Q2 2024 Essex Property Trust Inc Earnings Call

Good day and welcome to Essex Property Trust's second quarter 2024 earnings call. As a reminder, today's conference call is being recorded. Statements made on this conference call regarding expected operating results and other future events are forward-looking statements that involve risk and uncertainties.

Unknown Executive: As a reminder, today's conference call is being recorded. Statements made on this conference call regarding expected operating results and other future events are forward-looking statements that involve risk 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. However, a number of factors could cause actual results to differ materially from those anticipated. Further information about these risks can be found in the company's filings with the SEC.

Unknown Executive: As a reminder, today's conference call is being recorded. Statements made on this conference call regarding expected operating results and other future events are forward-looking statements that involve risks and uncertainties. Forward-looking statements are made based on current expectations, assumptions, and beliefs, as well as information available to the company at this time.

Forward-looking statements are made based on current expectations, assumptions, and beliefs, as well as information available to the company at this time.

Unknown Executive: A number of factors could cause after results to differ materially from those anticipated. Further information about these risks can be found on the company's filings with the SEC.

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 FEC.

Unknown Executive: It is now my pleasure to introduce your host, Ms. Angela Kleiman, President and Executive Officer of Essex Property Trust. Thank you, Ms. Kleiman. You may begin.

Angela Kleiman: It is now my pleasure to introduce your host, Ms. Angela Kleiman, President and Executive Officer for Essex Property Trust.

Angela L. Kleiman: It is now my pleasure to introduce your host, Ms. Angela Kleiman, President and Executive Officer for Essex Property Trust. Thank you, Ms. Kleiman. You may begin.

Angela Kleiman: Take you, Ms. Kleiman; you may begin. Good morning, and thank you for joining Essex's second quarter earnings call. Our pack will follow with prepare remarks, and Rylan Burns is here for Q&A. We are pleased to report a strong second quarter with core FFO per share exceeding the high end of our guidance range by five cents. As a result, we have our second notable increase to our four-year guidance.

Angela L. Kleiman: Good morning, and thank you for joining Essex's second quarter earnings call. Barb Pak will follow with prepared remarks, and Rylan Burns is here for Q&A.

Speaker Change: Good morning and thank you for joining Essex's second quarter earnings call. Barb Pak will follow with prepared remarks and Rylan Burns is here for Q&A.

Angela L. Kleiman: We are pleased to report a strong second quarter, with core FFO per share exceeding the high end of our guidance range by five cents. As a result, we have made our second notable increase to our full year guidance. Today, my comments will focus on underlying drivers of our outperformance and operational highlights, followed by an update on the investment market.

Barb Pak: We are pleased to report a strong second quarter with core FFO per share exceeding the high end of our guidance range by five cents.

Angela Kleiman: Today, my comments will focus on underlying drivers to our outperformance and operational highlights, followed by an update on the investment market. Starting with operating fundamentals. Year-to-date demand for West Coast multi-family housing has exceeded our expectations, particularly in Northern California and Seattle regions. While we've traditionally relied on the BLS to assess housing demand, the reported data have not correlated to the strength we're experiencing on the ground. As such, we've analyzed alternative demand indicators from third-party sources for better insights into the key drivers supporting housing demand. The first of these is job openings at the top 20 technology companies.

Speaker Change: As a result, we have our second notable increase to our four-year guidance. Today, my comments will focus on underlying drivers to our outperformance and operational highlights, followed by an update on the investment market.

Angela L. Kleiman: Year-to-date demand for West Coast multifamily housing has exceeded our expectations, particularly in Northern California and Seattle. While we've traditionally relied on the BLS to assess housing demand, the reported data have not correlated to the strength we're experiencing on the ground. As such, we've analyzed alternative demand indicators from third-party sources for better insights into the key drivers supporting housing demand. The first of these is job openings at the top 20 technology companies.

Starting with Operating Fundamentals.

Speaker Change: Year-to-date, demand for West Coast multifamily housing has exceeded our expectations, particularly in Northern California and Seattle regions. While we've traditionally relied on the BLS to assess housing demand, the reported data have not correlated to the strength we're experiencing on the ground.

Speaker Change: As such, we've analyzed alternative demand indicators from third-party sources for better insights into the key drivers supporting housing demand.

Angela Kleiman: In June, openings in Essex markets total over 17,000 jobs, which represent a 150% increase from the 2023 trough. While we have yet to return to the historical average of 25,000 jobs, the study improvement so far has generated incremental demand in our markets and is a good precursor of the recovery, particularly in Northern California and Seattle.

Angela L. Kleiman: In June, openings in the Essex markets totaled over 17,000 jobs, which represents a 150% increase from the 2023 trough. While we have yet to return to the historical average of 25,000 jobs, the steady improvement so far has generated incremental demand in our markets and is a good precursor of the recovery, particularly in Northern California and Seattle. Another factor contributing to West Coast housing demand is migration. Real-time data using Placer AI shows a gradual improvement in domestic migration patterns on the West Coast. This is illustrated on page S16.1 of our supplementary.

The first of these is job openings at the top 20 technology companies. In June , openings in the Essex markets totaled over 17,000 jobs, which represent a 150% increase from the 2023 trough.

While we have yet to return to the historical average of 25,000 jobs, the steady improvement so far has generated incremental demand in our markets and is a good precursor of the recovery, particularly in Northern California and Seattle.

Angela Kleiman: Another factor contributing to West Coast housing demand is migration. Real-time data using Placer AI shows a gradual improvement in domestic migration patterns on the West Coast. This is illustrated on page S16.1 of our supplemental. This data suggests that workers are relocating back to the coastal headquarters, generating a shadow demand similar to a new job being added. Additionally, this year, Northern California has positive net domestic migration for the first time since pre-COVID.

Speaker Change: Another factor contributing to West Coast housing demand is migration. Real-time data using Placer AI shows a gradual improvement in domestic migration patterns on the West Coast. This is illustrated on page S16.1 of our supplemental.

Angela L. Kleiman: This data suggests that workers are relocating back to the coastal headquarters, generating shadow demand similar to a new job being added. Additionally, this year, Northern California had positive net domestic migration for the first time since pre-COVID. As for supply dynamics, limited new housing combined with favorable rental affordability continue to underpin our market fundamentals. For example, the rate of income growth has outpaced rent growth, which has improved affordability metrics in our markets.

Speaker Change: This data suggests that workers are relocating back to the coastal headquarters, generating a shadow demand similar to a new job being added. Additionally, this year, Northern California has positive net domestic migration for the first time since pre-COVID.

Angela Kleiman: As for supply dynamics, limited new housing combined with favorable rental affordability continues to underpin our market fundamentals. For example, the rate of income growth has outpaced rent growth, which has improved affordability metrics in our markets. Additionally, it is 2.8 times more expensive to own than to rent in our markets today, compared to 1.7 times back in 2019 when interest rates were near the historical low. Even if mortgage rates were to revert back to the 2019 level, home ownership in our markets will still remain significantly less affordable than renting. Turning to Property Operations, we experienced a solid peak leasing season with blended rent growth for same property portfolio of 3.4% for the quarter.

Speaker Change: As for supply dynamics, limited new housing combined with favorable rental affordability continue to underpin our market fundamentals. For example, the rate of income growth has outpaced rent growth, which has improved affordability metrics in our markets.

Angela L. Kleiman: Additionally, it is 2.8 times more expensive to own than to rent in our markets today, compared to 1.7 times back in 2019 when interest rates were near their historical low. Even if mortgage rates were to revert back to their 2019 level, home ownership in our markets would still remain significantly less affordable than renting. Turning to property operations.

Speaker Change: Additionally, it is 2.8 times more expensive to own than to rent in our markets today, compared to 1.7 times back in 2019 when interest rates were near the historical low.

Barb Pak: Even if mortgage rates were to revert back to the 2019 level, home ownership in our markets will still remain significantly less affordable than branching.

Angela L. Kleiman: We experienced a solid peak leasing season with blended rent growth for the same property portfolio of 3.4% for the quarter. Blended rent growth would have been 4.5%, so 110 basis points higher if we exclude LA and Alameda, the two counties with elevated delinquency-related turnover. As for regional highlights, Seattle has been our best performing market today, achieving a 4.9% blended rent growth while maintaining a strong occupancy level of 97% in the second quarter. The east side, which has been less impacted by supply than the CBD, led this region with 5% combined rent growth.

Speaker Change: Turning to property operations, we experienced a solid peak leasing season with blended rent growth for same property portfolio of 3.4% for the quarter.

Blended rent growth would have been 4.5%, so 110 basis points higher if we exclude L.A. and Alameda, the two counties with elevated delinquency-related turnover.

Angela Kleiman: 4.9% blended rent growth while maintaining strong occupancy level of 97% in the second quarter. The East Side, which has been less impacted by supply than the CBD, let this region with 5% blended rent growth.

Angela Kleiman: There are two key factors that contribute to this strong performance. First, relative to our other regions, Seattle has the strongest job growth. Second, the new supply has been less impactful as timing delays resulted in fewer deliveries in the first half of the year. These two factors have led to a prolonged seasonal peak in that this market typically peaks around late June, but this year the peak occurred a month later around the end of July. Northern California was our second best performing region, achieving a 3.3% blended rent growth in the second quarter and occupancy of 96.3%.

Angela L. Kleiman: There are two key factors that contributed to this strong performance. First, relative to our other regions, Seattle had the strongest job growth. Second, the new supply has been less impactful as timing delays resulted in fewer deliveries in the first half of the year.

Angela L. Kleiman: These two factors have led to a prolonged seasonal peak in that this market typically peaks around late June, but this year, the peak occurred a month later, around the end of July. Northern California was our second best performing region, achieving a 3.3% blended rent growth in the second quarter and an occupancy of 96.3%. San Mateo and San Jose were the notable outperformers at around 4% growth, with Alameda County pulling down the regional average by 80 basis points due to delinquency turnover and the continued elevated supply in Oakland.

These two factors have led to a prolonged seasonal peaks and that this market typically peaks around late June but this year. The peak occurred a month later around the end of July.

Barb Pak: Northern California was our second best performing region, achieving a three 3% blended rent growth in the second quarter and occupancy of 96, 3%.

Angela Kleiman: San Mateo and San Jose were the notable outperformers at around 4% growth, with El Amida County pulling down the regional average by 80 basis points due to delinquency turnover and the continued elevated supply in Oakland. Generally, rents in this region peaked around early July, consistent with historical patterns.

Barb Pak: San Mateo and San Jose with a notable outperformers at around 4% growth with Alameda County, pulling down the regional average by 80 basis points due to delinquency turnover and the continued elevated supply in Oakland.

Barb Pak: Generally rents in this region peaks around early July consistent with historical patterns.

Angela Kleiman: Lastly, Southern California continues to be a steady performer. We achieved 2.8% blended rent growth with quarter, which would have been 200 basis points higher if we were to exclude LA. In similar fashion, Southern California's average occupancy of 95.7% for the quarter was tempered by Los Angeles, with all other markets at or above 96% occupancy, excluding LA. Southern California's rents peaked in late July, consistent with historical patterns. As we begin the third quarter, our portfolio is well positioned with an average concession of less than two days and occupancy is healthy at 96.2%. We are prepared to shift to an occupancy strategy as appropriate while maintaining the optionality to minimize rental growth.

Angela L. Kleiman: Generally, rents in this region peaked around early July, consistent with historical patterns. Lastly, Southern California continues to be a steady performer. We achieved 2.8% blended rent growth for the quarter, which would have been 200 basis points higher if we were to exclude LA. In similar fashion, Southern California's average occupancy of 95.7% for the quarter was tempered by LA, with all other markets at or above 96% occupancy. Excluding LA, Southern California's rents peaked in late July, consistent with historical patterns.

Lastly, southern California continues to be a steady performer, we achieved two 8% from Atlanta rent growth for the quarter, which would have been 200 basis points higher if we were to exclude L. A in similar fashion Southern California average occupancy of 95, 7% for the quarter was tempered by Los Angeles.

Barb Pak: With all other markets at or above 96% occupancy.

Barb Pak: Excluding L. A southern California rents peaked in late July consistent with historical patterns.

Angela L. Kleiman: As we begin the third quarter, our portfolio is well positioned with average concession of less than two days, and occupancy is healthy at 96.2%. We are prepared to shift to an occupancy strategy as appropriate while maintaining the optionality to maximize rental growth. Finally, on the transaction market, in the second quarter.

Barb Pak: As we begin the third quarter, our portfolio is well positioned with average concession of less than two days and occupancy is healthy at 96, 2%. We are prepared to shift to an occupancy strategy as appropriate while maintaining the optionality to minimize rental growth.

Angela Kleiman: Finally, on the transaction market. In the second quarter, there was a significant increase in investor demand for well-located newer multi-family properties on the West Coast. In contrast, the number of market properties for sale remained low. This combination has resulted in a highly competitive bidding process and a compression in cap rates in some markets. Over the past few months, SXS has selectively procured three high-quality communities in the Bay Area. All three of these investments have significant upside potential based on the favorable fundamental backdrop and efficiencies from our operating platform. We are pleased with the progress to date, with over 500 million in acquisitions closed, and are optimistic more opportunities will arise in the near future.

