out that you know there are people that may benefit from the checks that though we see from the government either through unemployment or onto that federal supplementary paying it and I'm not sure I'll quickly.

All those are reaching people either and that could be a benefit to us as well. So I don't we don't have a break down or anything we've got a few people that have goes to that but that's a pretty small number and really it's most people have been talking also be work itself out or again, it's not more peanut plans. It's often just give me not a couple of weeks and copy of the rent that's been a more predominant conversation.

[music].

And I appreciate the holding rent renewals flat oil.

Oil, but you did call out some of your markets after doing quite strong Seattle tetlow cruising in particular.

I guess would you phased in rewards for different segments or as you can see a blanket spend especially those with.

How you approach and I guess the increase is going.

Yeah. So I think there's Michael again, so I think we're now looking at kind of months like August and September renewal offers and I think you know each market always was done strategically with different kind of parameters being set for kind of how we would issue kind of renewal offers so I would expect that there will be markets that will.

Maintain kind of I know, we increase option for and then there will be markets that we start going back to kinda tiering approaches and see kind of what those results are and add to it isn't just markets. We price by you, though so I mean in 2015 when things were great in the industry and great for our company. We had unit types there werent increases that we could.

Get on renewals and when you had bad years like 2009, we had unit types that we did get increased on renewals. So it is a unit by unit thing. It is a market thing as it relates to maybe legal restrictions, but Michael and his team starting going forward I mean looking at the saying, let's knees restrictions are removed how do we now feel about supply and demand in the market and.

How are we going to think about this and that's kind of how we're expecting the plane.

Okay. One last one I guess looking at your your platform probably little different than we need your competitors in the market. So do you think you're taking share of new applicants that touches applications and the cell killing.

Well I think our closing ratios tell us kind of whether or not we're kind of taking more market share I mean, historically, we would run against what we used to call foot traffic, but that's got a whole new definition mall with virtual leasing, but people that express interest you historically would close somewhere.

In that 20% range for people that express interest take tours with you.

Right now that's kind of what we've been balancing off and so when we're closing 30, 35%.

We're getting more than kind of the normal share of those applicant.

Thank you.

Thank you well is next moves with Jeff Spector from Bank of America. Please go ahead.

Great. Thank you. Good morning, just a couple follow ups and then just maybe one big picture question first on the on occupancy into Q. I believe you mentioned you do expect to Q to be the worst I guess, it's just thinking about the applicants and as you said figuring out the the right rent.

Levels here.

You just you know it's going to be hard to convert those applicants into occupancy during twoq was that your your expectations.

No I think I would say the impact from what we experienced at the tail end of March and April is really what was kind of this occupancy down right now even when you look at call. It. The 900 application that we had last week call. It 60 plus percent of them are moving in before me.

20 seconds.

Right. So so that's going to help kind of balance. So you know in a world of yield management, I mean, you're optimizing revenue you're trading off occupancy and rate and you're balancing that and that that demand part of the equation is going to say, whether or not you're going to optimize revenue at 90, 595, and a half or if you're going to kind of continue on this.

Pat maybe you'll bounce back and started optimizing back at 96%, but I still think it's too early to understand where that sweet spot is for these portfolios.

Okay. Thanks, and then I was surprised to hear that garden style delinquencies were higher than a mid to high rise I believe you made that comment can you provide a little bit more color there.

Yeah sure. So it was it was almost in every single market that we looked at we can see that relationship in some of this just has to do with where our kind of rent to income ratios.

So it wasn't surprising right when you think about Seattle being the lowest while Seattle also as our lowest rent as a percent of income and when you go to L.A. It was the highest percentage of income and those are markets like when you start looking at that where we absolutely had more garden style property versus the high rise property, but that relationship Hello.

True across all of our markets.

Okay. Thanks, and then in terms of amenities.

That's because it's encouraging to hear that you are working on.

I used to open up the Jim's or were you know more open space and just thinking about working from home is it.

Too early to to incorporate changes into buildings to maybe foster we're working from home environment within the apartment building like can you set up areas that you know comply with social doesn't seem to offer focus to work, let's say from a lounge within the building.

Was that just is it too soon to tell.

So I guess I will do start by saying first we have a whole group of individuals that are focused on what does it look like to be operating in the new normal right. So that that starts with looking at all of our existing common area space and understanding how are we going to guarantee the safety and well being the borrowing.

