Good day, and welcome to Essex Property Trust's second quarter 2024 earnings call. As a reminder, today's conference call is being recorded. Statements made on this conference call regarding expected operating results and other future events are forward-looking statements that involve risk and uncertainties. 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, Ms. Angela Kleiman, President and Chief Executive Officer for Essex Property Trust. Thank you, Ms. Kleiman. You may begin. Good morning, and thank you for joining Essex's second quarter earnings call. Barb Pak will follow with prepared remarks, and Rylan Burns is here for Q&A. We are pleased to report a strong second quarter with Core FFO per share exceeding the high end of our guidance range by $0.05. As a result, we have our second notable increase to our full-year guidance. Today, my comments will focus on underlying drivers to our outperformance and operational highlights, followed by an update on the investment market. Starting with operating fundamentals. Year to date, demand for West Coast multifamily housing has exceeded our expectations, particularly in Northern California and Seattle regions. While we've traditionally relied on the BLS to assess housing demand, the reported data have not correlated to the strength we're experiencing on the ground. As such, we've analyzed alternative demand indicators from third-party sources for better insights into the key drivers supporting housing demand. The first of these is job openings at the top 20 technology companies. In June, openings in the Essex markets total over 17,000 jobs, which represent a 150% increase from the 2023 trough. While we have yet to return to the historical average of 25,000 jobs, the steady improvement so far has generated incremental demand in our markets and is a good precursor of the recovery, particularly in Northern California and Seattle. Another factor contributing to West Coast housing demand is migration. Real-time data using Placer.ai shows a gradual improvement in domestic migration patterns on the West Coast. This is illustrated on page S16.1 of our supplemental. This data suggests that workers are relocating back to the coastal headquarters, generating a shadow demand similar to a new job being added. Additionally, this year, Northern California has positive net domestic migration for the first time since pre-COVID. As for supply dynamics, limited new housing combined with favorable rental affordability continue to underpin our market fundamentals. For example, the rate of income growth has outpaced rent growth, which has improved affordability metrics in our markets. Additionally, it is 2.8 times more expensive to own than to rent in our markets today, compared to 1.7 times back in 2019 when interest rates were near the historical low. Even if mortgage rates were to revert back to the 2019 level, home ownership in our markets will still remain significantly less affordable than renting. Turning to property operations, we experienced a solid peak leasing season with blended rent growth for the same property portfolio of 3.4% for the quarter. Blended rent growth would have been 4.5%, so 110 basis points higher if we exclude LA and Alameda, the two counties with elevated delinquency-related turnover. As for regional highlights, Seattle has been our best-performing market today, achieving a 4.9% blended rent growth while maintaining a strong occupancy level of 97% in the second quarter. The Easts ide, which has been less impacted by supply than the CBD, led this region with 5% blended rent growth. There are two key factors that contributed to this strong performance. First, relative to our other regions, Seattle has the strongest job growth. Second, the new supply has been less impactful as timing delays resulted in fewer deliveries in the first half of the year. These two factors have led to a prolonged seasonal peak in that this market typically peaks around late June, but this year, the peak occurred a month later, around the end of July. Northern California was our second-best-performing region, achieving a 3.3% blended rent growth in the second quarter, an occupancy of 96.3%. San Mateo and San Jose were the notable outperformers at around 4% growth, with Alameda County pulling down the regional average by 80 basis points due to delinquency turnover and the continued elevated supply in Oakland. Generally, rents in this region peaked around early July, consistent with historical patterns. Lastly, Southern California continues to be a steady performer. We achieved 2.8% blended rent growth for the quarter, which would have been 200 basis points higher if we were to exclude LA. In similar fashion, Southern California's average occupancy of 95.7% for the quarter was tempered by Los Angeles, with all other markets at or above 96% occupancy. Excluding L.A., Southern California's rents peaked in late July, consistent with historical patterns. As we begin the third quarter, our portfolio is well-positioned with an average concession of less