Essex Property Trust (ESS) 3 Aug 182018 Q2 Earnings call transcript

Good day, and welcome to the Essex Property Trust Second Quarter 2018 Earnings Call.

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

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

quarter our me three thank Q&A. and to Today, here and market and us our John for Good topics: and investment results market earnings will John revisions morning, the call. follow you conference Kleiman for discuss first second comments, outlook, today quarter I joining and regulatory XXXX for will second with update an Angela matters. is Burkart Eudy to topic. On conditions on

that We’re revenue results, benefit when we which attributable XXXX. pleased compared The in leasing growth two quarter early the season in of second difference compared versus XXXX normal our QX a QX with to the reflect XX to QX a rents QX peak experienced occupancy gain deceleration points in strong to in point in XX mostly in increase the market as XXXX. basis quarters is in basis

growth at become of which market will housing rent for fundamentals that and will for modestly to benefit favorable, growth demand half push is our comps year, rental levels continues the easier expectation revenue second in strong. slow we XXXX. Overall, as of slightly While lower this rents the it mostly occupancy, apartments remain be

particularly Southern supply-related portfolios, and We weakness Northern in Jose are Seattle. and seeing in strength Diego, in California San San and our

across a re-acceleration and positive much for growth U.S. by Coast trends West economies, a support expected, job country. indicated of the macroeconomic outlook favorable As in the

pace with in information job forecast continued the three growth X.X% Coast Essex ending this hiring of West by the growth sector. to year the the quarter, initial than in and period, increases the X.X%. months our during the driven at – for Jose with trailing of a Seattle Outperforming way outperformed June. markets healthy job During metros The lead San in the tech more for continued X%

job S-XX for our basis increasing year growth Seattle This Given this basis Page by year forecast we increase the our are supplemental The Essex average. markets Personal U.S. well in to full an XX and full in in rents. workers skilled X%. the forecast respectively. than of up growth faster which to home U.S., Essex which the are grow Shortages workforce. basis growth job of of on markets over stronger XX points, points rate are more strength, resulted incomes is San below the rate labor for the in Throughout people and parents points Jose X.X current average lead XXX back still doubling the and currently data in market or seen people the rate weighted by up. resulted tight has incremental for In a Strong year, million average jobs market portfolio expected the X.X%, cycle. X%. force double the drawing with is X.X%, unemployment wages, the labor into past those economy a of X.X% conditions growth Essex rent compared living people from at to can XXXX growing higher to pushing the are or labor demand participation are

are increases home average XX% driving we to XX%. cost are for-sale tax to premium on law along Coast of tax ago. the improvement XX% severe As all of year-over-year, On recent published to reform, and our shortages chart prices, Large to median supplemental, in a with own to up increase. S-XX.X markets a home has compared the own Due versus home rent to renting changes a the in risen we apartment of rental in an historical year the as market. substantial housing a result, seeing an our are compared affordability versus in West one which

for apartment impact we favorably result, rental housing to and this fundamentals. a expect As demand

Turning to supply.

quarter, under-construction projects, and our Angeles, timing. relatively to assess up the delivery progress scrub expected from Seattle exception During back supply we markets of pushed with to completed XXXX and of remains slightly. on-the-ground analysis, prior surveys a Overall, supply recent is in supply and delays of XXXX, the projections unchanged later full our where in where our Los including deliveries into

be supply the indicates across our downtown the analysis San deliveries markets. XXXX. Francisco continue by be to and CBD of Diego, past to we that Our be will peak end relatively markets, expect heavily San XXXX. and Orange compared Overall, flat apartment Multifamily to deliveries County, Seattle their in XXXX concentrated

time, noted are temporarily same lease-up properties increase, concessions at stabilized delivered nearby disrupting As previously, will often when pricing the at communities. several

stabilized once Seattle abate at concentration to concessions of in communities, of L.A, apartment and and four weeks Specifically, leasing subsides. concession new deliveries has deliveries communities. downtown begin concessions price of These the nearby in timing the to six and resulting periodic resulted at pace in impacting

Going believe will construction construction decline and shortages skilled conservative given markets of cost, our a rising slowly forward, labor we more starts in lending environment.

relates our S-XX, growth forecast rent to market to there revisions is portfolio the growth no X%. to on of As XXXX rent Essex change it

rent second that markets. the deliveries in expected seasonal higher on and apartment of due weaker in second markets, initial Seattle Seattle and X%, half is conversely, better end QX stronger points expectations now However, given be demand to updates is we half in to namely: greater are drop-off than basis to year. growth; job the expect QX, which back Jose there growth changes occurs XXX expected our the in than with in San be investment XXXX usually of My topic, the

B-quality cap in one to generally in trading million. property see low around and markets at a locations and the institutional property significant disposition to X% San Diego transactions been Therefore, a in reviewed co-investment During that XX there concluded the rate trading closed with Essex one has A-quality locations to any in not We a points rates. to higher. and rate, cap quarter, in XX cap X% continue contract have change $XXX acquisition basis we X.XX% approximately we on for apartment recent entity

the past noted, volume continue property our yields the healthy levels permits, development. headwind to Development compressing growth significant preferred even that in that construction NOI and with underwriting see of criteria. we given equity As increase meet rates, exceed are quarters, of a opportunities a to new multifamily representing slowdown generally cost two

one total of equity quarter. investment year, far full commitments Angela our our for we $XX.X guidance bringing will as So momentarily. million, closed the this year preferred revisions $XXX outstanding to million to discuss have investment second

matters. regulatory topic, Third

great few and in concern During Costa-Hawkins the to the been deal California reaction Proposition last XX seeking Rental to Housing investor months, there of a has repeal Act.

