Good day, and welcome to the Essex Property Trust fourth quarter 2020 earnings conference call. As a reminder, today's conference call is being recorded. Statements made on this conference call regarding expected operating results and other future events are forward-looking statements that involve risks and uncertainties. Forward-looking statements are made based on current expectations, assumptions, and beliefs, as well as information available to the company at this time. A number of factors could cause actual results to differ materially from those anticipated. Further information about these risks can be found on the company's filings with the SEC. It is now my pleasure to introduce your host, Mr. Michael Schall, President and Chief Executive Officer for Essex Property Trust. Thank you, Mr. Schall. You may begin. Welcome to our fourth quarter earnings conference call. I'm very pleased to acknowledge the promotions of Angela Kleiman and Barb Pak to their new roles at Essex, and greatly appreciate their contributions for many years of dedicated service. Both Angela and Barb will follow me with prepared remarks, and Adam Berry, our Chief Investment Officer, is here for Q&A. At the end of last year, we announced John Burkart's retirement, and we thank John for his tireless efforts and numerous contributions to the company's success over nearly three decades. As we reported last night, our fourth quarter and full year 2020 results continue to be significantly impacted by the COVID-19 pandemic, resulting in lower same-property revenue and core FFO per share for both the quarter and the full year. Similar to the last few quarters, pandemic-related regulations have had two primary consequences. First, shelter-in-place and related orders have resulted in unprecedented job losses. Second, anti-eviction and related laws prevent us from maximizing property performance. Government mandates are constantly changing, and they intensified during the fourth quarter given surging COVID-19 cases. Navigating the pandemic involves extraordinary efforts, and I thank the Essex team for their tireless dedication amid these challenges. Overall, our fourth quarter results reflect stability in sequential net effective rents beginning in October, as discussed during our third quarter earnings call. Sequential revenues improved 30 basis points in the quarter, with market rents mostly flat in the cities and modestly positive in suburban locations. Therefore, we are cautiously optimistic that we have or will soon reach the bottom in market rent declines. As of December 2020, preliminary three-month trailing job losses in the Essex markets were 7.9% year-over-year, 150 basis point improvement compared to -9.4% for September 2020, and outperforming the nation, which had 100 basis point improvement from September to December. Even with the recovery of jobs in Q3 and Q4, the nation had 9.2 million fewer jobs year-over-year for the month of December, roughly equal to the number of jobs lost at the worst point of the financial crisis. Our data analytics team prepared S17 to the supplemental, which is our base case scenario underlying our expectation that net effective rents will decline 1.9% in 2021. The range of potential outcomes is extraordinarily wide for 2021, given many unknowns that relate to the pandemic, including the pace of vaccine deployment and changes in regulation. Our modeling further assumes 4% GDP growth, which should lead to positive momentum in the second half of 2021. Apartment supply will continue to be a challenge, especially in the downtown locations of Los Angeles and Seattle. Our data analytics team expects approximately 34,000 apartment deliveries in 2021, a modest increase compared to last year. Also similar to 2020, we don't expect much for-sale housing production going forward. It's our experience that affordable for-sale housing competes directly with rentals once rents rise to a level that approximates the monthly payment of an entry-level for-sale home, and there is little risk of that occurring in the Essex markets anytime soon. Page S17.1 of the supplemental highlights 13 recent multi-billion-dollar tech initial public offerings for companies headquartered in the Essex markets. Overall, 2020 was a great year for IPOs, with 147 tech sector offerings completed during the year. It's our view that the IPO market is essential to recharge the tech ecosystem, providing growth capital to early-stage investors, and to generate liquidity for reinvestment. Page S17.1 also illustrates a re-acceleration in job openings for the top 10 tech companies, which has increased 38% since the August trough. Our analysis indicates that nearly 60% of the total job postings are located in California or Washington, with the next largest state, Texas, accounting for just 7%. Page S17.2 of the supplemental package demonstrates that venture capital investments continued on a record pace in 2020, with approximately $130 billion invested in the U.S., with the Essex markets continuing to receive the dominant share of VC investment. Success in the knowledge-based economy requires a critical mass of highly skilled workers, creating a network effect that draws companies to the Bay Area and Seattle. While only a limited number of venture-backed companies will go public, some will experience extraordinary growth, similar to Snowflake, DoorDash, Airbnb, and resulting in thousands of high-paying jobs. The environment today has many similarities to the previous recessionary periods, including the financial crisis and the bursting of the dot-com bubble. In both cases, migration out of California was often front-page news. In 2020, we experienced higher out-migration than normal, especially in our West Coast urban centers. In our experience, people make different housing choices during recessions, and it is not surprising to see many in the large baby boomer cohort monetize the value of an expensive California home to move to less expensive areas as part of a retirement plan. This recession is unique with respect to the extraordinary loss of jobs that involve lower-paid service workers, jobs that are concentrated in the city centers, and affected employees often had only two choices: move immediately to find work or stay in their homes shielded by eviction forbearance laws. As with previous recessions, we expect most of these trends to reverse. We expect that the demand for restaurants, services, and travel will recover swiftly as vaccines are administered, bringing back related service jobs. Workers in the Essex markets earn more than in most parts of the country, and the draw of higher-paying jobs, combined with lower recent rent levels, makes rental housing on the West Coast the most affordable it has been since 2013. A recent McKinsey study estimates that only 22% of the American workforce can work from home without any productivity loss. We have been tracking many companies that have adopted work-from-home models during the pandemic, and we remain confident that the vast majority of companies will ask employees to return to the office when it is safe to do so, likely with increased work-from-home flexibility going forward. Google, Netflix, and Apple are among the largest companies to have expressed their desire to return to the office. Many others will follow. Turning to the regulatory environment, a third wave of COVID-19 cases beginning in November and related concerns about hospital availability led to the imposition of severe stay-at-home orders in all of our California markets. Some of these restrictions were eased last week, but all of the Essex markets remain in California's most restrictive category. Recently, with the passage of SB 91 last week, the state of California has extended COVID-19-related eviction protection from January 31st to June 30th, 2021, including pushing back the requirement to pay at least 25% of pandemic-related rent. In addition, the law established a state rental assistance program to allocate $2.6 billion in federal stimulus funds using income levels to prioritize payments and accepting related applications in March. As with similar laws, there are many related requirements and complexities which we are evaluating. Turning to the apartment investment markets, during 2020, we sold four properties with a total of 670 apartment homes for $343 million, all of which were placed under contract subsequent to the implementation of shelter-in-place orders in March. Given the wide discount in valuation for public REITs compared to the private real estate markets, property sales remain our preferred source of funds for investment. Since the onset of the pandemic, a relatively small number of apartment sales support our belief that property values have not changed materially since the onset of the pandemic. However, extraordinary changes in rent, increasing in the case of most suburban markets and decreasing sharply in some urban locations, makes it difficult to draw conclusions about cap rates. In the suburbs, where rents are generally at or above pre-pandemic levels, property values have modestly increased, and cap rates are somewhat lower compared to the pre-pandemic period. Given lower rents and significant concessions in hard-hit cities, recent price talk around possible sales indicate about a 5% reduction in value versus the pre-COVID period, resulting in cap rates for high-quality properties below 4%. As with previous recessions, Fannie Mae and Freddie Mac have continued to provide very attractive financing, with seven-year fixed-rate financing in the mid 2% range, potentially supporting lower cap rates. Vaccine distribution should remove uncertainty with respect to apartment operations and property values. As a result, we believe transaction volumes will begin to accelerate. As we've indicated before, improved cash flow from positive leverage in apartments has historically led to a robust