than two days, and occupancy is healthy at 96.2%. We are prepared to shift to an occupancy strategy as appropriate, while maintaining the optionality to maximize rental growth. Finally, on the transaction market, in the second quarter, there was a significant increase in investor demand for well-located, newer multifamily properties on the West Coast. In contrast, the number of marketed properties for sale remained low. This combination has resulted in a highly competitive bidding process and a compression in cap rates in some markets. Over the past few months, Essex has selectively procured three high-quality communities in the Bay Area. All three of these investments have significant upside potential based on the favorable fundamental backdrop and efficiencies from our operating platform. We are pleased with the progress to date, with over $500 million in acquisitions closed, and are optimistic more opportunities will arise in the near future. As always, we remain disciplined and focused on maximizing shareholder value and enhancing the growth profile of the company. With that, I'll turn the call over to Barb. Thanks, Angela. I'll begin with comments on our second quarter results, followed by the key components of our full-year guidance raise, and conclude with an update on the balance sheet. Beginning with our second quarter results, we are pleased to report Core FFO per share of $3.94, which exceeded the midpoint of our guidance range by $0.11. The outperformance was primarily driven by $0.05 of higher same-property revenues, which was largely the result of stronger net effective rent growth. In addition, this quarter benefited from $0.04 of one-time revenues and lower operating expenses, which are timing-related. Turning to our full-year guidance revision, our strong second quarter results and healthy peak leasing season have enabled us to increase the midpoint of our same-property revenue growth by 75 basis points to 3%. Our improved outlook is largely driven by blended rent growth outpacing our initial forecast, resulting in a 50 basis points increase to revenue growth. We now forecast blended rent growth to be 120 basis points higher than our initial forecast, driven by outperformance in Northern California and Seattle. As for same-property operating expenses, higher utility costs and legal fees are the primary drivers of the 50 basis points increase in our midpoint to 4.75%. As it relates to controllable expenses, we have been effective in managing this aspect of the business despite the elevated cost environment. For the year, we expect controllable expenses to increase less than 3%. In total, we now expect same-property NOI to grow by 2.3% at the midpoint, representing a 90 basis points improvement to our prior guidance and 170 basis points improvement from our initial outlook. Based on our strong second quarter results and the revision to same-property growth, we are raising full-year core FFO by $0.27 to $15.50 per share, which represents 3.1% year-over-year growth. In total, we've raised core FFO a notable $0.47 per share so far this year. As it relates to our third quarter guidance, we are forecasting $3.87 at the midpoint. The sequential decline from the second quarter relates to two factors. First, same-property NOI is expected to be $0.05 lower, which is driven by elevated operating expenses given the typical seasonality in spending for repairs and maintenance, taxes, and utilities. And second, we had $0.02 of one-time items in the second quarter. Turning to the preferred equity portfolio, for the year, we expect between $125 million-$175 million in redemptions, of which we've received $50 million to date. Our intention is to redeploy the proceeds into acquisitions depending on market opportunities. In terms of the watchlist, we started the year with five properties on the list, of which three have been removed so far to date. Two of the properties were acquired and consolidated on our financials, and one of the investments had a significant equity infusion, which puts us in a better position in the capital stack. In total, the reduction in the watchlist added approximately $0.04 to our full-year Core FFO. The rest of the portfolio is performing as planned. Finally, our balance sheet metrics remain a key source of strength. We have no remaining consolidated maturities in 2024. Our leverage levels remain healthy with net debt to EBITDA at 5.4x, and we have over $1 billion in available liquidity. As such, we are well-positioned to capitalize on opportunities as they arise. I will now turn the call back to the operator for questions. Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you. Our first question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Please proceed with your question. Hi, and good morning, everybody. Angela, you'd mentioned that you're prepared to shift to an occupancy strategy. So just curious if we should view kind of the pullback in renewal rate growth in recent months as a tactical move to drive occupancy, or are you getting some pushback on the increases and kind of seeing retention moderate? What's sort of driving the pullback? Thanks. Hey, Austin. Good to hear from you. This is more in line with our approach to address seasonality in our business. And so typically, as we approach the seasonal peak, we would push on rents. And now, as we shift toward the seasonal slower time of demand, we start to migrate toward occupancy. Ultimately, the goal is to maximize revenues. So it's not so much of anything we're seeing that is any red flags on the fundamentals. It's more of how we normally run our business to maximize revenue. Got it. And then could you break out how new lease growth has trended across the three regions as you get into July? And just curious where you're seeing kind of the most moderation and what's kind of holding stronger, maybe a little longer than you would have anticipated. Thanks. Interesting. So on the new lease rates, net effect new lease rates, we are seeing Southern California holding steady slight deceleration, but nothing material, like 10, 20 basis points. Northern California is the more deceleration, about 200 basis points. And then Seattle, about 50-60 basis points of deceleration. And once again, under new lease activity here, it's pretty much what we had expected. There's nothing here that's giving us any alarm. This is normal business with us. Normally, Northern California peaks earlier than Southern California, and so this is unplanned. Thank you. Our next question comes from the line of Eric Wolfe with Citi. Please proceed with your question. Thanks. It's Nick Joseph here with Eric. Maybe just following up on that pricing strategy, but more specific to L.A. and Alameda. Are you getting closer to the point where you can be pushing pricing more right now, or do you need to get to a certain occupancy level first? That's a great question, Eric. We are not quite there on LA/Alameda in terms of our operating strategy. We pretty much ran an occupancy-focused strategy starting late last year that has continued throughout the year. We've been able to kind of switch back and forth a little bit, but it really didn't last long. At this point, we made really good progress on delinquency, and essentially, it improved by almost 50%. We reduced by another 50% from the beginning of the year. So we're making good traction there. We probably will not be able to have pricing power until we get through the rest of this year in LA/Alameda. Thanks. And then just on your gross bad debt, it looks like it came down to 80 basis points in July. Is your expectation that it'll hold around this level for the rest of the year? Hi, Nick. This is Barb. Yeah, our guidance has about 1% baked into the rest of the year. Remember, the number can bounce around month-to-month, but we're pleased with the progress that we've made so far and feel comfortable that we'll continue to make progress. If we do make more progress and the 80 basis points hold, that'll just be upside to the high end or be to the high end of the guidance range. Makes sense. Thank you very much. Thank you. Our next question comes from the line of Joshua Dennerlein with Bank of America. Please proceed with your question. Hi, this is Stephen Song for Josh. Thanks for the time. Then my first question is on the bad debt assumption. It seems like that's progressing better than expected so far. I wonder if you can give more color on how it will trend for the second half. Yeah, this is Barb. It is a difficult number to predict because it does bounce around month to month, and we are pleased with the progress. Keep in mind, we did take that we did increase our guidance in the first quarter by 40 basis points because we did lower bad debt to 1.1% for the full year. Through July, we are at 1.1% year to date. So we're in line with our forecast. We do expect we're working hard to make progress, but it does depend on when tenants leave and when the courts process evictions. So it's a little out of our control. So we've got 1% budgeted in the back half of the year. Okay. Got it. That's very helpful. And then my second question is on the concession. If I hear this correctly, you said it's less than two days across the markets. I wonder whether you can separate that for different regions and how that's trending so far. Yes, we have that detail, right? Aha, concessions. So generally speaking, Southern California has a heavier concession in LA for the most part, no surprise there. And Northern California's concession environment is driven primarily by Oakland because of the elevated supply. And so Southern California's EQ with LA and Northern California Oakland with supply. And those are the two primary drivers of higher concession levels. But ultimately, we're talking about, say, closer to 4-5 days in those areas versus the rest of the region where Seattle has essentially zero and everywhere else around 1-2 days. So the average is to the 2 days in July. Okay. Got it. Thank you so much. Thank you. Our next question comes from a line of Steve Sakwa with Evercore ISI. Please