Equity Residential (EQR) Q1 2020 Earnings Call Transcript

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Equity Residential (EQR 0.40%)
Q1 2020 Earnings Call
May 6, 2020, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the EQR First Quarter 2020 Earnings Conference Call and Webcast. Today's conference is being recorded.

At this time, I'd now like to turn the conference over to Mr. Marty McKenna. Please go ahead, sir.

Mr. Marty McKenna -- Investor Relations

Thank you, operator. Good morning, and thanks for joining us to discuss Equity Residential's First Quarter 2020 Results. Our featured speakers today are Mark Parrell, our President and CEO; Michael Manelis, our Chief Operating Officer; and Bob Garechana, our Chief Financial Officer.

Please be advised that certain matters discussed during this conference call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or supplement these statements that become untrue because of subsequent events.

Now I'll turn it over to Mark Parrell.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Good morning, and thank you all for joining us today. I want to begin today by giving a big thank you to my Equity Residential colleagues for their dedication to serving our 150,000 residents during this difficult time. Whether working on-site performing essential maintenance or concierge duties, whether you're engaging remotely with prospects using our new touchless leasing process, or whether you are working from home in the many corporate roles that make Equity Residential hum, you are keeping our company rolling. So thank you very much Equity Nation for your amazing work.

Now turning to our business. The best way I can describe it in the last seven weeks is resilient. In April, we collected in our residential business about 97% of the cash that we would usually collect. While no part of our country's economy will be immune from the coming recession, we feel that our portfolio of properties, populated with residents having average annual household incomes of $164,000 and often employed in technology and other knowledge industries, will fare relatively well. Our operations team has also shown resiliency. When the pandemic hit in full force in mid-March, Michael Manelis and his team quickly pivoted, and over a few week period, adjusted our leasing and service operations dramatically.

On the leasing side, Michael and his team were able to quickly create a touchless process that made our customers comfortable to lease. And on the service side, we focused on essential maintenance tasks and cleanliness, which helped our existing residents feel safe and comfortable living with us through this pandemic. Michael will give you more details about all of this in a minute. When the lockdowns were initially announced, we saw our leasing activity decline significantly, but demand has since picked up, as we noted in the release. We see our recent pickup in demand as a further indication that our properties and markets will remain attractive places to live for our target demographic. All in all, we think our people and our properties have been resilient, with the capital R going through this crisis.

We do fully acknowledge that challenging days remain ahead and are taking steps to weather the storm and prepare for the post-pandemic world. We have further fortified our already strong balance sheet, as Bob Garechana will describe in a moment. We are also preparing in earnest for our properties to operate with fuller staffing as lockdowns across the country are relaxed. We will keep in mind the safety of our employees and residents as we reengineer our business. Equity Residential has historically performed well in these downturns, and we would expect this to be no exception. We are optimistic that we will perform well operationally given these circumstances and that we will find opportunities to add high-quality assets for our platform as the economy works its way through this recession.

Finally, we did withdraw guidance in the release. We are unable to estimate with precision the continuing impact of the pandemic and the timing and character of the reopening process on our business. It makes it impossible for us to give you the high-quality estimates of where our business might go in the near-term that you're used to receiving. We did provide a significant amount of information on April's preliminary results and hope that is helpful.

Now I'll turn the call over to Michael.

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Thanks, Mark. So today, I'm going to provide a quick recap of operations over the past 45 days. Prior to the COVID-19 pandemic, we were off to a very good start for the year. Our occupancy was ahead of expectations, and we were well positioned for the primary leasing season. And then COVID-19 hit, causing us to adjust our operations to this new unprecedented challenge.

Let me start by acknowledging the dedication and hard work of our employees during these unprecedented times. They inspire me with their ability to quickly adjust operations while keeping an intense focus on our customers, properties, themselves and their families. Shelter-in-place was mandated by governors in our markets in early to mid-March. For us, this means that our more than 150,000 residents began staying at home 24 hours a day, seven days a week. In response to shelter-in-place, we made some key changes to our operations. We closed our common area amenities, we increased cleaning frequency, we quickly modified our website and our artificial intelligent E-Lead responses to pivot the entire sales process to virtual leasing. Capturing video content and conducting the sales process via video conversations allowed the business to continue uninterrupted. This process would have normally taken us several months to accomplish. We also locked the office doors to encourage social distancing but kept the business running as we implemented shift rotations of the staff to reduce the number of employees coming to the property.

When we look back to March 15, we saw our traffic and applications drop 50% compared to the same period in 2019. That being said, we continued to receive over 375 new applications each week through the end of March, which we see as a validation of the new leasing process. With reduced traffic coming through the front door, our focus has been on keeping current residents in place. We are currently offering residents the option to renew without increase. Overall, retention in April and May has improved as we are now renewing in the mid- to upper 60% range, which is a 300 basis point improvement from last April and an almost 800 basis point improvement from last May. New York is having the strongest renewal percents of nearly 70% for March, April and May.

Despite this good retention, our overall occupancy since March 31 has declined by 130 basis points. We expect the occupancy impact to be the most pronounced in the second quarter, setting a new base from which we hope it will improve as shelter-in-place orders are lifted.

Let me share some color on the performance in April. At the beginning of April, we began to notice an improvement in demand, with both traffic and leasing activity rebounding by almost 30% and actually now trending on par with last year. In fact, we had over 900 applications last week, which is a significant improvement compared to the 375 that we were averaging in late March and very encouraging for us. Given the activity in the last 45 days, we would like to see that volume grow even more to help offset the lower demand that we experienced in March and to match the increased volume of applications that we usually get in May. What is clear is that our high-quality, well-located portfolio continues to attract future residents. While the pandemic is certainly a deterrent, people have life reasons that require them to move like changes in jobs or partners.

On Page 13, we reported the first quarter and included April monthly pricing statistic by market. I would remind everybody this is only one month of data, and that longer periods of time are usually required to show definitive trends. Mark mentioned the strength and quality of our resident base. This is evident by the fact that we received a very strong 97% of the cash collections in April relative to our March collections. This resilience delivered 5.4% delinquency, which is quite good given these unprecedented circumstances. Notably, Seattle and Denver were our markets with the lowest delinquency at below 3% and Los Angeles was the laggard close to 8%. The rest of our markets were centered around the average.

We have also taken a cut at looking at property type. And in most of our markets, our garden-style or more suburban assets have experienced higher delinquency than our mid-rise, high-rise more urban locations. As we move through the continued disruptions created by COVID-19, we remain strategic in our pricing efforts. Sitting here today, our base rents are down 4% compared to the same week last year.

Let me give you some color on notable markets. Overall, our strongest market is Seattle, which has shown great resilience, with limited delinquency and the best overall revenue growth performance in the portfolio. New York is a bit of a mixed story. On one hand, it has the strongest retention of any market, but it has also not shown the signs of recovery that other markets have with traffic and applications. Long term, we expect the New York market to benefit from low new supply and technology firms expanding their presence in the city. We are hoping leasing activity will improve as the hard-hit New York area gets through the worst of the pandemic.

Finally, we started 2020 anticipating that Los Angeles would have a very challenging year given the new supply pressure. COVID will definitely add to this. Despite recent improvements in applications, we expect this market to remain challenged with meaningful pricing pressure that will continue as supply is delivered.

So where do we go from here? Well, we're now in the early stages of preparing our properties for the new normal. We expect things to shift over time. Right now, the new normal is going to be focused on increased deep cleaning standards at the properties; adjustments to the layout of common areas, including fitness and lounges to accommodate social distancing; balancing the capabilities of virtual leasing with the need to engage with our customers; and ultimately, staggering work shifts to ensure that we limit the number of employees on-site at any given time. These are challenging times, but our business is resilient, and our teams are positioned to deliver.

Thank you. At this time, I'll turn the call over to Bob.

Robert A. Garechana -- Executive Vice President and Chief Financial Officer

Thanks, Michael. This morning, I'll highlight our enhanced disclosure from last night's release, give a brief update on nonresidential operations and end with our incredibly well-positioned balance sheet.

Starting with our new disclosures. We've modified our disclosures to help better present our business and where it stands today. We do so by providing April operational and collection statistics, by breaking out our same-store performance between residential and nonresidential, a practice that we would expect to continue as the performance from our main residential business, which makes up approximately 96% of total revenues, is likely to diverge meaningfully in the upcoming quarters for our much smaller nonresidential business. This includes modifying the schedules on Pages 10 through 12 of the release. And finally, by providing an update on liquidity and balance sheet information. In order to accomplish this, we've defined a number of key terms in the back of the release. We hope that these definitions will provide specificity and clarity to our disclosure.

