Q4 2020 Essex Property Trust Inc Earnings Call
Dead dead dead dead.
Good day, and welcome to the Essex Property Trust fourth quarter 2020 earnings conference call as it reminder today's conference call is being recorded statements made on this conference call back 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 on the company's filings with the SEC. It is now my pleasure to introduce your host Mister Michael Shaw president and chief executive officer for a Property Trust. Thank you. Mr. Shawl, maybe get Welcome to our fourth quarter earnings conference call. I'm very pleased to acknowledge a promotions of Angela climate in, Georgia.
Our pact to their new roles at Essex and greatly appreciate their contributions for many years of dedicated service. Both Angela and Barb will follow me with prepared remarks off and Adam Berry. Our chief investment officer is here for Q&A at the end of last year. We announced John Burkhardt retirement and we thank John for his tireless efforts and numerous contributions to the company's success over nearly three decades.
As we reported last night our fourth-quarter and full-year 2020 results continued to be significantly impacted by the COVID-19 pandemic resulting in lower same property tax revenue and core ffo per share for both the quarter and the full-year similar to the last few quarters pandemic related regulations have had to primary coccyx wences first shelter and place and related orders have resulted in unprecedented job losses and second anti-eviction and related laws prevent us from maximizing property performance government mandates are constantly changing and they intensified during the fourth quarter given certain surging COVID-19 cases.
Gave him the pandemic involves extraordinary efforts and I thank the s16 for their tireless dedication and made these challenges.
Overall, our fourth-quarter results reflect stability in sequential that effective rents beginning in October and is discussed during our third quarter earnings call sucked actual revenues improve Thirty basis points in the quarter with Market rent, mostly flat in the cities and modestly positive in Suburban locations. Therefore, we are cautiously optimistic that we have or will soon reach the bottom in Market rent declines as of December twenty twenty preliminary three months trailing job losses in the essence jackets were 7.9% year-over-year a hundred and fifty basis point Improvement compared to minus 9.4% for September 2020 and outperform a nation which had a hundred basis point improvement from September to December even with the recovery of jobs in Q3 and Q4. The nation had 9.2 million.
Fewer jobs year-over-year for the month of December roughly equal to the number of jobs lost at the worst point of the financial crisis.
Our data analytics team prepared s17 to the supplemental which is our base case scenario underlying our expectation that net effective rents will decline 1.9% in 2021. The range of potential outcomes is extraordinarily wide for 20 21 given many unknowns that relate to the pandemic including the pace of vaccine deployment and changes in regulation are modeling further assumes 4% GDP growth, which should lead to positive momentum in the second half of 2021 apartment. Supply will continue to be a challenge especially in the downtown location of Los Angeles and Seattle.
Our analytics team expects approximately 34,000 Department deliveries in 2021 a modest increase compared to last year also similar to 20. We don't expect much for sale housing production going forward. It's our experience at affordable for sale housing competes directly with rentals once rent rise to a month that approximates the monthly payment of an entry-level for sale home and there is little risk of that occurring in the ethics markets anytime soon.
Page Seventeen point one of the supplemental highlights 13 recent multibillion-dollar Tech initial public offerings for companies headquartered in the Essex markets awful. Overall 2020 was a great year for IPOs with a hundred forty-seven Tech sector offerings completed during the year. It's our view that the IPO Market is essential to recharge the tech ecosystem providing growth Capital to early-stage investors and to generate liquidity for reinvestment page as 17.1 also took a straight to re re acceleration in job openings for the top ten tech companies, which has increased 38% since the August 12th.
Our analysis indicates that nearly 60% of the total job postings are located in California or Washington with the next largest state taxes accounting for June seven per-cent.
HS 17.2 of the supplemental package demonstrates that Venture Capital Investments continued on a record Pace in twenty-twenty with approximately $130 billion invested in us with the ethics Market's continuing to receive the dominant share of the investment success in the knowledge-based economy requires a critical mass of highly-skilled workers off creating a network of fact that draws companies to the Bay Area and Seattle while only a limited number of venture-backed companies will go public some will experience extraordinary life extraordinary growth similar to snowflake doordash Airbnb and resulting in thousands of high-paying jobs.
The environment today has many similarities to the previous recessionary periods, including the financial crisis in the bursting of the.com bubble in both cases migration out of California was often front page news in 2020. We experienced higher out-migration than normal especially in our West Coast Urban centers in our experience people make different choices during recessions and is not surprising to see many in the large baby boomer cohort monetized the value of an expensive California home to move to less sensitive areas as part of a retirement plan. This recession is unique with respect to the extraordinary loss of jobs that involve lower-paid service workers jobs that are concentrated in a city centers and affected employees often had only two choices move immediately to find work or stay in their home shielded by eviction for birth.