Barb Pak: Finally on the transaction market.

Barb Pak: In the second quarter.

Angela L. Kleiman: There was a significant increase in investor demand for well-located, newer multi-family properties on the West Coast. However, in contrast, the number of marketed properties for sale remained low. This combination has resulted in a highly competitive bidding process and a compression in cap rates in some markets. In the past few months, Essex has selectively procured three high-quality communities in the Bay Area. All three of these investments have significant upside potential based on the favorable fundamental backdrop and efficiencies from our operating platform.

Barb Pak: There was a significant increase in investor demand for well located in newer multifamily properties on the West Coast. In contrast, the number of marketed properties for sale remained low. This combination has resulted in a highly competitive bidding process and a compression in cap rates in some markets.

Barb Pak: Over the past few months.

Barb Pak: Selectively procure three high quality communities in the Bay area. All three of these investments have significant upside potential based on the favorable fundamental backdrop and efficiencies from our operating platform.

Angela L. Kleiman: We are pleased with the progress to date with over $500 million in acquisitions closed, and we are optimistic more opportunities will arise in the near future. As always, we remain disciplined and focus on maximizing shareholder value and enhancing the growth profile of the company. With that, I'll turn the call over to Barb.

Barb Pak: We are pleased with the progress to date with over 500 million in acquisitions closed and are optimistic more opportunities will arise in the near future.

Angela Kleiman: As always, we remain disciplined and focus on maximizing shareholder value and enhancing the growth profile of the company.

Barb Pak: As always we remain disciplined and focus on maximizing shareholder value and enhancing the growth profile of the company.

Barbara Pak: With that, I'll turn the call over to Barb. Thanks, Angela. I'll begin with comments on our second court of results, followed by the key components of our full year guidance raise and conclude with an update on the balance sheet. Beginning with our second quarter results, we are pleased to report core of a full per share of $3.94, which exceeded the midpoint of our guidance range by 11 cents. The outperformance was primarily driven by five cents of higher same property revenues, which was largely the result of stronger net effective rent growth. In addition, this quarter benefited from four cents of one-time revenues and lower operating expenses, which are timing-related.

Barb Pak: With that I'll turn the call over to Barb.

Barb Pak: Thanks, Angela. I'll begin with comments on our second quarter results, followed by the key components of our full year guidance raise, and conclude with an update on the balance sheet. Beginning with our second quarter results, we are pleased to report core FFO per share of $3.94, which exceeded the midpoint of our guidance range by 11 cents. The outperformance was primarily driven by $0.05 of higher same property revenues, which was largely the result of a stronger net effect of rent growth. In addition, this quarter benefited from $0.04 of one-time revenues and lower operating expenses, which are timing-related.

Barb Pak: Thanks, Angela I'll begin with comments on our second quarter results followed by the key components of our full year guidance raise and conclude with an update on the balance sheet.

Barb Pak: Beginning with our second quarter results. We are pleased to report core F O per share of $3 94, Sun, which exceeded the midpoint of our guidance range by <unk> 11 cents.

Barb Pak: The outperformance was primarily driven by five cents of higher same property revenues, which was largely the result of stronger net effective rent growth.

Barb Pak: In addition, this quarter benefited from four cents of onetime revenues and lower operating expenses, which are timing related.

Barbara Pak: Turning to our full year guidance revision, our strong second quarter result and healthy peak leasing season have enabled us to increase the midpoint of our same property revenue growth by 75 basis points to 3%. Our improved outlook is largely driven by blended rent growth outpacing our initial forecast, resulting in a 50 basis points increase to revenue growth. We now forecast blended rent growth to be 120 basis points higher than our initial forecast, driven by outperformance in Northern California and Seattle. As for same property operating expenses, higher utility costs and legal fees are the primary drivers of the 50 basis points increase in our midpoint to 4.75%.

Barb Pak: Turning to our full year guidance revision, our strong second quarter results and healthy peak leasing season have enabled us to increase the midpoint of our same property revenue growth by 75 basis points to 3%. Our improved outlook is largely driven by blended rent growth outpacing our initial forecast, resulting in a 50 basis points increase in revenue growth. We now forecast blended rent growth to be 120 basis points higher than our initial forecast, driven by outperformance in Northern California and Seattle.

Barb Pak: Turning to our full year guidance revision, our strong second quarter results and healthy peak leasing season have enabled us to increase the midpoint of our same property revenue growth by 75 basis points to 3% are.

Barb Pak: Our improved outlook is largely driven by blended rent growth outpacing our initial forecast, resulting in a 50 basis points increase to revenue growth.

Barb Pak: Now forecast blended rent growth to be 120 basis points higher than our initial forecast driven by outperformance in northern California and Seattle.

Barb Pak: As for same property operating expenses, higher utility costs and legal fees are the primary drivers of the 50 basis points increase in our midpoint to 4.75%. As for controllable expenses, we have been effective in managing this aspect of the business despite the elevated cost environment.

Barb Pak: As for same property operating expenses higher utility costs and legal fees are the primary drivers of the 50 basis points increase in our midpoint to $4 75 per cent.

Barbara Pak: As it relates to controllable expenses, we have been effective in managing this aspect of the business despite the elevated cost environment. For the year, we expect controllable expenses to increase less than 3%. In total, we now expect same property NOI to grow by 2.3% at the midpoint, representing a 90 basis points improvement to our prior guidance and a 170 basis points improvement from our initial outlook. Based on our strong second quarter results and the revision to same property growth, we are raising full year core FOE by 27 cents to $15.50 per share, which represents 3.1% year-over-year growth.

Barb Pak: As it relates to controllable expenses, we have been effective in managing this aspect of the business. Despite the elevated cost environment.

Barb Pak: For the year, we expect controllable expenses to increase less than 3%. In total, we now expect same property NOI to grow by 2.3% at the midpoint, representing a 90 basis points improvement to our prior guidance and 170 basis points improvement from our initial outlook. Based on our strong second quarter results and the revision to same property growth, we are raising full year core FFO by $0.27 to $15.50 per share, which represents 3.1% year-over-year growth.

Barb Pak: For the year, we expect controllable expenses to increase less than 3%.

Barb Pak: In total we now expect same property NOI to grow by 2.3% at the midpoint, representing a 90 basis points of permit turf prior guidance and a hunter and 70 basis points improvement from our initial outlook.

Barb Pak: Based on our strong second quarter result in a revision to same property growth. We are raising full year copper fell by 27 cents to $15.50 per share, which represents three 1% year over year growth.

Barbara Pak: In total, we've raised core foe a notable 47 cents per share so far this year. As it relates to our third quarter guidance, we are forecasting $3.87 at the midpoint. The sequential decline from the second quarter relates to two factors. For a same property, NOI is expected to be 5 cents lower, which is driven by elevated operating expenses, given the typical seasonality and spending for repairs and maintenance, taxes, and utilities. And second, we had two cents of one-time items in the second quarter.

Barb Pak: In total, we've raised CORFFO by a notable $0.47 per share so far this year. As it relates to our third quarter guidance, we are forecasting $3.87 at the midpoint. The sequential decline from the second quarter relates to two factors. First, same property NOI is expected to be $0.05 lower, which is driven by elevated operating expenses given the typical seasonality and spending for repairs and maintenance, taxes, and utilities.

Barb Pak: In total we've raised corvo of notable 47 cents per share so far this year.

Barb Pak: As it relates to our third quarter guidance, we are forecasting $3.87 at the midpoint.

Barb Pak: The sequential decline from the second quarter relates to two factors.

Barb Pak: For our same property NOI is expected to be five floor, which was driven by elevated operating expenses given the typical seasonality in spending for repairs and maintenance taxes and utilities.

Barb Pak: And second, we had $0.02 of one-time items in the second quarter. Turning to the preferred equity portfolio. For the year, we expect between $125 million and $175 million in redemptions, of which we have received $50 million to date. Our intention is to redeploy the proceeds into acquisitions, depending on market opportunities. In terms of the watch list, we started the year with five properties on the list, of which three have been removed so far.

Barb Pak: Second we had two cents of onetime items in the second quarter.

Barbara Pak: Turning to the preferred equity portfolio. For the year, we expect between $125 million to $175 million in redemptions, of which we received $50 million today. Our intention is to redeploy the proceeds into acquisitions, depending on market opportunities. In terms of the watch list, we started the year with five properties on the list, of which three have been removed so far today. Two of the properties were acquired and consolidated on our financials, and one of the investments had a significant equity infusion, which puts us in a better position in the capital stack. Our leverage levels remain healthy with net debt to EBIT's at 5.4 times, and we have over 1 billion available liquidity.

Barb Pak: Turning to the preferred equity portfolio for the year, we expect between 125 million to $175 million in reductions of which triggers.

Barb Pak: We received 50 million today.

Barb Pak: Our intention is to redeploy the proceeds into acquisitions, depending on market opportunities.

In terms of the watch list, we started the year with five properties on the list of which three have been removed so far today.

Barb Pak: Two of the properties were acquired and consolidated on our financials, and one of the investments had a significant equity infusion, which puts us in a better position in the capital stack. In total, the reduction in the watch list added approximately four cents to our full-year core FFO. The rest of the portfolio is performing as planned. Finally, our balance sheet metrics remain a key source of strength. We will have no remaining consolidated maturities in 2024.

Barb Pak: Two of the properties were acquired and consolidated on our financials and one of the investments had a significant equity infusion, which puts us in a better position in the capital stack.

Barb Pak: In total the reduction in the watch list added approximately four cents to our full year core if I saw the.

Barb Pak: The rest of the portfolio is performing as planned.

Barb Pak: Finally, our balance sheet metrics remain a key source of strength, we have no remaining consolidated maturities in 2024, our leverage levels remain healthy with net debt to EBITDA at five four times and we have over 1 billion in available liquidity.

Barb Pak: Our leverage levels remain healthy with net debt to EBITDA at 5.4 times, and we have over $1 billion in available liquidity. As such, we are well positioned to capitalize on opportunities as they arise. I will now turn the call back to the operator for questions.

Barbara Pak: As such, we are well positioned to capitalize on opportunities as they arise.

Barb Pak: As such we are well positioned to capitalize on opportunities as they arise.

Unknown Executive: I will now turn the call back to the operator for questions. Thank you.

Speaker Change: I will now turn the call back to the operator for questions.

Unknown Executive: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Yeah.

Unknown Executive: We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation to indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you.

Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment it may be necessary to.

Speaker Change: Take up your handset before pressing the star keys, one moment, please while we poll for questions.

Unknown Executive: One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Austin Wurschmidt with Key Bank Capital Markets. Please proceed with your question.

Speaker Change: Thank you. Our first question comes from the line of Austin Wordsmith with Keybanc capital markets. Please proceed with your question.

Austin Wurschmidt: Our first question comes from the line of Austin Wordsmith with Key Bank Capital Markets. Please proceed with your question. Good morning, everybody.

Angela L. Kleiman: Hi, and good morning, everybody. Angela, you mentioned that you're prepared to shift to an occupancy strategy. So just curious if we should view the pullback and renewal rate growth in recent months as a tactical move to drive occupancy? Are you getting some pushback on the increases and kind of seeing retention moderate? What's sort of driving the pullback?

Speaker Change: Hi, and good morning, everybody I'm, Angela you'd mentioned that you're prepared to shift to an occupancy strategy. So just curious if we should view kind of the.

Angela Kleiman: Angela, you mentioned that you are prepared to shift to an occupancy strategy. So just curious if we should view the pullback and renewal rate growth in recent months as a tactical move to drive occupancy. Are you getting some pushback on the increases in kind of seeing retention moderate? What sort of drive in the pullback? Thanks.

Austin Todd Wurschmidt: The pullback and renewal rate growth in recent months.

Austin Todd Wurschmidt: Tactical move to drive occupancy are you getting some pushback on the increases in kind of seeing retention moderate what what's sort of driving the pullback.

Angela L. Kleiman: Hey Austin, good to hear from you. This is more in line with our approach to address seasonality in our business, and typically, as we approach the seasonal peak, we would push on rents, and now, as we shift toward the seasonal, you know, slower time of demand, we start to migrate toward occupancy. Ultimately, the goal is to maximize revenues, so it's not so much of anything we're seeing that is, you know, any red flags on the fundamentals; it's more of how we normally run our business to maximize rents and revenue.

Angela Kleiman: Hey, Austin. Good to hear from you. This is more in line with our approach to address seasonality in our business. And so typically, as we approach the seasonal peak, we would push on rent. And now, as we shift toward the seasonal slower time of demand, we start to migrate toward occupancy. Ultimately, the goal is to maximize revenues. So it's not so much of anything we're seeing that is, you know, any reflects on the fundamentals. It's more of how we normally run our business to maximize rents by revenue. Got it.

Austin Todd Wurschmidt: Hey, Austin Oh, good to hear from you.

Speaker Change: This is a more of more in line with our approach to address seasonality in our business and so typically as we approach the seasonal peak, we would push on rents.

Speaker Change: Now as we shift toward the seasonal.

Speaker Change: Slower times are female and we started to migrate toward occupancy ultimately the goal is to maximize revenues. So it's not so much of anything we're seeing that is a.