Please as well as our resident once these spaces start to open up an operator and I think there theres occupancy limits their spacing in fitness center, there's a lot of complexity to this and each one of our jurisdictions is gonna have different kind of rules that will be applying to our operations as we think about it.

Opening up but longer term as we think about the fact that residents maybe working from home more it does create an opportunity for us to look at our common areas basis and look at any of our available spaces that we may have in our properties and think about how do we make some adjustments to that to allow them the opportunity to.

Work from home as well as it here to social distancing. So I think you'll see us start to get creative with how we're using spaces.

Going forward to to allow for more of that to occur.

Thanks, and then my last question just Big picture for marker I believe Mark you mentioned there might be opportunities is is it too soon to to share with US you know your thoughts on just kind of your Q our strategy going forward.

No I'm into New York, New Jersey area, and I admit I am a bit more worried about the your work.

You know like your I heard some optimism there that you know tech will still come to New York and hopefully they still do.

You know can you share with US you know some some big picture thoughts on your go forward strategy when you think about opportunities.

Great. So it's kinda two questions in that part of it I read is just when might we get active on the investment side and then other is sort of a new York question and when that city, Mike Mike function, a little better and I guess I would start on the investment side by saying as I said my earlier remarks is not a lot going on right now were seven weeks.

And sellers still remember the price they would've gotten in early March and buyers think about the price the dream of getting right now and it's going to take a little while for that all the sort itself out on some of the big deals that you might remember we did we were quite active coming out of the great financial crisis, So purchasing the big portfolio in New York and develop.

And then Landon.

Broken condos, but on the east coast in the West Coast. Those were all down 12 to 18 months. After the beginning of the great financial crisis. So those were fourth quarter 2009 deals at the beginning of then into 2010, what do you think about that crisis. The GFC really being a 2000 mid 2008 third quarter 2008 event. So I tell you it's gonna.

To be a little while I'm before we really see much to act on so I'd I'd start with that and the way. It was sort of thinking about opportunity is trying to think about replacement cost a little bit trying to think a little bit about what long term growth will be in this market did anything change that matters and we think it is sort of get.

In the your New York question little bit.

We think these big cities and I'll focus will on New York are really quite resilient New York's been through as you are quite aware on you know why it's it's been through wars. It's been two epidemics before it's been through 911 and after 911, there's lot of comment that New York wouldn't come back and people would be camp from New York and insight.

Yes, and yet you know New York had a terrific urbanization trend over the last 20 years and the population in New York City was higher in 2016 and it was in 2001. So I think every morning millions of owners of businesses throughout the country are waking up trying to figure out how to run the restaurant there cultural amenity either nonprofit there.

You know restaurant, whatever and you know they're going to figure that out over time, we're gonna have new rules about distancing and and cleanliness of then overtime hopefully there's some cure to this and we don't have this top mind, but I I think these cities are going to just like they always have and I think you could expect that will still be focused in our investment efforts.

On these large cities and dense suburban areas on for our you know kind of for apartment investment.

Thank you for your thoughts I wish everyone well.

Yeah same you stay well.

Thank you. We'll next go it's hard to gold from Zelman and Associates. Please go ahead.

Yes, thanks for the quarter.

Sometimes osten market are you seeing with difference and you know investor sentiment and you know.

The gateway cities versus somewhere like Denver on what is your thought on you know where cap rates might eventually settle out wouldn't bother them.

Sellers and even the metal.

Great I want to repeat that back to make sure I understood. If you had a question about where cap rates might end up through this and then investor interest in some of these less dense markets like Denver.

The first you know that Denver question or the Investor interest question as we look at that it's just again a little early for us to sort that out I think some types of trades like for example, the value add trade, maybe less attractive I think you're going to have a hard time doing your renovations you're going to our time jacking up rents all.

All of those things and a lot of the value add deals that were done just before the pandemic unlikely to perform pretty poorly. So my sense is that you're gonna see investor interest get sorted out and I think and we've talked about this in the last call.

Cap rates it really compressed between all these markets and I think is use go through this recession and you get pass some of this government stimulus you're going to see people with better resident bases like ours performed better and you're going to see those cap rates on those properties be more durable and cap rates that it's sort of come down on b and C quality stuff.

And then lesser markets and have lesser employment bases than the ones. We're in so that is our sense of things terms or where cap rates end up part of this is of course, a function of interest rates and rates are incredibly low, but there's also a limited because of replacement cost. So I think there's a bunch of things going on with cap rates. It wouldn't surprise me if cap.