transaction market. With that, I'll turn the call over to Angela. Thank you, Mike. First, I would like to express my appreciation to the Essex operations team for their diligent efforts to serve our customers amidst a challenging environment caused by the COVID pandemic. Thank you for all your hard work. For my comments, I will begin by discussing our 2020 results, followed by our outlook for 2021. Our market performed as we expected despite the headwinds of new COVID-related closures and seasonal decline in demand. The urban core, particularly in tech-centric markets, continue to remain more impacted by COVID-19 related job losses and office closures. The change in quality of life resulting from the closures of restaurants and public amenities has driven a temporary shift in consumer preferences. High-rise buildings or communities located in areas with high Walk Scores have been the most impacted by this shift in demand. Conversely, communities with private outdoor space or more affordable residences outside the urban core continue to experience greater demand, which benefited many of our properties in Ventura, San Diego, Orange County and the East Bay in Northern California. This temporary shift in demand continued in the fourth quarter, where we experienced a 7.6% and 9.9% year-over-year increase in quarterly turnover in CBD Seattle and San Francisco, compared to the portfolio average turnover of only 1.3%. Our CBD locations also had a greater concentration of apartment supply deliveries, typically accompanied by very high concession levels. During the fourth quarter, we continued our leasing strategy of leveraging concessions on stabilized communities and building occupancy. There have been encouraging indicators from a sequential perspective in that more than half of our same property portfolio grew revenues sequentially, driven in part by increases in occupancy and decreases in concessions. We have provided year-over-year net effective rent changes for our portfolio on page S16 of our supplemental. New lease rates were down 8.9% in the fourth quarter, stable in January, an improvement from the - 12.2% achieved in the third quarter. Concessions on the same property pool improved from approximately $18 million in the third quarter to $13 million in the fourth quarter. This reduction in concessions is noteworthy considering the fourth quarter has seasonally lower demand and historically concessions increase during this period rather than decrease. Key highlights of the same property performance of our major markets in the fourth quarter are as follows. In Seattle, 4.9% year-over-year revenue decline was primarily driven by Seattle CBD, which declined by 13%, while the remaining submarkets averaged a 3.2% decline. Year-over-year job growth in Seattle declined by 7.3% in the fourth quarter. In Northern California, the 10.4% year-over-year revenue decline was led by CBD San Francisco and Oakland, averaging an 18% decline, contrasted with a 4.2% decline in Contra Costa County, while Santa Clara County performed in line with the regional average of a 10% decline. Year-over-year job growth in Northern California declined by 8%, with San Jose fare better at a 6.4% decline. In Southern California, the 7.2% year-over-year decline was primarily driven by L.A. CBD and West L.A. submarkets averaging a 17% decline, offset by an average decline of 2.4% in our suburban markets of Ventura, Orange County and San Diego. Fourth quarter year-over-year job growth in Southern California declined by 8%. Moving on to our 2021 outlook. As indicated on S17 of the supplemental, multifamily supply as a percentage of stock remained low at 0.9% for our portfolio. While we expect the percentage of the year-over-year growth to remain flat, new completions will once again be concentrated in the CBDs and urban submarkets, where supply is projected to increase by 2.1%, compared to just 0.7% across the rest of the portfolio. The confluence of minimal supply and extraordinary job losses remain a significant headwind in our urban markets. In Seattle, we expect multifamily supply as percentage of stock to increase in 2021 by 1.6%, driven by 2.9% in the CBD, offset by a 1% increase in the suburbs, where we have a majority of our units. We have also seen positive office activities by major tech companies as they continue to push forward on expansion projects. In Seattle, Amazon received approval for a 1.1 million square foot project. In Bellevue, Microsoft has continued with their campus expansion. In Kirkland, Google acquired a 10-acre site for a large campus. In Northern California, we project overall multifamily supply as percentage of stock in 2021 to decrease by 10 basis points. Although Oakland and San Jose CBD are expected to increase by 1.8% and 3% respectively. Despite the impact of COVID, tech expansion plans have continued in the Bay Area. Amazon purchased a six-acre site near downtown San Francisco. Facebook last month submitted an updated plan for its 1.25 million square foot campus expansion in Menlo Park, and Google continued to work with the city of San Jose for its major new campus at Diridon Station. In addition, the biotech sector continues to be a strong source of office demand, highlighted by the recently approved expansion of Genentech's headquarters in South San Francisco, which would add up to 4.3 million sq ft of new office space. In Southern California, we project overall multifamily supply as a percentage of stock to remain flat. The most notable increase is 4% L.A. CBD, and deliveries in West L.A. will remain elevated once again this year. While many uncertainties remain as to legislation and the timing of the vaccine, based on current market conditions, we assumed our scheduled rent for the same property portfolio will trough in the second quarter of this year. Because leases are typically one year in duration, our year-over-year revenue growth will be negative in the first half and positive in the second half, leading to our same-store full-year guidance of 2.5% revenue decline at the midpoint. Lastly, our current same-store physical occupancy is 96.4%. Our availability 30-day out is 4.7%. Thank you. I will now turn the call to Barb Pak. Thank you, Angela. I'll start with a few comments on our fourth quarter results, followed by key assumptions in our 2021 guidance, and finally an update on our recent capital markets activities and the balance sheet. As expected, the fourth quarter was a challenging period, with core FFO declining 12.5% compared to one year ago. This was primarily driven by an 8% decline in same-property revenues as a result of higher concessions and delinquencies. As we noted last quarter, we report concessions on a cash basis in our same-property results because we believe this is more indicative of true market conditions. However, we are required by GAAP to treat concessions on a straight-line basis in calculating consolidated revenue and FFO. As Angela mentioned, during the fourth quarter, we provided $5 million fewer concessions than the third quarter, which helped improve same-property revenues sequentially. Core FFO declined by 4% or $0.13 per share compared to the third quarter, of which $0.16 is attributable to lower straight-line rent concessions. We expect this line item to continue to be a headwind to core FFO growth in 2021, which I will discuss in a minute. Please note on page S8 of the supplemental, we have detailed the quarterly impact of non-cash straight-line rents. Turning to delinquencies. We continue to take a conservative approach to reserving against uncollected rents, especially given the surge in COVID-19 cases in the fourth quarter, which resulted in extended lockdowns in our markets throughout much of the quarter. We reserved against the entire net delinquency balance during the fourth quarter. Our receivable balance currently stands at approximately $7 million, including joint ventures at pro rata share. Based on past collections, we feel this receivable balance is consistent with our ongoing conservative approach. We will continue to assess our delinquency reserve and our net receivable balance each quarter based on collection history and market conditions. Turning to our 2021 guidance. Key assumptions are available on page five of the earnings release and S14 of the supplemental. We've provided a wider than normal range for same-property revenues and core FFO, given the significant uncertainties that remain surrounding COVID and the recovery ahead, including vaccine distribution and eviction moratoriums that are outside our control but could swing guidance in a variety of ways. We felt it was important to outline our key assumptions based on information we have today. For the full year, we expect core FFO per diluted share to decline by 5.1% at the midpoint. The key drivers of the decrease are primarily related to the following two items. First, we expect same-property revenues and NOI to decline by 2.5% and 4.6% respectively at the midpoint. While current operating fundamentals remain steady in our markets as compared to several months ago, we will continue to feel the negative effects of the 2020 rent declines throughout most of 2021. In addition, due to the eviction moratoriums and regulations that remain outside our control, we expect delinquencies will remain elevated in 2021 and will be a drag to core FFO by an estimated $0.45 per share at the midpoint. The company has a long history of excellent rent collections, and we expect this temporary delinquency headwind to become a tailwind to FFO growth once the various COVID-related restrictions are lifted. Second, we also face significant headwinds from straight-line concessions. We expect this non-cash item will result in $0.41- $0.56 per share decline in core FFO, representing about a 4% reduction in growth on a year-over-year basis. As it relates to concessions, we expect they will