Logo of jester cap with thought bubble.

Image source: The Motley Fool.

AvalonBay Communities Inc (NYSE:AVB)
Q2 2020 Earnings Call
Jul 30, 2020, 1:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. And welcome to AvalonBay Communities' Second Quarter 2020 Earnings Conference Call. [Operator Instructions] Your host for today's conference call is Mr. Jason Reilley, Vice President of Investor Relations.

Mr. Reilley, you may begin your conference.

Jason Reilley -- Vice President, Investor Relations

Thank you, Matt. And welcome to AvalonBay Communities Second Quarter 2020 Earnings Conference Call. Before we begin, please note that forward-looking statements may be made during this discussion. There are a variety of risks and uncertainties associated with forward-looking statements and actual results may differ materially. There is a discussion of these risk and uncertainties in yesterday afternoon's press release as well as in the company's Form 10-K and Form 10-Q filed with the SEC.

As usual, this press release does include an attachment with definitions and reconciliations of non-GAAP financial measures and other terms, which may be used in today's discussion. The attachment is also available on our website at www.avalonbay.com/earnings and we encourage you to refer to this information during the review of our operating results and financial performance.

And with that, I'll turn the call over to Tim Naughton, Chairman and CEO of AvalonBay Communities for his remarks. Tim?

Timothy J. Naughton -- CHAIRMAN OF THE BOARD, CEO & PRESIDENT AVALONBAY COMMUNITIES, INC.

Thanks, Jason. And welcome to the Q2 call. With me today are Kevin O'Shea, Sean Breslin and Matthew Birenbaumthe. Sean, Kevin and I will provide commentary on the slides that we posted last night and then all of us will be available for Q&A afterwards. Our comments, I will focus on providing a summary of Q2 results, an update on operations and some perspective, our development in the balance sheet now that we've entered an economic recession. But before you start on the deck, I thought I'd offer a few general comments about the environment we are currently facing.

To say things that have changed over the last 4 months is certainly an understatement. We are in the middle of the largest global healthcare crisis in a century. The economic downturn is the most severe we've seen since the Great Depression. And on the heels of the longest expansion on record and social unrest is at a level we haven't experienced since Vietnam and the civil rights movement over 50 years ago. It's been said but these are indeed unprecedented times.

And these events aren't just having an unprecedented impact on an economic activity, but also I think determine wealth distribution across industries in the broader population. For those companies and workers leveraged to the virtual economy, they're actually doing quite well and some are even thriving. For those companies and workers that operate in the real economy of bricks and mortar like ADD, we're certainly feeling the normal effects and then some of the downturn. And then for those companies and workers in the travel leisure and entertainment sectors among others, they are basically in shutdown. These sectors as well as others, will undoubtedly need to be restructured over the next few years.

Many companies will not survive and their employees, it's evenly temporarily furloughed for now and will join the ranks of the permanently unemployed over the next several quarters. And unfortunately those impacted by these events, or most impacted by these events are those in lower paying service jobs and minority populations. As a result -- this downturn carries not just the normal economic risk of prior recession, but also a profound health, social and political risk, that are likely to shake the length and -- shake the legs and of the economic recovery.

So all this was a sudden and quick downturn. The timing and shape of recovery is hard to project and that presents a unique challenge in managing our business and communicating our expectations to you, our shareholders. Having said that, we'll do our best to be as transparent and direct as possible. As we all try to this understand and gauge how the current environment will play out in our business in the months and quarters ahead.

Alright, now let's turn to the results for the quarter, starting in on the Slide 4. As expected, Q2 was a challenging quarter our core FFO growth was down almost 2%, driven by a same-store revenue decline of almost 3% or 2.3% if retail is excluded. And on a sequential basis from Q1 same-store revenue was down 4.5% or 3.9% excluding retail.

We had no development completions or new development starts this quarter and we've had no starts and so far year-to-date. And lastly, we raised over $700 million in capital this quarter at an average initial cost of 2.8%, with most of that coming from a $600 million long 10-year bond deal at a rate of around 2.5%. As Kevin will share his remarks, our liquidity balance sheet and credit metrics are very well positioned heading into this downturn.

Turning to Slide 5. I wanted to drill down a bit more on the decline in same-store residential revenues this past quarter. As this slide demonstrates, the decline was primarily attributable to the loss of occupancy it uncollectible lease revenue or bad debt. Economic occupancy was down 120 basis points. Our bad debt was 200 bips higher than normal. A higher than normal bad debt is likely to continue, given the breadth and depth of the downturn, coupled with eviction moratorium in many of the markets in which we operate.

We also experienced higher concessions in the quarter and lower other income as we waived various fees this past quarter for our residents, including late payments, common area fee and credit card convenience fees. Average lease rate for our same-store portfolio in Q2 was actually up 1.8% over Q2 of 2019. We are expecting a better rent growth for leases entered into in 2019 through Q1 of this year.

I'm turning to slide 6. As I mentioned in my opening remarks this downturn poses unique risks relative to other recessions. And in addition to the household contraction and consolidation that occurs due to job losses in any downturn. The pandemic is driving other trends that are impacting rental demand. These include, work from home flexibility that is shifting somewhere in demand from higher cost and urban infill markets. Many renters are relocating perhaps only temporarily to lower cost markets or submarkets, leisure areas or even back home with their parents.

Second, record low mortgage rates and the desire for space is accelerating demand for single-family homes, many home builders reported strong orders and sales this past quarter particularly toward the back half of the quarter. And home ownership rate is on the rise. And lastly, we're seeing reduced demand from two important segments that are corporate and students. As most temporary corporate sites have been canceled, while higher education is adopting remote running models and limiting on-campus activities for the fall.

These factors will likely weigh our performance until the public health crisis has abated. On the other hand, they will also likely contributed to a more robust recovery once employees beginning to return to the workplace.

With that I'll turn it over to Sean to discuss operations and portfolio performance in more detail. Sean?

Sean J. Breslin -- Chief Operating Officer

Alright. Thanks, Tim. Turning to slide 7. The fact that Tim highlighted on the previous slide, impact of leasing volume throughout the quarter, which is down roughly 10% year-over-year. Turnover for the quarter fell about 5% to the volume of resident notices to leave our communities exceeded leasing velocity, most materially in May when we experienced about a 25% in lease breaks for a variety of reasons, including corporate apartment operator shutting down operations in certain markets. As a result we move-outs exceeded move-in for the quarter. As of yesterday, net lease volume for July is roughly on pace with the volume of notices to vacate our communities, which should help stabilize occupancy as we move into August.

