Essex Property Trust (ESS) Q2 2020 Earnings Call Transcript

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Essex Property Trust (ESS 2.31%)
Q2 2020 Earnings Call
Aug 4, 2020, 1:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Essex Property Trust Second Quarter 2020 Earnings Conference Call. [Operator Instructions] Statements made on this conference call regarding expected operating results and other future events are forward-looking statements that involve risks and uncertainties. Forward-looking statements are made based on current expectations, assumptions and beliefs as well as information available to the company at this time. A number of factors could cause actual results to differ materially from those anticipated. Further information about these risks can be found in the company's filings with the SEC.

It is now my pleasure to introduce your host, Mr. Michael Schall, President and Chief Executive Officer for Essex Property Trust. Thank you. You may begin.

Michael J. Schall -- President And Chief Executive Officer

Thank you for joining our call today. The unprecedented reactions from the COVID-19 pandemic have presented many challenges that have affected every part of our business and indeed our lives. We'd like to offer our best wishes to all those impacted by COVID-19, and thank you for participating on the call today. On today's call, John Burkart and Angela Kleiman will follow me with comments, and Adam Berry is here for Q&A. Our reported results for Q2 reflect these unprecedented challenges as we reported 5.1% decline in core FFO from a year ago, representing an abrupt turnaround from very favorable conditions throughout this economic cycle.

Our first priority upon receiving COVID-19-related shutdown orders was to ensure the safety of our employees and residents, while reacting thoughtfully to shelter-in-place restrictions and regulatory hurdles that have been especially pervasive across our markets. Unprecedented job losses from mandatory shutdown orders in March, suddenly and significantly, reduced rental demand, leading to lower occupancy in April, followed by a steady recovery throughout the quarter. Ultimately, occupancy fully recovered and was 96.2% in July. Delinquencies also spiked due to job losses and anti-eviction ordinances, which often contain collection forbearance provisions.

Proposed regulations that could further impede collection of COVID-19-related rent receivables led us to adopt a conservative approach to bad debt. During the second quarter, the direct cost of the pandemic in the form of greater residential and commercial delinquency, lost occupancy and COVID-19-related maintenance totaled $27 million. We view these costs as mostly temporary and have seen improvement in each category in the second quarter. John and Angela will provide additional detail as part of their remarks. Fortunately, the economy improved quickly from its April trough as measured by resumed job growth, lower continuing unemployment claims and fewer WARN notices. In addition, many businesses have found ways to adapt to the virus by creating new safety protocols and procedures.

After declining nearly 14% in the Essex markets during April, by June, year-over-year job declines had moderated by almost 400 basis points to 10.1%. We expect gradual improvements to continue in the second half of the year. Turning to the West Coast markets. Technology companies are a primary driver of wealth creation and growth in the Bay Area and Seattle. Most of the leading tech companies remain in a growth mode with minimal damage to their business models, and many of them, such as Amazon, Netflix and Zoom, have benefited from the shelter-in-place restrictions, resulting in greater market share.

Generally, it appears that many large tech companies have slowed their pace of growth, while allowing greater flexibility for employees to work from home. We track the open positions at the 10 largest public technology companies, all of which are headquartered in an Essex market. Recently, these companies had approximately 17,000 job openings in California and Washington. These large company tech jobs are down by about 1/3 on a year-over-year basis and are now at about the same levels as we saw in 2017. Many of the top tech companies, including Apple, Alphabet, Microsoft, Amazon and Salesforce, are planning for employees to return to the office and have established related dates, which range from October 2020 to July 2021.

This is consistent with our comments during our June NAREIT meetings, whereby we expect employees in the post-COVID era to have a greater work-from-home flexibility, while also needing to report to the office at various times to maintain team dynamics, acclimate new hires and pursue career opportunities, all of which require periodic face-to-face contact. Venture capital has continued to flow at a healthy pace according to the most recent data. However, we understand that the mix of investments is more focused on companies that have business models that are not directly impacted by COVID-19 and have lower cash burn rate.

Southern California has a more diversified economy that has outperformed during previous recessionary periods. While San Diego, Orange and Ventura counties have generally continued this trend, Los Angeles County has notably underperformed. L.A.'s preliminary unemployment rate was 19.5% in June, well above the level implied by recent job losses of 12.3% on a trailing three month basis and partially explained by the unusually large number of gig and freelance workers in L.A. that are not captured by the BLS payroll survey. Filming and content production is a key contributor to jobs and wealth creation in Los Angeles, and the industry came to a temporary standstill.

FilmLA reported that the number of shoot days during the second quarter declined 98% from the prior year across television, film and commercials. Despite these challenges, the demand for content is unabated amid the pandemic, and there are reasons to be optimistic. In a joint report called A Safe Way Forward, various organizations, including the Screen Actors Guild, have outlined the process for content production amid the pandemic, which is building production momentum. A key factor impacting all of our markets is the loss of leisure and hospitality and other services jobs, which represented from 12% to 17% of total jobs at June 2019 in the Essex metros.

Compared to the total jobs lost in the Essex markets this past year, these service jobs declined an average of about 30% year-over-year with the greatest declines in Seattle and San Francisco. These job losses are throughout each metro area, although the downtown locations have the greatest concentrations of affected businesses. We see the recovery path ahead as reversing the pandemic-related declines we experienced this last quarter. In the near term, progress will depend on the direction of COVID infection rates and the associated governmental limitations on business activity.

Given the COVID-related shutdown of film and digital content industries and its potential for value creation, its recovery is essential in Los Angeles. Fortunately, that recovery is under way with the recent restart in the production of daily TV shows, such as Jeopardy! and Wheel of Fortune in Culver City and several soap operas produced by CBS and ABC. Necessarily crowded motion picture sets and safety mandates will probably make this a slow process. Wealthy areas create demand for restaurants, bars and other services and the related jobs contribute to housing demand, particularly in the cities.

That makes service jobs systematically important to housing, and we believe that they will recover. Finally, most of the technology industries are in great condition and should be expected to resume greater hiring and growth. Along with unspent wealth accumulated during the pandemic, we expect the recovery of jobs to be strong as the outlook for managing the pandemic improves. In light of the unpredictable nature of the pandemic and with the recent surge in COVID-19 cases and hospitalizations, the course of the pandemic and governmental responses have become intertwined with job growth and other economic outcomes.

Thus, we've made the decision to withdraw our forecast on page S-16 of the supplemental until we have better clarity on the direction of the pandemic. Finally, turning to the apartment transaction market. We sold two properties during the quarter, both of which were placed under contract in May. Pricing for both represented a small discount compared to the pre-COVID period. Both properties were in Downtown San Jose, continuing the theme of the past few years of selling downtown locations that are more susceptible to added supply and a diminishing quality of life. Going forward, we expect to grow the portfolio near major employment centers that offer a better living experience.

Generally, the transaction markets have been slow to recover with very few closed apartment sales and even fewer properties being marketed. The industry is working through key issues in the selling process, such as travel restrictions and due diligence challenges. Given a dearth of transactions, it's too early to conclude on how buyers will value apartment properties going forward. The few closed transactions since the onset of the pandemic traded at prices at or near pre-COVID levels, suggesting that highly motivated buyers have taken a longer view when valuing property by treating the COVID-19 specific impacts, such as delinquency, as a purchase price adjustment rather than long-term reductions in NOI or higher cap rate.

At quarter end, we had two additional properties under contract for sale. Both are smaller properties and one of them closed in July. Going forward, our intent is to mostly fund our growth with disposition proceeds. We announced one new development deal in suburban San Diego, and we have a robust preferred equity pipeline. As before, plenty of money is searching for distressed real estate, which will be scarce with institutional-grade apartments given extraordinarily low financing cost.