remain high in the first half of the year before moderating in the second half of the year as the economic recovery takes hold. We expect the impact from straight-line rent concessions to be minimal in the first half of the year, with most of the negative impact we forecasted to fall in the last two quarters of 2021. On the capital markets activities and the balance sheet. During the fourth quarter, we closed $206 million of new preferred equity investments and bought back $46 million of common stock at a significant discount to NAV. These investments are being funded with three asset sales totaling approximately $275 million that are under contract and expected to close in the first quarter. This is consistent with our guiding principles of match-funding investments on a leverage-neutral basis. For the year, we were able to arbitrage the difference between public and private market pricing by selling $343 million of assets at prices generally consistent with pre-COVID levels and buying back $269 million of stock at an average price of $225 per share, all while maintaining our balance sheet strength and creating value for our shareholders. Our balance sheet remains strong with minimal near-term funding needs and sound financial metrics. While our net debt to EBITDA has increased this year, this is primarily the result of the significant decline in EBITDA caused by the pandemic. As the economic recovery takes hold and the West Coast economies continue to reopen, we expect our net debt to EBITDA ratio will improve. With ample liquidity and a well-covered dividend, our balance sheet remains a source of strength. With that, I'll turn the call back to the operator for questions. Thank you. We will now be conducting a question and answer session. We ask that you please limit yourself to one question and one follow-up question. Our first question comes from the line of Nick Joseph with Citigroup. Please proceed with your questions. Thanks. Appreciate the commentary on kind of the dynamic nature of your markets as well as the slides in the supplemental. I'm just wondering, as you think about kind of post-COVID, right, if we're in a more flexible work environment, putting aside any kind of migration trends outside of the state. Just if there is more flexibility, and commuting times change, how does that change how you think about your exposure within your markets, either urban, suburban, or even further out? Could there be opportunities that you're exploring today? Hi, Nick. Thanks for the question. It's a good one. This is Mike. We think that there will be more work-from-home flexibility. At the same time, we think that employees will be tethered at some level to the office. As I think about the three other very capable people here today, knowing them and trusting them and all these things are a great team effort. Teams are better when you really know the people and can trust the people. I'd say that is a key factor that I think, and as noted in the prepared remarks, will keep employees relatively close to their jobs. Having said that, I would think the winners in this scenario will ultimately be the high-quality cities that are near the jobs, but also offer maybe a little bit more affordable housing, and good schools, low crime rates, et cetera. I think that will play itself out, and I think those areas, we have a lot of cities that are among the major metros that qualify for that. Some of them have been pretty hard hit. I guess I would add to that, some of the cities that are high-quality cities, their rents have been highly impacted by COVID. Certainly, when I think about Northern California and the tech markets, the Peninsula, San Mateo, even suburban parts of San Jose would be major beneficiaries of that because we view that technology is going to continue to be a very strong economic driver. The tech ecosystem in the Bay Area is incredibly unique. Therefore, we think it will do well. Thanks. That answer the question? That's very helpful. Just one quick question, I guess, on the rent relief programs, is Essex helping residents who are behind kind of fill out or navigate the ability to get rent relief, and is there any kind of rent relief from the government assumed in guidance? Yeah. Noted on the call that last week, the state of California, using federal stimulus dollars, started a program or announced a program, $2.6 billion potentially of rent relief. The way it would work is the landlord would be required to forgive 20%. The reimbursement from these programs could be 80%. That will be predicated on percentages of median income, average median income. It will provide the greatest benefit to those that are at lower income levels. It's hard to tell exactly what that means. We just haven't had enough time to evaluate that program. I'm guessing that we will have a pretty significant positive impact from it. Again, it's too early to evaluate. Thank you. Thanks, Nick. Thank you. Our next questions come from the line of Jeff Spector with Bank of America. Please proceed with your questions. Great. Thank you. First, I want to say congratulations to Angela and Barb, and we wish John a great retirement. Thanks for the time today. Mike, in your opening remarks, you commented that you have or soon will reach a bottom in market rents. I know you're fairly conservative, and so I take that comment pretty serious. I guess, what gives you comfort to say that? Can you just talk about that a little bit more, please? Of course, Jeff. I think that's a good question, and it's, I think, probably maybe the most important question out there. If we look at net effective rents for the fourth quarter sequentially, they were down under 1%. Net that's all the markets. Now there's pretty significant variation between market to market. Part of that is even though we have high occupancy overall. There are parts of our portfolio that have lower occupancy. For example, San Francisco is still at 92.5%. Seattle downtown is at about the same level. There are areas that were very highly occupied that are offsetting areas that don't have the same occupancy and actually below the average occupancy level. Most of that, as Angela alluded to, is related to the supply level. As you can imagine, if you've got negative job growth equivalent to right now, still as of December, equivalent to the worst part of the great financial crisis, it is not a great time to be delivering apartment units, and therefore, the cities are getting the bulk of the supply delivery. You have this confluence that Angela spoke about, which is negative demand growth and lots of supply, and the cities are understandably hit from that. Offsetting that is we do have markets that are doing very well. For example, Ventura, where rents are up almost 10% year-over-year on a market basis. We're doing pretty well in a lot of these suburbs. That leads to this issue that I've talked about many times, which is rent to income. It's interesting that Ventura, with its, I think it's more like 8.5%-10% rent increase, is now about 17% above its long-term historical average of this ratio, rent to income, which is incredibly important to us. Whereas in Northern California, we're 7% below the long-term average of rent to income. Everyone looks at this like, hey, the suburbs are going to do a lot better, but when rents go up a long way, I would question that. Conversely, when the rents are essentially hammered in the cities, it changes the consumer's view of where the opportunity is. Our view is, a little bit longer term, that you're going to see a very significant movement back toward the areas, high quality cities, where rents are pretty affordable. Thank you. That's very helpful. Is that what ultimately led to Essex providing the full-year guidance, which is very much appreciated? There's a number of things. I kind of have a philosophy on guidance, being an ex-CFO. If I weren't here, I'm not sure that Barb and Angela wouldn't have come to a different decision, to be perfectly candid. Yeah, our preference is to always provide what we can and to be pretty open with the market. Then you all can disagree with us, but presumably, we have better information than you have, and therefore, it's up to us to sort of lead the way. That's the philosophical position I took, and it prevailed. Thank you. Thank you. Our next questions come from the line of Rich Hill with Morgan Stanley. Please proceed with your question. Hey, good morning, guys. Thanks for all the transparency you provided in the release and in the prepared remarks. One of the things that struck us is that you guys did a really good job early on of valuing occupancy over rent. I think that's one of the reasons that you're really starting to see some sequential growth. You've alluded to this a little bit, but I do want to maybe drill down a little bit more on the leases that are coming due and what's historically the peak leasing season and how you think you're going to manage through that. I recognize that you said 1Q is going to be tough, 2Q is going to be challenging as well, but how do you think through that? How do you think your occupancy sets you up to manage through the leases coming due when demand's still not going to be back to where it is? Yeah. Hey, it's Angela here. That's a good question. It's certainly something that we actively debate internally with the tactical strategy, right? While I don't think I want to go through our playbook in detail, I would just say that we focus on maximizing revenue, and we do so by optimizing occupancy whenever possible, and we beat the market. Given where we are, and you're right on point, that we did, in the third quarter, focus on occupancy, which allowed us in the fourth quarter to pull back on concessions as we see the market stabilize. As we continue to see how the market performs, we will continue to use that strategy. The goal at this point is really to try to pull