Moving to slide 8, we experienced a 120 basis point decline in physical occupancy from April to June, with most of it occurred in May as a result of the lease break I mentioned a few moments ago. Chart 2 on Slide 8 depicts those lease in effective rent change for the quarter. As detailed in our earnings release blended lease rent change was down 40 basis points in Q2. While effective rent change was down 3.1%. Rent change for July has improved slightly from June, but the nature of the health crisis and economic environment will dictate the ongoing demand for rental housing and our pricing power as we move through the balance of the year.

Turning to slide 9. You'd see the regional distribution of both lease and effective rent change for Q2. Northern and Southern California were the most challenging region for a variety pre-zones, while the Pacific Northwest performed the best.

Moving to slide 10 to look at performance metrics by submarket type. Urban submarkets deteriorated more materially during Q2 as compared to suburban submarkets. From an occupancy standpoint, urban submarkets declined by 270 basis points from April to June. While suburban submarkets fell by only 50 basis points and from a rent change perspective, urban submarkets showed suburban by roughly 200 basis points. Well, the weakness in urban environments is pretty broad based across all portfolios, most pronounced in San Francisco, Boston and parts of LA. And unfortunately, demand in urban submarkets is suffering from a variety of factors, several of which, Tim mentioned in his prepared remarks, including a desire for more affordable price point, extended work from home policies across corporate America, the lack of short-term and corporate demand, uncertainty regarding on campus learning at urban University and a general concern of our population density.

Shifting to Slide 11, to discuss our development portfolio, construction delays at the beginning of the pandemic weighed on both deliveries and occupancies during the second quarter. As noted in Chart 1 on Slide 12, deliveries and occupancies for the first half of the year fell short of our expectations by roughly 450 and 650 units respectively, which translated into an NOI shortfall of approximately $2 million. Fortunately, following some initial shutdowns at about one third of our construction sites for a short period of time, all of our jobs are currently under way, albeit with a slower pace of deliveries expected across certain assets.

I'll now turn it over to Kevin to further address development, starts funding in the balance sheet. Kevin?

Kevin O'Shea -- Chief Financial Officer

Thanks, Sean. Turning to Slide 12, in response to the current environment, we have chosen not to start any new construction projects this year, despite having initially guided in the beginning of the year to about $900 million in new construction starts for 2020. Looking ahead, we expect lower construction cost will benefit many of our future plan starts and we are prepared to wait for the perspective correction on hard costs before breaking ground, so that we can lock in lower basis on the investments.

Although, real time construction cost data are difficult to come by, initial indications suggest we are beginning to see a softer labor market and a reduction in overall construction activity, makes their way to subcontractor pricing. As for development that is currently under construction, as you can see on Slide 13, we are in a remarkably strong position from a financial point of view. Development under construction is already 95% match funded with long-term capital, which not only mitigates the financial risk of development but also means that we have locked in the investments for a profit on these development by having maximum long-term expected returns on the projects with equity and debt price, when we were selling these projects.

Finally, as shown on Slide 14, we continue to enjoy an exceptionally strong capital position today. This is particularly evident, I'm comparing our key credit metrics today to those from the fourth quarter of 2008 when we entered the last recession. Specifically, since late 2008, our net debt to EBITDA ratio has improved to 4.9 times from 6.5 times. Our interest coverage ratio has increased to 6.9 times from 4.5 times. Our unencumbered NOI percentage has increased to 94% from 77%, and our credit ratings improved to A3 A- from a B AA1 to 2B+. A strong balance sheet position provides us with great flexibility to pursue attractive investment opportunities that may emerge as this downturn unfolds. And that will turn back to, Tim.

Timothy J. Naughton -- CHAIRMAN OF THE BOARD, CEO & PRESIDENT AVALONBAY COMMUNITIES, INC.

Thanks, Kevin. Just turning to the last slide and offering a few summary comments. Our Q2 was a challenging quarter driven by the suddenness of the pandemic in the depth, with the downturn. So far, the impact on same-store performance has been driven by lower occupancy and elevated bad debt, contributions from NOI and redevelopment lease-ups were less than expected due to construct delays and weaker absorption. We have curtailed our new developments from adequate and have not started any new community so far this year, despite the strength in the for-sale market. We do expect construction cost to fall over the next few quarters and we'll incorporate that into our capital allocation plans. And then lastly, the balance sheet is very well positioned both an absolute sense and relative to prior downturns, which is Kevin, there just gives us plenty of financial flexibility to address challenges or opportunities as they arise. So with that, Matt, we'll open the call for the questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question will come from Nick Joseph with Citi.

Nick Joseph -- Citibank -- Analyst

Thanks, I appreciate the color on the rationale behind pausing new starts, just curious how long you think the delay will be until you actually started new projects, again what signals are you looking at before actually making that decision to proceed?

Matthew H. Birenbaum -- Chief Investment Officer

Hey, Nick. This is Matt. Yeah, I mean it is -- we have [Indecipherable] start and we are you -- there is fairly a high degree of conviction that hard cost will start to correct here. So, that's the main thing we're looking at. It is kind of where hard cost is trending, what the subcontractor's bid coverage look like. There may be one BO that we would start here. This kind of got some exceptional circumstances building in an opportunity down and we're looking at starting with third-party joint venture capital, which is, as you know, it's very unusual for us, but for kind of for wholly owned balance sheet on the start. That's really what we're watching. It's kind of an interplay between potential reduction in our cost and frankly reductions in NOIs on the other side and kind of looking at what the total basis looks like, what costs look like relative to their long-term trend line and what rents and NOIs look like relative to their long-term trend line as well.

Sean J. Breslin -- Chief Operating Officer

Yeah. Nick. It's hard to know exactly. If you look at last cycle, we lost about four or five quarters. Part of my introductory comments around what this economic downturn, might look like, maybe different from others that we see where others may then sort of -- may be drifted a little bit more into the recession. This was quite sudden and others were making a quicker bounce back to think this could be a more drawn out bounce back and likely to be more and more --you've heard certainly, an IT solution of people need more and more here sort of the K -- K shaped recovery where it's going to be very uneven depending upon even demographic and and the population. So, I -- just given the public health and economic aspect to this one, it's hard to know for sure, but as we showed on that once, I -- we're just starting to see construction cost for the last cycle that correct on the order of 15%, maybe a little bit more. And you know, it's, we're probably going to need to see, the kind of double-digit, corrections before we start to have a little bit more faith that we're buying deals out of the basis that, yeah, we looked, sort of next cycle.

Nick Joseph -- Citibank -- Analyst

Thanks. I think you announced the $500 million share repurchase program, how do you think about actually executing on that and where does it currently stack up in terms of the user proceeds, maybe relative to development or any other kind of acquisitions or redevelopment kind of other options that you have for that capital?