Flaws address with previous recessions we expect most of these Trends to reverse we expect that the demand for restaurants services and travel will recover swiftly as vaccine administered bringing back related service jobs workers in the ethics markets earn more than in most parts of the country and the draw of higher-paying jobs combined with lower recent rent levels makes rental housing down the West Coast the most affordable. It has been since 2013 a recent McKenzie study estimates that only 22% of the American Workforce can work from home without any productivity loss.
We have been tracking many companies that have adopted work from home models during the pandemic and we remain confident that the vast majority of companies will ask employees to return to the office is it safe to do so likely with increased work from home flexibility going forward Google Netflix and apple are among the largest companies to express a desire to return to the office many others will follow her into the regulatory environment a third wave of COVID-19 cases beginning in November and related concerns about Hospital availability led to age of severe stay-at-home orders in all of our California markets. Some of these restrictions were last week. But all of the Essex park has remained in California's most restrictive category patiently with the passage of SB 91 last week. The state of California has extended COVID-19 related eviction protection from January 31st to June 30th, 2021 in club.
pushing back the requirement to
Pay at least 25% a pandemic related rent in addition the law established a state rental assistance program to allocate 2.6 billion in federal stimulus package using income levels to prioritize payments and accepting related to applications in March as with similar laws. There are many related requirements and complexities which we are evaluating turn into the apartment investment markets during 20 20, we sold for properties with a total of 670 apartment homes for $343 million all of which were placed under a contract subsequent to the implementation of shelter-in-place orders in March given the wide discount in valuation for public reads compared to the private real estate market property sales remain our preferred source of funds for investment since the onset of the pandemic a relatively small number of Apartments sales.
Support our belief that property values have not changed materially since the onset of the pandemic however extraordinary changes in rent rent increasing in the case of both Suburban markets and decreasing sharply in some Urban locations makes it difficult to draw conclusions about cab rates in the suburbs where rents are generally at or above pre pandemic length property values have modestly increased and cap rates are somewhat lower compared to the pre pandemic. Given lower rents and significant concessions in hard-hit City's recent price around possible sales indicate about a 5% reduction in value versus the code. Resulting in cap rates for high-quality properties below 4% off.
As with previous recessions Fannie Mae and Freddie Mac has continued to provide very attractive financing with seven year fixed rate financing in the mid 2% range potentially supporting lower cabernets vaccine distribution should remove uncertainty with respect to apartment operations and property values as a result We Believe transaction volumes will begin to accelerate as I indicated before improved cash flow from positive leverage in apartments has historically led to a robust transaction Market with that. I'll turn the call over to Angela.
Thank you Mike. First I would like to express my appreciation to the Essex operations team for their diligent effort to serve our customers and then say challenging environment caused by the pandemic off. Thank you for all your hard work as for my comments. I will Begin by discussing our 2020 results all of our outlook for 2021.
Overall our Market perform as we expect that despite the headwinds of new code related closures and seasonal decline in demand. Currently the urban core particularly often text Centric markets continue to remain more impacted by covert by COVID-19 related job losses and office closures in addition.
the change
Quality of life resulting from the closures of restaurants and public amenities has driven a temporary shift in consumer preferences high-rise buildings are communities located in areas with I walk scores have been the most impacted by this shift and demand conversely communities with private outdoor space or more affordable residences outside the urban core continue to experience a greater demand which benefited many of our properties in Ventura San Diego Orange County and the East Bay in Northern California this temporary shift and demand continued in fourth-quarter wage. We experienced a 7.6% and 9.9% year-over-year increase in quarterly turn over in Seattle and San Francisco compared to the portfolio the average turnover of only 1.3%
Furthermore are CBD locations also had a greater concentration of apartment Supply deliveries typically accompanied by very high concession levels during the fourth quarter. We continued our leasing strategy of leveraging concessions on stabilized communities and building occupancy. There have been encouraging indicators from a sequential perspective in that more than half of our same property portfolio grew revenues sequentially driven in part by increases in occupancy and decreases in concessions. We have provided year-over-year and matter of fact that changes for our portfolio on page sixteen or supplemental new lease rates were down 8.9% in the fourth quarter stable in January and an improvement from a negative 12.2% achieved in the third quarter.
Concessions on the same property improved from approximately 18 million in third-quarter. She was searching million in the fourth quarter. This reduction in concessions is noteworthy considering the fourth quarters has seasonal. We lowered demand and historically concessions increase during this period rather than decreasing he highlights of the same property performance of our majors in the fourth quarter are as follows in Seattle, 4.9% Year-over-year Revenue decline was primarily driven by Seattle CBD, which declined by 13% off the remaining submarkets average a 3.2% declined year-over-year job growth in Seattle declined by 7.3% in fourth quarter in Northern California wage, 10.4% Year-over-year Revenue decline was led by CBD San Francisco and Oakland averaging an 18% decline contrast it with a 4.2% decline in Contra, Costa College.