As with prior recessions, the existence of Fannie Mae and Freddie Mac virtually assures a source of liquidity for apartments. Yields or cap rates for apartments generally substantially exceed long-term interest rates on related debt, and the resulting positive leverage remains a powerful force in the market. Unlike REIT stocks, private market values in terms of cap rates are generally sticky, meaning that they don't change immediately in reaction to events, but rather seek to reflect the longer-term financial performance of a property.

At the end of the day, we believe that the transaction markets will likely recover because lower interest rates will provide sufficient incentive to offset greater perceived risk. Historically, we found opportunities to add value as markets transition and in periods of disruption. I'm confident that we have the team, resources and strategy to thoughtfully act on these opportunities, consistent with our long-term track record of outperformance.

And now I'll turn the call over to John Burkart.

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

Thank you, Mike. Our priority during this period was our people, the safety of our residents and our employees. I'm incredibly proud of what our team accomplished and how they worked together to serve and support our residents through this challenging time. Thank you, E-team. Looking at the second quarter of 2020, the occupancy challenges that we faced early on related to a reduction in demand when the initial stay-at-home orders were implemented as opposed to an exodus of existing residents.

During May, traffic increased substantially, and we took advantage of the relative strength in our markets by lowering our rental rates and offering significant leasing incentives in certain markets of two to eight weeks on stabilized properties leading to an increase in our same-store occupancy of 110 basis points in June. The relative strength in the market continued into July, enabling us to increase our asking rents, decrease our leasing incentives and add another 80 basis points in occupancy.

Our availability 30 days out as of the end of July was 10 basis points lower than where it was last year at this time. As our customers adapt to the new COVID-19 environment, we are seeing some consumer behavioral changes that make intuitive set. For example, with the current work-from-home practices, the value proposition of living in Downtown San Francisco has temporarily changed since the restaurants, entertainment and sports venues have shut down. Additionally, the value of having more private indoor space for Zoom calls, high-speed Internet and access to open space for outdoor activities have increased demand for suburban assets despite being a greater distance from corporate offices.

We have also noted that work-from-home has turned into work-from-anywhere, as we have seen several consultants moving back to their original home and continuing to work for their West Coast employer. Regarding the work-from-anywhere theme, we believe this trend will reverse when conditions permit. We were all positively surprised by the ease in which we all adapted to Zoom and believe that this experience will have a lasting impact on future same-day business travel. However, the loss of a personal connection, frozen screens and barking dogs in the background show that Zoom cannot replace the value that comes from in-person interaction.

As I heard someone say recently, I am done with living at work. We see the changes in consumer behavior within our portfolio. Our same-store portfolio in Contra Costa, Ventura, Orange and San Diego have higher occupancies today than in pre-COVID March. Turning to our Q2 2020 results as presented on page two of our press release. Year-over-year revenues declined by 3.8%. On delinquencies, various governmental bodies have enacted and continually extend resident protection along with prohibitions against late fees and eviction.

These regulations have been a strong headwind for the industry in our markets compared to other metros. Thankfully, they are temporary in nature. Referring to the S-15, delinquency for our total portfolio on a cash basis was 4.3% in the second quarter of 2020 compared to 34 basis points in the second quarter of 2019. In the month of July, on a cash basis, delinquency was 2.7%, which was down from the prior month. In July, 18% of our same-store assets had positive delinquency, meaning the delinquency line item contributed positively to the revenues due to residents paying past due amounts.

We appreciate that our residents continue to prioritize their rental obligations. Moving on to our operating strategy in this new environment. Our operations objective continues to be focused on maximizing revenue. Given current conditions, our strategies will evolve as the market changes and will vary across our markets. For example, we will likely run lower occupancies in certain urban markets, such as Downtown San Francisco, while targeting higher occupancies in highly desirable suburban markets, such as San Ramon. Overall, we believe that market occupancy has fallen about 150 basis points, and our same-store portfolio is expected to run at a lower occupancy for the remainder of the year.

As noted on S-15 of our supplemental and consistent with our expectations, our new lease rates, excluding leasing incentives, were down 5.8% in July compared to the prior year's period. We expect that market rental rates will remain depressed in the fall due to the seasonal decline in demand. That said, some of the historical factors, such as contractors moving home in the fourth quarter, are not an issue since they've already moved out due to the work-from-home policies in place. On to tech initiatives. We continue to make considerable progress on the technology front as our employees learn how to optimize our new tools.

For example, we currently have several leasing agents that are leveraging these tools that enable them to be two to three times more productive than the average leasing agent. We are seeing similar progress with our maintenance systems as well. Our emphasis will continue to be on people first as we try to bring everyone up to speed. However, we expect that through the increased productivity and natural attrition, we will both lower our headcount and increase our compensation to our top performers. Another advancement in our technology road map includes the development of our mobile leasing app that is on target for pilot at the end of this year.

The app is fully integrated with our other sales tools and will fundamentally change how we interact with our prospects, providing them with a simple, seamless 24/7 mobile experience. Finally, we are now offering ultrafast Internet, offered by market-leading fiber providers at 10% of our assets, and we expect to complete installation at another 50% of our assets by year-end. The ultrafast service is in great demand in our current work-from-home environment and is expected to be a great value-add asset for our residents. Turning to our markets. In the Seattle market, year-over-year revenues in Q2 was down 20 basis points, and occupancy was down 1%.

The greatest decline during this period was in the Seattle CBD, where revenues declined 70 basis points, followed by the East side with a 20 basis point decline, while revenues in the South saw an increase of 10 basis points in the same period. In July, unemployment in Washington remained 90 basis points below the U.S. average of 10.7%. In the same period, Amazon's job openings remained at just over 8,000, a year-over-year decrease of about 25%. Moving to Northern California, in the Bay Area market, year-over-year revenues in Q2 were down 3.4%.

Revenues in San Francisco, Oakland CBD declined by 6.3% and 7.8%, respectively, while our San Jose revenues declined only 1.5% in the same period. San Jose job growth declined the least of our markets in Q2 and was 100 basis points below the U.S. decline of 11.3%. Down in Southern California, year-over-year revenues in the second quarter declined 5.7%, while occupancy declined 2.1%. L.A. was our hardest hit market with a year-over-year revenue decline of 8.6% in Q2. Our L.A. County submarket declined between 8.4% and 9.7% in the same period with the greatest decline in L.A. CBD. The L.A. economy has been the most impacted out of all our markets with an unemployment rate of 19.5%, leading to a higher delinquency rate than our other markets.

In Orange County, the South Orange submarket outperformed North Orange submarket with year-over-year revenue declines of 2.6% and 5.1%, respectively, in the second quarter. Finally, in San Diego, year-over-year revenue declined 2% in Q2 with the exception of the Oceanside submarket, which grew revenues by 2% in the same period, likely benefiting from the military stay-in-place order through the end of June. Currently, our same-store portfolio's physical occupancy is 96%, our availability 30 days out is at 5.5%, and our third quarter renewals are being sent out with an average reduction in rate of 1.4%. Thank you.

And I will now turn the call over to our CFO, Angela Kleiman.

Angela L. Kleiman -- Executive Vice President And Chief Financial Officer

Thank you, John. I'll start with a few comments about the quarter, followed by an update on our funding plan for investments and the balance sheet. As noted in our earnings release and earlier comments, this was a challenging quarter with declines in both same-property revenue growth and core FFO per share. The 3.8% decline in same-property revenue growth is primarily driven by two key factors. First, we took a conservative approach and reserved against approximately 75% of our delinquencies, which negatively impacted our same-property revenue growth by 2.9%. This information is available in a new table at the bottom of page two of our press release along with other additional details.