Kevin O'Shea -- Chief Financial Officer

Yeah. Hey, Nick. This is Kevin. I'll jump in here. And Tim may want to add a couple of comments. You're right, as we -- as you saw in the earnings release, we did announce a share repurchase program of $500 million and really the genesis behind that is we believe our stock is as you alluded to trading at a compelling value, both absolutely and relative to other investments, including development. Because we have the balance sheet strength and liquidity to pursue the program, we intend to do so, though, as we indicated in our earnings release, we're likely to act upon that on a long-term basis with asset sales and potentially some incremental debt, but we do intend to proceed and probably will do so initially on a measured basis to have clarity on those sources. But I think at this point, that's probably our most attractive investment that we have today.

Timothy J. Naughton -- CHAIRMAN OF THE BOARD, CEO & PRESIDENT AVALONBAY COMMUNITIES, INC.

Yeah. I -- maybe just add a little bit to Kevin, I agree, I think two things working here. It's the best, so the most attractive investment and you've got the disparity between what actually costing and what certainly debt costing is being supported and artificially relevant, but as I said right now, and although there's not a lot of visibility on asset pricing, we feel supportive that asset prices, And I'm going to correct near what equity prices have correctly, we've seen nearly 30% on the equity and probably -- we think probably less than 10% on asset sales. So, that informs our conviction as well in terms of what the alternatives that are in terms of the, in terms of capital sources.

Nick Joseph -- Citibank -- Analyst

Thank you.

Operator

Our next question will come from Rich Hightower with Evercore.

Rich Hightower -- Evercore Inc. -- Analyst

Hey. Good afternoon, guys. So, I'm on the second chart on Page 8, just on the blended like term rent change chart. Just help us understand some of the details there across new and renewals, and what you're seeing currently in suburban and maybe some of the weaker markets you mentioned, Boston, San Fran and L.A. Just help us to understand some of what goes into the mix there?

Sean J. Breslin -- Chief Operating Officer

Yeah, Rich. This is Sean. Happy to walk you through it a little bit. I mean, as we noted on an effective basis on the change is down about 3% for the quarter. If you look at it on a lease basis, it was down only about 40 basis points. And certainly based on what I mentioned in my prepared remarks, we're seeing the greatest weakness in Northern and Southern California, as you double click through those regions. probably the softest spots are San Francisco and throughout L.A., particularly in some of the entertainment oriented economies around L.A., so think about Hollywood, West Hollywood, Burbank, San Fernando Valley, etc. And then the other markets, we're basically anywhere from sort of zero to minus 2% and across the other markets, the softest spot is probably New York City and throughout the urban submarkets within Boston.

And as I mentioned in my prepared remarks, generally across the portfolio, what we're seeing in the urban submarkets is rent changes trailing suburban by about a couple of hundred basis points. And as you probably noted in the chart, economic occupancy and physical occupancy are both trailing. what we're seeing in the suburban submarkets as well. So certainly a tougher place to be as it relates to both rent change in occupancy in those environments. And then as it relates to, kind of, where things are today, if you look at it in the context of July, effective rent change is down about 3.5%, a little bit better than June and lease rent change is down about 3% and in both cases renewals do remain positive, right now, sort of, in the 50 to 70 basis point range, slightly lower than what we experienced in Q2, but still positive in July at this point.

Rich Hightower -- Evercore Inc. -- Analyst

Okay. Sean, that's helpful and then, just thinking maybe a little more broadly, in some of the bullets highlighted in the prepared comments about the work from home shift and the fact that suburban is outperforming urban and I would also assume with respect to home purchases. I mean, given the price points in Avalon's markets, maybe you're a little more insulated from that effect then, than the average apartment landlord out there. So, at what point does that sort of mix start to help Avalon in the sense of having a highly concentrated suburban portfolio? When do you think we'll really see that shot in the numbers there, as in that positive, you think?

Sean J. Breslin -- Chief Operating Officer

Yeah, this is Sean. I can provide a couple of comments on them and then Tim can chime in. I mean, it's really a function of how some of those factors evolve over the next few months here. I mean, urban submarkets, we've mentioned several of the factors that are sort of driving it. So, I think, as I mentioned in my prepared remarks, it is sort of the nature of the health crisis and the economic environment will dictate when people sort to come back to the urban submarkets. And at least some more material way. And on the suburban side, it's really a function of, sort of, portfolio mix and in some places it is certainly very helpful. There are some submarkets where even though it's suburban, it's a little bit painful right now. I'll pick one specifically like Mountain View and Northern California where Alphabet is headquartered given their extent to work from home policies, it tends to be a weaker submarket, even though it's technically considered suburban. So I'm not sure there is a one size fits all answer here, as it relates to that. At least, that's material pass at this point in time, but, Tim anything you want to add?

Timothy J. Naughton -- CHAIRMAN OF THE BOARD, CEO & PRESIDENT AVALONBAY COMMUNITIES, INC.

Yeah, I just --maybe just, yeah, I mentioned suburban had been outperforming urban for parts of the pandemic, and then we haven't seen a trend both on the demand [Technical Issues] and I suspect our supply to outpace suburban by a fair amount in our markets. But, also on the demand side, which last cycle supply and demand was strong in the urban submarkets. This cycle, it's probably going to the opposite where both suburban get the offer to 21, 22 where you're likely to see stronger demand and some of the suburban submarkets and more supply and that's probably because, it's more on the coming of age, just more economic activity starting to occur in the suburbs as part of its affordability. So you see more economic activity, you have that other more rental or demand in the suburbs as well. But, we already started to see that trend a little bit before the pandemic, but it is just a longer trend that we expect will continue over the next few years.

Rich Hightower -- Evercore Inc. -- Analyst

All right, thank you.

Operator

Our next question will come from John Pawlowski with Green Street Advisors.

John Pawlowski -- Green Street Advisors -- Analyst

Thanks a lot. Sean, I want to go back to your comment about you seeing signs of stability and leased occupancy heading into August. Does that comment hold for the current pockets of weakness that you alluded to L.A., Boston, San Fran?

Sean J. Breslin -- Chief Operating Officer

In the short run, John. yes. And we are starting to see some student demand come back in some of these urban submarkets, based on announcements that have been made to date as it relates to hybrid learning environment, both on-campus and distance learning and it is anecdotally, getting a lot of feedback from some of the student population that had enough time at home and even if they only could be on campus a couple of days a week, they want their apartment back. So whether that holds or not is, obviously is a function of the health crisis and the decisions that are made across the university system. But in general, I would say we are seeing that relatively sort of stabilized a little bit. That being said, between now and year-end, as I mentioned in my prepared remarks, the health crisis and the economic environment will dictate whether things kind of shift up or down in terms of demand as we move forward here.