Well Santa Clara County perform in line with the regional average of a 10% decline year-over-year job growth in northern California declined by 8% the San Jose your brother off at a 76.4% decline.
In Southern California, the 7.2% year-over-year decline was primarily driven by La CBD and West Market averaging a 17% decline offset by an average decline of 2.4% in our Suburban markets of Ventura Orange County in San Diego fourth quarter year-over-year job growth in in Southern California declined by 8%
Moving on to our 2021 Outlook as indicated on us-17 of the supplemental multi-family supplier is the percentage of stock remained low as 0.9% for our Prestige while we expect a percentage of the year-over-year growth to remain flat new conclusions will once again be concentrated into an urban submarkets were Supply is projected to increase by 2.1% compared to just 0.7% across the rest of the portfolio the Confluence of minimum Supply and extraordinary job losses. We met a significant had one in our Urban markets in Seattle. We expect multifamily Supply as percentage of stock to increase in 2021 by 1.6% driven by 2.9% in the CBD offset by a 1% increase in the suburbs where we have the majority of our units. We have also seen positive office activities by maija.
That companies as they continue to push forward on expansion projects in Seattle Amazon received approval for a 1.1 million-square-foot project in Bellevue. Microsoft has control over their campus expansion and in Kirkland Google acquired a ten-acre site for a large campus in Northern California. We project overall multi-family Supply as per month of stock in 2021 to decrease by ten basis points, although Oakland and San Jose are expected it increased by 1.8% and 3% respectively life impact of Covent text expansion plans have continued in the Bay Area Amazon purchased a six Acre Site near downtown San Francisco Facebook last last month to month and updated plan for its 1.25 million-square-foot campus expansion in Menlo Park and Google continue to work with the city of San Jose for its major new campus at zero down station. Yep.
The biotech sector continues to be a strong source of office demand highlighted by the recently-approved expansion of Genentech is headquartered in South San Francisco, which would add up to four point three million square foot of new office space in Southern California. We project overall multi-family Supply as percentage of stock to remain flat the most notable increase is 4% and deliveries and West will remain elevated. Once again this year Well many uncertainties remain as to legislation and the timing of the vaccine based on current market conditions. We assumed our schedule around for the same property portfolio. Will we will drop in the second quarter of this year because leases are typically one year interracial. Are you over your Revenue growth will be negative and the first half and positive in a second half leading to our same-store full-year guidance of two and half percent of Revenue decline at the midpoint wage.
Sweet or current same-store physical occupancy is 96.4% our availability 30 day out is 4.7% Thank you, and I will now turn the call to our pack.
Thank you, Angela. I'll start with a few comments on our fourth-quarter results followed by key assumptions in our 2021 guidance and finally an update on our recent Capital markets activities off-balance-sheet as expected. The fourth quarter was a challenging. With core ffo declining 12. 5% compared to one year ago. This was primarily driven by an eight percent decline in st. Petersburg are pretty revenues as a result of higher concessions and delinquencies as we noted last quarter. We report confessions on a cash basis in our same property results because we believe this is more indicative of a true market conditions. However, we are required by Gap to treat concessions on a straight-line basis in calculating Consolidated revenue and ffo.
As Angela mentioned during the fourth quarter. We provided five million fewer concessions than the third quarter which helped improve same property Revenue. Sequentially. However, Courtney declined by 4% or 13 cents per share compared to the third quarter of which $0.16 is attributable to lower straight-line rent concessions. We expect this line item to continue to be a headache went to court ffo growth in 2021, which I will discuss in a minute. Please note on page S8 of the supplemental. We have detailed the quarterly impact of non-cash straight-line rent.
Turning to delinquencies continue to take a conservative approach to reserving against uncollected rent, especially given the surgeon COVID-19 cases in the fourth quarter, which resulted in a standard lockdowns in our markets throughout much of the quarter as such we reserved against the entire net delinquency balanced during the fourth quarter are receivable balance currently stands at approximately 7 million Ventures at Pro rata share based on past collections. We feel this receivable balance is consistent with our ongoing conservative approach. We will continue to assess our delinquency reserved and our net pack local balance each quarter based on collection history and market conditions.
Turning to our 20 21 guide in key assumptions are available on page five of the earnings release and S14 of the supplemental. We provided a wider than normal range for same property revenues and coughing. So given the significant uncertainties that remains surrounding covet and the recovery ahead including vaccine distribution and eviction moratoriums that are outside our control old but could swing guidance office variety of ways that said we felt it was important to outline our key assumptions based on information we have today for the full year. We expect core ffo per diluted share to declined by 5.1% at the midpoint. The key drivers of the decrease are primarily related to the following 2 items first, we expect same property revenues and Noy to declined by 2.5% and 4.6% respectively at the midpoint while current operating fundamentals remain steady in our markets as compared to several months ago. We will continue to feel the negative effects of the birth.