by negative which costa-Hawkins As in in of development draconian Monica, control provisions, for dramatic improvement. a policies establishing be the ordinances unintended a law seeks state of housing enacted. counter to severe XX property is there vacant which certain period. suppression enacted Santa to laws guidelines housing resulted cities. In adopted by reminder, production had Berkeley, for impacts, law XXXX containing that the a Prior that housing such cities, Francisco summary, ordinances control were control became rent Costa-Hawkins, rent to state effects can A meet promote Costa-Hawkins demand cities, of and to production by as severe rental local San following including passed rent and no of meaningful few apartments, XX-year including rent control

built cities construction a respect exempting in undersupplied production and As The XXXX quality, decontrol with after jurisdictions these X, from result, control. legislature to state California housing remain new requiring any passed XXXX, housing. chronically rent all vacancy to increase Costa-Hawkins and in February

experienced trade significant pro-business the broad development Following new and rebound. policy. coalition oppose NAACP unions, a veterans, of of We the joined enactment companies, apartment a been Costa-Hawkins, Costa-Hawkins, other part variety Essex by organizations, bad is of the rent believe control has housing that of groups. repeal to a

an and housing XXXX, California California’s the shortage, in where people remains new new live. the jobs coastal Given jobs it in severe will of estimated XXX,XXX vibrant many unclear filling economy

vigorously proposals more or changing portfolio cities critical local cities attractive, Strategically, not the incomplete attractive rejected. to oppose all cities tighten investment. shortages might in now for consideration and operate of in decisions. rent cities We state is about control Keep XX% nearby over outlook about pursued repealed properties, rent any is become a be time, XX greater both continue housing information in of at in control cities expansion for often allocation that what in will years, is less available. control to California, for the in XX rent do the rent two without control pre-XXXX control while and Property mind, levels. with the if leading We Costa-Hawkins past rent

now I’ll That We my call to over to update as and will continue needed. John. concludes periodically turn the you comments,

for quarter year-over-year solid growth of X.X% NOI and Mike. Thank revenue was another you, QX growth with same-store Essex X%. of

the to its portfolio the in period. due led year-over-year revenue XX gain over is point second with in occupancy playing season part This basis growth out California year’s the X.X% prior leasing anticipated. as quarter in Southern of

XXXX next rental to in impact XXXX, of rents Our our year’s a grew peaks July operating headwind be growth order is XXXX in July the in headwind early. In basis opposed in occupancy be following rents point XX occupancy July to will favoring in instead XX of was numbers, our approximately expect our lease year year revenue our quarter income. Therefore, which of create normal over to about timing X%. low to favoring this X.X% revenue below months, to rental occupancy. July is financial of rate of revenue QX year-over-year the peaked loss for as the during points pattern and lease historically period curve, occupancy was or other the – compared the our to to maximize market last In XXXX which same-store evident that which due for period. XX.X%. strategy rates XX.X%, will when last are we XXXX the will loss when The significant third prior seasonal

Now the portfolio. which period. East of second is construction, in X.X%, rents to of on their of supported of MD preleased. second office prior continues of under WeWork additional highest year’s update markets. XXX,XXX we’ll Seattle the downtown year-over-year square has Seattle provide expand respectively, be and and compared to strong Zillow continue over already and city relatively Revenue million office grew quarter second by outperformance, last of space. in submarkets quarter gains feet the growth, our the X.X% The currently feet market the posting job Seattle year. are The of the Seattle years combined XXXX, for side job our by flat XX% leasing Essex roughly in XXXX After to CBD space an footprint square X.X% – the X.X market

for square as totaling which in XXX,XXX of Fremont. bay all to continues over largest well taking with LinkedIn adding office XX,XXX feet Park led finally Moving on added. to expansion X.X% for leasing San for Francisco, Amazon Bay biotech by robust adding Francisco Francisco companies intensify growth, feet, XXX,XXX the footprint for space. the office And footprint at XXX,XXX July, Northern square the car ended WeWork hands Oakland X market. of Between Bay, healthy Phase and XXX,XXX construction, lease-up in foot mid-XXXX. there phases Park lease grew the a a activity by two highest maker office X.X% Silicon additional tech across job San project changed and California. XXX,XXX feet. X.X%, X.X Job we and in million Valley, an prime in that square combined of Francisco Jose jobs estimate compete and adding square about Green X.X% absorption in in leasing San quarter, the year-over-year space which San with quarterly respectively. amongst their of the space South in to as while buildings companies is signing in to sometime San up was under-construction Other total averaged Area as Bay feet. and the stock. the X office preleased. Mountain Sunnyvale. lease both Tower completed growth markets Essex feet way this View history up building the X Facebook’s self-driving Facebook, from Demand office start office pre-leasing was San QX were XXX,XXX Francisco expanded and will Area by major the San square and In under Station was An feet remains Francisco X.X% In square XX% – in a square of the