proceed with your question. Hi, this is Sanket Agrawal for Steve Sakwa. We were looking at the same store revenue guidance that you guys updated, and we were just surprised that you didn't raise the low end more because year to date, you guys are trending at 3.5%. So we were just curious about how do you get to low end or in the lower range of the guidance range in terms of same store revenue? Yeah. Hi, this is Barb. Yeah, there's a lot of factors that go into it. And at the low end, it just does depend on how steep the decline is in the back half of the year in terms of the peak leasing season. We expect a normal season, but we've seen air pockets in the past. And so that factors into the low end, and that could impact occupancy and concessions. And then delinquency has been a wild card. It feels like it's less of a wild card this year, but once again, that is something where we've seen blips every now and then. And so those are the factors that really led to the low end where it is. But we feel very comfortable with where our midpoint is at this point. Okay. As a follow-up, where are you guys sending out renewals for the month of August and September? Yes, we're sending out renewals at around low 4% portfolio-wide. Based on the negotiations that we're seeing, we'll probably land somewhere between mid-threes to high threes on the renewal side. Okay. That's helpful. Thank you. Thank you. Our next question comes from the line of Nick Yulico with Scotiabank. Please proceed with your question. Hey, good morning, team. It's Daniel Koelsch. Along with Nick. Can you talk to your expectations around pricing through the back half of the year with respect to your comments on a normal seasonal pattern and pricing peaking later than typical? And would you say there's any conservatism in the new guide related to any macroeconomic or political-related factors? Oh, that's a great question. Well, let's start with we have expected that full year, our blended rents will be about 2.7%. And we achieved 2.9% in the first half. So there's an implied deceleration of about 35-40 basis points. And this is actually quite moderate. It's not nothing to be concerned about. But aside from what's going on out there in the political realm, the key drivers to our anticipation is really that we have tougher year-over-year comps. So last year, our seasonal peak actually occurred 1-2 months later, Northern California 1 month later, and Southern California 2 months later. And so that tougher year-over-year comp is a primary driver. And then the secondary factor is the renewals ultimately will converge toward market rate over time, and that's normal. Really helpful. Thanks, Angela. My follow-up is you've been a bit more active in the transaction market and with your JV partners recently. Obviously, it seems to imply a vote of confidence in your markets. You also mentioned the competitive bidding and compressed cap rate. So just curious if you're considering any new on-balance sheet development today with the supply and demand outlook you're communicating? Yeah, hi. This is Rylan here. It's a good question. I'd say working in our favor, we've started to see hard costs come down a little bit from a year ago. The vast majority of development that we underwrite, however, does not meet our return expectations. We're looking for a significant premium to where we can go and purchase today, given the risk inherent in development. But I would say the trends are favorable, and we are pursuing several opportunities that could lead to an increase in our development pipeline in the near future. What would be the spread you're targeting versus market cap rates? Yeah, it's case-by-case dependent, but a general rule would be in our markets today, for a shovel-ready site full entitlement, we'd be looking for at least 100 basis points spread to where we can go and buy a comparable product. Thanks, Rylan. Thanks. Thank you. Our next question comes from the line of Brad Heffern with RBC Capital Markets. Please proceed with your question. Yeah. Thanks. Hi, everyone. So for LA and Alameda, when you do get pricing power back, do you see those markets just returning to kind of a normal level of growth, or should there be some sort of catch-up given incomes have gone up, much more of the rent has gone up? That's a great question, Brad. I think that's going to depend on demand. So how quickly do we see job acceleration as we return back to that normal state to the pre-COVID level? And so fortunately for us, we don't need much, right, given the such low level of supply, which is one of the reasons we've been able to produce all the results, even though we are in a low-demand growth environment. But the magnitude we're talking about will be really dependent on job growth. Okay. And then, Barb, on the new guidance, I think the fourth quarter implied Core FFO number is down slightly from the third quarter. Normally, the seasonal pattern with you guys is that the fourth quarter is the highest FFO quarter. So I'm just curious if there's something