Operates and two or three years weren't lower than they were before the pandemic because of interaction of interest rates. My sense is that the apartment sector in our company in particular will perform better than most other real estate and that there'll be more capital attracted to the area and then you just got to think about replacement cost to be careful about king.

Big premiums to replacement cost no matter, what interest rates are buying an asset. So I guess I look through it and say I wouldn't surprise me if cap rates were lower in a few years than what they are now for those reasons.

I'm just as a quick follow up could you split out what delinquency as far South Garden style properties versus you know, let's say your high rise.

Yeah, I'm not sure we're gonna give quite that level of detail I think that's just probably more than we have at our fingertips.

Got it Ah. Thanks, that's all from me.

Thank you.

Thank you we'll next go with Rich Hill from Morgan Stanley. Please go ahead.

Hey, almost good afternoon, guys at least on the East coast.

Just two quick final follow up questions.

When we think about the 97% rents that you collected versus March I'm, sorry, If you mentioned this already but did that does that 97% include the decline in occupancy is that that that you noted or should we think about the decline occupancy is on top of 97% of rents you collect it.

So let me make sure I understand that question kind of frame of reference and I'm going to rephrase it and hopefully that answers. Your question, it's Bob here rich about so.

97% is measured off of March rental payments in March we had higher occupancy right. So then we get in April.

So if anything it probably under state that 97%, probably understates, what the collection percentages as a whole does that answer your question.

Yeah, I think I think that's exactly what I was trying to get at so so said another way if your occupancy went down <unk> percentage point in a half that would be included in the percent the percent of rent that you did not collect compared to them on prior.

That is correct.

Okay. Thank you.

That's that's very helpful. Oh, one bigger bigger picture question I've heard a lot of conversations about the G.S.C., but I'm curious why isn't a you know post 911, a a better proxy for what this recession might look like you know obviously, a big shock to the system payrolls wind down there were some job losses.

Maybe job losses focused on lower income earners, how do you guys think about that I recognize not everyone's been an industry since since nine <unk> since 911, but you guys have a along institutional memory. So how do you think about this versus 911.

Well most of us in this room worse. So we remember that unfortunately, the then distinctly first off I'd say our portfolio compared to the awake great financial crisis is very similar when you go all the way back to 2001, it's a very different portfolio. So when you think about what lessons, we would pull out of that.

When that happened of course it also created this which led to the next problem created a big booming been purchasing single family homes, and so our markets like Phoenix, we owned at that point really suffered I don't know how to think about that again rates are really low mortgage capital is not that loose. So I I appreciate that there are similarities both.

The GFC answer that 911, 'cause 911 was much more that existential shock like co videos, but our portfolio. So different it's hard for me to draw some lessons to share with you.

Okay. That's a that's helpful. Oh it that's it for me guys I appreciate the transparency in this quarter.

Thank you.

Thank you we'll next go when John Kim from BMO capital markets. Please go ahead.

Thanks. Good morning, I was wondering if you could quantify what do you could impact is on a rent deferrals and reduced fees.

Same store revenue.

Yeah.

Yeah. So the rent deferral question. It I guess the long term in plaque impactful depend on kind of what back that turns out to be John right. So we're not providing guidance, but that will factor in deferral you would recognize your revenue and the normal course. The question is what bad debt ends up being on that piece certainly.

We will be impacted.

By fee revenue, our lack of fee revenue potentially rife with lower applications and and some of that in our markets, but it's hard to it's not a meaningful part of the overall topline. So it's not a huge impact and I would say even given the fact that we've been waiting late fees. That's a short term kind of imply.

Packed and even those dollars are not that significant yeah.

But if it's a tenant is going to payment plan or deferred rent.

It would not impact deficit, though.

Not at that same store revenue.

That's correct. So if if a resident is on a differ or a or a tenant on the nonresidential side is on a deferral program right you're still going to recognize the revenue unless you believe the revenue was not collectible at which point you're going to reserve against the revenue or take a bad debt expense against that revenue line item. So it all.

Sure nature of having deferral doesn't necessarily mean that you're not going to recognize the revenue it's all about collectability.

That delinquency is just to tell you where are we charged revenue, but haven't received cash so overtime to be very specific and this will be a discussion with our auditors and the audit Committee and we'll think about this because again, we're fortunate not to be a that familiar with delinquency I'd. So we'll get into June and July and we'll look at these.