Second, we report concessions on a cash basis in our same-property results, which reduced our growth rate by approximately 1% compared to using the straight-line method. The combined negative impact to same-property revenue growth from both of these accounting treatments is 3.9%. As for our core FFO per share growth, the total negative impact of delinquencies in the second quarter is $0.22. Without this, our core FFO per share growth would have been positive 1.5%. More details are available in a new reconciliation table on page S-15 of the supplemental along with additional disclosures on operations.

On to operating expenses. Same-store expenses increased by 6%, primarily driven by Washington property taxes, which have increased approximately 15% compared to the prior year. As you may recall, taxes in Seattle decreased by 5% in 2019, resulting in a difficult year-over-year comparison. Our controllable expenses have remained generally in line with the plan for the rest of the year. Turning to funding plan for investments and the stock buyback. We are expecting to spend approximately $205 million in 2020 between our development pipeline and structured finance commitments.

In addition, we have bought back $223 million of stock year-to-date, bringing total funding needs to $428 million. As for funding sources, we expect $150 million of structured finance redemptions, and we closed on the sale of three assets for $284 million. In total, we have $434 million of funds available, which covers all known funding obligations this year on a leverage-neutral basis. Moving on to capital markets. The finance team was very productive in the second quarter, securing a $200 million term loan, which was used to pay down all remaining 2020 debt maturities.

In June, we opportunistically issued $150 million in bonds, achieving a 2.09% effective rate for 12-year paper and used the proceeds to pay down our line of credit. Lastly, on the balance sheet. Our reported net-to-EBITDA was 6.4 times, an increase from prior quarter, primarily related to how we account for delinquency reserves. Adjusting for the impact of delinquencies, our net debt-to-EBITDA would have been six times. With nothing drawn on our line of credit and approximately $1.4 billion in total liquidity, our balance sheet remains strong as we continue to maintain our disciplined approach to capital allocation. Thank you.

And I will now turn the call back to the operator for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Jeff Spector with Bank of America. Please proceed with your question.

Jeff Spector -- Bank of America -- Analyst

Great, thank you. Good afternoon. Just looking at some of my notes from the remarks between Mike and John on your thoughts on periodic contact at the office versus work-from-home and some of the initiatives that John laid out. I guess just big picture, can you clarify, at least today, how you think your portfolio is positioned for what you think may be? Because I was I'm sorry, I was a little confused between the different comments.

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

Yes. Why don't I go ahead and start with that. This is John. I think we're actually positioned very well. And what we're seeing is people wanting a different value proposition. So they're looking for assets, of which we have many, that have a little bit lower price point or dollars per square foot, a little bit more space, they're in great locations as it relates to outdoor recreational opportunities. And then, of course, access to high-speed and going forward gig-speed Internet.

So I think we're positioned very well for that. What we're seeing is, at this point in time, many of the tech companies have decided that they're going to defer occupying the buildings, a range of dates really starting from October through one of them throughout July of 2021. But in no cases do we see that becoming permanent. And again, it gets back to this reality of people are now realizing that as much as we all kind of sucked it up and were impressed with Zoom and really worked hard to make things work, which was fantastic, something is being lost.

And with the competitive juices flowing, we strongly believe the companies will want to bring people back together. And they see the value, like they've always saw the value in having that. And there's also another piece to it, which is, and I can speak anecdotally, I was talking to someone over the weekend, and they mentioned the idea of moving into extended commute zone and their employers said, that's fun, but you're going to get a 20% to 25% pay cut, obviously completely negating their perceived value of lower real estate prices. So no doubt, they're not moving. And we think we're positioned very well for the long run with our portfolio. Does that answer it? Mike, do you have?

Michael J. Schall -- President And Chief Executive Officer

Yes, Jeff, let me just add a little bit more kind of numeric point of view because I totally agree with what John says. And I think that things are in ultimately pretty good order considering the fact that we've had 10% loss of jobs in June. So that's an extraordinary number of jobs being lost and more than the financial crisis. And as a result, that's going to impact our performance and our economy. And there are a couple of pieces that are just so fundamental. And these are the things I tried to bring out in my script. Basically tourism did shut down.

And obviously, the West Coast, tourism is a pretty big deal. A lot of people like to go to San Francisco and to the various L.A. places. But with restaurants and bars shutdown, those services are not available, and you probably can't get there or it's difficult to get there given all the various shutdown orders,etc. And the other kind of key parts to our economy are certainly the film and content production in L.A., which you'd realize exactly how big a problem that was with respect to COVID-19 and prevention of COVID-19 and producing content.

And then finally, the tech slowdown that I commented on in my script. So all these things are actually things that are demanded in the marketplace and they will recover. And it will yes, it will take time, and we're certainly disappointed about the second wave and the renewed shutdown orders. In many cases, restaurants and bars were open for a couple of days and then shut down again in California. And so this has been incredibly disruptive in California, and it's made it difficult to get traction on things that really matter.

Generally speaking, we have areas with pretty substantial amounts of wealth. Wealthy people like to consume services. And including restaurants and bars. Also people that have a choice between living in the hinterlands where you can make $15 an hour versus working in the city in a restaurant job restaurant-type job making $50 an hour. That's why there are that's why people go to the city. So basically, most of these relationships and activities have been shut down, again, on a temporary basis. And I think California has been incredibly, let's say, vigilant with respect to the shutdown orders. They have been very extensive throughout the marketplaces and continue to have an impact. So with the easing of that and with better COVID news, I think you're going to see things open up relatively quickly.

Jeff Spector -- Bank of America -- Analyst

Thank you. Very helpful.

Michael J. Schall -- President And Chief Executive Officer

Yes, thank you.

Operator

Our next question comes from Nick Joseph with Citi. Please proceed with your question.

Michael Bilerman -- Citi -- Analyst

It's Michael Bilerman here with Nick. Mike, in the press release, you talked about a Cares fund that Essex started with donations from executive officers, and it says that you intend to distribute up to $3 million. So of that $3 million, was it all donations? And do you expect to use corporate cash as part of it? Or is it all led by executives?

Michael J. Schall -- President And Chief Executive Officer

No, Michael, it's a combination of both. And we set up at the beginning of the crisis, we set up a resident response team, and they found extraordinary needs out there and including people, for example, that couldn't have didn't have money for food and other essential needs. And so we actually, the executive group, in that case, essentially donated some money to provide meals for people. And then we realized that even more broadly, we have other needs because there are people that have lost their jobs and don't have great prospects for getting another job.

And so we wanted to have an entity that would provide relocation money and similar types of services. And so we decided to set up the Essex Care entity in order to do that. So in situations where it's not doing them any good, they need to move on in their life and find something better. If we can provide those relocation benefits, it's good for them, it gets them into a better place. And in our case, we have the anti-eviction ordinances, so we can't evict them anyways, so it's probably better for everybody. So I think that this is a good example of finding sort of the common good as it relates to the current situation and providing an opportunity to let people move to pursue their life and better their life.

Michael Bilerman -- Citi -- Analyst

Right. So and then so how much of that $3 million was corporate cash? How much was by donations? And how much capital do you foresee Essex contributing going forward to these initiatives?

Michael J. Schall -- President And Chief Executive Officer

Well, I don't think we've decided exactly. I think the portion that came from the employee pool is somewhere around $500,000. And the rest came from Essex, but that's not a perfect number, but a rough number, that's what we did.

Michael Bilerman -- Citi -- Analyst

And then the $2.5 million is prospective? Or was there an expense in the quarter for the corporate cash then? I mean how are you treating that, like...

Michael J. Schall -- President And Chief Executive Officer

Yes. Yes, Michael, let me address that. So there were expenses during the quarter, but we set the entity up toward the end of the quarter. So what happened during the quarter was already expensed. And essentially, we created the entity in response to the needs that were out there and what we were seeing on the ground when we're dealing with the people. We our resident response team consists of some 50 to 60 Essex employees, and they're talking to our residents a couple of times a month typically. And again, they're trying to we came up with a basket of needs and people that were really in difficult situations. And so this is intended to respond to those needs on more of a prospective basis.