that's offsetting that or there's something timing-related that's falling into the fourth quarter. Yeah, it's mostly the timing on the preferred redemption. So we've got $50 billion to date. Most of that occurred in July. And then the rest of it is slated for end of the third quarter, beginning of the fourth quarter. So we'll see the biggest impact from those redemptions then. And that's what's causing that anomaly. Okay. Thank you. Thank you. Our next question comes from the line of Haendel St. Juste with Mizuho Securities. Please proceed with your question. Hey. I guess thanks for taking my question. I was intrigued by some of the comments you made about seeing positive migration into Northern California for the first time since, I think, pre-COVID and hearing more of employers enforcing return-to-office mandates. So I guess I'm curious, are you seeing that translating at all into more demand or applications, anything tangible that you can point to, and if that's perhaps something that could drive perhaps some rent or any upside over the next couple of quarters? Thanks. Hey, Haendel. That's a great question. Ultimately, we're seeing pricing power, and that's translating to our outperformance. You've seen us raise guidance twice. It's primarily driven by demand because we've always maintained that having that low supply environment, we're in a really good position here. As far as where that's going to land, it's hard to say because it depends on the rate of the return. So just to give you some data points, during COVID, about 400,000 people migrated out of our markets. What's interesting is the majority of the out-migration was to tertiary markets within Washington and California. So say about a third, 35% of them actually went out to the Sunbelt and East Coast. What we're seeing right now is about a quarter of that has returned. So about 100,000 have come back. And it's generally in line with that proportion of a third out of Washington and California and two-thirds within the tertiary markets. So there's still some legs here. The question here is when and how much. And that is just we just don't have enough visibility on the timing about that one. Okay. No, I appreciate that. And I guess we'll be watching. And I think you also mentioned I guess there was an earlier question about transaction activity. And I think you mentioned in your comments that you bought assets with some occupancy or perhaps some repositioning upside. So I guess I'm curious overall in just the state of seller psychology in the marketplace. Are you seeing more potential sellers willing to engage the assets that you're underwriting? What IRRs are you looking for? And your overall level of interest in deploying more capital and what cap rate range you're broadly seeing in the market? Thank you. Hi, Haendel. This is Rylan here. Several questions in there. So if I forget one, please follow up. But in general, we've seen volumes pick up in the second quarter compared to a year ago as well as the first quarter. Cap rates are fairly consistent across our markets for high-quality, well-located buildings in the mid- to high-4 cap range. So we are looking for unique opportunities that we can put it onto our operating platform and generate some additional accretion just from operating a little bit more efficiently. We're always looking for ways that potentially can add incremental yield on the top line. So we are, again, pretty excited about the investments we were able to make in the second quarter. The one that was noted there, the Elan, was a high-4 cap. We're expecting some additional benefit from putting it onto our operating platform. This is a building probably 20% discount to replacement cost and with rents that are about 15% below pre-COVID levels. So those, given our fundamental outlook for some of these sub-markets, if we can find more opportunities like that, we will pursue as we have always, aggressively, but with great discipline as well. Any color on potentially the IRRs that you're underwriting? Yeah. I don't want to provide too much detail just for competitive reasons, but back of the envelope math would suggest that these are above 8s. Okay. Appreciate that. Last one, if I could squeeze one in, just broadly, if you can give us a sense of whether loss or maybe gain to lease is across the major regions of the portfolio. Thanks. Sure, Haendel. For you, yes. You could squeeze another one in. So July loss to lease is about 2%. And so it's certainly a good position, especially when we compare to last year, July. It's a 50 basis points improvement. Last year, July was only at 1.6. So things are moving the right direction. Thank you. Thank you. Our next question comes from the line of Adam Kramer with Morgan Stanley. Please proceed with your question. Hey, guys. Thanks for the question. Wanted to ask about competition from new supply in the market. I think looking at the kind of supply disclosure at the end of the supplemental, really helpful, by the way. And it looks like multifamily supply is maybe lower