Folks and we'll see if they're performing per the payment plans. If there is still in the units and will write things off and that will run through revenue, that's where a bad debt runs through revenue and then they'll be a number of people that will effectively lab. This receivable outstanding and we'll be getting paid on it and we'll be hopefully just as transparent as we are right now with you about.

You know all those numbers what did we write off but it remains an account receivable that you know what's the status of the payments we've received on on delinquent accounts.

And it makes sense and then secondly, I was wondering if you offer to your tenants payment of ranch with credit cards in the <unk>, if youve seen any trends on merchants in the last couple of months.

Yes, so we did well first of all we've always had the option to pay rather the credit card. It's just that there were fees associated with that processing fees. So through the process of our conversations we are allowing rather than to pay their delinquent balance with a credit card and we would absorb the processing fee. It just is not a material.

Oh lumber at all right now.

The change or well below even $100000 I mean kind of level.

Yeah, that's really encouraging because that shows you that our residents are living hand to mouth and having to put a months you know credit card on their credit card a rental pain. So we think that's encouraging from our point of view.

Okay.

Agreements.

Thank you Donna.

Thank you we'll next go with Alexander Goldfarb, some 5%, let's please go ahead.

Oh, a good morning, pointing out there.

So two questions first can you just go back through the the the delinquency instead of 5% delinquents. Your number of units, probably New York, California sector have the eviction moratoriums. So it would seem like tenants really don't have any incentive to go on a payment plan for.

You know a good deed period of time as these things are are pushed out but mark you said that a lot of people are coming to voluntarily and not many have been ghosting. So how do we reconcile that the two that a lot of your tendency to be coming to you and yet the delinquencies are still high or people playing the eviction thing. They just realize that they can skip a.

A few months rent and pay it next year and maybe never pay it or how how should we think about this [noise].

Yeah, Alex its Mark I guess I'm going to take issue with the idea that our delinquency and I mean, I again, you're talking about a company with 220 plus million dollars a monthly residential revenue that in what is the worst panic of our lifetimes, maybe has $5 million rent were chasing around and making progress on so I.

I don't feel like this is a big number of people I'm more concerned frankly about the recession that I am about delinquency in our portfolio listen we've got high level credit tenants on these obligations aren't going away, we're not going anywhere. So you know these are folks at value their credit that no, they're receiving a great service and I'm.

Lucky I get to read all the feedback that our residents right on our teams onsite and that feedback Alex's didn't really good they really appreciate that our people our frontline workers that he QR are keeping the property clean or maintaining all the essential parts of the building. So they can shelter in place. They don't they don't look at this rented.

Something they need to avoid they don't we're not ripping them off day, what taking care of them in a crisis. So I guess I'd say I I think our resident mindset at least as far as I can tell is very different then there's sort of resident and I said, you're describing our there are few people that are taking advantage of the system and creating this moral hazard absolutely and that's just.

Plain wrong, I mean, we're turning around and paying their rent in property taxes to these hard pressed municipalities to our whereas it to our two hardworking frontline workers me, that's just wrong, but I'll tell you, we're not going to stop being persistent pursuing them will follow the law, but you know they owe the ramp in sooner or later there will be it.

Discussion about that so I guess I'd put it to you that way.

Okay, no because the listen that Mark that's helpful. Yeah, and then second question.

Just you know in New York, specifically, obviously, a lot of us or are impacted you know why did we live in the city or or outside you, but from what you're hearing from your property or from the managers. There are you hearing about you know what do these things are residents are looking to do our our numbers looking to leave our number looking to move into as you say you keep your building.

Better better maintained and that probably number of your New York neighbors. So what does that sort of mood and expectation for New York. This summer through the summer leasing season.

Well I guess I would just start by saying in New York. It was always has the strongest retention in the portfolio, but it absolutely is seeing an improved retention with renewals at that 70% level, we've never experienced that in the city. So a lot of our residents are standpoint, and it's not like they're just staying for a month or two months there really.

Doing at those 12 month firms.

As far as the front door, that's that's a really tough tough tough thing to answer right now because it's not it's not rebounding yet like the other markets have which understandably. It's the hardest hit from from the coal bed. So I think we need to see a little bit of the public health crisis Kinda softened.

Dampened a little bit in New York to get a feel as to what the new folks coming in are saying, what they're looking for and everything else like that but I think that retention side of it short term is a positive for us.