Part of the new disclosure includes a breakout of nonresidential operations for our same-store portfolio. This is a modest component of our business at 4% of total revenues and consists mostly of ground floor retail and public nonresident parking at our well-located apartment communities. Ground floor retail makes up about 2/3 of this 4%, with public nonresident parking making up the rest. As you would suspect, a good portion of the retail tenants that rent our space have been significantly impacted by shelter-in-place orders. This is evidenced by the 58% April collection rate for all retail that we disclosed, which, while certainly below what we would have hoped, may be higher than many other retail landlords. The drugstores, bank branches and national chains that occupy a good portion of these spaces have, for the most part, continued to pay rent, while local small business owners have struggled.

With nonresident parking, we've seen an approximately 30% decline in parking volume for April, given the lack of public events and increased work-from-home arrangements. We suspect that this may recover as shelter-at-home orders are eventually lifted.

Finally, a few highlights on our balance sheet. We ended the first quarter with an incredibly strong net debt to normalized EBITDA of 4.9 times and nearly $1.8 billion in liquidity under our revolving credit facility. Subsequent to quarter end, we improved this already strong position by closing on a very attractively priced 2.6% or $195 million 10-year GSE loan and by closing on the sale of an asset in the San Francisco Bay Area. With these steps, we sit here today with over 84% of our total NOI unencumbered, about $150 million in commercial paper outstanding and readily available liquidity of over $2.2 billion under our revolving credit facility, which does not mature until 2024. This liquidity is more than sufficient to address our modest level of anticipated development spend, minimal debt maturities in 2020 and to address our next significant debt maturity, which isn't until December of 2021. Our balance sheet is in excellent condition to weather the storm and take advantage of opportunities should they present themselves.

With that, I'd like to turn it back over to the operator.

Questions and Answers:

Operator

[Operator Instructions] We'll start with Nick Joseph from Citi. Please go ahead.

Nicholas Gregory Joseph -- Citigroup Inc, -- Analyst

Thank you.I hope you guys are doing well. Just first on May rent collections, I recognize we're still very early in the month, but I'm wondering how collections have been thus far? And maybe you can tie it to where you were in March or this time last year.

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

So this is Michael. I guess I would just say, so first and foremost, yes, you're right. This is very early in the month. But right now, looking at kind of how we closed out yesterday, we are identical, like right on par to the way collections kind of played out through the month of April.

Nicholas Gregory Joseph -- Citigroup Inc, -- Analyst

And if you think about the delinquency moving up at the end of April, and I recognize there's always some level of delinquency, it was helpful to put in the March number two. But how do you think about the ability to collect on that rent? And then how are you working with the residents to get repaid?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Yes. So maybe I'll start, and then Bob can kind of fill in. So first and foremost, I mean, I think you can see from the release, we're dealing with about $11 million in total delinquency, and that was above the $5.4 million that we had in the previous month. So the process that we're going through right now is we're working through conversations with all of these residents, with both kind of an empathetic mindset as well as an obligation kind of reminder mindset. And that's a tough balance that our teams are doing, but we're setting up various payment plans in places, and we're just documenting kind of the financial hardships that many of our residents have experienced from this. And we'll be navigating and working through those conversations through the month of May, just like we did in the month of April.

Nicholas Gregory Joseph -- Citigroup Inc, -- Analyst

But how much of that is like building in? And maybe just to frame, it sounds like the 260 basis points from March was totally in line with the historical nature of where you are on a monthly basis in terms of collections, which obviously accelerated in April given the hardships that a lot of individuals are going through. Is there anything in that increased delinquency bucket that is either geography-based, asset type-based? Is there any color that you can give in terms of that amount? And have you already entered into any sort of deferrals on that amount or outside of the collections that you've had?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

So I think, first, in the prepared remarks, I kind of identified, right? Seattle and Denver were absolutely the lowest at 3% or below total delinquency. L.A. was the highest at 8%. As far as property types, we definitely saw kind of lower delinquency at the high-rise, kind of mid-rise product versus kind of the more suburban or garden-style. So I think right now, in regard to deferred rent, I mean, the nature of these conversations are all over the place. I mean these are very one-on-one conversations that we're having. But much of that delinquency or at least the incremental delinquency from hardships is set up in payment plans or set up into deferred rent situations. And I think the varying state of emergency orders that we have around the country are going to dictate when those payment plans are going to allow for payments to reoccur.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

And I just want to add, Nick, it's Mark. As you think about building delinquency going forward, you also have to think a little bit, we do have significant security deposits that we haven't applied in any of these analyses. So generally speaking, you take the security deposit when the resident moves out, but that's a matter of local law. So we do have a significant amount of security deposits against these obligations. Michael has entered into a bunch of payment plans that the company has, and there'll be more of those. So I don't disagree that the economy will get worse before it gets better. But I'd also say we do have these other offsets, both on the security deposit side and with these payment plans, and we'll just have to feel our way through it.

Nicholas Gregory Joseph -- Citigroup Inc, -- Analyst

Right. And your April, that with the April numbers that you're quoting, would you outside of that 5-point $11 million would you have already deferred a certain amount of your monthly rent that was already due? So effectively, there is more sort of delay in cash collections even outside of the $11 million?

Robert A. Garechana -- Executive Vice President and Chief Financial Officer

Yes. It's Bob. And I'll give you a little bit of color to that. So if you think about March and kind of the regular or the pre-COVID delinquency levels, it's very uncommon or would have been very uncommon to have any level of deferral of rental payments. Typically, you would have ended a month at 2% to 3% of delinquency and then through the regular process of having conversations and collecting that rent, etc, that would have diminished to the point in time where it converted to a financial statement impact, which would have been write-offs of bad debt, etc. And that number would have been something more like 50 basis points of, call it, total income. So very uncommon in this business to have a material amount of delinquency or payment plans, if you will. Obviously, the situation has changed modestly with the COVID-19 and pandemic implications.

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

And Nick, I want to answer just precisely, delinquency includes everything, including the payment plan. So that number is all-inclusive as it relates to the residential book. There isn't like, if it's a payment plan, it isn't suddenly undelinquent. It remains in our books to link. We just aren't pursuing the resident, we have a deal with them, but we don't we include that in our number.

Nicholas Gregory Joseph -- Citigroup Inc, -- Analyst

Perfect, thank you.

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Thank you.

Operator

We'll next go with Rob Stevenson from Janney. Please go ahead.

Robert Chapman Stevenson -- Janney Montgomery Scott -- Analyst

Can you guys talk about what level of extra operating expenses you're incurring from COVID? And how much of that has been offset by reduced hours for employees and other areas?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Sure. So maybe this is Michael. I'll start off. I guess I would tell you, to date, we probably have incurred about $0.5 million of expense specific to COVID, and that would include kind of not only the increased cleaning standards that are occurring at our properties, but also some of the personal protection equipment that we've been acquiring. And I think some of the offset has been, obviously, we're incurring less overtime expense on our payroll. We're experiencing less turnover expense. But then on the flip side, having all these residents living with us, we're also having some increased trash expense that's mitigating some of those offsets.

Robert Chapman Stevenson -- Janney Montgomery Scott -- Analyst

Okay. And if things begin to spool back up in some markets, how much of that do you expect of the expense side to be sticky? And how much of the offsets do you lose as the hours for employees tick back up and other things? I assume that the trash doesn't go down anytime soon, etc.

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Yes, so I mean, I think we're looking at kind of what it looks like to kind of reopen and what that new normal is going to look and feel like. I think it is clear to expect that we are going to be spending more money on cleaning standards and protocols at our properties. But I think that we're going to be balancing kind of that out, not only kind of with the labor and the overtime, but trying to figure out more things that we're going to get done in-house versus relying on contract labor.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

And I'll just add, I mean, if we're again, we did withdraw guidance. So I know you're trying to feel your way through that, so we'll give you a few other building blocks. Our general instinct here is that our expense numbers will be lower this year than we thought, not higher. So these cleanliness and other costs aren't 0, but they're not that significant. And the overtime, the less routine maintenance that's being done because things are being deferred, all of that is more material. And so over time, again, you could have certain events occur in markets, weather-related or otherwise. But absent that, our general sense is that the expenses will remain pretty tight and this is not going to blow a hole in the expense number for us.

Robert Chapman Stevenson -- Janney Montgomery Scott -- Analyst

Okay. And then on the capital side, I mean, how I assume that all the dispositions completed year-to-date were under contract before COVID hit. Can you just talk about I mean, if you wanted to sell assets today, is there enough demand in pricing to be able is that market back to being liquid or people taking a pause there? How are you guys thinking about potentially making acquisitions going forward and also redevelopment spend over the next quarter or 2?

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Yes. There isn't a lot going on right now. I mean, the last seven weeks with the pandemic, again, talking to the brokers, talking to potential sellers, there really isn't anything institutional grade in our markets that's priced and closed or is even very far along in that process. So I don't have any markers there. As you relate to EQR, I mean we're always out there. We have teams in our markets, and it's their job to always be looking at purchase opportunities and such. But right now, there's just not a lot going on.