20 rent declines throughout most of 2020
In addition to do the eviction moratoriums and regulations that remain outside our control we expect delinquencies will remain elevated in 2021 and will be a direct ffo by an estimated forty five cents per share at the midpoint. The company has a long history of excellent record collections. And we expect this temporary delinquency headwind to bring a tail into ffo growth. Once the various COVID-19. The restrictions are lifted second. We are we also face significant headwinds from a straight line confessions. We expect this non-cash item will result in 41 to $0.56 per share decline in core Pho representing about a 4% reduction and growth on a year-over-year basis.
As it relates to concessions we expect they will remain high in the first half of the year before moderating in the second half of the year as an economic recovery takes hold as such we expect to in fact from straight-line rent concessions to be minimal and the first half of the year with most of the negative impact we forecasted to fall in the last two quarters of twenty Twenty-One Blackjack on the capital markets activities and the balance sheet during the fourth quarter. We close 206 million of new preferred Equity Investments and bought Back Forty Six Million of common stock at a significant discount off the nav. These Investments are being funded with three asset sales totaling approximately $275 million that are under contract and expected to close in the first quarter. This is consistent with a guiding principles of match funding Investments on a leveraged neutral basis.
For the year, we were able to Arbitrage a difference between public and private market pricing by selling three hundred forty-three million of assets at prices generally consistent with pretty COVID-19 is and buying bath 269 million of stock at an average price of $225 per share all while maintaining our balance sheet strength and creating value for our shareholders.
Our balance sheet remains strong with minimum near-term funding needs and sound financial metrics. All our net debt-to-ebitda has increased this year. This is primarily the result of the significant decline in Abuja by the pandemic as economic recovery takes hold in the west coast economy's continued to reopen we expect our net debt-to-ebitda ratio will improve with ample liquidity just a well covered dividend our balance sheet remains a source of strength with that. I'll turn the call back to the operator for questions.
Thank you. We will now be conducting a question-and-answer session. You would like to ask a question, please. Press star one on your telephone keypad. The confirmation tone will indicate your line in a question Q. You may press star to if you would like to remove your question from the Q. We ask that you please limit yourself to one question and one follow-up question. One moment, please while we pray for your question.
Our first question comes from the line of Joseph with Citigroup. Please proceed with your question. Thanks. I appreciate the commentary on kind of dynamic nature of your life as well as the slides in the in the panel, but I'm just wondering as you think about kind of postcode right if we're in a more flexible work environment pretty beside to be kind of migration Trends south side of the state, but just if there is more flexibility, you know in commuting times change. How does that think how does that change how you think about your exposure within your Market in urban Suburban or even further out and could there be opportunities that you're exploring today?
Hi, Nick. Thanks for the question. It's a good one. And this is Mike. You know, we think that there will be more work from home flexibility. But at the same time we think that that employees will be tethered at some level to the office, you know, as I think about the three other very capable people here today knowing them and trusting them and I you know, all these things are a great team effort and teams are better when you really know the people and can trust the people. So I'd say that is a key factor that I think and is noted in the prepared remarks will keep employees relatively close to their jobs. So having said that I would think the the winners in this scenario will ultimately be the high quality cities that are near the jobs but also offer, you know, maybe a little bit more affordable housing and good schools low crime rates Etc. So I think Thursday
That will play itself out and I think those those areas we have a lot of cities that are among the major metros that qualify for that. So in some of them have been a hard hit so I I would I guess I would add to that some of the cities that are high quality cities that rents have been highly impacted by COVID-19.
Thanks that answered the question. That was very helpful. And then just one quick one quick question. I guess on the rent relief programs. Is that 6 helping residents who are behind kind of fill out or navigate the ability to get relief and is there any kind of relief from the government assumes that guidance?
Yeah, the note it on the call that last week the state of California using Federal stimulus dollars started a program or announced the program took six billion potentially of rent relief. And the way it would work is the landlord would be required to forgive 20% And so the reimbursement programs could be 80% that would be predicated on you know percentages of median income average median income. So it will provide the great benefit to those that are lower income levels and it's hard to tell exactly what that means. We just haven't had enough time to evaluate that program. So I'm I'm guessing that we will have a pretty significant positive impact from it. But again, it's it's too early to evaluate.
Thank you.
Thanks dick. Thank you. Our next question comes from the line of Jeff Spector with Bank of America. Please proceed with your questions.
Great. Thank you. First I I want to say congratulations to Angela and Barb and we wished on a great retirement. Thanks for the the time today Mike in your opening remarks, you know, you you commented that you have or soon will reach your bottom and you're in Market rents, and I I know you're you're fairly conservative. And so I take that comment, you know, pretty serious. I guess what gives you comfort to say that, you know, can you just talk about that a little bit more, please?