The thing Alex we've been wondering about and we don't know as Michael said the biggest question Mark just when do they stay at home orders get lifted we do people feel comfortable getting out there and looking for apartments in doing virtual tours mean, there's going to be more distancing, but are they going to feel comfortable doing a self guided tour in our property on their own but you know they're able to see this.

Those are more efficient those are good marketing techniques that will improve closing so we're trying to balance all that we've also done some extensions of people into the fall those people probably want to go somewhere and that's probably true that theres. Other people in other apartment owners portfolios. So we wonder about whether the lease this isn't a leasing season different than any other.

Where it might go might be as high a peak the kinda go a little bit longer into the slick shoulder season, a bit but that's a little speculation on our part we're trying to sort out because again, we had no one else has been through this before.

Hi, and hopefully we don't go through it for another hundred years.

Listen I. Thank you.

Thanks stay well.

Thank you we'll next go with rake Skidmore from Goldman Sachs. Please go ahead.

Good morning. Thank you just one quick question as you think about occupancy in the trade off of trying to grow occupancy how do you think about tenant credit quality or through the various tenants that you're looking at are you able to perhaps high grade or do you.

Move perhaps down the credit quality spectrum as you look to build occupancy. Thank you.

Yes, so right now I will tell you we're not changing our models our criteria for underwriting residents I mean, we had a strong resident base and I think that that's proven some of the benefits out right now and I think you know we're going to continue down that path.

Obviously, if the demand profiles totally change through the summer and all that we can we can revisit baton pulls the levers and make some changes but at this point, we don't expect to do that.

Thank you.

Q.

Thank you we'll next go with John Guinee from Stifel. Please go ahead.

John Guy need here question first I have marked a nice real nice job today, Neil in more detail what does it goes to us exactly.

[laughter], Thanks for that comment and I went up handed over to Michael could you use that term he and I between us and maybe that need more definition, yeah. I think just to give some color that obviously you know our onsite, they're working really hard and I think I said. This before this is this is difficult.

Right because you know its heavy lifting to go after some of these delinquent balances because you have to add the are you have to have the tone of empathy, but you also have to reinforce the obligations that sit with this stuff. So we have outreach programs right for folks that we haven't heard from we're trying to do well being checks on many of our residents that we have.

<unk> from as well and the turn goes thing is we've left some messages. We spent some emails and we've gotten zero response back from those bold and again I think mark alluded to it. It's a small subset of this group that we're dealing with but eventually we have to have some conversations with these folks.

Okay. So it so it doesn't mean they moved out in the dark Knight.

On top half that furniture with them or maybe not it just means there are going sound on you.

Gone silent and then some of the markets were put in some notices on the door to make sure because we will we will enter to make sure that hasn't been vacated.

Yes, and that is part of a process, but that is one of the things that we will be doing.

Okay, and then second you obviously have a computer generated revenue optimization tools and.

Ron like everybody else run into a full occupancy.

Is there a color both good and bad in terms of how far you would drop.

Grants and the next six to 12 months to maintain full occupancy or are you not there yet.

Well I would definitely not there yet I guess I can give you a little bit of context, So first and foremost in the beginning of March we changed some of our plant parameters inside these yield management application to just less than the volatility of pricing to begin with on March 20th we actually stopped generating prices.

From the pricing engine, we turned it off in essence, and just let all of our prices stay as they were regardless of lease term, regardless you know a duration of lease as well so at that point now we're watching and we're seeing the kind of the apple pay or the traffic come back in the application.

Volume come back so just a couple of weeks ago, we started to re initialize kind of that L. A role or the the yield management application to start sending out the daily price changes as well. So I don't know exactly I think I said this before where we'll optimize kinda revenue at what level of occupancy. It is you know and.

What rate decline you would allow I think demand is going to tell you, where what that market clearing price needs to be.

But I think you could see right now I alluded to the fact that the base rents are down 4% and we're closing at a higher percentage of what we normally would be so that to meet feels like the right level today, and we'll just see where the demand levels are going forward.

Gotcha, Okay, Great and then last question I think you've got to increase disclosure Ah. Thank you any consideration of bringing back your disclosure for your consolidated joint ventures.

Consolidated joint I mean, you know our unconsolidated joint ventures at the moment are really just one asset that if they oh garage parking kind of did you think consolidated or unconsolidated.

Oh, you your consolidated keys to Oh carve out your partners ownership or economics at the consolidated Jvs I think he stopped doing that.