Robert Chapman Stevenson -- Janney Montgomery Scott -- Analyst

And on redevelopment, are you going to be able to get the returns to warrant the spending in the near term? Or do you guys put a pause on that for now?

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Yes. Great question. We have a pause on it, but for a little different reason. Our residents don't really want contractors in the building, our contractors don't really want to go out right now with the shelter-in-place. So what you're going to see across our portfolio is a real slowdown in capital spending, including renovation. These projects that we've talked about on prior calls, we hope to begin those again. We'll be thoughtful about whether we can get the rents and all of that. But at this point, really, a lot of this capital spending depends on having people on-site. Those people aren't willing to come. And frankly, our residents are more comfortable with them not being there, so I think there's going to be a real slowdown there.

Robert Chapman Stevenson -- Janney Montgomery Scott -- Analyst

How significant have been any of the delays in the development pipeline for those few assets?

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Yes. That's a great question. It depends on where you are, so I'll start by saying that. So for example, in Boston, where we've got a tower we're building, the mayor closed down construction May 17 March 17, and it still hasn't reopened, and that's the sort of city of Boston Rule. But outside the City of Boston in some of the suburbs, construction continues. So it's really place by place across the country. And I'd say there's more significant delays in places like Boston and New York in terms of places we do business and to a good extent, Seattle. There's less of a delay in D.C. and Southern California, where things have just kind of continued. And the delays you'll see in those places are people working in shifts. General contractors saying, you need to split your shifts up, we need more physical distance between workers. And so you'll see things slow down a little bit because of that. For example, when you look at our numbers and Axio's numbers for supply, shifting like what happened between our opinion at the end of 2019 and at the end of the first quarter of 2020 as to what 2020 supply would be, and in markets like Boston and New York, those numbers, we think, are going to move down, supply being lower in 2020 by upwards of 20%. In places like Southern California, it's more nominal, and the same with D.C. So it's very much a local law thing.

Robert Chapman Stevenson -- Janney Montgomery Scott -- Analyst

Okay, thanks guys, I appreciate the time.

Operator

We'll next go with Nick Yulico from Scotiabank. Please go ahead.

Nicholas Philip Yulico -- Scotiabank -- Analyst

So appreciate the April data you gave on renewals, new leases in terms of rate growth. I guess from a timing standpoint, I want to be clear on this because I think it can be confusing at times. If you guys reported renewal rates achieved 2.8% in April, you're saying that I think you said that you're offering 0 renewals, flat renewals across the portfolio now. At what point in the year does that sort of 0% renewal rate growth get kind of fully factored into your rent roll?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Yes. So this is Michael. So I think first and foremost, you got to realize the April numbers that we reported on renewals, many of those offers were generated in January and February. So many of those leases were already executed well before kind of COVID-19 pandemic began. When we started issuing those offers in mid- to late March, those are really for kind of May, June and now even July offers that are out there. So I think what you could expect to see is May is going to trend down, probably be somewhere between 50 to 100 basis points positive. And then in June is when I would expect that you'll start to see us kind of deliver flat on the renewal increase percent.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

And just to add a little to that, we will start to adjust our renewal expectations, our asks, and we'll try and look at the market and see what we can get done. So as conditions start to normalize, we'll sort of feel our way through supply and demand conditions, and you will see us increase our renewal asks, I would expect mid- to later in the year. Right now, we're making decisions in some markets as far out as August. So we've got to call that Nick, at some point, and make a judgment.

Nicholas Philip Yulico -- Scotiabank -- Analyst

Okay. That's helpful. And I guess also on the new lease change side, if we look at the April numbers, I don't know if you have any data you could share on May so far. But I mean, April seems like it's unusual month, right? You didn't have as much traffic. So if we're looking at down almost 2% on new lease growth in April, I guess May shaping out to be a similar number, maybe you could just talk about how we should think about that new lease growth impact.

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Yes. Well, I think in the prepared remarks, I kind of stated that base rents or amenitized rents right now are down about 4% compared to the same week last year. So as you kind of just fast-forward your way through May, you could expect that, that new lease change could deteriorate down to that 4%. But again, the numbers that you're looking on that release, if you go to the footnote of that, you'll see that the 12 to 12 are the like term actually improves by about 110 basis points, so it's actually down negative 80 basis points. So I don't know exactly where we'll land because, again, this is kind of a lease-by-lease thing that you work through to see these stats, which is why I always caution everybody from looking at just one month. But I think I'd like to just understand where are my amenitized or asking rents relative to last year, and that's that kind of down 4% level.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

And I'm just going to take a chance, Nick, to add a little bit to that answer. And that's we feel and we gave some extra disclosure about, at the moment, demand conditions. We like, on the occupancy side, the momentum we feel like we will pick up. It's certain it's not certain. We have to see how these unwinds and these various stay-at-home orders go, but we would expect our occupancy to recover. And we feel good about that. And then you have, as Michael said, with the recession, and that will affect new lease and renewal and all the other quotes. But on the occupancy side, I think we've shown we're already having days where we have more move-ins than move-outs. We're already seeing all that occupancy stuff kind of steady. So as we see these markets open up, our hope is that, again, if it's done in an orderly fashion, and we don't slide back into a lockdown again, that we'll work our way out of occupancy, and then there'll be just the rate stuff to deal with. So I just want to emphasize, we feel pretty good about demand. Even in the pandemic, we're seeing good demand for our product. It's just a matter of figuring out the clearing price at the moment.

Nicholas Philip Yulico -- Scotiabank -- Analyst

Okay. Yes, that's helpful, Mark. I guess just one follow-up on occupancy. And I know you guys did talk about second quarter being the biggest occupancy impact in the portfolio. I mean in April versus March, you already lost 130 basis points of physical occupancy. I mean, is it is that kind of the brunt of it? Is it going to get worse than that? I mean any idea on occupancy for the second quarter right now?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Well and I guess the way to think about it is right now is that the fact that if our applications like they are right now are on par with last year, and my retention continues to improve, it's already improved, but if it continues to improve, I think you're going to see occupancy not only stabilize, but possibly start to improve. If our demand continues at this pace and our applications start running above last year with stronger retention, I think you're going to see this portfolio come back to that 96% level and start kind of optimizing revenue there. But I think it's still a little bit too early to understand because we really need some of these shelter in places to be lifted to truly understand the longer-term kind of demand or impact on traffic for us to kind of optimize revenue off of.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Yes. And everything Michael said absolutely agree with, but would add we don't really understand the impact of the recession. I mean it is true that 20-million-plus jobs are gone. It's hard for us to understand that impact on rate and on demand without all these stay-at-home orders being lifted. And once that happens, we'll have a better view for you. But certainly our hope that given the strong demand we've seen, while we're still in a shutdown that we have stemmed the sort of occupancy bleed for the most part. And then we're just going to have to all figure out what rate is in a recession like this.

Operator

We'll next go with Rich Hightower from Evercore. Please go ahead.

Richard Allen Hightower -- Evercore ISI -- Analyst

I hope all is well. So just a follow-up again on that occupancy question. Just to clarify, that 130 basis point month-over-month loss. Were those move-outs in April according to sort of normal lease expirations? Was it COVID-related? What was the sort of composition of the change exactly, if you don't mind adding a little more color there?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

No problem. So it's a little bit of both, right? So I think when March 15 kind of rolled around, everybody that was scheduled to move out for the balance of the year from or for the balance of the month based on lease expirations, moved out. People that were scheduled to move in, some of those folks canceled kind of those move-ins or deferred those move-ins. And then we had, call it, a couple hundred of our units, basically COVID-specific reasons leave early, early terminations. And that's really the impact on the occupancy.

Richard Allen Hightower -- Evercore ISI -- Analyst

Yes. Okay. That's helpful color. And then maybe, obviously, tough to predict, but as you apply the experience from maybe '08, '09 and the possibility of sort of the trade down or the doubling-up effect coming out of a recession, where do you guys how do you think about your portfolio, given its predominant Class A white-collar composition, how do you think about that dynamic with respect to your own portfolio going forward here?

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Yes. Rich, it's Mark. I'd start by saying the portfolio is similar, but not the same as '08 and '09. I mean, we have a higher end clientele, as you acknowledged in your question. I like the income levels. I like the kind of employment our residents have, doesn't mean they're immune to the recession that's coming, but I think they'll be less affected than some of the folks in hospitality and other industries got laid off very quickly and suffered, unfortunately, very quickly in this recession. So I guess we feel not I guess, we do feel much better about our resident base. We think they've both got skills that will mean they'll be more readily employable. I mean we worry, I think, a little bit about portfolios that depend on workers that have been laid off and how many of those workers are really getting those jobs back. In our portfolio, we just don't see that as much at this point as I mean, a few people won't lose their jobs in our resident base. But we think being tied to technology and some of these knowledge industry jobs is going to mean that our folks will have more employability, less layoffs coming through this recession.