John Pawlowski -- Green Street Advisors -- Analyst

Makes sense. And then the 200 basis point drag from bad debt in the quarter on the residential portfolio with the opening remarks for something effect that it remained elevated. Is that a reasonable betting line, just the trajectory over these coming months, we're getting into worsening, meaningfully better. I guess, I don't know how to completely think through markets like in LA where this eviction moratorium keeps getting kicked down the road. So just curious and quick comments around the trajectory of bad debt from here would be, will be helpful.

Sean J. Breslin -- Chief Operating Officer

Yes, I'm happy to come in and Kevin or Tim can chime in as well. I mean at this point in time, it's obviously difficult to predict, given the nature of, you mentioned the health crisis, the macroeconomic environment. Obviously there have been federal support for people to date in terms of being able to sort of subsidize their incomes which they can't do this more in terms of personal income growth. So I think, it's, I mean it's a relatively static environment through year at year-end. If I expect to sort of collection rates to hold within reason, but to the extent there is significant shift in any one of those variables in a meaningful way, if I could pick it up or down as a result. But I think there's primary variables we will all be monitoring to try to determine whether we think it's going to take up and down. So...

John Pawlowski -- Green Street Advisors -- Analyst

Okay, thank you.

Operator

Our next question will come from Jeff Spector with Bank of America.

Jeff Spector -- Bank of America Merrill Lynch -- Analyst

Thank you. Good afternoon. Just wanted to go back to some of the big picture comments, Tim, that you've discussed so far, including some of the comments during the Q&A and I very much appreciate how difficult it is to figure out the medium to long term. I am just thinking on your comments about the lower cost options elsewhere in Southeast, increasing home ownership. I mean can you talk a little bit more how this is impacting let's say Avalon's medium to long-term strategic plans, whether that includes new markets, I guess. Can you share some thoughts on that?

Timothy J. Naughton -- CHAIRMAN OF THE BOARD, CEO & PRESIDENT AVALONBAY COMMUNITIES, INC.

Yeah, I'm not sure, Jeff. I think we've spoken to this in the past. I think you've said, I mean, I think, the pandemic is there, these trends aren't necessarily new there, a lot of them are being being accelerated. So, if you think about sort of big tech and quarters in places like New York and California are already diversifying their work forces in other markets, whether San Fran or DC or having bases in Austin or Denver and so we want to be leveraged really for the innovation and knowledge economy and so that means kind of going where those workers are going and to the extent jobs, employer continue to chase jobs, rather jobs, sort of the job chasing the employee rather than the employee chasing the job, and you don't want to be in those markets as it was one of the things, we got in Denver, in the Southeast Florida. I would say, one of the things that you look at the -- just the fiscal situation of some of the blue states, obviously you are being exacerbated as well. And so I think that probably informs our thinking, also just the overall affordability, driving and driving some of the population because some of these markets -- you want to be in a sort of spillover markets. We think what's happening is good for the innovation of economy. So, I don't think it's bad necessarily for the San Jose and in San Francisco, in Boston, though recognize that some of those benefits are going to spill over to some other sort of secondary innovation, markets as well, and those will be good markets for us to be. And so when we look to do a few things, one is the kind of reallocate a recycle capital, some cap on New York, certainly and probably in the future some out of California to both expansion, our existing expansion markets as well as markets like DC, Seattle and Boston, and then also potentially some new markets that we're not into today.

Jeff Spector -- Bank of America Merrill Lynch -- Analyst

And is that -- and I appreciate the comments, I mean, I guess the -- your thoughts on work from home and the permanency of work from home, is that impact the decision process at all or do you feel like that it's just a temporary adjustment right now, but maybe it will be more going forward, but not to the extent that some on the media are portraying or some on the street are portraying?.

Timothy J. Naughton -- CHAIRMAN OF THE BOARD, CEO & PRESIDENT AVALONBAY COMMUNITIES, INC.

Yeah. Yeah, it's hard to know, I know that the office guys get that question a lot, I can sort of speak from our own experience. And we -- who would have expect, we'd have more work from home activity kind of going forward, but there are certain jobs where -- you know that are more kind of individual contributors, where they can be efficient working away from the office space, but that is not by close to majority of the jobs in this Company and most companies. So, we view it as kind of a more of a marginal side that gives people a little bit more flexibility about where to live, this -- if they want to work from home then secondly finance that focus on career growth. You're probably not gonna manage a lot of people working out front at least over the next, next few years. And in my view, so I would say, doesn't really affect our view in terms of where we want to be, probably less so than the fact that big employers like the Googles or Apples in the world are already diversifying their their workforces in other markets with satellite operations there. So, whether it's a satellite operation or people working from homes are likely to go to some of the same markets, I would think.

Jeff Spector -- Bank of America Merrill Lynch -- Analyst

Thank you. Stay well.

Timothy J. Naughton -- CHAIRMAN OF THE BOARD, CEO & PRESIDENT AVALONBAY COMMUNITIES, INC.

Well thank you, as well. Thank you.

Operator

Our next question will come from Rich Hill with Morgan Stanley.

Richard Hill -- Morgan Stanley -- Analyst

Hey. Good afternoon, guys. I wanted to follow on the lines of bigger picture question and go back to some of your prepared remarks. Specifically, about home-ownership, we've seen some similar trends with home-ownership particularly under the age of 35 cohort. Do you think those are just near term given the decline that we've seen in interest rates or do you think there is a more secular shift that's going on there?

Timothy J. Naughton -- CHAIRMAN OF THE BOARD, CEO & PRESIDENT AVALONBAY COMMUNITIES, INC.

Yeah. We're talking view they may have a view. I think part of it may be, if you just look at the composition of the millennials as little bit as the pig through the pie faster, there is a lot more of those that are under 35 and that 30 to 35 in sales force than they were five years ago. Yes, sort of starting to enter this kind of prime home-ownership. So, I think a lot of, I think a lot of it has been stimulated by demographics and and really being accelerated by what we're seeing in terms of registry. We're not seeing it yet with our residents. Reasons for move actually went down to [Indecipherable] but home-ownership is going up nationally and it has an impact on the overall rental pool that affects all of us as landlords at some level. We may be look -- we think we're far less sort of the epicenter of it, but it's probably mostly coming from single family rental and other demographics in other markets, but it does have an overall, it does have an impact on a broader, sort of rental pool, if you will.