back on concessions whenever possible. Of course, keep in mind, that's subject to, of course, the supply, which I mentioned, that in the CBDs will continue to be pretty heavy, assuming a recovery in the back half of the year. All those come into play. Okay. I have appreciation for you not wanting to give the playbook away. I would love for you to, but I appreciate why you might not want to. On the other side of the equation, just the job growth. One of the things that, believe it or not, I think is misunderstood about your portfolio is your Class A/B mix in urban versus suburban. I'm not sure that's always appreciated by the investor base. When you think about job growth, can you maybe break down those job growth views relative to white-collar, high-class, high-paying jobs in urban markets versus maybe the type of renters that would rent Class B in the suburban markets? Yeah. This is Mike, there's a lot to that question, so I'll try to unpack it as best I can. Every recession is a little bit different and normally, we view Southern California as our more typical of the U.S. average, and therefore, it's less volatile. In this recession, it has been incredibly volatile in a certain sector, and that is the motion picture sector. We didn't talk about it this time. We have on prior calls. It's effectively shut down, and this is the big wealth generator in Southern California. Southern California is probably the biggest surprise relative to prior recessions. For example, in the financial crisis, market rents went down in Southern California about 10% versus about 15% for the Essex portfolio in total. This time, Southern California looks a lot like Northern California, and I think it's because of the two key parts of it. Again, the filming and entertainment business, plus all of these low jobs. When you look at the sectors of jobs that have been demolished, it's all the lower-income segments of the job base. Mainly it's hospitality and restaurants and other services. Those jobs are down. On the metros, somewhere in the 20% range, which means in the cities which are even higher concentrated, they're even more impacted. As Angela said, you got more supply coming into the cities. You also have worse job growth. Again, when we give you the averages, these are averages. They're more concentrated in the cities. Then when you go north into the tech markets, I think that you have two things that are happening. You have all those service jobs in Seattle and the Bay Area. You also have, I would say, greater work-from-home flexibility that on the margin, has allowed the areas that are suburban in nature. Most of San Jose is suburban, has a very small downtown, up the peninsula through Mountain View, where Facebook is located and Google right in that area. Those areas have been much greater impacted, and I think a lot of that is the work-from-home phenomena. I think the recovery looks like a couple of things. There's nothing fundamentally wrong with any of these businesses. The motion picture business is still high demand. The technology companies, as noted in the prepared remarks, a lot of venture capital money being invested, lots of investments being made by the big tech companies into locations and buildings. Everything, I think, in terms of the broader economy, looks fine. We need those companies to come back to the office, to some extent. There's always people that are retiring, and again, selling their expensive California home, going somewhere else. Then backfilling comes from college graduates coming to take high-paying jobs. I think that there's a mismatch there. I think that the people that are leaving have left. The low income can't afford to stay. They either have left or are staying put given anti-eviction laws, but we haven't seen the backfill yet. I think you're going to see the backfill starting relatively soon, and I think that they will start to solidify because we're 90-something percent occupied. It doesn't take that many jobs to sort of fill things up, tighten things up, and then concessions start abating pretty quickly. That's how we see it. Hopefully, that helps. That does help a lot. One final thing from me. It strikes a chord with me when you say you have more information than us. I think that's very true. I would encourage you if there was anything that you could provide on population migration trends that you're seeing in your specific markets in the coming months, I think that would be really well-received. Thanks, guys. I really appreciate, as always, the dialogue. Sure. No, hey, we're happy to give it. Yeah, I can give you a little bit of migration information. Again, similar to prior recessions, where everyone focuses on the very short term, which is recessions happen about every 10 years. About every 10 years, I was 50, now I'm 60. I make a different decision when I'm 60 than when I'm 50 about where I live and how hard I want to work and various things. That's part of it, and so lots of people make changes in their life based on what they're doing and how close they are to retirement and a variety of other things. I would say a lot of what you're seeing is just the first leg of what always happens about every 10 years and typically around a recessionary period. In terms of inflow outflows, it's a little bit different by market. The migration into our markets is still dominated by New York and Boston and even some other California metros. There's quite a few people moving from San Francisco to Los Angeles, for example, maybe for better weather or whatever. In L.A., the outflow is really Las Vegas, Phoenix, and other California cities. In San Francisco, it's Seattle, Austin, Sacramento. Seattle is Phoenix, Boise, Austin, in terms of outflow. Again, all three benefiting from highly skilled workers probably in a lot of the eastern metros and from some California cities. Hopefully that helps. That's LinkedIn data, but our experience is pretty consistent with that. Thanks, guys. Thank you. Our next questions come from the line of Amanda Sweitzer with Baird. Please proceed with your question. Great. Thanks for taking the question. I want to dig in a little bit more on just the near-term demand you've seen. Kind of as you've had occupancy pick up, do you have a sense of where that demand is coming from? Are you taking share from other properties in the market, or have you really seen renters moving up in quality like you have last cycle? Angela, I think, put a happy face on it, and I'll let her comment in a minute, but it's a battle out there. I wouldn't say we're taking anything from anyone. I'd say we're all competing fiercely. We all have maybe a little bit different focus. Again, as we've said before, our focus is maintain high occupancy, protect the coupon rent. We'll use concessions when we have to, try to be aware of what time of year it is and what that battle is going to look like and plan ahead. I think we do a good job of that, but I don't think there's any winners in this current situation. We are trying to turn the battleship toward a better day, but it's not quite here yet. Obviously, apartments, we look ugly when it's getting better. We lag. One-year leases cause us to lag. The all-time high in terms of our achieved leases will hit in Q1 and Q2, which is why the year-over-year will look so ugly. Things are definitely slowly getting better, and I think we'll see that down the road, as Angela said, in the second half. Okay. That makes sense. Turning to the dispositions you have lined up, can you just provide more color on kind of the profile of those assets, either in terms of age or location, and then as well as the buyer pool, and if that buyer pool has changed at all from pre-COVID? Sure. Yeah. This is Adam. Happy to answer. For those three, they're situated throughout our portfolio. There's really no kind of general overview of the type of asset they are. In all three cases, these were actually three exchange buyers. Say there's one in the Bay Area. I'll just use it as an example. It's in a heavily concessioned Bay Area market, and the way we're underwriting it, as you can imagine, it's kind of tough to peg cap rates given where current net effective rents are. We're underwriting it based a couple different ways. One is on kind of pre-COVID in-place rents and then looking at current net effective today. On current net effective, that deal, again, this is a heavily concessioned Bay Area market. It's in the low threes, call it three two, something like that. On pre-COVID numbers, that's about a 3.8 or so. That's the spread. That was underwritten in the fourth quarter, so concessions have varied before that and since, but that's the ballpark. There's enough of a transaction market out there where a market has been set. The buyers are a little different than during your typical cycle, but there continue to be deals that go down. Appreciate all that detail. Thanks. Thank you. Our next questions come from the line of Rich Anderson with SMBC. Please proceed with your question. Hey, thanks. Good morning, and congrats, everyone, and congrats to John, too, if he's listening. On the topic of eviction moratoriums, I'm feeling like that could be a messy time when they start to expire. I wonder if you agree. I mean, some people just start paying again, but then perhaps a swath of people say, "Oh, I got to leave now because they're making me pay." Is there a risk that you could see some volatility in the occupancy when those things start to burn off and we kind of try to get back to some sort of normalcy? Hey, Rich, it's Mike. Maybe Angela will want to comment as well. I think messy was a good way to describe it because I think we evaluate it very much the same way. Back in when AB 3088, which again was supplemented by this SB 91, 3088 was passed in August and required COVID-affected residents to pay at least 25% of their rent by January 31st. SB 91 ruled that January 31st