Richard Allen Hightower -- Evercore ISI -- Analyst

Okay, I appreciate that.

Operator

We'll next go with John Pawlowski from Green Street Advisors. Please go ahead.

John Joseph Pawlowski -- Green Street Advisors -- Analyst

I just want to follow up with some of the comments in terms of the occupancy floor and application volume picking back up. I'm just trying to wrap my head around what's the more important leading indicator for what the spring and summer leasing season, is it applications currently being flat or traffic being down 20%? And Michael, what kind of weight do you put on traffic versus applications? Just trying to understand what's more important for us to focus on.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Well, so I think the improvement in traffic is really telling, right, compared to where we were even in the beginning of the month and where we are right now. And then our closing ratios is kind of giving us that sense of this market clearing price. And if I backed up all the way to March, I'll tell you I mean we're looking at how many eyeballs were hitting the website, what was that traffic count looking like, and we were closing 70% to 80% of everybody who expressed interest. So it was not a price issue back then. And right now, as you can see, OK, we have an opportunity to kind of make an impact with the traffic improvement that we're seeing, and we're going to continue to do what we're doing with promotion-based to go forward and try to recover some of what we gave back in the last 45 days. But I think it's really the improving trends is what you got to focus on because, again, the peak leasing season is not going to exist like the peak leasing season has in the past. It's probably going to shift forward a few months or it may just be kind of more dull throughout the whole thing. We don't know that yet. So what we're watching is week over week, are we seeing the improving traffic, are we seeing the improvement in apps like you would expect to see through a leasing season? And so far, that's what's been playing out for the last several weeks for us.

John Joseph Pawlowski -- Green Street Advisors -- Analyst

Okay. Bob, on the delinquency side, thanks for the comments on what's a typical delinquency rate and then as you work through the payments, what does it all come down to in terms of bad debt, 2% to 3% delinquency, eventually getting down to 50 bps. A market like L.A., where there's an 8% delinquency rate and tenants have a year to pay back rent. With 8% delinquency rate, what's a reasonable bad debt working assumption for rent you'll never see?

Robert A. Garechana -- Executive Vice President and Chief Financial Officer

I think that's a hard question to answer in all fairness. We haven't seen those kind of levels historically, right? So like I said, this business was very fortunate and has been very fortunate to see very little delinquency historically, so I'm not sure that, that ratio of that I talked about between 2% to 3% converting itself ultimately to 50 basis points necessarily holds true in the middle of a pandemic. I do think that all the positives that we have in our resident base that Mark outlined in terms of high-quality employment, etc, should help in the collections process, but hard to guess an answer to that one right now.

John Joseph Pawlowski -- Green Street Advisors -- Analyst

Okay. And is it fair to say you probably won't know until, I guess, 2021? And we won't see it in the financials until 2021, the net shortfall?

Robert A. Garechana -- Executive Vice President and Chief Financial Officer

Yes. I mean, my and that kind of gets toward the kind of bad debt expense policy or kind of what policy we have in terms of write-offs, etc. I think that's something that in the second quarter we will evaluate with a lot more detail about at what point do you reserve against some of these outstanding deferral programs and payment programs because certainly, there will be some subset of residents that are subject to a payment program that ultimately don't pay. That's something that we're currently evaluating and currently discussing as we have just simply a lack of historical payment history to understand because of the unprecedented nature. So I think you're correct in assuming that it'll that it's to be told as how it manifests itself in the financial statements.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

And again, just to add to that just a little bit, John, we have the security deposits that we need to apply against this amount. It's not appropriate to apply it against delinquency. Now you usually by law do it when a resident moves out or near that time or with the resident agreement. So we do have a little bit of an offset there that we need to figure out, but there'll certainly be more delinquency. Bob, I think maybe you give a little color on what was delinquency in the great financial crisis.

Robert A. Garechana -- Executive Vice President and Chief Financial Officer

Yes, delinquency, and I'm sorry, on bad debt expense. So I'll talk maybe to bad debt expense. To give you a frame of reference. So I mentioned earlier that in normal kind of environment, so not in the great financial crisis, we run about 50 basis points of total. In 2009, which would have been the worst year of the great financial crisis, that 50 basis points converted itself to slightly over 100 basis points.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Is that helpful, John, given you a little bit of a frame of reference?

John Joseph Pawlowski -- Green Street Advisors -- Analyst

Yes. No, definitely. I know it's a guessing game right now, but as more cities enact, longer payback periods in Seattle yesterday coming out and saying you have until 2021, I imagine more cities along the coast will do the same. I'm just trying to understand how those historical relationships change in this environment.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Thank you.

Operator

We'll next go with Wes Golladay from RBC Capital Markets. Please go ahead.

Wesley Keith Golladay -- RBC Capital Markets -- Analyst

I'm looking at that $11 million delinquency, is that mostly tied to hardship in your opinion? Or is it more people electing not to pay a rent in more tenant-friendly government, which is the coast on the last question?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

So just to make sure I understand your question, Wes, is it mostly people who have hardship issues that they can sort of document or is it folks that have just decided not to pay sort of the moral hazard issue? Is that the question?

Wesley Keith Golladay -- RBC Capital Markets -- Analyst

Dead on. Exactly.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Yes. I guess that's a little hard to tell for us. Not some of the residents haven't called us back, and we don't have insight into their thought process not paying us. But that's a very small number for us, given, again, the quality of the portfolio. We're talking about a pretty small number of accounts here. So I guess I'd say that most of the conversations that Michael has shared with me have been people saying, "Hey, I need another week or two" and then they paid. So that's been most of the conversations that we've had to date. I'd also point out that there are people that may benefit from the checks that they'll receive from the government, either through unemployment or through that federal supplementary payment. And I'm not sure how quickly all those are reaching people either, and that could be a benefit to us as well. So I don't we don't have a breakdown or anything. We've got a few people that have ghosted us, but that's a pretty small number. And really, it's most people have been talking to us, we've been working something out or again, it's not more payment plans, it's often just giving a couple of weeks not paying the rent. That's been a more predominant conversation.

Wesley Keith Golladay -- RBC Capital Markets -- Analyst

Okay. And I appreciate the holding rent renewals flat through the whole portfolio, but you did call out some of your markets are actually doing quite strong, Seattle, tech workers, in particular. I guess would you phase in renewals for different segments? Or is it going to just be a blanket without any special rules for the whole portfolio? And how are you approaching the I guess, the increases going forward?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Yes. So I think this is Michael again. So I think we're now looking at kind of months like August and September renewal offers. And I think each market always was done strategically with different kind of parameters being set for kind of how we would issue kind of renewal offers. So I would expect that there will be markets that will maintain kind of a no increase option for, and then there will be markets that we start going back to kind of tiering approaches and see kind of what those results are.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

And to add, it isn't just markets, we price by unit. So I mean, in 2015, when things were great in the industry and great for our company, we had unit types that there weren't increases that we could get on renewals. And when you had bad years like 2009, we had unit types that we did get increased on renewal. So it is a unit-by-unit thing. It is a market thing as it relates to maybe legal restrictions. But Michael and his team starting going forward are going to be looking at this saying, listen, these restrictions are removed, how do we now feel about supply and demand in the market, and how are we going to think about this, and that's kind of how we're expecting to play it.

Wesley Keith Golladay -- RBC Capital Markets -- Analyst

Okay. Let me one last one. I guess looking at your platform, probably a little different than many of your competitors in the market. So do you think you're taking share of new applicants with potential applications and the self-showing?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Well, I think our closing ratios tell us kind of whether or not we're kind of taking more market share. I mean, historically, we would run against what we used to call foot traffic, but that got a whole new definition now with virtual leasing, but people that express interest you historically would close somewhere in that 20% range for people that express interest take tours with you. And right now, that's kind of what we've been balancing off of. So when we're closing 30%, 35%, we're getting more than kind of the normal share of those applicants.

Operator

We'll next move with Jeff Spector from Bank of America. Please go ahead.

Jeffrey Alan Spector -- BofA Merrill Lynch -- Analyst

Just a couple of follow-ups and then just maybe one big-picture question. First, on the on occupancy in 2Q. I believe you mentioned you do expect 2Q to be the worst. I guess it's just thinking about the applicants and as you said, figuring out the right rent levels here. Is it just it's going to be hard to convert those applicants into occupancy during 2Q. Is that your expectations?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

No. I think I would say the impact from what we experienced at the tail end of March and April is really what brought kind of this occupancy down. Right now, even when you look at, call it, the 900 applications that we had last week, call it, 60-plus percent of them are moving in before May 22, right? So that's going to help kind of balance. So in the world of yield management, I mean, you're optimizing revenue, you're trading off occupancy and rate and you're balancing this, and that demand part of the equation is going to say whether or not you're going to optimize revenue at 95%, 95.5%. Or if you're going to kind of continue on this path, maybe you'll bounce back and start optimizing back at 96%. But I still think it's too early to understand where that sweet spot is for these portfolios.