than it was in the prior disclosure, but that there may be kind of more single-family new supply in kind of the way that you guys tabulate it. So just wondering if you've kind of seen that have any effect on the market, kind of competition from greater new single-family supply. Hey there. It's Angela. The best indication of new supply competition is looking at our concessionary activities. With where we are today at 2 days and that concessionary environment has progressively improved over the past 6 months, we certainly are not seeing competition from the single-family side. Got it. That's helpful. And then just wanted to ask about kind of modeling and inputs and takes with regards to kind of the preferred equity investments and then kind of buying those assets out. I know you did one in the quarter, maybe one subsequent to the quarter end. So just wondering how to think about kind of the trade-off there, right? You're buying these at kind of fairly tight cap rates, and you're losing yield that's a bunch higher. But just kind of the modeling and puts and takes or how to think about kind of the short-term impact in terms of kind of gain of NOI, maybe lost equity income. Yeah, this is Barb. I might have to follow up after with the puts and takes on that. What I will tell you is that on the 2 investments that we did acquire and we had preferred equity on, there was originally forecasted in our guidance for 2024, no FFO impact. So by buying them out, we actually gained about $0.01 for this year in terms of core FFO because we didn't have any preferred equity income baked into the model, given they were on the watch list. Given where values were at the end of last year, we took a conservative approach on the accruing on those 2. So net-net, it did add about $0.01. But I can follow up with you after and go through the NOI and the other various metrics. Great. Thanks for the time. Thank you. Our next question comes from the line of Jamie Feldman with Wells Fargo. Please proceed with your question. Great. Thank you for taking the question. I guess maybe a question for Rylan. It sounds like you're getting more active on potentially the acquisition front. Your markets are at the leading edge or in the headlines probably the most in terms of rent control regulation. Obviously, Prop 13 is always out there. How do you underwrite potential long-term rent growth or at least handicap those risks to the top line and I guess the expense line as you're looking at new assets going forward, especially given big election coming up and a lot seems to be on the table? Hey, Jamie. Yeah, that's a fair question. I mean, at a high level, we believe the Prop, the Costa-Hawkins regulation that's coming up this November, again, we can go into some more detail, but historically, that has been resoundingly defeated. And there's our base case that that is going to happen again this year. Now, we will look at. There's specific sub-markets that have rent control and that occasionally will propose specific rent control. And we'll certainly factor that into our rent growth assumptions. But at a high level, our expectation is driven by our economic research model, and we are not anticipating any change to statewide rent regulation in the near term. Okay. So you'll underwrite greater than 5% growth over the long term across any of your markets? Assets, it's all on a case-by-case basis, but that's certainly feasible. And given AB 1482, that is certainly achievable. So we know that that's certainly possible. I would say a possibility. That is not our base case. Typically, when we're looking at these market rent growth, we are thinking over the long term. And so they're closer to our long-term averages. And then in some instances where, again, some sub-markets in Northern California where the affordability metrics, the future look on supply, as well as some positive traction we're seeing in terms of potential demand, those are the types of investments where we might be a little bit more aggressive in the near term as a catch-up on rent. Okay. And then just thinking about your comments on the urban markets getting a little healthier on the turn, do you think you might get more you could get more aggressive, find better value buying in the urban markets now, given what you think you're seeing? Or do you think you'll keep the portfolio balance? I know you kind of buy what you can get that hits your IRRs, but is there a play there of getting more aggressive in the cities given that they've been more challenged? It's certainly something that we're evaluating. We've seen much fewer transactions in the urban core across our markets, but they're starting to see some more product come to market. That's something that we're certainly evaluating. Again, the majority of our portfolio located in great suburban markets near transportation nodes, that's kind of our bread and butter. But we will look at anything, and everything has a price. So we are excited to potentially see some more opportunities throughout all of our markets in the