Hills leases year ago. for quarter XXXX and L.A. grew for Arts expansion by of Woodland Tri-Cities Jose year-over-year, growth San jobs and QX revenue Our District quarter to XXth foot grew Beach growth with pace Southern and X%. year-over-year points lease, includes for with at Job XXXX for and X.X% be square for and same-store second L.A. the growth. XX,XXX Long period. the WeWork’s in X.X%, Angeles while of trailed foot the the down continues XXXX of the was X% basis with last by Heading averaged X.X%, growth revenue into in California. led in the X% X.X% quarter with same Fremont Spotify’s by X.X% Orange second Notable a and respectively, Revenue growth XXX,XXX West period, downtown year-over-year. submarkets quarter Mateo X.X% Francisco second Los was to the the square in X.X% San the San Oakland led the its with above XX area. and L.A. County in

this growth be then similarly soft XX% grew annual time in pre-leased year-over-year last to our BLS’s healthy which worth Essex’s this the QX with weaker at year. of than construction, other was higher is that of Office was South XX% in million North under revised X.X%, was revisions. square up X.X% and pre-leased. While is for the and year markets, and feet it’s pace submarkets activity at reported period. That continues respectively, from this benchmark materially noting it X

Chula XX.X% in second X.X% second X%. over Finally, prior growth Currently, to our days in between submarkets at year-over-year XX San Revenue is growth Diego, of year’s and the portfolio availability in the North X.X% of the remained occupancy, our in XXXX. Vista XXXX is job was at side period. the X% quarter out in quarter at

are I Kleiman. and our to renewals Angela call Our being out, Thank turn lease. loss now you, the over the will sent with CFO, consistent to

guidance second quarter, core and on Thank quarter with color start FFO conclude our with grew revisions balance exceeding second X.X%, share. In provide additional of $X.XX midpoint you, year sheet review update. our a I’ll of by guidance John. a the results, full the per

from relates The operating $X.XX items. a As $X.XX comprised of combination tax the occur noted miscellaneous in $X.XX expected to of the timing second favorable the half is non-same-store following: pool various expenses, release, of remaining press our from variance outperformance now revenues, $X.XX to adjustments of from in of the which are in property the $X.XX property of and year.

But our is results quarter core per-share us guidance represents year-over-year the per than X.X% midpoint of FFO which our year respectively. we same-property second growth, guidance and a have share. NOI raise increasing our our year higher and result X.X% to by for raised have the are points same-property the FFO basis at also $XX.XX. core to to and XX by $X.XX second a XX As of basis our of quarter strong basis growth revenue full X.X%, performance, of XX NOI growth a the points midpoint guidance growth points, full revenue guidance we XX and X.X% original enabled respectively. This midpoint Year-to-date, by

guidance. year Turning to full our investment

discussed assumed to acquisitions, $XXX Therefore, would $XXX disposition guidance of million to which between achieving dependent upon $XXX of proceeds. with $XXX or funded was be joint initial million guidance million ventures initial our in million Our disposition our earlier. as investment competitive desirable the resulting in have our any not we environment, landscape, the cap acquired properties Mike Year-to-date, markets tight current rate continued targets. highly remain a assets as in

for our for revised $XXX $XXX we million strategy. disciplined are acquisitions Accordingly, full increase range, year. this underwriting includes stay million $XXX to our and XXXX our investment on have of Given dispositions assume Therefore, chosen current to of the we million our that volume, range to which million the million The modifying buyback program. stock excludes $XXX consistent we guidance allocation guidance dispositions funding buyback dynamic, to to our guidance basis. and execute pipeline. dispositions to Note capital of $XXX amount in from stock could leverage-neutral a the transaction guidance the would subject

on sheet. update brief and Lastly, the a capital balance markets

our the in needs. of provided $XXX unsecured And and With debt-to-EBITDA of funding answers. capital X.Xx our now maturing only net in balance comments, to already issuance year, debt development The which quarter first call all of sheet de we for year, the $XXX $X.X was million sale the over our in second the our Domain of quarter. have As needs of secured in contemplated minimis. remains remain concludes will look half to my second bond for strong. questions operator million of we half the of second liquidity, I billion and turn the That the and back the

question. Citigroup. first proceed Instructions] [Operator is your with from Please Nick you. Our Thank with question Joseph

I want guidance. to Thanks. just start on

XQ low growth. revenue same-store for that mentioned point the You would be

what and you are XQ? assuming So for XQ

range, QX guidance low the in assume in and QX high we the For Xs revenue Xs. same-store

pass, it the Thanks. do And municipalities XX. in on rent what Prop timing to control, implement? take move long terms to be would it then does Hypothetically, if just think how actually of some you would

have banned going state Washington Nick Cruz to going question. pretty Hey, local many examples or the exactly the level It’s and There tell of attempt conversations are at local defeated: rent what are in was and including there tough they happen the it’s they’re control debating have And – Santa to when of do that have passes. course, to been it. Schall. on point the cities Pasadena that are are bans the ballot. respect control public, or Beach, failed law Santa they at currently. that a that. the three time, various are And good rent – if control. are Ana with local on would repeal to they’re Long the to going level is are new that tried rent do proposals, at Mike some because that were exactly going Prop. not There this XX open haven’t There but deliberations what decided that to to because And either to pursue it’s Inglewood.

there’s So none this of and a area, lot activity of it is in complete.