Michael Bilerman -- Citi -- Analyst

Okay. And just last one on this topic. Is the $2.5 million that's going to be Essex corporate cash, how are you going to treat that? Are you going to treat that as a contra revenue? Are you going to include it in same store? Or are you going to treat it completely separate from your financials?

Michael J. Schall -- President And Chief Executive Officer

Well, I'll let my financial guru talk about that. Angela?

Angela L. Kleiman -- Executive Vice President And Chief Financial Officer

Michael, that's a good question. I think it depends on what it's being used for. So for example, if it's for groceries or to relocate our tenants, it will be a G&A item. But if it's for something that's revenue related, impacting, say, delinquency, it would be a contra revenue item. And so at this point, it's too early to see where that geography lands. But the intention is really more of a G&A item, and we'll see what the needs end up being.

Michael Bilerman -- Citi -- Analyst

Thank you.

Operator

Thank you. Our next question comes from Rich Hill with Morgan Stanley. Please proceed with your question.

Rich Hill -- Morgan Stanley -- Analyst

Hey, good morning guys. I apologize if my phone dies in the middle of this call, we're in the midst of getting a pretty bad storm. I think a lot of my people out on the phone might be as well. So I wanted to come back and talk about a topic that you've spent some time on in the past, which is valuing occupancy versus rent growth. And if I'm looking at sort of your metrics, I think you're at 94.9% in 2Q and you've gone up to 95.8% as of July.

But new and renewal spreads are obviously negative and maybe even a little bit lower than where they were in the quarter. So I'm just wondering if you can give us an update about how you're thinking about occupancy versus rent growth at this point. And when do you think that you might be in a position to push occupancy and renewal and new leases be less bad than they are right now?

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

Sure. This is John. That's a great question. Well, again, as Mike had mentioned, we started in a hole in April really related to the shelter in place and just the demand stopped for a period of time. So as we moved and as traffic increased pretty dramatically in May, and then we took advantage of that and decided to fill up the portfolio. And big picture, there's a saying that we like, which is, let's not be proud and vacant. And vacant units really obviously earn nothing.

So we made the decision to get aggressive and offer some leasing discounts or leasing incentives to enable us to gain occupancy. And we ultimately gained about 200 basis points of occupancy between June and July. And that's positioned us well. We subsequently pulled back on concessions. And we're still offering them. And certainly, market by market, it depends. But taking some of our markets, the suburban markets like San Diego, Orange County, Ventura, Contra Costa, in many of those cases, we've pulled back quite a bit on concessions, and those occupancies are riding higher. There is in actuality, they're actually higher, as I mentioned in my remarks, than they were in March.

So we look at it and say, the best thing is to position ourselves so that we're leading the market and not allow ourselves to be sitting vacant. And so that's why we took that action. Right now, we're in a pretty good spot, and we're just watching the market on literally a daily basis, understand what's going on. There are some areas that are more distressed. Certainly, San Francisco, we have less than 1,000 units there. But San Francisco is definitely under stress. And I'll also note San Francisco, about 30% of our units or so are studios. And studios are clearly a challenged unit type in this market. The consultants have moved out. And so that's also putting a little bit of excessive pressure in the San Francisco market in our numbers. Does that answer your question?

Rich Hill -- Morgan Stanley -- Analyst

Yes, it does, it does. And I wanted to maybe just come back to that a little bit more and think about the impact of concessions. And you might have talked about this a little bit earlier on. But if I'm thinking about this correctly, new leases were an average new leases saw an average of one to two months of concessions. So I'm just trying to think about how we're supposed to think about the net effect of rents. Can you just walk us through the effective portion of it? Because it seems like it could be down a lot more than what the headline suggests. So I want to make sure I'm thinking about that correctly.

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

Yes. So concessions, I mean, I think of it in this particular market, I would think of it very similar to a development lease-up, where you offer concessions to incent someone to move. I mean there's obviously a certain real cost of moving. And then there's just the pure motivation of moving. And so when we desired to fill up our portfolio, we offered concessions. It's not really reflective on necessarily market rents are lower. Doing offering the concessions enabled us to gain a significant amount of occupancy. So I would look at it that way.

I don't want to dance around, though. There are clearly concessions in the marketplace. We were more aggressive because we want to fill up our portfolio, and we've now backed away quite a bit from that. Our average concessions, I know in the supplemental you're looking at, saying four to eight weeks, and that was pretty common, but the average concession during June was closer to 4% four weeks or a little bit less than that, that we used to which enabled us to fill up. But we there was a range. We clearly had assets that had 0 concessions and some that were at eight weeks. And so hence the footnote in the financials.

Rich Hill -- Morgan Stanley -- Analyst

Got it. Got it. And so just to be clear, and I'm sorry for belaboring this point, but it's hard to compare across names, and that's what I'm trying to understand at this point. But the new and renewals are headline without the concession, right?

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

That is correct. And I'll actually throw in one more comment on the renewals to give a little clarity. The renewals go out typically 60 days plus into the marketplace, both we're trying to give our customers time to make a decision and then there are certain laws that prevent us from sending them out, say, less than 30 days. And so what can happen is the market can move between the time you send the renewal out, which is what happened in the second quarter and when it actually becomes effective. So we would have had renewals that were effective in June that may have been signed in March, if that makes sense. So you're always the renewals are always going to lag the market rents, which are happening at that point in time.

Rich Hill -- Morgan Stanley -- Analyst

Yeah, that makes sense. Thank you very much guys.

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

Great questions Rich.

Operator

Our next question comes from Austin Wurschmidt with KeyBanc. Please proceed with your question.

Austin Wurschmidt -- KeyBanc -- Analyst

Yeah, thanks guys. And just building a little bit, maybe even more, John, it sounds like you said that into July, incentives have improved even more. So I mean relative to that four weeks or less in June, have you virtually eliminated concessions at this point across most of your markets given where occupancy is today? Or is it two weeks? Can you give us help us quantify that? And then what the impact is on from an effective rent perspective?

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

Sure, sure. So it moves around daily literally. But I can tell you that for a period of time, we completely eliminated them out of San Diego, Orange, Ventura and parts of Contra Costa. Subsequently, we've moved back in with a week to two weeks here and there. Other markets and certainly, Seattle falls in that bucket as well. Other markets like San Francisco, we continue to offer concessions somewhere in the range of four to eight weeks, it depends. And San Mateo, pretty high with concessions in a similar number of weeks. And Silicon Valley is a mixed bag, but there are concessions in Silicon Valley, especially near the lease-ups.

There's both Downtown Oakland and Silicon Valley and then some in San Francisco, where there's lease-ups, that obviously is a concessionary market. But we are pulling them back, and we're going back and forth. And part of it is, we run the company as a portfolio and not asset by asset. So where we see opportunity, where the markets are stronger, like Orange County and San Diego, Ventura, we're going to allow that to increase the occupancy to increase a little bit more and offset some of the areas that are a little bit weaker, like San Francisco.

Austin Wurschmidt -- KeyBanc -- Analyst

That's helpful. And then how frequently are you using concessions on renewal leases to retain tenants? And could you quantify what that net effective spread is in July versus last year?

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

Yes. So with renewals, much less. It's probably about 10% of what we're doing with the new leases. And when the renewals go out without any concessions, that can get negotiated in depending upon the situation, but our renewals are really I expect the renewals going forward, that will really dry up because the market is changing right now. And so where we were in June and what we negotiated in June, we negotiated less in July and probably less again in August.

So maybe it's a week or something or less than that. I mean because, again, most of them don't even have concessions for the renewals. So we're not really trying to incent someone to move. It's the where we're trying to incent someone to move, that's where they come into play because it really is a matter of they have moving costs, and so there's kind of this exchange that goes on.