Jeffrey Alan Spector -- BofA Merrill Lynch -- Analyst

Okay. And then I was surprised to hear that garden-style delinquencies were higher than mid- to high-rise. I believe you made that comment. Can you provide a little bit more color there?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Yes, sure. So it was almost in every single market that we looked at. We can see that relationship. And some of this just has to do with where our kind of rent to income ratios. So it wasn't surprising, right? When you think about Seattle being the lowest, while Seattle also has our lowest rent as a percent of income and when you go to L.A., it was the highest percent of income, and those are markets like when you start looking at that, where we absolutely had more garden-style property versus the high-rise property, but that relationship held true across all of our markets.

Jeffrey Alan Spector -- BofA Merrill Lynch -- Analyst

Okay. And then in terms of amenities, I thought it's encouraging to hear that you are working on ways to open up the gyms or more open space. And just thinking about working from home, is it too early to incorporate changes into buildings to maybe foster more a working from home environment within the apartment building? Like can you set up areas that comply with social distancing to offer folks to work, let's say, from a lounge within the building? Or is that just is it too soon to tell?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

So I guess I will just start by saying, first, we have a whole group of individuals that are focused on what does it look like to be operating in the new normal, right? So that starts with looking at all of our existing common area space and understanding how are we going to guarantee the safety and well-being of our employees as well as our residents once these spaces start to open up and operate. And I think that there's occupancy limits, there's spacing in fitness center, there's a lot of complexity to this, and each one of our jurisdictions is going to have different kind of rules that we'll be applying to our operations as we think about opening up. But longer term, as we think about the fact that residents may be working from home more, it does create an opportunity for us to look at our common area spaces and look at any of our available spaces that we may have in our properties and think about how do we make some adjustments to that to allow them the opportunity to work from home as well as adhere to social distancing. So I think you'll see us start to get creative with how we're using spaces going forward to allow for more of that to occur.

Jeffrey Alan Spector -- BofA Merrill Lynch -- Analyst

And then my last question, just a big picture for Mark. I believe, Mark, you mentioned there might be opportunities. Is it too soon to share with us your thoughts on just kind of your the EQR strategy going forward in the New York, New Jersey area? And I admit, I am a bit more worried about New York. I heard some optimism there that tech will still come to New York, and hopefully, they still do. But can you share with us some big picture thoughts on your go-forward strategy when you think about opportunities?

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Great. So there's kind of two questions in that. Part of it I read is just when might we get active on the investment side and another is sort of a New York question and when that city might function a little better. And I guess I would start on the investment side by saying, as I said in my earlier remarks, there's just not a lot going on right now. We're seven weeks in. Sellers still remember the price they would have gotten in early March, and buyers think about the price they dream of getting right now. And it's going to take a little while for that all to sort itself out. Some of the big deals that you might remember we did, we were quite active coming out of the great financial crisis. So purchasing the big portfolio in New York and development land and broken condos, both on the East Coast and the West Coast. Those were all done 12 to 18 months after the beginning of the great financial crisis. So those were fourth quarter 2009 deals at the beginning and then into 2010. If you think about that crisis, the GFC really being at mid-2008, third quarter 2008 event. So I'd tell you, it's going to be a little while before we really see much to act on. So I'd start with that. And the way we're sort of thinking about opportunity is trying to think about replacement cost a little bit, trying to think a little bit about what long-term growth will be in this market, did anything change that matters. And we think and this sort of gets into your New York question a little bit. We think these big cities, and I'll focus a little on New York, are really quite resilient. I mean New York's been through, as you're quite aware, riots, it's been through wars, it's been through epidemics before. It's been through 9/11. And after 9/11, there's a lot of comment that New York wouldn't come back and people would decamp from New York in size. And yet, New York had a terrific urbanization trend over the last 20 years, and the population in New York City was higher in 2016 than it was in 2001. And so I think every morning, millions of owners of businesses throughout the country are waking up trying to figure out how to run their restaurant, their cultural amenities, their nonprofit, their restaurant, whatever, and they're going to figure that out over time. And we're going to have new rules about distancing and cleanliness and then over time, hopefully, there's some cure to this, and we don't have this top mind. But I think these cities are going to adjust like they always have, and I think you could expect that we'll still be focused in our investment efforts on these large cities and these dense suburban areas for our kind of our apartment investment.

Operator

We'll next go with Hardik Goel from Zelman & Associates. Please go ahead.

Hardik Goel -- Zelman & Associates -- Analyst

As it turns to transaction market, are you seeing a difference in investor sentiment and the gateway cities versus somewhere like Denver? And what is your thought on where cap rates might eventually settle out when buyers and sellers meet in the middle?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Great. So I'm going to repeat that back to make sure I understood it. You had a question about where cap rates might end up through this and then investor interest in some of these less-dense markets like Denver. The first that Denver question or the investor interest question, as we look at that, it's just, again, a little early for us to sort that out. I think some types of trades, like, for example, the value-add trade may be less attractive. I think you're going to have a hard time doing your renovations, you're going to hard time jacking up rents, all of those things. And a lot of the value-add deals that were done just before the pandemic are likely to perform pretty poorly. So my sense is that you're going to see investor interest get sorted out. And I think, and we've talked about this in the last call, cap rates had really compressed between all these markets. And I think as you go through this recession and you get past some of this government stimulus, you're going to see people with better resident bases, like ours, perform better, and you're going to see those cap rates on those properties be more durable than cap rates that had sort of come down on B and C quality stuff and in lesser markets and have lesser employment bases than the ones we're in. So that is our sense of things.

In terms of where cap rates end up, part of this is, of course, a function of interest rates, and rates are incredibly low. But there's also a limiter because of replacement costs. So I think there's a bunch of things going on with cap rates. It wouldn't surprise me if cap rates in two or three years weren't lower than they were before the pandemic because of an interaction of interest rates. My sense that the apartment sector and our company, in particular, will perform better than most other real estate, and that there'll be more capital attracted to the area. And then you just got to think about replacement cost because you'd be careful about paying big premiums to replacement cost no matter what interest rates are when you buy an asset. So I guess I look through it and say, it wouldn't surprise me if cap rates were lower in a few years than what they are now for those reasons.

Hardik Goel -- Zelman & Associates -- Analyst

And just as a quick follow-up, could you split out what delinquency is for just garden-style properties versus, let's say, your high-rise?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Yes. I'm not sure we're going to give quite that level of detail. I think that's just probably more than we have at our fingertips.

Hardik Goel -- Zelman & Associates -- Analyst

Got it, thanks. That's all from me.

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Thank you.

Operator

We'll next go with Rich Hill from Morgan Stanley. Please go ahead.

Richard Hill -- Morgan Stanley -- Analyst

Just two quick follow-up questions. When we think about the 97% of rents that you collected versus March, and I'm sorry if you mentioned this already, but did that does that 97% include the decline in occupancies that you noted? Or should we think about the decline in occupancies on top of the 97% of rents you collected?

Robert A. Garechana -- Executive Vice President and Chief Financial Officer

So let me make sure I understand the question and kind of frame a reference. And I'm going to rephrase it, and hopefully, this answers your question. It's Bob here, Rich. So the 97% is measured off of March rental payments. In March, we had higher occupancy, right? So than we did in April. So if anything, it probably understates that 97% probably understates what the collection percentage is as a whole. Does that answer your question?

Richard Hill -- Morgan Stanley -- Analyst

Yes, I think that's exactly what I was trying to get at. So said another way, if your occupancy went down 1.5 percentage points, that would be included in the percent of rent that you did not collect compared to the month prior?

Robert A. Garechana -- Executive Vice President and Chief Financial Officer

That is correct.

Richard Hill -- Morgan Stanley -- Analyst

Okay. That's very helpful. And then one bigger picture question. I've heard a lot of conversations about the GSE. But I'm curious, why isn't post 9/11 a better proxy for what this recession might look like? Obviously, a big shock to the system, payrolls went down, there were some job losses, maybe job losses focused on lower income earners. How do you guys think about that? I recognize not everyone's been in the industry since 9/11, but you guys have a long institutional memory. So how do you think about this versus 9/11?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Well, most of us in this room were. So we remember that unfortunate event distinctly. First off, I'd say our portfolio compared to the '08 great financial crisis is very similar. When you go all the way back to 2001, it's a very different portfolio. So when you think about what lessons we would pull out of that, when that happened, of course, it also created this which led to the next problem, created a big boom in purchasing single-family homes. And so our markets like Phoenix, where we owned at that point, really suffered. I don't know how to think about that. Again, rates are really low, but mortgage capital is not that loose. So I appreciate that there are similarities, both to the GFC and to the 9/11 because 9/11 was much more that existential shock like COVID is, but our portfolio is so different. It's hard for me to draw some lessons to share with you.