Got it yeah, it's a very de Minimis I'm out I'm happy to give you more color and Marty or I could give you more color about it but it's it's its a very it's a very small percentage and it's also I think theres more disclosure in the 10-Q in a footnote in the 10-Q, we just stop including a whole page in the supplemental the press.

[noise] release, but in the 10-Q, we can point you to.

Some.

Color on that.

Right. Okay. Thank you.

Thank you, we'll next go and handles and she is from Mizuho. Please go ahead.

Hello.

And now so.

Well I don't know your comments earlier on potential changes you're considering.

When you are losing Psycho arena.

Most code world interest in a that more loosen couldn't ship good forward out of the second quarter, let's put it with weapons and talking about 60% plus releasing so just curious on how active so these considerations or.

And how that might look.

Let me put on Oh.

<unk>.

Yeah, So I'm going to start it's mark and Michaels going to supplement here. This is more about looking at small sample sizes and seeing a little shifting and trying to figure out the conduct of our customer and just kind of Harry situation. So I can't tell you. We're sure that demand will be flattened out it will just be longer.

That's just again, we have a few of those Michael by turning on the pricing machine has already begun doing something we don't want to do six month leases now have explorations in the late fourth quarter. So to incentivize us to do that we are going to raise your rent do you want a renewal for a one year term I'm like term, we'll do that flat so.

So I guess handle we're gonna still manage our expiration schedule, but there are a few people who took shorter term and our portfolio. We're guessing others shorter term extensions in March and April because what's the no. One was in a position to really move and so you may see some of those people turnaround to go Okay. Now I'm ready, it's August and they would have been ready instead.

In April or May right. So there, maybe a little bit of a shift but it's it's a little it's not fully discernible I'd say at this point.

The public bone since it could be clear that goes with Clinton short term lease extensions here or they are subject to the same premiums that they would have been dark blue or before cobot or are those all could've been extended that represent.

So no so everybody basically since March 15th that had flexibility to move to any term at at no increase we basically flows rents regardless of term.

And now we're starting to pivot and change off of that and that was our way to kind of help people through these unprecedented times people that were really nervous about movie we wanted to give them the opportunity to just say so I think the peak leasing season like we all do it.

It's definitely impacted from this we just don't understand yet how that impact is going to play out.

Got it thank you for that or another lives in a post cope with world question.

I'm curious if your recent experience with virtual in contact with loosen up to more inclined to accelerate increase.

Investments, even with some of your operating platform.

Full oppose called World and you know what do you see some of the more lasting changes in your leasing in operations approach or could be I'm, assuming that kind of world you'll have more virtual loosening, maybe less new concept personnel or so just given how the business Mike no change to your views on technology.

And then maybe some buckland retail exposure, that's something that's not going forward or you wouldn't look to have left clubs.

So this is Michael maybe I'll start with just kind of the impact on the operations I will tell you I think you've heard us talk a lot about what we were doing from a sales process and all the initiatives that we were teeing up before all the I think this was an accelerator to US I think this just advanced a lot of the things that we were already kind of t. enough and thinking about.

I think it added a new layer with this virtual leasing and having kind of high content video available doing face time kinda like tours, that's a new element to the sales process and I think going forward, we're going to continue to have all the above available as our sales process is just another tool kind of that we'll have available to close leases an apple.

Occasion as.

As far as the Tech investment side goes this did not change the tech investment that we were thinking about from the service side of the business, we already deployed that mobile kind of software and I'll be honest with you that was a huge advantage for us in that allowed our team to quit pivot to focus on urgent service requests only we had complete.

Transparency at the top of the houses to what was happening all the way down to an individual tax a we knew what needed to get done all from your mobile device that was a big win on the sale side of the business. We've already made most of the investments in the technology that we're going to need to run I think the biggest thing that was out there as you heard us.

Talk about making some investment into the smart home technology, where we were getting ready to move forward with about 10000 units. This year. We already have about 2500 units deployed I think that's one of the areas that will probably pause and we're going to see the nexgen of technology come out that probably won't ASCII pads that will be Bluetooth.

Enabled is already some of this technology available, but we'll just wait to see it kind of get vet out a little bit and then we'll continue to move forward with that but I think as you think about operations going forward. It is very clear that contact list.

Touch free those are kind of things that are going to be with us.

In this environment, not only immediately but probably even longer term.

In this world of new normal.