Austin Wurschmidt -- KeyBanc -- Analyst

No. Understood. No, that's very helpful. Appreciate.

Operator

Our next question comes from Alexander Goldfarb with Piper Sandler. Please proceed with your question.

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

Hey, good morning.

Alexander Goldfarb -- Piper Sandler -- Analyst

Good morning. Rich was right on the power outages. We've now had a few of them since. So a few questions here. John, in hearing your responses to everyone's questions, it sounds like things improved in July. And then since then, they have improved. So where I think it was Mike who talked about or you talked about rent pressure in the back half, it sounds like that's more like you're not pushing rents positively, but you're seeing good demand, most of your markets are seeing up occupancy. And that you're really not concerned about the back half for a repeat of the softening that occurred in early in 2Q. Is that a fair assessment?

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

I'll start. I'm sure Mike might have some comments. But there's a lot of risk factors out there, Alex. So certainly, factually today, the market is better today than it was yesterday, the day before,etc. And this is all a good thing, and we feel good about that. Our portfolio is positioned very well all things considered, but there's obviously things that are happening related to COVID that throw risk factors. There's some unusual there are some positives, as I mentioned. We had consultants. They usually move out in the fourth quarter. Well, that's not going to happen because they already moved out. We didn't have interns come in, and therefore, they won't move out. So those are positives that may enable us to have a longer leasing period.

And then there's some interesting things going around some of the colleges. For example, many of them are doing partially online and that requires you to be very tethered to the university because you may be online for a class and then half an hour later, you have a lab on site. But you still need to live right at that university and they cut down the occupancy. My family just went through this, and my daughter got bumped out of her spot. So she's now in an apartment. And so there's things like that, that are positive, but there's obviously risk factors out there. And I'll flip it over to Mike, if you have more to add there.

Michael J. Schall -- President And Chief Executive Officer

Yes, Alex, let me I try to tie this thing pretty specifically back to what's going on, on the job front. And John so John mentioned that things have gotten better. And I probably didn't draw enough attention to this, but in my script, I said year-over-year job growth declines have moderated almost 400 basis points to 10.1%. So from my perspective, things were really horrible in April. We fell off a cliff in terms of occupancy and a variety of other things. We had an additional challenge, in that we had all of these anti-eviction ordinances.

And if someone wanted out of their lease, given the backdrop of having an anti-eviction ordinance, we were actually, I would say, motivated to let them out of their lease probably to a greater extent than many other places would be. And so we did. So that accounted for sort of the occupancy drop. And then things got better, and again, job declines moderated 400 basis points, and the results got better. And so I would and kind of the point on my script is to say, we need things to continue to get better. And that's going to be intertwined with the COVID-19 experience going forward. And we remain hopeful that it's certainly we certainly believe it's going in the right direction.

We certainly believe that mankind and potentially a vaccine or therapeutics or whatever is going to continue to moderate the picture. But we need positive development certainly as it relates to the shutdown orders. And once again, it looks like we're hitting a new peak on this second surge. And so maybe we can open the restaurants again, and we can do some other things. I was talking to some people recently about restaurants in Palo Alto, and they're shutting down partially shutting down the streets, so they can move more of the tables out on the street and then have a traditional restaurant experience outdoors.

That won't work in the winter, but in the summer, that will be great. So there is incremental improvement for sure. And we and just good thoughtful people can overcome a lot of these challenges. So I would expect, certainly, the progress to be ongoing, but whether we can take a big step forward or when we take the big step forward, we're still unclear as to when that might be. Hopefully, that makes sense. So we're making progress. We want it to be faster. It's a little too slow, but it seems to be going in the right direction.

Alexander Goldfarb -- Piper Sandler -- Analyst

Right. But I guess to the point, Mike, you guys obviously, none of us can predict the future, but from what your properties and your regions are telling you today, you feel comfortable, as you guys said, pulling back concessions. You've seen an uptick in occupancy. And I think with the exception like a Downtown L.A. or Downtown San Francisco, it sounds like most of your markets have been responding well to the actions that you guys have taken. You didn't identify maybe I missed, but it didn't sound like you identified markets that are still weakening and getting softer yet, correct?

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

Yes. I mean that's a fair statement, Alex. I mean San Francisco is still challenged. That we're trying to figure that one out, but it's a very small part of our portfolio. But the yes, no, the other markets clearly responded to pricing. I mean we said this back at NAREIT. We saw traffic increase pretty dramatically, and that's when we made the decision to get aggressive and lease up the portfolio. So our pricing was intended to increase occupancy. It worked very well. We've pulled back from that. We're maintaining occupancy. It's still we're working very hard. We're watching things daily. But yes, no, we're not seeing things fall backwards, in your words. San Francisco, again, is an exception, it's a little challenged. It's not necessarily falling backwards, it's just pretty challenged.

Alexander Goldfarb -- Piper Sandler -- Analyst

Okay. And then just the second question. On the delinquency, it sounds like you guys let people leave who because of the ability to do so, whatever, unlike New York. So you guys let people leave their rent, the delinquency came down. The people who are in there, do you expect those people to be money good? Or these are sort of the freeloaders that are just paying out for free rent and they're never going to pay, they're never going to leave the unit?

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

There's going to be I mean there's no doubt there's going to be a mixed bag of people. But as I said in my remarks, we had 18% or almost one out of five assets where we had positive delinquency, meaning they contributed to revenues because people that owed us were paying back payments. So there's a lot of hard-working people out there. We continually see these headlines of people struggling to get the unemployment payment.

So my sense is as the money is coming through, many of them are trying to make a good effort to pay us. In the end, will there be some that take advantage of us? Yes, there always are. But I don't think that's the majority. But how it works out, certainly, as this thing drags on, it becomes harder to peg. And so we're cautious on how this whole thing plays out as it relates to collecting delinquency.

Alexander Goldfarb -- Piper Sandler -- Analyst

Thank you.

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

Thanks, Alex.

Operator

Our next question comes from Rich Hightower with Evercore. Please proceed with your question.

Rich Hightower -- Evercore -- Analyst

Hi guys. Just to maybe steer the conversation in a different direction here. Mike, what's your updated take on the policy risk landscape for Essex? And certainly, we could be having a very different conversation 90 days from now, the next time you report. So just where do we stand on the different bills and Prop 21 and so forth?

Michael J. Schall -- President And Chief Executive Officer

Yes. Well, there's definitely a lot to talk about. So Rich, if I miss something, you can just follow up and ask again. But obviously, the biggest one that we're most focused on is Prop 21 here in California, which would amend a law that was passed in the mid-'90s to promote housing construction called Costa-Hawkins. And so it'd severely change that law and bring back potentially forms of rent control that really don't work, that really discourage housing production in all the cities that they adopt it. And it's interesting that we already have statewide rent control with respect to AB 1482, which passed last year, along with about 18 other bills that were intended to try to jump-start and to increase the amount of housing that was available in California.

But and in fact, in the case of AB 1482, the apartment industry did not oppose that bill because we thought it was a reasonable, finding the middle ground of the need for more housing and the need to protect tenants. So we thought that the legislature did a very good job of that. And but Prop 21 is brought by someone that is not involved in the housing industry. It's a special interest group. And so they are continuing that campaign. In our case, we decided to keep our entity that we used to fight Prop 10 in 2018 alive, and essentially the same group of people leave that entity and/or the opposition team on with respect to Prop 21.

And they've made a lot of progress. Polling continues to be fairly similar to what it was as it relates to Prop 10 at this time, maybe a little bit better than that. Because AB 1482 was passed, the politics, I think, are somewhat different, in that we already have statewide rent control. So why do we need this other rent control proposal. And the campaigning is proceeding well.