Of course Jeff, I think that's a good question. And it's I think probably the maybe the most important question out there. So if we look at net effective rents for the fourth quarter, sequentially, they were down under 1% So net-net, that's all the markets now, there's pretty significant variation between Market to Market and part of that is an even though we have high occupancy overall. There are parts of our portfolio that have lower occupancy. For example, San Francisco still at you know, ninety two and half percent Seattle downtown is at about the same level. And so there are there are areas that were very very highly occupied that are offsetting areas that are that don't have the same occupancy and actually below average occupancy level and most of that is Angela alluded to is related to the supply level as you can imagine. If you've got negative job growth equivalent to right now still has a dead.
Number equivalent to the worst part of the great financial crisis. It is not not the not a great time to be delivering apartment units and therefore in the in the cities are getting off of the supply delivery. So you have this Confluence at Angelo spoke about which is negative demand growth and lots of supply and the cities are understandably hit from that offsetting. That is we do have markets that are doing very well, you know, for example Ventura where rents are up almost 10% year-over-year on a market basis. And so, you know, we're doing pretty well in a lot of these suburbs now that leads to this issue that talked about many times which is rent to income and it's interesting that you know Ventura with it's I think it's more like a game.
They didn't have the temple.
Rent increase is now about 17% above its long-term historical average of this ratio rent to income which is incredibly important to us. Whereas in Northern California. We're 7% below the long-term average rent to income. So, you know, everyone looks at this like, hey, the suburbs are going to do a lot better, but when rents go up a long ways, I would question that and and conversely when the rents are essentially hammered in the cities. It changes the consumers view page where the opportunity is and so our view is, you know long a little bit longer term that you're going to see a very significant movement back towards the areas where rents are high quality cities where rents are pretty affordable.
Thank you. That's very helpful. And is that what ultimately led to you know Essex providing the full year guidance, which is very much appreciated.
Well, it's a it's there's a number of things. We have a a whole I kind of have a philosophy on guidance being a CFO and if I weren't here, I'm not sure that bargain Angelo wouldn't have come to a different decision to be perfectly candid. So but yeah, you know, I mean our preference is to always provide what we can and to be open with the market and and then you know, you won't disagree disagree with us. But you know presumably we have better information that you have and therefore it's up to us is you know, I believe the way so that's the philosophical.
Position I took and and it prevailed. Thank you.
Thank you. Our next questions come to the line of Rich Hill with Morgan Stanley. Please proceed with your question. Hey, good morning guys. Thanks for calling transparency provided in the in the release and they prepared remarks one of the things that struck us is that you guys did a really good job early on a valuing occupancy over over Rent Em. And and I think that's one of the reasons that you're really starting to see some sequential growth and you've alluded to this a little bit but I do want to maybe drill down a little bit more on the way the leases are coming due and what's historically the peak leasing season and how you think you're going to manage through that I recognize that you know, you you said one key is going to be tough to queue is going to be challenging. Oh well, but how do you think through that? How do you think your your your occupancy sets you up to to to manage through? You know at least coming to when demand still not going to be back to where it is?
Yeah. Hey Sandra one here. That's a good question. And it's certainly something that we actively debate internally with you know, the Tactical strategy, right, Well, I don't think I want, you know, go through our playbook in detail. I would just say that that we focus on maximizing wage Avenue and we do so by optimizing occupancy whenever possible we need the market and so you've given where we are and and you're right on point. They actually did, you know in the third quarter focus on occupancy, which allowed us fourth-quarter to pull back on concessions Thursday it is we see the market stabilized and so as we continue to see the how the market perform, you know will continue to use that.
strategy and in
Although this point is really the tried to pull back on concessions whenever possible. And of course keep in mind, you know, that's the subject of course the wage which I mentioned that in the cbc's will continue to be pretty heavy and and they all assuming a a recovery in the back half of the year or so all those come into play.
Okay, I think I think that I have appreciation for not wanting to give the Playbook away. I would love for you to but I appreciate why you might not want to check on the other side of the equation just the job growth. One of the things that I believe it or not. I think is misunderstood about your portfolio is your class A B mix in in urban versus Suburban home. Um, I'm not sure that's all we appreciate it. But by the investor base, so when you think about job growth, uh, can you maybe break breakdown that that those job growth views relative to do, you know white collar high-class high paying jobs and and urban markets versus maybe the the type of renter's that would rent class be in in in the Suburban markets.