Bob any lines just sit on the retail yeah, no other retail in nonresidential pieces out we've always focused on minimizing that exposure I'm, we've focused on investing in high quality apartment buildings riper, an apartment company. So that hasn't changed that's how we ended up at the limited exposure that we have here today. So I don't think from a strategy standpoint, that's going to.

Change at all in our market in particularly in the urban areas. There is typically with these high quality assets some some exposure to retail.

That's helpful. Thank you and one more classes and I think really wasn't much in that.

2% of the loses and signed recently or set the move them before May 12, one if I heard that correctly I don't I guess I'm more curious.

How the time between loose approval a move ins due in part with your bye bye.

Noticeable changes a little about timing on either you or parts of customers apart.

A couple of about 60% figure it with some contracts.

Yes. So first let me go at 60% of the applications last week are scheduled to move in before May 22nd.

That may 12, and I think from a behavior standpoint, as you think about the duration I think you know this is the time of the year right, where you have a lot of people looking to to lease future a month or leases are expiring. That's typically what you see in a peak leasing season, and I think we're seeing that we're seeing demand.

And for June Phil.

And we're seeing some of our noted to vacate or units that we will have become a vacant in the future those are being sold today.

But that's not a huge changes in their normal behavior.

Okay. Thank you very much.

Thank you we'll next go with Nick Joseph Some city.

Hey, it's Michael Bilerman.

Mark I wanted and look I appreciate your comments.

But the resiliency of.

Orkin other and urban cities.

But I also know that you know this isn't a pretty unprecedent time that doesn't have sort of one's a marker relative to other times.

And I wanted to know what the house view and not enough with me into tends you, but collectively is the equity organization.

About the interplay between office utilization and you know where you are weighted.

Rental apartment, or you know house or or or condo or whatever it is but the whole dynamic once we get post oh stuff and just from a frame of reference yes, 911 out of a massive impact clearly in New York and.

Organizations desires to being Big office towers.

This is what we're going through now is 100% of corporate America, except for central workers have their organizations working remotely.

I would imagine that that is going to change some element of how corporations, we'll see where their workforces, our who they are and where they may anyway, and I would have.

I thought that could have significant impacts in terms of how things would play out from a residential perspective. So can you dive a little bit more into that element.

Sure a lot a lot there down pack and I sort of they very thoughtful and I mean, it isn't evolving situation no doubt this is.

100 year event, we hope and we're going to go all go through it together and figure it out.

I was trying to get to this thought process about vibrancy and flexibility that these big urban areas have you know gone through a lot before and they'll figure this out to in ways that we can't yet determine and you talk just a little bit I wonder about that Michael about corporate preferences versus individuals and.

People could probably always live in different places and Telecommute and now they'll be able to telecommute, even more I I agree with that part of it but our sorts of people. These affluent renters big liked living in each urban in dense suburban places and right now there are thrown off a little because we're all trying to figure out how do you how do you run New York City.

With more social distancing and cleanliness is it ships. So how does that all work, but you know everyday millions of people are waking up trying to figure out how to do that you know how to run the transit systems in the restaurants and all that so I guess I'd say I'm certainly not have in mind that that's something you abandoned very quickly that all the sudden were all movie.

And to exar been in rural settings that that doesn't make sense to me that the preference for you know young affluent renters like we have to live in these cities among their peers is pretty you know pretty durable and pretty strong. So I guess I don't deny this is unprecedented but I guess I'd answer by saying.

The company's may allow more teleworking, it almost certainly will us, including but I think resonance p. or excuse me employees will still choose where they care to reside and I think our markets will still be very attractive to them and that the dense denser solutions, especially as we work through you know new ways to be clean inside buildings in a distant.

Inside buildings that that'll kind of work itself out over time, So I guess, that's I'm not sure. If that's the house view, but that's the sort of eat you our view and you know I think Sam it's been on record very recently in a big broadcast about the strength of the residential business. So I think you know we feel we feel good about our business model.

Right I, just I wonder if there is an investment or a future opportunity. If if corporations are going to have some portion of their workforce right incremental higher they're gonna have I would believe corporate America. Just so you wouldn't do would look at an employee and train or we can find a really good.

Operations person that may not have to be in Chicago and be head office, but you know given all of our technological improvements and we've all now had this trial then it works you may find that incremental higher you may want to put in Denver or another and local market. When you don't have an office in that person you know if they're living.

In the New York hearing they need a certain amount of office into is there an opportunity to further the investment in your communities to provide a now you'd already started some of this in terms of the need of co working and things like that I don't know if there is a trend there that you've started to think about.