There are something like or somewhere over 100 organizations, and you can see them all, representing seniors, labor, community groups, etc, that have joined Essex in opposing Prop 21. And there is a website, if anyone's interested, which is noonprop21.vote and go to that website and see it. So we're optimistic about it. We're fully 100% in support of it, and we're raising money and preparing for the final showdown. So that is the story on Prop 21. Rich, maybe before I go on, do you have any follow-ups on Prop 21? Or did I get that one?

Rich Hightower -- Evercore -- Analyst

Yes. No, that was great summary, Mike. You mentioned that polling Prop 10 is maybe a little bit of things this back. And is there anything other than the obvious, the COVID environment that's driving that? Or are there other any takeaways from that element, specifically?

Michael J. Schall -- President And Chief Executive Officer

Well, it's difficult to see exactly how COVID is going to play out as it relates to that. Obviously, rents have declined. And certainly, since AB 1482 was passed, rents have declined. So why not give 1482 a chance to work because it seems to be working. And again, what is the need for another ballot proposition that effectively attacks the same issue that the legislature has already acted upon. And I think that, that issue actually helps us because, again, we have a legislative solution.

So why do we need to go to the ballot box certainly with respect to a sponsor that has very little to do with housing and fight that battle. So but that's where we are. And we will see. I mean there will be more coming out on Prop 21 in the coming weeks. So happy to discuss if you want to call separately or whatever. And then I guess, I would also mention the potpourri of anti-eviction ordinances, which are incredibly difficult. And like John, I give great credit to the Essex team because sorting through city, county, state and even federal laws with respect to anti-eviction ordinances and all the different things that are out there, there's a tremendous amount going on.

They are constantly changing all of these various eviction ordinances being extended, different terms. I think that there will likely be some legal action on some of them because they're pushing the envelope with respect to, I think, what would normally seem to be appropriate in the circumstances. And I throw out as an example of that San Francisco permanently banning landlords from eviction, this is at any time in the future, for COVID-19 delinquencies. So I mean, we definitely have an uphill struggle with respect to collections.

And to the extent it almost appears that if you never have to have accountability for your delinquency, then it almost seems like and we can't there's no late fees, there's no interest charges, you almost make create a scenario where there's no incentive to pay the landlord. So this is the dilemma because we're not, in many cases, allowed to ask for documentation of a COVID-19 hardship and normal things that one would expect. So this continues to be an ongoing dilemma.

Rich Hightower -- Evercore -- Analyst

Okay. I appreciate the color. I mean, I guess, one follow-up, if I may. The incentive of being a landlord in some of these places might also be called into question longer term. I mean, what's your sense of risk to the portfolio from a capital allocation standpoint? And obviously, it's nothing you can turn on a dime or do quickly, but how do you think about diversification sort of beyond your current core markets in that sense?

Michael J. Schall -- President And Chief Executive Officer

Well, yes, we're I mean we're here for a very specific reason. So we I think we're actually pretty diversified as it relates to the major metros on the West Coast, which, again, it's a big part of the globe global economy, what I think California and Washington are something like a fifth largest economy in the world. So we're not talking about a small area. And what we've done is tried to diversify with respect to product and in many, many cities up and down the West Coast. So I think we're actually more diverse than that might than it might seem.

And having said that, why are we here? We're here because supply and demand for housing is very attractive and rents grow better over time. And so we if there were other places that had similar long-term rent growth as the West Coast, we would likely be there. But that doesn't exist. And so we are trying to maximize the growth of the portfolio over time and do it in a thoughtful way and certainly a risk adverse way and diversify the portfolio within the West Coast, which again, it's a very large area. So and so we will look at and we constantly look at other geographies and other opportunities. And we'll continue to do that.

We certainly do that once a year in our strategic planning session with the Board, which comes up here in September. And so we'll continue to do that. And maybe this will change it a little bit, but I would say the anecdote to maybe a little bit less diversity is a very strong balance sheet. So you have to withstand the periods of time when there's more volatility, and we've done that. And as a result, we believe that we have kind of the best of both worlds. We have a very strong balance sheet that can withstand significant shocks, and on the other hand, have among the highest long-term growth rates in rents.

Rich Hightower -- Evercore -- Analyst

Great, thank you.

Operator

Our next question comes from Rich Anderson with SMBC. Please proceed with your question.

Rich Anderson -- SMBC -- Analyst

Thanks and good morning everyone. Maybe there should be a new proposition to cap rent declines, that will get them.

Michael J. Schall -- President And Chief Executive Officer

Rich, we'll vote for you for Governor.

Rich Anderson -- SMBC -- Analyst

So I'd like to get back to the concentration West Coast concentration. To our point, Mike, I get it, big economy, big area of the country, but still a lot of common knitting in the State of California that's causing sort of a singular problem. One thing I've noticed about you guys over the years is things have a tendency to change over a shorter period of time than your peers. I remember back the supply issue one quarter, you were kind of having trouble pinpointing it; the next quarter, things suddenly were much better and I had that a little bit wrong, but I know I'm close.

Do you in saying that, things change and perhaps measured in months for Essex, where it might be measured in quarters for your peers. And I'm wondering could third quarter have a very different flavor. Is there a real chance that we could have a conversation three months from now that could feel vastly different than the tone of the press release that you released last night?

Michael J. Schall -- President And Chief Executive Officer

Well, that's a very good question. And my take would be that and I tried to highlight this that we need the drivers, the normal drivers of wealth and job creation to do well. And we noted a couple of them. We need the tech world to go back to growing and growing robustly. And we think that they've effectively taken a break by letting their people work from home for a time being. And the motion picture industry needs to come back, and we need to have the normal tourism that we benefit from.

So I mean we're really looking at those things as a catalyst for something better to happen during the quarter. And that is all intertwined with COVID-19. And again, we were incredibly I can't tell you how disappointed we were when we had that resurgence of cases and which is now looks like it's starting to abate finally. But so I think it might be a little bit longer term than that. Having said that, we fell off a cliff in terms of occupancy in April. And again, because of these anti-eviction ordinances, we were probably more aggressive at letting people move on with their life if they lost their job and needed more affordable housing than some of the others.

And that caused vacancy to decline more. And but it also set us up to find a tenant that can be a good long-term tenant. And so we there were some definite trade-offs during the quarter and then playing catch-up with respect to using concessions to build occupancy, as John alluded to, definitely cost us something. And again, as of July, we're in a much better position, and we don't have that overhang that we have to deal with. So I would say that's incrementally better.

Certainly, unemployment going from improving by 400 basis points, that's going to help us in the quarter. So there is good news out there. And but as I tried to allude to in my comments, we need the film production business to come back, and that looks like a choppy road. And even restaurants, all the service jobs and restaurants and bars, etc, that looks like a somewhat choppy road. So cautiously optimistic, and we'll see. But I do think the next quarter will be better than the last. That's for sure. Yes. It's a little of both. I mean what we try to do is look at other major metros similar to the West Coast. So there's some element of supply constraints. We look at the stability of the economy, and the federal government in Washington, D.C. is pretty darn stable employer of people. And so it tends to do better when things are not going well, although it also can produce a fair amount of apartment supply at the same time. So that can hurt it. But we look at things much like trying to find markets that are like the West Coast, which are very difficult to find. And then we also consider blurring the line, so at what point in time might we go to some of the other markets that are near our existing markets, but just a step further out, where we own an asset in Santa Cruz, we've owned assets in Tracy and the Inland Empire. And I'd say, our experience there is those are very much timing markets. And so is there a possibility of, for example, setting up a co-investment-type entity, which inherently will have an exit, own over a period of time and then to exit and do more a timing-type trading is something that we also consider. And so I'm not sure what we're going to do. I do know that from feedback from our Board that they are going to want to take a harder look at, at this issue. So we'll be having more robust conversations about it.