Yeah, this is Mike and there's a lot to that question. So I'll try to unpack it as best. I can every every session is a little bit different and I normally, you know, we view Southern California as are more typical of the US average and therefore it's less volatile in this recession. It has been incredibly he's a little in a certain sector and that is the motion picture sector we didn't talk about it this time we have on prior calls and you know, it's effectively shutdown and this is like the big wolf generator in Southern California. And so Southern California is probably the biggest surprise relative to Prior recessions, you know, for example in the financial crisis Market rents went down in Southern California about 10% versus about 15% per the ethics portfolio in total. So this time Southern California looks a lot like Northern California, and and I think it's because of the two key parts of the
Again, the filming and entertainment business plus all of these low jobs, when you look at the the sectors of jobs that have been demolished it's off all the lower-income segments of of the job base, you know, mainly it's hospitality and restaurants and other services those jobs are down on the edge, you know, somewhere in the 20% range which means in the cities which are even higher concentrated. They're even more impacted. So, you know, it's Angela said you get a oh, you got a month supply coming into the cities. You also have worst job growth again, but we give you the averages these are averages they're more concentrated in the cities. So and then when you when you go north into the the tech markets, I think that you have two things that are happening you have all those service jobs in Seattle and and the bay area, but you also have a game
I would say greater.
Work from home flexibility that is that on the margin has allowed the areas that would generally be that are Suburban in nature. You know, most of San Jose is Suburban has a small downtown up to you know through a Mountain View where Facebook is located and and Google right in that look that area those areas have been a much greater impacted and I think a lot of that is the work from home phenomenon. So, you know, I think that the so I think it's the recovery looks like a couple of things it's you know, there's nothing fundamental choice of these businesses. The motion picture business is still high demand the technology companies as noted in the the prepared remarks, you know, a lot of venture capital money being invested lots of Investments. I made by the big tech companies and two locations and buildings. And so everything, you know, I think in terms of the broader economy looks fine, we need those companies to bring birth.
Back to the office to some extent. We also need you know, there's always people that are retiring and again selling their expensive California home going somewhere else and then backfilling comes from college graduates coming to take high paying jobs. So I think that there's a mismatch there. I think that the people that are leaving of left the low-income can't afford to stay. They either have left or our thoughts put given an eviction laws and then but we haven't seen the backfill yet and I think you're going to see the backfield starting in the next, you know, relatively soon and I think that they will, you know start to solidify wage because you know, we're ninety something percent occupied. It doesn't take that many jobs to sort of fill things up tighten things up and then concession start updating pretty quickly. So that's how we see it off. Hopefully that helps that does help a lot one final thing for me, you know strikes a chord is me when you say you have more information than us. I think that's very true. Yep.
I would encourage you if there was anything that you could provide on population migration trends that you're seeing in your specific markets, um, you know, and in the coming months, I think that would be really well received. But but thanks guys. I really appreciate as always the dialogue. Sure. No. No, hey, we're happy to give it and yeah, I can give you a little bit of you know, migration information and and again, you know similar to Prior recessions, you know where everyone focuses on the very short-term which which is you know recessions happen about every ten years about every five years, you know, I was fifty-nine sixty. I make a difference decision when I'm 60 with a 50 about where I live and how hard I want to work in various things and and so that's part of it and I lots of people make make changes in their life based on where you know what they're doing and how close they are to retirement and a variety of other things so I would say off
A lot of what you're seeing is just the first leg of what always happens.
You know about every ten years and typically around a recessionary. But in in terms of inflow outflows, you know, it's a little bit different by market, you know, we still the mileage in into our markets still dominated by you know, New York and Boston and and even some other California Metro. So there's quite a few people moving from San Francisco to Los Angeles for example, maybe for better weather or whatever and and the outflow is really Las Vegas is Phoenix and other California cities in San Francisco. It's Seattle, Austin Sacramento and Seattle is Phoenix Boise Austin in terms of of outflow. And again, all three took it in from highly-skilled workers, you know, probably in in a lot of the Eastern metros and from some California cities, so hopefully that helps that's Linked In data off.
Uh, and but our experience is is pretty consistent with that. Thanks guys.
Thank you. I will next questions come to the line of a man. Despite Sir With Bear. Please proceed with your question.
Great. Thanks for taking the question. I want to dig in a little bit more on just the near-term demand you've seen kind of as you've had option to pick up 2% of where that demand is coming from. Are you taking chef from other properties in the market or you have you really seen renters moving something quality like you have last cycle?
Well, it's you know, Angela I think put a happy face on and all that her, in a minute, but it's a battle out there. So I wouldn't say we're taking anything from anyone I'd say we're competing fiercely to we all have maybe a little bit different Focus, you know, and again as we've said before our focus is maintained high-occupancy protect the coupon rent used, you know, we use confessions when when we when we have to try to be aware of, you know, what time of year it is and and and what that battle is going to look like and and plan ahead. So I think I think we do a good job of that but I don't think I don't think there's any winners in this current situation. So we are trying to turn the battleship toward a better day, but you know, it's not quite here yet. Obviously Apartments, you know, we look ugly when it's getting better. You know, we we lag when your lease is dead.