coming quarters. Okay. Great. Thank you. Thank you. Our next question comes from the line of Connor Mitchell with Piper Sandler. Please proceed with your question. Hey, thanks for taking my question. There's been a lot of discussion on the bidding wars in a tougher environment and a lot of transaction activity. Just thinking about that and then maybe also the prospect of Fed rate cuts. Just wondering, does that increase opportunities for the preferred and mezzanine business investments, or are you guys kind of weighing more on the acquisition opportunity still? Yeah. As you can see from our activity today, we've been very focused on acquiring high-quality, fee-simple ownership properties. That's kind of our base case. We are open to the preferred and the mezz investments, and we are pursuing several. It's not that we've shut that off. That's really a large portion historically of our pref and mezz investments have come as a result of development opportunities. As the development pipeline has slowed considerably in the past year, there's just fewer opportunities for us to deploy in the pref space. We are open, and I think we're well-known within our markets as being a great partner for that product. So we will continue to pursue. As a result of supply coming down and new development starts coming down, there's just been fewer opportunities. Okay. Appreciate it. And then in the opening comments, I think it was discussed the strength of Seattle and seeing less of an impact from supply and some more return to office. Just wondering if you guys can give an outlook on those two items for the Seattle markets going forward in the back half of the year? Sure thing, Connor. Seattle is an interesting market in that it's one of our more volatile markets because of supply. And what's interesting here is we originally had expected Seattle to continue to outperform in the second half. But now that supply got pushed, it's going to end up being an offset because Seattle last year in the second half had fallen quite a bit. And so it has this odd combination of easier year-over-year comp, but now more supply. So it probably offsets into something neutral and slightly better. Okay. That's all for me. Thank you very much. Thank you. Our next question comes from the line of John Kim with BMO Capital Markets. Please proceed with your question. Thank you. I wanted to follow up a couple of times. Rylan had mentioned cap rates in the mid-to-high 4% range and rent growth expectations. Rylan, I think you mentioned with the line, the rents were 15% pre-COVID levels. Is that the level of rent growth that you and competitive buyers are looking at today on acquisitions? Just so for clarity, those rents are about 15% below pre-COVID levels. We are not anticipating that that snaps back tomorrow. We know that given the strong income growth we've seen in this sub-market, as well as what we feel is coming through the COVID and slowdown in the tech market, that the fundamental setup is attractive. I wouldn't be surprised if we recover those rent growths within several years. That is a factor. As to what our peers are doing, we are seeing some assets trade that we're staying disciplined on at levels that don't make a lot of sense to us. I do think there are other participants in the market underwriting even more aggressive rent growth in some of these sub-markets. It's difficult to parse through exactly what our competitors are underwriting. But in general, it feels like there's been a lot of capital demand and excitement about Northern California given the fundamental setup that we've been talking about for a couple of years now. Okay. And it seems on this call there's been a lot of discussion on pricing power and some favorable trends. Your rent-to-income ratios are improving in your markets, and it seems to be some of the lowest in the country. Should we think about renewal rates exceeding the 5% that you've been getting recently? Hey, John. If we hadn't reached our peak, then that would be more of a likelihood. But at this point, what we're seeing is renewal rates trending downward. And relative to the prior months, it's been gradual. So the good news is it's not a huge deceleration. But from June to July, it's about 30-ish basis points decel. And renewal ultimately will converge toward market rent. So that will be possible if suddenly there's a massive amount of job growth and demand and that, and then the market rents take off. But that's not a likely scenario that we are seeing at this point in time. Got it. Thank you. Thank you. Our next question comes from the line of David Siegel with Essex Property Trust. Please proceed with your question. Hi. Thank you. I was curious if you could provide some color on what is changing with the multi-family supply forecast and whether some deliveries are being pushed into next year and to the extent that you can comment on the outlook for 2025 supply growth relative to this year? Thank you. Yeah, this is Barb. So as it relates to our 2024 forecast for supply, some properties