are distinguish control For cities it’s have. of rent to these types difficult different example, to what going

good a my the and as therefore, can nearly comments, need are example. a decision in lot extreme. – a them controlling before a about noted be for are of Some what forms, to of that those be. extreme, learned, not there’s still to But that And many we we involve going are vacant lot units, information impacts make more lot

Eudy. add Yes. This to one is like comment. I’d John

to but that of it the control draconian a a version much it as very all cities with most And the vast cities we in can and housing In of approach we rent produce going are the another waiting We believe assuming our pass. – I rent that balanced are to think few – do entitlement to were we done We do, question, be they the to Prop. exactly cities how factor. it. speculative and to methodical deal at With where take. it’s the the the probably their will have they’re governing impact ability say, large the Most part long think be your tell don’t a lands, that would to asked cities On would city, too in be a rent element, XXXX you Mike control be on housing. thoughtful initiate control, will it you belief. on fact XX said, on is that behind that’s recognize side, general if majority it were believe initiated altar way. like it how less

you. Thank

Capital Markets. Wurschmidt Our next with Please KeyBanc from question Austin proceed. is

if revised of provided. just Hi. sounded your of taking of some you the moderates of job points that XQ half I growth on the assume It growth some assumptions like in above the pace back questions. was revenue full the guidance job data in the year. growth job Thanks were for curious outlook the the year

a the Sure. we that doing John. now. right basis. moves we quite But see follow little and on We – expecting monthly it growth, Job numbers our doing well economy a Job a well, raised bit is to growth very end, reflect reality. – around the obviously, economy this in we’re is the bit,

We’re not volatile. slowdown, expecting are the numbers a but somewhat big

some second down. So we job movement growth just half up see solid and just a it as relates and limited with to

an in was And if – Thanks. doubling and if this interesting, the this you of market your around a impact then and improving households provide thought rents. any what past curious I and an the affordability could demand up or have you’ve I just was sense on or comments benefit seen phenomenon from perspective

we, it’s terms of that we’re Mike. to long-term is XXX% And XX% good there’s And this into average And time, band If a in above if of under of as interestingly, it’s the as indicates tends ratio ratio, all three in that with in something believed XX%, yes, a to rent-to-median that, the threshold it spot pricing. wrong in income then these have as in issues. long rental each Yes, script. long improved for you XXX%, in the get Northern that probably be major that noted are affordability market. market, XXX% metros. we below my California,

news. that’s Southern most close pretty to of in good And California. XXX% So we’re

actually quarters. So a respect long in really way with several to affordability the we’ve last come

where that And historically? ratio has been

XXXX – XXX% to Again, of – band the XXXX XX-year, is of this the XX% long-term, comparing it’s to average. the we’re

California range historical San the and Northern is Francisco California And market. Southern in more So XX% is is Typically, by XX%. range average. it about depends is the Seattle like typically, the XX%. XX% except long-term in That’s

Great. Thank you.

Spector Lynch. America Jeff of with Bank Our next from is proceed. question Please Merrill

rent? Are demand, It push on that you. to, Thank you saying back well. in And Hi, trying your – you on XXXX. you Great. decline like a comments again? on based occupancy should [indiscernible] for feel clarify rent saying half on second pick bit to XXXX are that to we’re comments and go up just opening will sounds want back everyone. your I occupancy Mike,

the John rest me because that to of his think let outlook this kick you’re Yes, actually I for referring year. to

you handle So want John, that? to

Yes, absolutely.

the of basis the numbers points shifted referencing, Last that the year historical occupancy shifted in year, past, the that of market reason Angela curve consistent we or clearly with is seasonality off improved And the it’ll that to QX, last has XX impacts in and is the was seeing with basis strategy and basis I’m of be being a the to year-over-year. had we’ve early. XX actually a headwind it what as QX, points. fell points, year-over-year with XX QX, benefit that standards. So

So as achieving strategies market maximizing to we rent shifted opposed favor occupancy. to

it’s that turning. So that in increased which turns, increased unit occupancy also is with Each line a adjustment, certain there’s turnover, units related to it.

So and more It’s because the strategy market units as to months. focus occupancy, stronger, and on over the XX of turn next natural we a in instead because maximize the summer rent the as it’s adjusted achieving we’ve not our weak, we management revenue there’s actually adjustment. market’s market’s

QX impacted occupancy as back that enter question? season. And QX the I up mentioned. weaker one most So bring then Does our negatively, your that’s of as is we answer the the will part rental

his in opening in about the I But that’s Mike benefit expected XXXX. Yes. thought talked helpful. And Thanks.

yes. Sure, I’ll...

Let me...

Sure, sure.

that. Answer

exactly. yes, So

four a to X% this us and going XXXX. Keep occupancy – into higher have QX, rent a is we’re was going rents that pushing loss versus left year last we headwind X.X% benefit if in of the positive the rent So from lease start – only create the to obviously, at XXXX, out on then year. so months mind of end to foot July growth in the growth by mainly

could you XXXX. in to expect us help increment, that So

mean, that rent control early with about just what I it Then if the on town town – control, to talk do – would or Essex does conversation. one in their too Thanks. a Okay. municipality? is follow-up implement a rent

discussions have this, a Yes, discussions cities. these to any on research things rent are And conclusions, the lot from glean pretty we’ve cities a forms other are rent rent to it’s various of the cities that because there few of are so right this same. now. as then conclusions control, forms given are, of is extreme that have control. Mike. thought we’ve Because is in Yes, all done difficult control lot of we’ve There said, relatively in flux what and obvious and those moderate many not