date to June. The 25% is getting larger, and it definitely will add pressure to that whole situation. I definitely am not smart enough to figure out how that's all going to play out. We're all hoping that this federal stimulus money, we have mostly a B type of portfolio. We don't have any quantification of it whatsoever. That would certainly help a lot because that would potentially pay 80% of the unpaid rent, and we would have to walk away from the other 20%. That's a whole lot better than what we've assumed in terms of our delinquency. Yeah, I think we're covered in terms of the normal to kind of probably slightly conservative case scenario, and maybe there's a little bit of upside here given SB 91. That's how I'd answer it. You're absolutely right. I don't for sure know the answer to it. Okay. You kind of talked about your portfolio sort of characterization B quality. I guess I'm a little surprised that the portfolio didn't do a little bit better. With the disruption going on in the urban core, you would think that your portfolio, being largely once removed from those environments, might have captured a bit more in terms of flow of residents. It's easy for me to say, obviously, there's a lot going on in your markets. Perhaps maybe it's that very characteristic of your portfolio, again, sort of B quality, not necessarily downtown locations, that gives you the feeling to say something like cautious optimism. I'm wondering if that's a driving factor to some of the optimism that you're kind of trying to say today. I'm not sure If optimistic is, yeah, it looks like we've hit bottom after being pummeled, then yeah, I guess that's optimistic. I wouldn't say that. I think that as I said in the opening script, the reason why I put it in there is, hey, we're still at a point where the nation has lost as many jobs as it lost in the financial crisis. In the financial crisis, our average market rents were down 15%. Seattle was a little worse, about 20%, and Southern California did a little better. I think we are kind of where we are and where we would expect to be, given the extraordinary number of jobs lost. It's not the same as the financial crisis in that you've lost these low-end service jobs, and they're mostly in the city servicing at various levels, very wealthy clientele with lots of money. It's different, but mostly the same. I would say I'm not surprised about where rents have gone in general. I hope for a robust recovery with vaccine distribution and all that stuff because it seems like a lot of this is really focused on COVID direct outcomes. Losing service jobs is because of COVID, because those service jobs just aren't there. They're shut down by the government. Yeah I think they'll come back pretty quickly because I think people do want to go out to eat dinner and that type of stuff. I think it's going to come back, and I hope soon, obviously. Okay. Just real quick, on the delinquencies, kind of just taking a reserve against all of it, $0.45 hits to this year. When you really look at that, what's your experience in terms of them actually not deserving the bad debt tag and they actually become collectible? Is it 50% in past cycles, or is it hard to say because this one is so different? This is Barb. This cycle is very different than any other cycle. Even during the financial crisis, our delinquency was only 50-60 basis points of scheduled rent. Being at 2.7%, which is where we've been the last couple of quarters, is obviously a lot higher. I think in the fourth quarter, we reserved against all of it, and that was really due to the environment. We were in a severe lockdown state for most of the quarter and into January, not really knowing when any of that was going to lift. We decided to take a pause, and we'll reassess in Q1 and see where things are at as that goes. The $0.45 that I alluded to in my script, that's really compared to our historical run rate. For the foreseeable future, we do expect delinquency to remain elevated. This eviction protection moratorium, SB 91, goes until June. We don't know what's going to happen after that. We have assumed that we don't make a lot of progress on the delinquency. It's not because we can't collect. It's a combination of both. People not paying and collections kind of are getting us to that mid 2% range of scheduled rent. Thank you. Our next questions come from the line of Rich Hightower with Evercore ISI. Please proceed with your questions. Hey, good morning out there, guys. Just on this disconnect between reported same store and FFO, given the cash concession accounting treatment versus GAAP with respect to revenue and FFO. If we sort of assume the heavy concessions shut down on June 30th, let's say, which I think is sort of implied in the outlook. Help us understand the cadence thereafter, when you would sort of stop seeing that disconnect between the two series, just as we think about modeling that into 2022, it sounds like. Yeah. Well, I don't have 2022 guidance at this point, but in the back half of the year, we do expect concessions to moderate, not to abate completely, but to moderate. That's where you'll see it will benefit same-store revenue growth, but the offset will be on core FFO growth, given that we'll have to amortize the straight line of concessions. That will mute our core FFO growth relative to the same property growth that you'll see. We expect that to happen in the last two quarters of this year. 2022 is not something I can give at this time. Yeah. Right. Thanks, Barb. I guess that part of it for while the concessions are still heaviest. Is there a way to walk through the timing, assuming a 12-month lease or something like that would say, okay, by this point in 2022, you would see same store and FFO converge or correlate more in the way they have historically? Is there a way to frame that out, or is it just sort of reaching too far at this point? Yeah, Rich, this is Mike. Let me add something here, and Angela's in the middle of this, so she can comment too. It's more like a battle every day because we're constantly increasing or pulling back concessions, changing rent levels, trying to find the optimum for net effective rents. It's impossible to bottle that. I'd say, trust us to do a good job of trying to figure that out. We have people that are spending very I'd say senior people that are spending a lot of time in the trenches, pricing units. Every month's a little bit different, as you can imagine. Supply and demand changes on a daily basis, and we just can't tell you what's going to happen. Our guidance is based on something, but the reality is we can't tell you that that exactly is going to happen. The mix of concession and rent differential, it could change. I've been here for a really long time. Many of you probably say too long, but it's unlike any other period I've seen. As a result, it's very difficult to be too granular with respect to answering these questions. Thank you. Our next questions come from the line of Alexander Goldfarb with Piper Sandler. Please proceed with your question. Oh, hey, good morning. Morning out there. First, we'll continue the congrats. Angela and Barb, mazel tov, as we say here in New York, on your new roles. That's wonderful. Mike, to the point of CEO succession planning, obviously we saw AvalonBay do it. You guys did it a number of years ago when Keith handed the reins over to you. It did seem from the outside that John was being groomed. Maybe that wasn't the case, but again, on the outside, that's what it looked like. Can you just talk a little bit about CEO succession? Does this impact anything? Does it not? Just any other impact that may come of this, or maybe this opens up spots in the senior ranks to allow you to groom more people to raise to more senior roles at Essex. Yeah, Alex, thanks for the question. It's a good one. Really important. We take succession planning super seriously. I am really pleased that I have three very capable executives around me, and I think as I look even beyond them, we have a pretty deep bench. You're right, I was somewhat surprised when John contacted me late third quarter, early fourth quarter, about sort of a change of plans involving him. I asked him to reconsider, but we all need to live our lives and make decisions. We decided on the course, and it probably took too long to come to agreement about what his role was going to be going forward. We ended up with the press release after Christmas. It could've been much earlier. It just took time to finalize what that was going to look like. Apologize for the optics of it. Having said that, John is always in our minds and our hearts, and he's forever a part of the company. Certainly, we wish him well. He's done a tremendous amount of good for the company. As we think about succession planning, the basic philosophy is the doors to or the paths to the CEO job are always open. The historical path has been mostly through finance. I came through finance and then ran ops and then up. We want other paths to be open too, including maybe through operations or through investment. Wherever we see talented people, I view as one of my primary jobs to keep those paths open and don't let them be blocked by people that don't have interest in being CEO. That's kind of the key to the whole thing. Then backing off of that down, looking at the people below and making sure that they have diverse experiences and are moved around the organization. In the case of Barb, Angela, John, all of them wore a variety of hats on their way to up the organization. We expect to continue to do that. I think that's the way it has to be in order to have a proper succession process. Okay. The second question is, one of the hallmarks of Essex has been investing when there's abnormalities in the market. Mike, you mentioned something interesting that in the suburbs, the rent affordability index was at perhaps the all-time high, or