Operator

We'll next go with John Kim from BMO Capital Markets. Please go ahead.

Piljung Kim -- BMO Capital Markets -- Analys

I was wondering if you could quantify what you think the impact is on of rent deferrals and reduced fees to same-store revenue.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Yes. So the rent deferral question, I guess, the long-term impact will depend on kind of what bad debt turns out to be, John, right? So we're not providing guidance, but that will factor in. Deferral, you would recognize your revenue in the normal course. The question is what bad debt ends up being on that piece. Certainly, we will be impacted by fee revenue or lack of fee revenue potentially, right, with lower applications and some of that in our markets. But it's hard it's not a meaningful part of the overall top line. So it's not a huge impact.

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

And I would say even the fact that we've been waiving late fees, that's a short-term kind of impact and even those dollars are not that significant.

Robert A. Garechana -- Executive Vice President and Chief Financial Officer

Yes.

Piljung Kim -- BMO Capital Markets -- Analys

But if a tenant is on a payment plan or deferred rent, it would not impact FFO and it also not impact same-store revenue. Is that correct?

Robert A. Garechana -- Executive Vice President and Chief Financial Officer

So if a resident is on a deferred or a tenant on the nonresidential side is on a deferral program, you're still going to recognize the revenue unless you believe the revenue is not collectible, at which point you're going to reserve against the revenue or take a bad debt expense against that revenue line item. So it all sheer nature of having deferral doesn't necessarily mean that you're not going to recognize the revenue. It's all about collectability.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

That delinquency is just to tell you where we've charged revenue but haven't received cash. So over time, to be very specific, and this will be a discussion with our auditors and the Audit Committee, and we'll think about this because, again, we're fortunate not to be that familiar with delinquency, all right? So we'll get into June and July, and we'll look at these folks, and we'll see if they're performing per the payment plans, if they're still in the units, and we'll write things off, and that will run through revenue. That's where bad debt runs, is through revenue. And then there'll be a number of people that will effectively will have this receivable outstanding. And we'll be getting paid on it, and we'll be hopefully just as transparent as we are right now with you about all those numbers, whether we write-off, whether it remains in account receivable, and what's the status of the payments we've received on delinquent accounts.

Piljung Kim -- BMO Capital Markets -- Analys

Okay. That makes sense. And then secondly, I was wondering if you offer to your tenants payment of rents with credit cards? And have you seen any trends on that in the last couple of months?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Yes. So we did well, first of all, we've always had the option to pay rent with a credit card, it's just that there were fees associated with that processing fees. So through the process of our conversations, we are allowing residents to pay their delinquent balance with a credit card, and we would absorb the processing fee. It just is not a material number at all right now. The fees are well below even $100,000, I mean, kind of level.

Robert A. Garechana -- Executive Vice President and Chief Financial Officer

Yes, and that's really encouraging because that shows you that our residents aren't living hand to mouth and having to put a month's credit card on their credit card a rental payment. So we think that's encouraging from our point of view.

Operator

We'll next go with Alexander Goldfarb from Piper Sandler. Please go ahead.

Alexander David Goldfarb -- Piper Sandler & Co. -- Analyst

So two questions. First, can you just go back through the delinquency? So the 5.5% delinquents, number of municipalities, New York, California, etc, have the eviction moratoriums? So it would seem like tenants really don't have any incentive to go on a payment plan for a good period of time as these things are pushed out. But Mark, you said that a lot of people are coming to you voluntarily and not many have been ghosting. So how do we reconcile the two that a lot of your tenants seem to be coming to you and yet the delinquencies are still high, are people playing the eviction thing and they just realize that they can skip a few months rent and pay it next year or maybe never pay it? Or how should we think about this?

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Yes. Alex, it's Mark. I guess I'm going to take issue with the idea that our delinquency is high. I mean again, you're talking about a company with $220-plus million of monthly residential revenue that in what is the worst panic of our lifetimes, maybe as $5 million of rent we're chasing around and making progress on. So I don't feel like this is a big number of people. I'm more concerned, frankly, about the recession than I am about delinquency in our portfolio. Listen, we've got high-level credit tenants. These obligations aren't going away. We're not going anywhere. So these are folks that value their credit that know they're receiving a great service. I mean I'm lucky I get to read all the feedback that our residents write on our teams on site. And that feedback, Alex, has been really good. They really appreciate that our people, our frontline workers at EQR are keeping the property clean, are maintaining all the essential parts of the building so they can shelter-in-place. They don't look at this rent as something they need to avoid. They don't we're not ripping them off. We're taking care of them in a crisis. So I guess, I'd say I think our resident mindset, at least as far as I can tell, is very different than the sort of resident mindset you're describing. Are there a few people that are taking advantage of the system and creating this moral hazard? Absolutely. And that's just playing on. I mean we're turning around and paying their rent in property taxes to these hard press municipalities, to our hard-working frontline workers. I mean that's just wrong, but I'll tell you, we're not going to stop being persistent pursuing them. We'll follow the law, but they owe the rent. And sooner or later, there will be a discussion about that. So I guess I'd put it to you that way.

Alexander David Goldfarb -- Piper Sandler & Co. -- Analyst

Okay. No, listen, that's Mark, that's helpful. And then second question is, just in New York, specifically, obviously, a lot of us are impacted, whether we live in the city or outside and commute. But from what you are hearing from your property from the managers there, are you hearing about what are they saying their residents are looking to do? Are a number looking to leave, are a number looking to move in? Because you say you keep your buildings better maintained than probably a number of your New York neighbors. So what is the sort of mood and expectation for New York this summer through the summer leasing season?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Well, I guess I would just start by saying New York, one, it's always had the strongest retention in the portfolio, but it absolutely is seeing an improved retention with renewals at that 70% level. We've never experienced that in the city. So a lot of our residents are staying put. And it's not like they're just staying for a month or two months, they're renewing at those 12-month terms. As far as the front door, that's a really tough thing to answer right now because it's not rebounding yet like the other markets have, which understandably, it's the hardest hit from the COVID. So I think we need to see a little bit of the public health crisis kind of soften or dampen a little bit in New York to get a feel as to what the new folks coming in are saying and what they're looking for and everything else like that. But I think the retention side of it, short term, is a positive for us.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

The other thing, Alex, we've been wondering about, and we don't know. As Michael said, the biggest question mark is just when do the stay at home orders get lifted? And when do people feel comfortable getting out there and looking for apartments and doing virtual tours. I mean there's going to be more distancing, but are they going to feel comfortable doing a self-guided tour in our property on their own, but they're able to see the site. Those are more efficient. Those are good marketing techniques. That will improve closing. So we're trying to balance all that. We've also done some extensions of people into the fall. Those people probably want to go somewhere, and it's probably true that there's other people and other apartment owners' portfolios. So we wonder about whether the lease this isn't a leasing season different than any other, where it might go might be as high a peak, but kind of go a little bit longer into the shoulder season a bit. But that's a little speculation on our part we're trying to sort out. Because again, we and no one else has been through this before.

Alexander David Goldfarb -- Piper Sandler & Co. -- Analyst

And hopefully, we don't go through it for another 100 years.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Thanks. Stay well.

Operator

We'll next go with Rick Skidmore from Goldman Sachs. Please go ahead.

Richard Wynn Skidmore -- Goldman Sachs -- Analyst

Just one quick question. As you think about occupancy and the trade-off of kind of grow occupancy, how do you think about tenant credit quality or the various tenants that you're looking at? And are you able to perhaps high grade? Or do you move perhaps down the credit quality spectrum as you look to build occupancy?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Yes. So right now, I will tell you, we're not changing our models, our criteria for underwriting residents. I mean we have a strong resident base, and I think that's proven some of the benefits out right now. And I think we're going to continue down that path. Obviously, if the demand profiles totally change through the summer and all that, we can revisit that and pull some levers and make some changes. But at this point, we don't expect to do that.

Operator

We'll next go with John Guinee from Stifel. Please go ahead.

John William Guinee -- Stifel, Nicolaus -- Analyst

John Guinee here. Question first, Mark, nice really nice job today. Give me a little more detail, what does ghosted us exactly mean?

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Thanks for that comment, and I'm going to hand it over to Michael because we've used that term, he and I between us, and maybe that needs more definition.