Speaker Change: And any red flags on the fundamentals its more of how we normally want our business to us.

Speaker Change: Maximize rent.

Speaker Change: Revenue.

Angela L. Kleiman: Got it. And then could you break out how new lease growth has trended across the three regions as you get into July? And just curious where you're seeing kind of the most moderation and what's kind of holding stronger, maybe a little longer than you would have anticipated?

Speaker Change: Got it and then could you break out how new lease grades.

Angela Kleiman: And then could you break out how new lease growth has trended across the three regions as you get into July, and just curious where you're seeing kind of the most moderation and what's kind of holding stronger, maybe a little longer than you would have anticipated. Thanks. Interesting. So on the new lease rates, net effect, new lease rates, we are seeing Southern California holding studies slight deceleration. But, you know, nothing material like 10, 20 basis points. Northern California is the more deceleration. About to our basis points and then Seattle, you know, about 50 to 60 basis points of deceleration.

Speaker Change: Trended across the three regions as you get into July and just curious where you're seeing kind of.

Speaker Change: The most moderation and what's kind of holding stronger maybe a little longer than you would have anticipated.

Angela L. Kleiman: First thing, so on the new lease rates, net effect new lease rates, we are seeing Southern California holding steady, slight deceleration, but nothing material, like 10, 20 basis points. Northern California is the more deceleration, about 200 basis points, and then Seattle, about 50 to 60 basis points of deceleration.

Speaker Change: Sure thing so on the new lease rates net effective new lease rates, we are seeing them.

Speaker Change: Southern California.

Speaker Change: Holding studies slight deceleration, but yeah, nothing material like 10 20 basis points.

Speaker Change: Northern California is the the more just the deceleration.

Speaker Change: Hum.

Speaker Change: About 200 basis points, and then Seattle, Yeah about 50 to 60 basis points of deceleration.

Angela Kleiman: And once again, under new lease activity here, it's pretty much what we had expected. There's nothing here that's giving us any alarm. This is normal business, you know, with us. Normally, northern California peaks earlier than southern California. And so this is unplanned. Thank you.

Angela L. Kleiman: And once again, on the new lease activity here, it's pretty much what we had expected. There's nothing here that's giving us any alarm. This is normal business, you know, with a... Normally, Northern California peaks earlier than Southern California.

Speaker Change: And.

Speaker Change: Once again on the under new lease Yeah, no activity here, it's it's.

Speaker Change: Pretty much what we had.

Speaker Change: Expected, there's nothing here, that's giving us any alarm. This is normal business, yeah, I was with us.

Speaker Change: Normally northern California peaked earlier than southern California, and so this is.

Angela L. Kleiman: And so this is Unquam.

Unplanned.

Speaker Change: Yeah.

Speaker Change: Oh.

Thank you.

Eric Wolfe: Our next question comes from the line of Eric Wolfe with City. Please proceed with your question.

Angela L. Kleiman: Our next question comes from the line of Eric Wolfe with Citi. Please proceed with your thanks. It's Nick Joseph here with Eric. Never just following up on that pricing strategy, but more specific to LA.

Speaker Change: Our next question comes from the line of Eric Wolfe with Citi. Please proceed with your question.

Angela Kleiman: Thanks, it's Nick Joseph here with Eric. I'm just following up on that pricing strategy but more specific to LA and Alameda. Are you getting closer to the point where you can be pushing pricing more right now, or do you need to get to a certain occupancy level first? That's a great question, Eric. We are not quite there on LA and Alameda in terms of our operating strategy. We pretty much ran an occupancy focused strategy starting late last year that has continued throughout the year. We didn't have to switch back and forth a little bit, but it really didn't last long.

Nicholas Gregory Joseph: Thanks, Nick Joseph here with Eric maybe just following up on that pricing strategy, but more specific to L. A and Alamito, you know where you're getting closer to the point, where you can be pushing pricing more right now or do you need to get to a certain occupancy level first.

Angela L. Kleiman: That's a great question, Eric. We are not quite there on LAL-OMEDA in terms of our operating strategy. We pretty much ran an occupancy-focused strategy starting late last year that has continued throughout the year. We've been able to kind of switch back and forth a little bit, but it really didn't last long. At this point, we made really good progress on delinquency, and essentially, it improved by almost 50 percent. We reduced it by another 50 percent from the beginning of the year. So we're making good traction there. But we probably will not be able to have pricing power until we get through the rest of this year in LAL-OMEDA.

Nicholas Gregory Joseph: That's a great question, Eric we are not quite there.

Speaker Change: All of them either in terms of our operating strategy, we pretty much ran a occupancy focused strategy starting.

Speaker Change: Late last year.

Speaker Change: That has continued throughout the year, we didn't have to kind of switch back and forth a little bit, but really didn't last long at this point, we made really good progress on delinquency and essentially improved.

Angela Kleiman: At this point, we made really good progress on delinquency, and essentially it improved by almost 50%. We reduced by another 50% from the beginning of the year. So we're making good traction there.

Speaker Change: By almost 50% we've reduced by another 50% from beginning of the year. So we're making good traction there, we probably will not be able to have pricing power.

Angela Kleiman: We probably will not be able to have pricing power until we get through the rest of this year. I'm in LA and Alameda.

Speaker Change: Until we get through the rest of this year.

Speaker Change: Uh-huh in L. A L a meter.

Angela Kleiman: Thanks. And then just on your gross bad debt, it looks like it came down to 80 basis points in July. Your expectation that it'll hold around this level for the rest of the year? Our guidance has about 1% baked into the rest of the year. Remember, the number can bounce around the month to month. But we're pleased with the progress that we've made so far and feel comfortable that we'll continue to make progress. If we do make more progress in the 80 basis points, I'll just be upside to the high end or be to the high end of the guidance range.

Speaker Change: Thanks, and then just on your gross add data it looks like it came down to 80 basis points in July your expectation that'll hold around this level for the rest of the year.

Barb Pak: My name is Barb. Yeah, our guidance has about 1% baked into it for the rest of the year. Remember, the number can bounce around month to month, but we're pleased with the progress that we've made so far and feel comfortable that, you know, we'll continue to make progress. If we do make more progress in the 80 basis points, I'll just be upside to the high end or be to the high end of the guidance range.

Speaker Change: Hi, Nathan Barb, Yeah, our guidance has about 1% baked into the rest of the year remember the number can bounce around month to month, but we're pleased with the progress that we've made so far and you'll feel comfortable that you know we'll continue to make progress. If we can make more progress in the 80 basis points hold on I'll just.

Speaker Change: Be upside to the high end or beat to the high end of our guidance range.

Unknown Attendee: Makes sense.

Speaker Change: Makes sense. Thank you very much.

Unknown Attendee: Thank you very much. Thank you.

Unknown Executive: Thank you. Our next question comes from the line of Joss Dennerlein with Bank of America. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Josh Darren Leung with Bank of America. Please proceed with your question.

Nick Joseph: Our next question comes from a line of Josh Dernley with Bank of America. Please proceed with your question. Hi, this is Steven Son on for Josh. Thanks for the first thanks for the time. And then my first question is on the bad debt assumption; seems like that's progressing better than expected so far. I wonder if you can give more color on how we'll turn for the second half.

Unknown Executive: Hi, this is Stephen Song on behalf of Josh. Thanks for your time.

Speaker Change: Hi, This is Steven on for Josh. Thanks for the thanks for the time and then my first question is on the bad debt assumption seems like that's progressing better than expected. So far I wonder if you can give more color on how it will trend for the second half.

Barbara Pak: Yeah, this is Barb. You know, it is a difficult number to predict because it does bounce around month to month, and we are pleased with the progress. Keep in mind, we did take that, you know, we did increase our guidance in the first quarter by 40 basis points because we did lower bad debt to 1.1% for the full year. And through July, we are at 1.1% year to date. So we're in line with our forecast, and, you know, we do expect, you know, we're working hard to make progress, but it does depend on when tenants leave and when the courts process evictions.

Barb Pak: And then my first question is on the bad debt assumption. Seems like that's progressing better than expected so far. I wonder if you can give more color on how it will trend for the second half.

Barb Pak: Yeah. This is barb you know it is a difficult number to predict because it does bounce around month to month and we are pleased with the progress keep in mind. We did take that you know we did increase our guidance in the first quarter by 40 basis points, because we didn't lower bad debt a two 1.1% for the full year.

Barb Pak: Yeah, this is Barb. You know, it is a difficult number to predict because it does bounce around month to month. And we are pleased with the progress. Keep in mind, we did take that, you know, we increased our guidance in the first quarter by 40 basis points because we did lower bad debt to 1.1% for the full year. And through July, we are at 1.1% year to date. So we're in line with our forecast.

Barb Pak: Through July we are at one 1% year to date. So we're in line with our forecast.

Barb Pak: And we do expect you know, we're working hard to make progress, but it does depend on when tenants leave and when the courts process evictions and so its a little out of our control. So we've got 1% positive in the back half of the year.

Barb Pak: And, you know, we do expect, you know, we're working hard to make progress, but it does depend on when tenants leave and when the courts process evictions. And so it's a little out of our control. So we've got 1% budgeted for the back half of the year.

Barbara Pak: And so it's a little out of our control. So we've got 1% budgeted in the back half of the year. Okay, got it. That's very helpful.

Unknown Executive: Okay, I got it. That's very helpful.

Speaker Change: Okay got it that's very helpful.

Barbara Pak: And then my second question is on the concession. If I hear this correctly, you said it's less than two days across the market. I wonder, like, whether you separate that you can separate that for different regions in how that's trending so far. Yes, we have that detail, right? Uh-huh, concessions. So generally speaking, Southern California has a heavier concession in LA for the most part, no surprise there. And Northern California's concession environment is driven primarily by Oakland because of the higher, the elevated supply. And so, you know, Southern California, DQ with LA and Northern California, Oakland with supply.

Speaker Change: My second question is on the concession in.

Unknown Executive: And then my second question is on concessions. If I hear this correctly, you said it's less than two days across the markets. I wonder whether you can separate that, you can separate that for different regions and how that's trending so far.

Speaker Change: In fact here is correctly you said it is less than two days across the market.

Speaker Change: I wonder like whether you use separate that you kind of separated out for different regions and how that's trending so far.

Unknown Executive: Yes, we have that detail. Right?

Speaker Change: Yes, we have that detail.

Speaker Change: Right.

Unknown Executive: Aha, concession. So, generally speaking, Southern California has a heavier concession in L.A. for the most part, no surprise there, and Northern California's concession environment is driven primarily by Oakland because of the higher, the elevated supply. And so, you know, Southern California's EQ with LA and Northern California, Oakland, with supply, and those are the two primary drivers of higher concession levels. But, you know, but ultimately, we're talking about, say, closer to four, five days in those areas versus the rest of the region where, you know, Seattle has essentially zero, and everywhere else one around one to do days. So the average is about two days in July.

Speaker Change: Uh-huh concessions.

So generally speaking so southern California has a heavier concessions in L. A for the most part no surprise, there and northern California concession environment is driven primarily by Oakland.

Speaker Change: Because of the higher the elevated supply and so yeah, southern Californias EQ with L. A in northern California, Oklahoma with supply and those are the two primary drivers of Oh higher concession levels.

Barbara Pak: And those are the two primary drivers of higher concession levels. But, you know, but ultimately, we're talking about say closer to four, five days in those areas versus the rest of the region where, you know, Seattle has essentially been zero. And everywhere else, one around one to two days, so that averages to the two days in July. Okay, got it. Thank you so much. Thank you.

Speaker Change: But.

Speaker Change: But ultimately we're talking about say closer to four five days in those areas versus rest of the region where you'll.

Speaker Change: Seattle has.

Essentially zero and everywhere else one.

Speaker Change: Around one to two days so the average is two the two days in July.

Unknown Executive: Okay, I got it. Thank you so much.

Speaker Change: Okay got it thank you so much.

Unknown Executive: Thank you. Our next question comes from a line from Steve Sakwa with Evercore ISI. Please proceed with your question.

Speaker Change: Thank you our next.

Sancaith: Our next lesson comes from a line of Steve Sakwa with Evercore ISI. Please proceed with your questions. Hi, this is Sancaith on for Steve. We were looking at the seams to revenue guidance that you guys updated. And we were the surprise that you didn't update like you didn't raise the low and more because you're today, you guys are trending at three and a half person. So we were just curious about how do you get to low and are in the lower, lower range of the guidance range in terms of seams to revenue.

Steve <unk>: Question comes from the line of Steve <unk> with Evercore ISI. Please proceed with your question.

Barb Pak: Hi, this is Sanket on for Steve. We were looking at the same store revenue guidance that you guys updated, and we were just surprised that you didn't update it, like you didn't raise the low end more because, year to date, you guys are trending at three and a half percent, so we were just curious about how you get to the low end or in the lower lower range of the guidance range in terms of [inaudible].

Steve <unk>: Hi, This is sung Kim on for Steve.

John P. Kim: We were looking at those same store revenue guidance that you guys updated and you were just surprised that you didnt update like you didn't raise the low end more because year to date you guys are accounting a T. In a first and so we were just curious about how do you get to low end or the low end lower end of the guidance range on the same store revenue.