that consistent As to development, of to the et with but California’s with split put of cars. There effectively their didn’t another of have lot Act, Global in and California’s the it of part from the minutes housing for money XX going housing we few more to politicians perspective to this do to John deal a world things my are legislature to given promote real be just ago, Solutions chosen cities incredible their – signed think development, and of housing and housing people seems last – reiterate how there objective example, office out a affordable produce penalizing shortage. seeks Governor said which year, A next I’ll increasing that Warming housing had that bills get Brown by cetera. one were element, raising for and housing,

the whole to to one doesn’t use rent this more then you other units. problem. political a hand, on as a control solution movement produce rent Well, So have have try that and control obviously you to

time extreme they are around. produces forms housing going it less of fact, In units cities last with did to like produce less rent because control

know is governments is, estimated we impact I of in fiscal other there’s condos – So example, hundreds that there’s also then is the range, housing. would dollar from housing think, and local rental in conversions, far to rent cost They third state also for problem that problematic with the goes. the of as finally, forms And control as which of a millions that. the into

So housing stock. the it actually depletes

of the then people there shortages, greater i.e., is, the unit. people about likely talking more benefit here and and control, – from in control they’re scenario means rent units rent difficult be down that will expensive road, will be there’s further that again term be we’re be there’s to and going those available be that houses to because in more what to short the going scenario, fewer most that fewer limited vulnerable So obtain. a are And housing people that will to the get in

Okay. helps. That Thank you.

Thanks.

with from question is next Goldfarb Sandler Our O’Neill. Alexander

did that of Or not, the nuance just the not with conversations morning of is municipalities, nebulous of understand a one cities the vacancy there seems the draconian that of Costa-Hawkins cities. decontrol on guess as they’re out point speak thing bringing not appreciate or and whether the of would different But to your the is elements Hey, it there. all removing that decontrol part or have? – different over and the from on element key good rent control most because Mike, you be that I up? any impact comments sense, even they vacancy guys to

Alex. we that that. Eudy, brings in question return. pretty don’t units were market, to if it rider the understand that. ability passing able And to you to be And have virtue of This also cities lose you a city wouldn’t the element at it’s is by of vacancy no that fair that, turn There’s achieve a decontrol John clear if

a in cities So there’s understand that legal there line keeps the argument metric. that to also

There be So comes that to that. with we of a to believe it we’ll few will if it. get the work vast majority cities exceptions have

on spoke occupancy the you question about last you you crushed Okay. peak of year’s obviously early still, hitting lower points in Classic fires, the quarter. the you with or impact third But the year XX And earlier points spoke guys Mike, wild about – – Angela, quarter. – definitely and second XX spoke guys you basis and then is, the basis versus then the pricing Essex.

outlook when salt is when guess versus better? the the bit be year grain I hey, much discussions with comments earlier the is, how And to more Essex of point of you’re a of NAREIT your low guys lot the conservatism? things saying take than point standard it that thought Or going quarter year? third going economy do your you So are at this we is a you improved the and had has

specifically show script I, fiscal. the July, Hey, occupancy guess, Alex thank we’re pretty were you for this to mentioned as where And And at of current and course, is has that it drifted in significantly. to at compliment, I my XX.X% down that John. at with XX.X% the the relates I very we numbers, I really ended occupancy – the script, we’re that fact

that quarter basis at quarter, in the the But to and from were XX point year last XX.X%, we’re some. so pushed third last which we’ve average for changed So back year it expecting we the a up year third swing. still a benefit. from real. QX real a it we XX headwind, is had at number, a this it’s basis when quarter XX a good XX.X%, difference That’s basis There’s point point really third on and

early, real curve tied peaked, and back the expected, actually to as expected market relates to the And performing so So well. and numbers, that it we market strategy opposed yes, performing were and as as change, is has the the then that. adjusting to in July it’s – to

no, for a not but we’re baking way, compliments. big seeing in – it So the thank you

earlier thought The guys thought Okay. But that originally you the market this has market it? way been John, improved saying, hasn’t you more than with were you consistent year? the

reality. leases of Yes, it’s happens in the numbers Mike. in some this Think up new it future because the have lagging as machine. show until what we turn big And again, to day a doesn’t today,

choice given can are can to about last done rent occupancy an we’ve we between I’m occupancy? we rent a the were quarter. what push year Or we in So given talking third push How off occupancy-based much scenario. get get? XXXX. to that decision trying better we how made much We is

loss we’re And that. the or for just it’s way July XXXX, end shows of X% getting this it – it this and because lease was really in piece come happen weaker, it’s It’s And the of gave X.X%, numbers, shape in rent to more getting a so it’s rent better. much first go down. to the benefit At of, like the of take you weaker, growth half see - because looks curve, the the we year. to year, comps couple we going for and quarters again, to XXXX, That XXXX. I to we market the at and Now XXXX, have XXXX, the different months up tough XXXX, second getting it’s it, looking several being much of really in it of critical of the but not stronger. conclusion. half won’t this up much back year, normal the Again, going

to become in a revenue down looking some down trying it’s maximize terms but for road again, quarters somewhere. we’re and pricing the to going this months apparent, decisions take our to the few and road of So

Okay. Thank you.