Richard Hill -- Morgan Stanley -- Analyst

Got it. That's helpful. I've been a little bit surprised there hasn't been more focus in this earning season on the election coming up in a couple of months, in potentially rent regulation depending upon what parties have power. I'm wondering if that is something that you're focused on obviously the Biden plan has housing as a big focus and affordability on the other side of COVID-19 is obviously more challenged, how are you thinking about that in the medium to long -term?

Timothy J. Naughton -- CHAIRMAN OF THE BOARD, CEO & PRESIDENT AVALONBAY COMMUNITIES, INC.

Richard, the fact is that -- I mean less the regulatory risks we face is really at the local and state level, not as much of the national level, because I would be a little bit more concerned, if there was another nominee, this -- that was because that nominee turned at the national level, but you -- our markets have always been more regulated than in other markets, we are in blue states, yeah, it's always, part of it's -- it's part of what's been the appeal of our markets is sort of the various entries created, some supply constraints on new housing which is help elevate rents and and rent growth over time. I think the issue that you're starting to touch on is that the key one, which is when it starts to leak in the price controls and rent control that becomes the issue for us and the type of rent control.

Certainly in New York, and parts of California, you have vacancy decontrol that is a -- that's usually pretty manageable in terms of as an owner of as part -- we have continued when you lose, we have controlled pricing on vacant as they become available. That's the kind of rent control as an industry we have to absolutely avoid and it is -- it will be awful for the housing markets, if that occurs. So, that's something we're going to continue to watch, we're going to continue to fight as an industry because it's more attractive for us as landlords, for sure, but it's not for the housing market, long-term, I mean it's not a way to solve any housing crisis at any the local level. It's politically expedient but it's from a policy standpoint, it's absolutely poor policy.

Richard Hill -- Morgan Stanley -- Analyst

Understood. And then one more question if I may. In the past, you've done a really good job thinking about how your development and your land development is really under option that you don't have to move forward with it, so I'm wondering as you survey the landscape post COVID-19, are there any land that you have under option and maybe high barrier blue states that you might want to not move forward with? And you mentioned, Florida, I think earlier in your remarks, are there any of other the markets, where you prefer to maybe focused on the development going forward versus some of the markets that you're in right now?

Matthew H. Birenbaum -- Chief Investment Officer

And here it is Matt. As it relates to our current development rights pipeline, you're right, we only own two of those 28 deals, as a land owner the we bought from a third party. So, we do have a lot of optionality and it's really deal by ideal. There maybe deals in there that are not going to work without some type of restructuring, there are other deals that probably will work and there are some deals where we may say,the land is of good price, and we may close on the land and carry for a while, wait for hard cost to come down.

So, it's a little bit of all of the above. It doesn't really factor into the geographic mix, it's really bottom-up in terms of where we're finding the best opportunities. And so we have a couple of development rights in some of our expansion markets, including two in Denver, more than Florida that are working their way through the system. We have development rights in our legacy markets as well. I don't think we've seen any particular trend yet in terms of kind of an intact to the land market or development economics more so, in one market than another. Other than what you're seeing, obviously rents taking the biggest hit so far.

Richard Hill -- Morgan Stanley -- Analyst

Got it. All right, guys. Thanks for your time and I appreciate the answers.

Operator

Next question will come from Wes Golladay with RBC Capital Markets.

Wes Golladay -- RBC Capital Markets -- Analyst

Hi guys. Another development question for you. I was wondering if you could frame up how the development pipeline is active, is positioned relative to the headwinds you say on Slide 6. And then, basically trying to get a sense of the potential volatility around your 5.7% projected development yields.

Timothy J. Naughton -- CHAIRMAN OF THE BOARD, CEO & PRESIDENT AVALONBAY COMMUNITIES, INC.

Yeah. I am sorry, is that about the development under way or the development right here on the future start?

Wes Golladay -- RBC Capital Markets -- Analyst

No. Yeah, sorry. Adequate pipeline, I mean, I believe you guys pivoted a few years ago to more of a suburban footprint, but I don't know if they technically qualify as more the infill that you said of the headwind on page six.

Timothy J. Naughton -- CHAIRMAN OF THE BOARD, CEO & PRESIDENT AVALONBAY COMMUNITIES, INC.

Yeah, I mean, when you look at the $2.4 billion in development under way, you can kind of look at in terms, by the current yield of five to seven on those deals that are still, there's only five of those 19 where we've actually turning up market rents to market yet. And on those five actually, the rents are slightly ahead of pro forma by about $30. So now the mills are a little bit behind because there have been some cost overruns on a couple of deals, but generally speaking, so five of the 19 are more or less mark to market. The other 14 you could handicap them. A lot of them are in markets that have seen less downward rent pressure so far. It is a predominantly suburban portfolio. In fact, looking at, I think the only deal in that we will consider urban other than Hollywood, which is under construction would be downtown Baltimore. [Technical Issues] And I think that will going to. Yes.

Wes Golladay -- RBC Capital Markets -- Analyst

And then what about with their work from home trend, are you noticing any demand for your larger units, people looking for maybe another room for an office or may be room with the view.

Sean J. Breslin -- Chief Operating Officer

Yeah, Wes, this is Sean. I mean we've been digging into that and at least based on sort of early returns, I would say, it appears as though suburban direct entry product, which often is a townhome is doing a little bit better in the current environment. And there is a little bit mixed but overall that appears to be a positive trend for us in terms of that product type across the volume.

Matthew H. Birenbaum -- Chief Investment Officer

And I would say, just to add to that, this is Matt. When you look at our development, as an industry, the average unit size has been trending down really for the last cycle, probably came down 10%. What we've seen at least the last year or two, our development starts the average unit size has started to move the other direction. A lot of that is in our shift to more suburban assets, but also even before the pandemic, we were starting to see just the demographic heading where they were. Greater demand for three bedroom units, which we did in the 100 overall almost every project we built regarding in it and, and more of the kind of one bed and two bedroom loft, we're definitely seeing building more of that product than we were 5 years ago.

Wes Golladay -- RBC Capital Markets -- Analyst

Got it. Thanks a lot guys.

Operator

Our next question will come from Nick Yulico with Scotiabank.

Sumit Sharma -- Scotiabank -- Analyst

Hi guys, this is Sumit Sharma in for Nick. Question about your bad debt expense and I just want to be clear, maybe you've stated that earlier, so I apologize in advance, but off the 2.7% of uncollectible rent, I guess, how much was part of the bad debt provision or reserve? Some of your peers have talked about reserves up to June of around 200 basis points or so. And just getting a sense of how much went into reserves, how much is deferred, how much is just write-offs and cash bad debt.