Steve <unk>: Yeah.

Barbara Pak: Yeah, hi, this is Barb. Yeah, there's a lot of factors that go into it. And, you know, at the low end, it just does depend on how, how steep the decline is in the back half of the year in terms of the peak leasing season. We expect a normal season, but we've seen air pockets in the past. And so that factors into the low end. And that could impact occupancy and confessions. And then delinquency has been a law card. It feels like it's less of a law card this year. But once again, that is, you know, something where we've seen, you know, blips every now and then.

Barb Pak: Yeah, hi, this is Barb. Yeah, there's a lot of factors that go into it. And, you know, at the low end, it just depends on how steep the decline is in the back half of the year in terms of the peak leasing season. We expect a normal season, but we've seen air pockets in the past. And so that factors into the low end, and that could impact occupancy and concessions.

Barb Pak: Yeah, Hi, this is barb yeah, Theres a lot of factors that go into it and you know at the low end. It just it does depend on how how steep the decline is in the back half of the year in terms of the peak leasing season, we expect a normal season, but we've seen air pockets in the past and so that factors into the low end and that could impact occupancy and concern.

Barb Pak: And then delinquency has been a wildcard it feels like it's less of a wildcard this year, but once again that is something where we've seen you know blips every now and then and so those are the factors that really led to the low end, where it is but we feel very comfortable with where our midpoint is at this point.

Barb Pak: And then delinquency has been a wild card; it feels like it's less of a wild card this year. But once again, that is, you know, something where we've seen, you know, blips every now and then. And so those are the factors that really led to the low end where it is. But we feel very comfortable with where our midpoint is.

Barbara Pak: And so those are the factors that really led to the low end where it is. But we feel very comfortable with where I'm at this point.

Unknown Executive: Okay, and as a follow-up, where are you guys sending out renewals for the months of August and September?

Barbara Pak: Okay, and if, as a follow-up, are you guys sending out renewals for the month of August and September? Yeah, for sending out renewals at around low 4% portfolio wide. And based on the negotiations that we're seeing, we'll probably land somewhere between mid-3s to high-3s on the renewal side. Okay, that's helpful. Thank you.

Speaker Change: Okay, and if I could follow up there you guys sending out renewals for the month of August and September.

Unknown Executive: Yes, we're sending out renewals at around 4% portfolio wide. And based on the negotiations that we're seeing, we'll probably land somewhere between mid threes to high threes on the renewal side. Okay, that's fine.

Speaker Change: Yes, we're sending out renewals at around low 4% portfolio wide and based on the negotiations that we're seeing will probably land somewhere between mid threes to high threes on the renal side.

Unknown Executive: Okay, that's helpful. Thank you.

Speaker Change: Okay. That's helpful. Thank you.

Speaker Change: Yeah.

Speaker Change: Okay.

Unknown Executive: Thank you. Our next question comes from the line of Nick Yulico with Scotiabank. Please proceed with your question.

Speaker Change: Okay.

Daniel Tricarico: Our next question comes from the line of Nick; you'll go with Scotia Bank. Please proceed with your question. Hey, good morning, Team. It's Daniel Tricarico. I'm with Nick. Can you talk to your expectations around pricing through the back half of the year? You know, with respect to your comments on a normal seasonal pattern and pricing peaking later than typical? And would you say there's any conservatism in the new guide related to any macro macroeconomic or political related facts?

Speaker Change: Thank you. Our next question comes from the line of Nick.

Speaker Change: With Scotiabank. Please proceed with your question.

Unknown Executive: Hey, good morning team. It's Daniel Tricarico, along with Nick.

Speaker Change: Hey, Good morning, Tim It's Dan answer character, along with Nick can you talk to your expectations around pricing in the back half of the year with respect to your comments on on a normal seasonal pattern and pricing kicking later than typical and what did you say there is any conservatism in the new guide related plenty macro macroeconomic or political related factors.

Angela Kleiman: Well, that's a great question. Well, let's start with, you know, we have expected the out. Full year, our blended rents will be about 2.7%. And we have achieved 2.9% in the first half. So there's an implied acceleration of about 35 to 40 basis points. And this is actually quite moderate. You know, it's not thing to be, nothing to be concerned about. But aside from what's going on out there in the political realm, the key drivers to our anticipation are really that we have tougher year-over-year comps. So last year, our seasonal peak actually occurred 1 to 2 months later; you know, Northern California a month later and Southern California, 2 months later.

Angela L. Kleiman: Can you talk about your expectations around pricing through the back half of the year, you know, with respect to your comments on a normal seasonal pattern and pricing peaking later than typical? And would you say there's any conservatism in the new guide related to any macro, macroeconomic, or political factors?

Speaker Change: Oh, that's a great question.

Speaker Change: Well, let's start with you know we have expected that full year, our blended rents will be about two 7% and we achieved 129% in the first half. So there is an implied deceleration about 35 to 40 basis points.

Speaker Change: And this is Ashley quite moderate you know, it's it's not seem to be nothing to be concerned about but yeah.

Angela L. Kleiman: Oh, that's a great question. Well, let's start with, you know, we have expected that full year our blended rents will be about 2.7%, and we achieved 2.9% in the first half. So there's an implied deceleration of about 35 to 40 basis points. And this is actually quite moderate, you know; it's nothing to be concerned about.

Ashley: Aside from what's going on out there in the political realm. The key drivers to our anticipation is really.

Angela L. Kleiman: But aside from what's going on out there in the political realm, the key drivers to our anticipation are really that we have tougher year-over-year comps. So last year, our seasonal peak actually occurred one to two months later, you know, northern California a month later and southern California two months later. And so that tougher year-over-year comp is a primary driver. And then the secondary factor is that renewals ultimately will converge toward market rates over time, and that's normal.

Ashley: We have tougher year over year comps, so last year, our seasonal peak actually occurred one to two months later, northern California, a month later and in Southern California. Two months later, and so that tougher year over year comp as is a primary driver and then the secondary factor is the renewables ultimately.

Angela Kleiman: And so that tougher year-over-year comp is a primary driver. And then the secondary factor is the renewals ultimately will converge toward market rates over time. And that's normal.

Speaker Change: Will converge towards market rates overtime and Thats normal.

Ashley: Okay.

Rylan Burns: Really helpful, thanks, Angela. My follow-up is, you know, you've been a bit more active in the transaction market and with your JV partners recently. Obviously, it seems to imply a vote of confidence in your markets. You also mentioned the competitive bidding and compressed cap rates. So just curious that you're considering any new on balance sheet development today with the supply and demand outlook you're communicating.

Angela L. Kleiman: Really helpful. Thanks, Angela.

Speaker Change: Very helpful. Thanks Angela.

Speaker Change: My follow up is you know you've been a bit more active in the transaction market and Mr. JV partners recently.

Rylan Burns: My follow-up question is, you know, you've been a bit more active in the transaction market and with your JV partners recently. Obviously, it seems to imply a vote of confidence in your markets. You also mentioned competitive bidding and compressed cap rates. So just curious if you're considering any new balance sheet development today with the supply and demand outlook you're communicating.

Speaker Change: Obviously, it seems to imply about a confidence in your markets. You also mentioned the competitive bidding and compressed cap rates. So just curious if you're considering any new on balance sheet development today, what the supply demand outlook you're communicating.

Rylan Burns: Yeah, hi, this is Riley and here. It's a good question. I'd say working in our favor, we've started to see hard costs come down a little bit from a year ago. The vast majority of development that we underwrite, however, does not meet our return expectations. We're looking for a significant premium to where we can go purchase today, given the risk inherent in development. But I would say that trends are favorable and we are pursuing several opportunities that could lead to an increase in our development by applying in the near future. I would be the spread in your targeting versus market cap rates.

Rylan Burns: Hi, this is Rylan here. It's a good question. I'd say working in our favor, we've started to see hard costs come down a little bit from a year ago. However, the vast majority of development that we underwrite does not meet our return expectations. We're looking for a significant premium over where we can go and purchase today, given the risks inherent in development. But I would say the trends are favorable, and we are pursuing several opportunities that could lead to an increase in our development pipeline in the near future.

Speaker Change: Yeah, Hi, this is Ryan here, it's a good question I'd say working in our favor we've started to see hard costs come down a little bit from a year ago.

Speaker Change: The vast majority of the development that we underwrite however, does not meet our return expectations. We're looking for a significant premium to where we can go purchase today, given the risks inherent in development, but.

Speaker Change: But I would say the trends are favorable and we are pursuing several opportunities that could lead to an increase in our development.

Speaker Change: Pipeline in the near future.

Rylan Burns: I would be the spread you're targeting versus market cap rates. Yeah, it's case by case.

Speaker Change: What would be the spread you're targeting versus market cap rates.

Rylan Burns: Yeah, it's case-by-case dependent. But, you know, a general rule would be in our market today for a shovel-ready site, full entitlement. We'd be looking for at least a 100 basis point spread to where we can go and buy a comparable product.

Rylan Burns: Yeah, it's case by case. But you know, a general rule would be in our markets today for a shovel-ready site with full entitlements, we'd be looking for at least 100 basis points spread to where we can go and buy a comparable product.

Speaker Change: Yes. It is.

Speaker Change: By case dependent but a general rule would be in our market today for a shovel ready site full entitlements, we'd be looking for at least 100 basis point spread to where we can go out and buy a comparable product.

Rylan Burns: Thanks, Rob. Thanks. Thank you.

Rob: Thanks, Rob.

Rob: Thanks.

Unknown Executive: Thank you. Our next question comes from the line of Brad Heffner with RBC Capital Markets. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Brian Hoffman with RBC capital markets. Please proceed with your question.

Brad Heffner: Our next question comes from a line of Brad Heffner with RBC Capital Markets. Please proceed with your question. Yeah, thanks, everyone. So, for L.A.

Unknown Executive: Yeah, thanks. Hi everyone.

Brian Hoffman: Yeah, Thanks, Hi, everyone.

Angela Kleiman: and Alameda, when you do get pricing power back, do you see those markets just returning to kind of a normal level of growth, or should there be some sort of catch-up given incomes have gone up much more than run as gone up? That's a great question, Brad. I think that's going to depend on demand. So, how quickly do we see job acceleration as we return back to that normal state to the pre-COVID level? And so, fortunately for us, we don't need much, right, given the such low level of supply, and which is one of the reasons we've been able to produce all the results even though we are in a low demand growth environment.

Brian Hoffman: So for La Alameda, when you do get pricing power back do you see those markets just returning to kind of a normal level of growth or should there be some sort of catch up given incomes have gone up much more of the rent has gone up.

Unknown Executive: So for LA and Alameda, when you do get pricing power back, do you see those markets just returning to kind of a normal level of growth? Or should there be some sort of catch-up given incomes have gone up much more than rent has gone up?

Angela L. Kleiman: That's a great question, Brad. I think that's going to depend on demand. So how quickly, you know, do we see job acceleration as we return back to that normal, normal state before COVID? And so, fortunately, for us, we don't need much, right, given the such low level of supply, and which is one of the reasons we've been able to produce all the results, even though we are in a low demand growth environment. But the magnitude of what we're talking about will be really dependent on job growth.

Brian Hoffman: That's a great question, Brad I think that's gonna depend on demand. So how quickly you all do a do we see job acceleration as we return back to that normal normal state to the pre COVID-19 level.

Speaker Change: And so unfortunately for us we don't need much right given that's such a low level of supply and which is one of the reasons, we've been able to produce solid results, even though we're in a low demand growth environment, but the magnitude we're talking about will be really dependent on.

Angela Kleiman: But, the magnitude, you know, if we're talking about, will be really dependent on job growth.

Speaker Change: On job growth.

Barb Pak: Okay, and then Barb on the new guidance, I think the fourth quarter implied core FFO number is down slightly from the third quarter. Normally, the seasonal pattern with you guys is that the fourth quarter is the highest FFO quarter. So I'm just curious if there's something that's offsetting that or there's something timing-related that's falling into the fourth quarter. Yes, most of the time.

Speaker Change: Okay.

Barbara Pak: Okay, and then Barbara, on the new guidance, I think the fourth quarter implied KORFFO number is down slightly from the third quarter. Normally, the seasonal pattern with you guys is that the fourth quarter is the highest FFO quarter, so I'm just curious if there's something that's offsetting that or there's something timing related that's falling into the fourth quarter. Yeah, it's mostly the timing on the preferred redemption, so we've got 50,000,000 to date. Most of that occurred in July, and then the rest of it is slated for beginning of the end of the third quarter, beginning of the fourth quarter. So we'll see the biggest impact from those redemptions then, and that's what's causing that anomaly.

Barb Pak: And then barb on the on the new guidance I think the fourth quarter implied core FIFO number is down slightly from the third quarter are normally the seasonal pattern with you guys is that the fourth quarter is the highest <unk> quarter. So I'm just curious if theres something thats offsetting that or there something timing related thats falling into the fourth quarter.

Barb Pak: Yeah, it's mostly the timing of the preferred redemption. So we've got 50 billion today, most of that occurred in July. And then the rest of it is slated for the beginning of the end of the third quarter, beginning of the fourth quarter. So we'll see the biggest impact from those redemptions then. And that's what's causing that anomaly.