proceed. with Our Zelman Associates. is & next from Dennis Please question McGill

following that Hi. Actually, you. question. last Thank

supply? versus rent you much the of what’s last things of and So to how more push right the today about due the focused the to year when occupancy on think two those decision Or be look better that about versus of a the shifting way you year? have stronger balance think the at over to ago today the you is side, that outlook when less market, demand change in

want and want – this John. in we certainly, in strong I’ll and it’s I’ll But the start Mike – marketplace, the have to really demand showing Mike – curve. is follow to on. out might

As little benefited bit the which from. light was we first of well half as, a the supply in year,

result rents curve combination, it’s is So comps strategy. what you say operations And back in market the to better year-over-year what brought pattern. as then, relates that’s and probably of normalized might shift and really the the a seasonal it therefore, to the that is

you Okay, front second supply this year, the clarify. that in of When half just less the XXXX? into push out supply a to of half of say was

to theme out. last you for what? out. seems some just L.A, So certainly, that’s pushed years, in saw out, the markets pushed like it and It keeps getting ongoing supply two we And is know be pushed supply like the continues in getting

We concentrated when housing that. the In be place. time there. demand, obviously from pricing problematic. that’s it in have enough evaporated, that’s supply. kind somehow versus a do a supply impacts it supply it upside It’s – a the same context, when we’re of of in clearly same amount the at in delayed, the not time, marketplaces, more gets the We not it’s area, But – to just crisis. continues supply at we’re down yes, the the all have delivered MSAs, all So same and it’s of comes benefiting

half it’s And time, been has he – in this of this at last year so point a little slower.

maybe to things very of determine that other supply thing Dennis one completed I labor delay. to going the would is difficult is, tend that because actually that. and shortages to these And to be it’s add when

had projections, second the supply But we mostly it way half in is So looks for half. like now, much more it’s first example, L.A. according focused. in now, our we it the to have

that that the markets us half However, again, enough make know is of is how piece comment. Seattle to And we impossible of we the in other going of detail to XXXX. that don’t actually It’s much can level heavy supply get – labor get detail understand to and pushed it, is, in that second for XXXX. to into just down second which

Some could XXXX. into of that pushed very easily get

these that and we information when again, price pricing at recognizing we the but – and expectations, of look not to are impossible, if very difficult, best look So use we some at have, predict. things

side like side, year at has Is what Yes. it get that at sounds were you’ll your to you In understanding that sounds go-forward volatility, was I I and it’s make basis more strategies a driven to outlook. this trying understand supply time is I being today a ago, correctly offensive if demand fair? the be similar more comments than sure on guess offensive a relatively like the from that

start more that supply any of get in – catches that the okay, apartment That’s housing into much when is yes, The shortage, we catches get supply Downtown with markets, to saying. up to Union up compete of think a are concentrated what issue critical way you stops weeks and Seattle eight greater L.A. Yes, you’re the demand, Lake getting think the another in more some get scenario. six one rental have we that several or which even – these example, your for deliveries demand more downtown. and there’s the more – or are the no I you under chance demand effectively buildings communities. concession, you specifically growth stabilized going are Seattle, in And the that concentration, South than of Downtown with to going to

So do push somewhere have disruption. do they with supply units that nothing concessions how to competing talking become phenomena about. in to with in to This is properties one and another this And to overall around on do has multiple order aggressive It owners a of demand. just absorb periodic or make month. is has far lease-ups what order I’m rents How happen. that each to XX with

us think and difficult the I very key it’s that would to be. what estimate issue, that’s for

respect on call, the to with tends job growth seasonal in Seattle the noted As and to comments more demand. also be

down those growth pushed pushed of year. why the terms that’s back estimates market so And in we have Seattle on or rent for

sense change – market to mix question that any relative done whether the and of on your any If other headwind as would pre look Costa-Hawkins. market? broader have One a be would the assets work when we to you Okay. – post-XXXX, at benefit to of or where versus you you be

I’m sure understand from. exactly not Mike. I where It’s you’re coming

and try just me And here base. broad and I’m in off of if Dennis, you comments. a Let make couple can – chime

in. I – the in X,XXX of more than Four call, units in have cities, – we have we’re California. operating We on noted them, as in seven

of greater them no California, there’s many rest concentration. the so in again, And were, properties and scattered throughout cities

perfect longstanding rent Two a portfolio have we’ve have the we have them two four have onerous evaluate and done, to is what And less science, but and concentration. L.A. areas San So our greatest not of at is not of those control done rent in a what That’s we ordinance. Jose. this them try all. control that do

the we’re, And housing signed of law, including Act, the bills very so bunch again, allocation conundrum of movement severe and by our less Solutions trying we’re and XX Brown of believe know, discussion you leads in this or that enormous impossible decisions, portfolio be good shortage control. Global embedded Eudy there in don’t Warming middle, – embedded forms the And time. again But us to year, will recognizing that which of in at that make it’s to be know a the Governor somewhere rent more conundrum the monitor, of – to compromise has the benefit throughout said, John rent this California, while last contradiction a point as we an to control have diversified. to

guys. you, Thank helpful. That’s Okay.

Thank you.