definitely elevated, whereas the urban areas are below the average, more affordable. However, you guys have sold out of the urban areas and been more suburban. Does this make you want to switch and now sell more suburban, get back into the urban? Are there other dynamics at work where, with this pricing affordability imbalance, you wouldn't do what maybe you would've historically done prior to the pandemic? Maybe I'll have Adam comment on that, and then I'll fill in when he's done, because he looks at the stuff in a lot of detail. I give him a lot of credit because he's out there transacting when no one else is. Some of the transactions he's done, we are so close to the pre-COVID period, and I think it's pretty exceptional what we've been able to accomplish. Adam, you want to comment on that? Alex, hopefully this is the gist of what you're looking for. We're looking at all of our markets at all times. During this recent kind of during COVID period, we've been primarily sellers. Most of those we sold in the CBDs. We've done that for a variety of reasons, and that dates back to we sold Eighth and Hope in downtown L.A., sold Mosso in San Francisco prior to COVID. Pricing on those deals was significantly above what our in-place NAV was at the time. We felt at the time the right decision to make from an arbitrage standpoint was sell those and reinvest in either our existing portfolio, buy back stock, or in other assets in suburban locations. The really heavily impacted CBD locations, quality of life, especially, say, in downtown L.A., in SoMa in San Francisco, has been challenging, and will likely continue to be challenging here for the foreseeable future. Many of the, what we consider, what we call suburbs, are very densely populated suburbs, and that's where we see opportunity, and that's where we see much of the market coming back sooner rather than later. Like I said, we're constantly assessing where we are, and if there are opportunities in CBD where we can buy at a good basis and we see significant rent growth, we'll do that. Yeah, like I said, we've been net sellers here, and all the deals that we've sold last year and then into this year have been within 2% of our pre-COVID NAV. Some above, some slightly below. That's been the right philosophy and the right strategy, and we'll assess as we go along. Mike? I think that says it well. Alex, maybe I'll add one more thing, just real briefly. The Walk Score issue is pretty interesting to me because the areas with the best rent growth have the worst Walk Score. The CBDs and some of the places that have the best Walk Score have been hammered in terms of rent. Everyone needs to ask themselves a question, will Walk Score ever matter again? My view is it will, and it'll be nuanced and it may not be the highest Walk Score gives you the best rents, but I just have a belief that having a nice location, low crime, pleasant surroundings, lots of entertainment and food options, et cetera, is going to continue to be important. Those are in sort of the high-quality suburbs that Adam just referred to. Thank you. Our next questions come from the line of Zach Silverberg with Mizuho. Please proceed with your questions. Hi. Good morning out there. Just a quick one from me. Just to follow up on an earlier one, it's supplemental in your prepared remarks, you talked about the VC investments and job postings in Essex Market. Maybe can you give a little historical context around that? Is there specific correlation that you're looking for or lag time, or how are you able to sort of quantify this momentum in terms of lease up or lease rates? Yeah. This is Mike. I have the experience of living through the dot-com bubble and then bust, and I would say that what I see relative to that is not even close. During the dot-com bubble period, rents surged about 40% in two years. It set our all-time high in terms of rent-to-income level, rents being at a very high percentage of income level. Contrast that to what I said earlier, which is, rents appear very affordable. San Francisco real rents down somewhere around 20%. Northern California in general is about 7% below our long-term average of rent to income in terms of affordability. If I take a look at that number and compare it to the financial crisis, I think we got to about 90% of the long-term average. Northern California, we're at 93%, so it's starting to feel pretty affordable. These are areas that support high income, high jobs, high-paying jobs, et cetera, and the rent levels are now at a point where I doubt that the tech companies are going to bat an eye all that much at the cost of living because affordability has changed pretty dramatically overnight. It can change back. It doesn't take that many new apartment units of demand to come in and take 96% occupancy to 97%, and then it's a whole different game. That's the way that we look at it. We've said the band between the rent-to-income, the band between 90% and 110%, is kind of the green zone that we do well in. In the markets that have been hardest hit, we are closer to the 90% of the long-term historical average. Again, in Ventura, we're above the 110%. It will change the choices that renters make, I believe. Got you. I appreciate the color. I just have one quick follow-up. In your guidance, you're not really guiding for any development. Can you maybe just comment there? Is there any future opportunity that you guys are looking at? Anything that right now you guys just sort of haven't contemplated in guidance? Any color there? Zach, this is Adam. We're constantly looking at different development opportunities, and we do get exposed to quite a few through our pre-development pipeline as well, and they kind of can both feed off of each other. We have a couple of deals right now where we're looking at fairly seriously in pre-development stages, where we're spending minimal pursuit dollars. We actually did. We walked away from a pre-development deal last year, there continues to be some potential there as well. We're looking for unique opportunities. Development yields right now are substantial, generally speaking. These two or three that we're looking at, one's a really well-located, high quality of life suburban location. One is in a really good job center, TOD. The other one is also very good job situation with some existing income. Looking at everything and one or two might fit the bill. Thank you. Our next question has come from the line of Neil Malkin with Capital One Securities. Please proceed with your questions. Thank you. Morning, everyone. Two questions. One for Mike, one for Adam, and also congratulations, Angela and Barb as well. Looking at the sort of recovery that you guys are sort of talking about starting in the second half, I guess I just want to kind of understand what you think that looks like in terms of the timeline to get back to like, I guess quote unquote covered. I ask because you look at your main Essex markets, about 1.1 million jobs have been lost in 2020. You're assuming like 3.4% or around 400,000 jobs. A little under three years of that kind of growth would be needed to get back to a level commensurate with pre-COVID. Just based on those things, Mike, how do you guys see that sort of "recovery?" I understand the comps in the second half of this year are going to be very easy. After that, what do you guys kind of think about when we're at, again, like pre-COVID type pricing? Yeah, that's a great question. Well, for example, based on the job losses in San Francisco, we should be a lot lower occupied than we really are. What happens during a recession is people move closer into the better areas. Plenty of people will say, "Hey, I would live in San Francisco, but the rents are too high." They live within the proximity around San Francisco and commute in. Once this happens, they make a different choice and they say, "Hey, with those rents, there's a backfilling approach." I would agree with you. What happens, the natural consequence of that is, obviously there's another way beyond that and another way beyond that. Somewhere out there on the hinterlands in the very periphery of the Bay Area, you have areas that are not 95% occupied. They might be 80% occupied because people make different choices based on pricing. Again, this has been one of the absolutes in my career and why we harp on this rent-to-income ratio as being so important. The number of people that moved out of San Francisco has been backfilled largely by people that have moved in from, let's say, Oakland or further out and want to live in the city. Then this backfilling process is ongoing. Here we are at 96%, having lost all those jobs that you just mentioned. The question is, when those jobs come back, how does this reverse itself? Some of these people will be happy to live in the city for a year, then maybe they'll be priced out of the city and will be moved into one of these secondary markets. You're absolutely right. Again, this is part of why we price things to keep occupancy high, because if we keep occupancy high, we'll draw people out of the, let's say, the less desirable suburbs, and you wait for demand to come back, and that is our way of maximizing revenue during the recessionary periods. I totally appreciate that strategy. I think it's the right one. I guess I'm just trying to get at, it's great that you have 96 above occupancy, but the market rents are still terrible. Yeah, I guess, by 2022, I don't know. I'm just saying. 