Speaker Change: Yeah, it's mostly on the timing on the preferred redemption. So we've got $50 billion today most of that occurred in July.

Speaker Change: Then the rest of it is slated for beginning of the end of the third quarter beginning of the fourth quarter. So we'll see the biggest impact from those redemptions that and that's what's causing that.

Speaker Change: Emily.

Unknown Attendee: Okay, thank you. Thank you.

Emily: Okay. Thank you.

Unknown Executive: Thank you. Our next question comes from the line of Haendel St. Juste with Mizuho Securities. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Hondo St. Jude with Mizuho Securities. Please proceed with your question.

Haendel Juste: Our next question comes from a line of Handel St. Juiced with Muzooho Securities. Please proceed with your questions.

Angela L. Kleiman: Hey, I was, I guess, thanks for taking my question. I was intrigued by some of the comments you made about seeing positive migration into Northern California for the first time since, I think, pre-COVID and hearing more of employers enforcing return office mandates. I guess I'm curious, are you seeing that translating at all into more demand or applications, anything tangible that you can point to? And if that's perhaps something that could drive perhaps some rent or any upside over the next couple quarters? Thanks.

Haendel Juste: Hey, I was, I guess, thanks for taking my question. I was intrigued by some of the comments you made about seeing positive emigration into California for the first time since I think pre-COVID, and hearing more of employees enforcing return office mandates, so I guess I'm curious, are you seeing that translating it all into more demand or applications, anything tangible that you can point to? And if that's perhaps something that could drive perhaps some rent or any upside over the next couple of quarters, thanks.

Hey, I was I guess, thanks for taking my question.

Speaker Change: I was intrigued by some of the comments you made about seeing positive in migration into northern California for the first time since.

Speaker Change: I think pre COVID-19.

And hearing more of.

Speaker Change: Of employees enforcing returned office mandate. So I guess I'm curious are you seeing that translating at all into more demand or applications anything tangible that you can point to and if that's perhaps something that could drive perhaps some rent or are any upside over the next couple of quarters. Thanks.

Angela Kleiman: Hey, Handel, have a great question. Ultimately, we're seeing pricing power, and that's translating to our outperformance, and you've seen us, you know, raise guidance twice, and it's primarily driven by demand, because we've always been thinking that having that low supply environment, we're in a really good position here. As far as where that's going to land, it's hard to say, you know, because it depends on the weight of the return. And so just to give you some data points during COVID, about 400,000 people migrated out of our markets. And what's interesting is the majority of the outmigration was to tertiary markets within Washington and California, and so say about a third, 35% of them actually went out to the Sun Belt and East Coast.

Angela L. Kleiman: Hey Haendel, that's a great question. Ultimately, we're seeing pricing power, and that's translating to our outperformance. And you've seen us, you know, raise guidance twice, and it's primarily driven by demand because we've always maintained that having that low supply environment is a really good position here. As far as where that's going to land, it's hard to say, you know, because it depends on the weight of the return.

Speaker Change: Hey handle that's a great question ultimately.

Speaker Change: We're seeing pricing power.

Speaker Change: And that's translating to.

Speaker Change: Our outperformance and you've seen us raise guidance twice and it's primarily driven by demand because we've always maintained that having that low supply environment, where we're in a really good position here.

Angela L. Kleiman: And so just to give you some data points, during COVID, about 400,000 people migrated out of our markets. And what's interesting is the majority of the out-migration was to secondary markets within Washington and California. And so, say about a third, 35% of them actually went out to the Sun Belt and East Coast. And so what we're seeing right now is about a quarter of that has returned, so about 100,000 have come back.

Speaker Change: As far as where.

Speaker Change: Where that's going to layer onto its hard to say you know because it depends on the weight over the return and so just to give you some data points during COVID-19.

Speaker Change: 400000 people migrate out of our markets.

Speaker Change: What's interesting is the majority of Oh migration was too tertiary markets within Washington, and California.

Speaker Change: So say about a third 35% of them actually went out to the sunbelt and east coast and so what we're seeing right now is about a quarter of that has returned to about 100000 have come back and it's generally in line with that proportion you know offered out of.

Angela Kleiman: And so what we're seeing right now is about a quarter of that has returns, about 100,000 have come back, and it's generally in line with that proportion, you know, a third out of Washington and California, and two thirds within the tertiary markets. So there's still some legs here. The question here is when and how much, and that is just, you know, we just don't have enough visibility on the timing about that one.

Angela L. Kleiman: And it's generally in line with that proportion, you know, a third out of Washington and California and two-thirds within the tertiary market. So there's still some legs here. The question here is, when and how much? And that is just, you know, we just don't have enough visibility on the timing of that one.

Speaker Change: Washington, and California, and two thirds are within the tertiary markets.

Speaker Change: There is still some legs here. The question here is when and how much and that is just we just don't have enough visibility on the timing about that one.

Rylan Burns: Okay, no, I appreciate that. I guess we'll be watching. And I think you also mentioned, I guess there's an earlier question about transaction activity. And I think you mentioned your comments that you bought assets with some occupancy or perhaps some repositioning upside.

Unknown Executive: Okay, no, I appreciate that. I guess we'll be watching.

Speaker Change: Okay No I appreciate that.

Speaker Change: And I guess, well, we'll be watching and I think you also mentioned.

Speaker Change: I guess there was an earlier question about transaction activity I think you've mentioned in your comments that you bought assets with some occupancy or perhaps some repositioning upside. So I guess I'm curious what robin just to the state of sellers psychology in the marketplace are you seeing more potential sellers willing to engage the assets that you're underwriting.

Rylan Burns: And I think you also mentioned, I guess there was an earlier question about transaction activity, and I think you mentioned your comments that you bought assets with some occupancy or perhaps some repositioning upside. So I guess I'm curious overall, about the state of seller psychology in the marketplace. Are you seeing more potential sellers willing to engage the assets that you're underwriting? What IRRs are you looking for? And your overall level of interest in deploying more capital and what cap rate range you're broadly seeing in the market?

Rylan Burns: So I guess I'm curious overall, and just the state of sellers' psychology in the marketplace, are you seeing more potential sellers willing to engage the assets that you're underwriting? What IRRs are you looking for, and your overall level of interest in deploying more capital, and what cap rate range you're broadly seeing in the market. Thank you.

Speaker Change: <unk> are you looking for.

Speaker Change: And your overall level of interest in deploying more capital and what cap rate range, you're broadly seeing in the market. Thank you.

Rylan Burns: My hand, Ellis, is Rylan here. Several questions in there, so if I forget one, please follow up. But in general, we've seen volumes pick up in the second quarter compared to a year ago, as well as the first quarter. Tap rates are fairly consistent across our markets for high quality, well-located buildings in the mid to high four cap range. So we are looking for unique opportunities that we can put onto our operating platform and generate an additional creation just from operating a little bit more efficiently. We do, we're always looking for ways that potentially can add incremental yield on the top line.

Rylan Burns: Hi Haendel, this is Rylan here. There are several questions in there, so if I forget one, please follow up. But in general, we've seen volumes pick up in the second quarter compared to a year ago, as well as in the first quarter. Cap rates are fairly consistent across our markets for high-quality, well-located buildings in the mid- to high-4 cap range. So we are looking for unique opportunities that we can put on our operating platform and generate some additional accretion just from operating a little bit more efficiently.

Speaker Change: This is a relevant here several questions in there so if I forget one please follow up but in general we've seen volumes pick up in the second quarter compared to a year ago as well as the first quarter.

Speaker Change: Cap rates are fairly consistent across our markets for high quality well located buildings in the mid to high four cap range. So we are looking for unique opportunities that we can put it onto our operating platform and generate some additional accretion just from operating a little bit more efficiently. We do we're always looking for ways.

Rylan Burns: We do, we're always looking for ways that potentially can add incremental yield on the top line. So we are, again, pretty excited about the investments we were able to make in the second quarter. The one that was noted there, Elan, was a high-4 cap.

Speaker Change: That potentially can add.

Speaker Change: Incremental yield on the topline.

Rylan Burns: So we are, again, pretty excited about the investments we were able to make in the second quarter. The one that was noted there, the Ilan was a high four cap or expecting some additional benefit from putting it on to our operating platform. This is a building, probably 20% discount to replacement cost and with rents that are about 15% low pre-COVID levels. So those, you know, given our fundamental outlook for some of these submarkets, if we can find more opportunities like that, we will pursue, as they have always, you know, aggressively, but with great discipline as well.

Speaker Change: We are again pretty excited about the investments, we're able to make in the second quarter.

Speaker Change: Oh that was noted that the Golan.

Speaker Change: High four cap, we're expecting some additional benefit from putting that onto our operating platform. This is a building probably 20% discount to replacement cost and with rents that are about 15% below pre COVID-19 levels. So those given our fundamental outlook for some of the submarkets. If we can find more opportunities like that we will.

Rylan Burns: We're expecting some additional benefit from putting it onto our operating platform. This is a building that probably has a 20% discount to replacement cost and with rents that are about 15% below pre-COVID levels. So those, you know, given our fundamental outlook for some of these submarkets, if we can find more opportunities like that, we will pursue them as we have always, you know, aggressively, but with great discipline as well.

Speaker Change: You pursue as we have always aggressively but with great discipline as well.

Rylan Burns: Any color on potentially the IRRs that you're underwriting? Yeah, I don't want to provide too much detail just for competitive reasons, but, you know, back to the envelope math that suggests that these are above eights.

Rylan Burns: Any color on the potential IRRs that you're underwriting?

Speaker Change: Any color on potentially the IRR that you're underwriting.

Rylan Burns: Yeah, I don't want to provide too much detail just for competitive reasons. But, you know, back of the envelope math would suggest that these are above eight.

Speaker Change: Yeah, I don't want to provide too much detail just for competitive reasons, but.

Speaker Change: Back of the envelope math would suggest that these are above eight.

Rylan Burns: Okay, appreciate that. And last one, if I could squeeze one in just broadly, could you give us a sense of where the loss or maybe gain to lease is across the major regions of the portfolio?

Unknown Attendee: Okay, appreciate that.

Speaker Change: Okay I appreciate that and last one if I could squeeze one in just broadly if you could give us a sense of whether loss or maybe gain to lease is across the major regions of the portfolio. Thanks.

Unknown Attendee: And last one, if I could squeeze one in just broadly, if you give us a sense of whether loss or maybe gain to lease is across the major reaches of the portfolio. Thanks. Sure, handout for you. Yes, you could squeeze another one in. So July lost to be is about 2%. And so it's in a certainly a good position, especially when we compared to last year July. It's a 50 basis points improvement; last year, July was only at one six. So things are moving in the right direction. Thank you.

Unknown Executive: Thanks. Sure, Haendel. For you, yes, you can.

Unknown Executive: Sure, Haendel. For you, yes, you could squeeze another one in.

Speaker Change: Sure handle for you, yes, you could squeeze another one in.

Unknown Executive: So, July's loss to Leeds is about 2%, and so it's a... In a certainly a good position, especially when we compare to last year, July. It's a 50 basis points improvement. Last year, July was only at one six. So things are moving in the right direction.

Speaker Change: So July loss to lease is about 2% and so it's it's hard in.

Speaker Change: And certainly a good.

Speaker Change: <unk>, especially when we compare to last year July and it's a it's a 50 basis point improvement Master July was only at one six.

Speaker Change: So things are moving in the right direction.

Speaker Change: Thank you.

Speaker Change: Okay.

Unknown Executive: Thank you. Our next question comes from the line of Adam Kramer with Morgan Stanley. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Adam Kramer with Morgan Stanley. Please proceed with your question.

Adam Kramer: Our next question comes from the line of Adam Kramer with Morgan Stanley. Please proceed with your question. Hey guys, thanks for the question. What's the ask about competition from new supply in the market? I think looking at the kind of supply disclosure at the supplemental, really helpful, by the way, and it looks to multi-family supplies, maybe lower than it was in the prior disclosure, but that there may be kind of more single-family new supply in kind of the way that you guys tabulated. So just wondering if you've kind of seen that have any effect in the market, kind of competition from greater new single-family supply?

Angela L. Kleiman: Hey guys, thanks for the question. I wanted to ask about competition from new supply in the market. I think looking at the kind of supply disclosure at the end of the supplemental, really helpful by the way, and it looks like multifamily supply is maybe lower than it was in the prior disclosure, but that there may be kind of more single-family new supply in the way that you guys tabulated. So I'm just wondering if you've kind of seen that have any effect on the market, kind of competition from greater new single-family supply.

Adam Kramer: Hey, guys. Thanks for the questions.

Adam Kramer: Wanted to ask about competition from new supply in the market I think looking at the kind of supply disclosure within the supplemental really helpful by the way.

Speaker Change: And it looks at multifamily supply is maybe lower than it was in the prior disclosure, but that there may be kind of more single family new supply.

Speaker Change: Any kind of the way that you guys calculate it. So I'm just wondering if you've kind of seen that have any effect on the market kind of competition from greater new single family supply.