Stanley. with is Rich Our Morgan next question from Hill

to upside to the anything you’re there back you me. just I and come this But somewhat yields, know maybe projecting? question there sooner that time. a is give than – little mentioned supply be crest bit? don’t could I somewhat know expect lot where be and happen anything to a lower supply sense upside makes expecting? thanks But we your volatile forecast. of can that supply you we’re of completely what for hard Hey, supply guys be to Is development would sort would we’re than that Why

chime it factors where year, development. been our have here. around made to And are we it’s It’s be And I down. back is our this that preferred when things we going this things maybe the Mike, the seeing million the new little, constraining you you But program to excess a belief pared things. happening that. business. that respect to we to somewhere look were sensitive very at some production, well opportunities. but $XXX want is comments thought that those year There’s our of one we’re of by said. We were with in goes most of equity less started I’ve little some parts affect others with of and in Yes, that and pipeline, lot the robust a

We – matters. or which for Canadian you include rent pro-business And and not have steel. example, the direct lumber, control that discussions have are tariffs, pro-development for

number housing, trying to a of is have issues to against be about the produce And earlier. the that contradiction you to have you I seems was before. that, though even state pushing environment leading that so didn’t that And talking more

it. Got

And markets detailed? so is specific – the surprise getting too are might upside? any downside Or the little is versus think bit to any you there that supply a there where

permitting. there’s a more we’re deals. why he’s our I California problems would of remain I confident guess going seeing we and, coalition, Northern The about mostly we L.A. or had John areas get than I deals that – which John two to – think And those at lot co-chair – don’t of chime we that significant you’re mentioned very peaked. job markets he when is have guess, that you’re because are that be the I concerned starts, jobs. time start they talk full-time two Seattle – actually peaked and what that and down peaked. where Eudy looks you the out in also Well, the job; would this very there? Head on the you And about seeing point of think and John, that’s at has to a because in He’s a don’t Development. has full-time

say impact with couple on I than the that were that Well, of can far it cities’ in in entitlements being the and are there process, was year processed if pipeline years of will, our fewer deals stack dealings most between on cities a their development less ago. is far There peak, XXXX. now two were a than XXXX buildup you and in the

it So lower I the not. with be even it’s it’s think much from that the run in because now is between the to And then exception worst-case headwinds very concern growing that going muting short the it years repeal the in two is right is aligned further. Costa-Hawkins and the construction than now costs outlook

going is supply down. So

Prop. Costa-Hawkins Got it. then And XX. and question more just on one maybe

with confident you’re noise would over all are are participating the associated very long to XX entering Prop. some occur, think given lead Your you enough taken affordable into medium just comments the it, that not if market of supply markets term? very not to currently Or to markets maybe the well was with housing. But about having it on you in? your

Mike. is to scenario. back interesting, It’s Yes, the this again

In cities a – if control did and we basically go the had that I the extreme just very that fine, in there no cities those way. housing few let’s back and have about, forms as world, to built John were there’s world, few talked which pre-Costa-Hawkins a cities. by of rent we So

else. has So it demand demand housing. And for somewhere the therefore, the obviously, is to go

San to go are that invest – that places if scenario, you rent people higher, idea – cities, cities in example, control, that about are how good nearby cities you’re the extreme the Francisco, lock you cities, So are more or for And in we those will you’re will have some might where have pretty rental be in And live. to of would rents a forms be likely reduction example, down that Berkeley, those the the rents for will less likely of if housing working going because that cities cities work. in will with got probably net not talking again, beneficiaries the of high. the presumably, nearby. Because housing a –

let’s cities. greater of by supply, demand or say, So from rent is the lack that the control they benefit will caused the

appreciate you, everyone. the Thank I color. Understood.

Thank you.

hear now? to Hello, able you are me

hear you. we Yes,

Okay, can hear. you

her for We’re going to Karin question. join Ford

Great. Thank you.

Glad Prop. from you repeal? said in I ahead about to I ask markets, more to know hear landlords seeing Sorry moved back. just rates market one you about but to your wanted that. XX. that are we’re of more potential to come cap starting product haven’t

said Karen, something. you have comments, missing some sticking it’s there completed deals more make for that out listings we’ve we with I thank Mike there. that are been as us. to just year-to-date all in and Anecdotally, weren’t heard my sure the that But scrubbed we really

the went the them – care markets hear by one, through we one in deals in So about. that our that were we

have get wait until sellers little that’s a transactions. typically therefore, peak back that there June rents bit the there’ll although there anecdotes underwriting be year, that or was July, of no and June best But we because activity unusual they as maybe in half cap again, and, their the so that now transaction deals. are more indication get those so rates July to the the some changed of all And to not in

wouldn’t at all I unusual. say So that’s

affordability growth some impact we there. interested weakness thereof the is start the think you markets and your driver could to that Northeast, lack the current started see the same real people my that was in as tax headwinds housing you guys tax the have Great. Thanks. tax in and I second your of in the demand XXXX a Do to change? given markets We comments And obviously in have guys question the you for – in single-family out about law don’t job be single-family here recognize in regime.

when homes transit, cetera. of Warming for production we’ve of Solutions traffic fix public seeks of housing carbon – levels problems at housing look production increase seen very – We’ve the Mike low near for in single-family Act, lower it’s again. jobs, seen in very, which largely that California’s Karin, California, to Global pollution, put have, because et the spending we housing high-density you

is So and in agenda that sort agenda. not type a of background, of home pro-single-family the is that operating