Rich Anderson -- SMBC -- Analyst

Great, thanks very much.

Operator

Thank you. Our next question is from Neil Malkin with Capital One Securities. Please proceed with your question.

Neil Malkin -- Capital One Securities -- Analyst

Hey, everyone. Good morning.

Adam W. Berry -- Executive Vice President And Chief Investment Officer

Good morning.

Neil Malkin -- Capital One Securities -- Analyst

Great. Right, OK. So maybe talking about the development side or the external side, you started a JV development. Just curious how that side of the business is going and the appetite level, hearing that only kind of distress in the market, and not really on the acquisition side, but more on the development, land, prepurchase, those types of things. Can you just talk about what you see there? Have you gotten more inbound calls? And how do you see maybe the next six to nine months shaking out on that side of the ledger?

Adam W. Berry -- Executive Vice President And Chief Investment Officer

Neil, this is Adam. So I can cover this, and Mike, feel free to hop in. So as far as distress goes on the land side of things, landowners are incredibly stubborn when it comes to decreasing their expectations on land values. So yes, lots of inbound calls, but very few deals that seem to be getting inked right now. We haven't seen much, if any, decrease in construction costs. So that, coupled with some challenging a challenging rental environment, there's very little that we see right now that would pencil.

We continue to be aggressive on the pref equity side because there are a number of legacy deals that are out there searching for funding. And construction lending standards have gotten somewhat tighter, and we've gotten more conservative with our pref underwriting. But even still, there's still a relatively high demand for that. So like I said, we continue to have a robust pref pipeline, and that's probably where the main focus is going to be for the immediate future.

Neil Malkin -- Capital One Securities -- Analyst

Okay, great. Other one for me, kind of been talked about, but it seems like on each call, the talk about regulation and things like that continue to get, I don't know, worse or more extreme. Can you just maybe talk about a couple of things, in particular. AB 1436, which I think is the statewide codifying the statewide eviction moratorium, either the sooner of the end of state of emergency plus 90 days or April 2021.

Just maybe what's going on there? And then the other thing, I guess, part B would be, you look at like CHOP or CHAZ in Seattle, you look at a lot of these things that defund the police. A lot of issues that although you are diversified, as you say, they're very much a function of the California and Washington, I'll say, mentality type. So I'm just wondering how you navigate through that process or approach these things that seem to kind of come out at you on a more frequent basis?

Michael J. Schall -- President And Chief Executive Officer

Yes. It is a great question. And I will say that we are surprised at the incredible, both number of eviction-related and tenant-protection-related bills that come out of this. And certainly, in the short term, we had our own self-imposed limitations for 90 days on evictions and rent increases and a variety of other things. So I think that, that is something that is just appropriate and proper in the in dealing with this, with the pandemic. But there's a point at which, and I would guess that we're getting near that point that, things go too far.

And so what we've tried to do is both certainly comply and understand all the existing ordinances that are out there. And again, they're at all different levels of government, and they constantly change and at the same time, try to advocate in our discussions with CAA and others. Like, for example, if a resident if this goes on for some prolonged period of time, if a resident owes us a certain amount of funds, shouldn't they have some affirmative responsibility to prove their COVID-19 effect or impact or something like that and work with their tenant.

There is this fear out there that there's going to be widespread evictions following this situation. And I look at it as, we're realistic people. We have no interest in just mass evictions at all. In fact, we're better off working together, but it needs to be on sort of a level playing field. We need them to essentially prove their or acknowledge their COVID-19 issue, and then we can react and try to do what is thoughtful for both of us. So the laws, as they are currently constructed, don't do that exactly. So there's a bunch of laws out there, as you point out, that prolong the eviction process and not just limited to the one you mentioned, but just on an ongoing basis.

And it still remains to be seen what happens with those laws. I mentioned in San Francisco the inability to evict anyone at any time indefinitely for COVID-19 delinquencies. And I'm not sure exactly how we get paid back on those particular delinquencies. So this has been an ongoing issue. And certainly, it's disappointing from our perspective in that we have no ability to control our destiny, and it seems like people have the ability to essentially do things they shouldn't be allowed to do. So I'll leave it at that.

Operator

Our next question comes from Alex Kalmus with Zelman & Associates. Please proceed with your question.

Alex Kalmus -- Zelman & Associates -- Analyst

This is a big my question. Just looking at your noted discrepancy between the public market cap rating and private market cap rating, would it make sense to sort of match fund your stock buybacks with dispositions? Or are you looking to get a little more aggressive on buybacks price.

Michael J. Schall -- President And Chief Executive Officer

Yes. We Angela, in her remarks talked about match funding virtually everything that we do going forward. So that definitely is the plan. And so not just stock buyback, but preferred equity and others. So and Angela outlined the her sources and uses for the rest of the year. So I think we're on the same page with respect to how we're going to do that, maintain a very strong balance sheet.

Alex Kalmus -- Zelman & Associates -- Analyst

And just looking at rent collections month-over-month, what is the usual cadence for catch-up in the following months That we're doing?

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

It's a little bit hard to hear your question. So I'll repeat. Hopefully, I get it right. You're asking what's the usual cadence for rent collection if someone's delinquent, I think. And we're just in a different time because normally, if someone is delinquent, we're going to obviously communicate with them, either come up with an agreement with them, in which case, we're pretty reasonable, say, over the month's rent, we're going to let him have a prepayment plan that's going to work over a reasonable amount of time. If they don't want to communicate, we're going to give them a 3-day notice and start a process and work through that.

So normally, that how it would go. Where it is today, some of those options are not available. The communication is. And again, I'm very pleased to see that without any current hammers, we're seeing people step up and make payments on what they owe. Some people wanting to enter payment plans. Others not, they're concerned about whether they'll be able to keep those, but they're still paying more than their rent. And so we're seeing good behavior out of people, in general. Hopefully, that answers your question.

Alex Kalmus -- Zelman & Associates -- Analyst

Got it. I'm looking more for is there a percentage of catch-up, like you're collecting 94% of April rent at the end of April, and enter contact with you in May. Is there a basis point catch-up that you have been seeing? Or has it been mostly negotiated?

Angela L. Kleiman -- Executive Vice President And Chief Financial Officer

Yes. This is Angela here. If you're looking at the amount of revenue that is not reserved, we are essentially at over 100% collective for same store, which means some of that, of course, goes toward delinquency. But keep in mind, this is only July. It's one month. And so to John's point, we are seeing good behavior, and most people are trying to be responsible, but it's just too early to be of today, OK, what does that trend mean given this is July numbers.

Alex Kalmus -- Zelman & Associates -- Analyst

Got it. Thank you.

Operator

Thank you. Our next question comes from John Pawlowski with Green Street Advisors. Please proceed with your question.

John Pawlowski -- Green Street Advisors -- Analyst

Thanks for continuing the call a longer. Just one follow-up for me. John, can you just help me understand a little bit your comment where elevated concessions aren't exactly indicative of where market rents are? Because in certain markets, it feels like every a lot of big private and public developers are four to eight weeks free. So it feels like the market clearing price of rents to incent demand market rents across your portfolio, if all your competitors are four to eight weeks free, is down in the neighborhood of 15%. Could you just elaborate on that?

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

Yes. No, I'm glad to. First, I have to give you guys some credit. You've done a nice job trying to track things. So I appreciate that, getting the facts out there. But I would say what in part what we're picking up and what Essex does is, out of frustration out of not having great market data because some of the vendors aren't doing a great job, we created our own proprietary database. So we've got over 1,000 assets, and we're tracking them. And what we find is different days, different competitors are offering concessions. They're doing it in different units. And so there are commonly assets out there that are offering maybe four to eight weeks, but that doesn't mean that those are the only units that are renting.