Angela Kleiman: Hi there, Angela. The best indication of new supply competition is looking at our concessionary activities. And with, you know, what we are today at two days, and that concessionary environment has progressively improved over the past six months, we certainly are not seeing competition from the single family side. Got it, that's helpful.

Angela L. Kleiman: Hey there, it's Angela. The best indication of new supply competition is looking at our concessionary activities. And with where we are today at two days, and that the concessionary environment has progressively improved over the past six months, we certainly are not seeing competition from the single family side.

Angela: Hi, there it's Angela.

Speaker Change: The the best indication of a new supply competition is.

Angela: Looking at our concessionary activities and was you know where we are today of two days and that's a concessionary environment has progressively improved over the past six months, we certainly are not seeing competition from the single family side.

Barb Pak: Got it. That's helpful. And then just wanted to ask about kind of modeling and inputs and takes with regard to the kind of performance equity investments and then kind of buying those assets out. I know you did one in the quarter, maybe one subsequent to the quarter end.

Speaker Change: Got it that's helpful. And then just wanted to ask about kind of modeling and puts and takes with regards to the.

Barbara Pak: And then just wanted to ask about kind of modeling and inputs and takes with regards to the kind of the pre-faculty investments and then kind of buying those assets out. I know you did one in the quarter, maybe one subsequent to the quarter end. So just wondering how to think about kind of the trade off there, right? You're buying these that they kind of fairly tight cap rates and you're losing yield. That's a bunch higher. But you know, just kind of the modeling puts a take to how to think about kind of the short-term impact in terms of kind of dealing with a lot of maybe lost equity income.

Speaker Change: The perf equity investments and then kind of buying those assets out I know you did one in the quarter, maybe one subsequent to the quarter end.

Barb Pak: So just wondering how to think about kind of the, you know, the trade-off there, right? You're buying these at kind of fairly tight cap rates, and you're losing yield that's a bunch higher. But, you know, just kind of the modeling puts and takes to how to think about kind of the short-term impact in terms of kind of the gain of NOI, maybe lost equity income.

Speaker Change: Just wondering how to figure out kind of the.

Speaker Change: The tradeoff there right you are buying these kind of fairly tight cap rates.

Speaker Change: And you are losing Youll thats, a bunch higher but just kind of like the modeling puts or takes or how to think about kind of a short term impact in terms of kind of getting them NOI maybe lost equity income.

Barbara Pak: Yeah, this is Barb. And I might have to follow up after with the puts and takes on that. What I will tell you is that on the two investments that we did acquire and we had preferred equity on, you know, there was we originally forecasted in our guidance for 2024 no FFO impact. And so by buying them out, we actually gained about a penny for this year in terms of core FFO because we didn't have any preferred equity income based into the model given they were on the watch list and given where values were at the end of last year. We took a conservative approach on the accruing on those two.

Barb Pak: Yeah, this is Barb. And I might have to follow up after with the puts and takes on that. What I will tell you is that on the two investments that we didn't acquire, and we had preferred equity on, you know, there was, originally, we forecasted in our guidance for 2024, no FFO impact. And so by buying them out, we actually gained about a penny for this year in terms of core FFO because we didn't have any preferred equity income baked into the model, given they were on the watch list.

Barb Pak: Yeah. This is barb and I might have to follow up after with the puts and takes on that what I will tell you is that on the two <unk>.

Barb Pak: Investments that we didn't acquire and we had preferred equity on there is we originally forecasted in our guidance for 2024, no SSO impact and so by buying them out we actually gained about a penny for this year in terms of core S. F O because we didn't have any preferred.

Barb Pak: And given where values were at the end of last year, we took a conservative approach on accruing on those two. And so, net net, it did add about a penny. So, I can follow up with you after and go through the NOI and the other various metrics. Great.

Speaker Change: QWERTY income baked into the model given they were on the watch list and given where values were at the end of last year, we took a conservative approach on.

Barb Pak: The accruing on those two and so net net it did out about a penny. So I can follow up with you after I go through the NOI.

Barbara Pak: And so, net net, it did add about a penny. So, but I can follow up with you after and go through the NOI and the other various metrics. Great. Thanks for the time. Thank you.

Barb Pak: Various metrics.

Unknown Executive: Great, thanks for the time.

Speaker Change: Great. Thanks for the time.

Barb Pak: Okay.

Unknown Executive: Thank you. Our next question comes from the line of Jamie Feldman with Wells Fargo. Please proceed with your question.

Speaker Change: Thank you our next.

Jamie Felden: Our next question comes from a line of Jamie Felden with Wells Fargo. Please proceed with your question. Great. Thank you for taking the question.

Speaker Change: Next question comes from the line of Jamie Feldman with Wells Fargo. Please proceed with your question.

Unknown Executive: Great, thank you for taking the question. I guess maybe I have a question for Rylan.

James Colin Feldman: Great. Thank you for taking the question.

Rylan Burns: I guess maybe a question for Rylin. You know, it sounds like you're getting more active on the density acquisition front. You know, your markets are, you know, at the leading edge or in the headlines probably the most in terms of rent control regulation. Obviously, Prop 13 is always out there. How do you underwrite potential long term rent growth or at least handicap, you know, those risks to the top line and I guess the expense line that you're looking at new assets going forward, especially given, you know, big election coming up and, you know, a lot seems to be on the table.

James Colin Feldman: Maybe a question for Ireland.

James Colin Feldman: Sounds like Youre getting more active and potentially the acquisition front.

Rylan Burns: You know, it sounds like you're getting more active on potentially the acquisition front. You know, your markets are, you know, at the leading edge or in the headlines, probably the most in terms of rent control regulation. Obviously, Prop 13 is always out there. How do you underwrite potential long-term rent growth, or at least handicap it? You know, those risks to the top line and, I guess, the expense line, as you're looking at new assets going forward, especially given the big election coming up, and, you know, a lot seems to be on the table.

Speaker Change: Your markets are at.

Speaker Change #101: Leading edge or are in the in the headline is probably the most in terms of rent control regulation. Obviously prop 13 is always out there how do you underwrite a.

Potential long term rent growth or at least handicap.

Speaker Change #103: Those risks to the top line and I guess the expense line.

As you are looking at new assets going forward, especially given you know big election, coming up and what seems to be on the table.

Rylan Burns: Hey, Jamie. Yeah, that's a fair question. I mean, at a high level, we believe the, you know, prop, the Costa-Hawkins regulatory that's coming up this November. Again, we can go into some more detail, but historically, that has been resoundingly defeated. And there's our base case that that is going to happen again this year. Now, we will look at specific submarkets that have rent control and that are, you know, proposed that occasionally will propose specific rent control, and we'll certainly factor that into our rent growth assumptions. But at a high level, our expectation is driven by our economic research model, and we are not anticipating any change to statewide rent regulation in the near term.

Rylan Burns: Jamie, yeah, that's a fair question. I mean, at a high level, we believe the, you know, prop the cost of Hawkins regularness coming up this November. Again, we can go into some more detail, but historically that has been resoundingly defeated, and there's our base case that that is going to happen again this year. Now, we will look at their specific submarkets that have rent control and that occasion will propose specific rent control and most certainly factor that into our rent growth assumptions. But at a high level, our expectation is driven by our economic research model, and we are not anticipating any change to statewide rent regulation in the near term.

Speaker Change #103: Hey, Jamie Yeah. That's a fair question I mean at a high level, we believe the.

Speaker Change #100: The Costa Hawkins.

Speaker Change #102: Regulatory that's coming up this November again, we can go into some more detail, but historically that has been.

Speaker Change #104: Resoundingly defeated in there is our base case that that is going to happen again. This year now we will look at their specific submarkets that have rent control in their proposal that occasion will propose specific land control and we'll certainly factor that into our rent growth assumptions.

Speaker Change #104: But at a high level, our expectation is driven by our economic research model and we are not anticipating any change to statewide rent regulation in the near term.

Rylan Burns: Okay, so you'll, you'll, you'll underwrite greater than 5% growth over the long term for any of your markets?

Rylan Burns: Okay, so you'll, you'll, you'll underwrite greater than 5% growth over the long term price any of your markets. Okay. You know, assets, it's all in a case-by-case basis, but that's certainly, certainly feasible. I'm given a before to 82, that is certainly achievable. So we know that that's certainly possible. I would say a possibility that is not our base case. Typically, when we're looking at these market rent growth, we are thinking over the long term, and so they're closer to a long term. There are some averages and then in some instances where, again, some submarkets in Northern California where the affordability metrics, the future look on supply as well as some positive traction we're seeing in terms of potential demand.

Speaker Change #104: Okay.

Speaker Change #105: Yo Yo underwrite greater than 5% growth over the long term.

Speaker Change #106: Any of your markets.

Rylan Burns: You know, asset, it's all on a case-by-case basis, but that's certainly, certainly feasible. And given AB 1482, that is certainly achievable. So we know that that's certainly possible. I would say it is a possibility. That is not our base case. Typically, when we're looking at these market rent growths, we are thinking long term. And so they're closer to long-term averages. And then in some instances where, again, some submarkets in Northern California, where the affordability metrics, the future look of supply, as well as some positive traction we're seeing in terms of potential demand, those are the types of investments where we might be a little bit more aggressive in the near term as we catch up on rent.

Speaker Change #106: Okay.

Speaker Change #107: It's all on a case by case basis, but that's certainly certainly feasible given the 84 to 82 that is certainly achievable. So we know that that's certainly possible I would say a possibility that is not our base case typically when we're looking at these market rent growths were thinking over the long term and so theyre closer to our long term averages and then in some instances.

Speaker Change #107: We're again, some submarkets in northern California, where the affordability metrics that future look on supply as well as some positive traction were seeing in terms of potential demand. Those are the types of investments, where we might be a little bit more aggressive in the near term as a catch.

Rylan Burns: Those are the types of investments where we might be a little bit more aggressive in the near term as a catch up on rent.

Speaker Change #107: Catch up on that.

Rylan Burns: Okay. And then just thinking about your comments on, you know, the urban markets getting a little healthier on the turn. Like, do you think you might get more aggressive, find better value, buying in the urban markets now, given what you think you're seeing, or do you think you'll keep the portfolio balance? I know you kind of buy what you can get, you know, that hits your IRRs, but is there a play there of getting more aggressive in the cities, given that they've been more challenged? It's certainly something that we're evaluating. We've seen much fewer transactions in the urban core across our markets, but they're starting to see some more product come to market, and that's something that we're certainly evaluating.

Speaker Change #108: Okay, and then just thinking about your comments on the urban markets getting a little healthier.

Rylan Burns: Okay. And then just thinking about your comments on, you know, the urban markets getting a little healthier on the turn, like, do you think you might get more, you could get more aggressive, find better value buying in the urban markets now, given what you think you're seeing? Or do you think you'll keep the portfolio balance? I know you kind of buy what you can get, you know, that hits your IRRs, but is there a chance there of getting more aggressive in the cities, given that they've been more challenged?

Speaker Change #109: Like do you think you might get more you could get more aggressive to find better value buying in the urban markets now given what you think youre seeing.

Speaker Change #110: Or do you think you'll keep the portfolio balance I know you kind of by which you can get that that.

Speaker Change #111: It hits your IRR is but.

Speaker Change #112: Is there a play there are getting more aggressive in the cities given that they've been more challenged.

Rylan Burns: It's certainly something that we're evaluating. We've seen much fewer transactions in the urban core across our markets, but they're starting to see some more product come to market, and that's something that we're certainly evaluating. Again, the majority of our portfolio is located in, you know, great suburban markets near transportation nodes. That's kind of our bread and butter. But we will look at anything, and everything has a price. So we are excited to potentially see some more opportunities throughout all of our markets in the coming quarters.

Speaker Change #113: It's certainly something that we're evaluating.

Speaker Change #114: Seen much fewer transactions in the urban core across our markets, but they are starting to see some more product come to market and that's something that we're certainly evaluating again the majority of our portfolio located in great suburban markets and Eric transportation nodes, Thats kind of our bread and butter, but.

Rylan Burns: Again, the majority of our portfolio located in, you know, great suburban market transportation, knows that's kind of our bread and butter, but we will look at anything and everything has a price. So we're excited to potentially see some more opportunities through the market. We're out of all of our markets and then coming quarters. Okay.

Speaker Change #114: But we will look at anything and everything has a price. So we are excited to potentially see some more opportunities.

Speaker Change #114: Throughout all of our markets in the coming quarters.

Unknown Executive: Okay, great. Thank you.

Unknown Attendee: Great. Thank you.

Speaker Change #115: Okay, great. Thank you.

Speaker Change #114: Yeah.

Speaker Change #114: Yeah.

Unknown Executive: Thank you. Our next question comes from the line of Connor Mitchell with Piper Sandler. Please proceed with your question.

Speaker Change #116: Thank you. Our next question comes from the line of Conor Mitchell with Piper Sandler.

Connor Mitchell: Our next question comes to the line of Connor Mitchell with Piper Sandler. Please proceed with your question. Hey, thanks for taking my question. So there's been a lot of discussion on the bidding worth and tougher environment, and a lot of transaction activity. Just thinking about that, and then maybe also the prospect of set rate cuts.

Speaker Change #117: Please proceed with your question.