Kevin O'Shea -- Chief Financial Officer

So, this is Kevin O'Shea. I'm having difficulty hearing you. But maybe just to give you an overview of what we did with respect to bad debt. And then you can ask questions to the extent that I am not responding to some of your questions. So, first of all, our policies reserve delinquent base residential land for three months in order to delinquent items after two months. For residential revenue, we typically take a reserve about 50 basis points of residential revenue and we did so in Q2, in our same-store portfolio.

In addition in Q2, we took a further reserve of about 200 basis points or $10.7 million including for a resident who didn't pay anything during the quarter. That resulted in a total reserve for the same-store residential revenue portfolio of 250 basis points or $13.6 million. So, of course, we continue to caution our collection efforts, and we're certainly encouraged by increasing collection trends which you are cautioned against on page. April and May rents improving about 97.5% for about 93% to 94% at month end. So, that's the story in residential revenue. Is that helpful? Got responses?

Sumit Sharma -- Scotiabank -- Analyst

Yeah, no, that's great. Thank you so much and apologies for the bad sound quality. Another question following up to a different kind of way. I'm just wondering in terms of the concession activity, that should provide a lot of exploration urban versus suburban. Trying to understand where, what kind of unit types are being -- are seeing the biggest concessions? Two bedrooms, three bedrooms? I think, a few moments ago. someone was talking about developments and how it is changing with the unit mix. I'm just wondering from a concession standpoint where are you seeing the biggest drop in rents or where you have to give the largest amount of concession?

Sean J. Breslin -- Chief Operating Officer

Yeah, this is Sean. I will give you some general thoughts on that. So, first, as you might imagine, from what we described in our prepared remarks, concessions are generally greater in urban environments as compared to the suburban environments, to start with that. Within urban environments, we tend to see fewer concessions, only more affordable price points, which tend to be the studios and one bedrooms in those submarkets, as compared to the larger units. Initially we thought there might be sort of steadier demand for larger units and people looking to work from home with extra space, but I think the affordability issue sort of weighed on that a little bit. And we've seen better performance out of the studios and smaller one bedrooms. And in a suburban environment, I wouldn't say, there is a common theme as it relates to unit type. It's really submarket driven and the nature of the demographic within that environment. We've got very high quality towns in suburban Boston with great schools and two or three bedrooms are solid demand and ones not quite as much. And if you revert to some submarkets in L.A., more affordable price points and studios and one bedrooms are in better shape as compared to probably two or three bedroom units, given the shutdown of the entertainment studios. And so it's not a common theme as much as it relates to the suburban units as much as the specific of suburban geography.

Sumit Sharma -- Scotiabank -- Analyst

Great, thank you so much. Appreciate all the answers. Thanks.

Sean J. Breslin -- Chief Operating Officer

Yeah.

Operator

Next question will come from Alex Kalmus with Zelman & Associates.

Alexander Kalmus -- Zelman & Associates -- Analyst

Thank you for taking my question. Looking into bad debt and delinquencies, did you guys do an analysis on your resident base to see what age, income or profession, this is mostly centered on?

Sean J. Breslin -- Chief Operating Officer

Yeah, Alex, this is Sean. We have to run some data on that and I think what I would tell you, it's more industry specific than it is typical demographic makeup, in terms of gender, age and things of that sort. And it tends to be self-employed, sort of freelance workers, content producers, folks like that have, sort of, been impacted most materially and then in some of our East community, some of the service based sectors that have been impacted as well, whether it's food service, hotels, things of that sort. Some of the occupations that Tim eluded too earlier in his opening remarks. So that really is more occupation driven than anything else.

Alexander Kalmus -- Zelman & Associates -- Analyst

Got it. Thank you. And just to touch upon the [Indecipherable], how is the selling on that, this quarter end? I noticed the average unit price was a little higher. So I'm assuming some of the high units got sold. Was there any discount to February level of that you offered to enhance the sale process?

Matthew H. Birenbaum -- Chief Investment Officer

Yeah, hi, Alex. This is Matt. So the closings that we saw in the second quarter were almost completely deals that have been under contract earlier than that, not entirely. There were a few deals we did in the second part of that, with quick causes, including, I think, the penthouse units which the average price, it's settled in any given time period, is really more a function of just what units happened to settle based on scheduled settlement and so on. So you cannot drive any conclusions, I don't think from that. We have 54 units closed right now, we have another 12 under contract. When you add that together, it adds up to a little, bit more than $200 million. We have -- there certainly negotiation and there's probably more negotiation at the higher price points, and that was a trend even before the crisis hit. So we have not really taken a different approach to pricing post COVID. There just hasn't been enough traffic and transaction velocity in the market to really even justify. I'm not sure that if we were to drop prices we would see a significant change in the volume. And we were offering a very compelling value, we believe, before and it's still a pretty compelling value and that was validated by the pretty strong sales pace we have right before everything shutdown in early March, so there is more supply coming and I would say that there is a little bit more negotiation at the higher price point, but we expected that the relative to our expectations, nothing's really changed with our pricing, yeah.

Alexander Kalmus -- Zelman & Associates -- Analyst

Alright. Thank you.

Operator

[Operator Instructions] Our next question will come from Alexander Goldfarb with Piper Sandler.

Alexander Goldfarb -- Piper Sandler -- Analyst

All right. Good afternoon. And thank you. So, two questions. The first one is, do you guys have an idea of how many residents are living in your apartment, who are paying rent but aren't actually there, so they've moved away, but they are still paying rent?

Sean J. Breslin -- Chief Operating Officer

Yeah. Alex, this is Sean. That's a tough number to come up with. So, the honest answer is no, we don't, unless they voluntarily come to us and say, hey, I'm going to be gone for X period of time, can you do something for me? It's not necessarily a tracking mechanism for that would give you any sense of any real sense of accuracy, there.

Alexander Goldfarb -- Piper Sandler -- Analyst

Okay. So, as your apartment managers are seeing, I guess maybe maybe mail not being picked up or what have you, is that a way to sort of track and understand if those people plan on coming back or they're going to exit whenever the term ends?

Sean J. Breslin -- Chief Operating Officer

Not necessarily, I mean people have mails picked up and you think about buildings that are 500 units and we have 1,000 people and I'm -- it's really hard to get a sense for that. Unless there is something specific related to mail hole, so we're aware of -- were -- package delivery but I wouldn't say you can count on that as a representative sample that would give you an accurate estimate.

Alexander Goldfarb -- Piper Sandler -- Analyst

Okay. And then Kevin, on the development program, you guys were planning on doing meaningful start this year, you haven't, at what point as you deliver, but you don't replace the deliveries, at what point you the capital at the current capitalized costs start to burn off and that starts to those expenses start to accrete to the income statement like where, how far would the delays have to go, meaning before we would see the expenses start to appear on the income statement, because they can no longer be capitalized?