So the densification more housing we in of markets. see urban

And so to I that’s going happen. think don’t

number more anything, And if think condos it as that developed, as our that’s think big there’ll be of I being to relates on and I a a properties. more that well possibility. discussion

So to in is area I home. more the it be the think single-family high-density than in likely it’s

Great. Thank you.

next with Please is proceed. from Our question Stifel. Guinee John

you. Oh, here. question for John Thank you. great. Quick Guinee

pay have sticky untrended you’re as today’s looking hard cost really at show for the If costs are current come an know, prices, is basis, to and, what prices? return on and land land and development your you if on underwriting haven’t at prices you down, does the today’s

It John. a the far specifics, Eudy, on John obviously, deal. is than This it would to do depends but motivate less you

If numbers, in today’s on and year. you and today’s that’s it a somewhere probably number – high average land take at out entitlements buying the

at X.XX% X%, the low X%, high the So high.

kind are money essentially – backing returns? you of Do kind finally to continue see at willing that Or those of institutional off? they

perspective, the it it backing off. my you down. we what going pipeline the like program well appears do Mike, And think? pref see equity as through they’re From

in John. Yes, a amount deal have of forward. those the there are $XX say, I would is that get ones because, are beyond than totally you And yield already I a that are those tend deals money with caveat to not let’s move better agree invested a maybe in forward. going them, having When because significant and that one invested say million X% that’s transactions

that, end conundrum. up But agree I aside that you totally from So with with John.

Thank much. very Great. you

Pawlowski next Advisors. Our with Green from is John question Street

on thoughts commercial legislation C. about in like broader I’d XX, and initiatives have like landlords I Prop. Costa-Hawkins one you some just is your Prop. Thanks. Mike, against California. moving to mean, political the other aspect, risk get

California city be economics the do comparing non-California becoming risk-adjusted seem for have risk reaching political I voters framework any to question to how level-specific date. markets? leaning very versus into or legislators return decisions guess less of started investment approach of my landlords increasing. is, odds type factoring you of markets outside to this the in It’s increasingly you Costa-Hawkins, And of considerations? that So

a the that’s pretty question. a and – good It’s you Mike. lens everything is this And we through housing. John, much – of for – Yes, supply – it’s demand

going regulatory different that you that decision the demand if slow, job drives to the would so But environment same. which are us so the make And potentially. gets extreme a to then always seeing start be side, we growth cause

We’re look and various of believe through right then and supply areas have going the supply-demand that’s the come going – because different best dynamic to we’re to now demand risk, political conclusion. would in. If that to that we dynamic. lens of we’re the for we changes housing, seek that the in a dynamic And in markets California, the best

cetera, and ways, and think et from give-and-take it’s think right, the accommodate is some seem Washington, seen, on these world. seen you’ve and a that wanting was politicians really certainly give of – passed. local office proposals Notably, entities. have the and because on come variety very And do is being the be governments things after to to the head the tax repealed very Apples focused I of it’s there and tax side the certain California of what critical. you’re we a in So here, to head I going out you going of this in But some idea, Amazon, variety the willing recently, where those far California, Googles, is to growth accommodate on to more

there’s again, dichotomy think, I a here.

favor supportive repeal. respect democrat is Newsom of favor position of of XX. not our but have Gavin with You repeal, in the party the to Prop. that is He’s

going You have issues of back a forth. variety and

think that our And we UC the notable, the available to the starts a I that need what I that prevails Berkeley’s Center online. by is reason happen play mean, out. about at conversation let think I of day. hope there’s – should Terner a it’s it just end is study and

see which in going the year I so it’s too – go. this And tell. to early or way think next to know two we will we will is And

you Today redlining an – to any portfolio Okay, that’s rent back are investment prepare standpoint? helpful. right now from risk. the Today’s super decisions, control cities allocation –

extreme bend? control rates compensate don’t cap absolutely Santa assuming again, obviously, of that not significantly factor environment, in that return. that would It’s Cruz decides not change control, number from within a I the decision the the for wouldn’t investment very establish an say rent for a – rent a example, again, decision. – are current cap considerations risk things. rate there’s is you that the and one for you and redline really because, to Again, be redlining investment form And pretty but, that there would only cap rate also if, would fact, you yields to lower prevent of say

Thank Okay, you. great.

Our from next is question from Okusanya Tayo Jefferies.

of on peers’ tax down just Abramowitz also given the half climbed Peter the it half. quarter particularly the expense the touch same-store is in This the has in first below in just pool Hi. kind on from to but growth first that Tayo. I the in wanted second

was that’s you what Or keeping is are So for wondering half? the you’re how And seeing low. trends seeing pretty sort just going sustainable I what that that of forward? back

On we adjustments. the tax it’s first had property primarily front, half because but lower, tax was essentially

expected had the in – non-same-store we so And pool.

So higher. as and coming little wildcard, a bit be little coming in expected. the Seattle a much a is as of far as always same-store pretty it’s pool, it’d bit

we property half. be so in than tax your do that question? expect second higher half the first answer Does to And even

you. Thank sure. Yes,

Thanks. Great.

more no at time. questions this are There

over We will Mike closing for comments. conference return to back the

you many of thank at day. conference I during sorry problems Merrill to next the that. BofA your you Apologize Lynch we’re the today. technical Hope Hey, so month. you. see Good our Thank for want for to And call. for participation

This you. today’s conference. Thank concludes

You may disconnect and time, your participation. lines at this you thank for your