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Yes. I think just to give some color to that. Obviously, our on-sites, they're working really hard. And I think I said this before, this is difficult, right, because it's heavy lifting to go after some of these delinquent balances because you have to have the ear, you have to have the tone of empathy, but you also have to reinforce the obligations that sit with this stuff. So we have outreach programs, right, for folks that we haven't heard from. We're trying to do well-being checks on many of our residents that we haven't heard from as well. And the term ghosting is we've left some messages, we've sent some emails, and we've gotten 0 response back from those folks. And again, I think Mark alluded to it, it's a small subset of this group that we're dealing with. But eventually, we have to have some conversations with these folks.

John William Guinee -- Stifel, Nicolaus -- Analyst

Okay. So it doesn't mean they moved out in the dark of night and took half their furniture with them or maybe not? It just means they're going silent on you?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Gone silent. And then some of the markets, we're putting some notices on the door to make sure because we will enter to make sure that it hasn't been vacated on us, and that is part of a process, but that is one of the things that we will be doing.

John William Guinee -- Stifel, Nicolaus -- Analyst

Okay. And then second, you obviously have a computer-generated revenue optimization tools and you run like everybody else run to full occupancy. Is there a color, both good and bad in terms of how far you would drop rents in the next six to 12 months to maintain full occupancy? Or are you not there yet?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Well, we're definitely not there yet. I guess I can give you a little bit of context. So first and foremost, in the beginning of March, we changed some of our parameters inside these yield management applications to just lessen the volatility of pricing to begin with. On March 20, we actually stopped generating prices from the pricing engine. We turned it off in essence and just let all of our prices stay as they were regardless of lease term, regardless of duration of lease as well. So at that point now we're watching and we're seeing the kind of the application or the traffic come back and the application volume come back. So just a couple of weeks ago, we started to reinitialize kind of that LRO or the yield management application to start sending out the daily price changes as well. So I don't know exactly, I think I said this before, where we'll optimize kind of revenue at, what level of occupancy it is and what rate decline you'd allow. I think demand is going to tell you where what that market clearing price needs to be. But I think you can see right now, I alluded to the fact that the base rents are down 4%, and we're closing at a higher percentage of what we normally would be. So that, to me, feels like the right level today, and we'll just see where the demand levels are going forward.

John William Guinee -- Stifel, Nicolaus -- Analyst

Got it. Okay. Great. And then last question, I think you've got increased disclosure. Any consideration of bringing back your disclosure for your consolidated joint ventures?

Robert A. Garechana -- Executive Vice President and Chief Financial Officer

Consolidated joint...

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

So our unconsolidated joint ventures at the moment are really just one asset, but it's a garage parking kind of piece...

Robert A. Garechana -- Executive Vice President and Chief Financial Officer

Did you say consolidated or unconsolidated, John?

John William Guinee -- Stifel, Nicolaus -- Analyst

Your consolidated. You used to carve out your partners' ownership or economics of the consolidated JVs? I think you stopped doing that.

Robert A. Garechana -- Executive Vice President and Chief Financial Officer

Got it. Yes. It's a very de minimis amount. Happy to give you more color, and Marty or I could give you more color about it. But it's a very small percentage. And it's also, I think there's more disclosure in the 10-Q, in the footnotes in the 10-Q. We just stopped including a whole page in the supplemental of the press release. But in the 10-Q, we can point you to some color on that.

John William Guinee -- Stifel, Nicolaus -- Analyst

Right, OK. Thank you.

Operator

We'll next go with Haendel St. Juste from Mizuho. Please go ahead.

Haendel Emmanuel -- St. Juste -- Analyst

So aside your comments earlier on potential changes you're considering to the annual leasing cycle in a post-COVID world interesting that more leasing could be shifted forward out of the second quarter and third quarter periods where I think historically you've done 60% plus of your leasing. So just curious on how active some of these considerations are and how that might look? Any color that would be appreciated.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Yes. So I'm going to start, it's Mark, and Michael is going to supplement here. This is more of us looking at small sample sizes and seeing a little shifting and trying to figure out the conduct of our customer in this kind of hairy situation. So I can't tell you we're sure that demand will be flattened out. It will just be longer. That's just, again, we have a few of those. Michael, by turning on the pricing machine, has already begun doing something. We don't want to do six month leases now and have expirations in the late fourth quarter. So to incentivize us to do that, we are going to raise your rent. If you want a renewal for a one year term on like-term, we'll do that flat. So I guess, Haendel, we're going to still manage our exploration schedule but there are a few people who took shorter term in our portfolio, we're guessing others, shorter-term extensions in March and April because, listen, no one was in a position to really move. And so you may see some of those people turn around and go, OK, now I'm ready, it's August. And they would have been ready instead in April or May, right? So there may be a little bit of a shift, but it's a it's not fully discernible, I'd say at this point.

Haendel Emmanuel -- St. Juste -- Analyst

That's helpful. And just to be clear, the folks who are taking short-term lease extensions here, are they subject to the same premiums that they would have been historically or before COVID? Or are those also have been extended at a 0%?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

No. So everybody basically since March 15 has had flexibility to move to any term at no increase. We basically froze rents regardless of term and now, we're starting to pivot and change off of that. And that was our way to kind of help people through these unprecedented times, people that were really nervous about moving. We wanted to give them the opportunity to just stay. So I think the peak leasing season, like we all knew it, is definitely impacted from this. We just don't understand yet how that impact is going to play out.

Haendel Emmanuel -- St. Juste -- Analyst

Got it. Got it. Another "lives in a post-COVID world" question. I'm curious if your recent experience with virtual and contactless leasing makes you more inclined to accelerate and increase tech investments here near term as you tweak operating platform for a post-COVID world? And what do you think some of the more lasting changes in your leasing and operations approach could be? I'm assuming in that kind of world, you'll have more virtual leasing, maybe less need for on-site personnel. So just curious on how the business might be changed here, your views on technology investments. And then maybe some thoughts on retail exposure. Is that something that perhaps going forward you would look to have less loss?

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

So this is Michael. Maybe I'll start with just kind of the impact on the operations. I will tell you, I think you've heard us talk a lot about what we were doing from a sales process and all the initiatives that we were teeing up before all this. I think this was an accelerator to us. I think this just advanced a lot of the things that we were already kind of teeing up and thinking about. I think it added a new layer with this virtual leasing and having kind of high-content video available, doing FaceTime kind of live tours. That's a new element to the sales process. And I think going forward, we're going to continue to have all of the above available as our sales process. It's just another tool kind of that we'll have available to close leases and applications.

As far as the tech investment side goes, this did not change the tech investment that we were thinking about from the service side of the business. We already deployed that mobile kind of software. And I'll be honest with you, that was a huge advantage for us in this. It allowed our team to quickly pivot to focus on urgent service requests only. We had complete transparency at the top of the house as to what was happening all the way down to an individual tech. So we knew what needed to get done all from your mobile device. That was a big win. On the sales side of the business, we've already made most of the investments in the technology that we're going to need to run. I think the biggest thing that was out there is you heard us talk about making some investment into the smart home technology, where we were getting ready to move forward with about 10,000 units this year. We already have about 2,500 units deployed. I think that's one of the areas that we'll probably pause, and we're going to see the next-gen of technology come out that probably won't have keypads that will be Bluetooth-enabled. There's already some of this technology available. But we'll just wait to see it kind of get vet out a little bit, and then we'll continue to move forward with that. But I think as you think about operations going forward, it is very clear that contactless, touch-free, those are kind of things that are going to be with us in this environment, not only immediately but probably even longer term in this world of new normal. And Bob, maybe you want to just hit on the retail?

Robert A. Garechana -- Executive Vice President and Chief Financial Officer

Yes. No. The retail and nonresidential pieces, we've always focused on minimizing that exposure. We've focused on investing in high-quality apartment buildings, right? We're an apartment company. So that hasn't changed. That's how we ended up with the limited exposure that we have here today. So I don't think from a strategy standpoint, that's going to change at all. In our markets, particularly in the urban areas, there is typically, with these high-quality assets, some exposure to retail.

Haendel Emmanuel -- St. Juste -- Analyst

That's helpful. And one more clarification. I think earlier, you guys mentioned that 60% of the new leases you signed recently are set to move in before May 12. I wonder if I heard that correctly. And then I guess I'm more curious how the time between lease approval and movement is being impacted here by COVID? Any noticeable change or delay in that timing on either your part or the customer's part? And maybe help us put that 60% figure into some context.

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Yes. So first, let me correct. It's 60% of the applications last week are scheduled to move in before May 22, not May 12. And I think from a behavior standpoint, as you think about the duration, I think this is the time of the year, right, where you have a lot of people looking to lease future months. Their leases are expiring. That's typically what you see in a peak leasing season. And I think we're seeing that. We're seeing demand for June still, and we're seeing some of our notice to vacate or units that we will have become vacant in the future, those are being sold today. But not a huge change in their normal behavior.

Operator

We'll next go with Nick Joseph from Citi. Please go ahead.