in really Southern California were delayed more than we thought. And it's about 2,700 units effectively were pushed into next year. And in Seattle, some of our delay adjustments were too hard, and they're delivering this year. So we pushed up some of the Seattle supply by about 2,000. So there's net a small reduction to our supply for multi-family this year. And then as we look to next year, we think Southern California will be slightly higher because of the delays that occurred this year. Northern California will be pretty neutral to this year. San Jose up slightly, but offset by lower supply in Oakland. And then Seattle pretty neutral. So overall, it's going to be up a little bit. Our forecast right now calls for supply to be very muted at 50 basis points of total stock, similar to this year. No material change. Great. I'm curious, how does the delinquency issues in your portfolio compare to the broader market? To what degree could delinquencies in the rest of the market still create some overhang in terms of competition for newly listed units? Yeah, that's a good question. We have very little visibility when it comes to the broader market. The one thing that we can tell is that when the entire state of California was going through the delinquency process, the courts had a huge backlog, and it took about 12 months to process it. Now it's down to less than six months. That's been a direct correlation to our ability to recover delinquent units and the related improvement in that area. So as we see this improvement continues, and as Barb mentioned, it could be lumpy, but if you look at it over blocks of time, say a three-month period, it has continued pretty steadily. It would be surprising for that delinquency to increase suddenly and extremely. Obviously, the foreclosure-processing time is key. And so as long as that holds steady, then we should be in good shape. Great. Thank you. Thank you. As a reminder, please press star one to ask a question at this time. Our next question comes from the line of Wes Golladay with Baird. Please proceed with your question. Hello, everyone. Just want to talk about the developer environment right now on the West Coast. It's been a very tough cycle. Are you seeing any developers exit the market permanently? Yeah. I think there was news actually just last week of an Atlanta-based developer that decided to pull out of the West Coast. And given this is not a huge surprise to us, given what we've long said is a very challenging environment to develop in. So we're aware of it. And to be honest, we're not that concerned. Fewer developers means less competitive product in the near future and should create additional opportunities for Essex. Yeah, that's where I was kind of going with. I mean, I think you mentioned you're targeting 100 basis points spread versus acquisitions. And so I figured you might be able to develop more countercyclical at this time. Can you comment on where your spread would be today, how much further it has to go? Yeah. Well, that estimate is current today. Again, it's all dependent on our fundamental outlook for the specific sub-market where we can acquire land at a reasonable basis that can really drive the numbers. And then we're tracking hard costs very closely. So I'd say we're closer today than we've been in many years. We haven't started new development in almost 4 years. And so we've been really disciplined. We know it's very challenging to effectively develop and create value for shareholders through that process. So we're going to continue to be very disciplined. But the company has a long history of stepping in at bottoms of the cycle. And we are cautiously optimistic that we're going to be able to rebuild that pipeline in the near future. That's all for me. Thank you. Thank you. Our next question comes from the line of Ami Probandt with UBS. Please proceed with your question. Hi. Thanks. Bad debt ticked up a bit in Southern California, excluding L.A. County. So I'm wondering if that's lumpiness or if you're seeing residents potentially having difficulty paying or potentially signs of a resurgence in bad actors. Yeah, this is Barb. The numbers do bounce around month to month. That's why we tend not to like to publish the monthly numbers because there is noise every month. So we're not overly concerned about it. Nothing to flag there. It's just monthly noise. Great. Thanks for confirming. And then in terms of move-outs, have there been any notable changes recently in reasons for move-out? This is Angela here. Our reasons to move out have remained steady. It's mostly job changes or change in households. That's remained relatively consistent. Great. Thank you. Thank you. There are no further questions at this time. I'd like to turn the call back over to Angela for closing remarks. Well, thank you all for joining the Essex call and for all your questions. We look forward to seeing all of you real soon. This concludes today's teleconference. You may disconnect your lines at this time. Goodbye. Thank you for your participation.