And what we saw back in June was many of the bigger owners were trying to gain occupancy, increased absorption just like a very large development lease-up ultimately, or multiple lease-ups competing against each other. That worked for us. And I can't speak for our peers, but that worked for us. And so we're backing off, and we're continuing to find that we're achieving leases in many cases without concessions. Not all those gets it. San Francisco is different, and asset by asset, we have different plans. But the idea of having the concessions to help pay the moving costs and incent some of the move has paid off for us.

And again, we're generally backing off. Now when you get into very competitive spots like Downtown Oakland and the CBD or San Francisco or Downtown San Jose, there's lease-ups going on; in L.A., there's lease-ups going on. So things get blurred a little bit because you've got the lease-ups that are offering concessions. If you're stabilizing, you're down the street, you're probably still offering large concessions. So there's a little blurring going on. But we are seeing, as you get down to other markets, like say, Ventura, lots of Orange County, San Diego, in many cases, concessions just drying up.

And that's kind of what can happen with concessions, is that they're in the market and then they just dry up rather rapidly. And we are seeing that happen. So overall, again, really as a tool to increase absorption and I understand your idea of the net effective. But the reality is, we're trying to use them to increase absorption, and they worked well for us. So does that answer your question?

John Pawlowski -- Green Street Advisors -- Analyst

It does. It sounds like it's more of a debate over duration. So if these concessions were to continue for the next six months, the effective rents have to be down 15-ish percent across these markets, right? I mean it just it's really just too it's too lucrative of a market, yes.

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

Yes. No if it went on forever and again, with us, that's why I referenced, we gained 200 190 basis points in occupancy because there was an impact from it. We offered concessions, we increased occupancy. There's a direct impact, and we're backing off of that. So that worked well to create excess demand. So yes, no, if they went on forever, yes, then they're part of the market, that would be different.

John Pawlowski -- Green Street Advisors -- Analyst

Okay, thanks.

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

Yeah. Thank you.

Operator

Our next question comes from John Kim with BMO Capital Markets. Please proceed with your question.

John Kim -- BMO Capital Markets -- Analyst

Thanks, good morning. John mentioned in your prepared remarks the value proposition of downtown assets has declined versus suburban. And I was just wondering if you could remind us of the breakdown that you have or that you identify as downtown or urban versus suburban in each of your markets?

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

Sure. Well, yes, we look at about 10% urban and 90% suburban. And there, obviously, can be some blending that goes on, certainly, as you get into some of the locations in Southern California, where it's kind of blended. But overall, we'd look at 10%. We have very little in San Francisco, under 1,000 units in the downtown market in our same-store portfolio.

John Kim -- BMO Capital Markets -- Analyst

Okay. And then on this concession discussion, which I know it's already in the same-property results, but if we're assuming four weeks of concession that you use on average, it might be higher than that, in the second quarter, then that would imply your new leases were down 10%, renewals were down 8%. And I think there's a commentary made that July has gotten better, at least in the concession level, but I'm not really sure if on an effective basis level, it's gotten better, just given where the rates you've quoted have gone. So I was wondering if you could help quantify that difference between the second quarter and July as far as the effective rent change?

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

Yes. Well, I can definitely tell you, if you were to look at it purely on net effective and disregard the increase in absorption, so just where did rents transact, net effective, they definitely did get better in July. And on the there was a comment on the renewals. Not all the renewals got concessions, and in many cases, it was a week or something like that. So it wouldn't be it wouldn't translate to a, let's say, an average of an 8% or one month on the renewals. That's the renewals were closer to of 1%, somewhere in that area. But on the new leases, again, the focus was on the new leases with the concessions to increase absorption. So and some of that, it has gone away. And so if you looked at it purely that way, net effective, yes, definitely, rents are up in July over June.

Operator

Our next question comes from Zach Silverberg with Mizuho. Please proceed with your question.

Zach Silverberg -- Mizuho -- Analyst

Hi, thanks and good morning out there. Just a quick one on capital allocation. Just curious, I was reading the press release, you mentioned more stock buybacks. Where does the stock buyback program fit into your best use of capital today? And how do you view this moving forward?

Michael J. Schall -- President And Chief Executive Officer

This is Mike. Yes, we've we slowed down a little bit on the stock buyback. And the thought there is that the effects of COVID-19 are going to be with us for a longer period of time. And so the impetus to do a lot of stock buyback quickly is less important. We are constantly watching debt-to-EBITDA and some of the other balance sheet metrics. And so if you're selling assets to buy back stock, you're going to need to deleverage along the way because if you sell an asset, obviously, your EBITDA is shrinking. So we're mindful about how we do stock buyback.

We're still very interested in it. It is still one of the things that is important to us but and again, funding it along the way with asset sales is an imperative actually with respect to all of what we're doing. So I'd say at this point in time, as Adam mentioned, that probably the preferred equity pipeline is going to be our go-to source given that there are fewer providers out there. And therefore, we have a better selection of transactions to pick from. And that would be that. And we definitely like co-investment transactions when the transaction market gets better and we see more quality assets that are trading. And obviously, it depends on at what value they're trading at.

But this idea of buying, let's say, a 4.5-type cap rate with cost of debt in the low to mid-2s, that generates a whole lot of cash flow and is a pretty attractive transaction. So I think we're going to have opportunities on the external side. And actually, I think this is the fun part of the business. It's when there's disruption in the marketplace and lots of opportunity and we get to pick what the best use of capital is, is I think that's what we do exceptionally well. Does that answer question?

Zach Silverberg -- Mizuho -- Analyst

Yes, that was perfect. I appreciate the color. And just another quick one from me. You guys mentioned the mobile leasing app that you're developing. Do you have any sort of project return targets around this? And what percentage, I guess, of your portfolio is completely touchless for a customer from the lease-up process?

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

Sure. So yes, we're not giving away the metrics at this point in time on that, but I can tell you, it will be quite a change from a perspective of the customer, being able to come in and lease on a mobile iPhone literally, set up obviously, from setting up the appointment all the way through to getting approved instantly and moving forward. So we're very excited about that. We think that will give us a great customer experience and position us very well going forward. When you're talking about the touchless, at this point in time, really, we have, from a tour perspective and otherwise, we can go touchless all the way through other than, of course, once they get to the site, they're going to move in. But we're touchless across the board in that sense. Does that answer the question?

Zach Silverberg -- Mizuho -- Analyst

Yes, I think I got it.

Operator

We have reached the end of the question-and-answer session. At this time, I'd like to turn the call back over to Michael Schall for closing comments.

Michael J. Schall -- President And Chief Executive Officer

Very good. Thank you, operator, and thank you, everyone, for joining the call today. Certainly our best wishes to you and your families during these very challenging times, and we hope to see you all either in person or on Zoom someday soon. Have a good day.

Operator

[Operator Closing Remarks]

Duration: 93 minutes

Call participants:

Michael J. Schall -- President And Chief Executive Officer

John F. Burkart -- Senior Executive Vice President And Chief Operating Officer

Angela L. Kleiman -- Executive Vice President And Chief Financial Officer

Adam W. Berry -- Executive Vice President And Chief Investment Officer

Jeff Spector -- Bank of America -- Analyst

Michael Bilerman -- Citi -- Analyst

Rich Hill -- Morgan Stanley -- Analyst

Austin Wurschmidt -- KeyBanc -- Analyst

Alexander Goldfarb -- Piper Sandler -- Analyst

Rich Hightower -- Evercore -- Analyst

Rich Anderson -- SMBC -- Analyst

Neil Malkin -- Capital One Securities -- Analyst

Alex Kalmus -- Zelman & Associates -- Analyst

John Pawlowski -- Green Street Advisors -- Analyst

John Kim -- BMO Capital Markets -- Analyst

Zach Silverberg -- Mizuho -- Analyst

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