Unknown Executive: Hey, thanks for taking my question. So there's been a lot of discussion about bidding wars and a tougher environment and a lot of transaction activity. Just thinking about that, and then maybe also the prospect of set rate cuts. Just wondering, does that increase opportunities for preferred and mezzanine business investments, or are you guys kind of weighing more on the acquisition opportunity still?

Connor Mitchell: Hey, Thanks for taking my question. So there's been a lot of discussion on the bidding wars tougher environment a lot of transaction activity.

Speaker Change #119: Thinking about that and then maybe also the prospect of fed rate cuts just wondering does that increased opportunities for the preferred and mezzanine business investments or are you guys.

Rylan Burns: Just wondering, does that increase opportunities for the preferred and methaneed business investments, or you guys kind of weighing more on the acquisition opportunity still? Yeah, as you can see from our activity today, we've been very focused on acquiring high quality fee simple ownership properties and that that's kind of our base case. We are open to the preferred and the methaned investments, and we are pursuing several. So it's not that we've shut that off. That's really, you know, a large portion historically of our prepping methaned investments have come as a result of development opportunity. So, as the development pipeline is slowed considerably in the past year, there's just fewer opportunities for us to deploy in the prep space.

Speaker Change #120: <unk> kind of way more on the acquisition opportunity still.

Speaker Change #119: Yeah.

Rylan Burns: Yeah, as you can see from our activity today, we've been very focused on acquiring high-quality fee simple ownership properties, and that's kind of our base case. We are open to preferred and MES investments, and we are pursuing several, so it's not that we've shut that off. It's really, you know, a large portion historically of our PREP and MES investments have come as a result of development opportunities. So as the development pipeline has slowed considerably in the past year, there are just fewer opportunities for us to deploy in the PREP space.

Speaker Change #121: Yeah as you can see them from our activity today, we've been very focused on acquiring high quality fee simple ownership properties or not that's kind of our base case, we are open to the preferred in the Mezz investments and we are pursuing several so it's not that we've shut that off that's really a large portion historically.

Speaker Change #121: Our profit in Mezz investments have come as a result of development opportunities. So as the development pipeline has slowed considerably in the past year, there's just fewer opportunities.

Rylan Burns: So we are open, and I think we're well known within our markets as being a great partner for that product, and so we will continue to pursue it. But as a result of supply coming down and new development starting coming down, there's just been fewer opportunities.

Speaker Change #121: For us to deploy in the <unk> space. So we are.

Rylan Burns: So we are open, and I think we're well known within our markets as being a great partner for that product. And so we will continue to pursue.

Open and I think we're well known within our markets has been a great partner for that product and so we will continue to pursue but as a result of supply coming down and the new development starts coming down there's just been fewer opportunities.

Rylan Burns: But as a result of supply coming down and the new development starts coming down, there's just been fewer opportunities.

Angela Kleiman: Okay, I appreciate it. And then in the opening comments, I think it was discussed the strength of Seattle. It's seen less of an impact from supply, and some more return to office. Just wondering if you guys can give an outlook on those two items for the Seattle market going forward in the back after the year. Sure things, kind of Seattle is an interesting market in that it's, you know, one of our more important markets because of supply. And what's interesting here is we originally had expected Seattle to continue to outperform in the second half, but now that supply got pushed, it's going to end up being an offset because Seattle last year.

Speaker Change #121: Okay. Appreciate it and then.

Unknown Executive: Okay, appreciate it. And then in the opening comments, I think it was discussed the strength of Seattle. It's seeing less of an impact from supply and some more return to office. Just wondering if you guys could give an outlook on those two items for the Seattle markets going forward in the back half of the year.

Speaker Change #121: In the opening comments I think it was discussed.

Speaker Change #121: The strength of Seattle.

Speaker Change #122: It seeing less of an impact from supply.

Speaker Change #123: It's more a return to office just wondering if you guys could give an outlook on those two items for the Seattle market going forward in the back half of the year.

Unknown Executive: Sure thing, Connor. Seattle's an interesting market in that it's, you know, one of our more volatile markets because of supply. And what's interesting here is we originally had expected Seattle to continue to outperform in the second half, but now the supply got pushed. It's going to end up being an offset because Seattle last year, in the second half, had fallen quite a bit. And so it has this odd combination of easier year-over-year comparisons, but now there is more supply. So it probably offsets into something neutral and slightly better.

Speaker Change #124: Sure thing.

Speaker Change #125: <unk> is an interesting market in that it's you know one of our more volatile markets because of supply.

Speaker Change #125: And what's interesting here is we originally had expected Seattle too.

Speaker Change #125: <unk> continued to outperform in the second half, but now that supply got pushed.

Speaker Change #126: It's going to end up being an offset because Seattle last year and Thats what can have had.

Angela Kleiman: And this I can have had, you know, have fallen quite a bit. And so it has this odd combination of easier, you're over your comp, but now more supply.

Speaker Change #126: It has fallen quite a bit and so it has this odd combination of easier year over year comp, but now more supply. So it probably often send you something neutral and slightly better.

Angela Kleiman: So it's probably often tend to something new tour and slightly better.

Unknown Attendee: Okay, it's all for me. Thank you very much. Thank you.

Unknown Executive: Okay, that's all for me. Thank you very much.

Speaker Change #127: Okay. That's all for me thank you very much.

Speaker Change #127: Yeah.

Unknown Executive: Our next question comes from the line of John Kim with BMO Capital. Please proceed with your question. Thank you.

Speaker Change #128: Thank you.

John Kim: Our next question comes from the line of John Kim with BMO Capital Markets. Please proceed with your question. Thank you. I want to follow up a couple of times. Rylan had mentioned, you know, cap rates of the mid-high 4% range and run growth expectations. Rylan, I think you mentioned with Rylan, the rents were 15% pre-COVID levels. Is that the level of run growth that you and competitive buyers are looking at today on acquisitions? Just so for clarity, those brands are about 15% below pre-COVID levels. And we are not anticipating that that snaps back tomorrow, but we know that given the strong income growth we've seen in this some market as well as what we feel is, you know, coming through the COVID and slowed down in the tech market that the fundamental setup is attractive.

Speaker Change #129: Our next question comes from the line of John Kim with BMO Capital markets. Please proceed with your question.

Unknown Executive: Thank you. I wanted to follow up on a couple of times Rylan mentioned cap rates in the mid-high 4% range and rent growth expectations. Rylan, I think you mentioned with Elan that the rents were 15% pre-COVID levels. Is that the level of rent growth that you and competitive buyers are looking at today on acquisitions?

John P. Kim: Thank you I wanted to follow up a couple of times rather than mentioned.

John P. Kim: Cap rates in the mid high 4% range.

Speaker Change #130: And rent growth expectations.

Speaker Change #130: Ryan I think you mentioned with the rents were 15% pre COVID-19 levels is that the level of rent growth that you and competitive buyers are looking at today on acquisitions.

Speaker Change #130: Yeah.

Rylan Burns: Just so for clarity, those rents are about 15% below pre-COVID levels, and we are not anticipating that that snaps back tomorrow. But we know that given the strong income growth we've seen in this sub-market, as well as what we feel is coming through the COVID and slowdown in the tech market, that the fundamental setup is attractive, and I wouldn't be surprised if we recovered those rent growths within several years. So that is one factor.

And just for clarity those rents are about 15% below pre COVID-19 levels, and we are not anticipating that that snaps back tomorrow, but we know that given the strong income growth. We've seen in this submarket as well as what we feel is coming through the Covid and.

Speaker Change #130: Slowdown in the tech market that the fundamental setup is attractive and I wouldn't be surprised if we recover those rank growth within.

Rylan Burns: And I wouldn't be surprised if we recovered those rent growth within several years. So that is a factor. As to what our peers are doing, we are seeing, you know, some assets trade that we're, you know, not we're staying disciplined on that at levels that don't make a lot of sense to us. So I do think there are other participants in the market underwriting even more aggressive rank growth in some of these some markets. So it's difficult to parse through exactly what our competitors are underwriting, but in general, it feels like there's been a lot of capital demand and excitement about Northern California given the fundamental setup that we've been talking about.

Speaker Change #130: Several years, so that is a factor as to what our peers are doing we are seeing some assets trade that we're not we're staying disciplined on that at levels that don't make a lot of sense to us. So I do think there are other participants in the market underwriting even more aggressive rent growth in some of these submarkets. So it's difficult to parse through.

Rylan Burns: As to what our peers are doing, we are seeing some assets trade that we're staying disciplined on at levels that don't make a lot of sense to us. So I do think there are other participants in the market underwriting even more aggressive rent growth in some of these sub-markets. So it's difficult to parse through exactly what our competitors are underwriting, but, in general, it feels like there's been a lot of capital demand and excitement about Northern.

<unk>, what our competitors are underwriting, but in general it feels like there's been a lot of capital demand and excitement about northern California, given the fundamental setup that we've been talking about for a.

John Kim: For a couple of years now. And it seems on this call there's been a lot of discussion on pricing power and some favorable trends. Your rent income ratios are improving in your markets, and it seems to be some lowest in the country. Should we think about renewal rates exceeding the 5% that you've been getting recently?

Speaker Change #130: A couple of years now.

Unknown Executive: Okay, and it seems on this call that there's been a lot of discussion on pricing power and some favorable trends. Your rent to income ratios are improving in your markets, and it seems to be some of the lowest in the country. Should we think about renewal rates exceeding the 5% that you've been getting recently? Hey, John.

Okay and it seems on this call theres been a lot of discussion on pricing power and some favorable trends.

Speaker Change #131: Your rent to income ratios are improving in your markets and it seems to be some of the lowest in the country.

Speaker Change #132: Should we think about renewal rates.

Speaker Change #133: Exceeding the 5% that <unk> been getting recently.

Angela Kleiman: Hey, John, if we hadn't reached our peak, then, you know, that's, that would be more, more of a likelihood. But at this point, what we're seeing is renewal rates trending downward and relative to the prior months. It's been gradual. So the good news is it's not a huge deceleration, but, you know, from June to July, it's about 30-ish basis points to decel, and renewal ultimately will converge toward market rent. So that would be possible if suddenly there's a massive amount of job growth and demand, and that's, you know, and then the market rents take off.

John P. Kim: Hey, John.

Unknown Executive: If we hadn't reached our peak, then, you know, that would be more of a likelihood, but at this point, what we're seeing is renewal rates trending downward, and, you know, relative to the prior months. It's been gradual. So the good news is it's not a huge deceleration, but, you know, from June to July, it's about 30-ish basis points deceleration, and renewal ultimately will converge toward market rent. That will be possible if suddenly there's a massive amount of job growth and demand and that, you know, and then the market rents take off, but that's not a likely scenario that we are seeing at this point in time.

John P. Kim: If we hadn't reached our peak.

Speaker Change #134: And then you know that.

John P. Kim: That would be more more of a likelihood but at this point, what we're seeing is renewal rates trending downward.

Speaker Change #134: And.

Speaker Change #136: Relative to the prior months its been gradual so the good news is it's not a huge deceleration, but you know from.

Speaker Change #134: June to July it's about 30 ish basis points T cell and renewal ultimately will converge toward market rent.

Speaker Change #137: Thank you.

Speaker Change #134: That will be possible, if suddenly there's massive amount of job growth and didn't hand in that.

Speaker Change #134: And then the market rents take off but that's not a likely scenario that we are seeing at this point in time.

Unknown Attendee: But that's not a likely scenario that we are seeing at this point in time. Thank you.

Speaker Change #135: Got it thank you.

Speaker Change #135: Okay.

Unknown Executive: Thank you. Our next question comes from a line David Segal with Essex Property Trust. Please proceed with your question.

Speaker Change #135: Thank you. Our next question comes from the line of David Siegel with Essex Property Trust. Please proceed with your question.

David Siegel: Our next question comes from a line of David Siegel with Essex Property Trust. Please proceed with your question. Hi, thank you. I was curious if you could provide some color on what is changing with the family supply forecast and whether some deliveries are being pushed into next year. And to the extent that you can comment on the outlook for 2025 supply growth relative to this year. Thank you.

Speaker Change #135: Yeah.

Barb Pak: Hi, thank you. I was curious if you could provide some color on what is changing with the Ulta family supply forecast and whether some deliveries are being pushed into next year and, to the extent that you can comment on the outlook for 2025 supply growth relative to this year. Thank you.

David Siegel: Alright, thank you.

David Siegel: I was curious if you could provide some color.

David Siegel: What are the what is changing with the multifamily supply forecast and whether some deliveries are being pushed into next year.

To the extent that you can comment on the outlook for 2025.

Speaker Change #139: <unk> growth relative to this year. Thank you.

Barbara Pak: Yeah, this is Barb. So, as it relates to our 2024 forecast for supply, some properties in really southern California were delayed more than we saw, and it's about 2,700 units effectively were pushed into next year. And in Seattle, some of our delay adjustments were too hard, and they're delivering this year. So, we pushed up some of the Seattle supply by about 2,000. So, there's met a small reduction to our supply from multi-family this year. And then, as we look to next year, we think Southern California will be slightly higher because of the delays that occurred this year.