2023, are you back? I'm just trying to kind of assess what that looks like for the portfolio. Yeah, I see. I don't know if you can't give that or that's hard. I apologize. Well, no, you're spot on. Unfortunately, we won't be able to be all that specific about this. I would tell you that part of the reason why we do what we do is because concessions can abate pretty quickly, and I can't tell you how quickly, and I can't tell you how many jobs it's going to take in order for that to happen. I can tell you that that is typically what happens, that concessions, as quickly as they came, they can go away just as quickly. We're going to have the overhang from the straight-line rent issue, which is a different factor. Our hope is that we get enough demand. Those tech companies continue to hire people, bring them if they decide to live somewhere close to the major urban centers or where most of the job locations are. Again, it just doesn't take that much. How long will it take to get back to where we were? It's a battleship, and it's going to take a year or two, at least to get back there, is what I would guess. The trajectory, as you point out, we lost a whole lot of jobs as a nation, and we've gotten some of them back, but we're still going to have a shortfall, and we're delivering some apartment units. I'd argue that the single-family component is so muted, and a lot of markets have a lot more single-family as a percentage of total stock, housing stock, than we do. That at around, I think it's at 0.3% production level will help a lot. I think, I would guess that as the restaurants open up, we're going to see a surge of people coming back into the cities in these service jobs, and concessions are going to abate pretty quickly. That's what I would think would happen. We'll be updating as quarters go by, but it's hard to tell exactly when this is all going to happen. Thank you. Our next question has come from the line of Austin Wurschmidt with KeyBanc Capital Markets. Please proceed with your questions. Thanks, guys. Appreciate you keeping this going. A lot of great detail in the release on jobs postings and some of the macro forecasts despite all of this uncertainty. Your response to a question on migration patterns, that some people left aren't coming back certainly seems to be the case. How are you contemplating or does your guidance account for the portion of residents that didn't lose their jobs or even students that temporarily left your market or campuses in these markets? It really doesn't. We assume that there is sort of a tailwind, a demographic tailwind, and that people live longer and they retired about the same time that they used to retire, so they have longer retirements. People that live longer consume houses without consuming jobs, and so there's sort of a presumption that that is a demographic tailwind that's going to be with us as long as people live longer. In terms of being more granular than that, we're really not. We know those people are out there. There are lots of contract workers, and I don't have that data. That was something that John used to focus on a lot. A lot of contract workers that left amid COVID and connected with both the entertainment industry and the tech industry. How many of those come back remains a question, too. I view it as when uncertainty unfolds, everyone kind of pulls in. Companies become less aggressive at hiring. We saw that. We saw the drop-off of tech jobs by the top 10 employers there. All the contract workers go home. If there's a little bit of a bright spot here, the Trump administration was pretty negative on H-1B visas. That will probably open up a bit, and immigration might open up a bit here, which I think will help somewhat. We don't try to get more granular other than to look at this supply-demand ratio really represented by John. That's probably 80% of the total picture or something like that. Okay. No, that's helpful. Appreciate the thoughts there. Barb, I think you mentioned kind of concessions run high in the first half of the year, but was wondering if you could put a finer point on that. Do you expect the pricing you achieved in 4Q and early part of the year, that reverses because we don't see the demand come back until maybe later in the year? Does it kind of hold around current levels and then improve in the back half of the year? Yeah. Are you referring to S16, the new and renewal, when you talk about net effective pricing? Just wondering. Yeah, correct. I think you were doing gross before and provided some net effective data this quarter. I think Angela can talk about pricing. Yes, in the guidance, we do assume concessions remain relatively consistent with Q4 for the first half of the year, and then moderate in the second half of the year. Yeah, that's a good question. It's Angela here. On the pricing, I think the way we think of it is that Mike talked about market rents troughing, kind of currently, fourth quarter or December, January, I talked about scheduled rent troughing in, say by the end of second quarter, because I was looking at year-over-year. There's a couple of different factors which may be a little confusing. As far as pricing is concerned, we currently do see what we reported in January to hold. Keep in mind, this is also toward the lower peaking season. As we progress, and if the economy continues to improve, and reopen, that's why we talked about second quarter I'm sorry, second half of the year being better. It's hard to talk about it kind of month-to-month. I think right now we're in a good position because we had employed the strategy of higher occupancy, and which allows us to reduce our concessions. If we're able to continue to do that's what we're targeting for our guidance for the year. Thank you. Our next question has come from the line of Nick Yulico with Scotiabank. Please proceed with your questions. Hi, guys. This is Sumit here in for Nick. I apologize. I know we all ask the same questions differently. I just want to sort of understand how you guys look at this problem. 2020 wasn't a normal year for leasing. The cadence actually changed. Most of your occupancy gain happened in Q3. In Q3, as I was looking at the month-to-month stuff, July was the peak year sort of occupancy burst, and then a little bit sort of 50/50 percent split in August, September. You also offered more concessions in the Labor Day kind of timeframe. I guess if everything, the concessions aside, vaccine aside, everything is sort of, if you look at it from a normal lease expiration schedule perspective, things are weighted towards Q3. How does that sort of reset to a more normal kind of cadence of turnover and leasing, unless you invite in shorter leases or I'm just inquisitive on that? This is Angela here. I think you're asking about the cadence of our leasing season. If that's the case, if that is your question, we would expect that cadence itself for 2021 to be somewhat similar to prior years. We would expect, depending on our markets, but for the most part, they start peaking, say, around June, and Seattle peaks later, say, closer to July. That's during those times we tend to have the least amount of concessions. Because our leases also, more leases turn during that time, we would probably end up with slightly lower occupancy just by the way the numbers work. That kind of gives you the trajectory in terms of our business. The reason we're talking about when things trough and the year-over-year comparables, because that does impact what happens for the whole year. That behaves differently because of COVID last year. Second half of 2020 I'm sorry, first half of 2020 was much better than second half. You kind of have that flip in terms of year-over-year growth, where first half of 2021 will be much harder and second half will be easier. Got it. Again? Okay. Yeah. A little more clarity on the cadence was what I wanted to hear. Thank you. In terms of when we look at your macroeconomic forecast, kudos to Mr. Paul Morgan and team, I guess. It appears that Northern California has the highest job growth at 3.4%, but the lowest rent growth at -3.6%. There's a lag. I assume that the lag is related to the hyper-concession activity we saw in 2021 and 2020, and so you're sort of building back from there. I'm also wondering whether you guys have any sort of factors or discounts for jobs that are created by companies domiciled in California, but have offered the employees the flexibility to work from anywhere. Is that factored in into your kind of - 1.9% rent growth forecast, effective rent growth forecast? Let me comment on the - 1.9. What that represents is each month, year-over-year, what the market rent or the effective rent differential is year-over-year. Again, if you look at January of this year, the prior year rents were going up, and obviously, we've had a big decline in current rents. It really is the trajectory of rents year-over-year. It's going to start with a big negative in January, and then it's going to go to a mid-single digit positive by the end of the year. Averaging all that out, January over January, February over February, projected market rents, average all that out to -1.9%. It's not intended to be because of concessions. It's really because we start the year, again, the prior year rents were all-time highs. Rents have rolled down a lot. We start in a hole for the first half of this year, we start hitting much easier comps as we get into July, August, September, our year-over-year will be positive. When you average all that together month-by-month, you get -1.9%. Does that make sense? Yep, got it. As far as your job growth forecast as being a driver of that model, does that factor in any work from home flexibility versus, let's say, a model that you built in early 2020? I didn't ask Paul that question specifically, but he's a very thoughtful guy, and he's well aware and very concerned, as we all are, about this work from home scenario. Again, our base case scenario is that people will have greater flexibility working from home. Again, as a CEO of a company, being able to have this team dynamic where we're trying to accomplish, there's so many pieces to this organization all have to act in unison. You got to know the people. That's what really makes us believe that this hybrid model where greater flexibility of work from home, but people