What causes the lag and you know the all time high in terms of our achieved leases, you know, we'll hit in q1 and Q2, which is why the year-over-year will look so ugly and fat but, you know things were, you know, definitely slowly getting better and you I think we'll see that down the road as Angela said in the second half.
Okay, that makes sense. And then train to the disposition you have lined up. Can you just provide more color on kind of the profile of those assets even in terms of age or location? And then as well as the buyer pool and if you hire pool has changed at all from pre kogan.
Sure.
Yeah, this is Adam happy to answer. So for those three they're they're situated throughout our portfolio. And so from there. There's really no kind of General overview of of the month of asset. They are in all three cases. These are actually three exchanged buyers. Um, and and so so say there's there's one in the burial just uses as an example. It's in a you know, we heavily concession Bay Area market and the way we're underwriting it as you can imagine. It's kind of tough to pick cap rates given we're current net effect of rents are so Thursday. We're underwriting it based a couple of different ways one is on going to pre Cove it in place rents. And then looking at current net effective today on current net effective that deal again. This is a wage probably Conception Bay Area Market. It's in the low threes. So call it 3-2 something like that and on pre COVID-19. That's about a three eight or so dead.
And so that's the that's the spread and that that was under written in the fourth quarter. So, you know concessions have have varied, um, uh before that and and since but that's the ballpark and she still is there's enough of a transaction Market out there where Market has been set. The the buyers are a little different than uh than during your typical typical cycle, but there continued to be deals that that go down.
Appreciate all that detail. Thanks.
Thank you. I will next questions come from the line of Rich Anderson with SMBC. Please proceed with your question. Hey, thanks good morning, and congrats everyone and congrats to John too. If you listen to them on the on the topic of eviction moratoriums, I'm feeling like that could be a messy time when they start to expire. I don't know if you agree. I mean some people just suck paying again, but then perhaps a sloth of people that I got a I don't leave now because I'm making me pay. Is there a risk that you could see some some some volatility and occupancy when those things start to burn off and and you know, we kind of try to get back to some sort of normalcy.
Hey Rich, it's Mike and maybe Andrew want to comment as well, but I think messy was way to describe it because I think we're looking. Yeah. Well we've Al you ate it very much the same way the your back end. When a be 38, which again was supplemented by this SB 9138 was pass in in August and required residents to pay the residents to pay at least 25% of their rent by Thursday, January 31st. And and then sb91 ruled that January 31st date to June. So the the 25% is getting larger and it's I definitely will add pressure to that whole situation and you don't I definitely not smart enough to figure out how that's all going to play out. We're you know, we're all hoping that this month.
Federal stimulus
We you know, we have a mostly a b type of portfolio. And so, you know, we we don't have any quantification of it whatsoever. But you know, that would certainly help a lot because you know, that would potentially pay 80% of the unpaid rent and we would have to walk away from the other 20% but that's a whole lot better than what we've assumed in terms of our delinquencies. So yeah, I think we're we're covered in terms of you know, the normal to kind of probably slightly conservative case scenario and and maybe there's a little bit of upside here given wage has to be 91. So, that's how it answer but you're absolutely right. I I don't know. I don't for sure know the answer to it. Okay, and then, you know, you kind of talk about the you know, your portfolio sort of characterization D quality. I guess. I'm a little surprised that the portfolio didn't you know do a little bit better, you know with the disruption going on in the urban core birth.
You would think that your portfolio, you know being, you know larger once removed from those environments might have captured a bit more in terms of flow of of of residence and it's easy for me to say I owe a lot going on your markets, but perhaps maybe it's not very characteristic of your portfolio again sort of be quality that not necessarily downtown location that gives you the feeling to say something like, you know, cautious optimism, or I'm wondering if that's that's a driving factor to to some of the optimism that you're kind of trying to say today. How long were you know it I mean optimism is I I'm not sure where if optimistic is. Yeah. It looks like we've hit bottom after you know being pummeled and yeah, I guess that's the Mystic that I I wouldn't I wouldn't say that I mean, I think that as I said in the the opening script and the reason why I put it in there is hey this we're still at a point where the name?
His loss as many jobs as it lost in the financial crisis and in the financial crisis, our average Market rents were down 15% Seattle is a little worse than about 20% and wages in California did a little better. So I think we are kind of where we where we are where we would expect to be given the extraordinary number of jobs lost. Now, it's not the same as the the financial crisis in that you've lost these low-end service jobs and you know, they're mostly in the city, you know servicing at at various levels, you know, a very wealthy clientele with you know, lots of lots of money. So it's it's it's different but mostly the same I I would say I'm not surprised about where wreckage gone in general and um, I you know, I hope for a robust recovery with vaccine, you know, distribution and and all that stuff because it seems like a lot of this month.