Michael Jason Bilerman -- Citigroup Inc, -- Analyst

It's Michael Bilerman. Mark, I wanted and look, I appreciate your comments about the resiliency of New York and other dense urban cities. But I also know that this is a pretty unprecedented time that doesn't have sort of a marker relative to other times. And I wanted to know what the house view, and I don't know if this means a TAM's view, but collectively, as an equity organization about the interplay between office utilization and where you live, whether that's a rental apartment or a house or a condo or whatever it is. But the whole dynamic, once we get post this, and just from a frame of reference, yes, 9/11 had a massive impact, clearly in New York and organizations' desires to be in big office towers. This what we're going through now is 100% of Corporate America, except for essential workers, have their organizations working remotely. I would imagine that, that is going to change some element of how corporations will see where their workforces are, who they are and where they may live. And I would have thought that could have significant impacts in terms of how things would play out from a residential perspective. So can you dive a little bit more into that element?

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Sure. A lot there to unpack. And I certainly think very thoughtful. And I mean, it is an evolving situation. No doubt, this is a 100-year event, we hope, and we're going to go all go through it together and figure it out. I was trying to get to this thought process about vibrancy and flexibility that these big urban areas have gone through a lot before, and they'll figure this out too in ways that we can't yet determine. And you talked just a little bit. And I wonder about that, Michael, about corporate preferences versus individuals. And people could probably always live in different places and telecommute, and now they'll be able to telecommute even more. I agree with that part of it. But our sorts of people, these affluent renters, they like living in these urban and dense suburban places. And right now, they're thrown off a little because we're all trying to figure out how do you run New York City with more social distancing and cleanliness.

Is it shift? So how does that all work? But every day, millions of people are waking up trying to figure out how to do that, how to run the transit systems and the restaurants and all of that. So I guess I'd say, I'm certainly not of the mind that that's something you abandon very quickly, that all of a sudden, we're all moving to ex-urban and rural settings. That doesn't make sense to me that the preference for young affluent renters like we have to live in these cities among their peers is pretty durable and pretty strong. So I guess I don't deny this is unprecedented, but I guess I'd answer by saying the companies may allow more teleworking and almost certainly will, us included. But I think residents or excuse me, employees will still choose where they care to reside. And I think our markets will still be very attractive to them and that the denser solutions, especially as we work through new ways to be clean inside buildings and the distance inside buildings, that will kind of work itself out over time. So I guess that's I'm not sure if that's the house view, but that's the sort of EQR view. And I think Sam has been on record very recently in a big broadcast about the strength of the residential business. So I think we feel good about our business model.

Michael Jason Bilerman -- Citigroup Inc, -- Analyst

Right. I just I wonder if there is an investment or a future opportunity if corporations are going to have some portion of their workforce, right? The incremental hire they're going to have, I would believe Corporate America, just as you would look at an employee and say, we can find a really good operations person that may not have to be in Chicago and be in the head office, but given all of our technological improvements, and we've all now had this trial, then it works, you may find that incremental higher, you may want to put in Denver or another local market where you don't have an office, and that person, if they're living in an EQR community may lead a certain amount of office. And so is there an opportunity to further the investment in your communities to provide a and you'd already started some of this in terms of the need of co-working and things like that. I don't know if there is a trend there that you started to think about?

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Yes. I mean, Michael had some comments on that. I mean we are trying to figure out how we can make our apartment buildings even more comfortable as these common areas open up in this new distancing and cleanliness environment. I think that's something that we're working on right now. And you're right to ask about, and I think we want to make our properties attractive for people to spend more hours per day than they probably have in the past, at least for a while. And the good news is you've been in a lot of our buildings. They have terrific amenities. They have terrific most of them have just terrific lounges and large roof decks in places where you can be home but be outside your unit for a period of time and still feel safe. So I think that's something we'll market. And again, we've got to get the cleanliness and the safety thing right as an industry, and we will. And then I think you'll have the advantage of being at-home but outside your unit and that will feel good to our resident.

Michael Jason Bilerman -- Citigroup Inc, -- Analyst

Right. And just last thing in these higher density, higher rent locations, there's a certain aspect of these cities that have a massive cultural aspect. And while I would think about L.A. and San Francisco, New York, Seattle, all trying to reopen parts of that. You're not going to reopen it at full force. And the other part of it is the taxes in those locations are very high, and the employment places are not going to bring back 100% of their employees because they can't in a social distance world. And I just wonder whether more younger, affluent people are going to say, I'm just going to go lease in Denver or Austin or Miami for a year because I don't my office doesn't need 100% going back and none of the things that I live in the city for can I enjoy. And so could the occupancies get further in the near term before we sort of come out on the other side?

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Great question. I can't give you certainty on any of this. I'll just say that, so far, we've seen demand even in lockdown start to head up again already. I mean it seems to us that our demographic, and this is anecdotal, I have a daughter who's college age. I know a lot of kids in their mid-20s, and they don't want to live with their parents anymore. They want to go back to the big cities and be in their apartments and live their lives again. So I guess I'd be more anxious about owning a bunch of apartment buildings in Orlando or Miami, where they're hospitality-dependent, that's closed down and you wonder, how many people who work at airports and hotels and theme parks and cruise lines will ever come back to work. I think that's a pretty salient question to ask. I think you're right, there's these telecommuting options will be more available to people. But I think people didn't live in Brooklyn because it was cheap, people live in Brooklyn because they love the cultural amenities, they love the restaurants and all that stuff's closed down. And now everyone's figuring out how to reopen it, and I think it will reopen and over a period of time, as you suggested, and make those submarkets that we operate in continue to be pretty attractive.

Operator

We'll next go with Hardik Goel from Zelman & Associates. Please go ahead.

Hardik Goel -- Zelman & Associates -- Analyst

I just wanted to be respectful of everyone's time, so I joined back in. Mark, I guess, is it's not so much a question, but I just need your help understanding something. Garden has higher delinquency across your portfolio. The employment basis in some of the markets you are not in is weaker and yet, EQR is trading at a discount to some of its other peers, the greater discount than it's ever traded at. And there's this narrative about the future of apartments and suburban living and all that. But right now, we have 30% unemployment. And your portfolio has performed really well through that. And unemployment has got to be in some markets, so I'm a little confused by the investor response, and I just don't get it.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Well, I just would ask you to spread the word. I listen, I think what we were trying to get across in the release, besides this general feeling of empathy and concern for our communities, which are going through hell and back right now is that we did pretty well in April. We did pretty well as a company in the midst of this pandemic. And when you look long term, a lot of what just happened with COVID, doesn't you don't look at our strategy and go, that doesn't make sense, like you do some other real estate sectors. Our strategy makes a lot of sense. But in between then and now is this recession, and we're all going to go through that, and we're going to see how it goes. Our company has been pretty resilient through those. We've come out of it historically faster and better. So I think we just need to make our case and continue to be effective and transparent. And we're confident investors over time, and smart analysts like you will pick it up and people will see the opportunity. So I guess we think about running the business long term, and investors will respond to it over the long run.

Hardik Goel -- Zelman & Associates -- Analyst

Really appreciate the disclosures you guys put out. I think the reporting and the messaging was really transparent and high quality.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Thank you. All credit to Bob and his team. So thank you for that.

Operator

This marks the end of the question-and-answer session. I will give the floor back to the moderator.

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Well, we thank you all for your time today, and we hope everyone stays healthy. Good day. Thank you.

Operator

This concludes today's call. Thank you all for your participation. You may go ahead and disconnect.

Duration: 92 minutes

Call participants:

Mr. Marty McKenna -- Investor Relations

Mark J. Parrell -- President, Chief Executive Office ssand Trustee

Michael L. Manelis -- Executive Vice President and Chief Operating Officer

Robert A. Garechana -- Executive Vice President and Chief Financial Officer

Nicholas Gregory Joseph -- Citigroup Inc, -- Analyst

Robert Chapman Stevenson -- Janney Montgomery Scott -- Analyst

Nicholas Philip Yulico -- Scotiabank -- Analyst

Richard Allen Hightower -- Evercore ISI -- Analyst

John Joseph Pawlowski -- Green Street Advisors -- Analyst

Wesley Keith Golladay -- RBC Capital Markets -- Analyst

Jeffrey Alan Spector -- BofA Merrill Lynch -- Analyst

Hardik Goel -- Zelman & Associates -- Analyst

Richard Hill -- Morgan Stanley -- Analyst

Piljung Kim -- BMO Capital Markets -- Analys

Alexander David Goldfarb -- Piper Sandler & Co. -- Analyst

Richard Wynn Skidmore -- Goldman Sachs -- Analyst

John William Guinee -- Stifel, Nicolaus -- Analyst

Haendel Emmanuel -- St. Juste -- Analyst

Michael Jason Bilerman -- Citigroup Inc, -- Analyst

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