Timothy J. Naughton -- CHAIRMAN OF THE BOARD, CEO & PRESIDENT AVALONBAY COMMUNITIES, INC.

Hey, Alex. This is Tim, I'll jump in and Kevin may have something of the offer. So, if we have people working in development or construction that are not actively working on a job, whether it's one that's under construction or one that's going through the planning process, they get expense.,they go to the income statement then I'll look at the capital. And as you can still while look forward -- while we haven't started anything year-to-date. We still have our $2 billion under construction $4 billion of the process and so we're still managing a $6 billion pipeline that we are trying to right-size it. If you look at this quarter, it's about 10% lower than last four quarter average over capitalized overhead and it's been trending down as we've seen, we've had some recent departures and retirements over the last six to 12 months of some senior folks as we try to, they start to sort of right-size it for the sort of the next cycle and where we currently at. Getting a number of. help but roughly about half that groups comp is incentive, so if they're not doing things or if they're not doing as much production, there is a sort of automatic adjustment factors in the over-head piece as well, but our objective is really just to be really as we well positioned, right?

I kind of for the early, early, early part of next cycle, they able to flex up if we, if we need to the opportunities alligns. It's a capitalized was that we had this quarter is about $11 million, about $6.5 million of that is development, about $3.5 million and about a little over $1 million of its new development at the annualized. If we get about, about $25 million in development, about $12 million in construction. That is a level that supports kind of in the, I think we've talked about $800 million to $900 million range, sort of plus or minus. So that's what we're still here for us. So, to the extent we side over the next three, four years, it doesn't make sense to do in that kind of volume. Obviously, headcount will be adjusted but after we're suspecting in our next couple of years, we're going to, we'll be in a position to sort of ramp-up back quickly want to make sure we've got the leadership in in the right way personnel and there still managing as we go into this recession, about $6 billion worth of total pipeline, which is probably only about 25% off kind of where its peak level of problems, so to have peaked in our range. Okay. Tim, that's helpful. Thank you. Sure.

Operator

Our next question will come from Rob Stevenson with Janney.

Rob Stevenson -- Janney Montgomery Scott LLC -- Analyst

Hi. Good afternoon, guys. What's the positive impact that you typically see in terms of traffic and leasing wise in May, June, July time period from the influx of new college graduates renting for the first time in your core markets in a normal year? And what have you seen thus far this year? It seems like very few college grads in your core markets have actually rented apartments this year versus a normal year, given how early COVID hit, so that might be a big driver.

Sean J. Breslin -- Chief Operating Officer

Yeah, Rob. Sean. Good question. A couple of thoughts on that. Not necessarily, specific data since it's all a little hard to capture. But in our particular case, we don't have a lot of student oriented assets, it's pretty select across certain markets, particularly in the urban environments, I would say. But your prior question really probably relates to the percentage of the market that is really made up for the student population that sort of brings the occupancy up in the entire market, but sometimes we are trying to get our arms around that, not quite there yet in terms of what they represents, each one of the submarkets, but there are -- yes, so submarkets like we have a property here in the district, that's pretty side in a view that, what they announced their plan to have a hybrid learning model. We did 80 leases in one week. So, there is submarket stuff like that. They are highly dependent upon it, but I think the broader question is when we're still trying to answer, which is sort of collectively what the demand is?

For the student population is one segment and then from the short-term and corporate rental market is the other segment, we think the short-term corporate is probably in the 2% to 3% range, but I will try to understand that in terms of the students population. Particularly, as universities may shift their on-campus housing options, to the extent that they're trying to sort of dedensify some of those communities, so it's a little bit of a moving target, it's probably hard to answer, right? This exact moment, but certainly the peak time for that demand is as you described, as moving them through the pre-leasing fees that you're going to see sort of from -- yeah, basically April through June, but if I see us some student housing rate, and you want to be pre-leasing in those buildings then there might be some plus range, as you get toward the end of July and further show up in August. So, we're on track for that at some of the buildings, but there are places in and around urban Boston, Berkeley, places like that, where they are falling short because of the uncertainty around the ultimate learning model.

Rob Stevenson -- Janney Montgomery Scott LLC -- Analyst

Well I mean beyond the student stuff, I mean, I was really focused on the 21, 22 year olds graduated that have a job with, let's say, an investment bank, tech company, a consulting firm or whatever, that you normally get in New York. San Francisco, Boston etc. are renting for the first time, where they're bringing in offer letter to you in their leasing off of that. I mean, though that influx of student of, former students, but now and right people entering the workforce for the first time, meaning how significant is that typically in these big sort of gateway cities?

Timothy J. Naughton -- CHAIRMAN OF THE BOARD, CEO & PRESIDENT AVALONBAY COMMUNITIES, INC.

Yeah. That's -- it's definitely helpful to answer and it's not that it's related to the people that are coming in for a specific kind of program like a training program or some other kind of corporate program because 2% to 3% of the market. Our market, what you're really talking about it just ongoing demand as people are graduating from the universities and moving into the rental market. That's a little tougher to quantify, overall. Did point to Sean.

Okay.

Sean J. Breslin -- Chief Operating Officer

Yeah, I mean Rob that is part of -- it's not an earlier in my remarks about the typical household contraction in consolidation, you see in the downturn that is part of it, what you are describing to me. I mean, kids that can't get jobs when they get out and again I call to stay at home or they go into the house with six guys, six people setup, you have sort of getting our own apartment. So, you'll see in past recessions, we've seen occupancies, followed by a couple hundred basis points, so a little bit of new supply, so that's not unusual see contraction of household demand on the order of really 2 million housing units across the country and a normal downturn. And a big portion of that is I think exactly what here, we are focusing on.

Rob Stevenson -- Janney Montgomery Scott LLC -- Analyst

Okay and then lastly for me, what are you guys seeing today versus at the beginning of the year in terms of construction costs, both hard and soft. I mean how meaningful has been the delta and where is the greatest amount of slack today? And is there any of these buckets that are that you're seeing being more, you know, pressures either up or down on now given what's happening in single-family or what's happening elsewhere or the falling off of new construction in other sectors?

Matthew H. Birenbaum -- Chief Investment Officer

Yeah. Hey, Rob. This is Matt. Yes, we are starting to see it, but it is -- so where we started to see it first, is really in some of the smaller contract capex work. So if you think about it terms of the types of jobs that are short in duration, so if you're a subcontractors that is doing a facade restoration project for us, or some concrete repair work, that might be a two or three months or six months job and if they finished one-off, they don't necessarily have stuff to replace it. So we are starting to see it there and in some markets, we've seen, mid single-digit by updating on that work, which isn't all that meaningful, but given where we've been coming from where we've just been seeing construction costs growing much faster than inflation for the last four or five years, it is a significant change.