Yeah, I mean, Michael at some comments on that I mean, we are trying to figure out how we can make our apartment buildings, even more comfortable as these common areas open up in this new test in seeing and cleanliness environment.

You know I I think that's something that we're working on right now and you're right to ask about and I think we want to make our properties attractive for people to spend more hours per day, and then they probably have in the past at least for awhile and the good news is you've been in a lot of our buildings they have terrific amenities and terrific.

Most of them have just terrific lounges, and large group decks in places, where you can be home, but be outside your unit for a period of time and still feel safe. So I I think that's something more marketing.

Again, we've got to get the cleanliness of the safety thing right as an industry and we will and then I think you'll have the advantage of being at home, but outside your unit and that'll fuel feel good to our resident.

Right.

And just last thing in the higher density.

You know higher rent locations you know, there's a certain aspects of these cities that have a massive cultural aspect and while I would think about L.A. in San Francisco New York.

Seattle, all trying to read open parts of that I'm not going to reopen it full force and the other part of it is the taxes in those locations or are very high and the employment.

Places are not going to bring back 100% their employees, because I can't and social distance world and I, just wonder whether more younger after when people are going to say I'm, just gonna go leasing them or Austin or Miami for a year because I don't like my office is that doesn't need 100% going back in may.

Of the things that I live in the city for I can I enjoy it so could be occupancy is gets hurt or.

In the near term before we sort of come on the other side.

Great question I I can't give you certain key on any of this I'll just say that so far we've seen demand even in lock down start to head up again already I mean, it seems to us that our demographic and this is anecdotal either daughters College age I know a lot of kids in your mid Twentys and you know they they don't want to.

With with their parents anymore. They want to go back to the big cities and being in their apartments and live their lives again. So you know I guess I'd be more anxious about owning a bunch of apartment buildings in Orlando or Miami, where they're hospitality dependent that's closed down and you wonder how many people who work at airports and hotels.

Theme parks and cruise lines will ever come back to work I think that's a pretty salient question to ask I think you're right. There's these telecommuting options will be more available to people, but I think people didn't live in Brooklyn, because it was cheap people live in Brooklyn, because they love the cultural amenities, they love the restaurants, and all that stuff closed down.

Now and allergens figuring out how to reopen it I think it really open and over a period of time as you suggested and make those submarkets that we operate in it you know continue to be pretty attractive.

Well I take I appreciate taking the time to answer the questions and for all the details like gates and that really slow.

You stay healthy appreciate the good questions. Thank you.

Thank you. We'll next go it's hard to go from Zelman and Associates. Please go ahead.

Hey, guys I just wanted to be respectful of everyone's time, so I'm going back in.

Mark I guess is quite almost a question, but I just need your help understanding something.

Garden has higher delinquency across your portfolio employment base, and some of the markets and whatnot and it's a week or.

Yeah.

Was trading at a discount to office other peers.

It doesn't sound done its upward pressure that.

Those of narrative about.

You know apartments in suburban living all that but right now with a 30% unemployment.

Folio has performed really well.

Got to be in some markets. So.

Little confused by the Investor response, and I just don't got.

Well like I.

I just would ask you to spread the word.

You know I said I think what we were trying to get a crossing the release. Besides this general feeling of I've empathy and concern for our communities, which are going through Helen back right now is that.

We did pretty well in April we did pretty well as a company in the midst of this pandemic and when you look long term a lot of what just happened with coal that does it you don't look at our strategy and go that doesn't make sense like you do some other real estate sectors. You know our strategy makes a lot of sense, but even between then and now is this recession and we're all going to go through that we're going to see I would go.

Those are companies been pretty resilient through those we've come out of it historically faster and better. So you know I think we just need to make or case and continue to be effective in and transparent. Then you know, we're we're confident investors over time and and smart analysts like you will pick it up and people will we'll see the opportunity. So I guess, we think about running the business long.

Herman and investors will respond to it over the long run.

Thanks.

I really appreciate the disclosures you guys put out I think the reporting and the messaging was really focused on high quality.

Yes.

Thank you all credit to Bob and his team. So thank you for that.

Thank you. This smock stands the question and answer session I will give the floor back to the motion meter.

We thank you all for your time today, and we hope everyone stays healthy good day. Thank you.

This concludes today's call. Thank you all for your participation you May go ahead and discussed.

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Uh huh.