that are going to be in proximity, unlikely to be far, far away from the office because they're going to have to report from time to time, let's say, two, three times a week. We think that that is probably what's going to happen for a lot of workers. Again, I'm excluding all the workers that have to show up, which I think was estimated at about 60%, including, for example, all of our property teams. Anyone that works at a restaurant, et cetera. There's a lot of jobs, there is no work from home flexibility. There is no such thing. I think that if you read a lot of these reports and news clippings on this subject, they kind of forget about those people. I think it's going to, again, we will have more work from home flexibility. Maybe the city centers are a little bit less desirable, even though that's where the great restaurants are going to continue to be, and that's where the tourism's going and all those other things. Maybe the suburbs do a little bit better in that scenario. Thank you. Our next question has come from the line of John Pawlowski with Green Street Advisors. Please proceed with your questions. Great. Thanks for taking my question. Angela, just a few questions for you on your Northern California portfolio. I'm just curious your thoughts on the quality of occupancy heading into spring and summer leasing, when a lot of leases that were given one to two months free come and expire. Are you assuming meaningful occupancy slippage in the peak leasing season in Northern California? That's a good question. At this point, not likely because the occupancy slippage that we've seen last year that were driven by, say, some consultants which didn't come, or people who lost their job. They already lost their job. They're not going to re-lose their job. Northern California already is sitting at one of our lower occupancy levels. We don't expect significant further deterioration from that. We have been able to build occupancy there, and so that's a good sign. I expect that we will continue to do that. Yeah, 96.5 is well north of market occupancy, there's a lot of private competitors that have an eight handle on occupancy. As it remains concessionary, I know a lot of the pain is out of the system, is there any kind of reset in occupancy in your portfolio coming? I don't see that, but keep in mind some of the major pain points relate to CBD, where you have a lot more supply, and we don't have as much in the CBDs. While it's still going to be competitive out there, so I'm not dismissing that. I just don't see further meaningful occupancy deterioration for our portfolio. Okay. On the rent side, could you share what you think gain to lease is right now in Northern California portfolio, if you include concessions? You're making me cry, John. Angela, go ahead. It is not a pretty number, I can tell you that. In January, oh, I don't have the January number. I have December number. Close enough. Yeah. Gain to lease for Northern California as a whole is about 8%. I do want to also give a little context, right? Because while loss to lease is an important metric, during seasonally low or slow periods like in the first quarter or in the fourth quarter, and market rent has much higher volatility, so it negatively impacts this metric. It's just not as meaningful. It's not something we really want to hang our hat on, which is why whenever people ask us, we always point them to kind of the full year average, because it's not too hot, not too cold. This number isn't great, but typically during this time, December isn't great. Obviously, it's a larger magnitude, but there is a lot of volatility and small number of leases turn during this time, so that magnifies that volatility. Let me add a little color, John. Overall, it's about 4.6% on the portfolio. Typically, there is a gain to lease almost every December, more like in the 2% range. Again, you're picking the worst part, the bad boy for that. You're picking the worst part of the portfolio. I wanted to give you that broader context so that it was taken with a little bit of a broader view of what that looks like. Thank you. Our next questions come from the line of Dennis McGill with Zelman. Please proceed with your questions. Hi, this is Alex Kalmus on for Dennis. We talked a lot about migration, curious if you guys know where the tenants that have come, where they're coming from, like their previous living situation. Are there a lot of apartment to apartment moves, or have you also seen some pickup in potentially younger adults living with parents that came back to apartment situations? That's a very good question, and I don't have the data I wish I had on that. We noted, I think, last quarter that the number of adults living at home was something like 100-year high point. There's obviously a lot of people out there that work from home, flexibility, et cetera. I'm pretty sure that will uncouple itself in due course. Most of us don't want to live with our parents forever. I'm sure that that's a piece of it. I don't have the sense that really hiring has picked up quite yet. Typically what happens is the new year comes with new budgets and new business plans and things get going really after Super Bowl Sunday. We'll have a much better sense probably in a quarter about what's happened. You hit one of the key ones, how many adults are living at home with a parent. Recent college graduates, for example, that have work from home flexibility, and can work from home, save some money. That's one piece. There are other pieces. The contract employees coming back, which are big time part of the high-tech industry. H-1B visas, people that were forced to go home because of COVID and potentially can come back. There are a number of possible pieces of demand that are out there that we can see coming back. I just don't have a way to monitor them or follow them. Got it. Thank you for the color. Just hitting on that last point you mentioned on the H-1B visas, and forgive me if you talked about this earlier, given the overlapping calls today, is the new administration's potentially more immigration-friendly policy, do you see any benefit? Have you seen any benefits so far, and are you expecting any job growth or movement from those changing policies? Yeah, I do. I'd say the Trump administration was very tough on the foreign workers coming into the U.S. A lot of the technology jobs and a lot of, obviously, the technology CEOs have indicated that they need to draw the best and brightest from around the world, and that it's good for America for that to happen. Some of the policies that the Trump administration followed were not giving work visas to the spouses of foreign workers, and just in general, not accommodating them, making the renewal process more challenging. They also tried to make, actually, the process more fair as well. It's not all negative. I would expect the Biden administration. I think I saw something recently. I don't have anything that I pulled for the call, I think I saw something recently that they will open up, in addition to not building any more walls, et cetera, They will open up the immigration process to foreign workers, which would mean a lot of workers went home because their spouse couldn't work, or they didn't have another occupation. It changed the dynamic of that program. I do think that will be a positive. Whether it's a material positive remains to be seen. Thank you. Our next question comes from the line of John Kim with BMO Capital Markets. Please proceed with your questions. Thank you. Is it your understanding that tech companies are going to follow Google's lead and not require employees to return until September? I'm just wondering what's your assumption and guidance as far as the timing of workers returning to the office? It's a good question. We're not making any assumptions about that, and that remains one of the unknowns. All the COVID related items, I guess, remain unknown. Again, our core belief is that most of these companies have announced that they do want their employees to come back to the office. There've been a whole series of pushing back the back-to-office dates, allowing workers, in the Google's case, being concerned about making sure their workers have enough flexibility to plan their lives and lease an apartment, for example, somewhere else if they wanted to. One of the big tech companies, don't remember which one, asked all of their employees to come back into the current country, into the U.S. That was a good positive start and a step toward normalization. Again, there's no basic assumption that we've made with respect to that. We're just assuming that with virus, well, with vaccine distribution, that the world will become much more normal as we approach herd immunity. As soon as that happens, most of these companies will come back to working at the office. Okay. Angela, in your prepared remarks about an hour ago, you mentioned the strength of the life science office market. I'm just wondering if there's an opportunity to focus more on some of the biotech clusters that you operate in. I think that's a Adam question on investments. Okay. There are a few markets that we've targeted on the development side and investment side that are heavily driven by life sciences and biotech. Absolutely. We see that as a continued driver to the economy, and it continues to grow. Thank you. There are no further questions at this time. I would like to turn the call back over to management for any closing comments. Thank you, operator. Thanks, everyone, for joining the call today. We look forward to participating in the city conference coming up in about a month. Hopefully, we will meet with many of you there remotely. I also hope that sometime in the not distant future, we can meet once again in person. Have a nice day. Again, thank you for joining the call. Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time. Have a great day.