On the new construction, it's probably still too early in almost all markets because everything's under way and there's a lot under way, that is going to have to get finished first. So again, where you're going to see it first, is going to be in early trade earthwork, pipework, demolition, maybe a little bit concrete and then regionally it's going to vary as well. So what we heard others say is, maybe we're starting to a little bit in South Florida, because a big part of what drives that is also, it is not wood construction for one thing. It's all concrete because of the hurricane codes and there's a lot of a cruise ship restoration work and hospitality work that is not happening, that's been cancelled. So the sub base there has more extra capacity. It hasn't really worked its way into most of our markets yet. Some commodities are down. Lumber is up quite a bit, right now. So that's probably in response to what's going on in the single-family market and just home renovation market. So there are some cross currents there but it generally takes a while. Construction pricing is a live indicator and it's going to take a while for it to work its way through the system.

Rob Stevenson -- Janney Montgomery Scott LLC -- Analyst

Okay, thanks, guys.

Operator

And our final question will come from Rich Anderson with SMBC.

Richard Anderson -- SMBC Nikko Securities America, Inc. -- Analyst

Thanks, good afternoon. Hope everyone's well. So Tim mentioned or maybe somebody else, but did kind of the suddenness of what happened, make a lot of decisions for you, particularly as it relates to development postponement? As memory serves, in the '08-'09 timeframe, you did have a sizable write-off related to your development pipeline and if I am wrong, I apologize, going on memory. I'm curious, so if you fast forward to 12 years later today, is there anything about what happened then that you took from lessons learned and is sort of allowing you to sort of walk a tight rope here without having any sort of disruption like that? I'm just wondering how that experience during the great financial crisis has manifested itself at how you look today. I know you mentioned the difference in balance sheet in your prepared remarks, but I'm just wondering, just in terms of how you approach the business particularly on the development side. Thanks.

Timothy J. Naughton -- CHAIRMAN OF THE BOARD, CEO & PRESIDENT AVALONBAY COMMUNITIES, INC.

Yeah. Hey, Rich, it's Tim. I'd say it's largely been in land and so we had like -- we wrote-off or had impairments on the order of about $80 million in total. And a good portion of that was in land and I would just say relative to the size of the Development Rights pipeline, we've got deals where profits have been larger than that, in terms of value we create at site. So, we weren't --I mean, homebuilders were taking impairments in the billions, we took. I think we took an impairment on the order of $60 million, just on land. And so we've been really very disciplined about maintaining optionality and some of the -- that I was talking earlier, some of the deals may not make and we may have sellers that are unwilling to restructure, to be sent restructuring sort of to close the gap and could have some future write-offs, I suspect. But it's really out of the pursuit costs, which is pretty cheap capital relative to the size of the pipeline that we control. So, I would say the biggest issue is just, we just don't have land inventory of any significance in the cycle for the last one.

Kevin O'Shea -- Chief Financial Officer

And the only thing I'd like to add, this is Kevin, Richard. Obviously, we've discussed many times in recent years. One key lesson we took from that downturn was to be a whole lot more match funded with respect to the development under way in terms of having the long-term capital base. You see that lesson being applied here and in a very visible way we expected. $2.5 billion we have under way right now with 95% already match funded, so that obviously leaves us a lot more foot forward at this time around, to pursue opportunities that may pop up.

Richard Anderson -- SMBC Nikko Securities America, Inc. -- Analyst

Great. And then secondly, a lot of thought in this call that suburbs beating the urban poor. You guys are, I think, currently all on that, on this one, I think you're 60, two thirds suburban, one for urban and perhaps you're still expensive option in those suburbs. But do you think that that sort of break out could ultimately help you out long-term here as this sort of situation settles and that people maybe don't go all the way back in but they come back close enough or it benefits you in your suburban portfolio?

Kevin O'Shea -- Chief Financial Officer

Yeah, again, Richard. I think there already was a trend. We already were starting to tilt the portfolio of suburban. And if you look kind of at our history following well where we create the most value at least development pipeline is going to kind of the suburban infill and and I think as you know as the millennials get a little bit older, you see more likely navigating the suburbs, I think, kind of, this urban lite kind of lifestyle mix use kind of infill suburban areas is probably provides -- offers one of the more attractive opportunities that's less dense and an urban environment also has generally is more affordable than what we delivered in urban areas. So we were already kind of moving in that direction and maybe this just pushing us a little bit, a little bit harder, but, so I think the demand factors that were already in place, are just probably just being magnified by what's happening over the last few months.

Richard Anderson -- SMBC Nikko Securities America, Inc. -- Analyst

Great, thanks very much. Appreciate it.

Kevin O'Shea -- Chief Financial Officer

Thank you.

Operator

And with that I will now turn the call back over to Tim Naughton for closing remarks.

Timothy J. Naughton -- CHAIRMAN OF THE BOARD, CEO & PRESIDENT AVALONBAY COMMUNITIES, INC.

Okay. Well, great. Thank you, Matt. I know we have a number of calls we need to be on today. So I just want to thank you for being with us and enjoy the rest of your summer. Talk to you soon.

Operator

[Operator Closing Remarks]

Duration: 67 minutes

Call participants:

Jason Reilley -- Vice President, Investor Relations

Timothy J. Naughton -- CHAIRMAN OF THE BOARD, CEO & PRESIDENT AVALONBAY COMMUNITIES, INC.

Sean J. Breslin -- Chief Operating Officer

Kevin O'Shea -- Chief Financial Officer

Matthew H. Birenbaum -- Chief Investment Officer

Nick Joseph -- Citibank -- Analyst

Rich Hightower -- Evercore Inc. -- Analyst

John Pawlowski -- Green Street Advisors -- Analyst

Jeff Spector -- Bank of America Merrill Lynch -- Analyst

Richard Hill -- Morgan Stanley -- Analyst

Wes Golladay -- RBC Capital Markets -- Analyst

Sumit Sharma -- Scotiabank -- Analyst

Alexander Kalmus -- Zelman & Associates -- Analyst

Alexander Goldfarb -- Piper Sandler -- Analyst

Rob Stevenson -- Janney Montgomery Scott LLC -- Analyst

Richard Anderson -- SMBC Nikko Securities America, Inc. -- Analyst

More AVB analysis

All earnings call transcripts

AlphaStreet Logo