Barb Pak: Yeah, this is Barb. So, as it relates to our 2024 forecast for supply, some properties in really Southern California were delayed more than we thought, and it's about 2,700 units that were effectively pushed into next year. And in Seattle, some of our delay adjustments were too hard, and they're delivering this year. So, we pushed up some of the Seattle supply by about 2,000. So, there's been a small reduction to our supply for multi-family this year.

Yeah. This is barb so.

Speaker Change #140: And as it relates to our 2024 forecast for supply.

Speaker Change #141: Some properties and really southern California were delayed more than we thought and they it's about twice that of a 100 units effectively were pushed into next year and in Seattle some of our delay adjustments.

Speaker Change #142: We're too hard and Theyre delivering this year. So we pushed up some of the Seattle supply by about 2000, and so there is net <unk>.

Speaker Change #142: <unk> reduction to our supply for multifamily this year and then as we look to next year.

Barb Pak: And then, as we look to next year, we think Southern California will be slightly higher because of the delays that occurred this year. Northern California will be pretty neutral. San Jose up slightly, but offset by lower supply in Oakland, and then Seattle pretty neutral. So, overall, it's going to be up a little bit, but our forecast right now calls for supply to be very muted at the basic points of total stock, similar to this year. So, there was no material change.

Speaker Change #142: We think southern California will be slightly higher because of the delays that occurred this year.

Barbara Pak: Northern California will be pretty neutral to this year. San Jose, absolutely, but offset by lower supply in Oakland. And then Seattle, pretty neutral. So, overall, it's going to be up a little bit, but our forecast right now calls for supply to be very muted at speed-based points of total stock, similar to this year. So, no material change.

Speaker Change #142: Northern California, it'll be pretty neutral to this year, San Jose up slightly but offset by lower supply in Oakland, and then Seattle pretty neutral. So overall, it's going to be up a little bit, but our forecast right now calls for supply that would be very muted at 50 basis points of total stock similar to this year so no material change.

Speaker Change #142: <unk>.

Angela Kleiman: Great. And I'm curious how does the delinquency issues in your portfolio compare to the broader market and to what degree could delinquencies in the rest of the market so create some overhang in terms of competition for newly listed units? Yeah, that's a good question. We have very little visibility when it comes to the broader market. The one thing that we can tell is that when the entire state of California was going through the, started going through the delinquency process, the courts had a huge backlog, and it took about 12 months to process it. And now it's down less than six months.

Unknown Executive: Great. And I'm curious, how do the delinquencies in your portfolio compare to the broader market? And to what degree could delinquencies in the rest of the market still create some overhang in terms of competition for newly listed units? Yeah, that's a good question. We have very little.

Speaker Change #143: Great and I'm curious.

Speaker Change #144: Does the delinquency issues in your portfolio compared to the broader market.

Speaker Change #145: What degree could.

Speaker Change #146: Delinquencies in the rest of the market so create some overhang in terms of competition for newly listed units.

Unknown Executive: Yeah, that's a good question. We have very little visibility when it comes to the broader market. The one thing that we can tell is that when the entire state of California started going through the delinquency process, the courts, you know, had a huge backlog, and it took about 12 months to process it. And now it's down to less than six months. And that has been a direct correlation to our ability to recover delinquent units and related improvements in that area.

Speaker Change #147: Yeah. That's a good question, we have very little visibility when it comes to the broader market. The one thing that we can tell is that.

Speaker Change #146: Hum.

Speaker Change #146: The entire state of California was going through the started going through the delinquency.

Speaker Change #146: Process the courts.

Speaker Change #146: <unk> had a huge backlog and it took about 12 months across asset and now it's down less than six months and that's been a direct correlation to our ability to recover delinquent units and then.

Angela Kleiman: And that's been a direct correlation to our ability to recover the delinquency units and the related improvements in that area. And so, as we see, this improvement continues. And as Barb mentioned, it could be lumpy, but if you look at it over blocks of time, say three months' period, it has continued pretty steadily. It wouldn't; it would be surprising for, you know, for that, for the delinquency to increase suddenly and extremely. Obviously, for processing, time is key. And so, as long as that holds steady, then we should be in good shape. Great, thank you. Thank you.

Speaker Change #146: The related.

Speaker Change #146: Improvement.

Speaker Change #146: And in that area and so as we see this improvement continues and as Barb mentioned it could be lumpy, but if you look at our or blocks of time say a three months period.

Unknown Executive: And so, as we see this improvement continue, and as Barb mentioned, it could be lumpy, but if you look at it over blocks of time, say a three-month period, it has continued pretty steadily. It wouldn't, it would be surprising for, you know, for that, for the delinquency to increase suddenly and dramatically. Obviously, the poor processing time is key, and so as long as that holds steady, then we should be in good shape. Great, thank you.

Barb Pak: It has continued pretty steadily.

Barb Pak: It would be surprising for.

Barb Pak: Tom.

Tom: What delinquency too.

Barb Pak: Yeah.

Speaker Change #149: In increased suddenly and it's extremely obviously the core processing time is key and so as long as that holds steady then we should be in good shape.

Speaker Change #150: Great. Thank you.

Unknown Executive: Thank you. As a reminder, please press star 1 to ask a question at this time. Our next question comes from Wes Golday with Baird. Please proceed with their questions. Hello, everyone. Just want to talk about the developer environment right now on the West Coast. It's been a very tough cycle. Are you seeing any

Speaker Change #151: Thank you.

Unknown Executive: As a reminder, please press star one to ask a question at this time.

As a reminder, please press star one to ask a question at this time.

Wesley Golladay: Our next question comes from a line of West Golday with Baird. Please proceed with your question.

Speaker Change #151: Our next question comes from the line of Wes Golladay with Baird.

Speaker Change #152: Please proceed with your question.

Angela Kleiman: Hello, everyone. Just want to talk about the developer environment right now on the West Coast. It's been a very tough cycle. Are you seeing any developers exit the market permanently? Yeah, I think there was news actually just last week of an Atlanta-based developer that's decided to pull out of the West Coast. And given this is not a huge surprise to us, given what we've long said is a very challenging environment to develop in. So we're aware of it. And to be honest, we're not that concerned. Fewer developers means less competitive product in the near future and should create additional opportunities for more Essex.

Hello, everyone. Just wanted to talk about the developer environment right now on the West Coast. It's been a very tough cycle are you seeing any developers exit the market permanently.

Rylan Burns: Yeah, I think there was news, actually, just last week of an Atlanta-based developer that decided to pull out of the West Coast. And, you know, given this is not a huge surprise to us, given what we've long said is a very challenging environment to develop in. So we're aware of it.

Yes, I think there was news actually just last week of an Atlanta based.

Speaker Change #152: Developer, that's decided to pull out of the west coast and.

Speaker Change #152: Given this is not a huge surprise to us given what we've long said is a very challenging environment to developing so.

Rylan Burns: And to be honest, we're not that concerned. Fewer developers means, you know, less competitive products in the near future and should create additional opportunities for Essex. Yeah, that's what I was kind of going with.

Speaker Change #153: We're aware of it and to be honest, we're not that concerned fewer developers it means less competitive product in the near future and should create additional opportunities for Essex.

Rylan Burns: Yeah, that's what I was kind of going with. I mean, I think you mentioned you had a, you're targeting a hundred basis points spread versus acquisitions. As I figured, you might be able to develop more countercyclical at this time. Can you comment on where your spread would be today? How much further it has to go? Yeah, that estimate is current today. Again, it's all dependent on, you know, our fundamental outlook for the specific submarket where we can acquire land at a reasonable basis that can really drive the numbers. And then we're tracking hard costs very closely.

Rylan Burns: I mean, I think you mentioned you were targeting a 100 basis points spread versus acquisitions. And so I figured you might be able to develop more counter-cyclical at this time. Can you comment on where your spread would be today?

Speaker Change #154: Yeah, that's what I was kind of going with them. I think you mentioned you had a you were targeting 100 basis point spread versus acquisitions.

Speaker Change #155: I figured you might be able to develop more counter cyclical at this time can you comment on where your spread would be today, how much further it has to go.

Rylan Burns: How much further does it have to go? Yeah, BOS, that estimate is current today. Again, it's all dependent on, you know, our fundamental outlook for the specific sub-market where we can acquire land at a reasonable basis that can really drive the numbers. And then we're tracking hard costs very closely. So I'd say we're closer today than we've been in many years. We haven't started new development in almost four years. And so we've been really disciplined.

Speaker Change #155: Yes.

Speaker Change #156: What is current today again, it's all dependent on our fundamental outlook for the specific sub market, where we can acquire Atlanta, our original basis that can really drive the numbers and then we're tracking hard costs very closely so I'd say, we're closer today than we've been in many years, we havent started a new development in almost four years and so we've been really.

Rylan Burns: So I say we're closer today than we've been in many years.

Rylan Burns: We haven't started a new development in almost four years. And so we've been really disciplined. We know it's very challenging to effectively develop and create value for shareholders through that. So we're going to continue to be very disciplined.

Speaker Change #156: Disciplined we know, it's very challenging to effectively develop and create value for shareholders through that process. So we're going to continue to be very disciplined but.

Rylan Burns: We know it's very challenging to effectively develop and create value for shareholders through that process, so we're going to continue to be very disciplined. But the company has a long history of stepping in at the bottoms of the cycle, and we are cautiously optimistic that we're going to be able to rebuild that pipeline in the near future. That's all for me. Thank you.

Rylan Burns: But the company has a long history of stepping in at the bottom of the cycle. And we are cautiously optimistic that we're going to be able to rebuild that pipeline in the near future.

Speaker Change #156: The company has a long history of stepping in.

Speaker Change #156: Because of the cycle and we are cautiously optimistic that we're going to be able to.

Speaker Change #156: Rebuild that pipeline in the near future.

Unknown Attendee: That's all for me. Thank you.

Speaker Change #156: That's all for me thank you.

Speaker Change #157: Thank you.

Amy Proband: Our next question comes from a line of Amy, Amy Proband with UBS. Please proceed with your question. Hi, thanks. That that ticked up a bit in Southern California, excluding L.A. County.

Barb Pak: This question comes from a line of... Amy Probandt with UBC. Please proceed with... Hi, thanks. Um, that that ticked up a bit in Southern California.

Speaker Change #158: Question comes from the line of Amy <unk> with UBS. Please proceed with your question.

Amy <unk>: Hi, Thanks that that ticked up a bit in southern California, Excluding L. A county, so I'm wondering if that's the lumpiness or if you're seeing residents potentially having difficulty paying or potentially signs of a resurgence in bad actors.

Barbara Pak: Some wondering if that's lumpiness or if you're seeing residents potentially having difficulty paying or potentially science versus surgeons and bad actors. This is barb. The numbers do bounce around month to month. That's why we tend not to like to publish the monthly numbers, because there is noise every month. So we're not really concerned about it. Nothing to nothing to fly there. It's just monthly noise.

Barb Pak: Yeah, this is Barb. The numbers do bounce around month to month. That's why we tend not to like to publish the monthly numbers because there is noise every month. So we're not overly concerned about it. Nothing to fly bare. It's just monthly noise.

Barb Pak: Yeah. This is barb the numbers to bounce around month to month, that's why we tend not to like to publish the monthly numbers because there is noise every month. So we're not overly concerned about it nothing to nothing to fly bear interest.

Amy <unk>: Monthly noise okay.

Angela Kleiman: Great. Thanks for confirming.

Speaker Change #160: Great. Thanks for confirming and then in terms of move outs have there been any notable changes recently and reasons for move out.

Angela Kleiman: And then in terms of move out, have there been any notable changes recently in reasons for move out? This is Angela here. The reasons to move out has remained steady. It's mostly job changes or change in households, and and and that's remained relatively consistent. Great. Thank you.

Angela L. Kleiman: This is Angela here. The reasons to move out have remained steady. It's mostly job changes or change in households, and that's remained relatively consistent.

Speaker Change #160: This is Angela here the AR reasons to move out has remained steady, it's mostly job changes or change in households, and.

Angela: And that's remained relatively consistent.

Angela: Thank you.

Angela L. Kleiman: Thank you. There are no further questions at this time. I'd like to turn the call back over to Angela for closing remarks.

Speaker Change #161: Thank you there are no further questions at this time I'd like to turn the call back over to Angela.

Unknown Executive: There are no further questions at this time.

Angela Kleiman: I'd like to turn the call back over to Angela for closing remarks. Well, thank you all for joining the Essex call and for all your questions, and we look forward to seeing all of you real soon.

Angela: For closing remarks.

Angela L. Kleiman: Well, thank you all for joining the Essex call and for all your questions, and we look forward to seeing all of you really soon.

Well. Thank you all for joining the Essex call and for all your questions and we look forward to seeing all of you real soon.

This concludes today's teleconference. You may disconnect your line this time. Thank you for your participation. ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶

Unknown Executive: This concludes today's teleconference. Goodbye! Thank you for your participation.

Speaker Change #162: This concludes today's teleconference. You may disconnect Goodbye at this time.

Speaker Change #162: You for your participation.

Speaker Change #162: [noise].

Speaker Change #162: Hum.

Speaker Change #162: [noise].

Speaker Change #162: Hum.

Speaker Change #162: Hum.