Is is really?
Focused on you know, COVID-19 doubt comes, you know, losing service jobs is because of because of service jobs just aren't there other shut down by the government. So I think they'll come back pretty quickly cuz I think people do want to want to you know, go out to eat dinner and that type of stuff and so I think it's it's going to come back and I hope soon obviously, okay and just real quick. I'm delinquencies, you know, kind of just taking Reserve against all of its $0.45 hits to to this year. And we really look at that. What's your experience in terms then, you know actually not deserving the bad debt tag and and they're actually become collectable. Is it 50% in in you know past Cycles or or is it hard to say cuz this one sucks.
Yeah, this is Barb. This cycle is very different than any other cycle even during the financial crisis. Our delinquency was only fifty to sixty basis points of schedule rent. So being at 8.7% which is where we've been the last couple of quarters. It's obviously a lot higher I think in the fourth quarter, you know, we we did take we reserved against all of it. And that was really dead the environment. We were in a severe lockdown state for most of the quarter and into January and not really knowing when any of that was going to lived we decided to take a pause, reassess and coupon and see where things are at as that goes and then the $0.45 that I alluded to in my script that's really compared to our storico run-rate wage. So, you know for the foreseeable future, we do expect delinquency to remain elevated this eviction protection moratorium sp91 goes till June and then we don't know what's going to happen after that. So, yep.
We we have assumed that we don't make a lot of progress on the delinquency. It's not because we can't collect. It's it's a combination of both people not paying and collections kind of are getting us to that page mid 2% range of scheduled rent.
Thank you. Our next question comes from the line of Rich Hightower with evercore is I please proceed with your question. Hey, good morning out there guys. Just a quick one for me. I think we've covered a lot of ground. But just on this on this disconnect between you know reported same store and ffo given the the, you know, the cash concession account treatment versus gaap with respect to revenue and ffo. So if we you know, if if we sort of assumed that concessions heavy concessions shut down, you know on June 30th. Let's say which I think is sort of implied in the Outlook, you know, help us understand the the the Cadence there after you know, when you would sort of stop seeing that disconnect between the two series just as we think about modeling that you know into into 2022. It sounds like
Yeah.
Well, I don't have 20 to 22 guidance at this point. But in the back half the year, we we do expect concessions to moderate not to update completely but to moderate-income that's where you'll see it will benefit the same store Revenue growth, but the offset will be on core ffo growth given that will have to amortize the straight line of concessions. And so thank you to our core ffo growth relative to the same property growth that you'll see and and we expect that to happen in the last two quarters of this year.
And then you know twenty twenty-two is is not something I can give at this time.
Yeah, right, right. Thanks partly. I get I get I guess that part of it for you know, while the the concessions are still heaviest but I mean, could you is there a way to walk through the timing, you know, assuming a 12-month lease or something like that? That would say okay by by this point in 2022 you would see, you know, same store and ffo converge or correlate with a more in the in the way they have historically their way to to frame that out or is it just sort of reaching too far at this point?
Yeah Richard, this is Mike. Let me let me add something here and Angeles in the middle of this so she can comment too, but it's more like a battle every day because we are constantly increasing or pulling back concessions changing rent levels trying to find the optimum for net effect of rents. And so it's just possible to model that and so, um, I'd say, you know trust us to do a good job of trying to figure that out. We have people that are you know spending do you know very I'd say senior people that are spending a lot of time in the trenches pricing units every box a little bit different as you can imagine, you know, supply and demand changes on a daily basis and I just can't tell you what's going to happen. We can't tell you our guidance is based on something but the reality is we can't tell you that that exactly is going to happen and the mix of consumer.
Differential it could change and it this is you know, I've been here over a really long time many of you probably say too long, but it's unlike any other. I've seen and as a result, it's very difficult to be too granular with respect to answering these questions.
Thank you. I will next questions come from the line of Alexander Goldfarb with Piper Sandler. Please proceed with your question.
Hey, good morning morning out there first will continue the congrats. So Angela as we see here in New York on your new on your new life. It's wonderful, but my to the point of CEO succession planning mean obviously we saw avalonbay do it. You guys did a number of years ago when Keith took the reins over to you. It did seem from the outside the John was being groomed. Maybe that wasn't the case but again on the outside, that's what it looked like. So he just talked a little bit about you know, CEO 16 did this impact anything does it not and you know, you just any other impact that may come of this or maybe this open up this opens up spots in the in the senior ranks to allow you to groom, you know more people to to raise the more, you know senior roles of Essex.
Yeah, Alex think thanks for the question. It's a good one. Really.
You know, we take successful planning super seriously. I'm really pleased that I have you know three.